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FINANCIAL 



Europe's- Business Newspaper 


Ukraine parliament 
ratifies anti-nuclear 
treaty by big margin 

The parliament of Ukraine, the world's third-Largest 
nuclear power, has ratified the nuclear Non-Prolif- 
eration Treaty by a wide margin. The vote closed a 
chapter in the country's hesitant progress towards 
abandoning nuclear weapons inherited from the 
Soviet Union. The long-awaited decision looks set to 
improve strained relations with the west and Rus- 
sia. It is also a significant victory for President Leo- 
nid Kuchma a week before his summit with US 
President Bill Clinton. Page 22 

Mafor stakes future on EU bill: British prime 
minister Mr John Major acted swiftly to quell a 
revolt among Tory Eurosceptics by staking his 
administration’ future on a bill allowing higher con- 
tributions to the European Union. It means Mr 
Major must call a general election If if is defeated or 
substantially amended. Page 2% Issue of confi- 
dence, Page 11 

New sea taw sparks war fears hi Aegean 

A US warship was yester- 
day monitoring Greek 
and Turkish naval activi- 
ties in the Aegean, where 
a new international law 
has triggered fears of 
war. The UN Convention 
on the Law of the Sea 
has been hailed in 
Athens as vindication of 
its right to extend its ter- 
ritorial waters from six 
miles to 12. Turkey has 
said that any such move by Athens would turn the 
Aegean into a Greek lake and be resisted by force. 
Greece says it has no plans to extend its territorial 
waters, but it will not renounce the right to do so at 
some future data Mr Mrnntaz SoysaL the Turkish 
foreign minis ter met Mr Kardos Papoulis, (above), 
his Greek counterpart, in the Hague this week but 
there was little sign of a change in positions. Page 
22 

Pre-budget boost: Better than expected figures 
for UK inflation, unemployment and the public 
finances have provided Mr Kenneth Clarke, the 
chancellor, with a strong base for a confidence- 
building budget in 12 days time. The data reduced 
fears that Britain raise interest rates soon. Page 10 

Exxon, the US energy group, has agreed with the 
Indonesian government to develop the giant Natuna 
natural gas field in the South China Sea. Page 23 

National Gypsum, the second largest US maker 
of plasterboard, has received a $840m bid from a 
North Carolina-based investor group led by Golden 
Eagle Industries. Page 23 


THURSDAY NOVEMBER 17 1994 


D8523A 



i The partial privatisation of 
the French motor group attracted l-09m private 
investors and was 1.4 times subscribed, economy 
minister Edmond AlphandGry said. Page 23; Strate- 
gic questions. Page 24 

Fount over Europe’s outlook: Nearly half of 
European business leaders surveyed think China 
and south-east Asia are likely to outstrip North 
America and Europe in economic power by early 
next century. Page 4 

Lehman sues Chinese companies; Lehman 
Brothers, the US investment bank, is suing three of 
China's biggest trading companies for allegedly fail- 
ing to pay nearly $100m in debts arising from for- 
eign exchange trading. Page 7 

Vietnam to get $2bn extra aid: Vietnam has 
been promised S2bn in new assistance at a foreign 
aid donors conference In Paris which warmly 
endorsed the country’s achievement in boosting 
economic growth this year to &5 per cent while 
keeping inflation low. Page 6 

Germany’s funding need falls: A sharp 
improvement in the German government's cash 
position has helped cut the new borrowing require- 
ment of the public sector by about two-thirds this 
^ year, according to the Bundesbank. Page 2 

| Morgan Stanley profits drop 35%: Morgan 
{ Stanley announced a 35 per cent drop in third-quar- 
- ter profits to $lL8m, or $1.30 a share, as the Wall 
! Street firm followed the rest of the US securities 
i industry in reporting- sharply weaker earnings for 
'(the latest period. Page 25 

Japanese fillip for foreign brokers: Foreign 
brokers operating in Japan saw a rise in revenue in 
the six months to September due to a sharp rise in 
trading profits. Page 26 

London metal market soars: Copper, 
aluminium and lead prices tut new four-year peaks 
in frenzied fund and speculative buying on the Lon- 
don Metal Exchange. Nickel and zinc reached two- 
year highs. Page 32 


■ STOCK MARKET HDICES 

■ STERLING 

FT-SE 100: 3,1465 (frtl.fl 

Yield . 487 

FT-SE EaM a* TOO _1,35S169 (O.S9I 

FT-SE-A Aft-Share 1£GtL2 

tttta 19^8&66 (-85J32) 

New Yortc Kntfttne 

Dm Jones M AW —3333.77 (+7.41) 

S&CampaSto 46530 (+027) 

■ US LUHCHTWE RATES 

New T«k himMBiK 

S 12745 

London: 

S 15713 (1.5828) 

DU 24371 (2.4456) 

F Ft 82696 (8.4039) 
SFr 25502 (2.05C6) 
Y 154585 (155.446) 
£ Wax 79.7 (80.1) 

■ DOLLAR 

Fedenl Fonts: 5^K 

3-mo Treas Sis: YW ,^50M 

L« Bond 

■ LONDON MONEY 

New YM knciifrnK 

DM 1 .54S75 

FFt 55238 

SB 15045 

Y 98325 

London: 

DM 15510 0-5«4 

FFr 53265 (5.3104) 

SFr 13048 (12395) 

Y 9838 (88225) 

S Index 824 (622) 

Tokyo dose Y 8862 

3-mo tatertHtfc b&% (6>a%) 

Ute long gffl fijfire: -JBC 102*3 (D0c7Q2,y 

■ NORTH SEA OH. (Argas) 

Brent 15-day ton) S1GL56 (1EL6Z) 

■ CMd 

NSW m Cow# p«) -53883 (3B7J) 

London - 4W2 (38625) 


Sdi33 
BMn urn -250 


LmBOOO 

cei.w 

CZKSJ 

DOTS 

earn 

EKr20 

FMM 

FFA50 

QU3JB) 


BUprt 

OHMS 

CmAtO 

Dgrmb 


Ertond 
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Sanaa f 


OWC« O3S0 
Hang Kong HKS18 
Hungay RUB 
tottand a&lS 
htfc MO 
End S M3Q 
My 13000 
Japan YSOO 
Janfen JDiSD 
tt M* FMfiZS 
lrtw>»r USftSD 

Lux IASS 


Mtfa UrOuS) 
Mmeoa M0ht5 
Morocco moms 

Nath R 05 
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Norway NCrIZJB 
Oman ORUQ 
ftstt 
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PutugStr/hmS 


Qatar CR1XOO 
SAatta Sfill 

sngtpmssuo 

Slovak RpKSLSO 
& Africa R12J0 


Sweden SHn6 
Saute SfiOJO 
Syria SESOLOO 

Tirisa Dn1 .500 
T iMkmf 13 0000 
UA£ DM3J0 


President may try to avoid election as premier fails to appease partners 

Irish government on 
for collapse as 



EU chiefs 
clash over 
[rules on 



for airlines 


By John Murray Brown In Dublin 

The collapse of the Republic of 
Ireland's coalition government 
seemed inevitable last night as 
Mr Dick Spring, the Labour 
leader, announced his resigna- 
tion as deputy prime minister. He 
said the other five Labour party 
ministers would also quit the 
Fianna Fail-led government. 

Mr Spring's decision came at 
the end of a day of high political 
drama In which Air Albert Reyn- 
olds, the prime mins ter, in a 
last-ditch act of political contri- 
tion aimed at regaining Labour 
support, conceded his mistake in 
appointing Mr Harry Whelefaan. 
the attorney-general, as president 


of the High Court Mr Whelehan 
lias been under fire for his 
department’s failure to act for 
seven months on a request from 
British-ruled Northern Ireland 
tor the extradition of a priest 
who was later convicted of child 
sex-abuse. 

Mr Reynolds last night seemed 
certain to go to President Mary 
Robinson to seek an early disso- 
lution of parliament and an early 
general election. However, there 
was growing speculation that the 
president would use her powers 
under the constitution to force 
the parties to create a new coali- 
tion within t he wilt in g parlia- 
ment 

One factor is likely to be a wish 


to do as little damage to the 
Northern Ireland peace process 
as possible. 

After a day of force rich, in 
rumour, Dublin was in sombre 
mood last night-as Mr Reynolds 
struggled to save his political 
cares'. In a 45-minute address to 
the Dail, Irish 
Mr Reynolds offered what he 
called the “full facts, the unvar- 
nished facts'* on the extraditioin 
case. 

He said he bad acted unwisely 
in the attorney-general's appoint- 
ment 

Mr John Bruton, leader of the 
mflfti opposition Fine Gael party, 
sakt “What has happened in the 
Last hour, I believe, has done 


app alling d ama g e to the relations 
between the h gUrtm and the 
judiciary.’* 

He accused the prime minister 
of “setting out to destroy every^ 
one else so that he may save him- 
sdH" 

With opposition MPk . threaten- 
ing to reveal- new evidence to 
“rock the foundations of the 
state,” It- was not usffl &45ph. 
that Mr 

the crisis, rose to speak for toe 
first time- in this, two-day Dail 
drama. 

After three, separate adjourn- - 
meats the Dafl was- in its fourth 
separate sitting when Mr Reyn- 
olds conceded, .his error -in toe 
appointment 'of /the attumey- 


generaL Amid' speculation abouty 
a document showing official 
interference • to block . the : 
extradition of 4heu paeddphfle 
priest, .the vgfente? 
reported that 

tacted .all nrembere'aS^h^ ' 
ney-general'S^oiBctf ■ 

man bahoHd^i^to 
one in transi£froih a? vj8&?tb • 
Macedonia. 

attention was'- drawa toi May- 
nooth, a Catholic vsemtoaoT, 
where ' CarrtmalCahal Dais d&- 
missed as “utteriy absun^.and. 
“a total fobrication" thjaetistence 
of a letter purportetfly frofei a ' 
Catholfobishop.' 


Italy 

launches 

$4.58bn 

eurobond 

issue 


By Graham Bowtay In London 
and Andrew H4I In Maun 

Italy yesterday launched the 
largest eurobond issue of the 
year in order to complete its 
international burrowing pro- 
gramme for 1334. 

The issue talma thA amount the 
country has borrowed on foreign 
markets this year to $lL6bn, 
making It the world’s second- 
largest borrower, ou international 
bond markets. 

The Y450hn ($L58bn) issue is 
toe largest offering of yen-denom- 
inated bands ever offered outside 
the Japanese government bond 
market It is the high point of a 
four-year campaign, by the Italian 
treasury to increase international 
investors’ interest in the coun- 
try's bond market - the world’s 
largest outside the US and Japan. 

The strategy has proved a suc- 
cess, with the proportion of 
Italy’s debt held by outside inves- 
tors increasing from 4 per cent to 
63 per cent between 1990 and 
1992, and reaching a peak of 145 
per cent last February. 

However, since May this year, 
international bond and equity 
investors have been frightened 
away from the Italian market by 
uncertainties about the future of 
the rightwing coalition led by Mr 
Silvio Berlusconi. Italian trea- 
sury officials believe the propor- 
tion of foreign investment may 
have dropped below 10 per cent 

However, Mr Vincenzo La Via, 
a director of foreign borrowing at 
the Italian treasury, hailed the 
offering as a success. Bond trad- 
ers said interest from European 
investors was disappointing, but 
Mr La Via said there had been 
strong demand from Japan. 

The issue comes amid contin- 
ued political sparring between 
government, opposition and trade 
unions - and within the coalition 
itself - over the 1S95 budget 
Aimed at cutting Italy's large 
annual deficit toe budget was at 
first welcomed as tougher than 
expected. But analysts now fear 
it may have to be toned down to 
win parliamentary approval by 
the December 31 deadline. 

Mr Berlusconi has used confi- 
dence motions this week to force 
sensitive elements in toe budget 
through the chamber of deputies. 

Italy has turned to the Japa- 
nese yen market for all three of 
its main foreign borrowing 
operations this year. In January 
it borrowed Y300bn, and in June 
it borrowed Y175bn as part of a 
$4bn multi-currency transaction. 

The bond offering was split 
into three separate issues, of 
three-, 10- and 20-year bonds, 
designed to appeal to Japanese 
and European investors. 


Euromarkets, Page 27 





Union Carbide 
and Mitsubishi 
sell electrodes arm 


Facing a crisis: Irish prime 
minister Albert Reynolds 
arrives at the Dal, the Irish 
parliament, yesterday. His 
Fianna Fall-led government 
looked set to fall last night 


after Labors- len d er and deputy . 
premier Dick Spring puSed out 
of the two-year-old coalition 
and said he woUU vote against 
a motion of confidence in the 

■ • InchneRwiv 


A fragile consensus Inside the 
.Commission strapped 
as'" two senior comnds- . 

jmMSh over 
newvgu&tejhies -.on. state ajd to 

Em^i^lan^bted abtoo$s.-~ 

J ‘- ■ ' after Mr Mar- 

outgoing Spanish 
Art commissioner, 
that state fodL-oitte 
....... in'faroqriiwral 

circumstances such as currency 

djeV a fagtions pr.war. - • 
bfr^iKarti . Van Wert, Belgian 
wanmiwfrisisapi responsible -for 
^competition ; rejected Mr 

Otega'a kfatemant on currency 
:4ireaduat0n» as'incompatible 
Wlton^'g^afatot^om state aid, 

hgu re^fitt ^^toetaU ifcptem- 

c, ' The cLafr ratseSquestions 
i af the 

gific^me^wbkto'are Intended to 

serve Hs : justification tor the 
recent approval- of FFr2Qbn 
tt&gbh) "In state aid hr Air 
nance: and as a reference for 
future did cases- 
. A: CmsaitefeM official. .said, 
canstdesrotirai of. currmicy. deval- 
uation* in state aM cases would 
be highly controversial. It would 
favour aMincs from countries 
with weakdr aarendes nidi as 
Olympic of Greece. 

The ddjate about tire tightness 
with wiifttL rules on .state aid 
shoaldJSe .drawn has istatelfled 
in. Europe ; Mtar' British .Airways 
and other European airtines in 
fla -ptrate sector mounted a 
legal jtiudtenge to Use. Comjnis- 
stonfo decision last summer to 
approve aid to Air France. 

Yesterday's dash represe n ted 
a .dress reteearsal- for the hattie 
.in Brusto over whether to 
approve new state aid for Iberia, 
the «. hash-strapped Spanish 
national carrier. 

Spanish officials are privately 
Unions that Mr Van Uert pre- 
emptively ruled ont new state 
aid for Iberia last week - ahead 
of any such requestThis week, 
Mir Van Miert succeeded in 
strengthening the eight new 
Canmrisslan gtddeHnes on state 
aid. In future, airlines may 
expect Commission approval 

Continued on Page 22 


By Tony Jackson In New York 

Union Carbide of the US and 
Mitsubishi of Japan are to sell 
UCAR, their jointly owned graph- 
ite electrodes business, to the 
New York investment group 
Btackstone in a deal valuing it at 
JLlbn. Union Carbide wDl retain 
a 25 per cent holding and Mitsu- 
bishi none. 

UCAR is the world’s biggest 
maker of graphite and carbon 
electrodes, which are used In 
steebnaking. Sales Last year were 
5770m. The deal values UCAR’s 
equity at 8820m, and Hlackstone 
win also assume debt of about 
SISCtai. That replaces the planned 
flotation of about 44 per cent of 
UCAR, announced las t month. 

Union Carbide will receive 
$34Tm, resulting in a significant 
capital gain, the company said. 
Mits ubishi , which bought a half- 
share in UCAR in 1991, will 
receive 5406m for its entire hold- 
ing. Mitsubishi said that would 
result in a profit of Yl7.5bn 
(518333m) over book value. 

Union Carbide said the sale 
effectively completed a pro- 
gramme of disposals begun in 
1991, designed to return the 
group to Its core activities in 
chemicals and plastics. At the 
time, the group said it aimed to 
realise 5500m from the sale of 
con-strategic assets. The target 
was reached last year with the 
S30Qm disposal of its organorili- 
con business, OSI Specialties. 
The company has also span, off 
its industrial gases subsidiary. 


ft is understood that the flota- 
tion plan was shelved because 
Blackstone offered a higher price, 
ft is also believed that Mitsubishi 
decided to sell out because ft was 
reluctant to hold a minority posi- 
tion. 

Mr Stephen Schwarzman, presi- 
dent and chief executive officer 
of Blackstone, said the equity 
Investment in the buy-out would 
be 5250nu with 75 per cent sup- 
plied by his fiim and 25 per cent 
by Union Carbide. A particular 
attraction of the deal, he said, 
was that UCAR’s products are 
used particularly in the fost- 
growing mini-mill sector of the 
steel industry, which is little 
affected by recession. 

The total cost of the transac- 
tion including fees and overseas 
taxes would be about SLZbn, Mr 
Schwarzman said. Of that, 5950m 
would be funded by debt and 
5250901 by equity. Close to 5200m 
of the equity would be put in by 
Blackstone, he said, with the 
remainder coming from Union 
Carbide. 

In addition, be said, two-thirds 
of UCAR’s sales are outride the 
US. “We think that as Europe 
comes out of recession, well get 
the benefit of exposure there,” he 

aild 

"We have worked with Union 
Carbide in the past, and will 
work in partnership with them 
sow. We find that’s a very good 
way to get good returns with low 
risk." UCAR might be floated 
publicly within the next year or 
two, he added. 


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® THE FINANCIAL TIMES LIMITED 1994 No 32,526 Week No 48 


LONDON - PARIS • FRANKFURT - NEW YORK - TOKYO 



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2 


FIN ANCTAt TIMES THURSDAY NOVEMBER 17 1994 


NEWS: EUROPE 


Call for new relationship as US-Europe interests diverge 

Study warns on transatlantic ties 


By Lionel Barber In Strasbourg 
aid Bruce dark, Diplomatic 
Correspondent; in London 

The US and European Union need to 
upgrade their post-cold war relation- 
ship through a new political and eco- 
nomic treaty, according to a study by 
European political and business lead- 
ers. 

The report’s release coincides with 
an angry transatlantic row over the 
US withdrawal from the arms 
embargo against Bosnia, and with 
some public soul-searching by Euro- 
pean politicians over how to limi t the 


Ur Malcolm Rifkind, Britain's 
defence secretary, called this week for 
the establishment of an "Atlantic 
community 1 ’ which would shore up 
US-European solidarity on the basis of 
a shared commitment to democracy, 
ca pitalism and European culture. 

While giving few details, Mr Rifkin d 


called for more transatlantic 
exchanges between dvil servants, par- 
liamentarians, students and industri- 
alists. 

He said Europe and North America 
had a common interest in facing down 
the challeng es of Islamic extremism 
in North Africa, economic competi- 
tion in the Far East, nationalism in 
some parts of eastern Europe and 
international crime. 

However, this week's study says 
that Europeans are underestimating 
the degree to which US and European 
foreign policy interests diverge in the 
absence of a Soviet threat 

The report sees a risk of cleavage as 
Americans tilt away from Europe to 
the East-growing economies in Latin 
America and the Pacific, and as both 
allies become preoccupied with inter- 
nal renewal and economic competi- 
tion. 

Though not in any immedia te peril, 
"the transatlantic relationship 


founded primarily on the [Nato] alli- 
ance is adrift,’* concludes the study by 
Transatlantic Policy Network, a non- 
profit group which brings together 
business and political leaders on both 
sides of the Atlantic. 

The report recommends three steps 
to strengthen linkages between the 
US and Europe. 

• The transformation of the present 
Transatlantic Declaration into an eco- 
nomic and political treaty between 
the EU and US aimed at creating a 
"North Atlantic Flee Trade Area" 
which would cover regulatory 
co-operation, mutual recognition of 
product approvals, standardisation 
and certification, and treatment of 
foreign investment 

• Reforming Nato around a partner- 
ship between the US and a European 
defence pillar. Though the authors 
suggest further integrating defence 
and military procurement in Europe, 
they found "no firm foundation" for a 


coherent European, approach an secu- 
rity matters. 

• A new process for transatlantic 
summits which would bring together 
the annual Nato summit and the bien- 
nial US-EU meetings. The aim is to 
exploit the Clinton administration's 
shift toward strengthening the Euro- 
pean defence pillar within. Nato and 
its support for greater European polit- 
ical integration built around the 
Union. 

With one eye on the 1996 inter-gov- 
ernmental conference to review the 
Maastricht treaty, the report says 
there is a "window of opportunity” for 
real power-sharing between the US 
and EU. The onus is on member 
states, including Britain, to take fur- 
ther steps to integrate political, eco- 
nomic and security policies within the 
EU in 1996. 

Toward Transatlantic Pa rt nership - 
a European Strategy : TPN, Sue Frois- 
sart, 1040 Brussels. 



Rifkind: urged establishment of an 
"Atlantic co mmunit y" 



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Chill in the air of US-Russia relations 

Superpower diplomacy has taken a turn for the worse, writes John Lloyd 


"It is not a hot war nor a 
return of the cold war,” says 
Mr Georgy Arbatov, the grand 
old man of US-Soviet diplo- 
macy and still head of the US- 
Canada Institute of the Rus- 
sian Academy of Sciences. 
"But I do see a worsening of 
relations between the US and 
Russia." 

Mr Arbatov was speaking 
yesterday two days after Presi- 
dent Boris Yeltsin sounded an 
ominous note when be said he 
feared the US Republican con- 
gressional victory would 
"embitter” relations between 
the two states, and then went 
on to call for stronger armed 
forces to cope with a rising 
threat of conflict 

It was not an isolated 
remark. "There Is a growing 
anti-American, anti- western 
mood among our politicians," 
says Mr Arbatov. "The circum- 
stances of the last election (in 
December 1993) with the fail- 
ure of economic reform pushed 
upon us by the IMF and others 
and the growth of crime, mean 
that we have a very powerful 
nationalist wing.” 

This has influenced all politi- 
cal rhetoric for over a year - 


and it is gaining strength. Mr 
Andrei Kozyrev, the once 
fiercely pro-American foreign 
minister, now attacks the US 
for failing to respond to his 
initiative to persuade Iraq to 
recognise Kuwait’s indepen- 
dence by lifting sanctions, and 
for halting the enforcement of 
the arms embargo against the 
Bosnian Moslems. 

The spreading of Nato into 
eastern Europe through the 
Partnership for Peace has not 
been accepted, even though 
Russia itself joined the system. 
Mr Sergei Karaganov, a promi- 
nent foreign policy adviser, 
said yesterday that to "prevent 
or at least postpone the taking 
of the decision to increase the 
size of Nato” is the main task 
facing Russian diplomacy at 
next month’s Budapest Confer- 
ence on Security and Co-opera- 
tion in Europe. This is the 
body which Russia wants to 
promote in Nato’s place. 

The west and its institutions 
are no longer objects of official 
hate, but they do excite gen- 
eral suspicion: there is little or 
nothing left of an earlier feel- 
ing of gratitude towards the US 
and the west in general for 


welcoming and assisting the 
democratisation and reform 
process. 

Mr Arbatov dismisses as 
"small phawga in today's condi- 
tions” the $3bn in US aid to 
Russia - anri though be admits 
that President Bill Clinton’s 
early meeting with Mr Yeltsin 
in Vancouver in March 1993 
was an important gesture, be 
believes the US president is 
now weak and hobbled, and 
unable to reach out to Russia 
even if be wishes to. 

Mr Andrei Kortanov, one of 
Hn» loading younger policy ana- 
lysts at Mr Arbatov's institute, 
agrees that the significance of 
the US elections is not so much 
that the republicans won bat 
that right-wing, isolationist 
and strongly anti-Soviet repub- 
licans won, like Mr Jesse 
Helms, thought certain to be 
chairman of the Senate foreign 
relations committee. “And one 
must say, if these people are 
looking far faults in the way in 
which aid has been adminis- 
tered to Russia they win find 
rich materi al " 

Mr Kortanov says the under- 
standing extended to Russia by 
the Clinton administration - 


heavily criticised by today's 
resurgent Republicans for put- 
ting “Russia first” - will now 
end. That probably means, for 
example, that Russia's con*' 
slant complaint that it cannot 
observe the terms of the Con- 
ventional Forces in Europe 
treaty it signed with some 30 
countries, because it needs to 
strengthen the armour of Us 
southern forces, will be 
unheeded and its breach of the 
treaty will become a major 
issue. 

Besides, he says, the Republi- 
cans will have 1996 in their 
mind - the year of the next US 
presidential elections, and also 
the year when Mr Yeltsin must 
step down, or nm again. They 
will thus, he argues, have 
much less interest tn support- 
ing Mr Yeltsin. “They will 
instead be looking for a rela- 
tionship with the next Russian 
president, in the ranks of the 
opposition.” 

“The problem here.” says Mr 
Graham Allison, former US 
assistant secretary of state for 
defence and now a consultant 
to the Defence Department, “is 
that where you have a partisan 
battle going on between the 


Republicans and the president 
you tend to get attention 
focused on second and third 
order issues between the US 
and Russia where there will be 
conflict and people forget 
about the first order Issues 
where there are common inter- 


But neither Mr Arbatov nor 
Mr Allison - with same experi- 
ence of each other's defence 
establishments - believe the 
shilling need be serious. Mr 
Arbatov says that in the Mid- 
dle East, a historic battle- 
ground for states who were in 
part superpower proxies, the 
interests of Russia and the US 
are firmly for peace - “in our 
case”, says Mr Arbatov, 
“because we want our debts 
which these countries have 
with us to be repaid”. 

“There is a normalisation of 
the relationship going on,” 
says Mr Allison, "and that will 
continue. There is no need to 
deny we have differ ent inter- 
ests. There is no need to have 
con s t a nt big symbolic events. 
Our real state interests dictate 
co-operation. People in both 
countries are beyond thfainng 
of each other as the enemy.” 


Much improved cash position 
cuts borrow rag requirement 



funding need 
falls sharply 


By Andrew Rahar in Ftanfchit 

A sharp improvement In the 
German government's cash 
position has helped cut the 
new borrowing requirement of 
the public sector by about two- 
thirds this year, the Bundes- 
bank said yesterday in its 
monthly report 

The turnaround in Ger- 
many's fiscal position is Inline 
with statements by Mr Theo 
Waigel, the finance minister, 
that the high federal budget 
deficit, which soared as a 
result of high reunification 
costs, was now coming down 
significantly. 

In the first 10 months, the 
public sector borrowed 
DM32bn (?21bn) against 
DMlOlhn in the same period of 
1993, as the government’s 
credit needs were reduced by 
its more favourable cash posi- 
tion. 

The government's cash defi- 
cit totalled DM22.7bn in the 
Jannary-October period, down 
from DM4&5bo. One reason 
behind the reduction was that 
the Federal Labour Office, 
which ran a big deficit last 
year because of rising unem- 
ployment, no longer needed 
help. Net new government bor- 
rowings were down to DM17bn 
from DM66.5bn in the 10 

month 

Pressure on the re-elected 
government of Chancellor Hel- 
mut Kohl to continue the 
tougher line on spending haw 
come from industry and the 
Bundesbank. 

Hus week, Mr Kohl said the 
government would cut bureau- 
cracy, reduce the share of pub- 
lic sector spending in the econ- 
omy and strive to privatise 
more assets. Concern ova- high 
levels of state spending has 
been a main concern of the 
Bundesbank in trying to hold 
down money supply expansion. 
It has long argued that the 
high cost of firnmnfng oast Ger- 


Bfr Ganter Rcxrtxft; 

Germany ' s economics ■ - 
minister, will retain his post 
in file new cabinet to be 
announced today, according to 
officials from his Free . 
Democrat party, writes Judy 
Dempsey in Bonn. 

The FDP is a junior partner 
in Chancellor Helmut Kohl's 
governing coalition. Mr Klaus 
Ktnkel, HIP leader, wQl 
remain foreign minister, and 
MS Sabine 

Leutheusser-Schnarrenberger, 
also from the FDP, is expected 
to keep the justice portfolio. 

Mr Rexrodt, a s u pporter of 


privatisation, has suffered a 
string of recent failures in 
atte mpting to push through 
structural changes. These 

his inability to reach 
consensus between industry 
and local councils to 
deregulate the energy sector, 
his failure to scrap a law 
preventi ng department stores 
from reducing prices, and his 


''i'y. 


/J %: 

£y 


»y.‘. 

r, 


to 


f 

VJ._- 


$ 


relaxing shopping hours. 

many’s reconstruction should 
be matched by spending curbs 
in the west Although the ear- 
lier steep rise in M3 has slowed 
the Bundesbank is determined 
to reduce it farther. 

Mr Alexandre Lamfalussy, 
president of the European 
Monetary Institute, said on 
Tuesday night the Bundes- 
bank’s experience with M3 
would influence the EMI's 
deliberations on whether the 
planned European central 
bank should have monetary or 
inflation targets. 

“Germany used M3 as a tar- 
get with quite a lot of effi- 
ciency," he said. The impact of 
flnanm'ai innovation - now 
entering German financial 
markets “at a high speed” - an 
German monetary trends also 
had to be studied. " ~ " 


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THE ASB REFORM PROGRAMME: REVIEW 
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* REVIEW OF FRS 1; CASH FLOW 

* ASSOCIATES AND JOINT VENTURES 

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Mr Ken Wild 

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PROBLEMS OF APPLYING STANDARDS IN 
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nNANClAI. TIMES 


THURSDAY NOVEMBER 17 1994 


NEWS: EUROPE 


EUROPEA^EW^DIGEST 

EU set to agree 
telecoms pact 

across to competing telephone networks 

Sbr^S- Wni£S?2i th . be ^ inniri e of 1998. A spokesman 
chair 4 3e German post minister who will 

aereenw meeting, said he was “very optimistic" 

SKrSSi23taSs be * ■“* Spaia ^ Portugal 

agreed last year to liberalise basic voice 
23? “ I99B - hut ^ has been more difficult to 
cr _, swment on the networks. The Commission, hoping to 
fPffv^P d ® re 6ulation of infrastructures, takes the view 
■“?«?*« networks - energy and rail networks 
^e xample - should be liberalised as early as next year; but 
S5. mem u ber states war y Of such a timetable. 

° as , Warned that it will press ahead with its own 
“Pgffiton unless 1998 « agreed as a suitable date on which 
«lh? e ^r is l 1116 aitemative. yj 6 traditional monopoly 
networks. Even if agreement is reached today Mr Bfttsch may 
alternative networks to be liberalised in Germany 
oaorei398, a move which will put pressure on other European 
foUow suit. Michael Undemarm. Born, and Emma 
Tucker , Brussels. 

Benzene health doubts grow 

The European Commission is set to crack down on levels of 
tenzene in petrol because of growing health concerns. Mr 
Prudenao Perera. a senior official of DG11, the environment 
directorate general, said the Commission had been disturbed 
by the findings of a recent survey in Brussels which detected 
particularly high levels of benzene near some petrol stations. 

He told a Financial Times conference in Amsterdam that 
although benzene emissions were not currently regulated, 
there was “mounting evidence concerning its carcinogenic 
potential” and that he would be "surprised” if Commission 
proposals due next year on new fuel s tand ards for the Euro- 
pean Union currently under study would allow rampantly to 
maintain the current 5 per cent content level for benzene. The 
Co mmissi on was likely to follow guidelines now being pre- 
pared by the World Health Organisation. Last month a study 
by a parliamentary committee in the UK was critical of ben- 
zene in super unleaded petrol Robert Carzxne, Amsterdam 

EU jobs agency launched 

The European Commission is today launching a European 
Union-wide computerised employment agency, designed to 
assist companies and workers in the creation of an integrated 
labour market Known as Eures. the programme will give 
job-seekers specific vacancy details from each member state 
backed up by information on living and working conditions 
and problems such as accommodation, contract law and differ- 
ent levels of taxation and social security. 

The programme, which workers can use in 1995 to search for 
jobs, has an annual Ecu7.5m ($9.4m) budget It is starting 
modestly with a data bank of around 600 job vacancies from 
employers seeking recruits beyond their national borders but 
the organisers hope a growing number of companies will use 
Eures in their cross-border recruitment plans. Robert Taylor, 
Employment Editor 

Bosnian appeal over Bihac 

Bosnian President Alga Izetbegovlc appealed yesterday for 
international help to halt the advance by Bosnian Serb troops 
on the enclave of Bihac. Nato ambassadors considered declar- 
ing the enclave a total exclusion zone but took no final 
decision. However, Nato aircraft swooped low over the area 
after the Serbs fired a converted surface- to-aix missile which 
landed near UN peacekeepers. Bosnian Serb forces have been 
closing in an the Bihac pocket since halting a two-week long 
Moslem offensive. Troops loyal to Mr Fikret Abdic. the maver- 
ick Moslem leader who opposes the Sarajevo government, 
were reported yesterday to be crossing into Bihac, a UN 
spokesman said. Laura SUber, Belgrade 

Norway warned on EU entry 

The head of Norway's leading bank warned yesterday that 
staying outside the European Union could damage the coun- 
try's oil and gas industry, the biggest in western Europe. The 
anti-EU rampaig n maintains that membership would threaten 
Oslo’s control over its North Sea oil and gas production, which 
accounts for 16 per cent of gross national product But Mr 
Fhm Hvistendahl president of Den Norske Bank, said Nor- 
way's ml production was declining and that gas, which relies 
on European markets, would take over as the main earner 
from the North Sea. It was vital therefore, that the ElPs 
long-term energy policy, currently being formulated, put a 
heavy emphasis on the use of natural gas. 

“If Norway remains outside the EU, it will reduce our 
possibility to influence the increase of gas consumption. There 
is no guarantee that the EU will increase its dependence on 
energy from countries outside the EU while it can develop 
nuclear power and maintain coal production," Mr Hvistendahl 
said. Karen Fossli and Hugh Camegy, Oslo. 

Bonn citizenship law attacked 

Germany's opposition Social Democrats and groups represent- 
ing the country’s 6An foreigners have described the recent 
compromise agreement by Chancellor Helmut Kohl's coalition 
government to reform the citizenship law as “hypocritical" 
and “absurd". The agreement envisages granting dual nation- 
ality to the third generation .of children and only until the age 
of 18, after which time they would have to choose a single 
nationality. 

In a survey published by DPA. the German press agency, 
representatives from Hesse state, which is governed by the 
SPD and the Greens/BOndnis 90, said they would try to push 
the Bundesrat, or upper house, into making access to citizen- 
ship easier. The SPD nominally controls 41 of the 68 seats in 
the Bundesrat, enough to block legislation from the Bundes- 
tag or tower house. The criticism by the SPD and the federal 
agencies responsible for the interests of foreigners sign als the 
first implicit attack on the Free Democrats, the junior paxtoer 
in t-tw wiaKtkm. Judy Dempsey. Bonn 

economic watch 


Dutch industrial production 


Netherlands 

Index af Industrial production, 
annual percentage chango . 

4 T" 



■‘■-2 * 


1898 
SgurcaDatwWKm 


'1094 


Industrial production in the 
Netherlands rose a seaso n a l ly 
adjusted 2.1 per cent in Sep- 
tember from a year earlier, 
according to official figures. 
Uncorrected output' rose 1.8 
per cent However, the sea- 
sonally adjusted data indicate 
a slight montb-on-month 
decline of 0.3 per cent to an 
index of 1192 in September 
from 119.6 in the previous 
month, due largely to rela- 
tively low production in the 
food, tobacco, alcohol and 
petroleum sectors. 

■ EU industrial production 
was up in August fra - the sev- 
enth consecutive month, the 


Rnrostat statistical office said yesterday. The production 
index, adfasted for working days, was up 62 per cent com- 
Mred to the same month a year earlier. 

■ Prices of consumer goods and service in Poland rose by p 
Tier cent in October against the previous month, bringing 
inflation in the first 10 months to 32.4 per cent The govern- 
ment has been predicting a 32 per cent rise over the year, 

compared with 35 per cent in 1993. 




Commissioner Flynn: ‘No 
indication of UK programme' 

UK risks 
losing 
millions in 
EUaid 

By David Gardner in Brussels 

Britain risks losing European 
Union aid worth up to 
Ecu674m (£525m), intended to 
retrain workers in frontline 
industries, because it is refus- 
ing to apply for it. the Euro- 
pean Commission confirmed 
yesterday. 

Senior Commission officials 
warned that the UK would not 
be allowed to “opt out” or this 
policy, which is intended to lift 
EU competitiveness, and to 
which Britain's partners are 
committed. 

The UK government's refusal 
to draw down its full EU aid 
entitlements comes as it faces 
a potentially damag in g revolt 
b; right-wing Conservative 
MPs because of planned 
increases in UK and other 
member states' contributions 
to the Union's budget. 

The aid Britain risks forego- 
ing comes under the so-called 
Objective 4 of the European 
Social Fund. This policy, 
agreed by all member states in 
mid-1993, is designed to boost 
the skills of workers In indus- 
tries being restructured. 

Previously. Social Fund 
money was aimed exclusively 
at young and long-term unem- 
ployed, while Objective 4 tar- 
gets workers in threatened 
Industries in order to prevent 
them from becoming unem- 
ployed. The UK regards this 
switch in funding as part of a 
French-inspired Commission 
effort to build up an industrial 
policy by subterfuge, and 
wants to be allowed to spend 
all Social Fund money on the 
jobless. 

The Commission yesterday 
agreed on a share-out of Objec- 
tive 4 funds for the UK's part- 
ners, but confirmed that it was 
“holding in reserve" finance 
for which Britain had submit- 
ted no programme. 

Britain is entitled to a total 
of Ecu327bn under the Social 
Fund in 1994-99. Under the 
Commission formula, about 80 
per cent of this would go to 
tr aining the unemployed, and 
20 per cent to Objective 4 - in 
the UK’s case, therefore, some 

Ecu674m. 

The UK has asked for 95 per 
cent of its full Social Fund 
entitlement in 1994-96 - the 
first half of the scheme - but 
purely for funding training for 
the jobless and ignoring Objec- 
tive 4. Brussels has allowed 
this through, while withhold- 
ing the 5 per cent remnant 
worth EcuflOm. 

But it is insisting that the 
UK redress the balance 
towards the Objective 4 pro- 
gramme in the second half of 
the scheme, in 1997-%. Brus- 
sels officials say they are pre- 
pared to be flexible, allowing 
Britain to spend perhaps no 
more than 10 per cent of its 
Social Fund grant on retrain- 
ing employed workers. 

But Mr Padraig Flynn, EU 
social affairs commissioner, 
made dear yesterday that “ail 
member states should imple- 
ment Objective 4”. 

“Flexibility in dividing up 
the spending does not extend 
to opting out," he warned. 

Mr Flynn would not spell out 
publicly the consequences for 
Britain if it continued to boy- 
cott the retraining policy, 
beyond stressing that “we have 
no indication we are going to 
get a programme from the UK” 
to take np its Objective 4 enti- 
tlements. 

Britain has traditionally got 
the largest single share of the 
EU Social Fund. In 1989-93 it 
received Ecu2bn out of the 
Ecu7.4bn total; its full entitle- 
ment of nearly Ecu3.4bn in 
1994-99 stands against a total of 
Ecul4hn parcelled out to all 
member states. 

The Commission retains a 
portion of the Fund for pro- 
grammes it runs itself. These 
include the Adapt scheme for 
upgrading industrial skills 
across the Union, from which 
the UK should get Ecu25Qm in 
199499. Commission officials 
see virtually no difference 
between Objective 4 and the 
Adapt programme. “It's puz- 
zling that [British] ideological 
differences don't appear to 
extend that far,” one Brussels 
offic ial remarked yesterday. 


Commission leader plays Hamlet 

‘To run or not to run’ for the French presidency in next spring’s election? 
That is the question for Jacques Delors, writes David Buchan in Paris 


J acques “Hamlet" Delors 
has six weeks to decide 
whether to run or not to 
run in the French presidential 
election next spring. 

This week, the European 
Commission president said 
that, if his decision was nega- 
tive, he would tell the Socialist 
party “before Christmas" to 
give it time to cast around for 
another candidate. He may not 
have intended so precise an 
answer but, having given it, be 
knows that silence beyond 
December 25 will be taken as 
affirming his interest in the 
Elysee, thereby Increasing the 
pressure on him to run. 

Punters would be ill-advised 
to bet on the result of what Mr 
Delors calls his “very difficult” 
decision. Insiders are divided. 
One close and longtime collab- 
orator predicted that, despite 
Mr Delors’ steady rise in the 
polls and stream of Socialist 
endorsements, he will not run 
because “he has no taste for 
the monarchy” that is the Fifth 
Republic's presidency. 

Yet Mr Pierre Mauroy, for- 
mer prime minister, said this 
week the groundswell for a 
Delors candidacy was begin- 


ning to push the decision out 
of the man's control; Mr Mau- 
roy is running for re-election 
as mayor of Lille with Mr 
Delors' daughter. Martine, as 
his deputy. 

Most personal factors point 
the 69-year-oid Mr Delors 
towards taking a break after a 
decade of running the EU exec- 
utive. These include a back 
problem and a desire to follow 
up his latest book One Man's 
Unity with further tames. 

But set against this is 
mounting Soc ialis t pressure. 
Mr Michel Rocard, who would 
have been the presidential can- 
didate had he not led the party 
so badly in the European par- 
liament elections last June, 
said this week that the candi- 
dacy of someone “for 10 years 
out of French public life, and 
therefore less battered by it" 
was “an historic chance”. 

Talk of "history" appeals to 
Mr Delors, who has made a bit 
of it himself In Brussels, and 
he in turn is proving appealing 
to the public. In an Ifop poll to 
be published by L'Express 
magazine, he again leads Mr 
Edouard Balladur. the prime 
minister, and a field of eight 


other possible candidates in a 
hypothetical first round. 

But is Mr Delons popular 
enough? Virtually every poll 
today's Ifop survey included, 
shows that in a two-man run- 
off he would beat Mr Jacques 
Chirac, the mayor of Paris, but 
would be beaten by Mr Balla- 
dur. The latter, however, might 
give further ground, particu- 
larly if he continues to lose 
any more ministers to the sort 
of political funding scandals 
with which Mr Delors - by vir- 
tue of being abroad - can 
hanfly be associated. 

More of a conundrum for Mr 
Delors is, if he were elected, 
how and with whom would he 
govern? As he told French 
radio this week in En glish in 
his best Maurice Chevalier 
accent, “Zat is ze qvestion”. 

Faced with relatively small 
conservative majorities in par- 
liament, President Franpois 
Mitterrand was able to use the 
momentum of his 1981 election 
and 1988 re-election to dissolve 
parliament and win left-wing 
majorities there. But a Presi- 
dent Delors would be con- 
fronted with the enormous 
majority the RPR-UDF centre- 


right coalition won in 1993 
when it gained 80 per cent of 
the parliament's 577 seats. 

“Delors would have to dis- 
solve parliament, because the 
result of new elections could 
not possibly be worse than the 
present one for him,” says Mr 
Olivier Duhamel. This Sor- 
bonne political scientist 
believes the most likely out- 
come would be the Socialists 
and their MRG radical allies 
forming a working majority 
with support from CDS cen- 
trists. The latter are at present 
within the UDF federation and 
the Balladur government. 

M r Delors denies his 
new book amounts 
to a presidential pro- 
gramme. But virtually every- 
thing in it - belief in European 
integration, a strong currency, 
a wish for workers to restrain 
pay demands in the interest of 
competitiveness and of society 
as a whole - could not be bet- 
ter tailored to appeal to 
France's centrists and Chris- 
tian democrats. 

A Delors victory could even 
produce, in Mr Duhamel’s 
opinion, a “grand coalition” of 


left and right, with other pro- 
European elements of the 
shaky UDF federation follow- 
ing the centrists into coalition 
with the Socialists. It is hard to 
imagine a large number of RPR 
Gaullists going that way. But 
Mr Jacques Chaban-Detmas, 
veteran Gaulllst in whose 
prime ministerial cabinet Mr 
Delors once served, has said he 
hopes Mr Delors will run. 

So far, however, there is 
nothing remotely resembling a 
“military organisation" ready 
to roll into electoral action for 
Mr Delors, says Mr Francois 
Hollands, a former So cialis t 
deputy who runs the 
“Tfemoins" discussion club 
established by the Co mmis sion 
president two years ago. This 
club of 2,000 members, plus 
two smaller political dubs he 
set up earlier, together with 
some 15 local Delors-for-presi- 
dent committees around the 
country, form a tiny network, 
outside the party. 

But unless the polls are com- 
pletely wrong, there is a much 
larger number of French peo- 
ple ready to roll up their 
sleeves for Mr Delors - if he 
gives them the word. 


Balladur wants shorter presidential terms 


By David Buchan 

Prime Minister Edouard Balladur, who 
is expected to stand in presidential 
elections next year, yesterday 
suggested shorter terms for French 
presidents. He also proposed greater 
use of referendums in a programme to 
make France “more democratic". 

In a long article in yesterday's Le 
Monde - the nearest be has come to 
producing a manifesto In his 
undeclared candidacy for the Elys6e - 


Mr Balladur suggested suspending 
corporate contributions to political 
parties and politicians for a three-year 
trial period. 

However, speaking later before the 
National Assembly, he ruled out 
suggestions, even within his own 
government, of a government reshuffle 
to forestall further resignations. In the 
past four months, three ministers have 
been forced to resign just before 
magistrates placed them under formal 
investigation in political funding 


scandals. “In the present climate, any 
minister leaving the government would 
be suspected of doing so for reasons 
connected with. -the law.” he said. “I 
do not have the right to inflict such a 
moral penalty.” 

In his article, Mr Balladur disclaimed 
the idea that he was suggesting 
constitutional and political reform 
purely because France was entering its 
presidential election year. Such issues 
should be discussed more than just 
every seven years, he said. One reason 


for shortening the seven year 
presidential term was to “allow the 
people to arbitrate more frequently on 
the great national questions”. 

The ill health of 78-year-old 
President Franpois Mitterrand, in the 
last year of his second seven years, has 
underscored a widespread desire for 
reform. But Mr Bailarinr reflected the 
division of opinion among politicians 
in saying that he was (men to either 
reducing the term to five years or 
limiting presidents to a single term. 




of private an 



a better quality of life, a better 



j-ttracts more tarniiies. more families 


means a rename source 

of workers both now and in 


To say Telford is an agreeable place 
both to live and work would be an 
understatement. 

It is situated in some of Shropshire's 
most unspoilt countryside and commuting 
is a dream, particularly as Telford has over 
800 km of fast roads and only 6 sets of 
traffic lights. No wonder that this pleasant 
environment has attracted huge amounts 
of private investment. 

And also attracts young families. 
Telfords ivrccntage of people under 45 is 
higher than the national average. 

So while, in years to come, the number 



From 1994 to 2094 

vou can relv on a workforce in 

Telford. 


Mr-Mi* M" 
Comp.my _ 


Initial' 


Tb Tclfonl Enquiry Desk. Iordan House West, Hall Court. Hall Park Way, Telford TF3 

Title 

^Address, 


of school leavers will decline nationally; in 
Telford the numbers will actually increase. 

So you can be sure ot a young, willing 
and adaptable workforce. 

A workforce that has been well 
trained or which you'll find can be trained 
to provide the special skills your company 
may require. 

If you're considering relocation, see 
Telford, then decide. Vbu'Ii discover how 
quality of life dramatically improves 
quality of work. 

Call freephone 0800 16 2000 or com- 
plete the coupon for further information. 


4NN. 


, Postcode . 


JKV. 

-J^'Tel No.. 


. Fax Nlv. 


OSOO 16 2000 


14 


IPIl-UWnilWT ACFWVl 



FINANCIAL TIMES THURSDAY NOVEMBERS 


NEWS: EUROPE 


EUROPEAN BUSINESS LEADERS APPREHENSIVE OF GROWING ECONOMIC POWER OF ASIAN NATIONS 


Europe’s long 
term outlook 
gloomy but... 


Europe and the world: the view from the boardroom 


t bKABM • Ftecfacft. . : ;;;V ; 

{*& \ • ,W . •: • .. . •; 


By David Marsh, 

European Editor 

Nearly half the respondents in 
a survey of European business 
leaders published today thinic 
flhma and south-east Asia are 
likely to outstrip North Amer- 
ica and Europe in economic 
power by early nest century. 

Europe's leading industrial- 
ists are increasingly confident 
about the short-term business 
outlook, hut around one-third 
say they will continue to cut 
back their workforces. 

They show considerable pes- 
simism about the continent's 
long-term ability to stand up to 
international competition, par- 
ticularly from Asia. 

The survey was carried out 
among 1,500 companies in Ger- 
many, France, the UK, Italy, 
the Netherlands, Spain and 
Belgium by Harris Research 
for US-based United Parcel Ser- 
vice. 

Executives overwhelmingly 
favour more flexible labour 
laws to improve Europe's poor 
job prospects. Support for more 
flexibility in employment legis- 
lation is particularly strong in 
Germany, which has one of 
Europe's most regulated labour 
markets. 

Seventy per cent of compa- 
nies say Europe is not invest- 
ing enough in research, while 
56 per cent say investment in 
t raining is inadequate. 

Some 28 per cent of Euro- 
pean companies believe west- 
ern Europe offers the worst 
potential for manufacturing 
investment among the world's 
main economic regions during 
the next 15 years, while 75 per 
cent say south-east Asia and 
China will be the best area for 
investment. 

China topped the list by a 
wide margin or eastern and 
south-east Asian countries 
favoured as investment loca- 
tions. with 64 per cent of 
respondents naming it as the 
country with the greatest 
potential for investment The 
next most favoured country. 
South Korea, was cited by only 
7 per cent of companies, while 
only l per cent named Japan 
as the country with the great- 
est potential. 

Some 45 per cent of respon- 


dents think south-east Asia 
and China will be the world’s 
most economically powerful 
region in 10 to 15 years. 

While 41 per cent of compa- 
nies believe North America 
will have the strongest econ- 
omy by 2010. only 11 per cent 
believe western Europe will 

Business leaders are luke- 
warm about the European 
Union's capacity to help them 
improve competitive perfor- 
mance. A total of 45 per cent 
say the EU makes no differ- 
ence to their ability to com- 
pete. with 42 per cent saying 
the EU is helpful and 12 per 
cent it is a hindrance. 

German companies have the 
most positive view on the ElTs 
support for competitiveness, 
with British. Italian and 
French businesses the most 
negative. 

Asked about recipes for 
improving Europe's poor jobs 
outlook, 69 per cent of compa- 
nies argue for more labour 
market flexibility. Support is 
highest in Germany (91 per 
cent), the UK 177 per cent), 
Netherlands (69 per cent) and 
Spain (68 per cent). 

Only 12 per cent of compa- 
nies want government inter- 
vention to create jobs, but 17 
per cent back the levying of 
duties on countries with low 
labour and environmental 
standards - a view supported 
by 45 per cent of French com- 
panies. 

The survey offers widespread 
support for the idea of varying 
degrees of integration among 
EU states. Some 58 per cent see 
a “two-speed Europe” as 
acceptable in the short term, 
with 22 per cent favouring this 
in the long term too. Only 19 
per cent - above all. respon- 
dents in Spain and Italy - rule 
out the idea. 

Establishing a common 
European currency is seen as 
the main priority for the Euro- 
pean Commission by only 11 
per cent of business leaders. 
Asked what they think should 
be the main objective of Mr 
Jacques Santer, the Commis- 
sion's president-designate, 17 
per cent favour bringing down 
unemployment, while 10 per 
cent say they support closer 
European political ties. 


Tl»toort»tJPSau»Oir«s»3»swlOT 

• 1,808 jrrarvtewB carried out by 
• rimfc among EU txeipeap leodors 

arrf October lY, 

tSW. Swpcntfwas We refected tan 
; .. Expo's 1 5000 bustnams 

Jrinltf friamntfe . 

The Wooing count!#* 

, Mtxkxt Bdtfum htervtoiW). Gtaroany „ 


wiflycuF company's economic position be better 
or woree.t2 months from new? 


Na opts m sim ftfa twtar minus 9i worafr 




H olb rOoteHou^riotto^wFweB;. 
34^»Haf*ao,fftlwio«t 
Swmy. 1WW6UA,." 

OnttwjKjnstton' " 

Td (*1-9486011. CiX 061-3488336. 

Don foe EU help European cotxtpanies compete 
fngfotKftnartn&ft 





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What am the remaining barriers to free teatfa witttln 

1i»S» 


TOTAL Bel Gar UK Span Fates Be* Mb 

m c*> (mi m m w m w 

IMfeaAMfedfe « 44 34 IS S 15 15 42 

is 14 37 IS 21 6 T7 21 

Cuonqr 18 33 10 9 11 23 20 30 

P numUu fl fau i 17 28 18 7 23 9 19 27 


i* a 

ihar M mB a flnB 84 i wjrf .» :,*■ 


11 22 17 


6 12 6 


5 8 9 19 
10 2 10 10 


MStertsafe 


Which world region w» bo economfcafty most powerful 
and wMeft wB show e mi n t docfiiw over 10-15 yetta? 


Mora powerful 

(M) 


Socbl raptfflms 2 2 0 0 2 6 0 

Which world region otters the best/wnivt. potential far 
manu&cturtna fcwestmont? 



disL 1 




1 1 
1 1 


Said] East 
Ada and 
China 

Eastern 

Europe 

Central aid 
South 
America 



^^4 

1 


America 
South East 


Europe 
Coffla end 


a I 



IB 

j 

h 


18 




^ it 



...short term business confidence bubbles 


By David Marsh 

Business confidence in the 
European Union has gained 
ground substantially, led by 
optimism in Spain, the Nether- 
lands. Italy and the UK, 
according to the UPS survey. 

However, only one-fifth of 
companies plan to increase 
their workforces during the 
next 12 months, underlining 
how employment prospects 
across Europe remain bleak. 


A total of 72 per cent of com- 
panies believe their economic 
position will be better in 12 
months, with only 2 per cent 
saying it will be worse - the 
highest optimism rating since 
the survey was started two 
years ago. 

The net balance of compa- 
nies reporting optimism rather 
than pessimism about pros- 
pects has widened to 70 per 
cent from 4B per emit in the 
autumn 1993 UPS survey, and 


only 19 per cent in 1992. 

In Spain, 84 per cent of 
respondents believe their eco- 
nomic position will improve, 
compared with 80 per cent in 
the Netherlands. 74 per cent in 
the UK, 73 per cent in Italy and 
72 per cent in Belgium. 

However. 32 per cent of com- 
panies plan to reduce staff dur- 
ing the next 12 months, with 
only 21 per cent planning 
employment Increases and 46 
per cent saying their work- 


forces will remain the same. 
Propensity to reduce staff is 
particularly large in Germany, 
the Netherlands and Belgium, 
where respectively 53 per emit, 
37 per emit and 35 per cent 
forecast falling employment. 

In spite of relatively poor 
German job prospects, the sur- 
vey shows a marked increase 
in confidence in Germany’s 
position as a manufacturing 
base. Some 28 per cent iff 
respondents say Germany 


offers the best potential for 
manufacturing in western 
Europe, with Spain favoured 
by 18 per emit of companies 
and Britain by 13 per cent 

Among eastern European 
countries, the Czech republic is 
seen by 32 per rant of compa- 
nies as offering the best poten- 
tial for manufacturing invest- 
ment, followed by Poland (22 
per cast) and Hungary (20 per 
cent). 


Conde’s fall felt in Wall Street and the palace 


By Tom Bums in Madrid 


A s the legal noose tight- 
ens on Mr Mario 
Conde, the repercus- 
sions will be felt from Wall 
Street, home of JP. Morgan, 
the prestigious US investment 
bank that became the Spanish 
banker’s firm ally last year, to 
the Zarzuela Palace, home of 
King Juan Carlos where Mr 
Conde was a welcome visitor. 

On Tuesday, a Madrid high 
court prosecutor accused the 
former chairman of Banco 
Espafibl de Crtdito, Banesto, of 
criminal fraud, together with 
nine close associates who were 
senior Banesto executives. 

Mr Conde, who was dis- 
missed as Banesto chairman 
by the Bank of Spain, the cen- 
tral bank, at the end of last 
year, was yesterday under vir- 
tual house arrest at his Madrid 
town mansion. High court 


judge Mr Manuel Garda Cas- 
teflon who is likely to begin 
questioning Mr Conde next 
week before deciding whether 
to charge him, has ordered 
police to monitor the banker's 
movements. He may not leave 
the country. 

Full details of the criminal 
fraud accusation have not been 
released but the allegations 
made by the prosecutor centre 
on a web of intermediary com- 
panies, controlled by Mr Conde 
and the associates accused 
with him, that bought and sold 
assets within the banking 
group. 

If the flamboyant, 45-year-old 
financier was unreliable, as is 
alleged by prosecutor Mr Flo- 
rentino Orti and believed by 
members of a parliamentary 
commission that has investi- 
gated Banesto, should JP. Mor- 
gan have helped Banesto raise 
more than $700m from the 


intemational markets last 
year? 

If Mr Conde defrauded Ban- 
esto’s shareholders during his 
six-year stint as chairman of 
the bank, as alleged, just how 
gullible were the business, 
political and media figures who 
danced to his tune for so long? 

Mr Conde was dismissed as 
Banesto chairman by the Panic 
of Spain after an official 
inspection discovered that the 
bank had overvalued its 
Pta7,000bn <$61bn at the time) 
assets by Pta503bn. The Bank 
of Spain, which also removed 
Mr Conde's follow board mem- 
bers, said the “support of the 
entire banking system" was 
required to refloat Banesto. 

In April Banesto was 
acquired by Banco Santander 
after some Pta780bn in public 
and private moneys had been 
spent on saving it 

Less than four months before 


Mr Conde's dismissal, JJ*. Mor- 
gan had managed a two-part 
equity-raising exercise that 
brought $775m of fresh capital 
into Banesto. Among the new 
Banesto shareholders was the 
Corsair fund, a US portfolio 
run by J-P. Morgan which 
invested $175m in Mr Conde's 
bank. 

The summer of 1993 saw Mr 
Conde at the pinnacle of his 
professional and social career. 
He entertained the Spanish 
royals aboard bis yacht. 

A few weeks earlier the irre- 
pressible Mr Conde had 
received an honorary doctorate 
from Madrid University and 
had delivered a lecture on the 
responsibilities of civil society 
to an audience that included 
fellow bank chairmen, media 
moguls, members of the gov- 
ernment, ambassadors and 
King Juan Carlos himself. 

It all ended suddenly when 


the Bank of Spain moved 
against Mr Conde. What has 
happened between Mr Conde’s 
dramatic removal from Ban- 
esto and the formal accusation 
delivered to the Madrid high 
court is that a tale of bad bank- 
ing has become one of fraudu- 
lent financing. 

Last December the Bank of 
Spain said it had acted against 
Mr Conde because of “gross 
negligence" in the running of 
Banesto. In June the Bank of 
Spain reported that Banesto's 
problems appeared to have 
been based on issues that went 
well beyond mismanagement 

Two weeks after he was 
ousted from Banesto Mr Conde 
rejected the Bank of Spain's 
evaluation of Banesto’s loan 
portfolio and claimed that he 
was on course folly to restore 
the bank’s balance sheet under 
a rescue plan agreed with J J. 
Morgan. In September Mr 


Conde published a book that 
restated these claims and 
added new ones; his downfall 
had been plotted by those in 
the establishment who feared 
his political ambitions. 

However over the past 
months the public prosecutor, 
with the aid of two Bank of 
Spain inspectors and of the 
new team running Banesto, 
has built up a case which 
alleges that Mr Conde and his 
associates enriched themselves 
at the expense of Banesto's 
shareholders. Members of the 
separate parliamentary inquiry 
into Banesto's collapse, and 
who are due to Issue their 
report soon, say they have 
reached the same conclusion. 

Banesto's present chai rman 
Mr Alfredo S&enz told the par- 
liamentary commission last 
month: “In Banesto there have 
been cases in which money has 
not been lost: it has disap- 



Conde: says downfall plotted 

peered and somebody has it” 
Unravelling Mr Conde's busi- 
ness dealings in Banesto will 
occupy judge Garcia CasteflOn 
for months. The judicial pro- 
ceedings will backtrack on a 
trail that started in 1987 when 
Mr Conde and a partner sold 
their bulk chemicals company 
and used the the proceeds of 
the PtaG5bn disposal to buy 
into Banesto, making Mr 
Conde chairman. 


By Simon London, - 

Property Conwpondonl : . r y* y: 

The European Union.:, la 




which govern the amount at' 
capital banks have to set aside 
against commercial properly 
loans. There are loans of- 
EcuSSObn (£ 45 flm) to the EU. 

Under the terms of a deed 
agreed by EU governments In' 
1989, banks in Germany, Den- 
mark and Greece provide, only 
half the amount of : capital 
a gBind immiiia eM -mortgages 
as their counterparts in other- 
member states. 

The regulations most, he har- 
monised. by 1 January 1998. 

BaniM in the three countries 
could be asked to set aside: an 
estimated Ecu4.7bn additional 
capital to bring them Into Une. 
Alternatively, the rales which 
apply in these countries could 
be introduced across the EC.. . 

Any change could have a 
marked impact on the struc- 
ture of corporate lending to : 
Europe and on the behaviour 
of pr operty markets. - 

The European Commission 
has asked a group fririmBng 

Britain's Royal Institution at 
Chartered S u rveyors, Cfty Uni- 
versity Business School, West: 
Deutsche Landesbask and 
Compagnie Bamako to 
consider whether the roles dis- 
tort the mar ket and whether 
they should he removed or 
applied generally, which 
would have the. effect of 
increasing banks’ capacity to . 
lend against property. . . 

Mr Peter Champness, who 
will chair the research panel 

on behalf of the Royal Institu- 
tion, said: “German banks 
would be particularly affected 
by a requirement for higher 
ratios and their exposure to 
p rop erly- related lending is sig- 
nificant throughout Europe." 

Tim European Mortgage Fed- 
eration, which represents 
mortgage banks, said that 
institutions in Germany, Den- 
mark and Greece would have 
to reduce lending activity and 
increase interest rates by 
about (L2S percent if they are 
forced to set aside additional 

capital. 

It is calling for the lower 
capital requirement which 
applies in these countries to he 
extended to all member dates. 

.The Federation argues that 
mortgages are less risky ftm 
other forms of commercial 
lending if professional prop- 
erty valuations are carried out 
and regulations governing 
loan-to-value ratios are In 
force. 

For example, commercial 
mortgages only qualify for the 
lower capital requirement in 
Germany if the sum borrowed 
does not exceed 60 per cent of 
the value of the property. 

Some national bank regula- 
tors are likely to oppose such 
a change on the grounds that 
it would take the EU out of 
step with international bank- 
ing regulations. 

The Basle Accord on capital 
adequacy, whicb sets capital 
requirements for toternattooal 
batiks, treats mortgages in the 
same way as other commercial 
loans. The Federation said 
that the Basle regulations 
were designed, to cover large 
international banks while 
European legislation deals 
with national institutions 
which are not exposed to the 
same risks. 


Miami 

International 

Airport 

has 

Miami International Airport, die Gateway 

landed. 

European Business Office. For trade, 
tourism and business development 
opportunities, contact us today: 

In Europe. 

Miami International Airport 

European Office 

Jose Abascai, 57, 28003 Madrid, Spain 
Telephone: 34 (1 ) 399 3 1 49 

Fax: 34 (1) 442 56 61 


GER MA N 

Relevant, inielligcni and reliable 
German Brief, the week I v liniilish 
language newsletter covering 
German polities, economy and 
commerce Kir the internal ionai 
bu s i n css co mmtinilv. 


"If you 7v really serious i/hm/f do in-’ 
n us ! ■ i<rs.s ( /er/m / uy. l !i < ■a van \ h au ! cl 

' in c - A .■ 1 < err man Hr •/. 

Toni f*crcrs . 

Author; “In Srareh of IZxs elleitee ” 


FT 


\ IN \XCi \1 riMKS 


•brief 


Opportunities, Ideas, Analysis. 
Forecasts, News Sc Opinions. 

LR M T7fnJf a ^f' Ef rrnan 8 ? er rtt P° rtB oudualvely on Uia issue, 

I£r rro ” * «— 

• Key political issues 
» Regional rules and opportunities 
- Industrial rating analyses 
- Import-export trends 

- Company profiles 

* Le a d i n g economic indicators 

- Regulatory policy 
* Current events 

- Capital market and currency movements 
For exporters, importers, strategy planners, iniwcimo. 

55 Ss 3 E==«==S=&- 

"A 1 **? me v «y informed" 

a "*" 

Te iHdn • FREE 












financial times Thursday November 17 1994 


5 





NEWS: THE AMERICAS 




Inflation in US slows 
to annual rate of 2.6% 

Fall is likely to anger Fed’s critics 

u? iS???! 8 Graham per cent in October and have Bank of Dallas estin 


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“ril l? 5 «f,i 

j;-v 


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v.rv ci .Trr ,c =ft*fc 

“ ,j: 5 iste 

■ - — 


By George Graham 

*° Washington 

£15?^ slowed a8®“ »ast 
mon^. Je Labour Department 
reported yesterday, giving 
fresh ammunition to critics of 
the Federal Reserve’s decision 
on Tuesday to raise interest 
rates by y, of a percentage 
Ptnnt in order to head off infla- 
tionary pressures. 

The consumer price index 
rose by 0.1 per cent in October 
the department reported, the 
smallest monthly increase 
since April. Over the last u 
months the Index has risen by 
just 2.6 per cent, much slower 
than September’s year -on-year 
inflation rate of 3.0 per cent 

Excluding volatile food and 
energy prices, the inflation 
index rose by 0.2 per cent in 
October for a year-on-year 
increase of 2A per cent. 

Food and drink prices 
remained unchang ed in Octo- 
ber and have increased by 22 
per cent over the last 12 
months. Energy prices fell 05 


per cent in October and have 
gained just 0.4 per cent over 
the last year. 

Apparel, upkeep and trans- 
portation prices fell in October, 
while medical care, entertain- 
ment and other goods and ser- 
vices increased in price. 

Although yesterday’s figures 
showed that inflation remains 
restrained, the Labour Depart- 
ment announced yesterday 
that it p lanned to nwifce signifi- 
cant changes to the way It cal- 
culates the indeig which many 
economists, including the Fed- 
eral Reserve, believe overstates 
the real rate of inflation 

The changes will address the 
way prices are calculated for 
food eaten at home, rents and 
patented drugs. 

But critics of the index say 
that because the Labour 
Department still uses fixed 
weights for the basket of goods 
and services included in the 
index it will still exaggerate 
the rate of inflation. 

A recent study by econo- 
mists at the Federal Reserve 


Bank of D allas estimated that 
several different biases cause 
the CPI to overstate inflation 
by just under 1 per cent a year. 

A downwards revision in the 
inflation index could help the 
federal government keep its 
budget deficit under better con- 
trol, because the index is used 
to calculate cost of living 
adjustments for government 
wages and retirement pay as 
well as social benefits such as 
social security pensions. 

In a separate announcement, 
the Commerce Department 
said business inventories rose 
in September for the sixth suc- 
cessive mouth, increasing by 
0.5 per cent to a seasonally 
adjusted total of $907.2bn 
(£553.1bn) 

Inventories have risen 
sharply in recent months, but 

they remain at historically low 
levels, and the ratio of invento- 
ries to sales climbed only 0.01 
from the historic low it 
reached in August to 1.4 in 
September, 


Cardoso secures clear win 
j3"tP5 in main Brazilian states 

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- 


By Angus Foster in S3o Paulo 

Brazil's president-elect Mr 
Fernando Henrique Cardoso 
emerged as the biggest winner 
from Tuesday’s gubernatorial 
elections after cHnriiHntng from 
his centre-left Social Democ- 
racy party (PSDB) won in two 

of the country's most impor- 
tant states and looked set for 
victory in a third. 

The PSDB’s strong showing 
should help Mr Cardoso attract 
support to build a majority in 
Congress and wifi strengthen 
his bargaining power in negoti- 
ations over appointments to 
his government, set to take 
office on January l. 

The PSDB’s most important 
victories came jtn the- state of 
San Pardo, where former -sen^' 
tor Mr MSaio Covas won easi l y, 
and in Minas Gerais, where Mr 
Eduardo Azeredo was pro- 
claimed winner with more 
than 90 per cent of votes 


counted. In Rio de Janeiro, 
where vote counting was pro- 
ceeding very slowly, exit polls 
showed the PSDB candidate to 
be the dear winner. 

Control over these three 
states, which account for about 
60 per cent of Brazil’s GDP, 
should help Mr Cardoso main- 
tain the fi ght a gainst inflation 
and underpin the new Real 
currency, which he planned 
when finan ce minister. 

PSDB candidates were also 
declare d to have won in the 
northeastern state of Sergipe 
and to be well ahead in Paid. 
Including a state won in first 
round elections last month, the 
PSDB now controls six of Bra- 
zil’s 27 states, compared to 
only one before the polls. Only 
the Democratic Movement 
(PMDB), Brazil’s biggest politi- 
cal party, controls more states 
and looks set to elect at least 
eight governors. 

In Rio, where the army took 


to the streets and manned poll- 
ing stations following wide- 
spread fraud at aborted elec- 
tions last month, voting was 
peaceful The restaged elec- 
tions, for state and federal leg- 
islators, delayed vote counting 
in the gubernatorial race. Once 
counting is completed, the 

army is likely to prepare its 
next move against the city’s 
drug traffickers, approved by 
the federal government two 
weeks ago. 

The left-wing Workers Party 
(PT), whose candidate Mr Luiz 
Inftcio Lula da Silva lost to Mr 
Cardoso in the presidential 
race, succeeded in electing its 
first ever governors. The PT 
won the small southern state 
of Espirito Santo and a second 
candidate looked set to win in 
the capital. Brasilia. 

The big loser was the right- 
wing Liberal Front party, 
which appeared to have won 
only one state, Bahia. 


Venezuela opens its oil 
sector to private capital 

Exploration tenders sought for first time since 
nationalisation in 1976, writes Joseph Mann 


• ' - —■*“ ” * . 


™ * j n - „r--c 

;; 

' . . 7 ..-. •.= 



v,** 

- ,di rop.^ 

t*" * ...j- 


V -V- 

, * * * . -.I- ' 




-fS^Tb-ry ' L /- 


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t 

^ m 1 4 * 


V enezuela's national oil 
company has developed 
a programme to open 
its exploration and production 
sectors to private capital for 
the first time since the oil 
industry was nationalised in 
1976. 

Fetroleos de Venezuela, 
PDVSA, plans to seek tenders 
on profit-sharing contracts, 
under which private compa- 
nies will be allowed to explore 
about 10 geographical areas 
onshore and offshore. 

Successful companies must 
finance all exploration them- 
selves. If commercial quanti- 
ties of crude oil or natural gas 
are discovered, the private 
investor will then, set up a joint 
venture with one of PDVSA’s 
operating subsidiari es - C or- 
poven, Lagoven or Maraven - 
to develop the new fields and 
market the oil internationally. 

If no oil or gas is found in 
commercial quantities, the pri- 
vate party bears the loss. 

The PDVSA plan must still 
be approved by the cabinet of 
President Rafael Caldera and 
by a joint session of the Ven- 
ezuelan Congress. PDVSA offi- 
cials expect no -big problems. 

PDVSA, one of the world’s 
largest oil companies, has 
extensive proven reserves of 
heavy crude oil and bit umen , 
but wants to boost its reserves 
of higher-value light and 
medium crudes to stay compet- 
itive internationally. At end- 
1993, PDVSA' s proven reserves 
of crude oil stood at 64Jbnoar- 
rels, the largest in the western 

^Exec^i^s at PDVSA say 

geological and seismfo studies 
indicate that the country stall 
has large, undiscovered depos- 
its of light and medium crude 
oils. Exploration otto J® 0 ®* 
promising areas by PDVSA on 
its own would require cartel 
investments of $6btt-Sbn. tak- 
ing more tban^yema- 
However, PDVSA exiwvw 
that if private investors join 
the effort to find oil, explore 

tiaa of these same areas courn 

be completed in 10 years, with 

all exploration investment paid 
for by private complies- 
The areas to be put up for 
tender could hold between 7bn 


A Royal Dutch Shell 
subsidiary today hands back 
an important oil concession to 
Colombia’s state-owned oil 
company, JScopetroI, after the 
gove n n a mt declined to extend 
its operating contract, reports 
Stephen Fidler. 

The subskfiary, Hocol, took 
over the 16,000 bpd concession 
from Texmeco tn 1988. The 
concesafoivNieva 540, consists 
of. 10 fields and 134 oil wells 
about 150 miles southwest of 
Bogota. Hocol said it was dis- 
appointed and would appeal 
against the decision. 

The move follows an unsuc- 
cessful round of oil and gas 
tenders this year, in which 
bids were submitted for only 
four of the 21 exploration 
blocks on offer. 

Mr David Battman. of Con- 
trol Risks Group in London, 
says security remains a con- 
cern for oil companies operat- 
ing in the .cou n try. Bnt after 
having "shot itself in the foot 
over Shed”, the government 
must be “seen to make more 
effort to entice foreign capital 
and expertise with more 
attractive contract terms and 
guarantees bn taxation lev- 
els,” he said. ' 

and 23hn barrels of lightyme- 
dinm crudes, plus lO.OOObn 
cubic feet of gas, according to 
estimates made by PDVSA 
after a British Petroleum sur- 
vey. 

Winning bidders will be cho- 
sen on the basis of how much 
of their future after-tax profits 
they are willing to hand over 
to the state if they find ml and 
gas. PDVSA says that accord- 
ing to risk contacts offered in 
other countries, the state keeps 
between 71 and 38 per cent of 
after-tax earnings, with the 
remainder going to private 
investors. 

In developing its proposals, 
PDVSA has been mindful of 
the Mure of this year’s round 
of ml and gas tenders in neigh- 
bouring Colombia. But wMle 
international oil companies 
such as Exxon, Shell, BP, 
Amoco and others have shown 
considerable interest in the 
Venezuelan plan, they have 


some reservations. 

For example, some would 
prefer a transparent mecha- 
nism that would reduce their 
payments to the state to 
encourage them to develop 
profitably any smaller, more 
remote fields. The government 
is working on a plan which 
would offer possible post facto 
reductions in royalty payments 
in such cases. 

Companies have also 
expressed concern about gov- 
ernment policy, including 
strict controls on foreign 
exchange transactions and the 
suspension of constitutional 
rights to private property. 

PDVSA and the government 
are working cm possible solu- 
tions. PDVSA managers point 
out, for example, that when 
investors are ready to repatri- 
ate profits, probably in several 
years, exchange controls 
should have been lifted or soft- 
ened. 

“Venezuela is without doubt 
one of the most attractive 
countries for risk investment 
in exploration,’' said the local 
representative of a US oil com- 
pany. “If PDVSA can work out 
the kinks, they should receive 
a strong response from bidders, 
and could obtain several bil- 
lion dollars in exploration and 
development capital over the 
next decade." 

Venezuela has been slowly 
opening up its nationalised oil 
industry fat the last few years. 
Under the previous govern- 
ment, private oil companies 
were allowed to produce crude 
and natural gas under operat- 
ing contracts in so-called mar- 
ginal (relatively small) oil 
fields. But in thke cases, the 
operator is paid on a per-barrel 
basis by PDVSA; the oil does 
not belong to tbe private inves- 
tor and most be turned over to 
PDVSA. 

Several important joint ven- 
tures between PDVSA units 
and foreign companies have 
been established in producing 
natural gas and upgrading 
heavy oil, but none has begun 
to operate. Until now, explora- 
tion for and production of 
crude oil (for eventual sale) 
had been off limits to private 
Investors. 


Cubans 
court UN 
rights 
watchdog 

By Pascal Fletcher In Havana 


The United Nations' top 
human rights watchdog began 
a visit to Cnha yesterday by 
meeting political dissidents 
nho^d of formal talks with tbe 
Cuban government. 

Mr Jos4 Ayala Lasso, the 
Ecuadorean diplomat newly 
appointed UN high commis- 
sioner for human rights, was 
in Havana at the invitation of 
the Cuban government, nor- 
mally sensitive to interna- 
tional criticism of its human 
rights record. 

Reacting to Mr Ayala's meet- 
ing with the three moderate 
dissidents, Mr Roberta 
Robaina, Cuba's foreign minis- 
ter, said the official was free 
to speak to whom he wished. 
“We want to show the world 
that, as far as human rights 
are concerned, Cuba bas noth- 
ing to hide." 

Mr Elizardo Sa nchez, one of 

the dissidents who met Mr 
Ayala, said they gave him a 
list of 1,195 persons allegedly 
being held in Cuban jails for 
political offences ranging from 
rebellion to criticising Cuba’s 
one-party communist govern- 
ment and leadership. 

Mr Rnhaina gaid tbe H uman 
rights issue was being manipu- 
lated by the US In a politically 
motivated propaganda cam- 
paign against Cuba. US-spon- 
sored resolutions passed by 
the Geneva-based UN High 
Commissioner for Human 
Rights have condemned the 
widespread jailing of political 
dissidents and other rights 
violations on the island. Other 
human rights organisations 
have made similar charges. 

Mr Ayala risks angering his 

Cuban hosts if he endorses 
existing accusations against 
Cuba, but he could be accused 
of pandering to the govern- 
ment if he fails to probe 
alleged rights violations. 

The Cuban government was 
expected to press its argument 
that one of the biggest viola- 
tions against the rights of (he 
Caban people was Che US eco- 
nomic embargo. 



Clinton: should Washington provide credits for US arms safes? 


Export credit debate holds up rethink, reports George Graham 


US arms policy in firing line 


T he Clinton administration's plans to 
draft a new policy on arms sales 
overseas remain hobbled by an 
argument over whether to provide govern- 
ment financing to arms exporters. 

A draft presidential security directive cm 
conventional arms transfers, originally 
intended to be completed by the end of last 
year, has been sitting in President Bill 
Clinton's in-tray at the White House for 
nearly two months. 

Although the different government 
agencies that have contributed to the 
review have reached general consensus on 
most of the policy, they remain divided 
over the question of an export financing 
facility. 

The defence industry has lobbied hard 
for an agreement that would give them 
access to export credit guarantees once the 
US government has decided cm national 
security grounds whether a particular 
weapons system can be sold to a particular 
country. 

Administration officials involved with 
the directive say there has been “no recent 
movement" towards a decision, but 
re main hopeful one can be taken soon. 
However, Mr Clinton will have to resolve 
the export finanring dispute between gov- 
ernment agencies before he signs the 
directive. 

“It's an important issue, but it's not 
driven by an immediate crisis, like every- 
thing else around here," g*iii one adminis- 
tration official. 


“It's chicken and egg. We cant have an 
export financing facility until we have a 
conventional arms transfer policy, but one 
of the reasons they’re having trouble with 

the policy is that they are held up on 
export financing." said a defence industry 
executive. 

The basic lines of the directive are 
understood not to differ much from exist- 
ing policy. 

“The basic reason for selling weapons 
overseas has been to advance our foreign 
policy goals. It will remain to advance our 
foreignpolicy goals," said Mr Kenneth 
Bacon, the Pentagon spokesman. 

Nevertheless, the draft directive 

InrindM a l wwmmffnriatin n that *lig US 

pay explicit attention to the strength of 
the US defence industrial base in Its deci- 
sions. 

Mr Bacon said no decision had yet been 
taken on the industrial base issue, but 

insisted that foreign policy considerations 
Would remain Hnrnlmmt , 

"You can have a decision to seQ a cer- 
tain type of weapon and then still face a 
number of decisions on exactly which 
weapon is sold. . .Those can be decided an 
a range of other issues that are below the 
central foreign policy consideration,” Mr 
Bacon said. 

Industry officials say the industrial 
base issue is unlikely to make much 
difference, since most arms sales 
are made to dose allies where little contro- 
versy arises. 


“We're not going to start selling aircraft 
to Iraq in order to keep one of our fighter 
lines open," says Mr Joel Johnson, 
vice-president for international affairs at 
the Aerospace Industries Association, a 
Washington-based trade group. 

The issue of US arms sales has become 
more sensitive in the tight of recent statis- 
tics showing that the US has become the 
world’s leading arms supplier. Between 
1990 and 1993, according to a study by the 
Congressional Research Service, the US’s 
share of world arms sales rose from 42 per 
cent to 70 per cent 

Industry officials point out however, 
that much of this apparent sings results 
from an increase in arms exports to Mid- 
dle Eastern aTHm in the aftermath of Des- 
ert Storm and from the dwindling erf Rus- 
sian exports. 

The Pentagon says that US overseas mil- 
itary sales de clin ed from S33 _2hn (£20-2bn) 
in the 1993 fiscal year to J32Jbn in fiscal 
1994, which ended on September 30. 

These sales are expected to range from 
$9bn to 910.5bn over the next three 
years. 

But overseas sales are going to be partic- 
ularly vital in an environment whore the 
Pentagon's own military procurement has 
halved and where Mr John Deutch. the 
undersecretary of defence, is on the point 
of deciding which of a long list including 
virtually all the big weapons systems 
under development should be axed. 


ADVERTISEMENT 


INVESTING IN SOUTH AFRICA 


South Africa accounts for 75 percent 
of Africa’s insurance market 

Paul Heinamann, managing director of the Price Forbes Group, talks to John Spira, 
Business Editor of a leading Johannesburg newspaper. 


Spire: Has Ike focus of your business activities changed in the 
past 12 mouths? 

Heinamann: Broadly spcaUnj;. no. The fixup operates in four 
arras: 

* PFV Insurance Broker*., which, together with Corporate 
Risk Management CimMiluuilv strive- 10 offer die most 
comprehensive and beneficial -oIuiumk ui risk-related 
problems. 

* Alexander Forties Consuluniv A Actuaries, which aims lo 
provide the highest quality of empfuyee benefit consul- 
tancy. actuarial services. aJminisir.il i>m mid financial 
planning advice and health euiwuluncy 

* Forbes Reinsurance broking Services, which provides 
reinsurance administration, pmlvciioa and coverage 
service*. 

* Integrated Risk Consultants, which specialises in risk 
financing consultancy and related pnxluctt, captive 
consultancy and insurance company mujugcmeni 

One change in ihe past 12 months was the exchange nl" our per- 
cent holding in Medicaid Administrators for a minority sharehold- 
ing in Medwhemc. South Africa's market leader in medical 
scheme administration and healih can: management services. 

So we're now purely investors in the medical sthenic business and 
this has -o moshui changed the profile of the comp in Ituu we used 
to coiboJidnic Medicaid Administrators and this is no longer the 
case. 

Addiuonally. »e'ic expanded and altered the nature uf our British 
opera! ion. 

Price Forbes Croup employs 2.750 people in 2h aflicci situated in 
most of Souih Africa's principal ln*ns and cutes and ls active 
abroad through its association with foreign companies. 

Our clients, which include more than RO uf ihe country's largest 
100 slock exchange- listed companies, extend Iron) industry and 
LimriKTiv l hit High in ihe agricultural, mining and punisuiuJ sector. 
and in the individual. 

We'iv South Africa's largest insurance brokers, nxk management 
consultants and employee benefit consultant- 
Group retained brokerage and far* amount to more man R4fiu mil- 
lion. which ranks us among the largest firms of our type in the 
world, excluding the mega Alphabet-Brokers 
Price Fortes is a Sxith African company with Souih African share- 
holders. Our Stall owns 12 percent of the equity No single share- 
holder has control — a lacmr which gives us operating indepen- 
dence. 

Spire: The Increased incidence nf crime in South Africa has 
impacted negatively on the results of the country' 4 Aon |cna 
insurers. How has this affected Price Forbes? 

Hanamann: We're seeing a major deterioration in insurance com- 
panies' results. There are increased levels r«f ciwem as lo whether 
they should underwrite certain classes of business, hut at this stage 
it hasn’t affected us directly as brokers U would have affected us 
if we souUIn't iirul ways of insuring nur clients. But that hasn't 
happened ami I'm hoping it won't happen. 

One of the main areas at levied by crime is personal lines insurance, 
when; we've atiualjy X hm*n grind growth. 

It isn't a solely South African problem. In Germany, lor example, 
certain insurance companies won't insure car. fur Ihefi. Elsewhere 
in WcsJem Hu rope i here's also been a sen oils escalation in crime. 

Spire: How would you characterise Ihe outlook for your group 
over the next 1 2 months against the background of Ifte changes 
that are uking plan in Suulh Africa? 

Hriranuuin: Wu see new threats from the changed environment: 
but we alv* see new opportunities. On tuljncc. we believe cur 
group will keep un growing 

At pa-waif, billowing a |wruul "f rapid growth, we're going 
through a iimsnlidaiiun phase us »e determine certain strategies. 
The vast bulk >>t our business is conducted in South Africa; it will 
LTKiunue that way in an environment whore South Africa has re- 
entered the gluM economy 

Tbtniivlrcally. there wifi now he inure jniemaihinaf players in 
South Africa though we haven't vet wen much nf this. 

With the puis [xvi uf niuliiruitiutuls entering South Africa (or the 
first lime, of returning hoc. there voukJ he scofx- fnr additional 
business for us But such a laud could also enhance competition, 
because brokers fend in follow their clients 
Anutiivr change- in the environment has hevn the emergence nf sev- 


eral black brokerage firms. 

This could have an impact on our business, though obviously we 
are iUraicgbing so as to be as well placed as [Xissibic- Here Tin 
talking of strategies that will assist in the process or change in 
South Africa. We're doing so because we want to — and also for 
business reasons. 

Spire: Has youur new venture Into Britain produced the desired 
results? 

Hriwamanm It's exceeded nur expectations. 

A year ago wc had 100 percent of our own small business in 
Britain. Towards the end of last year our London company entered 
intu an agency agreement with Nelson Hurd, a London broker with 
in vestments in South-East Asia and Latin America. In terras of that 
relationship they look our wholesale insurance broking staff in 
London. We now earn a profit on the business they handle on our 
behalf. That’s working very well. 

Simultaneously, wc reinforced our lone, in the retail area, where 
we have considerable expertise. We only entered tbe wholesale 
arena to establish a presence. We formed a 50/ SO joint venture 
(under our leadership) with Nelson Hurst to do retailing to corpo- 
rations in the UK and Europe. 

At tbe same lime, we acquired on option to acquire 49 percent of 
Nelson Hurst's braking company providing retail services in the 
UK. Our plan is to exercise that option as soon as wc are able. We 
would then hare a sizeable stake in Nelson Hunt UK. 

We have a satisfactory share of the business of South African com- 
panies with investments in Europe. We're now successfully look- 
ing at British business. 

we budgeted for a loss in that joint venture, bin it looks very much 
as though weTI make a profit in our first year. 

Cm on the Nelson Hurst pfs 1 board and Nelson Hunt's chairman is 
on our board We've found a company with which wc want to work 
and which needs our skills and not our money. Thai's why it's 
worked well. 

Nelson Hurst is strong in certain niche markets and geographically 
(notably in South-East Asia and Latin America I bat not in terms of 
the risk management services wc provide. Hence we're formed 
another joint venture in the LiK (with Nelson Hurst) specialidng in 
risk management. This will service Nelson Hurst's operations 
worldwide. 

The whole arrangement is complementary. 

Spira: Have you experienced heightened (merest in yttnr ser- 
vices rnm foreign organisations? 

HeinaiBana: Not in South Africa (though we have overseas), 
because foreign investment in South Africa has been a slow sinner. 
I remain encouraged that we shall see investment coming into 
Suulh Africa — perhaps from unlikely sources. South-East Asia, 
for example t Malaysia and Indonesia) could wdl be invesijpg here 
before loo lung. 

I think South-East Asia will become a more understanding sourer 
of invcameni — possibly imderMurufing South Africa better than 
Ihe Wed Europeans do. Their altitude is that South Africa is going 
to work and they're happy to help us make it work. 

South Africa needs ju« enough foreign imrannent to ensure the 
country points in the right direction. Thereafter it will btlifd up its 
own momentum as others start climbing in on the investment band- 
wagon. 

Spin: Are yon bndgetiBg for growth hi the Sooth African 
economy a the year ahead? 

Hrinamann; Yes. And our group is budgeting for IS percent 
growth (about 5 percent real growth) next year. 

Spira: Whal do ytw Me as the main obstades to Sooth Africa 
reaching Its fufl potential? 

Heinamann: Firstly financial discipline and secondly confidence. 
But while these ore near term obstacles. I think they will be over- 
come. I really do beheve it wil happen Tor South Africa. 

The country ion settled down very wisff. Many have forgotten jun 
where wc were nine months ago. Wc experienced a miracle and 
now they expect n to happen all the lime. 

There's still a lot of politicking going on. Some anas of govern- 
mcni are able to be more effective than ulhers. That's a difficulty. 
The country soil needs a chance to settle down. 

Ora main bull point is the top leadership hi tbe form of President 



Pout Heinamann 

NcImmi Mandela and the financial authorities. Although Derek 
Keys's resignation was a shock, I haw a high regard for and every 
confidence in the new Minister of Finance. Chris Uebenbetg. 

Spira: How do you see South Africa’s future role tat Ihe brood- 
er African context? Does Price Fordo, too, have a role to play? 

Hrinamann-. South Africa won’t rush in to Africa. Wc have too 
many priorities of our own. Nrisoo Mandela has demonstrated that 
philosophy himself. 

Gradually, however, we will begin to play a huger rote in Africa. 
The leg mining house*, already active in many countries on the 
continent, will become more active. Some of South Africa's big 
contracting firms are getting contracts; they'll get more. 

1 haven't seen a singe or businesses rushing northwards, but I 
believe it will take place — gradually. 

Internationally, companies looking to do business in Africa we die 
place to be as Johannesburg and this will hive positive spinoffs for 
South Africa and in neighbours. 

Price Forbes is certainly imcreNted in Africa. We've become mem- 
ben of ihe African Insurance Organisation (wc were only allowed 
to join after South Africa became a member of the OAU). 

We will follow our clients into Africa. 

We've formed two joint ventures — one in Kenya and another in 
Zimbabwe — nuinly on the reinsurance front, though doing risk 
management and other work as well. We can do a kx or the work 
they've been buying Tram London much more cheaply. 

I believe Anglophone Africa will increasingly look to Sarah 
Africa. Significantly. South Africa accounts fur 75 percent of insur- 
ance business written on the continent of Africa. 

We're not talking of South Africa trying to dominate; it's a ques- 
tion of expertise and eapadty. 

Spira: What progress is Price Forties making on tbe affirma- 
tive action front? 

Hrinamann: Slower than we would like, though still positive. 

On the short terra insurance broking side, ibe majority (75 to 80 
petcetnj of our univendty graduates are young Mack people. In 
addition, we have a school -leaving cadet training scheme. Most or 
our group companies are devoting full-time resources to affirma- 
tive action. 

And we've entered into alliances with black insurance broken — 
relationships we'll continue to develop. 

Spira: Why should a foreign company ottering South Africa 
seek tbe service* of Price Forbes? 

Heins 


: Were the one organisation in South Africa dun could 
provide the full range of services they would require. And wc knww 
rm*di rnor: about i(us countty than anyone doing the touiocss from 
overseas; we could be of teal added value to them. 


PRICE FOKBES GROUP 
Price FWfees Group (Pty) Lid 
25 Sauer Street Exl. Johannesburg 2001 
P.O. Box 61689, Marshalltown 2107 
Tel.: Wll (637-91 II. Fax: (Oil) 838-1010 


f 



-'i- 



6 


NEWS: INTERNATIONAL 




Achievement boosting growth 
to 8.5% warmly endorsed 


Vietnam gets 
$2bn in new 
assistance 


Kenya does a tidy-up before investors nr|i| 

Leslie Crawford weighs economic reform commitment on day of London conference 


By David Buchan in Parts 


Vietnam was yesterday 
promised SZbn (£l-26bnj in new 
assistance at a foreign aid 
donors conference in Paris 
which warmly endorsed the 
country's achievement in 
boasting economic growth this 
year to as per cent while keep- 
ing inflation low. 

The new aid comes on top of 
Sl.abn pledged last year to 
Vietnam, whose development 
efforts “deserved large-scale 
support from the international 
community." according to a 
communique issued at the end 
of the two day conference 
which was chaired by the 
World Bank. 

“Vietnam is on the right 
track," Mr Caliisto Modava. a 
regional director of the World 
B ank, said of Prime Minister 
Vo Van Kiet's economic reform 
policies. 

"It has the right vision and 
is producing results." he said. 

“This country clearly has the 
potential to be a real success 
story." 

However, the Vietnamese 
delegation led by Mr Do Quoc 
Sam. chairman of the state 
pl anning committee, admitted 
that it had some problems in 
using some of the aid it 
received last year, and it prom- 
ised to streamline its bureau- 
cracy dealing with develop- 
ment aid and project 
implementation. 

Of the aid pledged last year, 
about S4Q0m had been dis- 
bursed. 

Mr Madavo said said the dis- 
bursement difficulties 
stemmed from Vietnam's unla- 
miliarity with identifying suit- 
able projects for receiving aid 
and tbe different procedures 
among individual donor 
nations for releasing cash. 

It was not surprising there 
had been delays as this had 
been Vietnam's first year of 
dealing with donor nations, he 
added. 



Kiet: "right vision’ 


Vietnamese officials empha- 
sised their government s 1995 
priorities of reforming state 
enterprises and the budget, 
boosting private industry and 
agriculture, modernising the 
financial system and further 
opening the economy to for- 
eign investment and trade. 

The meeting concluded with 
agreement that alleviating pov- 
erty. protecting the environ- 
ment and reforming public 
administration should be aid 
priorities. 

In absolute terms Vietnam- 
ese remain very poor, despite 
rapid recent improvement. 

Ten European countries plus 
Canada, Japan. South Korea. 
Singapore and Australia 
attended the Paris meeting as 
donors, while the US partici- 
pated as an observer and made 
no bilateral pledges. 

However. Republican Sena- ; 
tor Christopher Bond of Miss- 
ouri was reported during a 
visit to Hanoi as promising 
Vietnamese leaders that the 
new Republican majorities in 
both houses of the US Con- 
gress would continue efforts to 
improve relations between the 
two countries. 

The US only lifted its trade 
embargo last year, 18 years 
after US troops quit Vietnam. 


T he end of the year usu- 
ally heralds a flurry of 
economic reforms in 
Kenya. The proximity of the 
annual meeting of donor gov- 
ernments and reviews by the 
International Monetary Fund 
and the World Bank help con- 
centrate the minds of policy 
makers as they struggle to 
meet targets to qualify for 
more aid. 

This year has been no excep- 
tion. Earlier this month. Mr 
Musalia Mudavadi. Kenya's 
finance minister, deregulated 
the oil industry - the last 
remaining sector of the econ- 
omy subject to price controls. 

Mr Mudavadi also 
announced that civil servants 
in his own ministry and the 
central bank were under inves- 
tigation for the irregular pay- 
ment of billions of shillings in 
export compensation last year 
to a trading firm, Goldenberg 
International. Its owner. Mr 
Kamlesh Pattni, who was 
charged with corruption earlier 
this year and later released on 
bail, is back in prison. 

The actions appear to have 
been prompted by the need to 
convince donors that Kenya is 
committed to open government 
as well as an open economy. 
The slow judicial investigation 
into the Goldenberg affair - 
the biggest embezzlement of 


Inflation continues to fall, shilling continues to rise 


Inflation 

Annual 9 a change in CPI 
60 


Exchange rata 

Shflfings (»$ 
, 25 

~ Control A-m market 

...... 35 

•>. Otfraai, 



1992 B3 

Source Centra Berk a* Kerya 


1992 93 


public funds in Kenya's history 
- bad led many Kenyans to 
believe it involved powerful 
godfathers within President 
Daniel arap Moi's government. 

The last-minute house- 
cleaning may also have been 
inspired by President Moi's 
visit to London this week, 
where he is expected to inau- 
gurate an investors' conference 
today. The meeting, organised 
by the Confederation of British 
Industry, hopes to sell Kenya 
as a reformed economy with 
good investment opportunities. 

Rapid deregulation over tbe 
past 18 months has produced 
some encouraging results. 
Inflation has fallen from a 
peak of more than 100 per cent 


in early 1993 to an annualised 
rate of about 13 per cent. 

Record prices for coffee will 
boost export earnings this 
year. After the removal of 
exchange controls, the Kenya 
shilling has. against expecta- 
tions. appreciated against the 
dollar, while the central bank 
has accumulated S800m in for- 
eign exchange reserves, equiv- 
alent to six months' imports. 

With good rains promising a 
bumper maize harvest, and a 
strong shilling, Mr Mudavadi 
believes the goals of price and 
currency stability are wi thin 
reach. "The economy is mov- 
ing towards single-digit infla- 
tion. which it last encountered 
in 1987, ~ he told a recent meet- 


ing of Kenyan employers. 

But for tiie past three years, 
economic growth has been less 
than half the annual 3 per cent 
increase in population. Manu- 
facturing is hurting from high 
domestic interest rates and a 
flood of cheap imports, while 
tbe strong shilling has eroded 
the profitability of tbe tourist 
industry. Despite a 10 per cent 
increase in tourist arrivals this 
year, most hotels on the Mom- 
basa coast say they are operat- 
ing at a loss. 

“The government is acutely 
aware that in order to main- 
tain social peace, the economy 
must create 450,000 jobs a 
year." says the director of a 
multinational company in Nai- 
robi "And in order to do so 
private investment must be 
revived." 

The London conference 
marks Kenya's first attempt in 
many years to attract foreign 
direct investment into the 
country. Hopes are running 
high, but the outcome may fall 
short of expectations. 

“Kenya is only likely to see 
incremental amounts of new 
investment from companies 
already based in East Africa," 
says one businessman who wfll 
be attending the conference. 
Kenya is a latecomer to the 
liberalisation game, having 
embarked on economic reform 


a decade later titan Latin 
America and 20 years after 
south-east Asia. Its 26m citi- 
zens are too impoverished to 
provide an attractive domestic 
market for foreign manufactur- 
ers, while the pursuit of 
export-led growth stumbles 
over innume rable obstacles: 
the distance from export mar- 
kets, a dilapidate d infrastruc- 
ture, a poorly-educated work- 
force and competition from 
nrtwr third world countries fol- 
lowing similar strategies. 

There are also Angering 
doubts about President Moi's 
commitment to staying, the 
course, particularly if benefits 
are slow to materialise. He has 
reneged on the reform process 
before - reimposing exchange 
controls in March 1993 and . 
banning grain imports in 
August this year. 

Although both relapses were 
corrected, they reveal deep 
schisms within government 
over the policies adopted over 
tiie past 18 months. Mr Muda- 
vadi and central bank governor 
Mr Mi ca fr Cheserem have often 
looked lonely and exposed as 
the principal champions of 
reform. 

Much remains to he done, 
mainly in areas in which OIF 
technocrats fear to tread. The 
modernisation of the economy 
would proceed more rapidly, 


anil far more smoothly/ If its ■ ' 
die-hard opponents were V 
removed from senior, positions 
in the dvil service, the^TuBng ' 
Sana party aid President 
Moi's inner circle at advises. - 

Political iaflghtinfcf ISte ‘ 
delayed the govemma&b 
valuation programme, while a* ■" 
weak jutfidary, befcoMehto its.' 
political ’masters, has mate tifei 
tie- progress m mvestigmaag a : .- 
hbst of financial seandate that 
robbed the exchequer Of sbUfe, 
Ks30bn (£4fiLm) - 10 par cant of ; 
GOP *- last year. ■- - ; 

Economic - liberalisation^ . 
however ,- b creating agrouhd- 
swell far f undament al political* 
change far greater than the 
soda!' protests which brought 
. about. democratic elections in 
1992. Forced to compete, tflrd- 
nessmen have become far took , 
critical of the system.af potttH ' 
cal patronage which -has. made 
a few individuals immensely 
wealthy . and randered ihea '- 
above the law. " . ■*■■ ■.. 

“Kenya has changed,* says r 
Mr Raphael Waite,, deputy 
managing director of CaHet 
Oil Kenya, liberalisation has 
reduced corruption. We denrt V 
have to kneel before govent 
meat officials any more. WhaF • 
we now need is a clear legal 
framework that creates a.feir 
competitive environment for 
everyone." 


Unita urges UN truce observers I Syrian executions 


The Angolan rebel movement 
L'nita yesterday urged the 
United Nations to place observ- 
ers in the African country's 
main battle zones to guarantee 
the observance of a truce due 
to take effect last night. Renter 
reports from Lisbon and 
Luanda. 

Unita's Lisbon office said in 
a statement that government 
forces could not be trusted to 
observe the truce, which is due 
to hold until a formal ceasefire 
is declared after the signing of 
a new peace agreement on Sun- 
day. 

"Unless the truce is followed 
by the rapid placing of Unavem 
(United Nations Verification 
Mission) observers in tbe areas 
where military activity is most 
intense, there is no guarantee 
that the government will order 


its generals and mercenaries 
to stop their attacks." it 
said. 

The truce was clinched after 
two days of talks in Lusaka by 
commanders of the warring 
sides in a conflict which has 
killed hundreds of thousands 
of people, displaced millions 
and ruined the economy of 
the diamond- and oil-rich 
country. 

The rebel statement said 
Unita did not trust the govern- 
ment's declared commitment 
to national reconciliation in 
view of the offensive it had 
launched since the tw r o sides 
initialled the new peace agree- 
ment in Lusaka on October 31. 

The offensive has led to the 
government’s capture of 
Huambo, a Unita stronghold in 
the central highlands, tbe oil 


town of So vo in north-western 
Angola and Mbanza Congo, the 
capital of Zaire province in 
northern Angola. 

Representatives of both sides 
met in Lusaka secretly yester- 
day. Officials dose to the talks 
said details of the dose-door 
session w ere not expected to be 
made public before the week- 
end. 

There has been no reaction 
so far from either President 
Eduardo dos Santos or Mr Sav- 
imbito the truce declaration. 

Military analysts said the 
truce merely halted immediate 
hostilities and details of the 
ceasefire, including the thorny 
issues of the security of Mr 
Savimbi and other leaders of 
Unita and the planned disarm- 
ing of guerrillas, had to be 
sorted out before Sunday. 


• South African Deputy 
President Thabo Mbeki 
yesterday ruled oat 
deployment of a southern 
African military intervention 
force to rescue the peace 
process in Angola. 


concern Amnesty 


Responding to questions in 
parliament. Mr Mbeki 
dismissed reports that the 
South African government had 
considered joining such a 
regional military force to enter 
Angola when it appeared that 
a peace accord would not be 
si^ied. 


Mr Mbeki said President 
Nelson Mandela and fellow 
leaders of the so-called 
frontline states of tire region 
who met in Lusaka on Tuesday 
did not at any stage discuss 
military intervention. 


Amnesty International 
expressed concern yesterday 
about an apparent increase in 
the number of execution s in 
Syria and a feck of lair trials in 
death-penalty cases, AP 
reports. The group reiterated 
its longstanding concern about 
the cases of thousands of politi- 
cal prisoners in Syria. The 
statement came after the first 
visit to Syria by a team from 
the London-based international 
human righto group for talks 
with high-level officials. 

Amnesty described as “posi- 
tive" Mr Assad's release of 
thousands of political prisoners 
since 1991. but said there had 
been little progress made in 
reviewing the cases of others. 


some of whom have been jailed 
for more thhn two. decades. 

Amnesty said that during its 
visit, the delegation raised the 
cases of more than 1.000 peo- 
ple, Including prisoners 
detained without trial, those 
held even after expiration of 
their sentence, torture allega- 
tions and cases of people who 
simply “disappeared". 

The number of political pris- 
oners in Syria runs in the 
thousands. Amnesty says, con- 
ceding that an exact figure is 
impossible to obtain under cur- 
rent circumstances. Some of 
the longest-standing political 
prisoners in Syria are senior 
politicians jailed after Mr 
Assad's bloodless coup in 1970. 


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NEWS: INTERNATIONAL 


Lehman sues Chinese 


companies for 


By Simon Hotoerton 

in Hong Kong 


Lehman Brothers, the US 
investment bank, is suing 
three of China’s biggest trad- 
ing companies for allegedly 
“Hr 116 , t0 pa >’ “early $i00m 
(£b4m) in debts arising from 
foreign exchange trading. 

China United Petroleum 
Chemicals (Unipecl. Interna- 
tional Non-Ferrous Metals 
Trading (Minmetals) and China 
National Metals and Minerals 
Import and Export (CNMj have 
been given 30 days to appear 
before the US district court in 
New York to answer the claim. 

According to documents 
lodged with the court. Lehman 
clai ms that Uni pec owes it 
$44m. plus interest, arising 
from losses incurred in its for- 
eign exchange and swap trad- 
ing activities with the bank 
from May until August this 
year. Lehman claims a further 
$55 -5m. plus interest from Min- 
metals and CNM for losses 
arising from similar transac- 
tions over the same period. 

The suits were filed on Tues- 
day and have stunned bankers 
in Beijing and Hong Kong. 
They said that the companies 
concerned were trying to raise 
bank finance and that, if the 


suits drag on. then interna- 
tional banks may be wary of 
lending to them. 

"These companies have 
extensive international 
involvement." said one Euro- 
pean banker stationed in Bei- 
jing. “Foreign banka have 
something to lose here, but 
China has more to lose from 
this action.” 

Lehman’s decision to seek 
legal redress follows failed 
negotiations with the compa- 
nies. In a statement, Lehman 
said the lawsuits should be 
viewed “only as a necessary 
step toward resolving a com- 
mercial dispute with two cus- 
tomers". 

None of the Chinese compa- 
nies concerned has made any 
comment. 

The bank’s lawsuit comes at 
a time; however, of increasing 
frustration with lending in 
China. Some bankers said yes- 
terday that the suit might indi- 
cate that western financiers 
would be more public in seek- 
ing recovery of unpaid debts. 

At the weekend it emerged 
that 31 foreign banks had peti- 
tioned Mr Zhu Rongji, China’s 
economy minister, to help 
them recover $600m in loons to 
Chinese state industry which 
had gone bad. 


$100m 

The petition was submitted 
to Mr Zhu last month, the 
Tokyo newspaper. Nihon Kei- 
zai Shimbun, reported. The 
loans are believed to date back 
to the early 1980s and many of 
them are connected to leasing. 
Of the banks concerned, 24 of 
them are Japanese with total 
loans to Chinese industry out- 
standing of $1.8bn. 

Bankers also said that prob- 
lems the London Metals 
Exchange had encountered 
with China international Trust 
and Investment Corporation 
(Citic) had not engendered con- 
fidence in China. Citic Shang- 
hai. a wholly-owned subsid- 
iary. is alleged to have 
defaulted on obligations of 
between S3Gm and $50m arising 
from futures trading on the 
LME earlier this year. 

Ci tic's initial response was to 
claim that the trading by Citic 
Shanghai was unauthorised 
and therefore not the responsi- 
bility of the parent company. 
Recently, however, it had indi- 
cated it would make good its 
obligations, bankers said yes- 
terday. 

“Citic is one of the very best 
nam es and we can do nothing 
but assume that they will 
settle the bill.” said 
one. 



Supporters of Nepal’s Communist party celebrate in Kathmandu 
yesterday after their party took an early lead in parliamentary 
elections. Analysts believe the ruling Congress party is still 
likely to emerge as the largest party ***** 


Keidanren sees short-term rise in unemployment 

Deregulation boost for 
Japan by year 2000 


By WBUam Dawkins in Tokyo 

Full-scale deregulation of the 
Japanese economy would 
cause a temporary rise in 
unemployment and a drag on 
growth, leading to a net rise in 
prosperity in six years. 

That is the main conclusion 
of a report* by the Keidanren, 
Japan’s leading business lobby, 
in support of its campaign to 
encourage the government to 
fulfil promises to curb the 
administrative controls which 
constrain an estimated 40 per 
cent of industrial activity. 

The Keidanren predicts that 
the collapse of inefficient busi- 
nesses as a result of increased 
competition would wipe 
YlO.OOObn (£64 bn) off gross 
domestic product and put 
2&4m people out of work in the 
next few years, a rise in 
imports - already evident in 
recent months' trade figures - 
would come at the cost of a fall 
in domestic production, says 
the study. 

By the year 2000 however, 
consumer prices would have 
fallen enough to produce a rise 
in real incomes and demand, 
which would feed through to 
an eventual rise in output It 


cites independent forecasts of a 
20 per cent fall in consumer 
prices by 2000. from the pres- 
ent level, around 50 per cent 
above average prices in New 
York, London. Paris and Ber- 
lin. 

71115 would lead to a net 
jjp cww.se in 740,000 jobs and a 
Yl77,000bn rise in national 
wealth over the six years, 
equivalent to 5 per cent of GDP 
a year, according to a Keidan- 
ren economic model. 

Its forecasts are hypotheti- 
cal, given the government’s 
reluctance to deregulate faster 
thaw the vested interests which 
help keep it in power will 
allow, and companies’ tradi- 
tional aversion to making 
redundancies. Yet the study is 
one of the clearest analyses yet 
of the practical problems ahead 
for Japan’s latest deregulation 
drive, started just over a year 
ago by the former government 
of Mr Morihiro Hosokawa. 

To ease the shock of transi- 
tion to a freer economy, the 
Keidanren calls for joint gov- 
ernment-private action to 
improve “social capital”. By 
that it means improving urban 
infrastructure, telecommunica- 
tions and improving Japan’s 


current slim social services. 

The study also urges the gov- 
ernment to promote venture 
capital companies, to encour- 
age small business to flourish 
in new markets opened up by 
deregulation. It calls for tax 
breaks for start-up companies. 
financial aid for their 
long-term investments and 
easier listing requirements for 
the over-the-counter (OTC) 
market. OTC listing rules are 
far higher than in the US, 
birthplace of modem venture 
capitalism, the Keidanren says. 

The industries most likely to 
grow as a result of deregu- 
lation include service sectors, 
where Japanese productivity 
lags well behind the US and 
Europe, the study suggests. 
These include, sport, travel, 
telecommunications, multi- 
media and environmental busi- 
nesses, says the Keidanren. 
Irrespective of deregulation, 
the study forecasts a growth in 
services for the elderly, where 
Japan has the world's fastest 
ageing population profile. 

•Anotptf of cccna me impact it omtguooon and 
measures (or empta/mem (n Japanese on yl 
tram Kaktmnm. Kedanran KoAan. W Ommacr* 
t-chutm. CUfoJaJat, Totyo 100. 

A tough act to follow, 
Page 21 


INTERNATIONAL NEWS DIGEST 


Bankrupt debts 
up 50% in Japan 

The strains of recession continue to take their toll of corporate 
Japan, even into the hAginning of the economic upturn, as 
shown by a sharp rise in bankruptcy debts last month. Debts 
left by corporate collapses rose by nearly half from September 
to Y845bn (£5.4bn) in October, just over double the level the 
same tim e last year, according to Teikoku Databank, a private 
credit research agency. 

The figures are always volatile, distorted in this case by the 
Y51&5bn bankruptcy of Nippon Mortgage, the third largest 
business collapse of post-war years. They nevertheless high- 
light the continuing weakness of corporate balance sheets. 
However, there was good news in the number of company 
collapses, down by 2-5 per cent from a year earlier, for the 
fourth month in a row. Nearly two thirds blamed their failure 
on the recession, while a mere 10 out of the total of 1.226 
October bankrupt cies cited the yen’s strength as the reason 
for their collapse. William Dawkins, Tokyo 

Australia extends offshore zone 

Australia doubled in size yesterday, as it formally claimed 
massive new offshore territory under an international “law of 
the sea” convention. The 1982 United Nations Convention of 
the Law of the Sea, which was finally ratified this year, aims 
to divide about 35 per cent of the world’s oceans among over 
100 countries. In Australia’s case it means that the country 
can c jai in an exclusive economic zone ext e n din g 200 nautical 
miles from its baselines, instead of the traditional 12 miles. 

Because of the nation’s extensive coastline it is now claim- 
ing around 5.7m sq miles of ocean water, of which -L2m sq 
miles derives from the new extended nautical limits. As a 
result, Australia can boast one of the largest “exclusive eco- 
nomic zones" in the world. 

While much of the additional territory is undisputed, there 
is disagreement with Indonesia over territory around Christ- 
mas island and off the north coast of Australia, including the 
resource-rich Timor Gap. Nikki Tail, Sydney 

Aborigine fund move defeated 

Efforts to increase significantly the money available to a 
federally constituted Aboriginal land fund were defeated yes- 
terday in the Senate, the Australian parliament’s upper house. 
The firnd is des igned to acquire land on behalf of the vast 
majority of Aborigines who will see no practical benefit from 
the country's Native Title legislation, which was passed with 
much difficulty last year. The Native Title act was the first 
piece of legislation to acknowledge that Australia was inhab- 
ited before European settlement. 

At that stage the government promised to set up a land tuna 
to make acquisitions on behalf of dispossessed Aborigines. 
However, when details of the scheme were released, critics 
said it was too small to be viable, and poorly structured. 
Amendments put forward, but defeated in the Senate yester- 
day, would have increased funds flowing into the land fond to 
A$15bn (£7bn) over a 10-year period. The current government 
plan is for just A$L4bn, over the same decade - with much of 
this money being invested to ensure that the fund is self-sus- 
taining in 10 years. Nikki That 

N Korea to let in inspectors 

North Korean diplomats told United Nations atomic safe- 
guards officials yesterday that inspectors could leave for 
North Korea as soon as possible to begin some measures to 
monitor a nuclear freeze, UN officials said. Mr Kim Gwang- 
sqp North Korea’s ambassador m Vienna, said the Interna- 
tional Atomic Energy Agency GAEA) should also send a 
technical team to Pyongyang to discuss details of momtonng 
tSTfreSe agreed with the US in a breakthrough accord last 
^ntiT-Thfewi a good start," said Mr Hans Meyer, IAEA 
Sk^namlt tte effSr talks between Mr Em and IAEA 

— 

N N^th 0 ^?^ agreement with Wa^ingtanto 
hitaSvfties at its nuclear sites and stop construction of two 
mw-lear reactors in return for modern western nuclear 
SSSn^Q^ration estimated to cost $4bn (£2J6bn). 

Reuter, Vienna 

Fighting flares in Somalia 

Heavy fighting between rival dan fores erup^ ln Somalia’s 
capital of flarge^ tar 1 

SSSTSid hundreds of dvffians to flee, tomgn aid (fflcmfa 
Some 20 relief workers from the United 
Jf^d%ieragexiclfis had abandoned the town where 
JKE idTS- The workers were attempting to 
SSlS Srito B^TaboutlMan west, the officials said 

of 33 hundreds of civll- 

foot through the streets of the war-damaged aty 
Sh^rival dam>due£S with mortars, anti-aircraft guns and 
“5? JSf ££££** of casualties is not yet dear. The 

Awal clan mffitias loyal to Mr 
SJSn^Ibrahim Egai, the “president" of the breakaway 

Ml °l5S?rf Somalilandfapd Habr Yimis militias loyal to the 
redan's former ruler, Mr Abdurahman Ahmed 
A^S^foiK^sSmlia was devastated by a civil 
^rlSch mJpted in 1988 and spread to the southern capital 
of Mogadishu- Reuter, Mogadishu 





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TO. .d..*..™, „ !., ue d b, Tdl.Wd,. Cbrnmunicuon. pic .nd be. b™. W Klom.on B.n.on U»«d. . .—bur « ™ Socunb.c .«< R..«. *—■* Um„ri. „M, '« »»P— * ««“•» " »«• 




- -n«t 




WORLD TRADE DIGEST 


US keeps trade 
and rights link 


The US yesterday said it would continue to press for a link 
between fundamental worker rights and trade, despite strong 
opposition Cram many developing countries and lukewarm 
support at best from other western nations. Mr Jack 01m, US 
deputy undersecretary of labour, said Washington hoped to 
convince trading partners that all nations, whatever their 
level of development, should respect some core principles of 
“basic human dignity". He denied charges that the US stance 
was a pretext ter trade protectionism. 

Mr Otero was speaking after a lively debate earlier this week 
in the governing body of the International Labour Organisa- 
tion on an ILO proposal for five key conventions to be incorpo- 
rated in world trading rules. The conventions coves* freedom to 
form a trade union, to bargain collectively, and the prohibition 
of forced labour, child labour and disc rimina tion- The ILO 
discussion is due to be resumed next March. The US would 
also raise the issue in the OECD and the future World Trade 
Organisation, Mr Otero said. Frances Williams, Geneva 


Italy, UK 
finance 
plan for 
Kazakh 
pipeline 


By Steve LeVne in Alma Ata 


India foreign investment move 


The Indian government yesterday approved 51 proposals for 
foreign direct investment worth over Rs5bn (5955m). The 
finance ministry said some of the projects have projected 
export earnings of about Rs3Qbn over five years. Projects 
include General Electric's proposal for the manufacture, 
design and distribution of electric motors and control appli- 
ances; Croda International, a global chemicals company with 
factories at over 30 locations, has been permitted to set up a 
subsidiary to market speciality chemicals and later set up its 
own manufacturing base and Rhbne Poulenc, the French phar- 
maceuticals company, has received clearance to set up a joint 
venture to manufacture drugs to fight cancer, Aids, and car- 
diovascular diseases. 


CSC Holdings, a subsidiary of KLM Royal Dutch Airlines, 
will set up a wholly owned subsidiary in India to enter the 
cargo, transportation, and warehousing business. ITC, the 
Calcutta-based conglomerate will set up a joint venture with 
two Malaysian companies to develop oh-palxn plantations in 
2 the state of Andhra Pradesh. Shiraz Sidhva, New Delhi 


Suez cuts some ship tolls 


The Suez Canal Authority has announced a 35 per cent rebate 
for liquefied natural gas carriers headed to European markets 
from the south, in an attempt to attract new customers and 
deter competition from alternative routes. The discount will 
apply also to ballast carriers on their southbound trip. A 
minimal number of gas carriers presently use the Suez CanaL 
Foreign Staff, London 


c Ericsson Telefon has won an order to convert the analog 
mobile telephone system in Ho Chi Minh City. Vietnam, into a 
digital network. The order was placed by Singapore Telephone 
International, the operator for Saigon Mobile Telephone Co. 
The value of the order was not disclosed. AFX. Stockholm 
C The Telecommunications Authority of Singapore is inviting 
applications for licences to operate and provide Differential 
Global Positioning System (DGPS) services. GPS is a naviga- 
tion system consisting of 24 satellites in space. A GPS receiver 
gives its user an accurate three dimensional position as well 
as precise time anywhere in the world, 24-hours a day £euier, 
Singapore 

■ BAT Industries' Sri Lankan subsidiary, Ceylon Tobacco, 
plans to expand and upgrade its production at a cost of 520.4m 
over next two years to boost exports. By 19%, it will instal 
three new cigarette manufac turing machines and one new 
packing machine. Reuter, Colombo 



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FINANCIAL TIMES THURSDAY NOVEMBER 17 1 994 


NEWS: WORLD TRADE 


Paris rethinks line on ships 


By David Buchan in Paris 


British Gas and Italy's Agip 
are considering co-financing a 
$1 Jbn oil pipeline at the heart 
of a dispute with Russia. 
accor din g to Kazakhstan offi- 
cials. 

Kazakhstan’s deputy foreign 
minister, Mr Viaeheslav Gizza- 
tov, said British Gas and Agip 
might join Chevron of the US 
in financing the pipeline, con- 
necting the Tengiz field to 
Russia's Black Sea port of 
Novurassisk. 

The pipeline would also 
carry oil condensate from a 
rich northern Kazakhstan 
field, Karachaganak. which 
British Gas and Agip intend to 
develop. British Gas and Agip 
possess exclusive rights to 
develop Karachaganak, which 
contains proven reserves of 
1,3001m cu m of gas, 650m 
tonnes of condensate and 2GGm 
tonnes of oil. 

The financing proposal Is 
part of an attempt to break a 
logjam that has held op Chev- 
ron’s 520bn contract at Tengiz, 
the former Soviet Union’s larg- 
est oil field. 

Kazakhstan is believed to 
contain some of the world's 
richest oil and natural gas 
reserves. But all export pipe- 
lines to the west pass through 
Russia, which industry offi- 
cials say has thrown up obsta- 
cles to expansion. Chevron has 
refused to proceed with devel- 
opment of Tengiz, estimated to 
contain between 6bn and 9bn 
barrels of recoverable oil 
reserves, until the pipeline 
issue is settled. 

The financing proposal 
Involves plans to expand the 
existing oil pipeline to Novo- 
rossisk. A three partner con- 
sortium of Oman OB, Kazakh- 
stan and Russia possesses the 
right to operate the expanded 
pipeline that would carry Ten- 
giz’s production. 

Russia and Oman Oil are 
masting that Chevron arrange 
virtually the entire cost to 
build the pipeline, in exchange 
for a 25 per cent stake in the 
consortium. In turn, Chevron 
has offered to finance half the 
pipeline, bat effectively wants 
to exclude Oman, which has 


France may drop its threat to 
veto a new international ban 
on direct shipbuilding subsi- 
dies if. in talks with Brussels, 
it can Find other ways to help 
its merchant -ship construction 
sector. 

At stake is last July's agree- 
ment between European. US. 
Scandinavian and Asian coun- 
tries representing 80 per cent 
of world shipbuilding. Negoti- 
ated over five years within the 
Organisation for Economic 
Cooperation and Development 
(OECD), the agreement would 
put an end to the system 
whereby European Union gov- 
ernments can pay up to 9 per 
cent of the cost of a boat built 
in national yards. 

The agreement would not 
come into force until 1996. But 
the German presidency of the 
EU is keen to get the de-al, 
negotiated by the European 


Commission, ratified at a 
Council of Ministers meeting 
on November 28. France has 
made no secret of its opposi- 
tion to the deal, and threat* 
ened last month to invoke the 
“vital interest" clause of the 
1966 Luxembourg compromise 
to block it. 

However, to avoid a damag- 
ing confrontation with Ger- 
many, the Balladur govern- 
ment has seized on sugpstions 
from Brussels that Paris could 
exploit the OECD agreement’s 
authorisation of some indirect 
aid by increasing payments for 
research and development, 
environmental and training 
purposes. "This would be an 
elegant way out," an expert in 
the OECD negotiations said. 

To date, France has refused 
to follow Spain, Portugal and 
Belgium in winning an extra 
period to phase oat subsidies 
under the OECD accord by 
agreeing to further capacity 


cuts. “We have restructured 
enough." said one French offi- 
cial, citing the drop in the 
number of French-built mer- 
chant ships from 25,000 in 1975 
to 4^00 now. 

“But the Commission has 
suggested we come up with a 
plan that takes account of past 
restructuring expenses," such 
as redundancy payments, the 
official said yesterday. Brus- 
sels officials stressed, however, 
they were suggesting nothing 
that would break an agreement 
which has the support of 11 
other EU members, as well as 
the signatures of the US, 
Japan, South Korea. Fi nla n d. 
Norway and Sweden. 

French officials believe that 
Germany will help Paris out of 
the impasse. They said the 
OECD negotiations were trig* 
gered by the US threatening 
Germany, Japan, Korea and 
Norway with retaliation for 
unfair trade practices, and 


claimed Paris had been accom- 
modating in letting Bonn raise 
subsidies to the Rostock yards 
in eastern. Germany. 

The OECD accord allows 
governments to offer “home 

credits’ (to a domestic buyer to 
buy a domestic ship) equtvar 
lent to “export credits”.ffor for- 
eign purchasers of boats built 
at home). But France com- 
plains that, with the French 
merchan t fleet ranking 36th in 
the world, it has too few ship- 
owners left to take advantage 
of this. 

Experts counter that 
France’s problem is that its 
yards no longer make enough 
of the vessels sought by ship- 
owners. Its small-ship , con- 
struction sector has specialised 
in cruise ships and LNG gas 
carriers, and' has performed 
well in espmt markets. Of the 
15 ships on order to French 
shipowners, only four are 
being built in French yards. 


US pressure on 
trade deals in 


Asia pays off 


Dole seeks 
review of 
WTO’s 
decisions 




By Manueta Saragosa 
in Jakarta 


Mr Ron Brown. US secretary of 
commerce, yesterday wit- 
nessed the signing of $40bn- 
worth of contracts and memo- 
randa of understanding 
between Indonesian and US 
companies in Jakarta. 

The deals, which came a day 
after the signing of free trade 
plans at the Asia-Pacific Eco- 
nomic Co-operation summit, 
reflect the more aggressive 
stance by the US government 
to helping US companies 
secure contracts overseas. 

“In contrast to previous 
administrations, we have 
unashamedly been active in 
helping our businesses win 
contracts abroad." said US 
President Bill Clinton in Jak- 
arta. Many of the contracts 
have been in the pipeline for 
some time. 

Over the past few days the 
US has signed contracts and 
memoranda worth more than 
5100m in the Philippines and 
clinched deals worth more 
than S2S0m in Malaysia. 

Topping the list of deals in 
Jakarta was an undertaking 
between Esso Exploration and 
Production Natuna and Indon- 
esia’s state-owned oil company, 
Pertamina, to sign a basic 
agreement to develop the S35bn 
Natuna sea gas project 

The US Eximhank Bank sup- 
ported two of the Indonesian 
deals; a credit agreement with 
the ministry of finance to back 
a 565m AT&T contract with PT 


Telkom and a memorandum of 
understanding with the for- 
estry ministry to support Moto- 
rola's sioim forest radio com- 
munications system project 

Britain's Philip’s Systems 
made an initial bid for the lat- 
ter project and completed the 
preliminary stages in imple- 
menting forest radio communi- 
cation systems in Indonesia. 
However, it lost out to Moto- 
rola in the later stages. 

The Eximbank agreements 
are part of new US Tied-Aid" 
credit offers. 

The policy “is designed to 
counter foreign tied- aid offers 
and level the finan cial playing 
Field for US exporters," the 
bank said. Tied aid is govern- 
ment to government conces- 
sional financing which is 
linked to the purchase of donor 
country exports. 

Other memoranda included a 
S2.6bn project for the supply of 
power equipment and services 
by Mission Energy and General 
Electric to Indonesia's first 
large-scale independent private 
power project, Paiton. 

Heard Energy Corporation 
headed a consortium of bidders 
which signed a memorandum 
of understanding for a S200m 
power project with Indonesia’s 
directorate of electricity and 
energy development and PT 
Panha Serodia Pradhana. 

The companies are expected 
to build, own and operate a 
200MW coal-fired power plant 
to supply Indonesia’s state 
owned electricity company, 
PLN. 


Ely Nancy Dunne 
in Washington 


Senator Robert Dale, the likely 
majority leader of the US Sen- 
ate. is requesting establish- 
ment of an eminent person’s 
group to review decisions to be 
taken by the new World Trade 
Organisation and report on 
them to Congress. 

He is also seeking assur- 
ances that the US could pull 
out of the WTO at any time 
after it succeeds the General 
Agreement on Tarrifs and 
Trade next year. Mr Dole, who 
represents the grain-growing 
state of Kansas, said he was 
looking for a way to “extricate 
us from the World Trade 
Organisation, if we are getting 
adverse decisions. That’s the 
big sticking point at least in 
my part of the country.” 

Mr Dole’s suggestions coin- 
cided with requests from 
Republican leaders to delay a 
vote on a the Uruguay Round 
world trade treat)' due at the 
end of the month. Mr Jesse 
Helms, of North Carolina 
incoming chairman of the Sen- 
ate Foreign Relations Commit- 
tee, wrote to US president Bill 
Clinton requesting the vote on 
liberalising world trade be 
postponed until early in 1995 
because more hearings were 
needed. 

Republicans will take control 
of both the Honse and Senate 
next year and some Republican 
law maker s believe the change 
in power gives fhgm an rhanrp 
to recast the Gatt legislation. 


Robert Dole: wants 
establishment of an 
eminent persons group 


Israel eyes wider EU trade ties 


But talks stall over pace of drive into Europe, writes Julian Ozanne 


I srael is seeking long-term 
strategic economic integra- 
tion with Europe in its 
negotiations over a new trade 
association agreement due for 
completion by the end of the 
year. 

But the negotiations, which 
made substantial progress ear- 
lier this year, have stalled over 
differing views of the pace of 
Israel's economic drive into 
Europe. 

Israeli officials say they 
I envisage the agreement lead- 
[ ing to a fundamentally new 
relationship between Israel and 
Europe under which Israel will 
, be granted the same status as 
l members of the European Free 
Trade Association (Efta) within 
the framework of the European 
economic area. 

“We want the benefits of eco- 
nomic membership of the EU 
without political membership," 
said Mr Oded Eran, the co-head 
of the Israeli negotiating team. 

Israel's push towards Europe 
reflects the growing position of 
the EU as Israel’s main trading 
partner. Last year the volume 
of Israel-EU trade was $i4.4bn, 
40 per cent of Israel’s total 
trade, and is projected to 
increase next year to almost 50 
per cent 

Senior EU officials say they 
share the long-term vision of 
Israel having a special place in 
Europe hut believe the process 
should be evolutionary. The 
EU is growing increasingly 
frustrated with Israel's rigid 
demands in agriculture and 
public procurement which 
could derail efforts to sign the 
agreement fay the end of the 
year. 

“Yon can always ask for the 
moon but we are saying take 
what you have got and con- 
tinue from there,” said Mr 
Juan Prat, European Commis- 
sion director general, on a 
recent visit to the region. 

Mr Prat said the EU had 
already made considerable con- 
cessions to Israel in the cur- 
rent talks which would institu- 
tionalise political dialogue and 


Israel’s trade with EU and North America 


Exports (ton} 
15 — 


□ Total 


North America 





Imports (Stoo} 

20 


from the Golan Heights, fur- 
ther damaging Israeli agricul- 
ture. 

“We are being asicnd to make 
trade concessions to the region 
to consolidate peace and, in 
return, we are asking Europe 
to make an economic balance 
by deeper association," said Mr 
Eran. “Agriculture is the per- 
fect example where Europe 
could offset the concessions we 
made to Palestinians by mak- 
ing concessions to us." 

Israel is also holding out for 
concessions in opening of the 
EU market for public procure- 
ment in telecommunications 
and says the ETTs demand for 
a reciprocal opening of all sec- 
tors of public procurement 
would worsen its trade deficit 




sj ■ 


ilL,.':’*; 


Soueac Bank of MM 


help to reduce Israel’s $6bn 
trade deficit with Europe. 

Under the agreement Israel 
will become the first non-Euro- 
pean country to gain access to 
the EU*s research and develop- 
ment programme. The EU has 
also revised rules of origin and 
accepted the principle of rules 
of origin to allow products 
resulting from Arab-Israeli 
joint ventures access to the 
free trade area. 

The changes in the rules of 
origin will have a favourable 
impact on Israeli exports of 
high tech, electronic and com- 
munications products. 

But while Israel has said 
they are satisfied with these 


concessions, they want the EU 
to open further its agricultural 
market to cut flowers, easy 
peel citrus fruits, table grapes 
and processed products such as 
juices. 

The move is opposed by 
southern European states, 
notably Spain and Italy. 

Israel argues the EU must 
recognise that, as part of the 
Middle East peace process, it 
has opened its markets to Pal- 
estinian agricultural produce 
in the face of opposition from 
Israeli farmers and is being 
asked to make further trade 
concessions to Jordan. 

Peace with Syria would 
involve an Israeli withdrawal 


T he EU says it accepts 
Europe must play a crit- 
ical role in cementing 
Middle East peace and is pre- 
pared, as a much bigger econ- 
omy, to make uneven conces- 
sions to Israel but it expects 
some reciprocity. Mr Prat said 
Israel had not complied fully 
with the 1975 trade agreement. 
An example, he said, was Israel 
forcing a one year certification 
process on imported tourist 
buses from Spain. 

Mr Prat said the EU wanted 
to reduce Israel's trade deficit 
and the agreement, as it 
stands, would considerably 
help to narrow the deficit. But 
he said: “Israel has a structural 
trade deficit with the woTld, 
including the European com- 
munity. .. The agreement will 
help the trade deficit and this 
is our objective but it is not the 
miraculous solution.” 

Ultimately the dispute 
between Israel and the EU is 
more about timing. Israel 
wants a huge leap forward in 
economic relations enshrined 
in the new association agree- 
ment. Europe believes the 
agreement should grant con- 
siderable benefits now. as a 
stepping stone towards the 
fuller economic integration 
Israel wants. 


China the 
big prize 
m Asian 
beer sales 
contest 


H niheken, the Dutch 

brewer, has until now 
had the Asian beer 
mar ket largely to itself as 
other big European or 
American brewers were. . 
content with their domestic 
mar kets. 

But with home markets 
stagnating ami Asian countries 
offering the fastest rising beer 
consumption to the worid, 
Heineken is racing against the 
likes of Anheuser-Busch and 
PluBp Morris of the US, Kirin 
of Japan, Molson of Canada 
and San Miguel of the . 
P hilip pines to establish its 
brand in new markets. 

The prize is China, already 
the third biggest beer market 
a fter the US and Germany. 
Demand islargely met by a ■ 
hi g hl y fragmented domestic , 
brewing industry. But - 
consumption is growing so test 
that additional sales each year 
flmnmnt to 20m hectolitres, 
equivalent to the total yearly 
beer consumption of a much 
more mature market such as 
France. 

To cope with this growth, ; 
the Chinese government has 
already opened up the industry 
to a handful of foreign 
investment projects with more 
to come. Heineken, for 
example, already has a stake in 
Fujian Brewery in Fuzhou and 


Under congressional “fast 
track" rides, the implementing 
legislation now moving 
through both Houses cannot be 
amended. 

Mr Leon Panetta, White 
House fbipf Of him rail pH 

for bipartisan co-operation on 
the Gatt treaty. “I think all of 
ik recognise the importance of 
getting that kind of major 
trade agreement enacted,” Mr 
Panetta said. “It will be a test 
of our ability to work together 
to ensure that we are trying to 
protect this country's interrat," 
he said this week. 

The new provisions, as pro- 
posed by Senator Dote, could 
be attached to a trade bill 
which would also grant the 
Administration renewed, fast 
track authority to negotiate 
new free trade agreements in 
Latin America. 

Senator Dole, widely expec- 
ted to run for his party's presi- 
dential nomination in 1996, is 
seeking to placate the many 
conservative Republicans who 
oppose the WTO on the 
grounds that it will require the 
ceding of US sovereignly to an 
international organisation. 

The Gatt treaty, which took 
seven years to negotiate, would 
cut trade barriers and cut tar- 
iffs worldwide. 


Ronald van de 
Krol on the 
market of 
the future 


hopes it can establish up to 
four more vestures in China 
by the end of next year. 

In common with its 
competitors, the Dutch brewer 

tr alan pishing into s mall 

countries. FoBowing on from 
deals in Vietnam and Thailand, 
its latest project is a brewery . 
in Cambodia where pencapita 
beer consumption is a fraction 
of that in Heaneken’s 
Netherlands home market- . 

Some of Heineken’s rivals • 
are larger but the Dutch 
com pany has advantages 
gained from its experience 
abroad. Anheuser-Busch’ s 
revenues, for example, were 
5l3Jftra last year but only 3^ 
per cent came from outside its 
US home market Heineken’s 
revenues were less than half 
that but Europe accounted for 
only 49 per cent with a further 
25 per cent from elsewhere in 
the western hemisphere, 15 per 
cent from Africa and 11 per 
cent from Asia. 

To further its Asian 
ambitions, Heineken is 
drawing on its 63-year-old joint 
venture with Fraser & Neave, 
the Singapore-based drinks 
group. Asia Pacific Breweries 
(APBL) is 42.5 per cent owned 
by He i ne k e n which looks after 
technical aspects while sales 
are tire responsibility of its 
Singapore partner. 

The two partners, who have 
already invested through 
APBL in Vietnam, China and 
T h a iland , expect to invest 
another FlSQOm (5475m) in Asia 
over the next five years, nearly 
four times as much as they 
spent in the preceding 
five-year period. 

For Heineken, the attraction 
of APBL lies in its local 
expertise in Asian markets and 
its Tiger beer brand. This 
allows Heineken to pursue a 
two-pronged approach using 
national and regional brands 
plus its international Heineken 
brand. The Cambodian 
brewery, for example, will 
produce Tiger as well as 
another APBL brew, ABC 
Stout while Heineken will 
export its own premium la g er 
to the country. 

Heineken usually begins to 
build brand awareness in a 
country in this way. Once the 
brand is established, it often 
switches to producing it 
locally. Thailand will be one of 
the next countries to begin 
brewing the lager. 

For all its success in 
onerging Asian markets, 
He i neke n has not always 
succeeded in more mature 
ones. In Japan, where 
Heineken is brewed under 
asm* by Kirin, and in South 
Korea, where Heineken is 
toiported, the company has 
had to admit that sales are 
disappointing 


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K ;d 'andt 


Premier rejects joint authorities for Ireland 


By David Owen and Stewart Oalby 

J£tSvS r \ tb6 Pnme minister - 

ahnnf fhl - t0 Assure unionists 

Qf ^ on North- 
ern Ireland s future, telling MPs that 

beKn a SS >rity !? hamUe SttoM 

reSS ?* ,er I . 1 “ d ^hlin had been 

KEA* 1 " *** and Irish 

eve ° f toe fi»t visit 

thn?n for more 

than a decade by Mr Gerry Adams 

F . em President, the prime 
“unster said the government would 


begin talks next month with both the 
IRA’S political wing and loyalist rep- 
resentatives - "so long as the cease- 
fire is maintained". 

In those talks, the decommissioning 
of illegally held weapons would be “a 
vitally important subject,” Mr Major 
said, adding: "Gun law has no part in 
democratic politics." 

It is understood that the talks with 
Sinn F6in will probably begin first. 

The prime minister assured MPs 
that Northern Ireland remained at the 
top of the government’s priorities, but 
said there was still “a long way to go" 


before peace was secure. He said good 
progress had been made in discus- 
sions with the government or the 
Irish Republic on the joint framework 
document that will form the basis of 
future talks involving Ulster's main 
political parties. 

The document would contain pro- 
posals for a locally-elected Ulster 
assembly and framework for cross- 
border structures to handle north- 
south relations. But be said the 
framework would not be u a strait- 
jacket”. It was not a “London-Dublin 
deal" that was set to be imposed. Mr 


Tony Blair, the Labour leader, 
expressed “cautious optimism" on the 
province’s future and promised 
Labour would continue to support the 
peace process. 

Mr Major’s remarks came as leading 
unionists made clear they would not 
be sorry to see the departure of Mr 
Albert Reynolds, the Irish prime min- 
ister. if he lost the premiership. 

Mr David Trimble, the Ulster Union- 
ist party’s legal spokesman, said: "in 
a sense almost anyone would be bet- 
ter than Albert Reynolds." Mr Trim- 
ble added: “As we see it Mr 


Reynolds .. has been trying to get 
quick results. He has been trying to 
force the pace of peace negotiations 
and creating an air of crisis." Mr 
Trimble rejected the idea that the 
republic’s Fine Gael party is more 
pro-unionist than Mr Reynolds’s 
Fianna Fail. 

Mr David Ervtne of the Progressive 
Unionist party, which speaks for some 
loyalist paramilitaries, said a change 
of government would not damage the 
peace process. He said: "This is a big- 
ger issue than any individual or any 
group of individuals." 




Cheesemaker Peter Gott delivers some cheese to the prime minister’s residence at 10 Downing Street yesterday, along with a petition 
complaining about deregulation of the milk industry, which has raised prices for small producers Photograph : Trevor Humphries 

Trafalgar backed for Samsung deal 


By Andrew Taylor, 

Construction Correspondent 

Trafalgar House has been 
named by Samsung of South 
Korea as the chosen developer 
for its £600m plan to expand 
production of electronic con- 
sumer goods in north-east 

En gland 

The decision to build a man- 
ufacturing complex at 
Wynyard. Cleveland, was 
announced by Samsung last 
month. It is the world's 14th- 
biggest - industrial group. 

The complex, which will pro- 


duce consumer goods including 
microwave ovens and com- 
puter monitors for the Euro- 
pean market. Is expected to 
provide 3,000 permanent jobs 
by the end of the decade and 
will create substantial employ- 
ment during the construction 
phase. It win be the biggest 
stogie European investment by 
a Korean company. 

Preliminary design work has 
been started by Trafalgar 
House, the UK construction, 
property, shipping and hotels 
group. 

A construction contract has 


still he signed, but Trafalgar is 
in a strong position as 
favoured developer. Mr Chan 
Bae, Samsung Electronic’s UK 
managing director, said yester- 
day: “We are looking forward 
to working closely with Trafal- 
gar House over the next few 
years." 

The complex - the .Samsung 
Industrial Park - will eventu- 
ally comprise five manufactur- 
ing plants as well as training 
and administrative centres. 

The first phase includes the 
construction of microwave 
oven and computer monitor 


Post Office set 
to expand into 
travel insurance 


plants on the 200-acre site close 
to Samsung's existing £20m 
colour television factory. 

A second phase providing 
facilities to manufacture fac- 
simile machines, colour display 
tubes and personal computers 
is planned to start in 1997. 

The company plans to move 
its European headquarters 
from Frankfurt to London. The 
UK government offered Sam- 
sung £58m to regional grants 
and loans to secure the project 
With indirect aid, the support 
is equivalent to 20 per cent of 
Samsung’s investment 


By David Owen 

Britain's Post Office is dose to 
a deal with a leading insurer 
that would enable it to sell 
travel insurance through many 
of its 20,000 branches. 

The deal expected to be fina- 
lised by January, is part of a 
drive by the Post Office to 
expand the range of products 
and services offered through 
what the government has 
described as the largest chain 
of shops in Europe. 

Three companies are under- 
stood to be on the shortlist for 
the travel insurance deaf 

The arrangement is likely to 
be structured to give the Post 
Office a percentage on every 
policy or block of policies sold 

News of tbe transaction 
comes less than two weeks 
after the government was 
forced to abandon plans to pri- 
vatise Royal Mail, the Post 
Office's letters division, follow- 
ing opposition from some Tory 
backbenchers. 

Post Office managers are 
now keen to exploit govern- 
ment guidelines on the range 
of transactions mat can be 
handled through tbe organisa- 
tion’s retail network, Post 
Office Counters, and are seek- 
ing to branch out into finanrfai 
services and insurance. 

According to Mr Bill Cock- 
bum, chief executive, new 
business generated as a result 
of the relaxation of the guide- 


lines may eventually account 
for as much Post Office Count- 
ers business as Royal Mail 
does. In the year to March 1994, 
Royal Mail accounted for 
£221m of the branch network’s 
£l.09bn turnover. 

Mr Cockbum added* “Within 
a five-to-10-year timescale, we 
should be thinking about creat- 
ing a significantly larger raft of 
new business to the Post Office 
as a result of the wider powers 
the government has given us. 
Tbe thing the post offices are 
very good at is doing nation- 
wide transactions in very large 
quantities." 

He intends to continue press- 
ing the government to let the 
Post Office targe joint ventures 
- something ministers have 
opposed in the past 

He regards airlines, technol- 
ogy companies and printing 
groups as the sort of organisa- 
tions the Post Office could 
team up with in this way. 
Since May, the organisation 
has offered bureau de change 
services, in conjunction with 
Bank of Ireland, at some 4AQ0 
Post Office branches. About 
L50Q branches were involved 
in this week's launch of the 
UK's national lottery. The new 
guidelines were set out to a 
government paper on the 
future of postal services. Previ- 
ously, the Post Office was 
allowed to do business only for 
the public sector and recently 
privatised utilities. 


UK NEWS DIGEST 


Social worker 
wins landmark 
stress ruling 

A former senior social worker at Northumberland County 
Council in northern England yesterday became the first 
person to the UK to win an action against his employers for 
negligence after his workload damaged his health. 

The High Court ruled that the council had breached its duty 
of care to Mr John Walker, 57, whose workload drove him to a 
nervous breakdown. 

Mr Alan Jtokinson, general secretary of the public services 
union Unison, which brought the case, said: “This is a 
warning to employers that they can no longer expect then- 
staff to pay with their health while struggling to provide 
under-funded, under-resourced services." 

Mr Walker of Whitley Bay. Tyne and Wear, had been area 
manager responsible for a team of social workers to the Blyth 
Valley area since 1974. 

He suffered a breakdown in November 19S6 after his 
workload grew because of tbe rising number of child-abuse 
cases in tbe area. 

The union said Mr Walker would seek more than £200,000 in 
damages. 

Mrs Ann Robinson, head of the policy unit at the Institute of 
Directors, said: “Most of us who employ people had better shut 
up and go home. It will make people think very carefully 
about employing anyone at aH" The number of cases feeing 
employers in areas such as maternity rights, repetitive strain 
injury and now stress was becoming an increasing problem, 
she said. 

Red Baron relic unsold 

A piece from the plane of First World War fighter ace “the Red 
Baron”, which had been expected to fetch up to £100,000. failed 
to sell at auction today. Bidding for the relic, from the red 
Fokker triplane of Baron Manfred von Richthofen, reached 
£21,000 before it was withdrawn. 

A spokeswoman for the auctioneer said: “It is such an 
irmimial i tem it was very difficult to value and I think 
perhaps people didn't know what the appropriate price was." 

The piece, depicting the distinctive Balkan Cross, was sal- 
vaged by an Australian infantr yman and later given to an 
American surgeon whose son put it up for auction at Phillips. 

The Baron, who shot down 80 planes died to the Fokker, 
brought down by Allied forces to April 1918. The plane's 
angina is in London's Imperial War Museum. 

Trial hitch for Nadir aide 

Mrs Elizabeth Forsyth, a close associate of Mr Asil Nadir, 
cannot be put on trial until the Swiss authorities have sent 
evidence to Britain, London's Bow Street magistrates were 
told yesterday. 

Prosecution solicitor Mr Peter Kieman said the Serious 
Fraud Office hoped to have its requirements before Christmas. 
It was planned that Mrs Forsyth’s case would then be trans- 
ferred to a crown court 

Mrs Forsyth chaired South Audley Management the com- 
pany that dealt with the personal tax and property affairs of 
Mr Nadir, chairman of the fruit-tocompany Polly Peck Inter- 
national. 

Mrs Forsyth successfully applied through her solicitor for 
reporting restrictions on the proceedings to be lifted, a move 
which was described as unnsuaL 


The Investment Guide to Central 
& Eastern Europe 

Published by Kensington Publications Limited 

in association with 
a 


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i-" 



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uthh investment potential to rival that of South East Asia. 


Due to the Mm^oiis interest from the international business ami financial 
communities, the CIB and Kensington Publications are about to publish the first 
official guide to the business and financial environment in all the constituent 

countries of the region. 

Editorial has been commissioned from government ministers, central bank governors 
and other influential figures to protnde a unique insight into the benefits and 
problems that exist for potential investors in this exciting region. 


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Increase in base rates and mortgage costs causes rise in inflation but prices remain level for other goods 

RPI up 0.1% in October 


By Gillian Tett, 

Economics Staff 

The recent rise in base rates 
and mortgage costs pushed the 
inflation rate up last 
month. 

But this was partly offset by 
flat prices in most other 
categories of goods, suggesting 
that high street price competi- 
tion remains intense in the 
approach to Christmas. 

Overall, the Central Statisti- 
cal Office yesterday said that 
the all-items retail prices 
index, which takes 1987 as 100, 
rose to 145.2 in October. 

This was 0.1 per cent higher 
than in September, and 2.4 per 
cent higher than in October 
last year. 


Most of this increase 
stemmed from the rise in base 
rates in September, which 
pushed up mortgage interest 
payments and added 
0.4 percentage points to the 
overall inflation index. The 
CSO said this effect was exac- 
erbated by a rise in outstand- 
ing mortgage debt. 

Prices in most other areas 
were flat, or even feL Conse- 
quently, if mortgage interest 
payments are stripped out of 
the index - the measurement 
favoured by the government - 
"underlying" inflation fell 
slightly in the month, and was 
only 2.0 per cent higher than in 
the previous October, the 
same as in the previous 
month. 


This figure was better than 
City predictions. Mr lan 
Shepherdson, economist at 
Midland Global Markets said: 
“This is another excellent set 
of inflation data." 

He pointed out that the most 
favourable aspect of the data 
was that the price weakness 
was concentrated in the “core" 
consumer areas and did not 
stem from erratic elements. 

With prices flat in both 
consumer goods and many ser- 
vice sectors, the data suggest 
that tiie discounting mentality 
seen in food retailing last year 
is increasingly spreading to 
other consumer areas. 

Motoring costs fell 0.5 per 
cent between September and 
October, due to lower petrol 


and secondhand car prices. 
Big secondhand cars, for exam- 
ple, were up to £200 
cheaper. 

The price of household ser- 
vice dropped 1.1 per cent in the 
month, and 1.4 per cent in the 
year to October, reflecting 
lower telephone charges. 

Food prices were 1.1 per cent 
higher in October than the 
year before, largely because of 
intense supermarket discount- 
ing last autumn. 

But food prices were 02 per 
cent lower than in September. 
Although seasonal food prices 
rose, there was discounting on 
bread, beef, sweets and pre- 
pared meals. 

Mr Nick Parsons, economist 
at Canadian Imperial Bank of 


Inflation* 

Month on month % point change 
Food 

Housing 

Household 
services 

Ciothmg and 
footwear 

Personal goods 
and services 

Motoring 
expenditure 

-0.1 0 0.1 0J2 (L3 
■CDntntxjtxjn to afl-ftems index 

Commerce, said: “It appears 
that retailers are entering a 
further round of aggressive 
price discounting." 

Clothing and footwear fell by 
0.1 per cent during the month, 
even though clothing and foot- 
wear prices have risen in Octo- 


Housing 


Annual % change 
6 



ber in previous years as a 
result of new stock. The CSO 
said: “There appears to be a 
new mid-season sales effect 
creeping in." 

Nevertheless, some analysts 
yesterday warned that these 
factors could be reversed in 


Motoring 

Annual 96 chanhga 

8 



n 1 1 1 1 1 n m 1 1 1 1 1 1 » m * 11 1 1 *J 
.1998 . .94 

SouckCSO 

coming months. Mr Adam 
Cole, economist at James Capel 
said: “Several factors . . . sug- 
gest that we are close to a 
turning point and we expect a 
modest upwards drift in all 
measures of core inflation, from 
here.” 



Subdued demand 
eased pressure 
on interest rates 


Jobless drop 
is sharpest 
for six years 


Unemployment: the regional outlook 

October, seasonally accused, % of workforce 

a Northern Ireland 
Q North 


□ North-west 
Q Yorks & Humber 
jjl West Midlands _ 
Q Wales 
B Scotland 
a South-east 
Greater London 
D East Midlands 
a South-west 
Q East Anglia 
UK 



m 


B 


□ 




a 


□ 


City is 
criticised 
on ‘green’ 
reporting 


By John Gapper, 
Banking Editor 


By Philip Coggan, 

Economics Correspondent 

The sharp fall in the 
unadjusted rate of claimant 
unemployment last month was 
the biggest monthly decline 
since October 1988. when the 
rules governing claims by 16- 
year-olds and 17-year-olds were 
altered. 

According to the Department 
of Employment unadjusted 
unemployment, as a percent- 
age of the workforce, fell from 
92 per cent in September to 8.7 
per cent in October. The 
decline of 125244 to 2.45m was 
boosted by students getting 
jobs after the summer break 
and by October being a five- 
week month, exaggerating the 
rate of decline. 

After seasonal adjustment 
the decline was reduced to 
45,800, the second highest 
monthly fall in the recent 
recovery. Since the biggest 
decline also occurred in an 
October, this suggests that the 
seasonal adjustment process is 


not completely smoothing the 
fluctuations. 

September's seasonally 
adjusted fall was revised to 
31,600 from 28,000. In the six 
months to October the season- 
ally adjusted total declined by 
an average 27,500 a month. The 
Department of Employment 
estimates the trend is for a 
monthly fall of 20,000 to 
25,000. 

The seasonally adjusted 
unemployment total was 222m 
in October, or 8.9 per cent, its 
lowest level since December 
1991. Unemployment fell in all 
regions and among both men 
and women. Since the peak in 
December 1992 unemployment 
has fallen by 455.100. 

The stock of vacancies at 
Jobcentres increased by a sea- 
sonally adjusted 10.600 in Octo- 
ber to 177,100, its highest level 
since 1990. 

Long-term unemployment, 
defined as those out of work 
for more than a year, fell by 
47.800 between July and Octo- 
ber and dropped below lm for 


Source d Empto yiw t 

the first time since October 
1992. 

Mr Michael Portillo, employ- 
ment secretary, described the 
fall in long-term unemploy- 
ment as “a very welcome 
movement”. 

Mr John Edmonds, general 
secretary of the GMB general 
union, said the government 
was continuing to fail the 
long-term unemployed. He 
added: “Slight falls will not 
resolve the massive underlying 
problem." 

Ms Harriet Har man, shadow 
employment secretary, said: 
“Official figures suggest 
that unemployment is still 
rising among the unemployed 
and that jobs are still 


being lost in the economy." 

The fall in unemployment 
has yet to result in a pick-up in 
jobs in the manufacturing sec- 
tor. Manufacturing employ- 
ment fell by 4.000 between 
August and September and 
was up only 2.000 over the 
quarter. 

Manufacturing employers 
seem to be asking their exist- 
ing staff to work longer hours 
instead of taking on new work- 
ers. Overtime working jumped 
by lm hours a week between 
August and September to 
reach 9.84m hours, its highest 
level since July last year. 
Short-time working fell to 
0.15m hours in September, the 
lowest -ever recorded leveL 


City institutions have shown 
little interest in environmen- 
tal reporting, Mr lan Taylor, 
junior minister for trade and 
technology, said yesterday. 

He told a seminar organised 
by the Advisory Committee on 
Business and the Environment 
that retailers bad become ner- 
vous that any stigma associ- 
ated with poor environmental 
performance by suppliers 
would attach to them. This 
was “feeding through the sup- 
ply chain” in demands for bet- 
ter management. 

Mr Martin Sciclnna. a part- 
ner of accountants Touche 
Ross, said accounting stan- 
dards were adequate for com- 
panies to start disclosing envi- 
ronmental costs and liabilities 
in balance sheets and profit 
and loss accounts. 

He said there was likely to 
be increasing demand for 
accountants to provide inde- 
pendent verification of envi- 
ronmental reports, as his firm 
had done for Coats Viyella, the 
UK's largest textiles company. 


By Peter Norman, 

Economics Editor 

Mr Kenneth Clarke, the 
chancellor, hinted that more 
subdued growth, of consumer 
d eman d could delay further 
rises in interest rates at his 
late September monetary meet- 
ing with Mr Eddie George, the 
Rank of En gland governor. 

The min utes of the Septem- 
ber 26 meeting, published yes- 
terday. confirmed that the 

rhanrpTInr and Mr GeOTgC bad 

agreed to leave interest rates 
unchanged for the time being. 

Mr Clarke, while noting that 
the UK recovery remained 
strong, said there was little 
immediate prospect of infla- 
tionary pressure from the con- 
sumer side of the economy. 

Mr Clarke said more sub- 
dued growth of consumer 
demand would allow exports 
and investment to grow fasts: 
and for longer before capacity 
constraints were hit 

He added that pay pressures 
also appeared to be under con- 
troL 

The September 26 meeting 
was brought forward because 


of international meetings at 
the end of September and took 
place only two weeks after UK 
bank base rates were raised to 
5.75 per cent from 525 per cent 
There was. therefore, relatively 
Stele new information for the 
chancellor and governor to 

Mr George said there was no 
question of wanting to tighten 
the policy stance further in 
October. He said it was possi- 
ble, however, that the run of 
favourable ghnckg to inflation 
might be coming to an 

Since Mr Clarke made his 
observations about consumer 
demand the Central Statistical 
Office has disclosed a rela- 
tively robust 3.7 per cent rise 
in retail s al a s volumes in the 
year to September and the 
Confederation of British Indus- 
try has reported a fall in 
retail sales in the year to Octo- 
ber - the first since December 
1992. 

Official figures on retail 
sales in October will be 
released today and statistics of 
third quarter consumer 
demand tomorrow. 


Faster 

in pay 
signalled 

By Ph#p Coggan 

Signs emerged in September 
that pay growth is edging up, 
in spite of the annual growth 
rate of underlying average 
paming H remaining unchanged 

at 3.75 per cent 

In the production sector 
underlying average earnings 
growth increased from 425 per 
cent in August to 4J> per cent 
in September. Manufacturing 
w ar nin g s grew at 4JS per cent in 
September, after August’s rise 
had been revised up to .45 per 
cent from 425 per cent 

The overall figures are being 
kept low by the services sector, 
where annual earnings growth 
was unchanged at 32 per cent 
in September. The services fig- 
ure will be affected in October 
by the A5 per cent settlement 
for 750,900 local authority man- 
ual workers. Last year -they 
received an increase of only L5 
per cent 

The underlying figures for 
average warning s smooth out 
the effects of factors such as 
pay arrears and industrial dis- 
putes. The seasonally adjusted 
growth in average earni n gs in 
the year to September was 3.8 
per cent, down from 5L9 per 
cent in August 

Mr Michael Portillo, employ- 
ment secretary, said: "Earn- 
ings growth is still some way 
above the infla tion figure and 
this is an undesirable situation 
from the point of view of max- 
imising employment growth.” 

In spite of the rise in manu- 
facturing earnings, wages and 
salaries per unit of output 
were X.4 per cent lower in the 
three months to September 
thaw in the sarm» three months 
of last year. This was the big- 
gest fall since records began in 
1970. Figures for previous 
months have been revised 
down. 

The strong increase in out- 
put and the lack of growth in 
manufacturing employment 
has kept unit labour costs 
subdued. 

Manufacturing output per 
head was 6.0 per cent higher in 
the three months to September 
thaw in the "same period 7 last 
year. ' 







Some companies say they’re 
joining forces to make international 
network communications simple. 





FINANCIAL TIMES 


THURSDAY MOVFMBF.R 17 1994 




■ v„ fz„ 



II 


NEWS: UK - THE GOVERNMENT’S LEGISLATIVE PROGRAMME 


Encoura ging economic figures provide some respite for Conservatives as plans are outlined for second half of parliament 

Major makes Europe an issue of confidence 


ByPhiip Stephans, 

Political Ecfitor 

Quwn's Speech. Mr 
^ ors Poetical fortunes 
“® xt will not 
aericuitural ten- 
JSS. °, r plans to abolish 
bfJth authorities. 

The British government, lan- 
SUJfWng still in the opinion 
polls, enmeshed in charges of 
liable for more 
tton bnef periods to demon- 
strate grip or sense of purpose 
has a bigger task. As it enters 
the second half of this parlia- 
men* it must restore the repu- 
tation for competence which 
has so sorely eluded it since 
sterling’s ignominious exit 
from the European Monetary 
System two years ago. 

The strength and durability 
af the economic recovery, pros- 
pects for pre-election tax cuts, 
tranquillity or otherwise in the 
classrooms, and the future of 
the welfare state are the sort of 
things that preoccupy the elec- 
torate. If peace in Northern 
Ireland turns from a fragile 
promise into a reality, Mr 
Major’s achievement could yet 
change the political climate. 

We will hear no great 
dehates about whether the bills 
which form the core of the leg- 
islative programme mark a vic- 
tory for the cabinet's consoli- 
dators or for its radicals. 
Arguments about the govern- 
ment’s lack of Thatcherite edge 
belong to the rarifred atmo- 
sphere of Westminster, not to 
the real world. 

But there is one piece of leg- 
islation that must be passed. 
And the capacity of the Con- 
servative party to shoot itself 
in the head can never be dis- 
counted. The bill to implement 
the increased funding of the 


Some main pieces of proposed legislation 

included in yesterday's Queen's speech are: 

■ European Community (finance) bill - the contro- 
versial plan to increase budget contributions to the 
European Union. 

■ Gas bill - to abolish the British Gas monopoly over 
domestic customers allowing other companies to com- 
pete to sell gas, under close regulation, to households. 

■ Channel tunnel rail link bill - paving the way for 
the ctmstruction of the 67-mile high speed link from 
London to the tunnel, involving compulsory purchase 
of land and partial widening of the A2 trunk road and 
M2 motorway in Kent. 

■ Private international law bill - covering aspects of 
polygamy in marriage, torts involving foreign inter- 
ests and the payment of judgment debts in foreign 
currency. 

■ Pensions bill - to introduce a retirement age of 65 
for both men and; women by 2020, increasing equality 
in occupational pension schemes and tight ening up 
the management of schemes after the Maxwell scan- 
dal. 

■ Criminal appeal bill - to set up an independent 
body to investigate alleged miscarriages of justice and 
refer appropriate cases back to the courts for review. 
Likely to be introduced later in the session in the 
hope of winning all-party backing. 



MPs, led by prime minister John Major and Labour leader Tony Blair, proceed to the House of Lords to hear yesterday’s Queen’s Speech 


European Union agreed at the 
1992 Edinburgh summit is 
threatening another convul- 
sion on the Tory backbenches. 

Mr Major had no choice 
other than to make it an issue 
of confidence in his govern- 
ment After the agonies over 
the Maastricht treaty the cabi- 
net is agreed that appeasement 
will never satisfy the anti- 
Europeans. 

It is always possible, jnst 
possible, that there are enough 
nihilists « mnwg the hreconciii- 


ables to bring down the gov- 
ernment. But the odds over- 
whelmingly are that the bill 
will be passed. Mr Kenneth 
Clarke, the chancellor, wants 
the key second reading debate 
to be held the day before his 
November 29 Budget 
The more rational Euroscep- 
tics on the backbenches see lit- 
tle point in handing to Mr 
Tony Blair Britain’s negotia- 
ting mandate at the for more 
important 1996 intergovern- 
mental conference. Outspoken 


critics of Brussels among the 
younger generation of sceptics 
have anyway been unwilling in 
the past to match dark words 
with action. 

The rest of the programme is 
not without substance. Gas 
deregulation will complete tbe 
unfinished business of the 
1980s privatisation Programme- 
Equalisation of the pensions 
age at 65 and tighter regulation 
of pension funds is relatively 
uncontroversial. The Job Seek- 
ers' Allowance may mark the 


beginning of a new, cross- 
party, consensus on the struc- 
ture of benefits. No one will 
quarrel with the creation of a 
new environmental protection 
agency or with the principle, at 
least, behind the government’s 
belated promise to do some- 
thing to end discrimination 
against the disabled. 

Like man y in his administra- 
tion, Mr Major is a prisoner of 
the idea that good government 
defines itself through perma- 
nent legislative revolution. Mrs 


Margaret Thatcher the 

sanw when she introduced the 
ill-fated poll tax. 

As Mr Blair remarked during 
a competent if less than spec- 
tacular debut as party leader 
in a set piece Commons debate, 
the Conservative party is still 
undecided whether to praise or 
to bury the memory of Mr 
Major’s predecessor. 

As he enters the second half 
of the parliament, Mr Major 
must make that choice. All 
past precedents suggest it will 


be impossible for tbe govern- 
ment to recover its position 
before an election due at latest 

in mid-1997. 

But no-one, least of all Mr 
Blair, Is sure that tbe game is 
lost for Mr Major. 

If the encouraging economic 
statistics can translate into a 
significant i mprov e ment in the 
polls, the government has a 
chance. If they do not then the 
Conservative part; will be 
unable to escape the fate of its 
leader. 


Government ‘out of touch and out of steam’ says Labour leader 


By Kevin Brown, 

Pol Meal Correspondent 

Mr Tony Blair, leader of the 
opposition Labour party, yesterday 
scored a narrow victory in his first 
full-scale clash in the House of 
Commons with Mr John Major, the 
prime minister, since be became 
’party. leader- in the summer. 

In a lacklustre debate on the 
Queen's Speech, Mr Blair 


successfully fought off an ambush 
by backbench Conservative MPs 
who sought to undermine his first 
Commons speech as leader by 
repeatedly interrupting him. 

Tbe Tory tactics backfired as Mr 
Blair dealt with the interruptions in 
the style of a headmaster accepting 
and dismissing a series of cheeky 
questions from the less intelligent 
members of the fourth form. 

Even the prime minister allowed 


hims elf a smile as Mr Blair joked 
that Mr Bob Dunn, a Tory 
backbencher who had admitted 
regularly ignoring the advice of 
experts, was unlucky not to have 
made it to the cabinet 
Mr Blair focussed his attack on the 
Conservative record on taxation and 
the economy, prompting irritable 
interventions from Mr Kenneth 
Clarke, chancellor, and Mr Norman 
Lament his predecessor. 


He ridiculed Mr Major’s decision 
to drop Post Office privatisation in 
the face of opposition from a handful 
of rebels, and derided his threat to 
call an election if the European 
contributions hill is defeated as an 
empty gesture. 

Mr Blair said the Queen’s Speech 
showed that the government was 
“out of touch and out of steam.” The 
cabinet was “so riven by factions, 
buffeted by one day’s headlines to 


the next, that it cannot address the 
interests erf the country.” 

But. in a speech widely regarded 
as lacking inspiration, Mr Blair 
foiled to tempt an intervention from 
the prime minister, or to deflect him 
from his prepared speech, which 
focussed largely on Northern Ireland 
and Europe, 

Mr Major, unwisely tempted by 
the witty opening to Mr Blair's 
speech , attempted several jokes, all 


of which foil fiat But he was on 
surer ground with an attack on the 
opposition leader's Haim to have 
transformed Labour. 

Disparaging the "New Labour” tag 
developed by Mr Blair, the prime 
minister claimed that eight shadow 
cabinet members remained 
committed to unilateral nuclear 
disarmament, giving a fresh 
meaning to the phrase "brothers in 
arms." 


Commons 
set to see 
battle 
over bills 


By Kevin Brown 
and Ivor Owen 

Tbe government plans to 
confront its critics - both 
internal and external - over 
tbe nest few weeks by giving 
parliamentary priority to its 
European finance and Jobseek- 
er’s Allowance bills. 

Senior ministers said the 
two bills would be introduced 
quickly in the Commons, with 
a third controversial bill to 
remove a layer of admbUstra.- 
tioa from tbe National Health 
Service. 

The Enropean bill, which 
will Increase UK contributions 
to tbe Enropean Union, will 
provide the main battleground 
between tbe parties, not least 
because of tbe government’s 
threat to call a general elec- 
tion if it is amended or 
defeated. 

The Jobseeker’s Allowance 
bill, which replaces unemploy- 
ment benefit, will face tough 
opposition from tbe Labour 
party, which says that it will 
strip 90,000 people of benefits 
and force means testing on a 
farther 150,000. 

Tbe prime minister forecast 
that inward investment would 
“continue to flood in” to 
Britain as he again underlined 
the importance of bolding to 
the maintenance of a low level 
of inflation as a long-term 
objective. 

He suggested tbe signifi- 
cance of the “vote of confi- 
dence by foreign investors in 
the British economy” had not 
been fully appreciated. 

Mr Major said “For tbe first 
time we may be in a position 
where we have broken the 
inflation psychology which 
has damaged this country time 
and Km«» again since the war**. 

Tbe prime minister insisted 
that “meaty measures’* the 
government intended to intro- 
duce wonld provide a farther 
boost to the economy, includ- 
ing the bill authorising tbe 
construction and operation by 
tiie private sector of a high 
speed rail link between Lon- 
don and the Channel tunnel 
which was likely to create 
between 10,000 and 15.000 
jobs. 


We’d like to set the record st raight 


* 


There’s nothing simple about having a communications network that’s, patched together by a 
collection of different companies from around the globe, each with their own technologies and 
their own way of doing things. Common sense suggests it would be better to have one global 
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IBM Global Network. Others may utter a “single point of contact" — but il you ask for something 
like global E-mail, they’re likely to tell you their affiliates in Buenos Aires or Budapest aren’t on 
line yet. Assuming they even /wire affiliates in those places. But the IBM Global Network has 
5,000 network professionals and provides access to more than 00 countries. Now . So you can get 
a head start on the high-speed networking that’ll make it seem like everyone in your corporation 
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straight answers about international network rnnuiumicalions. 


The IBM Global Network 









12 


FINANCIAL TIMES THURSDAY NOVEMBER 17 1994 


TECHNOLOGY 


Toyota 
moves 
on line 


T oyota, the Japanese car 
maker, is tying up with a 
cable TV operator to con- 
duct experiments in high-speed 
data transmission. 

Toyota and ffimawari Cable, 
which operates in the Nagoya 
area where Toyota is based, win 

start exper im ents this month in 
asynchronous transfer mode 
(ATM) high-speed data transmis- 
sion using HUnawari’s optic 
fibre cable. Toyota owns almost 
13 per cent of Hhnawari, which 
readies 90 pm* cent of house- 
holds in Toyota city. 

ATM is a technology which 
enables data to be sent at about 
26 times the speed of systems 
using conventional telephone 
tinea by sending digital informa- 
tion in packets. 

Speedier data transmission 
will allow Toyota to improve 
efficiency in communications 
between facilities, the company 
says. “We need to send huge 
amounts of information, such as 
vehicle designs,” Toyota 
explains. 

The comany, which is also a 
shareholder in IDO, the cellular 
phone maker, and in Teleway 
Japan, a long-distance carrier, 
hopes to ex pand the network to 
affiliated companies in the auto 
industry by the end of 1996. 

If Toyota succeeds in linking 
its separate facilities with each 
other and with suppliers, the 
lead in efficiency the company 
already commands over many 
auto manufacturers is likely to 
widen even farther. 

Toyota is one of the more for- 
ward-looking in its approach to 
advanced computer and tele- 
communications technologies 
among Japanese companies, 
which have generally been slow 
to adopt high technology in the 
office. 

Japan's largest car company 
has also been quick to make use 
of computer on-line services, for 
example. It has boilt an on-line 
forum on the Prodigy computer 
network in the US through 
which it provides Toyota ow ners 
with information on everything 
from insurance to future models 
and accessories. 

Michiyo Nakamoto 


T he similari ties between 
compater viruses and 
h uman ones may be closer 
than the name alone sug- 
gests, according to computer scien- 
tists at IBM’s Thomas J. Watson 
Research Centre. 

IBM researchers have discovered 
similarities in the way computer 
viruses spread and the way human 
viruses jump from host to host. 
This has led them to develop anti- 
virus technology that continues the 
biological metaphor - using a 
model of the hnrnan immune sys- 
tem to develop a way of automati- 
cally trapping and eradicating com- 
puter viruses before they can 
damage the host personal computer 
and spread to other computers. 

The IBM Automated Immune Sys- 
tem Is an electronic version of our 
human immune sy s t em and could 
provide a breakthrough in the fight 
against computer virus infections. 
There are at least 6^000 computer 
viruses and computer security 
experts say they are discovering as 
many as three new viruses a day. 

A computer virus is a hidden pro- 
gram that can replicate itself, and 
sometimes causes widespread dam- 
age to data stored in the computer. 
While few of these rogue programs 
reach widespread distribution, com- 
puter viruses pose a daily threat to 
PC users. 

“The Automated Immune System 
allows us to detect a virus without 
having any prior knowledge about 
it" says Jeffrey Kephart, manager 
of anti-virus technology at IBM’s 
High Integrity Computing Labora- 
tory at the Thomas J. Watson 
Research Centre. “Once the virus 
has been detected, the system auto- 
matically analyses it and removes it 
from any infected files.” 

This approach differs from the 
way most current anti-virus soft- 
ware operates. Anti-virus applica- 
tions, such as VirusScan from McA- 
fee Associates, are at their most 
effective against known viruses and 
must be updated regularly with the 
‘‘signatures” of new viruses. 

Kephart says the system is mod- 
elled on the way the human 
immune system protects us against 
viral infection. In the IBM 
approach, the anti-virus software 
uses a decoy program to attract a 
virus if one is present 
The software can detect an infec- 
tion by noticing changes made by 
the virus in the decoy program. It 
will then isolate and analyse the 
virus, and erase it from any infected 
files it finds, in the human immimp 
system, a cell called a macrophage 
searches for infecting organisms. 
When the macrophage finds a virus 
or bacteria, it makes and analysis 
and then alerts other immune cells 
to the specific infecting organism, 
triggering the production of anti- 
bodies that target specific infec- 
tions. 



Electronic 

immunity 

Tom Foremski looks at the similarities between 
computer viruses and their biological counterparts 


The IBM system has an additional 
capability. It helps stop the spread 
of virus infections to other comput- 
ers. This is essential in today's 
high-speed networks because a 
virus can quickly spread. The sys- 
tem sends out a message to neigh- 
bouring PCs that it has found an 
infection and Instructs them to look 
for a specific virus. In this way. the 
path of a computer virus infection 
can be traced and contained. 

The IBM Automated Immune Sys- 
tem is in the prototype stage and 
will be introduced into IBM’s com- 
mercial anti-virus software next 
year. While it appears to be an 
important step against infections, it 
will not eliminate computer viruses. 
“There are some sophisticated 
viruses being written, n says Bill 
Arnold, an anti-virus specialist at 
IBM. “These viruses are written by 
people who know how we detect 
and analyse viruses. One such virus 
is the 1/2 virus which breaks itself 
into pieces to make itself more diffi- 
cult to analyse.” 

Computer virus creators have 
developed what are called stealth 
and polymorphic viruses. A stealth 
virus bides inside a PC and makes 
itself invisible to anti-virus soft- 


ware. A polymorphic virus will 
change itself slightly every time it 
infects a PC or a file, making it 
difficult to analyse or create a “sig- 
nature” that can be used to detect 
infections. 

Phil Talsky. manager of product 
marketing at McAfee Associates, 
says it is risky to do nothing when 
a virus is detected, even if it does 
not appear to be causing problems. 
"The trouble is that you can never 
really know what the virus will do 
and you risk a much bigger problem 
at a later date,” says Talsky. 

Although there are increasing 
numbers of sophisticated computer 
viruses, PC users should not panic, 
says David Stang. computer virus 
expert and president of anti-virus 
software firm Norman Data Defence 
Systems. "The chance of being 
infected is very low," says Stang. 
“But if you do have an infection, it 
can be very expensive.” Stang cites 
the case of a brokerage firm forced 
to shut down its PCs to clean out a 
virus infection and lost millions of 
dollars in business during the few 
hours the PCs were turned off. 

Magali Grim any, information 
security analyst at Sun trust Bank, 
based in Atlanta, Georgia, says that 


a virus infection closed down one of 
the bank’s servers affecting dozens 
of PC users for most of the day. 
Sun trust now uses McAfee’s Virus- 
Scan package to protect more than 
8.000 PCs. 

McAfee and other firms such as 
Symantec are trying to fnaicp the 
updating process easier with new 
software that will automatically 
update. Sun trust and other large 
organisations also prohibit staff 
from bringing in diskettes from 
borne or inserting diskettes Into 
their PCs that have not been 
scanned for viruses. 

Creating a computer virus is not 
that difficult and is not illegal, says 
Stang. which is why there are so 
many. “You can buy a CD-Rom disk 
containing hundreds of viruses and 
you can down-load software for 
creating viruses from computer bul- 
letin boards,” he points out 

Kephart is not the only one to 
note the analogy between computer 
viruses and their biological counter- 
parts. The British physicist Stephen 
Hawking gave the keynote speech 
at a computer show earlier this 
year. He found it ironic that the 
only form of “life” we have created 
so for is purely destructive. 



measure up 

F.mikn Terazono looks at a new 
database of body sizes 


A band of British MPs - 

LA visiting Japanese schools 
X V recently were surprised 
that the children’s body frames 
were for larger than they had 
expected. “There were a few as 
tag as me,” said one after a day at 
a school in central Tokyo. 

Japanese children are becoming 
generally taller bigger than 
previous generations. Changes to 
the normal dirt, now containing 
more meat and dairy products 
rather than fish and vegetables, 
and a more westernised lifestyle - 
using chairs rather than sitting 
on tatand-matted floors, for 
instance - are reckoned to have 
contributed to the modern 
Japanese physique. 


institute’s data an arm length, .. 

while Nissan Motor says It bought 


to affect industrial 
manufacturers. Calls from 
companies for more accurate data 
on the growing sizes of the 
Japanese have prompted the 
government to compile statistics 
in order to capture the changes. A 
comprehensive survey erf physical 
sizes was initiated at the start of 
last year for the first time since 
1978. 

After two years of gathering 
date, tire Research Institute <rf 
Himuwi Eng ineerin g for Quality 

life (HLQ), an organisation 
affiliate d to ffy* Ministry of 
International Trade and Industry 
(Kfiti), started marketing its 


The institute gathered date 
from 35,000 people between the 
ages of seven and 70. A 
measuring machine equipped 
with laser beams captured 
three- dimensi onal images of the 
bodies, with measurements 
provided for every three 
millimeters. 

The institute has received more 
than 400 queries and has now 
sold 95 database packages. The 
statistics are expected to help 
man ufa c turer s save on product 
sizes and rednee risk of 
accumulating unwanted stock. 
Clothing makers, consumer 
electronics and automobile 
companies are among the 
purchasers. 

The mghmgTMfthtnft riitrigiwn 

of Matsushita Electronic 
Industries, the leading consumer 
electronics company, has used the 


and the amount of room between, 
toe head and the car roof- 
TO to, the lavatory maker, says 
the date confirmed that Japanese 


as bottom sizes were not changin g 
drastically. 

Goldwtn, a sportswear maker, 
added a new size for shorter, 
plumper middle-aged women on 
to its rftmMng gear line 

after buying the data, wldle a . 


primary school children 


were 


increased the number ofspectade 
sizes for children. 

Yqji Fuknda, head of 
technology development at HLQ, 
says the institute spent YSOflm 
(£3m) an the project. The 
database provides daia.of 178 
body parts, from the thickness of 
the band to the distance between 
the eyes. According to the data, 
females in their 40s were 2.7cm 
taller than 15 years ago; males in 
the same age group were &5cm 
higher. Women hi their 20s were 
. ? tem taller; bust and waist 
measurement were larger by 
Iran. 

The statistics also show that the 
Japanese foot has become 
narrower, but indicate that 
Japanese still have shorter, lower 
legs and upper arms compared 
with Caucasians. 

Miti is cur r ently reviewing the 
Japan Industrial Standards - 
national size and format 
standards for industrial products 
- based on the data. It is 
currently comparing the 
differences with the standard 
sizes set in 1980 and is expected 
to revise the national standards 
in 1996. 

Fees for the database, available 
on floppy discs or paper, depend 
on the menu required. A basic, 
package covering 1,000 people 
costs around Y180JM0, while 
small and medium-sized 
companies are eligible far 
discounts. A ski-boot maker, for 
instance, buying foot . 
measurements of 10 categories 
could pay b e tw een ¥380,000 and 
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financial times 


THURSDAY NOVEMBER 17 1994 


13 


* 


Healthcare: A 
burden and a 
blessing: Page II 


FINANCIAL TIMES SURVEY 

MASSACHUSETTS 

Thursday November 17 1994 


Fishing: Sacred cod 
no longer works 
its miracle: Page HI 


The state may have started to take its prosperity for 
granted, says Tony Jackson. In which case, the 
downturn will have had a salutary effect 

Strengths reassert 
themselves 


It has been a tough six years 
for the state of Massachusetts 
Between 1388 and 1992. it suf- 
fered more Job losses in propor- 
tion to_ its size than any US 
state since the great depres- 
sion. 

For the home of the so-called 
high-tech Massachusetts Mira- 
cle -and the seat of Harvard 
and the Massachusetts Insti- 
tute of Technology (MIT) - the 
blow to morale was profound. 
Now, however, the state’s 
defenders claim that its native 
strengths are reasserting them- 
selves: Massachusetts, they 
say, is climbing back. 

To appreciate their case, it 
helps to recall what went 
wrong in the first place. Mr 
Wayne Ayers, chief economist 
of the Bank of Boston, says: 
“The years of the so-called 
Massachusetts Miracle [in the 
1960s] were an aberration. It 
was a confluence of one-off fac- 
tors.” 

Chief of those was the 
build-up of defence spending 
under President Ronald Rea- 
gan. Although Massachusetts’ 
technological base is impres- 
sive in breadth as well as 
depth, by the start of the 1980s 
the defence industry had come 
to assume an unhealthy domi- 
nance. For decades, MIT's 
research activities were 
skewed by government defence 
funding. Raytheon, the defence 
giant which makes the Patriot 
missile, is the state’s biggest 
private-sector employer. When 
defence spending passed its 
peak in 1987, trouble was inevi- 
table. 

It did not help that another 
integral part of the so-called 
miracle, Massachusetts com- 


puter industry, was in the 
wrong part of the market. Its 
biggest companies. Digital 
Equipment and Wang, were 
concentrating on the mini-com- 
puter just as the personal com- 
puter revolution was getting 
under way. While the state 
was, and remains, a seedbed 
for small-company innovation 
in information technology, by 
the end of the 1980s it was bet- 
ter known for its stumbling 
giants. 

The prosperous years had 
one further malign effect in a 
small, compact state like Mas- 
sachusetts, property prices 
went through the roof. By 1987 
all the warning signs were 
there: the proportion of the 
Massachusetts workforce 
employed in construction, for 
instance, was among the high- 
est in the country. The result, 
in 1989, was a property col- 
lapse. 

All this led to a period of 
serious introspection. Professor 
Michael Porter, of the Harvard 
Business School, says: “There 
were grave doubts about the 
future of the Massachusetts 
economy. We had the lowest 
credit rating of any state. It 
was felt there was something 
deeply wrong in a structural 
sense, analogous to the loss of 
the textile Industry in the 
past" 

A recent document* bearing 
the imprint of Massachusetts 
Governor W illiam Weld -in 
which Professor Porter also 
had a hand - develops the 
point In the late 18th century, 
it observes, Massachusetts 
enjoyed a burst of prosperity 
through Boston's dominance of 
American shipping; then, in 


the early 19th century, it was 
overhauled by the Port of New 
York. Again, it gained a com- 
manding lead in a wide range 
of manufacturing in the late 
19th century, only to lose its 
competitive edge to cheap 
southern labour by the 1920s. 

In that context, the loss or 
momentum in the late 1980s 
could be seen as deeply seri- 
ous. The high-tech boom, 
which had its origins in the 
start-up companies around 
Boston’s Route 128, repre- 
sented a third wave of prosper- 
ity for Massachusetts. In other 
words, the normal pattern of 
recession and recovery may 
not apply. "A more relevant 
consideration," says the docu- 
ment, “is whether the high- 
tech boom has ended in Massa- 
chusetts, or merely stumbled 
badly." 

In Prof Porter's own view, 
the latter is true. “What is 
unique about this state is that 
it's a remarkable engine for 
new business creation. New 
companies emerge with enor- 
mous frequency, not just in 
new industries but in textiles 
and apparels. In fact, this is an 
economy with enormous 
strength which has been 
weighed down by public pol- 
icy.” This is an important 
point for advocates of the Mas- 
sachusetts economy. In effect, 
they say, the state started to 
take its prosperity for granted. 
The downturn has thus had a 
salutary effect, especially in 
prompting its various constitu- 
encies - business, government, 
the universities - to co-ordi- 
nate a I990s-style industrial 
policy. 

“Ibis state is a very interest- 



senator Edward Kennedy with Ms wife Victoria after ha was no-etocted to a sbdh turn hi flie senate nwrihar 


Victoria Griffith examines Massachusetts politics 


Affair with Democratic 


party may be cooling 


isachusetts voters seemed 
iave a split political person- 
7 during the mid-term elec- 
ts last week. While they 
.vered Edward Kennedy, 
of the last liberal hold-outs 
he US. back to the Senate, 
y also handed Republican 
remor w iTHam Weld a land- 
e victory. 

fith 71 per cent of Massa- 
isetts voters supporting 
Id, pundits began to ask 
jther the political fide was 
ngtng in the state, 
[assachusetts has long been 
iwn as the Democratic Par- 
paradise. Registered Demo- 
te outnumber registered 
niblicans in the state by 
ne to one. The state handed 
Clinton one of his big gest 
tones in the election two 
rs ago, and residents still 
i the president his strongest 
roval ratings in the nation, 
issachusetts Liberals" has 
a a label residents of the 
n have carried, sometimes 
udly, for decades. 

[early all the famous politi- 
is Massachusetts has pro- 
ed over the years have been 
nocrats. The Kennedys 
It their political legend from 
oston base, and Tip O'Neill, 
sr speaker of the House of 
esentatives, hailed from 

setts. 

assachusetts Demo- 
ty has also produced 
jus failed contenders^ 
yWR, Bush's ill-fated 
in- 1988 , was a farmer 

af the state; and Paul 

whom Clinton, 
for the Democratic 
m two years ago, was 
uisetts senator. 

re are signs that the 
ive f |ff ' fl i T with the 
ie party is cooling. 
Kennedy won a corn- 
victory over chal- 
tt Romney, hot only 
ig the toughest elec- 

5 of his 32-year senate 

cst weeks before the 


election, polls showed the two 
candidates in a dead-heat 
“The time when people in 
Massachusetts roll over and 
play dead for the Democrats is 
over," said Mr Weld. The 
Republican governor’s popular- 
ity is one reason the GOP has 
been gaining ground in the 
state. With his pro-choice 
stance and strong support for 
women and gay rights, Mr 
Weld has helped to forge a new 
brand of Republicanism which 
has made the party more 
acceptable in socially liberal 



Governor WBSam Wold wa« 
handed a landslide victory 


Massachusetts. Still, political 
analysts accustomed to the 
state’s left-wing image were 
shocked when the governor 
succeeded in pushing privatisa- 
tion arid hefty spending cuts 
through the overwhelmingly 
Democratic state congress over 
the past four years. 

And the private sector was 
relieved' when it saw Massa- 
chusetts taking a more aggres- 
sively pro-business stance, 
encouraging companies to stay 
hi the state by cutting taxes 
an d helping them through the 
permitting bureaucracy. For- 
tune magazine now rates Bos- 
ton one of the best cities in the 
country to do business. 

The Republicans have bene- 
fited from demographic 


changes in the state as well. 
The Massachusetts economy 
was once based on manufactur- 
ing, and unionised factory 
workers showed a strong pref- 
erence for Democratic candi- 
dates. 

But the state now relies on 
high technology and service 
industries such as fund man- 
agement and biotechnology, 
whose employees tend to be 
wealthier and more concerned 
about high taxes and govern- 
ment spending. Because urban 
dwellers are much more likely 
to vote Democratic than subur- 
banites, an exodus of residents 
from Massachusetts' cities to 
suburbia has also helped the 
Republicans. 

Even traditional Democratic 
candidates had to make conces- 
sions to these shifts in their 
campaigns this year. Mark 
Roosevelt presented himself as 
a fiscal conservative, and 
Kennedy began to sound like a 
Republican when he talked 
about getting tough on crime, 
rhetoric that goes down well 
with suburban voters. 

In spite of the changes, Mas- 
sachusetts is far from becom- 
ing a Republican stronghold. 
In the end, Kennedy won the 
election by 17 points. Joe 
Kennedy, Edward’s nephew, 
ran unopposed for his own 
Democratic seat in the US 
House of Representatives, and 
the state's Washington delega- 
tion is still overwhelmingly 
Democratic. The mayorship of 
the city of Boston, now in the 
hands of Thomas Menino, IS 
also considered safely in Demo- 
cratic hands. 

Yet the days when Demo- 
cratic candidates were almost 
assured of victory against 
Republican opponents are now 
over, and the state has taken a 
definite turn to the right Mas- 
sachusetts is still a receptive 
place for Democrats, but it is 
no longer the Democratic 
heaven it once was. 



ing story which gets repeated 
around the world." Prof Porter 
says. “It starts from strength: 
we inherited Harvard and MIT 
and a pool of capital and finan- 
cial institutions, and when the 
high-tech revolution started in 
the late 1960s and early 1970s, 
this state was in the right posi- 
tion. But as wealth was cre- 
ated. forces were triggered 
which started to erode that 
environment-, regulation, taxes, 
anti-business sentiment." 

However, he argues, Massa- 
chusetts was paradoxically 
lucky in being very early Into 
recession. 

“Texas came first with the 
downturn in oil, then us with 
real estate. A number of domi- 
noes then started falling into 
place. A lot of the state's politi- 


cal leaders understood that we 
couldn't deal with our social 
problems if we weren't making 
money. So we got a pro-busi- 
ness governor and state legisla- 
ture; and since this is a small 
state, we were able to make big 
headway in a relatively short 
time." Much of this has 
involved the state govern- 
ment's working closely with 
business leaders. Prof Porter, 
who chairs a body called the 
Governor's Council on Eco- 
nomic Growth, says: “We've 
gone one by one through 
industry clusters, saying 'Let's 
find out what government is 
doing to make life difficult, and 
let’s change if" 

At the same time. Massachu- 
setts has benefited from cycli- 
cal recovery in the US econ- 


omy, and particularly from a 
prolonged period of low inter- 
est rates. The combined result, 
says Mr Ayers, of the Bank of 
Boston, is that the economy is 
now in better shape than any- 
one would have thought possi- 
ble a couple of years ago. 

In the period 1988-92, Massa- 
chusetts lost 600,000 jobs. “Two 
years ago. people were saying 
it would take until the turn of 
the century to get those jobs 
back. But just over a third of 
them have come back already. 
In percentage terms, Massa- 
chusetts is now slightly better 
than average: unemployment 
in the country is 6 per cent, 
and we're below that" 

Partly, he admits, that is 
because many people lost heart 
in the depths of the downturn 


and migrated out of the state. 
“But still, nobody would have 
believed two years ago that 
we'd be close to the national 
average, let alone below it" 

There is still one cloud on 
the horizon. The healthcare 
industry employs even more 
people in the state than the 
defence industry. Through the 
late 1980s, this was one sector 
which remained robust Now, 
healthcare spending is under 
fire throughout the US. 

Mr Ayers is fairly sanguine 
about this. “Healthcare won’t 
be the prop that it was, but it 
shouldn't be a drag either." A 
recent study from the Federal 
Reserve Bank of Boston partly 
bears him out granted that the 
healthcare industry will have 
to cut costs, it says that repre- 


sents a saving for local employ- 
ees and individuals. 

Above all, Mr Ayers agrees 
with Prof Porter on the impor- 
tance of small companies in 
the Massachusetts economy. 
“The concentration of higher 
education means this place is 
still an incubator of small 
high-tech firms. Many of these 
were growing throughout the 
downturn, though not by 
enough to offset the big hits in 
defence and computers." 

Nevertheless, the revival of 
Massachusetts as a manufac- 
turing centre seems to have 
been relatively short-lived. 
“Virtually all the job growth 
we've seen here has been in 
services,” Mr Ayers says. 
“These jobs are not flipping 
hamburgers or taking in each 
other’s laundry. But we have 
continued to lose jobs in manu- 
facturing since a decade ago." 

There are signs that this 
may be bottoming out, he says. 
“But this is still a high-cost 
place to manufacture. And soft- 
ware and biotech companies 
tend to be small cerebral out- 
fits which will never be big 
manufacturing employers in 
the way the mini-computer 
industry was." 

Perhaps, though, the last 
word should go to one of the 
academics who provide the 
backbone for Massachusetts’ 
high-tech industry. Professor 
Merton Flemings, head of 
ma terials science and engineer- 
ing at MIT, says simply: 
"Whatever effect the drop in 
the economy had is long gone 
in my memory. We see great 
strength here, and growing 
strength." 

* Choosing 7b Compete: a state- 
wide strategy for job creation 
and economic growth (Executive 
Office of Economic Affairs, Mas- 
sachusetts l 



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14 


II 



Frank McGurty examines the healthcare sector : . 

A burden and a blessing 


Harvard: enormous resources and a fundamental factor in Massachusetts' strength in high-technology fields 

TECHNOLOGY 


ftiiufs Tern ra * 


Image has taken a battering 


The image of Massachusetts as 
a hotbed of high technology 
has taken something of a bat- 
tering in recent years, writes 
Tony Jackson. 

In the 1980s, the Route 128 
corridor around Boston was 
trumpeted as the east coast's 
answer to Silicon Valley. Now, 
say the critics, look at the con- 
trast Silicon Valley lias won- 
derful high-tech companies 
such as Intel and Hew- 
lett-Packard; Massachusetts 
has disasters such as Digital 
Equipment and Wang. 

In fact, the comparison is 
skewed by one simple fact. 
Wang and Digital were among 
a handful of big. well-estab- 
lished Massachusetts compa- 
nies which concentrated on 
mini-computers, which turned 
out to be a blind alley in the 
era of the networked personal 
computer. 

Forget the headlines, say the 
state's defenders. A pool of 
highly talented workers, 
backed by a well-developed 
venture capital industry and 
the enormous resources of the 
Massachusetts Institute of 
Technology (MIT) and Har- 
vard. make Massachusetts as 
much a hotbed as ever it was. 

Professor Michael Porter of 
the Harvard Business School 
goes further. "I think we have 
now eclipsed Silicon Valley," 
he says. 

“The latest Inc. 500 report 
[on the 500 fastest growing pri- 
vate companies in America] 
showed that Massachusetts 
had 33 companies on the list, 
and California had 71. Calif- 
ornia is around 14 per cent of 
the nation’s economy and Mas- 
sachusetts is 2J5 per cent. Do 
your sums, and Massachusetts 
is much the more exciting.” 

Part of this, he says, has to 
do with developments in tech- 
nology. "California hit on the 
PC and the workstation while 
we had the mini-computer," he 
says. 

"So we had a pause while 
they charged ahead. But the 
wave of the future now is net- 
working, and we have com- 
pany after company in the tele- 
coms networking business. 
And while the west coast may 


have the consumer software, 
we have the sophisticated busi- 
ness software. The Massachu- 
setts cluster is better posi- 
tioned to ride the wave in the 
next phase.” 

In addition, he argues, Mas- 
sachusetts now enjoys a much 
better relationship between 
government and business. 
"One reason this area was 
down in the mouth in the Late 
1980s was the anti-business 
attitude: high taxes, and 
incredibly liberal regulatory 
plans." 

Under Governor William 
Weld, this has changed. "Calif- 
ornia has replaced us as the 
anti-business state. It was so 
prosperous that people got to 
feel that any amount of social 
activism could be afforded. It 
will take longer to turn Calif- 
ornia around than it did Mas- 
sachusetts. because it's such a 
big state.” 

Another fundamental reason 
advanced for Massachusetts' 
strength in high-tech is its uni- 
versities. in particular MIT. 
The links here are all-perva- 
sive and date back more than a 
century. 

Professor Merton Flemings, 
head of the department of 
materials science and engineer- 
ing. chairs a task force on links 
between MIT and industry. 
“From its earliest days. MIT 
had an intimate association 
with industry in Massachusetts 
and New England," he says. 
"Alexander Graham Bell spent 
time studying at MIT, and the 
telephone was invented in the 
Boston area." 

The defence giant Raytheon 
was founded by MIT graduates 
just before the war, Digital 
Equipment just after. 

EG&G. a local specialist in 
nuclear weapons and power 
plants with sales of S2.7bn, was 
founded by an MIT professor 
and two of his students. 

The main areas of commer- 
cial promise, in Professor 
Flemings' view, are informa- 
tion technology, materials sci- 
ence and engineering, manu- 
facturing technology in general 
and healthcare. "Information 
technology remains a very 
strong area." he says. “In the 


development of small compa- 
nies. we may even lead in this 
field." 

And then, of course, there is 
biotechnology. In Massachu- 
setts as elsewhere, this has a 
poor image at present. 

A string of biotech compa- 
nies. most recently Biogen, of 
Cambridge. Mass., has wrought 
havoc in the stock market by 
revealing that some of their 
much-hyped new pliarraaceuti- 
cal products have turned out to 
be duds. 

Professor Flemings takes the 
long view. "The biotecll indus- 
try here remains strong, and 
new companies continue to be 
formed. The stock market may 
have taken a bath, but I think 
we'll see continuing and grow- 
ing strength in the Massachu- 
setts region.” 

This is warmly seconded by 
Mr Henri Termeer. head of 
Genzyme. the third-biggest US 
biotech company, also based in 
Cambridge. 

New England, he points out. 
has the second-largest concen- 
tration of biotech companies in 
the US. after the Bay area 
around San Francisco. Massa- 
chusetts. he says, has some 140 
biotech companies - “around 
the same number as In the 
whole of western Europe.” 

In the industry's last big 
bout of fund-raising, in 1991 
and the first quarter of 1992. 
Massachusetts companies 
raised 20 per cent of the S6bn 
total. Genzyme's own commit- 
ment to the area seems beyond 
dispute. In round terms, the 
company has 1,000 employees 
in Massachusetts, 500 else- 
where in the US and 400 
abroad. It has also just spent 
SlOOm on a new plant next 
door to the Harvard Business 
School on the Charles river. 

When considering where to 
put the plant. Mr Termeer 
says, he also looked closely at 
a site in North Carolina. "At 
one point I was reported [in a 
local Boston paper] as saying 
we were about to choose 
between the two. The governor 
was In my office the next day, 
asking what he could do to 
help.” 

The decision in favour of 


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Massachusetts, he claims, was 
based less on Financial incen- 
tives than on the state's deter- 
mination to make the company 
feel welcome and to smooth 
the way to the early commis- 
sioning of the plant. 

In fact, he says. Massachu- 
setts is not a friendly environ- 
ment fora manufacturer in his 
industry; labour costs are high, 
regulations are burdensome 
and there is no tradition of 
pharmaceutical manufacture 
ns there is in North Carolina or 
New Jersey. However, he says. 
"I gambled on the notion that 
the goodwill I saw. and the tre- 
mendous technological back- 
bone of Harvard and MIT. 
would allow the beginning of a 
manufacturing cluster in Har- 
vard.' 1 

Whether this will work 
remains to be seen. Meanwhile, 
he argues. Massachusetts has a 
further important advantage in 
his industry: the availability of 
committed and knowledgeable 
investors. 

On the one hand, he says, 
there are a large number of 
venture capital funds in the 
area, always on the look-out 
for opportunities. In addition, 
there are the big fund manage- 
ment houses. 

'They have healthcare ana- 
lysts who become much more 
familiar with what's happening 
here because of their proxim- 
ity. As a result. Massachusetts 
companies have a dispropor- 
tionate amount of local fund- 
ing. Fidelity is a big investor in 
Genzyme: we have done eight 
financings, and Fidelity has 
taken around 5-10 per cent of 
the initial offering in well over 
half of them." 


By all accounts. Massachusetts 
has one of the finest healthcare 
systems in the US. indeed the 
world, its 150 hospitals are 
renowned for their technical 
excellence. Harvard leads a list 
of prestigious medical schools 
which assure the state has a 
pool of highly skilled doctors. 

A dense concentration of 
research laboratories gives 
patients access to the latest 
innovations in treatment and 
technology. 

Yet this seemingly enviable 
position is as much a burden 
for the commonwealth as a 
blessing. As the healthcare 
Industry struggles to adapt to 
mounting pressures to control 
medical inflation, it has 
become evident that the elite 
nature of the system is itself at 
least partly to blame for the 
high costs. 

For hospitals and clinics 
around the state, the tension 
between survival and main- 
taining the highest quality 
care has become painfully 
apparent over the past two 
years. 

Big purchasers of healthcare 
- including employers, insur- 
ers and the government - are 
forcing providers to become 
more efficient. A sweeping 
restructuring of the industry, 
which employs about 10.5 per 
cent of the state's workforce, is 
all but inevitable. 

The consequences of this 
shake-out will extend well 
beyond the sector, with hospi- 
tal closures and consolidations 
likely to impede the economy 
in ics tentative recovery from 
recession. Estimates of the 
□umber of healthcare job 
losses range up to 30,000. with 
most of them pruned from hos- 
pital statTs. 

That represents a stunning 
reversal for the industry, 
which was one of the few 
sources of new employment in 
Massachusetts between I9SS 
and 1W3. when the state's 
economy suffered a net loss of 
400.000 jobs. 

The market forces driving 
the industry to restructure 
have gathered momentum 
independently of the sputter- 
ing efforts in Congress to enact 
healthcare reform legislation. 

In the commonwealth, the 
consolidation is well under 
way. 

“In Massachusetts, health- 
care reform is now an auto-cat- 
alytic process.” says Mr Ron 
Hollander, vice-president of the 
Massachusetts Hospital Associ- 
ation. “The faster it goes, the 
faster it will go." 

The most important develop- 
ment so far was the merger of 
Massachusetts General and 


Brigham & Women’s, two of 
most prestigious hospitals in 
the state. 

The goal of the affiliation, 
announced last March, is to 
reduce their combined operat- 
ing budgets by at least 20 per 
cent over three years, initially 
through administrative and 
supply savings, and later by 
-eliminating duplicative medi- 
cal services. 

Their union carries symbolic 
and practical implications for 
the state's entire healthcare 
delivery system. It has already 
triggered a flurry of new alli- 
ances between providers seek- 
ing to assure themselves of a 
big enough piece of a shrinking 
pie to survive into the next 
century. 

"If hospitals with the reputa- 
tion. clinical strength and 
financial strength of Mass Gen- 
eral and Brigham. & Women's 


intended to ensure that 
patients are treated in. the. 
most appropriate - and cost-ef- 
fident- setting. 

Carney Hospital, to name 
just one, is negotiating with 
the fledgling Mass General- 
Brigham organisation. An affil- 
iation with the 289-bed commu- 
nity hospital, serving .neigh- 
bourhoods south of downtown 
Boston, could give the partners 
access to a sizeable base of new 
patients for thielr specialised 
units. For Carney, which has 
lost about & per cent of its in- 
hospital volume in the past 
three years, the deal may rep- 
resent a financial lifeline . 

“The process is not just 
about cutting a housekeeper 
here or clerk there," says Mr 
Hollander. "It's about funda- 
mentally rethinking what we 
do in order to devise more effi- 
cient and effective ways of 


Health care Industry employment 

Thousands of people employed 
300 — 


250 


200 



— i Health care garvtcas}— 


Drugs' 


~ ~ ■ — ' I Medical equipment F 

: Hearth Insurance] . ..._ 



1985 1986 1987 

Scurw US Eum cf Labnr Safccea 


1986 1989 1990 1991 1992 


see the need to combine forces, 
what institution can believe it 
can go it alone?' asks Mr Hol- 
lander. 

Most of the restructuring 
activity is aimed at creating 
efficiencies through "down- 
sizing" and outright closures of 
hospitals and other facilities. 

In mid-sized cities snch as 
Worcester and New Bedford, 
hospitals have either banded 
together into two or three com- 
peting groups in each market, 
or are discussing such a move 

Some big city hospitals are 
striking deals to divide up the 
available business- In June, 
Deaconess Hospital and New 
England Baptist forged a pact 
under which the former would 
focus on adult tertiary medi- 
cine and surgery, while the lat- 
ter would concentrate on mus- 
cular-skeletal disorders. 

Meanwhile, new affiliations 
between different types of pro- 
viders - such as teaching hos- 
pitals. community hospitals 
and physician groups -are 
being constructed, especially in 
and around the state capital 
Such hierarchal networks are 


delivermg care.” 

Analysts point out that the 
commonwealth spends more 
per person for healthcare than 
any other state. Average pay- 
ments for services and pre- 
scriptions are about 20 per cent 
higher than the US average, 
according to the Families USA 
Foundation, an advocacy 
group. 

The reasons are not entirely 
clear, but the evidence sug- 
gests that the state has too 
much of several good things. 
High personal income and gen-:, 
erous benefit packages from 


report,released last' spring. ' 

The anomaly is explained by 
the emphasis' -on' in-hospital 
-treatment which results &om 
the sheer number of providers, 
particularly expensive urban 
medical centres and t e a chi n g 
hospitals, such, as Mass. Gen- 
eral and Brigham & Women’s. " 

“While Massachusetts teach- 
. ing hospitals are a- vital 
resource, contributing to the. 
state’s prestigious reputa- 
tion. - - care in teaching~set- 
tings is known to be - more 
costly ." according to the study, 
conducted for the Governor's 
Council oh Economic Growth. 
nnri Technology. .*• 

Ironically, the pressure to 
control healthcare inflation 
arguably is now- more intense 
in -Massachusetts -than any- 
where else. This is largely 
because the state has a greater 
proportion of .its popula- 
tion - about 40 per cent - en- 
rolled in so-called health main- 
tenance organisations (HMDs). 

In contrast to traditional 
indemnity insurers, which pay 
a percentage of their policy- 
holders* healthcare fees on a 
service-by-service basis, HMOs 
offer subscribers a foil range of 
services for a fixed price. They 
are forcing doctors and' hospi- 
tals under contract with them 
ta keep expensive services, 
such as hospital admissions, to 

a bare mtmmnm. 

If anything, their clout to 
bargain for Iowier rates ' will 
probably Increase, as HMOs 
begin a consolidation of their 
own. Harvard Community 
Health Flan, the common- 
wealth's biggest HMD, is await- 
ing regulatory approval for its 
agreed merger with Matthew 
Thorton, a New Hampshire- 
based group, and Pilgrim 
Health Care of Massachusetts. 
The combined organisation 
would have about lm members 
in four New England states. 

In the face of such pressure, 
and the development of tech- 
nology that facilitates out-pa- 
tient care, hospitals are finding 
themselves with too many 
empty beds. Industry observers 
estimate that the number of 
jpatient-days in hospital will 


Massachusetts employers seem _ 
to play a role. More import shrink , by 30 to. 50 per cent 
tantly perhaps, a recent study . rfTom the peak years in the mid- 


conducted by a group of indus- 
try leaders and healthcare pro- 
fessionals suggests the state 
simply has too many doctors, 
and hospitals. 

That would not appear to be 
a problem. However, In appar- 
ent defiance of the law of sup- 
ply and demand, “healthcare 
spending has been observed to 
increase with the size of a 
state's healthcare infrastruc- 
ture”, the group says In its 


1980s. That precludes a drastic 
reduction in the number of 
available beds, and a subse- 
quent cut in hospital staff 
throughout the state. 

. In the mid, employers who 
now must foot the bill for the 
country's most expensive 
healthcare system are likely to 
benefit The big losers, at least 
temporarily, are sure to be the 
thousands who will lose their 
jobs. 


Tony Jackson on defence 

Budget cuts 
put 10,000 
out of work 


The Massachusetts economy 
has relied heavily on defence 
spending for 50 years, and is 
now paying the price. The 
starkest illustration comes 
from Raytheon, maker of the 
Patriot missile and the state's 
biggest private-sector 
employer. 

Since 1990. the federal 
defence procurement budget 
has halved. In the same period 
Raytheon has cut its Massa- 
chusetts workforce by a third, 
or 10,000 people. At the start of 
this year it had four missile 
plants in the state: it now has 
one. According to Mr Dennis 
Picard, Raytheon's chairman: 
“Our employment will stabilise 
when the defence budget 
does." 

Like so much else in the 
Massachusetts economy, the 
defence industry is intimately 
connected with the state's uni- 
versities. Raytheon was bora 
out of the Massachusetts Insti- 
tute of Technology: one of the 
company's founders in 1922, 
Vannevar Bush, later became 
MIT's dean of engineering. 

Professor Merton Flemings, 
the present head of MIT's 
department of materials sci- 
ence and engineering, takes up 
the story. "During World War 
Two, MIT and its research 
were turned entirely to the war 
effort. MIT was central to the 
atom bomb and the develop- 
ment of radar. The inertial 
guidance system Cor ballistic 
missiles was developed by fac- 
ulty members here. 

“From then until this year, 
there was a partnership 
between MIT and the federal 
government. Their largesse has 
allowed ns buildings and 
equipment, and we have con- 
tributed especially to national 
security," 

Much of the government’s 
spending has been concen- 
trated an the Lincoln Labora- 
tory, a defence-centred estab- 


lishment controlled by the gov- 
ernment but operated by MIT. 
On top of that comes MIT's 
own research budget, now run- 
ning at $360m a year. A large 
part of that, says Professor 
Flemings, has historically been 
defence-related. “That's going 
down rapidly now. The 
so-called partnership with gov- 
ernment over the past 50 years 
is changing, and should do. 
The national needs are chang- 
ing, and MTTs as well." 

This raises the central ques- 
tion of how far defence- related 
research and manufacture can 
be converted to civilian use. In 
general terms. Professor Flem- 
ings is not sanguine. "In the 
period to around 1975. I think 
the research sponsored by the 
Department of Defence was a 
significant contributor to the 
industrial sector. It produced 
some very important informa- 
tion technologies and new 
materials. 

"After that, the technological 
advances needed for military 
systems moved further and fur- 
ther Cram things of commercial 
value and significance. There 
was more and more emphasis 
on performance regardless of 
cost It's been very difficult to 
translate much of that to the 
commercial sector, where the 
emphasis is on high volume 
and low cost." 

Mr Picard of Raytheon 
agrees with much of this. Cost 
is obviously a problem, he 
says, and neither defence prod- 
ucts nor defence plants can. 
readily be switched to commer- 
cial use. "There is no commer- 
cial use for a guided missile or 
a warhead, and we build a lot 
of missiles." 

As for converting plants, “I 
have a refrigeration plant in 
Iowa. Suppose I tried to move 
it to one of our plants here. 
Besides the fact that the pollti* 
cians would object, trying to 
build that kind of product in a 



of this year Raytheon had lour mtesite plants in the state: It now has one pkx ^ ap - 


missile plant doesn't work. The 
workforce isn't trained for it 
and the rules are different.” 

He is more optimistic about 
conversion to civil use on 
other grounds. Granted, the 
product may be uncommercial. 
“That's not to say you can’t 
use the technology, or the con- 
cept, or the systems engineer- 
ing. Radar is a good example. 
In a military context, you work 
to very high specifications and 
expense, and put in special fea- 
tures to stop jamming and so 
forth. But it's not too hard to 
commercialise the components: 
you just don't test them to the 
same levels. As for the special 
counter-measures, you just 
take them out" 

He cites the high-tech elec- 
tronic medium of gallium arse- 
nide as another example. “We 
developed that for monolithic 
integrated circuits used in 
ground-based radar to detect 
things like Scud missiles. Now, 
you can. still grow chips and 
circuits on gallium arsenide, 
but you do it much more effi- 
ciently by sample testing at 
the end of the line rather than 
testing individually". 

Nevertheless, he remains 
gloomy about defence employ- 
ment overall. *Td love to be 
able to say to our people that 
we’ll stabilise tomorrow. The 
problem Is that the defence 
budget is coming down as a 
step function, otherwise known 
as a cliff. We have to hope that 
it will turn into a slope. It 
would be absolutely wonderful 
to build our defence business 
back up. and re-employ those 
skilled and talented people 
we’ve laid off. But I don’t think 
it’s going to happen.” 

Despite all that, Raytheon is 


an encouraging symbol of Mas- 
sachusetts resilience. It 
remains an immensely strong 
company, with good cash flow 
and a strong balance sheet. 
Year by year, its profits have 
increased, and its latest quar- 
ter was an all-time record. This 
results partly from brutal cost- 
saving. partly from a heroic 
and singularly successful effort 
to diversify. 

In 1990, when the cuts began 
to bite, defence accounted for 
53 per cent of Raytheon’s turn- 
over. The figure this year will 
be around 35 per cent Part of 
this is due to plunging defence 
revenues, but the company has 
also been active in finding 
business elsewhere. 

Last year, it bought the cor- 
porate jet business of British 
Aerospace, causing a local 
commotion when it shut down 
UK production. 

More recently, it paid $172m 
for Xyplex, a US manufacturer 
of products Unking desk-top 
computers. 

In a classic instance of turn- 


ing swords into ploughshares, 
it has just landed a hotly-con- 
tested $lbn-plus contract to 
supply environmental monitor- 
ing for the Amazon basin. 

From a Massachusetts view- 
point, the big remaining ques- 
tion is whether Raytheon will 
follow the route of other US 
defence giants such as Lock- 
heed and Martin Marietta, and 
combine forces with a rival to 
cut costs and reduce jobs far- 
ther. Mr Picard's answer Is 
encouraging. 

“I’ve got a five-year pro- 
gramme which is on plan, and 
a very strong company. I do 
have a problem with the order 
book. If we could acquire a 
defence company which 
wouldn't dilute earnings, had 
synergy and would help pro- 
tect jobs, then we'd do It. But 
I’m not interested in buying 
lay-offs. We’ve done 10,000 
already, and we’re getting to 
some very talented people. You 
have an obligation to the Stock- 
holders, but also to our peo- 
ple." 


Foley, Hoag & Eliot 


A/idl sente law firm with offk's in Bosun, and Washington. D. 
For h complimentary copy of our publication: 

Doing Business in Massachusetts 

A GLIDE rw U.S. AND MASSACHUSETTS 

Laws for Ncw-U.S. Businesses 

aTiS! srv- h ‘‘ i “r ■ ***• «■>* & 

Oni ■ IWm, Maw.Kh.Kn, 02100 

TA Oh). -,12.1000 . (Q l7 | 8,2-7000 


( 





financial times 


THURSDAY NOVEMBER 17 1994 


15 


MASSACHUSETTS III 


Ejg pk McGurtv on tourism and business travel 

Enjoying one of its 

best years 


In tourism and business travel 
Massachusetts is a state which 
makes a virtue out of its mod- 
P rop ? rtion s and under- 
stated charms, it has no 

imtiaJ trip to the 
US, few foreigners are drawn 
tothe cobble-stone streets of 
Boston s Beacon Hill or to his- 
tone Plymouth rock, where the 
Puntans landed in 1620. The 
first tune out. only the most' 
independent spirits venture 
north to Walden Pond or west 
to the autumnal splendor of 
the Berkshire mountains. 

. ^tead. they gravitate to the 
bright lights oF New York, the 
glitz of Hollywood or the sun- 
shine and spectacle of Florida. 

“It’s very difficult to compete 
with Mickey Mouse,” says Mr 
Fred Clifford, European mar- 
keting manager at the state's 
Office of Travel and Tourism, 
referring to the phenomenal 
appeal of Disney World in 
Orlando. 

Likewise, convention plan- 
ners most often turn to places 
such as Chicago or New York 
when booking the kind of 
events which attract tens of 
thousands of visitors. 

Compact Boston - one of the 
few American cities which is 
best enjoyed on foot -simply 
lacks sufficient size to accom- 
modate the biggest shows. The 
Hynes convention centre, its 
main venue, has only half the 
floor space of the grand exhibi- 
tion hall recently opened in 
Philadelphia. 

Yet despite these handicaps 
- if indeed they can be charac- 
terised as such -tourism and 
business travel are powerful 
economic wnginoc in Massachu- 
setts, generating an es timate d 
$12.5bn in business and J200m 
in state and local taxes a year. 
In Boston alone, hotels, restau- 
rants and hospitality busi- 
nesses employ more than 10 
per cent of the workforce. 


The travel industry is now 
enjoying one of its best years 
since 1986. when the regional 
economy was near the peak of 
an unsustainable boom. 

The growth is not nearly as 
explosive as it had been a 
decade ago, but the robust 
trend is encouraging for a state 
that is still shaking off the lin- 
gering effects of a severe reces- 
sion. 

By the end of 1994, the 
Greater Boston Visitors and 
Convention Bureau estimates 
that nearly 10m people will 
haw visited the city, up 16 per 
cent from the 1991 trough. 

The extra b usiness is espe- 
cially welcome during a period 
when some sectors of the city's 
economy - particularly health- 
care - are just beginning to 
undergo a painful contraction. 

There is evidence that the 
state is becoming a destination 
of choice for more foreign trav- 
ellers. An informal survey of 
London tour operators con- 
ducted by the state shows sales 
so far this year are 10 to 25 per 
cent ahead of 1993. The num- 
ber of German airline passen- 
gers visiting Massachusetts 
last year jumped 54 per cent, 
according to the US Travel 
Data Centre, which compiles 
tourism figures for the federal 
government. 

What explains the state's 
growing appeal? The price is 
right, for one thing. The weak 
dollar has made travel to the 
US much cheaper for both 
Europeans and Japanese. At 
the same time, fewer 
Americans can afford to book 
holidays abroad, instead, they 
are planning shorter vacations 
closer to home, a trend which 
has benefited Massachu- 
setts - with its wealth of quiet, 
famil y attractions - more than 
most states. 

On the symbolic level, at 
least, that orientation was 
underscored by the decision of 


America's “first family" - the 
Clintons - to spend their sum- 
mer holidays on Martha's Vine- 
yard, the exclusive island 
resort off Cape Cod. Even 
though accommodations there 
are booked solidly, year-in and 
year-out. the publicity was 
priceless for the state's tourism 
industry as a whole. 

But Massachusetts has more 
going for it than the vagaries 
of macroeconomics and a 
brush with celebrity. 

The state has stepped up Its 
overseas marketing pro- 
grammes in an effort to attract 
the growing body of Europeans 
who have visited the US more 
than once and who are now 
ready to book something more 
sophisticated than a trip to a 
theme park. 

In view of this burgeoning 
potential market. “Massachu- 
setts is about to explode as a 
holiday destination," predicts 
Mr Clifford. “It's a place which 
has really come into its own." 

In attracting such visitors, 
diminutive Massachusetts can- 
not be viewed in isolation from 
its five neighbours in the New 
England region. Typically, for- 
eign tourists will fly into Bos- 
ton. spend a few days sight-see- 
ing and shopping, and then 



Thompson Bmk at Otd Sturbridge VBtago, Sturbridga 


PtbivKndaCM 


head north by car to the fish- 
ing villages of Cape Ann and 
the state of Maine. 

The next stops on the circu- 
lar tour are nigged New Hamp- 
shire and rolling Vermont, 
before turning south into the 
Berks hires, world renowned 
for their autumn foliage and 
summer arts festivals. After a 
brief foray through Connecti- 
cut and Rhode Island, many 
usually find themselves at the 
sandy beaches of Cape Cod. 
before completing the loop 
back to Boston. 

Foreign travellers going to 
Massachusetts for business 
most often stay in Boston, and 
their numbers are climbing. 
About 10 per cent of delegates 
at the city's medical confer- 


mnwHtuixiMnr 





ences and meetings now come 
from outside the US, up from l 
per cent a decade ago. 

Indeed, medical conferences 
held in the city often have 
record attendance. Celebrity 
speakers affiliated from the 
state's prestigious schools and 
hospitals are a big draw, but 
there are other reasons which 
have nothing to do with Bos- 
ton’s renowned medical estab- 
lishment 

“We have all the thing s that 
convention delegates tend to 
like," says Ms Leslie Matthieu 
Hogan, marketing director for 
the convention bureau. 

Many visitors enjoy the Met 
that the airport is only min- 
utes away from downtown Bos- 
ton. First-class hotel rooms are 
plentiful, the restaurants 
sophisticated. Best of all, walk- 
ing around the city is easy. 

Last year, it became even 
easier with the opening of the 
Boston Convention Complex. 
The project actually involved 
no significant new construc- 
tion. Rather, the “complex" 
was formed by unifying the 
existing Hynes convention cen- 
tre. three hotels and some 200 
shops and restaurants by 
means of a network of glass-en- 
closed walkways. 

In part, the ad hoc complex 
represents an effort by the city 
and state to compensate for its 
lack of a big exhibition centre. 
While the Boston metropolitan 


area is the country’s seventh- 
laigest, the city ranks 4lst in 
terms of available space for 
meetings and trade shows. 
That reality has forced the city 
to concentrate on booking 
smaller events. 

A controversial plan to build 
a gigantic convention centre 
and stadium, probably on the 
southern fringes of downtown 
Boston, is now working its way 
through the Massachusetts 
Legislature. 

But it is a little surprising 
that the scheme is garnering so 
much political and public sup- 
port, given the success tourism 
officials have enjoyed in pro- 
moting the city as a leading 
host of small business meet- 
ings. 

The number of events 
booked this year is expected to 
reach 220. up from just 13) in 
1991. Meanwhile, the average 
number of people attending 
each function will have 
dropped from 5,000 to 1,500. 
underlining the shift in empha- 
sis. But for the city’s economy, 
it is a fair trade, considering 
that the number of hotel-room 
nights booked by people 
attending meetings climbed 
nearly 40 per cent over the 
same period. 

Indeed, Boston appears to 
have found a profitable niche, 
and one that seems most 
appropriate to its character as 
a small, intimate city. 


THE FISHING INDUSTRY 

Sacred cod no 
longer works its 
miracle 


Not many states think enough 
of fish to build a statue of one. 
but Massachusetts does. The 
“sacred cod" a wooden effigy of 
a fish, was hung in the state’s 
House of Representatives two 
centuries ago to symbolise its 
importance to the Massachu- 
setts economy and is still a big 
tourist attraction today. 

The fishing industry itself 
has had Less staying power. 
Stocks of cod and other key 
commensal species have dwin- 
dled to dangerously low levels, 
and fishermen have seen their 
daily catches fan to just a frac- 
tion of what they once were. 

Faced with a desperate situa- 
tion, the State Division of 
Marine Fisheries, which over- 
sees fishing regulation, put in 
place in May a number of rules 
which limit days at sea and the 
bole size in fishing nets. Hie 
agency now says that those 
regulations are insufficient and 
wants to have important fish- 
ing areas declared off limits . 

The latest moves, fishermen 
say, will mean devastating 
unemployment for many 
coastal towns which still 
depend on the industry. The 
Gloucester Fisheries Commis- 
sion, which represents fisher- 
men, predicts that half the peo- 
ple employed in the sector 
today will lose their jobs. 

Although fishermen say pol- 
lution is partly to blame for 
the decline in fish stocks, envi- 
ronmentalists and the Division 
af Marine Fisheries say the 
real problem is overfishing. 

“This area has been over- 
Bshed for years, and if we 
don’t do something about it 
now, stocks of cod and other 
Bsb could completely disap- 
pear," said Mr Philip Coates, 
director of the Division- 

Local congressmen have suc- 
ceeded in winning some federal 
support for the fishermen. 
About $30m in aid is being 
directed to re-training pro- 
grammes and other initiatives. 
But fishing activists say while 
poiing fishermen may be able 


to learn other skills, older 
fishermen will have a hard 
Hthp changing professions. 

“A lot of the fishermen in 
Massachusetts immigrated 
from Sicily and Portugal and 
may not have got past a fourth 
grade education,” said Mr 
Howard Nickerson, director of 
the Offshore Mariners Associa- 
tion in New Bedford. 

“This is all they’ve ever done 
and all they’ve ever wanted to 
do. I don't think they’ll be get- 
ting into computer program- 
ming." 

For those who remain in the 
business, times will be tough. 
Some of the federal aid money 
may go towards promoting spe- 
cies such as mackerel and dog- 
fish, which traditionally have 
not sold wdL But the fisher- 
men say marketing can only do 
so much. “Housewives just 
don’t like to prepare mack- 
erel," said Mr Anthony Verga, 
executive director of the 
Gloucester Fisheries Commis- 
sion. “They think it’s too oily 
and smelly." 

Fishermen and environmen- 
talists are looking to the Cana- 
dian model of fish stock man- 
agement. Canadians have used 
generous benefit packages, 
which include buying fisher- 
men's boats and settling their 
debts, to reduce the number of 
people in the industry. 

Because fishing stocks are 
near collapse, environmental- 
ists say strict rules must be 
enacted now, and fishermen 
themselves agree that some- 
thing drastic most be done to 
turn fish populations around. 

It will probably take many 
years for the regulations to 
make a difference to fish 
q fav kc hi the meantime, many 
fishermen will be forced out of 
business, and towns built on 
the fishing industry will proba- 
bly suffer profoundly. The 
sacred cod no longer works its 

miracle an the Massachusetts 
economy. 

-Victoria Griffith 


Boston worked hard for its rejuvenation, writes Victoria Griffith 

Foreigners provide impetus 


Over the past two decades, 
Boston has metamorphised 
from a sleepy parochial town 
into a fashionable, cosmopoli- 
tan centre. Elegant Newbury 
Street, once a residential 
enclave, is now a thriving 
mecca for designer shops and 
pavement cafes. Snatches of 
French, Italian, Spanish, Japa- 
nese. and other languages now 
drown out the oncedominant 
Bostonian dropped “R". 

A flood of foreigners into 
New England's largest city has 
provided the impetus for 
change. To diversify their stu- 
dent base and replenish their 
coffers, Boston’s universities 
have recruited surging num- 
bers of candidates from abroad, 
and foreigners have flocked to 
study at world-renowned insti- 
tutions such as Harvard, the 
Massachusetts Institute of 
Technology, and Tufts. 

A huge and growing immi- 
grant community has added 
diversity. Brazilians, Irish, Hai- 
tians and others have decided 
to try their luck in Boston and 
the area's high-technology 
companies have been a magnet 
for foreign scientists, many of 
whom are alumni from the 
city’s universities. 

Tourism is also booming. 
Hotel occupancy for the month 
of August in Boston was an 
impressive 89.9 per cent. For- 
eign visitors are increasingly 
drawn to Boston’s thriving arts 
scene, world-class restaurants, 
and well-preserved red brick 

amhiance 

Boston has worked hard for 
its rejuvenation, although the 
results have not always been 
desirable. 

The city kicked off urban 


renewal in the 1960s with a 
still-mourned destruction of 
the West End and the construc- 
tion of a much-criticised Gov- 
ernment Centre. 

In the 1970s. planners 
redeemed themselves with the 
successful renovation of the 
old Faneuil Hall marketplace, 
which served as a prototype for 
similar developments around 
the country, including the 
South Street Seaport in New 
York. 

Boston, now recovering from 
a devastating recession which 
sapped much of the city's vital- 
ity, is tackling urban projects 
with renewed vigour. A new 
sports centre for basketball 
and hockey is set to open early 
next year and the North Sta- 
tion rail terminal is undergo- 
ing a major renovation. The 
city is also in the middle of an 
$8bn project to put the city's 
elevated Central Artery high- 
way underground, in what is 
billed as the biggest urban 
highway project in the coun- 
try. 

Boston's vision of its future 
is ambitious. Developers are 
pushing for the construction of 
a new Megaplex, a combination 
sports stadium and conference 
centre which would allow the 
city to host important confer- 
ences. Public transportation 
should get an important boost 
from plans for new commuter 
rail lines and an extension of 
Boston's already efficient sub- 
way system. The city also 
hopes to host the Olympic 
Games in 2008. 

To shore up its tourism mar- 
ket and renowned quality of 
life, Boston is spending billions 
of dollars on the environment. 


New England’s Tourist Center 

Building tor sate at pre-rsoovsry price 

Domlowit 

£2 million doilara in vacant ronowstions 

Group of iiwsstors wW relaaso 
fat + 300.000 to ready and able buyer. 

Call Principal at 41 3-499-2498 



Faneufl Hal marketplace: successfU renovation 


ftefurr KnSru CSneft 


Environmental measures have 
at times caused resentment 
among the city’s residents. A 
$4bn harbour clean-up has 
been largely financed with 
local water tariffs, making the 
area’s water rates the highest 
in the country. 

Owning a car in the city can 
be a nightmare. Boston dis- 
courages driving in an attempt 
to control air pollution, and a 
freeze on the number of park- 
ing spaces available has made 
the city one of the most diffi- 
cult places to park in the 
world. 

On the whole, however, resi- 
dents seem happy with the 
way things are going. The 
downtown exudes an air of 
quiet self-confidence which the 
statistics seem to justify. The 
city is one of the best educated 
in the country, with some 46.7 
per cent of residents over 25 in 
the metropolitan area having 
completed a college degree. It 
is also one of the safest big 
cities, in terms of violent 
crime, in the US. 

Widespread satisfaction with 
the status quo led to a victory 
last year for Thomas Menino, 
former Mayor Flynn's hand- 
picked successor. 

The city's economy is also 
picking up. fortified by new 
sectors such as biotechnology 
and enviro- technology. Those 
sectors feed on the brain power 
of Boston's universities, which 
themselves provide an impor- 
tant economic impetus. 
Alumni and professors from 
the Massachusetts Institute of 
Technology alone started more 
than 600 companies in the 
state, and students are big 
spenders in the local economy. 
Harvard University is one of 
the largest employers in Mas- 
sachusetts. 

Although the city has moved 
forward, remnants of a sleepier 
past are evident At times the 
city appears too staid. Boston 
has never had a black mayor, 
for example, and Menino is the 
first non-Irish mayor to be 
elected in decades. For a town 
with so many students - they 
account for about 17 per cent 
of the population - Boston also 
goes to bed surprisingly early. 
It can be difficult to get a meal 
in the city after 10pm. 

Boston suffers from more 
serious blemishes as well. 
Despite its left-wing traditions, 
the city has been unable to 
shake the image of racism 
earned when it pioneered “bus- 
ing" in the 1970s. The practice, 
which sought to provide a bet- 
ter racial mix in schools by 
transporting black children to 
white neighbourhoods and vice 
versa, sparked off a series of 
riots and deepened racial divi- 
sions. 

In fact, critics say one reason 
Boston is relatively safe is 
because residents tend to stay 


in their own neighbourhoods, 
exacerbating segregation. They 
also complain that most of the 
urban renewal money has been 
invested in the downtown and 
up-market residential areas, 
and has done little to help poor 
enclaves such as Dorchester. 
Roxbury and Hyde Park. 

Still, as so many US cities 
confront devastating crime, 
worsening pollution and 
crumbling infrastructure. 
Mayor Menino feels he is in an 
enviable position. 

“I feel lucky sometimes, 
because Boston is still a city 
that works." he said. But the 
city wants to be more than just 
a nice place to live. Time will 
tell if its ambitious plans for 
the future will be realised. 


FUND MANAGEMENT 


Success harks 
back to the 
city’s origins 


Whatever else may have gone 
wrong with the Massachusetts 
economy in the late 1980s, 
Boston's fond management 
industry never missed a beat 

At the tail-aid of the boom 
in L989, Boston-based Fidelity, 
America’s biggest fund man- 
ager, had $109bn under man- 
agement and 6J>00 employees. 
It now manages $295bn and 
employs 14,100. 

Bostonians have a sense of 
history, and explanations of 
their success in fond manage- 
ment tend to hark back to the 
city's origins. 

Mr Daniel Pierce, chairman 
of Scudder, Stevens & Clark 
(foods under management: 
$90bn-plus) says: “In many 
ways, Boston is the cradle of 
investment management. It 
probably goes back to the 
point where wealth was cre- 
ated in this country on the 
east coast rather than the west 
coast 

“The legal concept of the 
prudent man came up through 
the courts here in Massachu- 
setts, and people became trust- 
ees here In the days when you 
managed money out of your 
hip pocket." 

Professor Michael Porter, of 
the Harvard Business School, 
agrees: “Massachusetts always 
had a financial centre: it’s 
where the industrial revolu- 
tion really started. When you 
get critical mass, you start a 
chain reaction. 

“Every company that makes 
a presentation to analysts 
comes to Boston - yon can fait 
100 institutions here. The 
State Street Bank and the 
Bank of Boston are among the 
country's biggest custodians. 
And talented people in the 
financial community like liv- 
ing in Boston - it’s an intellec- 
tual community and a nice 
place to live." 

Scudder, according to Mr 
Pierce, can claim to have been 
America’s first pure invest- 
ment manager, having been 
formed in 1919. 

Scndder, Stevens and Clark 
were Harvard graduates who 
started ont in broking as bond 
salesmen. 

“One of their clients was the 
head of the Boston Fed," Mr 
Pierce says. “They came np 
with a service for him based 
on a fee for assets under man- 
agement. So they came np 
with the investment counsel 
concept" 

The success of up-market 
Boston firms such as Scndder 
is partly based on an adroit 
combination of professional- 
ism and genteel discretion. 
Private clients with a net 
worth of $lm-$&n, Mr Pierce 
remarks, are Scudderis bread 
and butter. 

Many of them are not from 
Boston. “Fve bad a lot of good 
clients from New Orleans. 
That's an even tinier place 
than Boston, so perhaps pri- 
vacy is an element there." 


Another part of Boston's 
success is based precisely on 
its distance from New York. 
There is an intriguing British 
parallel in the investment cen- 
tre of Edinburgh, where fund 
managers like to argue that 
they gain in objectivity by 
viewing the London market 
from afar. 

“With modern communica- 
tions you can have analysts 
anywhere," Mr Pierce says. 
“But in New York, you can get 
quite swept up by the emo- 
tions of the market. People get 
quite hysterical down there. 

“Part of our job is to be a 
stabilising influence, and 
that’s easier when you're away 
from the screaming and yell- 
ing." 

Nevertheless, he concedes, 
New York tends to have the 
more international outlook. 
That Is important to Scndder, 
which is quite unusual among 
US firms in its international 
exposure. 

Against a US industry aver- 
age of 7-9 per cent of assets 
invested abroad, Scudder has 
30-35 per cent. 

In equities, it has more 
money invested abroad than at 
home; and while the bulk of 
its bond business is handled 
ont of Boston, most of its 
global equity funds are ran 
ont of New York. 

But the mutual food indus- 
try continues to increase its 
employment in Massachusetts. 

According to Fidelity, its US 
employment has risen 33 per 
cent since August 1993 to 
13.900; its Massachusetts 
employment has risen 24 per 
cent to 6,700. 

Thus, Ms Connie Hubble, of 
Fidelity, points out, while the 
firm’s 7m enstomers are 
spread across the US, half its 
employees are still in Massa- 
chusetts. “This is onr home 
and our heritage, and it will 
remain that way," she says. 

This fact has been a godsend 
to tiie local real-estate market 
which has never really recov- 
ered its nerve since the crash 
of 1969. 

Scndder has just started 
building a 110,000 sq ft office 
building 15 miles to the south 
of Boston - the first such new 
building in the area for years. 
According to an estimate 
quoted recently in the New 
York Times, the mutual-fund 
industry now occupies 8-5m sq 
ft in tiie Boston metropolitan 
area, compared with 3m in 
1989. 

Looking forward, the Boston 
fund management community 
may find it hard to combine 
explosive growth with 
regional loyalty. However, it 
seems committed to trying. 

"Onr objective," says Mr 
Pierce, “is to be a pre-eminent 
global investment firm. I don’t 
think yon have to give up your 
heritage to do that" 

Tony Jackson 


BINGHAM 
DANA & 
GOULD 

ATTORNEYS AT LAW 

Founded in I8PJ. Bingham. Dana & GouJl) is one of Boston's oldest and 
largest Ian firms. 

We established au office in London in 1973. and arc the only 
Boston-based firm to maintain that presence. 

Wc have expertise in helping foreign firms operate in the U.S.. 
and American companies operate in the U.k. and Europe. 

Bingham. Dana & Gould offers a full -service legal practice Including 
expertise in corporate and securities law. banking and financial services, 
taxation, litigation, real estate, employment law. alternative dispute 
resolution, entrepreneurial services and high technology, envirenmenial 
law. franchising and distribution services, lutellectuai property and 
licensing. 

Many of our rlients have been with us For several generations, and we 
look forward to building new relationships which will last for generations 
to come. 

BINGHAM. DANA & GOULD 


1 jo FEDERAL STREET 
BOSTON. MASSACHUSETTS 021 10 
TEL OI7.951.8000 
FAX: iil7.95f.8736 


39 VICTORIA STREET 
LONDON. SW1H OKfi. ENGLAND 
TEL: 071 .799.2046 
FAX; 071.799.2654 


BOSTON 


LONDON 


WASHINGTON 


HART KURD 




FINANCIAL TIMES -THURSDAY NOVEMBER 1-7 lSv+. 


r i 

The telephone , the 

j| 

j 

j 

j a x , 

and the computer were 

invented j 

i 

in A4assachusett 

S . 

i] 

Now , which will you 

use to 

request information 

on doing business h 

ere ? 

j] 

j 

if 

|l 


If you're considering an expansion into 1 J 
North America, you really should closely 
examine the Commonwealth of Massachusetts. VH)P 
You will find no other North American locale that. ^ 
to this day. is contributing more to technological JhHH 
progress chan Massachusetts. 

In its people, you will find everything V 

q 

you re looking for in a highly educared. innovarive. 
and productive workforce. The Commonwealth 
boasts 122 institutions of higher learning, some 60 
within the metropolitan Boston area. Additionally, you’ll 
find more than 100 hospitals, leading the nation in 

medical research and 


. : .m • » • •*••• j 

::r ./ .. j 


® \l \ I 




teaching. In fact, 
between the years 


H. H. . "iiim s 
Harvard HarA ! 

campstfer n\ts 
the tr- 

hoar y hlfi/i- 
pOWrvJ mcde/s. 


of 1 988 and 1 992, there 

were almost 1 0,000 patents issued to state residents. 

Statewide, you will find hundreds of successful 
companies, large and small, who are world leaders 
in their respective fields. At these very institutions. 




research is being conducted that will ~ 
forever alter the course of computer hardware, soft- 
ware. telecommunications, biotechnology, fiber 
optics, environmental technology, healthcare, and 
other growing business sectors for which, quite 
frankly, no one has yet found a name. 

The Commonwealth acts as a true 

business partner with scores of companies 79 

/( 

who realize that continued growth depends 
global presence. We offer generous incentives, 
including the highest R & D tax credit in the U.S. and 
financing for new high technology ventures. And 
we work with any business to accelerate rhe site 
development and permitting processes, helping rhem 
to be up and running in very little time. You'll find a 
pro-business attitude at every level of state government. 
In fact, six state tax cuts have been introduced during 
the past three years alone. 


Of paramount importance is Massachusetts' 
convenient location. Wfe are one hour closer to Europe 

► by air than any other U.S. state, and one 
day closer by sea. Boston’s 
Logan International Airport 
and the Port of Boston are worid 
renowned for their accessibility and efficiency. 
The Commonwealth of Massachusetts stands 
ready to help you expand. You can contact us by. 


. ;j.v i’js the 

rr;>-.-rcr i •* ■ .\\vc»wwi«UAsAenv 

"•v i \ n . :! crnAo!'. 





phone at 1-617-367-1830. 
by fax or fax modem at 1-617-227-3488. or at 
MOBDu/ AOL.COM on the Internet. No matter which 
method you choose, rest assured it was technology 
created by the innovative people of Massachusetts. 


Fq! ***"»** . 1 PUMdutn Office n inuarunena] 

Tfiie ji«d Imvimem 1 00 Cjmbnd^e Street Su»e 1 302 Bo*'on MA U S A 0220? 

Mime; 

Title- 

Compilin' 

Address 


M ASSACHU-SETTS 




1-617-367-183 0 

1 9^4 iHiiiatfiuscas Otfiae of Busmen Develepmera Missjchusenj Orfice el IrucnuiionjJ Tilde and Itiwumcm. and MASSPQRT 





FINANCIAL TIMES THURSDAY NOVEMBER 17 1994 

PEOPLE 


17 


Premier position for Barrie Stephens 


w wHh?S dated r, 0imeWs «me 

“STW- ' V S °“'"l ^Si° raDOn 
Welshma^Z to‘hSf , S te£ i '^S? 
“™ trols «"»*. into JS 

companies. Dur- 
rTr_ * S'® 3 ** at s,e w. sales have grown 
taSri £ J£, t0 £L86ba an<i the Windsor- 
Sjiite ” 0W empl0ys yi ' m pco < lle 

mSfES nS u C ? mbined lhe roles of chair- 

E5i££ SSi eXecutive at s >ebe until the 
beguune of this year, and stUI works three 
days a week as chairman. He became a 

ri~^° r0fSim0nE ^- 

Roland Shaw. Premier's colourful 
^ f°roed out in a boarcbSun 
coup at the age of 72. Shaw, who came to 


London from Dallas in the 1960s, is well 
known in the oil industry for his outspo- 
ken views and strong personality. 

The archetypal deal-maker. Shaw is 
widely credited with building up Premier 
from scratch to a company that at the 
peak of the oil market was worth £500m, 
compared with its present value or £142m. 
However, his flamboyant approach sat 
uneasily with the other members of Pre- 
mier's board when conditions in the oil 
industry were more sober. He was stripped 
of his executive position in 1992 and Quit 
as non-executive chairman in August. 
Shaw remains chairman of Heritage Oil 
and Gas. 

According to Charles Jamieson. Pre- 
mier’s chief executive, Stephens has con- 
tacts not only in the City, but in the inter- 
national business community where 
Premier is expanding its operations. 
Andrew Bolger and Peggy Hollmgcr 





Bodies politic 

■ Lord Trefgarne. who started 
his career in his family 
engineering business mid was 
a minister of trade, has been 
appointed chairman of the 
ENGINEERING TRAINING 
AUTHORITY. 

■ George Hammersley has 
been promoted to chief 
executive of the BUSINESS 
VENTURE PROGRAMME, 
funded by Glasgow 
Development Agency and 
Scottish Enterprise, and 
designed to create ventures 


between Scottish management 
teams and north American 
companies. 

■ Peter Smith, a director of 
Reuters Television, has been 
seconded to the DTI for two 
years to assist in the Export 
Promoter Initiative. 

■ Lynda Sharp, a scientist in 
the ministry of defence, has 
been appointed head of the 
government’s DEVELOPMENT 
UNIT ON WOMEN in Science. 
Engineering and Technology. 

■ Mark Sherrlff, a stockbroker 
with Greig Middleton and 
chairman of the TAVRA for 
the Highlands of Scotland, has 


been appointed chairman of 
The MacROBERT TRUSTS. 

■ Lindsay Fortune, head of 
health, environment and safety 
services at Courtaulds, has 
been appointed chairman of 
Incpen (the INDUSTRY 
COUNCIL FOR PACKAGING 
and the ENVIRONMENT). 

■ Sir Louis Blom-Cooper has 
been appointed to the chair of 
VICTIM SUPPORT. 

■ Eugene Connell, president 
and ceo of NYNEX 
CableComms, has been 
appointed chair man of the 
CABLE COMMUNICATIONS 
ASSOCIATION. 


No flies on Merrill Lynch’s Owen 


The average age of members of 
Merrill Lynch's London office 
has taken a dip this week fol- 
lowing the retirement of John 
Owen, 60. the longest serving 
member of London’s US stock- 
broking community. 

When Owen joined Merrill’s 
London office in 1961 as a 
£1.450-a -year trainee broker, 
Merrill had a staff of 10 and 
was the sort of outfit that was 
prepared to challenge the City 
establishment by advertising 
its services. Lord Dundee of 
the London Stock Exchange 
gave us a “very hard tune", 
says Owen. 

Today, Merrill employs 
around 1,800 people in the City 
and many of them got their job 
because they caught Owen's 
eye. Owen went trawling for 
new recruits long before it 
became fashionable for stock- 
broking firms and merchant 
banks to do the “milk round” 
at universities. 



Many still work at Merrill 
but others who have gone on 
to greater thing s include Rich- 
ard de Lisle, manag in g director 
of equities at Dean Witter. 
Geoffrey Bunting, first vice 
president of Prudential Bache 
Securities. Jonathan Laing of 
J.P. Morgan Securities, and 
Richard Spring, the Tory MP. 


A former chairman of the 
Association of New York Stock 
Exchange Member Firms in 
the City. Owen has bumped 
into most of the big investors 
dining bis City career. There 
will be plenty of people who 
still recognise the name of Jim 
Slater, the wealthy investor 
who once ran Slater Walker 
Securities. But how many, like 
Owen, dealt with go-go inves- 
tors such as Gerry Tsai or Ber- 
nie Cornfield? 

Owen refuses to accept that 
the City is less fun than it was 
when he started. His advice to 
young stockbrokers is to get an 
egg-timer. If the sand has run 
out and you are still talking, 
you are not doing your job. His 
final tip: never believe a broker 
who says that it's different this 
time, ‘in my experience it is 
never different." says Owen, 
who plans to use his retire- 
ment to improve his fly fish- 
ing. William Hail 


Morgan finds 
his password 
at Zergo 

Peter Morgan, former director 
genera] of the Institute of 
Directors, has added Zergo. an 
information security company, 
to his list of non-executive 
directorships. 

Morgan, 58, will be able to 
exploit his computer expertise 
in his new role: for 30 years he 
worked for International Busi- 
ness Machines, the world’s 
largest computer company, 
before moving to the loD in 
1989 for a period in office dis- 
tinguished by trenchant 
defence of the free market 

Zergo. with a turnover of 
about £7m and funded through 
venture capital, looks a differ- 
ent kind of story. It is a com- 
paratively new company, 
based in Basingstoke, Hamp- 
shire. Its managing director is 
Professor Henry Becker, a spe- 
cialist in passwords and 
encryption technologies. 

Its successes Include provid- 
ing security modules to Visa 
International and enhanced 
security systems for the 
banks’ Clearing House Auto- 
mated Payment System. 

Morgan's rale is expected to 
include overseeing Zergo’s 
eventual move to the stock 
market. Despite some jitters 
about high technology compa- 
nies in the light of recent 
reverses. Morgan should have 
little difficulty in persuading 
the City of Zergo’s potential. 
Information security is fore- 
most in many minds at pres- 
ent. Alan Cane 



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Enterprise number, name, location (in brackets: type of business [capacity p. a. if available], 
[turnover in 1993 in LVL (Latvian Lats if available}/number of employees mid 1994) 


BUILDING MATERIAL 


(LV-53)VrtJ Jdgara Building Materials Ptanr 
Jdgava.U/3000 

(Ftomtte (Mes (20.000 cbm], [02 mULlMjm 
(LY-98) V/U .Smfttene Wood and Metal Manufectur- 
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Smfltene ,1V 4729 


wooden cottages [200 pcs}./65) 


FC0C PROCESSING 


(iy-19) wu .Rcda fish Processing Ptenr 
Roja.U/3264 

(Tinned ttAPfimUL cans ]. fish products (1200 ft 
[2,2 mUL UAJ/192) 

(LV-36) WU .Riga Fat Processing Compter 

Riga, LV 1004 

(Soap [toilet soap ISOOLbuxby soap 8.000 IJ. 


n.BmHUMJ/134 ) 

(LV-96) V/U .Riga fishery* 

Riga, IV 1020 

(Bsri [95.000 1), p7.3nA LVL[/2.068) 


HEAVY ENGINEERING 


(U/-53J Assets ol ffiga WswWp Repair Plant No.177 
(State owned) 

Riga, IY 1016 

(S tip tepak (foaling dry dock 4500 t(ii7x 
22 m), 350 m Quay], tffese/ turbine engine overhaul 
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LIGHT ENGINEERING 


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gy-24) VAJ .Latura* 

YaJmiera, U/ 4200 


ft 100 units}. {0.8 mu llAj/377) 
(LV-87)VAJ.«gasPtetikB‘ 
ffiga, iy 1045 


{LV42JV/U .Progress" 

ffiga, IV 1006 


PAPER AND PRINTING 


(UMQ) VAJ .Riga Cardtoanl Factory" 
ffiga, IV 1004 

(t^nstjoan/arm^[dmms(M{0.i4mmije^ 
(IV-95) Assets of 

VAJ .Stalcates Paper Factory" (tossed ouQ 
Umbazu.LV 4043 

(Sue paper p 50.000 dm) staBonery 
1 600.000 cbm, l toafl paper mO. sqm}, 

(29.000 IMJ/42J 


OV-56) VAJ JKrastew Ra* Processing faddy* 
Kratova, iv 5601 

(Rax Mas p.lOO ft tong tor area [400 ft 

nzoooMym 

OUST) MI .Luba Fta Processing Factory* 
Luaza.iv 5701 

(Long and short tax fibers, Soon p. 100 1 Bax ttoer) 
PO.OOOUW64) 

(1V-81)VAJ wRreto Fta P rocessi ng Factory" 

Prea.LV 5318 

(Fta abets [1200 ft long tax fibers pOO ft 77) 
(production stopped la 1992/ 

(UWl)WU J»g»«cr 
ffiga, tv 1009 

(Fed bars, production stopped In 1993J/10) 


(1V-31) VAJ .tonSpes Transports O ap c dMfr* 
Vertspas.LV 3602 

fRoadUanspot [height turnover 126.000 p. 
bewantng warehousing. [2.5 m A MJP27) 

(IV-32) VAJ JtezstowTrareportaApvtenejr 
Rente*. tV 4600 

(Road transport [37 mS. tkw], [0.15 mS. Uty190) 

|ii/-52)/VS .BrastetenspQrtatJon* 

Riga. LV 1084 

(Road transport [32 m Urn}. (02 ntiL 12LJ/127) 

(IV-81)WU .Riga River Transport* 

Riga; IY 1007 

(bland navigation ( 5 river barges, 2800 ft /80) 


(UM0Q VAJ Jbga fishing Pwr 
Wga,iy 1020 

(Harbour senices. oB separ a tion [8 specMbsd 
wsss(sj&4«& 


(LY-06) u/u .Daugavpls Renters Plant* 
teuoavpb.lv 5400 

(Betooom tomtoxe sets fl J.7D0 pcs), wardrobes 
pi 100 pcs}, beds [7.400 pcs}, armchairs 
p.880 pcs), dtoan beds [840 pcs) Who disks 
[220.000 pcs}. [05 m)L IMJGSO) 

(U HM)V/U .Legate Furniture Ptarr 
ngB.LV 1019 

(Uphol st ered fun&xe [1.0 md. U/LJ/200) 

(IM-Sfy m JOrzomes Prtede Forestry’ 
Ltopo|a.lV3401 

(Sawn umber [200.000 cbm], BeopaPets 
(8.000 cbm), m 

(IV-62) VAJ ^Wcsne Forestry* 

Aluksne. IV 4300 

(Sam Umber p. 400 cbm), wooden cram 
[2.500 cbm], paper wood (2 .000 cbm), wooden 
dtps [450 ft (022 mar. Utyl 12) 

(tV-63) VAJ .Cesu Forestnr 
Ces6.LV 4100 

(Round Umber export [50.000 cbm) sawn Umber 
[12000 cbm}, wooden dips (10.000 cbm), 
transport sendee. {0.3 m# ti/Lf/95 ) 

(LV-64J A/S .DaugavpUs Forestry - 
Daugavpils, IV 5400 

(Timber logging [70.000 cbm), sawn umber 
[2000 Cbm). [0.6 md. U/LJ/207) 

(U/-65) V/U .Guibene Forestry- 
Gutoene. LV 4400 

(Timber togging [50.000 cbm), sawn timber 
P.500cbml.[0.25ma.LVLyi5B) 

(LY -661 V/U .mcuhalns Forestry* 

Riga region, IY 21 41 

(Round timber (36.000 cbm} sawn timber 
[7.000 com} wooden chips [20. 000 cbm) firewood 
[20.000 Cbm) (t. 1 mW. U/L(/272l 

(LV-67) Assets of 

VAJ jpunjelgava Forestry- (leased out) 

Achraukle region. IV 5134 

[Wtod processaig (24 000 am) / 0.42 mb. lvl)/i w 


OV-68) Assets of 

VAJ .Jefcabpiis Forestry* (leased out) 

Jekabptts, iy 5205 

WmbBr togging [208000 cbm), sam Umber 
(8000 Cbm) (0,4 mtU L/L}/92) 

(UF68IMS .Kotow* Forestry* 

AUsrauhls region. LV 5113 

(Writer toggtg (60.000 tin), sawn Umber 

[3.000 cbm) [18 mUL MJ7293) 

flV-731 ViV junta Forwky* 

Mtobera region. LV 4215 

pipy-wood [8500 cbm) asm Umber p. 000 cbm), 
firewood p5MQ<*m) plywood logs p.400 cbm], 
RK34 mSL MJ7167) 

(LV-74) A/5 .Ops Foresky* 

Ogre, IV 5000 

[Sam ttotoat p.600 cbm) paper wood 
[8500 dbra) moarnad [21000 cbm) 
pjfi mUL UPJ/191) 

W-7QW JStotomRea*r 
SMta8,LV3801 

fllntar toggtog [48000 cbm) sawn timber. 
fOLSnmmrisQ 

(L* 77) AS .Strata Forestry* 
vua region, ur 4730 

(Paper puto [20.000 dm) tmsapUJOO cbm), 
p tp mood tog s [1500 cbm) teefto. waod-puto 
(15000 cbm) omh tkaber fSMO cbm) firewood 
[20.000 cbm) (OBmUL HAW) 

AV-79 VAJ .ItoW Forestry* 

WM, tV 3257 

Paper wood (6200 da) sum umber 
[7.300 cbm], mood togs p.000 cbm}. 

[0,4 md. Ud.J/235) 

(U/-79) VAJ .Ti*una Forestry 
TiiaKS.LV 3100 

pound togs p 5.000 cbm), OmwoodplOOOcbm) 
suma Umber pJOO cbm) pjnU8UAyt5B) 

(Ly-80)vwj jagdifexudrr 
BaMregfon.(V45B4 

(Timoer logging [25.000 cbm) sawn Umber 
[2.500 cbm) matti togs [1.200 cbm) 

(0.7 mm LVLP209I 

(LV-1051V/U .Oundaga Forestry* 

Tala, LV 3270 

(Timber logging [ 10.000 cbm], sawn timber 
(1.500 cbm) m 



(IV-21)V/U .OlaineCJenTical-PhannacaAkal 
Planr 

Oleine. LV 2114 

fltoddnes p.500 mS. tablets], raw materials 
lor merBdnes f 700 ft byproducts ) 600 ft 
[4.3mUI.UiLJ/969) 

(IV-49) VAJ .livani Biochemical Ptanr 
Uvani, IV 5316 

(Concentrated forage lysm [1000 1). [production 
stopped in 1992J/S4) 


Tender Conditions 

1 In accorOance witn ns legal mandata (M Latvian 
Pnvattzeuon Agency LPA intends to sell As atere- 
mertooea enterprises by means ol an onama- 
tmnal render in me toBowing manner 

a) bos lor a state owned yum stock company 
(organized as A/S under Latvian law) must be 
tor the majority ol tfie shares ot me company. 
LPA may reserve a minority ol the shares ol Ota 
company tor future pubfic offering ot toms; 

b) bids tor a siaie owned enterprise (organized as 
V/U under Laiwan law) must be lor its total 
operations: 

c) bids tor a plant or leased out enterprise must be 
tor its total assets (e. g. buildings, leasehold, 
equipment and Inventory) twJb mvflnJO/yinBly 
to be valued as ot die tone of acqui si tion: 

d) bids tor assets or parts ol an enterprise must be 

(or a separable unit ol a A/S, VAJ or plant, with 
mventory Anany to be valued as ot the tone a( 
aquation. 

Z The tender ij public and anyone may tMl 

3. In deodng among me bids. LPA w# take tn*o 
cona M etaaon. among other things, the bd price, 
promlssa to maintain or create jobs, pledges B 
invest, and the business plan subminsd. antfi ol 
which wfl be considered pan ol the bid. Upon 
afpsng a contract, the successM bidder wto be 
required to post a bond ro guarantee ttwse pledges. 

4. interested parties can obtain enterprise and plant 
profifss without charge from LPA. LPA to not re- 
sponsible tor the accuracy and completeness ot 
this information. Prospective bidders will receive 
muted auffKwation from LPA to visii the enter- 
prises or plants on the basis ol which information 
wd be provided by the enterprise or plant manage 
mem. 


(LV-60JVAJ .SektosWhoteoto* 

Jetgava. IV 3008 

(vegetables am noner saeus memamB 
[02 mS. U/Lj/52) 

(iv-89) VAJ JVgaltawl mai EmntonOOtar 
R«ja.LV 1050 

(Pavel agency, pa OOP UAm 

(LV-IQI)WU JlMRHdCBBMelHl* 

Bafvi, IV 4500 

(Road construction, ewkwk [78000 g. toUng 

nMtui2miua.euuuMtm.wum 



a Bids must ba hi 

wetted mmtegs natsd arty otto Wm 
entarprtee » ptert lor «Nch am bU la 


a Bkts must ba reoalwad at IPA. 31. K. t 

SaatC Wga Ltoto-HW. no Mir tea MO pL nt. 
(local tone), ml 
Bids wto ifui inter be ape 
mini be denominated in lahiten Late 0.VL), and 
toisi remain vted tor one hunthad a n d twent y ( 120 ) 
days atrer the dosing teto. 

7. Bids must be aooorapanted by a band d tom (5} 
percent a! the bid value in the tone of an bSBVOCibte 
bank guarantee void tor one hundred and Matey 
(120) days attar the dosing dale. The bid band nut 
be payable on Bret d emand a nd wet be I w tolte d l C M 
bidder aimer tads to bold its bid open tor the reqUred 
period or refuses to sign a contract in e coo tea noo 
with as bid. 

8 LPA wU decide on ttw bids within one hundred and 
twenty (120) days after the dosing date. BtoUsm 
may present meirbidwetun a period net by LPA. LPA 
to eratlad to accept a bid after than that wCh Via 
highest purchase pnee or may reisci any of the bids 
at any tom. 

9. The (ytvflKafon of mo tondwod Gwerprisat wflitM 
carried out according to applicable Latvian law. 

LPA (Latvian Privatization Agency) 

Drums Skutie JSne Naghs 

State Minister for Privatization Genera Ur elctor 

Office hours of LPA are Monday through Friday 

from 9 am until 4 pjn. (local time). 



Privatizacijas agentura 

(Latvian Prlvqtjiation Agency) 
1 C VaUemara iela 31 , Riga, LV- 1887 ,Latvija 


For further information (enterpr ise profile, data on Latvia, visit authorization) please contact: 

Fax 


Tel. 


+371-2-332082 

+371-2-328069 

+358-49-106103 

+358-49-106104 


+371-8830363 

+358-49-106100 

+358-49-106101 

+358-49-106102 



This project is funded by the 
German Ministry of Finance 
and EU-PHARE 













18 


FINANCIAL TIMES THURSDAY NOVEMBER 17 1994 


MANAGEMENT: MARKETING AND ADVERTISING 


T he padded envelopes 
and strangely-shaped 
packages are starting 
to arrive: it is the time 
of year when diaries, pens, cal- 
endars, bottles and even ham- 
pers are beginning their ritual 
circulation between compa- 
nies. 

Christmas provides the per- 
fect excuse for buttering up ch- 
eats in the hope that their cus- 
tom will continue and augment 
ova- the canting year. Compa- 
nies' gift budgets were tight 
during the recession, but those 

involved in manufa cturing and 

supplying the gifts now report 
that business is brisk. 

There is concern from some 
in the industry that recent alle- 
gations in the British press of 
“sleaze” in public life have put 
a last-minute dampener on 
enthusiasm for gift giving and 
receiving this Christmas; oth- 
ers report no discernible dam- 
age has been done. 

Alyson Cook, editor of the 
trade journal Promotions and 
Incentives, says that gifts have 
been in the spotlight more over 
the last few weeks than ever 
before. “A certain amount of 
suspicion has been generated 
among general consumers as 
well as employees about receiv- 
ing corporate gifts. It is a great 
shame because corporate gifts 
are all about the feel-good 
factor - enhancing your com- 
pany's Image with regular 
or potential customers,” she 
says. 

But Peter Austin, manag in g 
partner of Clearwater Ham- 
pers, which has seen sales 80 
per cent up on this time last 


Christmas is coming and the gift budget is fattening up after some lean years, writes Diane Summers 


Packaging corporate 



year, says there has been no 
sign of post-sleaze puritanism. 
“Not a sausage," he says 
emphatically, although he 
reports losing two or three 
companies which have their 
headquarters in Italy, which 
has had its own sleaze to con- 
tend with. 

Sven where companies do 
object to their employees 
receiving gifts, it seems that 
some gift-givers may be finding 
their way round a ban. Says 
Alan McCleave, business devel- 
opment manager with Bor- 
deaux Direct, the wine gift ser- 
vice: “We are just given home 
addresses half the time. I 
would imag ine tha t is one way 
of getting round it” 

Austin is sceptical that mail- 
ings to home addresses show 
the rules are being bait An 
external gift-giver would be 
unlikely to have an employee’s 
home address and it would 
look a bit odd suddenly to ask 
for it, he says. 

Austin's hamper company 
also sends many gifts to home 
addresses, but it is employers 
themselves who are sending 
them as Christmas bonuses, he 
says. 

A home delivery saves hav- 
ing to tug a hamper home on 
the bus, and it stops envious 



Keeping the customer satisfied: sea 

glances at other employees’ 
presents. Even at Christmas, 
hierarchy intervenes. Austin 
explains: “If you have staff of 
different seniority, you do not 
want one person who has got a 


al fare to create a warm glow or themed items with a company toga such as EM’S Pink Panther range 


small hamper looking at the 
chap over the desk who has got 
one twice the size.” 

Apart from hampers and 
wine. Cook reports that gift 
vouchers, particularly those 


redeemable at large retailers 
such as Marks and Spencer, 
J. Sainsbury and Argos, have 
been a growth market in 
recent years. Goods bought 
with gift vouchers are unlikely 


to be a year-round reminder of 
the giver’s munificence, or sit 
around on a desk like a pen or 
a diary, adorned with the 
donor company’s logo and tele- 
phone number. Nevertheless, 







5 

S: 


a 

4 


K 

CD 

o 


There he is. Fourth row, second from 
the left The one with the moustache. 
Obvious really. 

Maybe not The unsavoury-looking 
character you’re looking at is more 
likely to be your average neighbour- 
hood slob with a grubby vest and a 
weekend’s stubble on his chin. 

And the real refugee could just as 
easily be the clean-cut fellow on his left. 

You see, refugees are just like you 
and me. 

Except for one thing. 


INT 


Everything they once had has been 
left behind. Home, family, possessions, 
aD gone. They have nothing. 

And nothing is all they’ll ever have 
unless we all extend a helping hand. 

We know you can’t give them back 
the things that others have taken away. 



m 

United Nations High Commissioner for Refugees 


We’re not even asking for money 
(though every cent certainly helps). 

But we are asking that you keep an 
open mind. And a smile of welcome. 

It may not seem much. But to a 
refugee it can mean everything. 

UNHCR is a strictly humanitarian 
organization funded only by voluntary 
contributions. Currently it is responsible 
for more than 19 million refugees 
around the world. 

UNHCR Public Information 

P.O.Box 2500 

1211 Geneva 2, Switzerland 


says Cook, vouchers are popu- 
lar with recipients’ families - a 
warm glow at home is bound 
to enhance the feel-gwd factor. 

Far same companies, giving 
gifts is all about attracting 
attention with freebies that are 
often in dubious taste. Says 
Cook: “You can get your own 
branded condoms . They can be 
luminous, shaped to any size 
and posted under plain cover." 
One of this year’s particular 
bits has been dolls featuring 
the chart-topping pop band 

Take That, she reports. 

In the experience ' of Jill 
Wilkin, maritwHng manager of 
software company BMC, even 
the hardest-bitten manager 
wCl have a soft spot for a silly 
gift Key-rings may be a clichfi, 
but a train-shaped key-ring, 
which emits train-Uke sounds 
when a button is pressed, is 
apparently irresistible. Present 
one “to a grown man who runs 
a company and he will fall 
about in. hysterical laughter," 
she says. 

While companies may toy for 

a time with arang thing differ - 
ent for their corporate gifts, 
they mil usually revert to the 
top five safe bets, according to 
Andrew Bourne, who beads the 
largest UK gift business. 
Bourne Publicity. 

These hardy perennials are 
pens, diaries, calenders, mugs 
and desk pads, replete with 
company logo. The logos have 
become more discreet, says 
Bourne, and quality of gifts 
has improved vastly. "It used 
to be a high volume of low- 
priced items which foil apart, 
iWng more barm than good,” 
he says. 

He finds that rmnpflnipg are 

now giving fewer gifts, spend- 


ing more on them and target- 
ing *ftg»w more closely. Clients 
include Sony, Royal Mail and 
IBM, for which Bourne has 
assembled a brochure of Fink 
• panther- themed promotional 

gifts. ‘ 

Wilkin agrees that the 
emphasis Is how on quality 
and targeting Her main aim is 
to get desk space: “We go for 
items which are useful, go on 

the desk and don’t take up too 

mwh space. A lot of people 
now work in open-plan offices. ~ 
You can't give them calenders 
because they don’t necessarily 
have their own wall to put 
frhwtrt on.” ’ 

offi* such as computer- 
mouse have been particu- 
larly popular, she says. Every 
Wwm will have her company’s 
n»mg ana telephone number. 
*Tf they hit a problem, they 
don’t even have td think who 
to talk to - our name is there” 
says Wilkin. ' 

T,iten» many other companies. 
BMC uses promotional gifts 
around the year, at exhibitions, 
seminars and as incentives, for 
example, for customers to fill 
in questionnaires. “There is 
less .of a push now at 
Christmas than there used to 
be.” 

For most companies the 
issue of whether or not to send 
corporate gifts this year will 
have been decided months 
before the current bout of 
sleaze allegations set in. 
According to Cook, “the sensi- 
ble promotional manager wiU 
have organised his gifts way 
hi the summer, buying in 
bulk to get a good price”. 

Even those who have hesi- 
tated at the last minute may 
reconsider theft-decision in the. 
cold tight of the new year, in 
the experience of McCleave. 
Bast Christmas some custom- 
ers said they were calling a 
halt to gift-giving. 

“Then they all panicked in 
January when they found their 
rival companies were doing it 
and getting the business,” he 


Generation X 
goes to the 
anti- 



Victoria Griffith finds designer? 

graffiti and a lack of marble 
fountains at The Lab, dedicated 
to young Californian shoppers 


G raffiti on the 
crumbling wall 
declares “Lost in a 
sense”. Weeds creep up 
through c racks in the 
pavement Teenagers in cut-off 
shorts and Inking boots lounge 
on thrift-shop furniture. 

The scene may be evocative . 
of city slums, but there is 
nothing undesirable about thic 
picture in the eyes of its 
creators. The place is The Lab, 
a shopping complex in 
southern California that bills 
itself as the first mall in the 
US to be conceived for a single 
generation. 

In fact, say its developers. 
The Lab is not really a mall at 
all; it is more of an anti-malL 
A hotch-potch of broken signs, 
scaffolding, and a fountain • 

maife of oQ d rama, the 

anti-mall’s target audience is 
the socalled Generation X: 
18-30-year-olds. 

“If anyone blindfolded you 
and dropped you in a typical 
mail across the c o u nt ry, you 
would not have any idea 
where you are,” says The 
Lab’s developer Shaheen 
Sadeghi. “Here, we tried for 
something different, not the 
old fountain-and-marble 
formula. We tried to put some 
excitement in re tailing ." 

Usual mall mainstays such 
as Neiman Marcus. The 
Banana Republic and 

Waldenbooks are 
conspicuously absent: r " < ft Q nd 
The Lab offers a comic book 
shop called Collectors Library 

and a florist called Weeds. 

So Car, The Lab's strategy 
seems to work. The complex 
rented out an available spaces 
before its opening in March, 
and retailers say they are 
pleased. "It allows ns to reach 
our target market," says 
Rodney Metoyer, manager gf 
Tower Alternative, a 
subsidiary of the music store 
Tower Records. Tower 
Alternative, created 
specifically for The Lab, stocks 
recordings of trendy handa 
such as The Cranberries, 

Green Day and Nirvana, as 
weD as unsigned local bands 
from the area. 

The retail store Urban 
Outfitters forms the anchor for 
toe shopping complex, and the 
chain’s architect, Pompei AJ)., 
designe d The Lab. It Is Urban 
Outfitters’ first time in a man 
- part of the chain’s strategy 
has been to locate only in 
urban areas. 

The Lab’s architects say the 
store is meant to mhni«» dense 
urban environments. “We 
were looking for the same sort 
of excitement and energy you 
get from being in a hip 


neighbourhood of a big city," 
said Ron Pompei, principal of 
Pompei AJD. “Imperfections 
are OK here.” 

As a base for the old and 
crumbling look, The Lab was 
built in and around the most 
and ent structure in the town 
of Costa Mesa, near Los 
Angeles - a military barracks 
from the 1950s. 

Instead of buil ding the 
complex in a real downtown 
area, Pompei imported urban 
decay for the simple reason 
that there are very few old . 
dow ntown areas in southern ' 
California. “There's no sense 
of centre here, and we are 
trying to fill that void.” 

Apart from Urban Outfitters 
and Tower Alternative, The 
Lab has no large chain stores, 
because Sadeghi believes 
Generation X opposes the 
homogenisation of Ameri can 
culture. Instead of “food 
courts”, tiie dusters of fast 
food restaurants found in most 
malls, The Lab dishes up 
heal th food in a coffee house 
furnished with lumpy sofas.' 

The Lab also capitalises on 
Generation x*s penchant for 
good causes. Instead of car 
expos and fashion shows. The 
Lab sponsors special charity 
events. One initiative earlier • 

tins year, for instance, invited 
shoppers to buy broken tiles to 
decorate walls. Proceeds went 
to a charity for the homeless. 

Sadeghi says the town was ■ 
sceptical when The Lab first' 
laid out Its plans. "They 
thought we were going to 
attract unemployed kids' with 
tattoos,” he ex plains. “But the 
people who come here are 


professionals,” Although The 
Lab is unabashedly aimed at 
the young, it has also 
attracted older customers. 
Sadeghi says half its 
customers are over 30. 

The formula may work in 
southern California, but it is 
questionable whether it wfll 
be as big a success in other 
areas of the country, such as 
the north-east and north-west 
of the US, where young 

ttend-setters have authentic 
crumbling downtown areas to 
frequent. 

But Sadeghi says he is 
planning new anti-malls. He is 
currently eyeing a 
deteriorating downtown 
sccpQR of Seattle, 'Washington, 
end a suburban area on th e 

edge of San Diego, south of - 
LA- O nce again, Pompei will 
Wovide a pseudo-urban 
design. The details have not . 
yet been finalised, but one 
™mg is certain. There won’t- . 
oe a marble fountain insight. 


r 









FINANCIAL times 


THURSDAY NOVEMBER 17 J994 


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Cinema/Nigel Andrews 

Emotionally 

arrested 


SECOND BEST f!2) 

Chris Menges 

THE SHADOW (12) 

Russell Mnlcahy 

AIRHEADS (15) 

Michael L ehmann 

MY FAIR LADY (U) 

George Cukor 


O wii^ to the indisposi- 
tion of Oliver Stone's 
Natural Bom Killers , 
My Fair Lady is the sur- 
prise addition to the 
weed's release schedule. What it is to 
have our censor to guide and guard 
us. Spared NBKs depraving modern- 
ism, we can bask in a week where the 
sun seems never to have set on Nice 
Anglo-Saxon Values; or never to have 
risen cm challenge, disorientation or 

i ty _ 

Screen violence has become an 
all-purpose scapegoat today. A 
well-known movie reviewer on TV 
said recently, with a cosmic shrug, “A 
hundred years of cin ema and we win 
up with Arnold Schwarzenegger." But 
1 am more concerned that after 100 
years we end up with Second Bat, 
Airheads, and The Shadow, not to 
mention a 30-year-old revived music al. 

Violence is not the enemy of art or 
morality, hi a grown-up world both 
these arenas should be strong enough 
to accept the challenge of lively 
debate. The enemy of art, and of 
thinking morality, is the apathy of 
demure traditionalism or brainless 
trend-following: both of which are 
mitten through this week’s films. 

We see the first in Second Best, the 
potentially touching tale of a Welsh 
sub-postmaster (William Hurt with 
accent and coriy-red wig) who seeks 
to adopt a disturbed youngster (Chris 
Cleary Miles). But he has many hat- 
ties to fight: not least with the uneven 
style and tone adopted by the British 
director and former cinemato g rapher 
(The Mission, The Killing Fields) 
Chris Menges. 

As in A World Apart, his anti-apart- 
heid directing debut, Menges has a 
maddening ability to outline main 
characters with a sharp, nompasaftm. 
ate light while Ietting the rest of tfae^ 
fihn dissatve' mlo miasma. Hues' is'] 
very moving. as the hoy, his large, 
hunted eyes ranging from bleak 
j qfmm to tearful self-surrender. And 






■ ATHENS 

Mogaron Sat Shsrrffl Mitnes song 
fscttaL More Franffote Le Roux song 
recftaL Next Wed: LntaTotewug^ 
piano music ty Satie (01-7282333/ 
01-722 5511) ~ 

■ BOLOGNA 

Teatro Commute* Yuri Baahmet 
gives a viola recital on Mon. The 
opera season opens on Nov 26 with 
anew production of Roasters B - 
tumo tn Haifa ?* e Plwje 
bookings. Information: 051-529999) 

■ LONDON 

THEATRE __ 

# The Merchant of Vsrw» a brief 
London visit by Peter Setters’ 
Chicago production, wWch 
transports Shakespeare's play to 
CaBfomla. Todght. Wjj 
Sat only (Barbican 071-g3S 8891) 

m 

ro^oeoed as the GWgud with Peter 

SS&proA^ofH*^ 

staning Stephen DiBane, kfidwel 

PSSSSTd onakfSftiden,Gwen 


Hurt’s pained precision in the older 
role is masterly. The thee is a trans- 
parent mask of perplexity: a kind of 
physiognomic fish tank through 
which we watch his restless thoughts. 

But this central tale of bonding 
between two emotional cripples - 
both maimed by lack of parental love, 
as illustrated in the epidemic of 
flashbacks in David Cook's script 
(from his own novel) - takes place in 
a social and moral void. 

Where are Hurt’s fellow villagers? 
How - apart from some brief rhubarb- 
ings from gossipy shop customers - 
do they react? And how should toe 
reac t to a story in which a single man 
with no sex life, apart from the “DIY” 
option that probing social worker 
Jane Horrocks compels him to admit 
to, seeks an 11-year-old surrogate son? 
It surely arouses a suspicion, at least, 
of substitute sexual passion. 

The movie stutters around this 
question as it does around tire dainty, 
ever-flowing tea table in Hurt's low- 
ceQinged home. Menges and Cook 
behave towards US tike parpnfc failing 
to get up the nerve to tell their child 
the facts of life. And as other charac- 
ters, from Uncle John Hurt via adop- 
tion therapist Prunella Scales to Keith 
Allen as the boy’s ex-convict Dad, pop 
up even the brave naturalism of the 
central duo starts to look like part of 
the dramatic evasiveness. 

Second Best ends up as second best 
itself to Cook’s 1380s TV play Walter, 
another, tauter case study of emo- 
tional arrest That one starred Ian 
McKellen. And where is Sir Ian? 

The finest Shakespearean actor of 
his generation balances a pair of 
Specs and a wobbly American accent 
in The Shadow. He plays a bombde- 

gi g iim g hrffln flang W: in a tUg of W&T 

between the too (Alec Baldwin as 
caped wrong-righter Lamont Cran- 
ston) anfl the villain (John Lone). 

This is anntfMy film that matroq us 

long for the impious, minpimiai anar- 
chy of Stone’s mayhem opera. Time- 
warped in 1830s New York, we stutter 
through yet aimthar romp about a 
condo-hook crusader filmed in a style 
that Batman popularised as “retro- 
nedr*’: dimly lit and stuffed with yes- 
terday's iconography. A Fu Manr.h u- 
style haHdia; a Gotham City sketched 
In swift chchS strokes of post-Depres- 

sinn Gothic; mid Ralih rin leaping into 

invisfbflfty with all tbe ease of an 
actor who has scant discernible pres- 
ence even when we can see him. 

'At 'tim‘ start it' looks hopeful The 
director is Russell “Highlander” Mul- 
-cahy, so the camera swoops and 
soars. The special effects boast a fly- 



PotentiaUy touching: Chris Cleary Miles and William Hurt in ‘Second Best* 


mg ornamental knife with an ani- 
mated face grimacing on its hilt. And 
we like the museum security guard 
who when confronted with a dose 
descendant of Genghis stomp- 
ing towards him after gwu^ - g in g from 
a sarcophagus, says, “Er, we’re 
closed.’ 

But a little post-modernism goes a 
long way; a lot can end up going 
absolutely nowhere. The Shadow is 
auto-erotism as style: the cinema’s 
farm of DIY love play, losing itself in 
reflected reveries of past glory. How 
apt that it ends with another of those 
hall-of-mirror shoot-outs plundered 
from Orson Welles’s The Lady From 
Shanghai. Or is this another in-joke? 
Welles, after all, was the original 
radio voice of r-ammit Cranston. 

Airheads is the week's third distress 
rail from Anglophone cinema. This 
time a Los Angeles radio station is 
comically hijacked by a fame-seeking 
rock group calling themselves The 


Lone Rangers, led by Brendan Fraser, 
last seen as a rigfr nated Neanderthal 
in California Man. They try to farce 
the station boss (Michael McKean) 
and the DJ (Joe Mantegna, mn ggm g 
away in a wig as if he had never been 
America’s leading Mamet actor) to 
play their demo tape over the air. 

Director Michel Lehmann’s early 
career was a do wnhill slalom from 
Heathers, his sweetly malicious com- 
edy about a girls school, to Hudson 
Hmok, his Bruce Willis superflop. 
F>»hmann still seems to be wearing 
runaway skis. The plot does not so 
much progress, more zigzag betwem 
deadly marker-posts. Blunt gags snap 
at the ankles; tone<bange6 are tried 
and discarded; finally the film enda in 
a heap at the bottom of the piste. 

At least Mg Fair Lady has grace 
and a sense of presentation. We still 
look at this large, creamy epic made 
from the Lemer-Loewe stage musical 
and wonder if less would not have 


I t's a poor sort of memoay that 
only works backward,’ the Queen 
remarked." In the first half of 
Edward Albee’s virtually plotless 
play Three Tall Women, memory 
works only backward. The play’s 
three-heroines are young (26), middle- 
aged (52), and old (92), and they repre- 
sent potential, achievement, after- 
math. Si la jeunesse saoait ... si la 
vteHlesse poiwaiL la Act Two, how- 
ever, the play moves through the 
looking-glass, and memory works for- 
ward. . 

The effect is original, contrived, 
witty, meandering, touching, impres- 
sive, specious. The play was new in 
1991, has received several prizes since 
its New York (Sty premiere this Feb- 
ruary, and now reaches London in an 
illustrious new production led by 
Maggie Smith and Frances de la Tour 
as Heroines A and B. 

It is the 92-year-old, a rich New 
TCngjamd lady at death's door, who is 
tha centre of the triptych, hi Act One, 
her memory Is slating in and out of 
focus (other signs of old age are 
explicit; the onset of Alzheimer’s dis- 
ease is Implicit); and the other two 
are her com panion and a member of 
her lawyer’s firm. In Act Two, how- 


Theatre / Alastair Macauls 


Albee’s ‘Three Tall Women’ 


ever, she is nothfng but wiamiiy; and 
the other two are herself at younger 
ages. The sense that she carries these 
younger alter egos inride her is dear, 
even though the 26-year-old repeat 
edly refuses to age into that 

Maggie Smith’s creation of the old 
lady is a marvel of daring and ind.- 
rivaness. Early on, she starts to wail 
- for no very good reason, and not for 
the last time - and the accuracy with 
which her vocal tone and fecial 
expression capture the peculiar mis- 
ery of helpless did age is uncannily 
fine. Yet within seconds her mischie- 
vous wit bobs back, and moments 
later bar malicious digdatn also. She 
Is more autocratic, more disturbed, 
more volatile, than Myra Carter in the 
same role in New York; she achieves 
serenity only gradually. 

On two or three occasions, she over- 
employs some comic devices - stac- 
cato, bird-like turns of the raised 
head, swivellings of the eyes, all as 


seen last year in The Importance of 
Being Earnest - but these are minor 
blots. In Act Two, she achieves a 
quiet and stillness that must rank 
among the finest hours of he* great 
career. 

Frances de la Tour’s performance is 
without blot, and complements 
Smith’s with model generosity, dry- 
ness. and elegance. Anastasia Hfile’a 
performance. In the junior role, is 
altogether less accomplished: fussy, 
restless, silly. Anthony Page’s direc- 
tion is perfectly paced; Carl Toms’s 
decor and Tran Rand's costumes are 
handsome. 

Wilde’s Bne, “The tragedy of old age 
is not that one is old but that one is 
stfl] young", explains part of the feel- 
ing that the play creates - but only 
part For the young woman Is so evi- 
dently callow beside the older two. 
The 52-year-old has more compassion, 
more irony, more resignation; and the 
92-year-old is moving towards the 


final resignation. They speak of fam- 
ily, losing virginity, marriage, sax, 
adultery, motherhood, Alness - much 
of which has not yet happened to the 
26-year-old. Interestingly, though the 
younger woman is most alarmed at 
the prospect of disillusion in mar- 
riage, the older women are most trou- 
bled by their son (who appears, albeit 
without speaking a word). 

The play is weaker and slighter 
than it has been proclaimed. (I con- 
fess that, at its NYC premiere this 
February, I nodded off more than 
once - but put that down to jet-lag. At 
the London premiere last night, how- 
ever, I spotted others yawning or 
slumbering at the points I had faded 
before.) The writing is full of humour, 
grace, Irony, edge; but too often a 
certain whimsical preciosity pro- 
trudes. Lines are repeated and echoed 
at times with a sub-Gertude-Stetn 
effect; non sequtiws and stream-of- 
consciousness changes of subject 



Moggie Smith: a marvel of 
daring and incisiveness 

abound as If Albee were imitating 
effects from Anton Chekhov, Virginia 
Woolf, Samuel Beckett, and others. 
An evening both rewarding and frus- 
trating. 

At Wyndham’s Theatre, WC2 


Concert/Antony Bye 

The Brno 
Philharmonic 

F or Western classical opera which inaugtu 
music lovers the city Brno’s National Theati 
of Brno, the provincial 1884), it certainly set the 
capital of Moravia in of the evening in the a 


been more. (Did they keep saying to 
designer Cecil Beaton, “More frou- 
frou, Cecil!”?) But when the film is 
tuneful it is very tunefoL And even 
when it is tuneless we have Rex Har- 
rison, master-croaker, in charge of the 
sprechtgesang. 

The otto pleasure for revival buffs 
is Vittorio De Sica’s Bicycle Thieves. 
neo-r ealism on wheels. The 1948 Ital- 
ian rfawnc is proof tha t all you m y d 
to make a great film is a camera, a 
few streets, and a group of characters 
tested by credible extremity. 

Much tike Natural Bom Ellers. Oli- 
ver Stone’s film is not a great one, but 
at least, unlflce any other new film 
this week, it is in touch with real life 
mid raw emotion, ft looks like a work 
of <?fa«wng made today for audiences of 
today. But in Britain, thanks to a 
movie-vetting system based on bow- 
ing to yesterday’s moral raanHatag, we 
shall have to wait till tomorrow, or 
longer, to see it 


F or Western classical 
music lovers the city 
of Brno, the provincial 
capital of Moravia in 
the Czech republic, probably 
means just one thing: JanAfek. 
It was there that he worked for 
the greater part of his life and 
there in the city's opera house 
where, during the 1920s, the 
last four of his remarkable 
operas were first performed. 

Curiously, the official foun- 
ding of the city’s flagship sym- 
phony orchestra, the Brno 
Philharmonic, postdates even 
that memorable era: although 
the Brno Philharmonic Society 
started giving conc erts as far 
back as 1808, and in various 
guises (at one point as the 
Brfinner Philharmoniker 
playing for the Ge rman Opera) 
has actively participated in the 
city's musical life ever since, it 
was not until 1956 that its pres- 
ent status - as the Brno State 
Philharmonic Orchestra - was 
fully established. 

Yet one would hardly have 
guessed its relative youthftil- 

nw»i from thft assurance an d 

love with which the orchestra 
under its Principal Conductor, 
Laos SvArovsky, played a pro- 
gramme ideally suited to its 
many qualities at the Royal 
Festival Hall on Tuesday, noth- 
ing from the core Austro-Ger- 
man repertoire, but Smetana, 
Tchaikovsky, Suk and Jana- 
Cek, all composers who found a 
perfect match in the orches- 
tra’s unanimity of purpose and 
radiant delivery. 

If the choice of the overture 
to Smetana’s The Bartered 
Bride as opener was somewhat 
predictable (though not inap- 
propriate, since this was the 


opera which inaugurated 
Brno's National Theatre In 
1884), it certainly set the tone 
of the evening in the agility 
and incisiveness with which It 
was projected, qualities even 
more evident in the glowing 
textures of Josef Suk’s attrac- 
tive if slight Fantastic Scherzo 
which the orchestra convinced 
us was nothing less than a 
masterpiece. 

Tchaikovsky’s Violin Con- 
certo certainly benefited from 
the orchestra’s warmth and 
vernal freshness, and in Igor 
Oistrakh it found an ideal part- 
ner. Admittedly Oistrakh’s 
rabato was a tittle free to begin 
with, causing some problems 
of ensemble, but once he 
embarked on his first bout of 
passage-work, strict - though 
by no mrans inflexible - time 
was the order of the day and 
the interpretation - objective 
but intense, robust but capable 
of delicacy - took wing. The 
slow movement, natural and 
supple was Imbued with a iyr- 
iesm free of mawkish senti- 
ment, the finale precise and 
rhythmically prised. 


A nd, of course, to end ft 
had to be the Jand&ek 
Sinfonietta, complete 
with the luxury of is 
extra Czech brass players. Jan- 
Acek's sinewy orchestration 
ran often «nind simpl y bizarre 
in the wrong hands, but here 
seemed to hold no terrors: con- 
firming the Brno Philharmon- 
ic's inborn musicalfty and 
utter unself consiousness, qual- 
ities which seem to infuse all it 
comes into contact with, tradi- 
tional - »nd fast- disap p ea ring 
- music-making at its best 


Opera/John Allison 

The Brandenburgers 
in Bohemia 


T he Chelsea Opera 
Group, whose regular 
concert performances 
of neglected works are 
a valuable asset to the T^ndnn 
music grane, has in the past 
enjoyed particular success 
with Slavonic repertory - the 
body of operatic literature 
most under-represented in the 
west - and Sunday's perfor- 
mance of The Brandenburgers 
m Bohemia was no exception. 

Smetana's first opera (premi- 
ered in 1866), though uneven, 
is Ml of vivid music. With its 
idiom derived from main- 
stream European opera, The 
Brandenburgers anticipates 
only here and there the com- 
poser's mature “Grech style", 
but several appealing folkish 
episodes make it worth hearing 
regardless of the shortcomings 
- revealed all too clearly at the 
Queen Elizabeth ball in Deryck 
Viney's stated translation - of 
its libretto. 

Although The Brandenbur- 
gers was & greet success at Gist 
- for a while it even overshad- 
owed Smetana’s second opera. 
The Bartered Bride - the work 
has always been hostage to its 
country's fortunes. With a plot 
based on an incident during 
the 18th-century Brandenburg 
invasion, it has provided dis- 
comfort for any occupying 
force; the opera was, of course, 
too dose to the hone for the 
Nazis, who banned it 
Sunday's concert had a valu- 


Tayior and Gina Bellman (Gielgud 
071-434 5065) 

• True West Matthew Warcus 
directs Sam Shepard’s drama about 
two bafifing brothers in toe Mid 
West TH Dec 3 (Donmar Warehouse 
071-369 1732) 

• The Prime of Miss Jean Brodie: 
Patricia Hodge takes on the rote of 
the formidable schoolteacher whose 
mix of romance and w&futness 
Inspires her pupils (Strand 071-930 
8800) 

• A Passionate Woman: Ned 
Sherrin dkects a new production of 
Kay Meter's play, first seen at toe 
West Yorkshire Playhouse last year. 
Stephanie Cole stars as the 
housewife whose passion for fife 
breaks out to toe horror of her famBy 
(Comedy 071-369 1731) 

• The Sisters Ro&enswalg: 

Michael Biakemore directs Maureen 
Upman, Janet Suzmai mid Lynda 
Bellingham fai Wendy Wasserstefe’s 
Broadway hit comedy about three 
American Jewish sisters who have a 

mid-fife reunion In London (Old Vic 
071-928 7616) 

• Moscow Stations: a one-person 
play, starring Tom Courtenay, 
inspired by Venedikt Yerofeev’s 
acclaimed modem Russian tale 
about an alcoholic who stumbles 
and dazes his way through a series 
of surreal adventures (Garrick 
071-4945085) 

• The Seagull: Jutii Dench's 
Arkacfina heads & splendid cast in 
Pam Gems' new version of 
Chekhov's play about disappointed 
aspirations. In repertory at the 
National with The Devil's Disciple, 
Bernard Shaw’s 1897 satire on 
mekxfcama, and Racing Demon, 
David Hare’3 play about tensions in 
the conte mp o ra ry Angfican Church 


(National, Olivier 071 -928 2252) 

• The Children’s Hour Harriet 
Writer and Claire Higgins head toe 
cast in the National Theatre’s new 
production of Lillian Heilman’s 1934 
drama about lesbianism, directed by 
Howard Dawes. In repertory at the 
Lyttelton with Tennessee WBfiams' 
Sweet Bird of Youth directed by 
Richard Eyre, and Arthur Miller's 
new play Broken Dreams (National, 
Lyttelton 071-928 2252) 

• Arcadia: Trevor Nunn directs 
Tom Stoppard’s complex but often 
funny drama that won the 1994 
O&vier Award for Best Play 
(Haymarket 071-930 8800) 

• She Loves Me: the charming 
1963 Mastaroff, Bock and Hamick 
musical about two longtime pen pals 
who don’t know they work in the 
same parfiimerie. Rutole HenshaH 
and John Gordon Sinclair head the 
cast (Savoy 071-836 8888) 
OPERA/DANCE 

Covent Garden The Royal Ballet 
has Anthony Dowell’s new staging 
of Sleeping Beauty (next 
performances tomorrow with Dancey 
BusseS and Sat with Sytvie Guillem) 
and an Ashton celebration featuring 
a new production of Daphnis et 
Chios (next performance on Mon). 
The Royal Opera has a final 
performance tonight of Romeo et 
Juliette, staged by Nicolas Joel and 
conducted by Charles Mackerras, 
with cast led by Roberto Alagna and 
teontina Vaduva. A new production 
of La traviata, conducted by Georg 
Solti and staged by Richard Eyre, 
opens on Nov 25 with Angela 
Gheorghni as Violetta (071-304 
4000) 

Coliseum English National Opera’s 
repertory consists of revivals of 
Ariadne auf Naxos (with Jane 


Eagten) and Die Zauberfldte. A new 
production of Musorgsky*s 
Khovanchshirta, staged by 
Francesca Zambete and conducted 
by Sian Edw&ds, opens next Thurs 
(071-836 3161) 

Sadler's Weds Northern Ballet 
Theatre winds up its London season 
with performances tonight, tomorrow 
and Sat of Christopher Gable’s 
touring production of Cinderella, 
music try Philip Feeney (071-278 
8916) 

CONCERTS 

Barbican Tonight Mstislav 
Rostropovich, Irene Schnittke and 
Mark Lubotsky play chamber music 
by Schnittke. Sat Handel’s Messiah. 
Sun and Mon: Lorin Maazri 
conducts Bavarian Radio Symphony 
Orchestra in symphonies by Mahler 
and Bruckner. Tues: Barbara Bonney 
sings concert arias with the ECO. 
Wed: Simon Rattle conducts City of 
Birmingham Symphony Orchestra in 
Corelli, Mozart, Tippett and Sfoefius. 
Next Thurs, Fri, Sat Colin Davis 
conducts concert performances of 
Idomeneo (071-638 8891) 

South Bank Centre Tonight 
Richard Goode plays Beethoven 
piano sonatas. Tomorrow: Michael 
Stem conducts London 
Philharmonic In works by Strauss, 
Tchaikovsky and Rakhmarenov, with 
violin soloist Boris Belkin. Sun 
afternoon: Shiva Cherkassky piano 
recital. Sun evening: Peter Maxwell 
Davies conducts RPO in his own 
60th birthday concert, with piano 
soloist Kathryn Stott Mon: Young 
Musicians Symphony Orchestra 
plays Rossini, Tchaikovsky, 
Rimsky-Korsakov and Ravel. Tues: 
David Will cocks conducts choral 
works by Gounod and FaurA Tues 
(QEH): John Biot Gardiner conducts 


Purcell programme. Wed: Carlo 
Marla Gtulini conducts Vienna 
Philharmonic In symphonies by 
Schubert and Brahms (071-928 
8800) 

■ MADRID 

Teatro Urico La Zarzuela A 
zarzuela double- biE, consisting of 
Tomas Breton’s La Verbena de la 
Paloma and Federico Chueca’s El 
Bateo, runs daily tfll Dec 4, except 
Nov 21 and 28 (01-429 8225) 

■ MILAN 

THEATRE 

The European Theatre Festival 
opened last night (0! Dec 18) with 
Bob Wlson’s Paris staging of 
Virginia Woolfs Orlando. The host 
theatre, the Piccolo Teatro, is 
presenting a new Strehler 
production of Marivaux's The Island 
of Slaves. The UK is represented by 
the Royal Shakespeare Company 
(Henry VI directed by Katie MitcheK) 
and the National Theatre 
(Christopher Hampton’s new Lewis 
Carroll adaptation, Alice's 
Adventures Under Ground, directed 
by Martha Clarke). Other visitors 
include companies from Berlin, 
Stockholm, Barcelona and 
Bucharest (02-861897) 

LASCALA 

Tonight Riccardo Muti conducts the 
Scab orchestra with piano sofofst 
Murray Perahla. Mon: Teresa 
Berganza song recital. Dec 7: opera 
season opens with Die Walkflre 
(02-7200 3744) 

■ PRAGUE 

Rudotfinum Tonight, tomorrow: 


Helmuto Rifling conducts Czech 
PhB harmonic Orchestra and Prague 
Philharmonic Chorus tn 
Mendelssohn’s oratorio St Paul 
Tues: Jan Simon piano recital 
(02-2489 3352) 

State Opera This month's repertory 
includes Cori fan tutte, Carmen, Las 
Contes tf Hoffmann, Rlgofetto, the 
Kafka opera Der P razees and Hans 
Krasa's 1933 opera Veriobtatg on 
Ttaum (02-2421 5031) 

■ ROME 

AwStorio <S Via defla ConcBazione 
Christian Thielemann conducts the 
Orchestra deti'Accaderrria Nazionale 
di Santa Cecilia on Sun, Mon aid 
Tues in works by Delius, Strauss 
and Schoenberg. Giuseppe S'nopoH 
conducts Liszt’s Faust Symphony 
next Wed (06-6880 1044) 

■ TURIN 

Teatro Regio A new production of 
Donizetti's La fiBe du fegiment 
opened last night, conducted by 
Bruno Campanefla and staged by 
Luca Ronconi. The production, sung 
in French, oars till Nov 30, with 
alternating casts including Eva Mei/ 
Laura Ciaycomb and Giuseppe 
Sabbatini/Jorge Lopez Yanaz 
(011-8815 241) 

■ VENICE 

Teatro La Ferice The opera season 
opens on Sat with the Tarkovsky 
production of Boris Godiaiov, 
rastaged by Stephen Lawless. 

Michaii Yunovsky conducts a cast 
including Anatoly Kotoherga and 
Vladimir Vaneev. Repeated Nov 23, 
26, 29, Dec 3 and 6 (041 521 0161) 


able fink with Czech operatic 
tradition in its conductor, 
Vfifen Tansky. The 84-year-old 
came out of virtual r etir e ment , 
eager to do The Brandenbur- 
gers, the only one of Smetana's 
eight operas be had never con- 
ducted before. 

A pillar of post-war operatic 
life in Britain, Tausky was 
given a heartwarming recep- 
tion. In spite of physical 
frailty, he galvanised the 
orchestra and chorus into one 
of their best recent perfor- 
mances, and led a lively 
account of the piece. 

One longed, ungratefully, for 
Czech singers, but the Chelsea 
Opera Group mustered a wor- 
thy cast with only a few 
small-voiced or score-bound 
exceptions. Helen Kucbarek’s 
fresh soprano made her affect- 
ing as the heroine Ludise, 
and she was nicely comple- 
mented by Jacqueline Bremar, 
lively as one of her sisters, 
yifrsnka. 

Jeffrey Cart was a musical 
Tausendmark, but as the vil- 
lain of toe piece lacked vocal 
heft. The tenor Donald Ste- 
phenson’s peasant leader Jfra 
was vivid in his crowd-inciting 
song-and-dance number, and 
Mark Beesley’s Mayor of 
Prague bad dignity. 

The most powerful singing 
came from Jeremy White’s 
bass Old Villager, whose Act 2 
prayer (with chorus) is one of 
the opera’s finest passages. 


ARTS GUIDE 

Monday: Berlin, New York and 
Paris. 

Tuesday: Austria, Belgium, 
Netherlands, Switzerland. Chi- 
cago, Washington. 
Wednesday: France, Ger- 
many, Scandhavia. 

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

Friday: ExttibtttonB Gutde. 

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

MONDAY 

. NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

Euro n ews: FT Reports 0745, 
1315. 1545, 1815, 2345 

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
ffeports 1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430, 
1730; 








I 





20 


FINANCIAL TCVEES THURSDAY NOVEMBER 17 1994 t 


A tax that was 
pole-axed 

Did ministers Bail? The poll 
tax was chosen after careful 


This book, 
which chroni- 
cles the birth, 
life and death 
of the UK’s poll 
tax. is impor- 
tant. interest- 
ing and thor- 
ough. The 
authors have interviewed most 
of the main people involved - 
including myself - and con- 
clude that the policy reveals 
shortcomings in the workings 
of the British government that 
ultimately led to the toppling 
of Mrs Thatcher. 

The book addresses three 
basic questions. First, why was 
it necessary to devise a new 
form of local government tax? 
Second, why was the poll tax 
selected? And third, why did it 
go so badly wrong? 

The pledge to abolish domes- 
tic rates was made in the sum- 
mer of 1974 by Edward Heath, 
the then Conservative leader. 
But nothing was done about it. 
A review of the rating system 
in 1979 when Margaret 
Thatcher became prime minis- 
ter led only to a reduction in 
the government grant to local 
authorities. 

By 1984 the position had 
become intolerable. It was diffi- 
cult for the government to get 
orders on grants to local 
authorities through the Com- 
mons since the Treasury con- 
trols, of byzantine complexity, 
bore heavily on Conservative 
councils. At the same time, cer- 
tain Labour inner-city councils 
were flouting the system by 
spending at record levels. The 
review that led to the poll tax 
was put in band, conducted by 
William VValdegrave and me as 
environment ministers. 

The central question was 
how much freedom a local 
authority should have. We 
were looking for a robust and 
substantia] tax base for local 
authorities that would allow 
them to raise and spend their 
own money, and to answer for 
it to their electorates. 

The solution we came up 
with w'os a charge for local ser- 
vices. the community charge - 
soon dubbed the "poll tax". It 
was based upon the principle 
that a wider tax base was nec- 
essary because out of the 35m 
taxpayers only about 14m paid 
rates: since many of these 
received rate rebates, only 
about 8m paid rates in fiilL 
The idea of a community 


FAILURE IN BRITISH 
GOVERNMENT: 
THE POLITICS 
OF THE POLL TAX 
By David Butler, Andrew 
Adonis and Tony Travels 

Oxford University Press. 

£25 hbk. a. 99 pbk. 352 pages 


charge was first mooted at 
Chequers, the prime minister’s 
country residence, in March 
1985. It was envisaged that the 
charge would be between £50 
and £100 a head. If the people 
who attended that crucial 
meeting had realised the poll 
tax would be levied at nearly 
£300 a head in its first year. I 
am sure the proposal would 
have been dropped. 

The book is wrong, inciden- 
tally . to say those involved 
wanted “to please Margaret". 
She had no clear views on 
what should replace rates, and 
her enthusiasm for the pall tax 
flowered late. 

Three things could have 
made the poll tax more bear- 
able. First a lower level in the 
initial years, which would have 
meant introducing it in tan- 
dem with rates. Such “dual 
r unning ** was abandoned after 
a debate at the Conservative 
party conference in 1987. One 
should never allow the Tory 
party conference to make pol- 
icy - that is not its function. 

Second, the exclusion from 
the tax of everybody below the 
age of 21 would have taken the 
sting out of student protests. 
Unfortunately the purist inter- 
pretation - that everyone over 
IS had to pay - won the day. 

And third, the central gov- 
ernment grant to local authori- 
ties for 1990, the first year of 
the poll tax, was utterly inade- 
quate. and put further upward 
pressure on its level. 

The Treasury was not help- 
ful Nigel Lawson, then chan- 
cellor. opposed the poll tax but 
was not prepared to block it 
He was already at loggerheads 
with the prime minister over 
the entry of sterling into the 
European exchange rate mech- 
anism and could not take on 
another issue. 

That left Chris Patten, envi- 
ronment secretary in 1990, and 
me as Conservative party 
chairman with the enormous 
problem of having to justify 
a high and unpopular tax. 


examination and full discus- 
sion, which this book acknowl- 
edges. 

One of the reasons it went so 
badly off the rails was that 
minis ters collectively were not 
looking at the political cons* 
Quences. Cabinet committees 
and the full cabinet examined 
the poll tax but in a fragmen- 
tary way. There was no real 
political discussion. 

Nor was parliament effective 
in scrutinising the impact of 
the tax. Attempts to modify the 
legislation were viewed as 
destructive of the whole con- 
cept and this made it even 
more difficult to get modest, 
but sensible, changes accepted. 

What, then, were the politi- 
cal consequences of this epi- 
sode? I do not believe it was 
the critical factor in Margaret 
Thatcher’s fall. The 1990 local 
government elections showed 
councils such as Wandsworth 
and Westminster could win 
majorities if the poll tax was 
low as a result of lower expen- 
diture. It was a good stick to 
beat Margaret Thatcher with, 
but it did not match Sir Geoff- 
rey Howe's resignation speech. 

Where do we go from here? 
The present system of funding 
local government based upon 
the council tax and tough cen- 
tral government controls is 
unlikely to survive. It does not 
give local authorities the free- 
dom they should have and this 
will increase friction and hos- 
tility between local and central 
government in future. 

There is no easy answer by. 
for example, allocating a slice 
of income tax to local govern- 
ment and calling it local 
income tax. If money is raised 
centrally and simply allocated 
to local authorities, what 
is the purpose of those authori- 
ties? 

Lessons have certainly been 
learnt from the failure of the 
pofi tax. But the issue at the 
heart remains what it was - 
the powers of a centralised 
state as opposed to the powers 
of a decentralised state. The 
issues raised by this episode 
are not simply fiscal, they are 
also constitutional 


Kenneth Baker 

The reviewer is Conservative 
MP for Mole Valley. 


A week in which the 
whole world has been 
waiting for a Federal 
Reserve meeting may 
seem a surprising one in which 
to express doubts ou the power 
and importance of central 
banks. Some contrary souls 
may. however, suspect that 
just when an institution seems 
most triumphant, history will 
subsequently show that it has 
passed its zenith. The serious 
point is that the monetary sys- 
tem over which the central 
banks preside is changing so 
radically that eventually there 
may be tittle room for their 
present functions. 

It Is indeed time to sit up and 
take notice when such a thesis 
is put forward not just by out- 
siders and free-banking fanat- 
ics, but by two serious and 
sophisticated economists from 
the Central Bank of Ireland. 
They are F.X. Browne and 
J.P.C. Fell (shortly to mqve to 
the European Monetary Insti- 
tute). Their paper is entitled 
Inflation - Dormant Dying or 
Dead? (Central Bank of 
Ireland, POB 559, Dublin 2). 
Their thesis is that “the newly- 
liberalised financial mar kets 
can render impotent monetary 
policy actions that are ostensi- 
bly inflationary". Moreover 
“over a much longer future 
horizon, payment system, 
advances, already realised or 
in the pipeline, could push cap- 
italist economies into a new 
post-monetary world without 
money or inflation". 

The authors are adamant 
that inflation has up to now 
been caused by excessive 
expansion of the money sup- 
ply. They explicitly reject 
structural, real economy, 
explanations of the kind put 
forward by Roger Bootle in an 
HSBC Greenwell paper. But 
unlike conventional monetar- 
ists they envisage the defeat of 
inflation, not by controlling 
the money supply, but by 
establishing an economy in 
which money as we now know 
it has ceased to exist. Readers 
who are suspicious of my gloss 
should refer to the original. 

• The first and most familiar 
part of the thesis is that the 
the bond market is becoming 
the arbiter of monetary policy. 
The authors argue that the 
bond market will itself tighten 
policy by pushing bond prices 
down and yields up at the 
slightest whiff of an inflation- 
ary threat. I have myself 
argued that the bond market 
can be and often is wrong and 
that central bankers should 
not follow it blindly in setting 
short-term rates. 

The novelty of the Irish 
paper is the suggestion that 
borrowers will no longer be 



BOOK 

Review 


ECONOMIC VIEWPOINT 


Post-money world 


on our 



By Samuel Brittan 


able to bypass the bond market 
by borrowing short term at 
officially determined interest 
rates. Bank depositors who 
regard bank interest rates as 
too low in view of likely infla- 
tion will quickly move into lon- 
ger-term securities, thus forc- 
ing up the whole yield curve 
and dosing off the option of 
borrowing cheaply at exces- 
sively low interest rates. They 
also suggest that past bond 
market overshooting and 
undershooting reflect hyper- 
sensitivity to inflationary 
developments, which will no 
longer make sense in the new 
post- monetary world. 

• The second and still reason- 
ably familiar part of the Irish 
thesis turns on “securitisa- 
tion". This ungainly word 
refers to the tendency to bor- 
row and lend to a greater 
extent via bonds, equities or 
other securities, which can be 
bought and sold in the mar- 
kets, and thereby to bypass the 
banking system. The authors 
argue that central banks will 
find it more and more difficult 
to exercise leverage cm interest 
rates through the influence of 
their operations on the com- 
mercial banks, because the lat- 
ter will become less important. 

• Third, because of financial 
liberalisation, the spending of 
both households and compa- 
nies is becoming much less 
determined by either immedi- 
ate income or money hi the 
bank, than by wealth. Put 
more simply, people are more 
and more able to borrow their 
way out of temporary squeezes 
and insure against future 
shocks. Expenditure will in the 
end be limited only by wealth 
- which like most economists 
they define as the discounted 
total of expected future income 
streams. The Irish authors 
draw from this development 
the implication that money is 
just the most liquid form of 
wealth: and boosting or 
restricting its supply will 
become pointless as people will 
simply use other assets or bor- 
row from each other. 

• Fourth, and most radically, 
the authors suggest that cash 


Currency is less important >.• ■, 

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020 
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0.10 : ,-v ■ 

005 

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q il.mj 

1953 60 

Souse: Branna aodM 




70 


and so are bank deposfts 

Ratio of total mutual ftmd assets to toiaibankdapafifts fci US- \ 



02 1 

1904 85 86 

Sguck Branra and FU 


will dwindle in importance and 
may eventually disappear. Cur- 
rency and bank balances with 
central banks together make 
up what economists used to 
rail fijwh “Electronic money" 
may eliminate the need for 
both types. 

Why do hanks hold balances 

Standard of value 
will be divorced 
from payment 
means and may be 
a basket of goods 

at central banks? Basically 
because such balances are 
default free. Such perfectly 
safe assets are essential when 
net settlements are made with 
other banks at the end of a 
working day, as some risks are 
being ran. But to the brave 
new world there will be “Real- 


aB transactions In assets ami. 
as mutual ftrad shares. S uch 
shares are not redeenfflbieinfo. 
dollars, sterling, marfej y«a or: 
sy-n s. They are claims' on the 
equities or bonds, asset-backed 
securities, commercial paper 
and other ^ assets In . wtodr toe . 
funds have been- Invested. 
Their value depends on the 
value of these underlying 
assets. .' :• 

•.Sixth, the result will be, it 
is- argued, a standard of value 
in which pricescan tie set and 
long-term contracts : fle n o x oi -. 
nated, divorced from the 

’ means of payment-- 'Die Iri s h 

authors suggest that values 
wifi ultimately beineasuredln’ 
tCTrhg Wf a unit account defined 
in teem of a basket ofgoods. 


efore dismissing the 
Irish picture as fend- 
fid, look at the many 



Time Gross Settlement". What 
this ugly piece of jargon means 
is that each transaction 
between banks wiE be settled 
fnstnntgTWmaTy and the credit- 
worthiness of the partner veri- 
fied simultaneously. When this 
occurs banks will avoid tying 
up assets to central hank bal- 
ances paying minimal interest 
rates. 

A parallel development at 
the retail end is “Electronic 
Funds Transfer at Point of 
Sale”. Customers will have 
debit cards which can be 
drawn down as they shop. Not 
only will these be cleaner and 
more theft-proof than notes 
and coins; there will be no 
by.imirfll reason why interest 
should not be paid on balances 
in credit 

• Fifth, and most far-reach- 
ing, when electronic money 
has gone far enough, the way 
will be open for the disappear- 
ance of money as a means of 


pointing in that direction. The. 
growing- influence of the bond 
markets 'on monetary policy 
does not 1 need to be laboured. 
Securitisation has become- a 
cliche. The buoyanc y of U K . 
domestic demand, in spite of 
large tax increases, suggests 
that expenditures are. Indeed 
becoming less constrained. by. 
income and cash flow. The 
technology for electronic bank- 
ing already exists.; Currency- 
. has become a. much smaller, 
part of the money supply; and, 
in the US, money marker: 
mutu a l hinds have shot up to 
becdmfrnearlyas huge as bank 
deposits: One central banker 
remarked to me that the pres- 
ent very low growth of -broad 
money would have been a 
pointer to recession in any peer 
vious period.' 

The contro ve rs i al part of the . 
Irish. Wwata is not the move 
towards a cashless and poficy- 
immune economy, but that the 
process will be benign. The 
authors have, for instance, 
only a couple of throwaway 
sentences on • how the 
suggested basket-based unit of 
account, will he created and 

ltraintainafl • 

The trend towards a post- 
monetary society wDl not solve 
the policy problems of the Fed- 
eral Reserve or the- Bank' of 
England while It. is only a 
trend. Indeed, the Irish authors 
warn that; during the transi- 
tion, monetary policy may only 
be able to iterate by driving 
- financial markets “against sol- 
vency constraints". Neverthe- 
less a view of the possible des- 
tination must surely help. -For 
policymakers Deed to think 
both about the problems of the 
tr ansitio n and. how to see that 
the emerging new monetary 


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LETTERS TO THE EDITOR 


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Politics, not control, behind UBS proposal 


From Mr Klaus Gottschlich and 
Mr Philipp Meier-ScherUng- 

Sir. Much has been written 
about Union Bank of Switzer- 
land’s proposal to convert its 
registered shares into bearers 
(“UBS holders urged to reject 
change", November 15). How- 
ever. the discussion to the UK 
as well as to the US misses 
some important points. 

The row between UBS and 
BK Vision, its single biggest 
shareholder, may on the sur- 
face look like a contest for con- 
trol It is in fact a struggle with 
a highly political background. 
DBS’s managers claim to have 
obligations to society which 
prevent them from maximising 
shareholder value. The fact 
that DBS’s managers are will- 
ing to sacrifice profits to order 


to meet the demands of various 
“stakeholders" may seem odd 
to Anglo-American investors 
and lend support to BE 
Vision's opposition. 

We have recently talked to 
Dr Martin Elmer, president of 
BE Vision, about his views cm 
corporate governance. We 
would point out that Dr Ebner, 
while acting as a trustee for 
his own shareholders, has also 
adopted measures to entrench 
hims elf outside the influence 
of the stock market Further- 
more, he has left no doubt that 
he wants to use his voting 
power in public companies as 
an instrument to influence 
Swiss politics. 

Bearing in mind , for exam- 
ple, his hostility towards Euro- 
pean integration of Switzer- 


land. investors cannot be sure 
BK Vision will always stand 
for shareholders’ interests. 

For institutional investors it 
may be tempting to support 
BK Vision to its bid to block 
the proposed simplification of 
DBS’s capital structure. How- 
ever, this is ijttie more than a 
problem of a shift to control. 
As long as Swiss law allows 
discrimination against foreign- 
ers, the creation of differentia] 
voting rights, the introduction 
of voting limitations, and toe 
like, there will be no market 
for corporate control worthy of 
its name. 

The real issue Is whether UK 
and US investors want to be 
excluded to the future from 
control of Swiss companies to 
which they have invested. IT 


this is the case let than vote 
for Mr Ebner. If not, they 
should start to fight for capital 
structures that allow competi- 
tion for the resources of a pub- 
lic company at all times. Mr 
Ebner will not do this for 
them, as he has nothing to 
gain from such action. 

How long do Anglo-Ameri- 
can Investors want to sit idly 
by watching Nfcstlq, Sandoz, 
Roche and others use interna- 
tional markets for corporate 
control, while at toe same time 
being denied the gains from 
mergers and takeovers to Swit- 
zerland? 

Klaus Gottschlich, 

Philipp Meier-Scherling, 

Routes des Prtalpes 44, 

CH-im Marly, 

Switzerland 


Complacency about escalation of debt 


Many failed 
by planning 

From Mr Henry Marks. 

Sir, Your leader, "Planning 
for higher prices” (November 
IQ), fan* to take into account 
the millions of people, includ- 
ing the elderly, the disabled 
and families without access to 
private transport, who are 
being disadvantaged by the 
proliferation of out-of-town 
superstores. 

The Independent small cor- 
ner shop plays a crucial role 
for these citizens and they 
would be the first to lose out 
were we as a nation to fbflow- 
lemmlng-Iike the American 
way of shopping. 

America now suffers from 
the “doughnut" effect, namely 
everything on the outskirts 
with very little, if anything, to 
the middle. 

Rather we should follow the 
Japanese example where plan- 
ning permission is not given 
for a large retail development 
without a vote being taken 
first among the local business 
community. 

It may be the case that these 
superstores are immensely effi- 
cient, clean, with a wide choice 
of goods and services to hand. 
However, once the superstores 
have kfiled off toe competition 
It may just be that quality will 
go down and prices will go up. 
Henry Marks. 
environ m ent chairman. 
Federation of Small Businesses. 
140 lower Marsh, 

Westminster Bridge, 

Condon SE1 7AE 


From Ms Am Pettifor. 

Sir, Barry Riley (Weekend 
Money, November 12/13) is a 
little too complacent about the 
indebtedness of poor countries. 
“Most of such countries,” he 
says, “have been allowed to 
renege on the bulk of their 
debts and are now at various 
stages of a third world eco- 
nomic boom." 

This is unfair and untrue. 
Because of what Keynes called 
“the magic of compound inter- 
est”, because of high real rates 
of interest, and because of 
unfavourable exchange rate 
movements, every single 
month between 1982 and 1990 - 
every month not year - the 
poor of the south paid the rich 
north $UL5bn. This is as much 
as the entire third world 
spends on health and educa- 
tion combtoed. Interest arrears 
on long-term debt owed to affi- 


From Ms Jill Jones 

Sir, I was not surprised to 
hear of Kim Fairweather's 
experiences with BA (Letters, 
November 12/13). I have been a 
regular business traveller with 
BA for many years, and I am 
also a silver tier member of the 
frequent flyer programme. I 
also have never been offered 
an upgrade. I have even had to 
pay to upgrade, when my male 
travelling companion has been 
offered a free upgrade. 

This discrimination does not 
only apply to upgrades. My 


rial creditors has risen from 
$I26m at the beginning of the 
1980s to more than JlObn 
today, and more than half of 
the debt owed by poor coun- 
tries to the Paris Club now 
consists of capitalised interest. 

Over the period 1993-1996 
poor countries are scheduled to 
pay an average of DS$41bn a 
year to their creditors - most 
of them rich OECD govern- 
ments. This is two to five times 
as much as they were able to 
pay in 1992. 

Of growing concern is the 
stock of debt owed by develop- 
ing countries to the Interna- 
tional Monetary Fund and 
World Bank, which has risen 
faster than any other type of 
debt It tripled from $9Sbn in 
1982 to $304bn in 1992. Further- 
more, there is no mechanism 
for the rescheduling or reduc- 
tion of this debt 


male colleagues frequently 
receive vouchers or bottles of 
wine when they complain 
about re-routings or bad ser- 
vice. AH I get is an obsequious 
letter, not explaining the prob- 
lem, and stating how much 
they value my custom. BA is 
like the curate's egg - good to 
parts - but for the female busi- 
ness traveller, the good parts 
are increasingly herd to find. 
Jill Jones, 

Thatched Cottage, 

WainhfU, Chirmor, 

Oxfordshire 0X9 4AB 


Translated into ability to 
pay, Africa is more debt-dis- 
tressed than any other develop- 
ing region, lbs debt has spiral- 
led from $8-4bn to 1980 to just 
under $20Qbn now. This is 
equivalent to 110 per cent of 
Africa’s entire income. 

The Debt Crisis Network, an 
alliance of 40 organisations 
working to, or linked to, devel- 
oping countries, has welcomed 
the chancellor’s recognition of 
"the unsustainable debt bur- 
den" of the poorest countries. 
We only wish that his concern 
was shared by columnists on 
your newspaper, so that your 
readers may not all be rudely 
jolted out of complacency by 
the next debt crisis. 

Ann Pettifor, 

Debt Crisis Network. 
c/o Christian Aid, 

PO Box 100 
London SEJ 7RT 


From Dr Paul MaretL 
Sir, With regard to airline 
upgrades, I do not fly very fre- 
quently. However, I am a regu- 
lar first class traveller on Brit- 
ish Rail I should be annoyed 
it when I had paid a considera- 
bly higher fare for first class 
travel standard class passen- 
gers were “upgraded” to any 
empty seats without extra pay- 
ment. 

Paul Marett, 

20 Barrington road, 

Stoneygate. 

Leicester LE2 3RA 


Some upgrades are more equal than others 




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financial times 

ifTj? ° ne Southwark Bridge. London SE1 9HL 
el: 071 ’ 8 ?3 3000 Telex: 922186 Fax: 071407 5700 

Thursday November 17 1994 


Controlling 
Euro -fraud 


Too much beef, too much grain, 
and now too much fraud. The 

5HSS2 U s ? io Jf S institutions, 
JHritaOm-ly its Common Agricul- 

MuntS« 1C f' have generated a 
mountam of corruption to stand 

£22? oth fT i P Ues of unwanted 
oommahbes. The question now is 
whethm the fraud can be curbed 
as long as those policies remain. 

This week, the Court of Audi - 
tors, the EO's financial watchdog 
accused the European Commis- 
sion of failing to take fraud seri- 
ously. Its 484-page report is the 
latest m an increasingly impas- 
sioned series from European and 
national organisations. 

Each tells the same story of 
fraudsters frolicking through 
Europe’s complex rules for dis- 
bursing funds, particularly those 
for agriculture and infrastructure. 
Large sums have been paid for 
non-existent wheat and for sub- 
standard olive oil. Cartloads of 
sugar, cattle and sheep have been 
smuggled across borders and re- 
imported to earn subsidies. 

Agriculture has proved particu- 
larly troublesome because the 
CAP allows identical products to 
be sold at very different prices or 
to earn different subsidies on 
either side of increasingly porous 
national borders. Its complexity 
also facilitates fraud within a 
country: “set-aside" requires 
detailed monitoring of each farm. 

Meanwhile, member states have 
a disincentive to uncover fraud by 
their citizens, given the embar- 
rassment that follows, and the 
risk that their governments will 
then have to pay compensation. 


There are signs that the public 
is increasingly irritated, but no 
signs of corresponding outrage in 
Brussels. Beyond doubt, member 
countries should give more 
thought to the practicalities of 
enforcing policies before passing 
them. But the Commission also 
needs to find better tools for enfor- 
cing those which already exist. 

It could apply more vigorously a 
sanction it has sometimes wielded 
in the past: withholding payments 
from member states which cannot 
demonstrate good management of 
agricultural funds, it could also 
enforce existing community regu- 
lations that require member states 
to penalise individuals who mis- 
use funds. If could, too, increase 
the potential penalties that gov- 
ernments face; at present, govern- 
ments can be forced only to pay 
back the misappropriated money. 

One more ambitious route is 
also worth considering: requiring 
countries to contribute part of the 
agricultural programme’s costs. A 
UK House of Lords committee 
reported this summer that EU 
structural programmes suffered 
less from fraud than agricultural 
schemes. It suggested that this is 
because countries must contribute 
to structural projects themselves 
and so have an incentive to man- 
age the money well 

Ideally, the EU would not be 
burdened by programmes, such as 
the CAP. that invite fraud. But 
even if they do remain, the option 
not available to the fawwiwi nn is 
to allow the scams to continue. 
Eventually that will bring all EU 
programmes into disrepute. 


Irish principles 


The fete of the Irish government 
should not affect the search for a 
peaceful settlement in Northern 
Ireland- All coalitions carry the 
seeds of disunity. The alliance 
between the traditionally national- 
ist Fianna Fail and the more 
modem-minded Labour Party is 
no exception. Always fractious, it 
seems, for now. to have ended. 

Mr Albert Reynolds, the prime 
minister, spent yesterday in a dra- 
matic and ultimately unsuccessful 
fight for bis political life. The gov- 
ernment’s fall is, however, a 
domestic matter, confined to the 
Irish republic. What is important 
beyond those borders is that the 
ceasefire holds, while the perpe- 
trators of violence are drawn into 
the democratic process. 

This should be possible whoever 
is in charge in either Britain or 
Ireland. The statement by Mr Mar- 
tin McGutoess of Sinn Fein that a 
chang e of government in Dublin 
would be “very, very unhelpful 
indeed” be rebutted. Sinn 

F&n, the public fece of the IRA, 
must rid itself of the habit of hint- 
ing that it may not be possible to 
maintain the ceasefire if this or 
that condition is not met. Such 
threats are unacceptable if its pro- 
testations of peaceful intent are to 
be taken seriously. 

That- said, no new constitutional 
set tlemen t for the island of Ireland 
is likely to last without the back- 
ing of Fianna Fail, either as the 
I parting- partner in a coalition or in 
scene other role, even if that has 
to be exercised from the opposi- 
tion benches. Mr Reynolds, the 
party’s leader, has acknowledged 


that the claim in the Irish consti- 
tution to the six British provinces 
must be rephrased to allow for 
self-determination by the people of 
Ulster. All mainstream Irish par- 
ties accept this, but an amend- 
ment drafted or backed by Fianna 
Fail would be much surer to pass. 
than one pmanating- solely from a 
government beaded by the more 
anti-republican party. Fine Gael 

There lies the rub. Too republi- 
can a flavour to any proposed 
amendment could lead to the 
rejection of any parallel constitu- 
tional package put before the 
northern electorate- Too unionist 
a flavour, and Irish nationalists 
might say No. It should be remem- 
bered that the Downing Street dec- 
laration, issued jointly by Mr 
Reynolds and Mr John Major last 
December, commits both govern- 
ments to the principle that the 
right of self-determination must 
be exercised separately by the 
electorates of north and south. 

If the IRA understands that this 
leaves it nothing to gain by 
restarting its murderous campaign 
the decimation will prevail, what- 
ever may happen to its authors. 
Even when a framework constitu- 
tional agreement has been pub- 
lished, the road leading to a gen- 
eral acceptance of its terms, or 
something like them, is likely to 
be long. Negotiations in Ireland 
are rarely speedy. There has never 
been, nor could or should there be. 
a guarantee that Mr Reynolds or, 
for that matter, Mr Major would 
remain in office long enough to 
see the process through to its 
hoped-for conclusion. 


Safety first 


ohn Major is quite right to 
! the passage of the European 
nunity (Finance) hill a mat- 
kf confidence. He could not 
in prime minister if he did 
ifrig less. His undertaking to 
lbute to the enlarged Euro- 
budget was given with the 
let’s support. As Mr Major 
in the Commons yesterday, 
! is no room for compromise, 
ras, of course, ad dressi ng the 
s within his own party, 
bour must now decide 
her its support for the Euro- 
Union overrides the tempta- 
to vote opportunistically In 
iope of staging a coup. The 
[hood that such a piece of 
re might succeed is small. 
Conservative Eurosceptics 
willing to topple their own 
lustration. The handful that 
t be so minded is outnum- 
] by Ulster Unionists who 
ort the Tories. The Liberal 
acrats might not vote with 
nr . in. sum, the balance of 
Ehvoors the prime minister. 
chwii*r risk assessment has 
ted the government’s legisla- 
programme for the coming 
ml Here too the watchword 
ieen caution: there is dearly 
omach for the prospect of fee- 
backbench rebels down on 
active matters such as the 
itisation of the post office, 
inavoidable bravado over the 
oean finance bill apart, the 
> is “safety first”, 
is may be no bad thing. The 
ns of a parHament are best 
id on grounds of quality. The 
trty of new bills should be 
low. The speech delivered by 


the Queen at the opening of Par- 
liament yesterday contained a 
gmafiftr package of proposals than 
has become customary since 1979. 
Few if any are radical or dramatic. 
In the debate following the speech 
the leader of the opposition found 
little to quarrel with in any of the 
prime minister's specific propos- 
als. This revving down of the pace 
of law-making may be derided in 
Westminster as “consolidation” 
but beyond the small circle of 
everyday politicking there may be 
a mare positive response. 

As the chancellor of the exche- 
quer is fond of saying, what the 
public wants is a period of good 
government There is no evident 
demand for ever-increasing 
amounts of hasty and therefore 
botched legislation. It will be pos- 
sible to assess specific bills when 
they are published, but at first 
reading a list that includes pen- 
sions reform, a tidying-up of the 
health service bureaucracy, mini- 
privatisations of the Crown 
Agents and the commercial parts 
of the Atomic Energy Authority 
and a disability rights law is wel- 
come - although the latter may be 
too watered-down to be useful. 

A period of low-key government 
might benefit the Tories. Unem- 
ployment has fallen lor the 10 th 
consecutive month. Inflation is 
steady, around the mid-point of 
the 04 per emit target range. A 
fester than advertised reduction in 
public sector borrowing seems 
likely, offering a potential justifi- 
cation for tax cats in the 1995 Bud- 
get Mr Major’s fortunes may yet 
improve, if only accidents will 
stop happening to his government. 


I n a deserted Tokyo, at mid- 
night, a huddle of people 
gathered last week for an out- 
of-hours announcement. Mr 
Yosuo Matsushita, a former 
bureaucrat and commercial banker, 
had been selected as Japan's next 
central bank governor. 

The late-night timing could 
hardly have heightened the interest 
in the appointment: few are the Jap- 
anese businessmen and financiers 
who have not hoped for a softening 
in monetary policy with the ending 
of the dramatic tenure of outgoing 
governor Mr Yasushl Mieno. 

The current restructuring of the 
Japanese economy owes much to 
Mr Mieno's vision, and the slowness 
of the recovery something to his 
discipline- He moved to curb the 
unbridled growth of the 1980s. and 
has since held to a policy designed 
to squeeze Japan's corporate sector. 

Mr Matsushita's task will be to 
steer the economy through the fal- 
lout from this process: refining the 
balancing after the overhaul. Such 
an agenda is unlikely to prompt a 
change of course on the scale wit- 
nessed by Mr Mieno. but it may 
prove as controversial. 

When Mr Mieno took office five 
years ago Japan's wild financial 
party of the late 1980s was at its 
high point Financial liberalisation, 
rapid economic growth and easy 
money had given birth to a bubble 
economy. 

What began as an explosion in 
land prices, in cramped conditions 
of tight supply and ballooning 
demand, had quickly spread to 
embrace equities, bonds, and even 
golf-club memberships. By the time 
of Mr Mieno's accession, land prices 
had risen fivefold in a little over 
three years, and the stock market 
had tripled in four. 

Appalled by the lack of financ ial 
control. Mr Mieno, something of an 
ascetic said never to have bought a 
share in his life, acted quickly to 
burst the bubble. Within three 
weeks he had cut financial sector 
liquidity and over the next 15 
months he raised the discount rate 
five times, taking it from 2.5 to 6 per 
cent by the end of 1990. 

The recession that followed 
proved the most serious in Japan 
since the second world war. Share 
prices collapsed by more than 50 
per cent in four years, and land 
prices fell by up to TO per cent 
As domestic d eman d fell, corpo- 
rate Japan was hit by overcapacity. 
The rise in the yen, prompted by 
rising interest rates, the large and 
rising current account surplus and 
a slowdown in Japanese overseas 
investment, led to declining 
demand in export markets. The 
underlying inefficiency of much of 
Japanese industry was exposed. 

The central bank responded to 
the recession with increasingly 
urgent cuts in interest rates, taking 
the official discount rate to a record 


Japanese business is hoping for monetary relaxation 
under a new central bank governor, says Gerard Baker 

A tough act 
to follow 


low of 1.75 per cent last autumn 

In the year since, the first signs of 
sluggish recovery have emerged, 
with the economy expected to 
expand by about 1 per cent this 
year, accelerating slowly thereafter. 

But tbe weakness of the recovery 
presents the new governor with a 
challenge as difficult as the one 
that faced his predecessor he must 
find the right mix of monetary' pol- 
icy to meet an exacting set of 
demands. In addition to the usual 
need to sustain non-inflationary 
growth, policy must deal with the 
continuing financial consequences 
of the collapse of the bubble - cor- 
porate indebtedness and the bank- 
ing system’s bad loans. It must also 
address the longer-term transforma- 
tion of the economy into an effi- 
cient deregulated market system. 

So far under Mr Mieno, the bank's 
approach has been a surprising one 
- a gentle tightening or monetary 
conditions. Since July, overnight 
call rates have been allowed to drift 
upwards - from 2 per cent in July 
to 2.3 per cent last week. 

“Since the summer the bank has 
moved gradually to tighten liquid- 
ity, which has pushed up short-term 
interest rates." says Mr Richard 
Werner, chief economist at Jardine 
Fleming in Tokyo. 

Many economists are puzzled by 
the bank's tactics. If the slow 
upturn bad been accompanied by 
the merest hint of infla tion, mone- 
tary tightening would have been 
comprehensible. In feet the opposite 
has occurred. The recovery is so 
weak that it has failed to counteract 
the prevailing deflationary forces at 
work. Wholesale prices are falling 
at a rate of 2 per cent a year and 
consumer prices are stable. 

So the bank’s tightening, though 
gentle for the moment, seems 
unnecessary. Tbe risks associated 
with it also appear to be unbal- 
anced. There is an infinitesimal risk 
of inflation if policy is relaxed, but 
a significant risk of renewed eco- 
nomic slowdown if policy is tight- 
ened. Confronted with this choice 
the bank has elected to tighten. 

Mr Toshio Koyano, economist at 
DKB Research in Tokyo, says: “The 
Bod’s move in the past few months 
has been premature - restr aining 
monetary growth now carries a risk 
of endangering the recovery." 


Japan’s monetary policy: a softening ahead? 


Leading 11 J apan a w banks' p ronto 
(ten) 

3.000 — 

Year-end Match 31 

2,500 



1909 90 91 92 93 94 
GDP Annua) percentage change 



1985 94 

inflation Annual percentage change at CPI 


.'t-.V 



Yasuahl Mlano 
Outgoing central bank governor 



Most central bankers have a 
weakness for what Lord Healey, 
chancellor in the last British 
Labour government, called sado-mo- 
netarism. But in the Bank of 
Japan’s case, there seems to be a 
more rational explanation for the 
strategy, based on Mr Mieno’s 
increasingly bullish view of eco- 
nomic prospects. The bank’s official 
judgment is that the economy is “in 
the early stages of recovery”, a 
much less cautious view than one 
espoused by other public bodies. 

Believing this, the bank’s behav- 
iour has differed in this cycle from 
its policies in previous cycles. In the 
last two recessions of the 1380s, 
interest rates were still allowed to 
fell even after the output gap - the 
difference between actual output 
and potential output - had started 


to narrow. Interest rates began to 
ease upwards only when inflation- 
ary pressures had clearly returned 
to the economy. 

This time, tbe bank is tying mon- 
etary policy to its perception of the 
performance of the real economy, 
rather than price levels. It has acted 
to raise interest rates as soon as the 
output gap has started to close - 
even though inflation is failing . 

The bank “has placed overwhelm- 
ing emphasis on tbe pace of eco- 
nomic recovery - not inflation - as 
the key policy determinant.” 
repining Mr Feldman, ririrf econo- 
mist at Salomon Brothers. 

The reason appears to be that the 
bank is determined to use monetary 
policy to promote the restructuring 
of the economy. Tbe long recession 
and the rise in the value of the yen 


have forced companies to begin to 
reduce the overcapacity produced 
during the bubble. According to Mr 
James Vestal, chief economist at 
Barclays de Zoete Wedd in Tokyo: 
“By allowing the economy to work 
through the excesses of the second 
half of the 1980s on its own, the 
hank will ensure that the momen- 
tum for deregulation, restructuring 
and rhang w remains intact” 

Mr Matsushita may wish to follow 
the policy of squeezing the corpo- 
rate sector. But as former ch a i rman 
of Sakura, a bank with one of the 
largest portfolios of bad loans, he 
wDl be more aware than most of the 
significant risk of a crisis in tbe 
financial sector. 

Japanese banks have not moved 
quickly to rid themselves of the 
problem loans collected to the bub- 
ble years. Tbe leading banks have 
made provisions of just Y3,000bn 
out of as much as YSO.OOObn. Years 
of sluggish economic growth, how- 
ever cathartic for manufacturers, 
would be difficult for the banks, for 
which it means weak demand, con- 
tinuing asset problems and poor 
profitability. 

W orse, the present 
monetary tighten- 
ing is potentially 
ruinous for them. 
Already the 
upward drift in short-term rates has 
pushed up hanks ' funding costs. As 
interest rates rise, banks’ interest 
costs rise more quickly than their 
income, because of the structure of 
their assets and liabilities. That is 
already putting pressure on mar- 
gins and will limit further their 
scope to dispose of bad debts. 

Financial markets are speculating 
that Mr Matsushita, with his direct 
experience of the banking sector, 
might adopt an easier monetary pol- 
icy to assist the banks. 

But more likely, tbe other, longer 
part of his experience - as a 
bureaucrat in the finmw* ministry 
- will incline him towards a middle 
course. Macroeconomic policy is 
likely to be geared towards 
restrained growth to maintain the 
pressure on corporate Japan, while 
hanks will be nursed back to health 
by micro-management. 

“Tbe focus will be on case-by-case 
problem solving of particular banks’ 
balance sheet problems,” says Mr 
Jesper Roll , of JP Morgan in Tokyo. 
“The governor will act as a 
hands-on manager of these issues. 
Interest rate policy win not change 
for the time being.” 

The implications of that strategy 
are far-reaching. Policy will not be 
dictated by the fear of a banking 
collapse. Instead, some hanks may 
be allowed to foil if they do not 
represent a risk to the banking sys- 
tem. Mr Matsushita will need to 
draw on all the credit that his years 
to the hanking sector have given 
him if he is to achieve that. 


Europe must show will to compete 


For an employee or 
manager "competi- 
tiveness" - like 
“restructuring” - 
can send nasty shiv- 
ers down the spine. 
If you are neither, 
however, it is a sub- 
ject that can make 
your eyes glaze over with boredom. 

Since most European politicians 
have not worked to - or managed - 
companies, this may explain why 
Europe’s competitiveness has 
steadily declined over the past 20 
years, with little being done about 
it in feet quite the opposite: laws 
have been introduced - and con- 
tinue to be introduced - whose 
effect is to erode Europe’s competi- 
tiveness even further. 

However, there are now some 
encouraging signs of change. The 
economic recession of the past three 
years has forced companies, 
national governments and the Euro- 
pean Commission to look for the 
causes of decline and to prescribe 
remedies. As a result, “competitive- 
ness" is high on the political as well 
as tbe business agenda. 

Even so, there remain a number 


of causes for concern: 

• As we emerge from recession, 
the political will to carry out the 
fundamental structural reforms 
necessary to restore competitive- 
ness may evaporate. 

• With the notable exception of 
Unice (Union of Industrial and 
Employers' Confederations of 
Europe), nobody is talking about 
the size, the cost and the burden of 
the state to Europe’s economies. 
Until that problem is recognised 
and tackled, we shall continue to 
suffer a heavy disadvantage vis-a- 
vis our main industrialised competi- 
tors. 

• Europe's most ambitious strate- 
gic plan in favour of competitive- 
ness - a genuine stogie market - is 
on the back burner, and, according 
to reports, no heavyweight commis- 
sioner volunteered to assume 
responsibility for making it work. 

• Tbe essential corollary of com- 
petitiveness - a strict competition 
policy - is being applied without 
the necessary rigour and determina- 
tion. State aids continue to be 
authorised too easily by the Com- 
mission, to many cases to the detri- 
ment of just those companies that 


have undergone the painful process 
of restructuring. 

• The legislative programmes of 
the German presidency and of the 
European Commission still include 
measures which, collectively, can 
do grave harm to European compet- 
itiveness - such as proposals for 
directives on a CO, and energy tax. 

The corollary of 
competitiveness - 
competition policy - 
is being applied 
without rigour 

on withholding taxes on savings, on 
parental leave, on atypical work 
contracts, on the reversal of the 
burden of proof in discrimination 
cases, on the posting of workers. 

A further cause for concern are 
tbe measures missing from the leg- 
islative programme. For example, 
proposed directives designed to 
eliminate double taxation to the sto- 
gie market or introduce loss con- 
solidation across national frontiers 
are stuck to the European Council 


and have made no progress for 
more than three years. Without 
these, the stogie market can only be 
a shadow of itseit just as it will be 
until we have a workable European 
company statute to simplify admin- 
istration and accounting practices 
which currently must conform to 12 
separate regimes. 

But if there is uncertainty about 
whether the Commission, the Coun- 
cil and national governments have 
it to them to reverse present trends, 
the talk, at least, is encouraging. 
The Defers white paper of Decem- 
ber 1993 on growth, competitiveness 
and employment contained many 
parallels with Unice’s own well-re- 
ceived studies of European competi- 
tiveness presented earlier this year 
to the Commission and to the EU 
summits to Brussels and Corfu. The 
Defers paper recognised the impor- 
tance of competitiveness as the 
essential precondition for economic 
growth and job creation. 

In September the Directorate for 
Industrial Policy, under Commis- 
sioner Martin Bangemann, pub- 
lished an important paper on indus- 
trial competitiveness which 
unequivocally states that it will not 


be possible to restore growth and 
consolidate economic revival to 
Europe except through compet- 
itive. efficient and innovatory 
industry. 

The German presidency of the 
European Union has now appointed 
the Molitor Committee to identity 
what laws and regulations at both 
national and EU level should be 
simplified or abolished to the inter- 
ests of efficiency and competitive- 
ness. 

Firm action is still lacking, how- 
ever. Meanwhile, capital is highly 
mobile. Investors will choose mar- 
kets where prospects are best. 

Yet it is well within our power to 
restore European competitiveness. 
As President Woodrow Wilson said 
to 1912: “While competition cannot 
be created by statutory enactment, 
it can, in large measure, be revived 
by changing the laws and forbid- 
ding the practices that killed it” 

Zygmunt Tyszkiewicz 


The author is secretary general of 
Voice 



PERSONAL 

VIEW 


Observer 


Cold turkey 
for Tories 

■ Sad day tomorrow for Glaxo’s 
shareholders as Sir Paul Girolami 
finally steps down from the helm of 
the UK drugs giant Tory treasurer 
Lord Hambro could also be forgiven 
for feeling a mite upset since 
Girolami 's going will almost 
certainly leave a gaping hole in the 
Tories' bank account 

Under Sir Paul, Glaxo has been a 
substantial donor to tbe 
Conservatives, giving £550.000 since 
1985 when he became chairman. He 
justified the largesse as being in the 
best interests of shareholders. But 
Sir Colin Corness, the part-time 
Bank of England director who will 
take the Glaxo chair, begs to differ. 

An outspoken critic of corporate 
donations, he has not yet had a 
chance to discuss the issue with 
Glaxo’s other directors. He doesn't 
take over till May. But the Tories 
are bracing themselves for the 
worst unless Lord Howe, a Glaxo 
new boy, can save the day. 


Stonewalled 

■ Talking of Lord Howe, the former 
chancellor of the exchequer posed a 
pertinent question at yesterday’s 
Sunday Times/KPMG Budget 
luncheon at the Mansion House. 
When was the last time anyone 
engraved an interest rate to stone? 
Howe's observant eye had spotted 


a block of apartments near 
London’s Camberwell Road called 
"The Four Per Cent Industrial 
Dwellings Association". He could 
not miss it. he said, because the 
rate was engraved on the feee of the 
building - erected less than 90 
years ago. The 4 per cent was meant 
to impress investors seeking high 
yields - rather than borrowers 
looking for cheap mortgages. 

Bui Howe did not sound at all 
optimistic about the future 
employment prospects for 
stonemasons. Surely the Bank of 
England could do with a bit or 
fettling up in the interim? 


Prime timing 

■ Not a peep so far from Canada’s 
Big Five banks. When US banks lift 
their prime lending rates, as they 
have this week, their Canadian 
counterparts aren’t usually 
backward to coming forward. 

Bank economists can find any 
number of technical reasons, mostly 
to do with interest-rate spreads, 
why the Canadian banks won't be 
following suit just yet. 

But Observer’s not fooled. The 
banks' year ended on October 31 
and their reporting season begins 
next Tuesday. Several are expected 
to announce record profits. Royal 
Bank of Canada, for instance, is set 
to become the first Canadian bank 
to earn more than C$lbn. 

Having long struggled to 
overcome a reputation as corporate 
fat cats, the last thing the banks 



•It's a fraud report mountain’ 


want is to be seen, through a rise to 
the cost of I gniting , to be upsetting 
the small businessmen they are 
keen to woo. 

But . . .once the results season is 
over, the profit motive is sure to 
come back into its own. 


Hopping mad 

■ An appealing feature of Japanese 
life looks like biting the dust 
Because of an increase in under-age 
boozing, the government has 
politely suggested to brewers that 
they stop selling beer from their 
140,000 street vending machines. 
Nobody lightly ignores 
government suggestions - even 


politely expressed ones. 

The five leading brewers will 
decide what to do soon. They will 
probably meekly bow heads and 
shuffle offstage - after all, the 
machines represent a mere 7 per 
cent of sales. But over-age drinkers 
will mourn tbe disappearance of 
these oases. Not only is vending 
machine beer always chilled, 
however hot the weather, it also 
comes in a range of sizes, from a 
one-gulp can up to two litres, 
enough to slake the biggest thirst 


Free ride 

■ Good news for MPs rushing to 
list their outside interests for fear of 
being caught up in the row over 
sleaze, ft seems there is no need to 
register those free trips to Paris on 
the newly-opened Eurostar tunnel 
rail link. Apparently since every MP 
was offered the trip it does not 
count as a declarable interest The 
moral is clear. It is perfectly 
acceptable to bribe our 
representatives at Westminster as 
long we bribe them aH 


Mark of faith 

■ An extreme case of coals to 
Newcastle? The Pope was yesterday 
presented with copies of the gospels 
by Walter Veltroni, tire trendy 
Ita lian ex-communist and now 
editor of what used to be the party’s 
daily organ, LUmta. The slim 
volumes are bang distributed with 


the paper both as a promotional 
exercise and to underline just how 
port-communist Italy’s left has 
become. Veltroni, now a leading 
member of the former communist 
Party of the Democratic Left, is the 
first PDS member to be received by 
the Pope. No Pope ever agreed to 
meet members of the Italian 
Communist Party. The gospels 
really do bring good news. 


Stinkeroo 

■ AXA, the French-based 
insurance group, wants to expand 
internationally but may have a 
problem doing so. The name was 
originally chosen partly so it would 
be at the top of any alphabetical list 
of its sector and partly because it 
was short symmetrical and easy to 
turn into a logo. 

But in Japan, where the company 
started operations this summer, 
AXA apparently means “It stinks”. 
Memorable, anyway. 


Foolgood factor 

■ Camelot, the operator of the UK’s 
National Lottery, says it’s 
"absolutely delighted” with ticket 
sales of about £7m a day. How to 
contain the euphoria over the next 
seven years as it moves towards its 
£32bn target? 

Easy. To reach that figure 
Camelot will need to average not 
£7m but a asm in sales every day 
of the year. 


r 

s 




Bryant 

Group 

Invest in Quality 


NOMEs-mopames-coNStmicTioN 
021 711 1712 


FINANCIAL TIMES 

Thursday November 17 1994 


&tAix>ffadCU« mES. - - 
iNTERPMJCB^UWtraP 
43 London Wall Lantton K2M 5TBT«d071 3740891 


L.l -\Dl\G MAKKET MAKTR 
L'SLQLTULS 


Matter of *eSenn»»and Vutm Aiawritjr 
and the Loocbn Sio*W*Vi 



Marine rights row leads to fear of war between Nato neighbours 

US cruiser tracks Greek 
and Turkish contingents 


GREECE.'^. ! - : -■ - V.': S' 


By Kerin Hope n Athens and 
John Barham in Ankara 

A US Navy cruiser was yesterday 
monitoring Greek and Turkish 
naval activities in the Aegean, 
where fears of war have been 
triggered by the start of a new 
international law. 

The United Nations Convention 
on the Law of the Sea has been 
hailed in Athens as a vindication 
of its long-standing argument 
that it has the right to extend its 
territorial waters from 6 miles to 
12 . 

Turkey has said that any such 
move by Athens would turn the 
Aegean into a “Greek lake” and 
would be resisted by force. 
Greece says it has no plans to 
extend its territorial waters, but 
it wQl not renounce the right to 
do so. An opinion poll published 
this week showed that 79 per 
cent of Turks would support war 
if Greece declared a 12-mile limit 

The quarrel dates from an off- 
shore oil strike west of the Greek 
i sland of Thasos more than 20 


years ago. The Athens govern- 
meat rejects Turkish proposals 
for joint oil exploration in the 


The Cape St George, a US 
cruiser equipped with the latest 
electronic surveillance devices, 
was yesterday tracking Turkish 
warships and Greek aircraft 
across the Aegean. 

President Bill Clinton has writ- 
ten to tbe leaders of both coun- 
tries urging them to show 
restraint and avoid the risk of 
clashes. 

Mr Mmutaz Soysal. the Turkish 
foreign minister, said Ankara has 
assured Ur Clinton that it had 
taken all possible measures to 
avoid a dash. Ur Soysal met Mr 
Karolos Papouhs, his Greek coun- 
terpart, in The Hague this week, 
but there was little sign of a 
change in positions. 

Turkey wants across-the-board 
negotiations on all the issues 
which it says are in dispute. 
Greece says the only issue that 
needs discussing is that of seabed 
mineral rights, which it wants 


settled by international arbitra- 
tion. 

Relations between Athens and 
Ankara have also been worsened 
by the war in former Yugoslavia, 
where Turkey supports 
the Bosnian Moslems while 
Greece has traditional links with 
the Serbs. 

Turkey was the only European 
member of Nato to support the 
US withdrawal from the arms 
embargo against Bosnia. 
Recently, Turkey gave a new 
thrust to tbe old antagonisms by 
accusing Greece of harbouring 
guerrillas from the separatist 
Kurdistan Workers party (PKK) 
fighting in eastern Turkey. 

The US Navy, in this year’s 
annual intelligence report, 
described the Greek-Turkish. 
standoff as one of the “most wor- 
risome situations developing in 
Europe and the most dangerous 
to Nato as an institution". 

The report says tension in the 
Aegean has also been stoked by 
supplies to both countries of new 
and secondhand ships from other 


1&- ‘.-W ~ 

Swrx,..iiT;-r TURKEY 

a***-'- v* •* 

<i*. -.^.v 
~*=w. 



Nato countries. Diplomats said 
they were alarmed that a hot-line 
between the two countries, set up 
alter they came close to war in 
1967, bad ceased to function. 

Turkey is conducting its man- 
oeuvres this week in interna- 
tional waters in the northern 
Aegean. About 100 miles to the 
south, the Greek navy is in 
charge of a Nato exercise held 
every year involving ships and 
aircraft from tbe US, France, 
Italy, Spain and the UK. 


Major threatens 
Tory rebels with 
poll over EU levy 


By Phffip Stephens In London 

Mr John Major acted swiftly 
yesterday to quell a revolt among 
Euro-sceptics in his own Conser- 
vative party by staking his 
administration's future on a bill 
allowing higher UK contributions 
to the European Union. 

The prime minister startled 
MFs at the state opening of par- 
liament by warning that legisla- 
tion to implement an agreement 
struck two years ago at the EU*s 
Edinburgh summit was “inescap- 
ably a matter of confidence”. 

The advance warning that a 
particular measure in the legisla- 
tive programme was sacrosanct 
is unprecedented in recent times. 
It leaves Mr Major with no option 
but to call a general election if it 
is defeated or substantially 
amended. 

The government will publish 
the biH within the next few days 
and Mr Kenneth Clarke, the 
chancellor of the exchequer, 
wants the crucial Commons sec- 
ond reading debate to be held 
before bis November 29 Budget 
It might complete all its 
parliamentary stages before 
Christmas. 

The signs last night were that 
most of those who had threat- 
ened to oppose any increase in 
payments to Brussels would now 
fall into step. But a group of 
about half a dozen refused to 
back down publicly. 

The decision to pre-empt a 
revolt, which overshadowed the 
announcement in the Queen's 


Speech of a low-key legislative 
programme for the next year, 
was denounced by opposition 
parties as a panic move to dis- 
guise Mr Major's weakness. 

The Speech included plans for 
nearly 20 bills, ranging from 
reform of pensions law to aboli- 
tion of regional health authori- 
ties and the construction of a 
high-speed rail link to the Chan- 
nel tunnel. 

Mr Tony Blair, leader of the 
opposition Labour party, said the 
government had run out of 
steam. He added: “It has surely 
come to something when a gov- 
ernment can only secure the pas- 
sage of its own legislative pro- 
gramme by threatening its own 
demise.” 

Mr Blair and Mr Paddy Ash- 
down, the Liberal Democrat 
leader, support the principle of 
an agreement which would 
increase Britain's contributions 
to Brussels by an estimated 
£250m a year by 1999. 

But Labour will seek to amend 
the legislation to reflect its oppo- 
sition to the Britain’s social chap- 
ter opt-opt Mr Blair indicated 
also that if defeat for the legisla- 
tion meant a general election. 
Labour might well vote against it 
without damaging its pro-Euro- 
pean credentials, 

Mr Major insisted: “There is no 
room for compromise on this 
bin.” 

Major makes Europe an Issue 
of confidence, Page II 
Editorial Comment, Page 21 


Ukraine approves 
treaty to abandon 
nuclear weapons 


By Matthew K a min sk i In Kiev 

The parliament of Ukraine, the 
world's third-largest nuclear 
power, yesterday ratified tbe 
nuclear Non-Proliferation treaty 
by a wide margin. The vote 
dosed a chapter in the country’s 
hesitant progress towards aban- 
doning nuclear weapons inher- 
ited from the Soviet Union. 

The Long-awaited decision 
looks set to improve Ukraine’s 
often-strained relations with the 
west and Russia. It is also a sig- 
nificant victory for President 
Leonid Kuchma a week before 
his summit with US president 
Bill Clinton. 

Ukraine will formally accede to 
the treaty as a non-nuclear state 
once it receives assurances from 
the US, the UK, France and Rus- 
sia about its territorial integrity. 
The four nations will meet at 
next month’s summit of the Con- 
ference ma Security and Coopera- 
tion in Europe in Budapest 

Ukraine's ratification is also 
crucial because Moscow and 
Washington have been delaying 


carrying out the first and second 
strategic arms reduction treaties 
until Kiev approved the NPT. 

Ukraine gave up its nuclear 
arsenal in January under an 
agreement signed with Russia 
and the US in exchange for about 
$lbn in nuclear fuel supplies and 
disarmament assistance. Parlia- 
ment ratified the Start-2 treaty in 
February and the NPT was the 
last step. 

The conservative parliament 
spent three years hedging on rati- 
fying NPT. and many nationalists 
and communists still view 
nuclear weapons as Ukraine's 
last bargaining chip. 

But Mr Kuchma told parlia- 
ment yesterday that, as a former 
director of a missiles factory, he 
found the argument for keeping a 
nuclear deterrent an illusion 
cherished by “false patriots". 

Although Ukraine inherited 176 
intercontinental missiles and 41 
strategic bombers, Moscow con- 
trolled the launch codes and Kiev 
lacked both the technology and 
financing to properly store the 
weapons or gain control- 


Clash over airline state aid 


Continued from Page 1 


only “under exceptional drcnm- 
stances, unforeseeable and exter- 
nal to the company”. 

A Brussels official said the 
new version was in Hue with the 
“rate time, last time** policy on 


state aid that governs efforts In 
Brussels to liberalise the airline 
industry by 1997. 

However, Mr Oreja said assis- 
tance could be justified to 
restore an airline to financial 
viability after “circumstances 
beyond the company’s control”. 


FT WEATHER GUIDE 


Europe today 

Conditions wffl remain unsettled in western 
Europe. There will be rain In the morning over 
the Benelux and northern France, and showers 
wli linger in the north. Temperatures WU be 
sBghtfy higher than the average for the time of 
year. 

Heavy ran wli fall In northern Ireland, Scotland 
end southern Scandinavia. Span wiB have 
sunny spells, but cloud and rein w3J affect the 
north-western coastline. - 
South-eastern Europe will be unseasonably 
cod with temperatures below 10C in Romania. 
There wfll be heavy rain and founder showers 
over southern Italy and the eastern 
Mediterranean. Conditions In north-eastern 
Europe wfll be chill and cloudy, with showers in 
the north. Concfitions in Russia wW become 
milder. 

Five-day forecast 

Wet and windy conditions wfll spread from the 
British Isles to the Benelux and northern France 
on Friday. 

On Saturday, rain will tell in Germany and 
southern Scandinavia. Temperatures win 
nevertheless be higher than the seasonal 
average. Rain and thunder showers over the 
eastern Mediterranean will progress eastwards 
during the weekend. 

TODAY'S TEMPERATURES 



Situation af T2 <3MT. Twrpanhava madman (or day. Forecasts by Mateo Consult of tea Netherlands 



Maximum 

g<fng 

fair 

8 

Caracas 

shower 

33 

Faro 

sun 

21 

Mated 


Cates 

Belfast 

rate 

9 

Cardffl 

shower 

11 

Frankfurt 

shower 

10 

Majorca 

Abo Dhabi 

fair 

31 

Belgrade 

Ur 

10 

Casablanca 

sun 

20 

Geneva 

doudy 

11 

Malta 

Accra 

fair 

82 

Berlin 

shower 

9 

Chicago 

fair 

10 

GJbraUsr 

sun 

19 

Manchester 

Algiers 

fair 

21 

Bamuda 

cloudy 

24 

Cologne 

shower 

11 

Gfasgow 

rain 

9 

Marfa 


shower 

11 

Bogota 

shower 

21 

Dakar 

site 

30 

Hamburg 

shower 

10 

Mefcoume 

Athens 

fair 

18 

Bombay 

doudy 

34 

Daflas 

fair 

28 

HetsteH 

doudy 

•1 

Mexico City 

Atlanta 

an 

18 

Brussels 

shower 

10 

DeH - 

sun 

28 

Hong Kong 

doudy 

27 

Miami 

B. Aires 

fair 

24 

Budapest 

doudy 

8 

Dubai 

fair 

32 

Honolulu 

fair 

31 

MBan 

BJian 

doudy. 

10 

C.hagen 

rain 

7 

DuMn 

shower 

11 

Istanbul 

fair 

14 

Montreal 

Bangkok 

fair 

38 

Cairo 

fat 

23 

Dubrovnik 

fair 

17 

Jakarta 

doudy 

32 

Moscow 

Barcelona 

fair 

19 

Capa Town 

sui 

23 

Edrtxrgh 

rate 

9 

Jersey 

doudy 

13 

Munich 


tun 

sui 

cloudy 

shower 

fak 

cloudy 

lab 

Ur 

sun 


No global airline has a younger fleet. 


(R) Lufthansa 


Kuwait 
L 

Las I 
Lima 
Lisbon 
London 
UKboug 
Lyon 
Madeira 


sui 
. Mr 
shower 
fab 
doudy 
son 
doudy 
shower 
doudy 
tab 


27 Naples 
IB Nassau 
24 New York 
22 Woe 
18 Nicosia 
11 Oslo 
8 Paris 
13 Path 
22 Prague 


rate 

ttuid 

ttvjnd 

fair 

doudy 

tab 

tiund 

tear 

fair 

fair 

shower 


16 Rangoon 

20 Reykjavik 

21 Rio 

11 Rome 
31 S. Frisco 
21 SeoU 

20 Singapore 
28 Stockholm 
13 Strasbourg 
10 9yd nay 
2 Tangier 
10 Tel Aviv 
24 Tokyo 
18 Toronto 
26 Vancouver 

12 Venice 
18 Menu 
18 Warsaw 

2 Washington 
12 Wellington 
30 Winnipeg 
9 Zufch 


fair 

doudy 

doudy 

shower 

doudy 


tilted 

doudy 

S how e r 

rate 

sun 

Shower 

doudy 

sun 

fat 

fair 

doudy 

shower 

doudy 

doidy 

snow 

shower 


34 

1 

29 
18 
12 
15 

30 
1 

11 

21 

20 

21 

18 

14 

6 

13 
11 
a 

14 

15 
2 

10 


THE LEX COLUMN 

Laughing gas 


Last year British Gas was fighting 
tooth and nail to preserve its domestic 
monopoly; yesterday it welcomed the 
promise in the Queen’s speech to abol- 
ish that monopoly. The main reason 
for the change of heart is that Gas has 
convinced ministers to create a level 
playing field when the market is 
opened to competition. A demonstra- 
tion of the new approach will come 
today when Gas announces price rises 
for late-paying customers but dis- 
counts for prompt payers. Without 
such differential pricing, rivals would 
have been able to concentrate on prof- 
itable prompt payers, leaving Gas with 
lossmaking late payers. 

Of course, when the monopoly goes. 
Gas’s mar ket share will fait, hut the 
decline is unlikely to be rapid. If the 
development of competition in the 
telecoms market is anything to go by, 
a largish discount will be needed to 
convince customers to switch. But 
given that all operators will face 
roughly tiie same charges for whole- 
sale gas and transportation - which 
account for the bulk of total costs - 
rivals will struggle to undercut Gas. 
The new competition will also give 
Gas an added incentive to cut costs. 
Yesterday’s better than expected third- 
quarter results show the restructuring 
programme is already containing 
costs; in coming quarters they should 
start to fall. 

More worrying for investors is next 
year’s review of Gas’s transportation 
price cap. The risk is that the regime 
will be tightened But there are oppor- 
tunities too. The regulator is consider- 
ing replacing the price cap with a 
mechanism for sharing excess profits 
with customers. That might lead to 
sharper falls in bills. But, if Gas also 
improved its performance, the quid 
pro quo would be higher profits. 

Soft commissions 

Soft commission is something of a 
misnomer. Commissions are no rmally 
paid by the investor to the stockbro- 
ker. not the other way round. The 
practice of paying institutions “in 
kind" in return for a commitment to 
deal looks suspect, even if it is not 
illegal or necessarily unethical 

The obvious question is who bene- 
fits from the strange practice. Fund 
managers dearly do, as the benefits 
they receive reduce the costs of run- 
ning an inves tment management busi- 
ness. and hence increase profitability. 
The benefits do not necessarily feed 
through to the client, who bears the 
dealing costs and the consequent 


FT-SE Index: 3146.5 (+11.1* 


British Gas 


Share price raWhn to the 
FT-SE-A AS-Shara Index 

105 : r 



re* 


Source: FT Graphite 


1904 


impact on. investment performance. It 
is likely that unnecessary deals are 
tin tip cm the client’s behalf, at a higher 
cost than if orders were placed 
directly with a marketmaker. 

New proposals from Imre, the fund 
management industry's watchdog, try 
to make a distinction between accept- 
able and son-acceptable kinds of “sett- 
ing” - the latter of which would he 
banned. But this approach is likely to 
run into pr oblems of definition, it also 
looks heavy-handed. Fund managers 
are already required to reveal th e ir 
soft commissions to their clients, giv- 
ing them an opportunity to object. 
Responsible fond managers are 
increasingly likely to boycott tbe prac- 
tice, as Mercury Asset Management 
has done this week. If trustees of pen- 
sion funds and their advisers fail to 
put pressure an managers to abandon 
soft commissions, they have only 
themselves to blame. 

UK economy 

If the chancellor had dreamt up 
the most favourable mmum ifc figures 
possible for the run-up to the 
Budget, they would not have been 
much differ e n t from those published 
yesterday. The UK appears to be 
enjoying rapid economic growth with 

fiftlA wiflatimn 

Underlying inflation in the year to 
October was lower than expected, 
remaining at a 27-year low of 2 per 
rent The sharp and politically desir- 
able foil in unemployment might have 
indicated an economically worrying 
tightening of the labour markot- But 
underlying wages growth remained 
unchanged for the fourth month at 
3.75 per cent while unit wage costs 


renHniied to fell Meanwhile, the pub- 
lic sector actually repaid" some debt 
That was partly because of £L5bn of 
. tn / vm te from the last tranche of the BT 
share sale, but it was also than ks to 
an impressive increase in tax receipts. 
A strong improvement in corporate 
profitability helped these rise 14- par 
cent during the first seven months of 
the fiscal year. The figures- were so 
good that some economists reduced 
than- public ‘ sector borrowing require- 
ment forecasts for next year. . 

With economic growth above trend; 
interest rates will eventually have to 
rise. But yesterday’s benign data rein- 
force the view -that there is no current 
need for an increase. The outlook for 
toe markets is fairly positive. Lower- 
than-expected inflation and reduced 
public funding requirements should 
sustain gfits while equities should be 
buoyed by the strong growth of corpo- 
rate flaming s and dividends. . . 

Unigate 

Unlgate’s increase in its in te rim div- 
idend was a tangible expression of tbe 
group's confidence in the future. The 
mild optimism contrasts with near 
pwnte before the new rnttb. marketing 
regime took effect. Now that Milk 
Marque is two weeks old, price rises of 
2p a pint appear to have stuck both in 
supermarkets and on the doorstep. 
The impact an Unigate’s profitability 
is unlikely to be quite so dire as 
feared. Sensing this, shares in both 
Unigate and Northern Foods have 
risen sharply in the past fortnight 

The stock market reaction, however, 
underestimates the scale of toe prob- 
lems ahead. Unigate will not be able to 
recoup the foil annnai £40m increase 
in milk costs. Moreover, higher prices 
for home-delivered mflk may acceler- 
ate the decline of this high-margin 
business. In the long run, Unigate will 
gam from sourcing more *ti*n Hair tts 
mflk from formers operating outside 
Mak Marque. But, initially at least, 

this milk rrnnmands a p remiu m price 

riot yet offset by improvements in 
quality and reduced delivery costs. 
Unigate will obtain better prices if it 
acquires Dairy Crest, which would 
more Qian double its buying power. 

Unigate will respond to the strategic 
challenges by implementing swingeing 
rationalisa tion measures, giving rise 
to an exceptional charge far in excess 
of toe expected £10m hit to operating 
profits. . This will arguably make the 
group fitter In the long-term, but now 
the shares' main attraction is the K3 
per cart prospective yield. 


c - . 


I 


Our 

Janun 

thoirnc 


Great Southern Group PLC 

has been acquired by 

Service Corporation 
International PLC 

by means of a recommended public offer 
for a consideration of £112.9 million 


Hill Samuel acted as financial adviser to 
Great Southern Group PLC 


4 

THE NATIONAL 


Hill Samuel jointly advised the 
Director General on the competitive 
process to appoint an operator 
to run the National Lottery 




Nordic Investment Bank 


US$81 million 
Currency Equivalent 


Ten Year Private Placements 
June-August 1994 



KIER 

GROUP 
Kier Group Pic 


£5.6 million 


Hill Samuel jointly led and 
arranged financing to assist with 
the repurchase and redemption by the 
Company of a minority shareholding 


jsfiic 


Doing what we do best. 



Hill Samuel 


Bank 


Hill Samuel Bank Limited - 100 Wood Street - London FC2P * a r 

L lnelTlber die Securities & Future, Authority - A member of rhrTSB Group 




» - 













23 




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FINANCIAL TIMES 






COMPANIES & MARKETS 


Mercedes 

Rental 


Available from only 
£64 per day at your 
nearest dealer 




IN BRIEF 


Morgan Stanley 
profits drop 35% 

* swjsesss 

economy for light domand 

whose (JR Easf), the railway network 

wose shares were listed last year, reported a 

^Jejaprofits for the first six monSsbtenung 
™J^»^cweakness for cutting demand for rail 

and losers in Japaneso broking 

orokers openating in Japan saw a rise in 
revenue for the first six months to September 
ttimks to asharp rise in trading profits, in contrast 
w toezr Japanese counterparts, who suffered 
decmves m stock commissions. Page 26 

C»«lo makes strong Jump 

C^io, tiie Japanese manufacturer of watches and 
calculat ors, re ported a strong jump in non-ponsoli- 
dated recur ring profits - before extraordinary items 
and tax. Page 28 

Tough times tor Tehnaac 

T e lm ex. the Mexican telecommunications monop- 
oly. faces big questions after news that AT&T, the 
US communications group, would form a Mexican 
venture with Grupo Alfa. Page 26 

TOonaon expands In electronic publishing 

Canada 's Thomson Corporation is further expand- 
ing its electronic publishing business by o ffe rin g to 
pay t7S$339m for Medstat, a Michigan-based group. 


China turning to US tor financing 

China is likely to turn increasingly to the US brad 
market for external financing of its amhitinuR infra , 
structure programme, according to an International 
Monetary Fund survey. Page 27 

SamMk surges to SKrt^ebn 

Sandvik, the Swedish cemented carbide and special- 
ity steel group, doubled profits in the first nine 
mantis due to strong economic conditions in mort 
markets. Page 24 

Hambros Mt by higher costs 

Hambros, the UK merchant hank and financial ser- 
vices group, said it had no plans to cut staff despite 
a £23m ($37m) increase in costs which contributed 
to a near-50 per cent fall in interim profits. Page 28 


Vosper adv ance s 13 % 

Vosper Thnmycraft Holdings, the UK' warship 
^ builder and engineering group, increased pre-tax 
~ profits by 13 per cent Page 30 

WIH reveals Attwooda 1 hopes 

t . Waste Management International, the London aim 
z ofWMX<tfthe US, confirmed it hoped to buy 

" Attwoods' UK businesses if shareholders rgected 

the hostile £384m ($690m) bid from Browning-Ferns 
Industries in favour of a break-up plan. Page 30 

Capital may soek four regional licences 

— Capital Radio, the largest UK company in the cam- 

— mercial radio sector, said that it might apply for all 
four Crf the regional licences to be advertised by the 
Radio Authority. Page 28 


Companies In this Issue 



Adam & Harvey 

28 Hambros 

28 

Aflip 

B Hoineken 

8 

Agent 

28 Land Securities 

28 

Attwoods 

30 Lehman Brothers 

7 

Banosto 

4 Lynx 

29 

Bangkok Land 

20 Merrill Lynch 

. 17 

Boots • 

30 National Gypsum 

23 

Boacombe Property 

29 Nintendo 

23 

British Bnpte Secs 

30 Nomura SecirWes 

28 

British Gas 

8 Pertamina 

23 

Browning-Ferris 

30 Premier OU 

17 

Bumah Castrol 

29 Prop PartnarstWpa 

29 

Cannon Street invs 

29 Qantas 

28 

Capital Radio 

28 Ftenautt 

23 

Casio 

28 Sec Endowment 

38 

Charnel 

29 Sega 

23 

Chevron 

8 Smith. CLa 

28 

Christie 

30 Ttbbett & Brittan 

29 

Coraft 

■ 29 Towry Law 

30 

Davis Service 

29 Tureas Pelrotculuck 

29 

East Japan RaBway 

28 Turfcpetrof 

29 

Bmap 

30 UK Land 

29 

Essex and Suffolk 

30 Urtgste 

• 30 

Eurocamp 

29 Voiex 

29 

Everest Foods 

30 Vosper Thomycrofl 

30 

Exxon 

23 WMGO 

29 

Fairfax. John 

28 Waste Management 

30 

Finsbury Qtwrth 

30 Yamaha Motor 

26 

GWR 

30 Young & Co’s 

29 

Golden Eagle Inds 

23 Zergo 

17 


»r«:*ur * 


Market Statistics 


fflnnua] reports aanfce 
Beodmark Sort bands 
Bead tuun and opkxn 

Bond prices and yWdB 

Cann io atta prices 
DMfcnfe smomead, UK 
a6 currency 
Eurobond prices 
FbBd Interest intflees 
FT-A WmW todos 
FT GoU Itees Wm 
FMSMAJnfl bonds* 
FT-SE Actuaries Mte 


34-35 Foreign exchange SB 

27 BBS prices 77 

27 USD equity options 33 

27 imfcn dare sanies 34-35 

32 London bad opOons . 33 

28 Uanaoed tends service 38-37 

38 Money markrte 38 

27 Hear M band tanas 27 

27 New Ydrk Btara aettee 40-41 

Recant tauea. OK 33 

Short-tera W rates 28 

27 US Mara* rams 27 

33 Werid Stock Martels 38 


Chief price changes yesterday 


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— 

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+ 

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TOKYO tTeoj 




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WB 

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35% 

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— 

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289 

+ 

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480 

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745. 


IB 

Mm teat 

BBS 

- 

22 

368 

+ 

18 

Ptoaorr 

2380 


150. 


Kvtturt 


domd. Nmr Vo* prices nt ttOOpm. 



104 

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OX 842 

MMW 374 

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12 


National Gypsum faces $940m offer 


By Tony Jackson in New York 

National Gypsum, the second-largest US 
maker of plasterboard, has received a 
$940m hid from a North Carolina-based 
investor group led by the investment 
company Golden Eagle industries. The 
head of Golden Eagle, Mr C. D. Spangler, 
has been non-executive chairman of 
National Gypsum since February. 

National Gypsum said the offer had 
come as a surprise, and that the board 
had not had time to consider It Golden 
Eagle first bought into the company on 
its emergence from bankruptcy last 


October, In conjunction with the large 
French building materials group Lafarge 
Coppte. Both took a 10 per cent stake, 
with Golden Eagle's holding since rising 
to 19 per cent and Lafarge Coppde’s 
remaining unchanged. 

Golden Eagle said It had offered 
Lafarge Coppee the opportunity to par- 
ticipate in the takeover, under the terms 
of an agreement struck at the time of the 
initial investment. Lafarge Copp6e, 
which also expressed surprise at the 
announcement, has yet to respond. 

Golden Eagle said it would have as 
equity partners in the bid First Union 


Corporation and NationsBank Corpora- 
tion, both of North Carolina. The offer 
price of $43.50 per share is 33 per cent 
above the previous day's close. National 
Gypsum's shares rose $UL25 to $45 in 
early trading. 

The offer is the second attempt to take 
National Gypsum private in recent 
years. The first, a $L6bn management- 
led buyout, ended in collapse in 1990 as 
a result of recession in the US construc- 
tion industry. Lafarge Coppfe, an inves- 
tor in the buy-out, had by the trm*» of the 
bankruptcy taken its stake to 50.1 per 
cent, held at arm’s length through a 


trust as a "wms of avoiding liability for 
the company’s debt and liability for 
asbestosis claims. The French company, 
which has a. seat on the board of 
National Gypsum, bought its stake for 
$19 per share. 

Mar ket analysts in Paris discounted 
the possibility that Lafarge Coppde 
would make a counter offer. The scale 
of the offer that would be required, 
something in excess of $lbn, suggests 
this is the least likely scenario,” said 
one. 

Since emerg in g bum Chapter 11 a year 
ago the company has traded profitably. 


with net earnings of $5&5m an sales of 
$463m in the first ninn monthu of this 
year. It has 24 per cent of the US plaster- 
board market, compared with 33 per cent 
for its larger rival, USG. 

At the time of National Gypsum’s 
bankruptcy, a trust fund was set up to 
cover its liabilities for asbestos claims. 
In recent weeks, the trustee has 
suggested further payments may be nec- 
essary, which National Gypsum dis- 
putes. A spokesman for the bidder said 
"the acquiring group recognises that dis- 
pute exists, and the offer Is conditional 
an it satisfying itself [on the facts]**- 


Exxon signs 
Indonesia gas 
field accord 


By Patrick Harverson 
In New York 

Exxon, the US energy group, has 
finally reached agreement with 
the Indonesian government to 
develop the giant Natuna natural 
gas ffrriii in the South Chinn Sea. 

Under the toms of the deal, 
Exxon will share the cost of 
developing the largest natural 
gas field in south-east Asia with 
the state-owned Indonesian oil 
and gas wwnpany Pnr brmma 
Industry experts, however, 
believe that the cash-strapped 
Pertamina will be unable to fund 
its share of the development 
costs, and that a third partner — 
possibly Mobil of the US - will be 
asked to join the project 
Mobil said yesterday that it 
would be pleased to be invited to 
join the the Natuna development 
but it had not been approached 
by either Pertamina or Exxon. 

Natuna will be the largest ever 
natural gas development project 
undertaken by Exxon, and if 
demand for gas in the Asia 
Pacific region is strong enough, 
could involve the group spending 
as much as $40bn over the next 
30 years. 

Before work begins on engi- 
neering, infrastructure develop- 
ment mid platform arid ptpatinp 
construction, Exxon must secure 
market outlets for the gas prod- 
uct 

It will immediately start mar- 
keting the gas to Japan, North 
and South Korea, Taiwan and 
other countries in the region. 

The level of demand will deter- 
mine the scale of the develop- 
ment, said Exxon. It estimates 
that production will not begin 
until after the year 2000. 

For Indonesia, the signing of 


the contract between Pertamina 
and Exxon should ensure that 
the country remains the world's 
largest exporter of liquefied 
natural gas over the next tow 
decades. 

In recent years production at 
other Indonesian fields Hag 
begun to decline, and a report by 
the World Bank last year 
attached “critical importance” to 
the development of the Natuna 
field for the future of the coun- 
try's natural gas industry. 

The agreement to start work 
has taken years to secure. The 
massive ^ip and complexity of 
the development project, and 
reported differences between 
Exxon the Indonesian gov- 
ernment over the tep m of the 
deal, has consistently delayed an 
agreement. 

Last month an unexpected 
decision by Indonesian politi- 
cians to place restrictions on leg- 
islation that granted special tax 
breaks to investors in certain 
important industries threatened 
to derail the deal. 

If demand allows the Natuna 
field to be folly developed, the 
project will require the building 
of 18 offshore platforms and the 
drilling of more than 200 produc- 
tion wells, which would at full 
capacity produce about $15m 
tonnes of liquefied natural gas 
per year. * 

The project’s costs will be high 
because Natuna is located in 
deep water far offshore and 
because of the technical difficul- 
ties of separating the natural gas 
from tiie carbon dioxide. 

Gas from the field will ulti- 
mately be transported by a 
200km-pipeline to Natuna Island, 
where It will be processed into 
liquefied natural gas. 


A new format is set to revive the market, writes Alice Rawsthorn 


More than a game to the publishers 

Beep’s Sortie 



Ebn Worldwide games 
15 “ so ft w are sales 


Revenue breakdown of rataB price of a game 


Mntendo’a 
Donkey Kong 


188890 at at a *r wr 



J apan's computer games junk- 
ies have for months been 
awaiting the launch of two 
products - the Sega Saturn and 
Sony PlayStation - which are 
about to arrive in the shops as 
the first of the new generation of 
games. 

The Saturn and PlayStation are 
examples of the 32-Ut, rranpant 
disc-based machines that the 
industry hopes will revitalise the 
£14hn ($23bn) video and com- 
puter games market by replacing 
the 16-bit cartridge consoles that 
have dominated for the past 
decade. 

The games market, one of the 
fastest-growing consumer sectors 
of tiie late 1980s and early 1990s, 
has slowed sharply over the past 
year. Sega, the Japanese com- 
pany behind Sonic the Hedgehog 
and which vies with Nintendo for 
leadership of the global games 
market, last week annoimred a 
steep fall in interim profits and 
confirmed that it was on course 
for a further profits fall this year. 
The industry is now waiting to 
see whether the new 32-bit 
machines will reverse the decline 
and stimulate sales. 

Until last autumn the games 
industry had known nothing but 
growth. Sales of games software 
rose rapidly from £4^bn in 1989 
to £L32bn in 1993, according to 
Durlacher, the London securities 
house. Sega and Nintendo saw 
their profits - and share prices - 


Renault staff embrace sell-off 
as public shows less enthusiasm 


By John Ridding In Paris 

The partial privatisation of 
Renault, the French motor 
group, was in strong demand 
from the company’s workforce 
and. institutional investors bnt 
was less enthusiastically 
received by the public, 

Ur Edmond Alphanddry, the 
economy minister, said that the 
public offer drew L09m private 
investors and was 1.4 times sub- 
scribed. It was fewer investors 
than previous issues in the 
French privatisation programme, 
which have attracted between 
1.9m and 3m subscribers. 

According to Mr Alphand&y, 
comparisons with previous 
issues are misleading because 
file state is retaining control iff 
Renault with a stake of just over 
50 per cent of its stares. 

. it was a partial privatisation. 


which tends to limit investors' 
interest,** be said. Industry ana- 
lysts added that demand from 
private investors was limited by 
the weakness of the Paris stock 
market and most privatisation 
stocks have fallen below their 
issue price. 

He added that the institutional 
tranche of the issue was 15.5 
times subscribed. The offer for 
employees closed last night, bat 
about 60 per cent of the work- 
force have applied for shares. 

The partial privatisation is 
part of the government's plan to 
sell 21 publicly-owned compa- 
nies. 

Renault’s flotation will bring 
almost FFr8bu ($l.5bn) to tbe 
state’s coffers, taking proceeds 
from the sale of public sector 
assets to FFrSObn for the year, 
compared with a target of 
FFr55bn. 


“Our mission is accom- 
plished,'’ said Mr Alphand6ry. 

Mr Alphandtry would not say 
if there would be more asset 
sales this year. Assurances Gfin- 
6raks de France is prepared for 
privatisation, and the govern- 
ment is also set to invite indus- 
try offers for Groupe Bull, the 
loss-making computer manufac- 
turer. 

Many industry observers 
believe that the flotation of Ren- 
ault shares marks a step towards 
tbe full privatisation of tbe 
motor group. Mr Alphanddry 
sought, however, to play down 
such expectations. “The sale of 
Renault is not oo the agenda," 
he said. 

Renault shares saw healthy 
demand on the grey market yes- 
terday, trading at more than 
FFrlO above the FFr165 paid by 
private investors. 


Markets cautious on rate rise 


By Ptdto Coggan in London and 
Lisa Branston in New York 

World financial markets reacted 
cautiously yesterday to Tues- 
day's interest rate increase by 
the US Federal Reserve. 

While a rise in US rates was no 
surprise, the increase of three- 
quarters of a percentage point 
was larger than had been expec- 
ted- Markets appeared to be 
divided between those investors 
trim took heart from the US cen- 
tral hank’s firm lina on inflation 
and those who feared that fur- 
ther rate increases would follow. 

“The rhetoric in the Fed state- 
ment had a clear-cut m pssag g 
that Mr Greenspan [the Fed 
chairman] Is worried about eco- 
nomic strength and that interest 
rates must rise if inflation is to 
be contained,” said Mr Keith 


Skeoch, chief economist at bro- 
ker James Capel. "Greenspan’s 
not ahead of tiie curve but he's 
catching up with the game." 

Hopes that the rate rise would 
lead to a favourable reappraisal 
of US financial assets were 
largely disapp ointed. The dollar, 
which had rallied a pfennig 
against the D-Mark on Tuesday, 
failed to make further progress in 
European trading yesterday. 

In New York, even news of a 
lower than expected rise in con- 
sumer inflation in October gave 
scant boost to equities or bonds 
in early trading. The benchmark 
30-year Treasury bond fell around 
a third of point by lunchtime, 
while the Dow Jones Industrial 
Average was up just 5.05 points 
at 3,831. 

While markets welcome the 
Fed’s anti-inflationary stance. 


there is also concern that the six 
rises in interest rates this year 
will eventually slow the pace of 
corporate earnings growth. 

European equity markets were 
weaker but held on to most of the 
gains made on Tuesday, before 
news of the rate rise. In London, 
the FT-SE 100 Index rose 11.1 
points to 3,146.5, helped by news 
of lower than expected underly- 
ing inflation and a public sector 
surplus in October. Gilts also 
moved ahead as heavy volume in 
short sterling futures indicated 
that markets had reduced their 
expectations of the extent of 
future UK interest rate rises. 

In Paris, the CAC-4G fell just 
over 0.2 per cent, while in Milan, 
the Comit index dropped by 
around 0.5 per cent. The German 
market was closed. 

Lex, Page 22 


Games junkies hold out 
for a more powerful hit 


soar despite economic recession. 

Tiie industry’s difficulties 
began last autumn when news 
broke that the leading games 
makers were developing 32-bit 
and 64-bit hardware to deliver 
more sophisticated sound and 
hnag pR than their old 16-bit car- 
tridge consoles. 

Only one company. Atari of the 
US, was ready to launch the new 
format and it did not have 
enough ca pital to market tiie 
machines e ff ectively. Sega, Nin- 
tendo and Sony admitted last 
autumn that their products 
would not be ready for at least 
another year. The industry was 
left In limbo as games enthusi- 
asts were reluctant to buy new 
software for the 16-bit consoles 
that they already considered 
obsolete. 

Meanwhile, the rise of the yen 
against other currencies hit Japa- 
nese exports, notably to North 
America and Europe. Mr Frank 
Herman, deputy chairman of 
Sega Europe, estimated that 
western European games sales 
fell 25 per cent over the past 
year. 

AR the big games companies 


stepped up their product develop- 
ment plans to try to rush out foe 
new machines. Sega and Sony 
are now shipping the Saturn and 
PlayStation to stores in Japan in 
time for Christmas. 

Nintendo this week unveiled 
the Virtual Boy, a 32-bit portable 
virtual reality machine, and its 
most ambitious new product, the 
Ultra 64. a 64-bit mnrhina, will be 
la unched na»t autumn. . 

Mr David TabizeL multimedia 
analyst at Durlacher, is confident 
that the new products will regen- 
erate the market He forecasts a 
modest increase in software sales 
fixnn £l&2m in 1998 to £l&5hn in 
1994, with more robust growth 
over the next few years to £8)bn 
by 1998. 

The emergence of a new games 
format will herald a change in 
the industry's finances. The new 
disc-based games will be much 
cheaper to produce. It costs 
roughly 32p to manufacture a 
CD, against £10 for a cartridge. 

Conversely, development costs 
are soaring as games players 
become more discerning and 
technology more complex. The 
first wave of 16-bit games ware 


developed in the early 1980s by 
amateur technology buffs. By 
contrast Rare, the UK software 
house, employed a team of 48 
graphic designers for 14 months 
to develop Donkey Kong Coun- 
try, Nintendo's new 16-bit garae, 

This means that publishing (or 
tho development anH ownership 
of games software) has become 
increasingly profitable. Dur- 
lacher estimates that publishing 
absorbs 37 per cent of the retail 
price of a CD game, against 10 
per cent for cartridges. 

The increased importance, and 
profitability, of games publishing 
has already triggered acquisi- 
tions including Sony's purchase 
of Psygnosis; the takeover of Ren- 
egade by Time Warner, the US 
pntoriaimwpnt company; 4"^ the 
recent deal whereby Pearson, the 
UK media group that owns the 
Financial Times, paid £31 2m for 
Software Toolworks. 

Mr Tahizel suspects that tbe 
real beneficiaries of the new 
games boom will be the publish- 
ers. Same of these guys are mil- 
lionaires already, but there’s no 
shortage of suitors waiting to 
makp them even richer.” 


GOON 

JUMR 


If you're on the edge, we’d be more buyout or buy in of £lO million or 

than happy to give you a push. more. So far wc'vc completed over 

As advisors to funds totalling £245 60 such transactions. And we'd 

million wc have the resources to back leap at the chance to complete 

your proposal For a management some more. 

PHILDREW^VENTURES 

Creative Capital for Management Boy-Oats 


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24 


FINANCIAL TIMES THURSDAY NOVEMBER 11 1994 


INTERNATIONAL COMPANIES AND FINANCE 


Sandvik advances sharply 
in nine-month period 


By Christopher Brown-Humes 
in Stockholm 

Sandvik, the Swedish 
cemented carbide and special- 
ity steel group, doubled profits 
in the first nine months due to 
strong economic conditions in 
most markets. 

The figures, which jumped 
to SKr2.46bn (S339m) from 
SKrLJilbtt, were helped by a 
lower depredation charge and 
increased income from associ- 
ate companies. 

The better-than-expected 
result, after an excellent third 
quarter, helped lift the group’s 
B share by SKrS, or 4 per cent, 
to SKrl27. 

Mr Clas Ake Hedstrom, chief 
executive, said demand in 
North America, Latin America 


and southeast Asia “continued 
to be high” while “order book- 
ings in western Europe have 
picked up substantially follow- 
ing the turnround in Germany 
at the beginning of the year”. 

He expected continuing 
strong demand in the fourth 
quarter and higher full-year 
profits than 1993’s SKrl.76bn. 

Demand has been driven by 
the recovery in the automotive 
sector and the chemical and 
energy sectors have improved, 
said Mr Gunnar Batelsson, 
group treasurer. 

He attributed the company's 
strong third quarter, when 
profits Jumped to SKr986m 
horn SKr245m, to demand and 
reduced holiday shutdowns 
at its main Swedish plant. The 
1993 figures were hit by 


SKr200m in one-off costs. 
Underlying nine-month sales 
were 13 per cent higher at 
SKrt8j09bn, while new orders 
surged 19 per cent to 
SKrl9.7bn. 

The group's four main divi- 
sions all benefited from higher 
sides and earnings. High vol- 
umes and good productivity 
enabled the biggest unit, 
cemented carbide, to lift earn- 
ings sharply to SKrl J6bn from 
SKr935m on a 13 per cent jump 
in sales to SKrtibn. 

Speciality steel, the second 
largest division, lifted profits 
to SKr650m from SKr354m 
after benefiting from high 
capacity utilisation. 

Depredation was 2 per cent 
lower, partly due to write- 
downs made last year. 


AsslDoman lifts profits forecast 


By Christopher Brown- Humes 

AssLDom&n. the Swedish pulp 
and paper group, has raised its 
forecast for full-year profits for 
the second time this year, cit- 
ing large r- than-expected price 
rises for many of its products. 

The company, which r anks 
as one of Europe's top 10 for- 
estry groups, says it expects 
1994 profits to be between 
SKrl.Sbn and SKrl.Sbn (8248m- 
2262m). more than double last 
year's SKr876m level. 

The latest upgrade came 
after profits at the nine-month 
stage reached SKrl.28bn, up 
12S per cent from SKr568m a 
year ago. 

Average selling prices for 


sawn timber, sawn timber 
products, kraftliner and pulp 
were all higher than during the 
same 1993 period- The 
increases reflect the recovery 
in the pulp and paper sector 
where demand is recovering 
sharply after a deep recession 
between 1991 and 1993. 

The increase in demand for 
timber and pulpwood has had 
a beneficial impact on Asst- 
DomSn, which is the biggest 
private forestry owner in the 
northern hemisphere. Its for- 
estry and timber division lifted 
operating profits 67 per oent to 
SKr939m as sales climbed 26 
per cent to SKr3.7bn. 

There was a strong perfor- 
mance from the Kraft products 


division, which swung to a 
SKrl3lm operating profit from 
a SKrTOm loss. The packaging 
and carton divisions fared 
worse than last year. 

Overall operating profits 
were 81 per cent higher at 
SKri.44bn on a 13 per cent rise 
in sales to SKrl2Jbn. The bot- 
tom line figure was influenced 
by lower financial charges to 
SKrl59m from SKr232m. 

AssiDom&n, partially priva- 
tised earlier this year, recently 
announced plans to buy a 
packaging operation from fel- 
low Swedish forestry group. 
MoDo, in a deal worth 
SKrl^bn. Analysts expect fur- 
ther acquisitions from the 
group. 


R JB Mining in British Coal move 


By Michael Smith in London 

RJB Mining, the UK coal 
company, has bid £914m 
($57 lm) to win the English 
regions of state-owned British 
CoaL it emerged yesterday. 

It aims to raise £425m 
through a share issue and 
ESJSm through debt 

In presentations to potential 
investors. RJB and its adviser 
Barclays de Zoete Wedd, the 
UK securities house, are indic- 
ating that they believe the debt 
can be cleared by 1998 when 


existing electricity contracts 
end. 

RJB is predicting annual pre- 
tax profits of £220m by the 
turn of the century on turn- 
over of £1.24bn. Profits will be 
£116m in 1995. £188m in 1996, 
£2Um in 1997 and £186m in 
1998. 

The amount of money RJB. 
capitalised at £157m, needs to 
raise means that its projections 
will be studied with intense 
scrutiny by investors. 

Many executives in the elec- 
tricity and coal industries 


believe the company, which 
bid more than 50 per cent 
higher than the nearest rival, 
is taking a highly optimistic 
view of markets, particularly 
after 1998. 

RJB says in its presentation, 
copies of which have been 
obtained by the Financial 
Times, that it expects to sell 
about 34m tonnes of coal from 
the regions it is acquiring and 
sell it at an average of £L32 a 
gigajoule at today prices. 

RJB yesterday refused to 
comment 


British Gas 
loss lower 
than City 
estimates 

By Robert Corzkie in London 

British Gas yesterday turned 
in a better than expected 
third-quarter performance as 
its corporate restructuring 
programme gathered pace. 

The after-tax loss of £164m 
(S267m) on a historical cost 
basis was well below the 
£180m-£240m range predicted 
by analysts. It was also well 
below last year's third-quarter 
loss of £225m. 

British Gas usually reports a 
loss in the third quarter, the 
period of lowest seasonal 
demand for natural gas in its 
t*>ain UK market 
The results coincided with 
the government’s announce- 
ment that it would introduce 
legislation in the current par- 
liamentary session to lift Brit- 
ish Gas’s monopoly of supply 
for 18m households. Full liber- 
alisation of the domestic gas 
market is due in 1998. 

Mr Richard Giordano, chair- 
man, said the corporate 
re s truc t uring exercise to pre- 
pare the company for competi- 
tion was ahead of schedule. 

About 7,000 jobs were elimi- 
nated in the first nine months 
this year, he said. A total of 
25,000 jobs will be shed over 
the next few years. 

Operating profits for the 
nine months were £89 7m. up 
from £845 in, on turnover of 
£7.06bn against £7.08bn. UE 
gas supply profits rose to 
£594m from £515m. 

The sale earlier this year of 
Bow Valley, the Canadian oil 
and gas exploration and pro- 
duction company, helped cut 
the nine-month net interest 
charge by £7 Dm to £197m. 

The disposal of Bow Valley 

contributed to the fall of turn- 
over in the exploration and 
production unit to £742m from 
£771 m. Operating profits fell 
to £l43m from £U6m. Ana- 
lysts said this reflected the rel- 
atively high cost of Bow Val- 
ley’s production. The 
division's remaining assets 
were lower cost and therefore 
more profitable. 

Attributable profits for the 
nine months were £466m 
against £4 09m. Earnings per 
share were 10.7p. np from 
9-5p. 

Lex. Page 22 


This announcement appears as a matter of record only 


November 1994 



Barclays Syndications 

ABN AMRO Bank N.V. 

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Enskilda "Corporate 


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Arrangers 

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Lead Managers 


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Manchester Branch 

Credit Lyonnais 

Leeds Branch 

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Manchester 


Managers 


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London Branch 

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London Branch 

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NM Rothschild & Sons Limited 


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Agent 

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NM 



Not quite at the end of the road 

Important challenges remain for Renault, writes John Ridding 


R enault, the French 
motor group, will 
today end its journey 
to the Paris stock market Its 
flotation has been a smooth 
ride, in spite of a cautious 
response from the general pub- 
lic, the principal target of the 
company's state shareholder. 

Mr Edmond Alphanddry, 
economy minister, said retail 
demand for the shares, which 
saw the public offer 1.4 times 
subscribed, was a good perfor- 
mance given the state keeps 
control of the group - a factor 
which he believes had damp- 
ened investor enthusiasm. 

Mr Louis Schweitzer, Ren- 
ault's chairman, expressed sat- 
isfaction with the operation, 
citing strong demand for 
shares from Renault's workers 
and from international institu- 
tional investors. 

However. Renault is left fac- 
ing some important challenges. 
In particular. Mr Schweitzer 
must develop the company’s 
strategy, which was derailed 
by tbe collapse of plans to 
merge with Volvo at the end of 
last year. The question of the 
future shareholding structure 
of the motor group remains a 
point of uncertainty. 

According to Mr Schweitzer, 
the flotation, and tbe fact that 
it has been accompanied with a 
FFr2bn (S3Slm) capital 
Increase, will strengthen Ren- 
ault’s position in the interna- 
tional car industry. 

Its financial position is 
healthy. The company was one 
of the few motor groups to 


endure the sharp recession in 
1992 and 1993 without foiling 
into loss. Mr Schweitzer om- 
finned yesterday that results 
this year should see a strong 
improvement over the 
FFrLOTbn in 1993. 

The collapse of merger plans 
with Volvo has left a question 
mark above the company’s 
industrial strategy. “For sev- 
eral years, this was the centre 
piece of Renault's thinking. 
The two companies were well 
matched in terms of geographi- 
cal markets and in terms of 
products," says an industry 
analyst in Paris. “In particular, 
Volvo would have given Ren- 
ault a strong partner in 
trucks.” 

For Mr Schweitzer the 
answer to the strategic ques- 
tion does not lie in another 
grand allianc e. “We are not 
seeking a big marriage.” he 
said yesterday. Instead, the 
Renault chairman favours 
case-by-case alliances, aimed at 
increasing geographical pene- 
tration and reducing costs in 
the joint production and devel- 
opment of components. 

Renault already has such 
partnerships. It co-operates 
with Peugeot, its domestic 
rival, in the development of V6 
engines. In July, Renault con- 
cluded an agreement with 
Iveco. the truck-making divi- 
sion of Flat of Italy, for tbe 
joint development of cabs. A 
project to develop gear boxes 
with Volkswagen of Germany 
is under way. 

Mr Schweitzer has a free 



Lends Schweitzer: *We are 
not seeking a big marriage’ 

hand to pursue further agree- 
ments. “We could not do this 
while we were in the process of 
the flotation ... but within the 
next few months we will start 
negotiations,” he said. 

T he Renault c h a irm a n 
does not go into details. 
But there has been 
much flirtation with Mercedes- 
Benz of Germany. Mr Gfirard 
Longuet, the former Industry 
minister, made no secret of his 
desire for co-operative ven- 
tures between the two compar. 
nies, while Mr Helmut Werner, 
chairman of Mercedes, 
described Renault as ‘'a very 
attractive .partner”. 

Partnerships are important 
not just to strengthen Ren- 
ault’s position in a consolidat- 
ing and fiercely competitive 
industry. The French govern- 


ment has 'describe d indu strial 
alliances as a ne cessary ocaa di- 
tiorr for the fofliiriratfcattan of 
the motor group, although Mr 
Jose .Rossi, the new industry 
minister, has Indicated this 
need not take, the form of a 
grand alUance- 

Few doubt that yesterdays 
flotation is simply a. step in 
Renault's eventual privatisa- 
tion. Mr Alphaod&y said yes- 
terday such an operation was 
Hot on the agenda". jBut once 
presidential ejections are out 
of the way next spring, the 
government may be encour- 
aged to review a dossier ren- 
dered politically sensitive by 
Renault's status as a former 
trade union stronghold. - . 

The centre-right government 
of Mr Edouard Balladur wffl- 
aisn be encouraged by cerium 
aspects of tbe partial privatisa- 
tion. In particular, the healthy 
from Renault wo r ke r s , 
60 per cent of whom subscribed 
for shares, reduces the threat, 
from trade unions which 
sought to block the flotation. 
International demand was 
strong, resulting in a subscrip- 
tion of more than 15 times the 
available shares for the institu- 
tional tranche. 

“The international demand; 
showed that France is seen as 
attractive as a manufacturing 
base and that Renault is 
viewed as an attractive com- 
pany,” said Mr Schweitzer. EBs 
ability to forge aiHanops with 
international partners will 
help determine whether tl 
remains so. . . 


Generale des Eaux set 
to endorse Messier 


By David Buchan in Paris 

The succession struggle at 
Compagnie Generale des Ranr 
the French utility, appears to 
be over. Next week's board 
meeting is expected to endorse 
Mr Jean-Marie Messier, a 
37-year-old Lazard Freres 
investment banker, as heir to 
Mr Guy Dejouany, the 73-year- 
old chairman. 

The only clear dissenter in 
the 13- man board remains Mr 
Jacques Calvet the head of the 
Peugeot car group, who at the 
November 23 board meeting is 
expected to carry out his pub- 


lic threat to resign from CGB if 
Mr Messier is “parachuted” in 
at such a high leveL 

He said he did not doubt Mr 
Messier's ability nor his char- 
acter but complained that the 
Lazards banker bad no indus- 
trial experience. 

Mr Calvet’s reservations 
were initially shared by a few 
other CGE board members. 
However, they have since 
decided that to repudiate Mr 
Dejouany’s strong desire to 
make Mr Messier his heir 
would provoke a boardroom 
row that the group could HI 
afford. 


Morocco completes 
withdrawal from SNI 


By Richard Lapper In London 

The Moroccan government 
yesterday announced the sale 
for about 3190m of 51 per cent 
of Societe Nationale dlnvestis- 
sement (SNI), the touting com- 
pany which has significant 
interests in a range of big local 
companies, to a consortium of 
local and overseas interests. 

International investors have 
bought 16 per cent of the com- 
pany's total equity, although 
two-thirds of these shares must 
be sold on the Casablanca 
stock exchange within the next 
three years. 


Mr Alex Papadimitriou, asso- 
ciate director of Swiss Bank 
Coiporation, which, along with 
Banque Pallas Stem,. advised 
the government described SNI 
as “the jewel of Moroccan 
state-owned companies”. 

The sale, which completes 
the government's withdrawal 
from SNI, is the largest to date 
in the Moroccan privatis ation 
programme, itself the most sig- 
nificant in Africa and the Mid- 
dle East Banque Commerciale 
du Maroc led the consortium 
which completed the purchase. 

The shares were priced at 
Dh425 ($4830). 



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55 FannieMae 

Federal National Mortgage Association 
¥7,000,000,000 

Floating Rate Japanese Yen Debentures 
Due May 77, 1996 

Notice to hereby given, that the rate of interest from November 17 
1994 through and including May 16, 1995 to 4.18% per annum! 
Interest payable on May 17, 1995 will amount to ¥20 728 oer 
¥ 1 . 000.000 principal amount. ’ 

By: The Cfease Manhattan Bank, NJt. 

London, RscaiAgeet i^CHASE 

November 17. 1994 


A National Westminster Bank 

(tncorpomfed in England with limited liability! 

U.S- $500, 000,000 Junior FRNs 

NoHcb is hereby gwen that the Rate of Interest has been fixed 
ot 6.S% and that the ,ntered payable on the relevant Interest 
Payment Date May 1 7. 1995 against Coupon No. 22 in 
rr^tDi 7 , ni U S j ^ 25,000 nominal of the Notes will be 

^JggjsliSa'sr ° f US - S5 ' 000 ° f 

November 17, 1994, London 

By: GlibonL N A (Issuer Services), London Branch, Agent Bank 


TteMrttt Laden m quad beau* - Fmnctf ad Spore tv a 
broc ™ l,e and n account appSc*** tm o0 071 2M 3067 
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ping ae.g.Mjfr.m.oaTUwcg png 603 





Over 200 secured and unsecured loans 

Collateral located in; Virginia, Washington, DC, 
Maryland, South Carolina and Georgia, USA 

Collateral types: Commercial, retail, industrial and 
resdenrial real estate and business assets 

E XTE NDED BID DATE: Tuea., Dec. 6 1994 

*r - > . EXTENDED due DILIGENCE DATE: 

SfeSlu Frida *. December l, 1994 
Eve* Reference Nmber.FU94Q4 

Bid pickups and additional infamation ovadabU from: 

a BSCMmerica company 

C ^ZT Ca TT' inC - to^-PvtiaaSchaeja 
Tbe Brokerage Builiimg • 34 Marker Place, Suite 800 
Baltimore, Maryland 21202 USA 

410-385-8922 • Fax: 410-385-0857 


Tbs 




'•ssssssssass^ 





FINANCIAL times THURSDAY NOVEMBER 17 1994 


25 


★ 


INTERNATIONAL COMPANIES AND FINANCE 


Kidder 
disposes of 
mortgage 
bonds 


By Richard Waters 
in New York 

Kidder Peabody, the OS 
investment bank, has disposes' 
of a large part of its portfolic 
““^gage-backet 
bonds. It has hired an outside 
firm to advise on the •‘manage 
ment and orderly disposition’ 
of the rest 

The bond sales mark a rever 
sal of a plan announced in 
Kiny October to transfer the 
bond holdings to GE Capital, 
another part of the General 
Electric group. Since then, 
General Electric has agreed to 
sell the bulk of Kidder’s 
operations to another broking 
firm, PaineWebber. 

Kidder’s said its holdings ol 
the securities, known as collat- 
eralised mortgage obligations 
(CMOS), now stood at $4bn, 
down from $6.7bn at the end of 
October. In March, before the 
company began its sales, the 
portfolio was valued at S16bn. 

CMOs are complex deriva- 
tive-type securities created 
from pools of mortgage-backed 
bonds. They have generally 
performed worse than other 
bonds as fixed-income markets 
have retreated this year. 

Kidder, has hired New York- 
based investment firm Black- 
Rock Financial Management 
to advise on the remainder of 
the portfolio, bnt said ft 
“plans to continue to own «mi 
manage the portfolio for the 
foreseeable future". 


AT&T buys 
interactive 
computer 
games unit 

By Louisa Kahoe 
in San Francisco 

AT&T, the US telecoms group, 
is to acquire The ImagiNation 
Network, an on-line computer 
service offering games and 
entertainment in a move to 
expand its involvement in the 
emerging market for interac- 
tive multimedia services. 

The move follows this 
week’s announcement by 
Microsoft the world’s largest 
software company, that It 
plans a worldwide on-line ser- 
vices network offering infor- 
mation, communications and 
entertainment features. 

AT&T, which previously 
held a 20 per cent stake in the 
ImagiNation Network, will 
pay about $40m for the 
remaining equity. The net- 
work is a fledgling California 
venture formed by Sierra 
On-Line, a computer games 
software developer, and Gen- 
eral Atlantic Partners, a ven- 
ture capital firm. 

Sierra On-line will continue 
to provide interactive games 
for the network as part of the 
sale agreement with AT&T. 


Stanley profits drop 35% 


Morgan 

By Patrick Harverson 
In New York 

Morgan Stanley yesterday 
announced a 35 per cent drop 
in third-quarter profits to 
SI 18m. or S1.30 a share, as the 
Wall Street firm followed the 
rest of the US securities indus- 
try in reporting sharply 
weaker earnings for the latest 
period. 

Like the rest of Wall Street, 
Morgan Stanley’s revenues 
from its investment b anking 
and trading businesses have 
been weak this year because of 
rising interest rates and a 
severe downturn in the US 
bond market. 

Mr Richard Fisher. Morgan 
Stanley's chairman, said yes- 
terday business conditions 


remained difficult, although he 
expressed confidence in the 
outlook for the firm's overseas 
businesses. 

Net revenues totalled $9i0m 
in the quarter, down from the 
$1.03bn recorded a year earlier. 
The bulk of that decline was 
attributable to a 36 per cent 
drop in revenues from Morgan 
Stanley's investment banking 
operations, which have been 
hard hit by the sharp drop in 
demand from corporations for 
securities underwriting 
services. 

The fall in investment bank- 
ing revenues would have been 
worse, however, but for 
another strong showing from 
the firm's mergers and acquisi- 
tions department, which con- 
tinues to benefit from the 


recent series of big deals 
among US and international 
corporations. 

On the trading side, Morgan 
Stanley posted a 4 per cent rise 
in revenues to $297m, hut the 
performance was not particu- 
larly impressive because trad- 
ing in the same quarter of 1993 
was hit by losses on mortgage- 
backed securities. In the 
second quarter a year ago, 
for example, the firm earned 
$517m from its trading busi- 
ness. 

Revenues from trading in the 
latest quarter were also hurt 
by a rise in the cost of financ- 
ing the inventory of bonds 
Morgan Stanley uses for its 
customer and proprietary trad- 
ing business. This rise was evi- 
dent in the 14 per cent increase 


in interest expenses during the 
quarter. 

Among its other revenues 
streams, earnings from com- 
missions were essentially flat 
at SKMm. interest and dividend 
income was up 9 per cent at 
$L.7bn, while fees from asset 
management and administra- 
tion services climbed 42 per 
cent to $95m. 

The slide in overall revenues 
helped reduce Morgan Stan- 
ley's compensation costs, 
which fell 12 per cent to $460m 
in the quarter. Other costs cat- 
egories were mostly little 
changed in the period. 

Although the profits fall was 
expected, Morgan Stanley's 
share prices fell on the New 
York Stock Exchange, slipping 
5% to 862 % in early trading. 


Thomson expands in electronic 
publishing with $339m deal 


By Bernard Simon 
in Toronto 

Canada's Thomson Corpor- 
ation is further expanding its 
electronic publishing business 
by offering to pay US$339m for 
Medstat, a Michigan-based 
group which collects and anal- 
yses medical claims data. 

The Medstat purchase fol- 
lows Thomson’s 5465m acquisi- 
tion of Information Access 
Company from Ziff Communi- 
cations of California. 

Electronic publishing is one 
of the fastestgrowing areas of 
the publishing business. 

“D emand is ahea d of the mar - 

ket’s ability to supply," one 
Toronto analyst said yesterday. 

Medstat, which is listed on 
Nasdaq, earned $7.4m in the 


By Alice Rawsthom 

Polygram, the London-based 
entertainment group, is 
ex panding its US music inter- 
ests by buying 50 per cent of 
RAL/Def Jam. the leading rap 
record label, for $33m. 

The acquisition of Def Jam - 
which numbers some the 
world’s most successful rap 
acts on its roster including 
Warren G., Public Enemy and 
the Beastie Boys - forms part 
of PolyGram’s long-term strat- 
egy of increasing its music 
business in the US. 

The Def Jam deal follows last 
year’s $325m acquisition of 
Motown Records, the famous 
soul labeL PolyGram, which, is 
also one of the world’s largest 
classical music record compa- 
nies as the owner of Deutsche 
Grammophon and Philips Clas- 
sics, has been steadily expand- 
ing its US interests since its 
1989 deals to buy the Island 


year to September 30 on reve- 
nues of 564.9m, making the 
purchase price equal to more 
than five times revenues. 

Some observers earlier 
expressed concern at the high 
multiple, about 3.5 times 
annual revenues, which Thom- 
son paid for LAC. 

Company officials told ana- 
lysts earlier this week that 
they expected the LAC acquisi- 
tion to pay for itself within 11 
years, and to be worth at least 
two or three times the pur- 
chase price by then. 

Medstat provides a number 
of services based on health- 
care data. They include data- 
bases supplied to government 
agencies and research groups, 
and claims information to 
large employers, insurance 


and A&M record companies. 

Its expansion in the US has 
helped PolyGram, which also 
has extensive film interests 
and produced this year’s run- 
away bit. Four Weddings and a 
Funeral, to sign up some of its 
successful European artists on 
a worldwide basis. 

The Def Jam investment will 
enable PolyGram to become a 
force in rap, which has in the 
early 1990s been one of the 
most dynamic areas of contem- 
porary music. 

Rap started off in the mid- 
1980s as a cult phenomenon 
among young black 
Americans. In the early days it 
was dominated by small, inde- 
pendent record labels, includ- 
ing Def Jam which was 
founded in 1983 by Mr Russell 
Simmons in New York. 

Def Jam is now one of the 
most commercially successful 
rap labels and Mr Simmons is 
regarded as a role model for 


companies and others with an 
interest in holding down 
healthcare costs. 

Thomson plans to make a 
cash tender offer for all out- 
standing Medstat common 
shares at $27 a share. Medstat's 
chief executive, Mr Ernest 
Ludy. who founded the com- 
pany in 1981 and owns about 11 
per cent of the stock, has 
agreed to tender his shares. 

Medstat's senior managers 
have agreed to stay on after 
the acquisition. 

Thomson was able to use 
cash on hand to pay for LAC. 
The Medstat purchase may 
require it to raise some debt, 
but tbe analyst said that “their 
debt-toequity is not out of line, 
and they have to take advan- 
tage of the opportunities”. 


the new breed of young black 
entrepreneurs. 

PolyGram first forged links 
with Def Jam in June when its 
became the latter's US distrib- 
utor and its licensee in other 
countries. 

PolyGram has traditionally 
pursued a policy with its music 
acquisitions of assuming 
responsibility for issues such 
as marketing and distribution, 
thereby leaving the original 
executives to concentrate on 
working with existing artists 
and nurturing new talent 

Mr S imm ons has signed a 
long term contract with Poly- 
Gram as has Mr Lyor Cohen, 
Def Jam's president and chief 
operating officer. 

Mr Cohen yesterday said: 
"All we ever needed was a 
company to nurture us,” 
adding that with PolyGram 
“finance, promotion, legal and 
distribution are covered and 
covered tight”. 


Repsol rises 
16.6% after 
nine months 

By Tom Bums in Madrid 

Repsol, the Spanish state- 
controlled oil. gas and chemi- 
cals group which recently post- 
poned a global offering 
planned for this year, lifted 
pre-tax profits for the first nine 
months by 16.6 per cent to 
Ptail3.2bn (588m) from the 
Pta94^bn in the same period of 
1993. 

The company said its results 
reflected the domestic eco- 
nomic recovery as well as an 
improvement in its chemical 
division, an increased contribu- 
tion from its gas division and 
better productivity. It added 
that the improvement in mar- 
gins accelerated in the third 
quarter. 

It said the strong perfor- 
mance in the chemical and gas 
units compensated for the 
downturn in the oil business. 

Income from r.hemirals was 
up from Pta3.7bn to Ptal0.7bn 
and by 23.1 per cent to Pta33bn 
in the gas division. Profits in 
Repsol refining and oil market- 
ing division, however, fell by 3 
per cent to Pta72bn and 
dropped by 29 per cent to 
Ptall.7bn in the exploration 
and production division. 

Repsol lifted its gas profile 
earlier this year when Gas Nat- 
ural, the dominant domestic 
gas distributor which is 45 per 
cent owned by Repsol. 
acquired Ena gas, the big state- 
owned importer or natural gas. 

Gas Natural has, as result, 
become the third biggest gas 
company in Europe and the 
virtual monopoly gas importer 
and distributor in the fast 
growing domestic market. 

Government plans to reduce 
its 41 per cent stake in Repsol 
by as much as half towards the 
end of this year through a 
global offering were delayed 
because of the instability of the 
markets. The offering, how- 
ever. remains first on the list 
of the Spanish state disposals 
planned for next year. 


Polygram kicks into rap groove 
with RAL/Def Jam stake move 


Tough times for Telmex as Mexico 


NEWS DIGEST 

Champalimaud 
regains control of 
Portuguese bank 

Mr Antonio Champalimaud yesterday regained 
control of Banco Pinto e Sotto Mayor (BPSM), 
paying Es37.28bn ($289.9m) for SO per cent of 
Portugal's sixth-largest bank 19 years after it 
was seized from his family in a wave of 
Communist-led nationalisations, writes Peter 
Wise In Lisbon. 

The Champalimaud group bid Esl.528 a 
share for the 24.4m shares on offer in a privati- 
sation operation on the Lisbon stock exc h a n ge. 
This was Bs228 more than the only rival bid, 
from a consortium led by Banco Fiuantia, a 
Portuguese investment bank, and 45£ per cent 
higher than the reserve price of Es 1,050. 

Mr Champalimaud. 76, said to be the 
wealthiest man in Portugal, acquired BPSM 
through M undial Confianca, the insurance 
company that he also bought back after its 
nationalisation in 1975. 

He fled Portugal after the 1974 revolution 
and rebuilt his business group in Brazil before 
returning to begin repurchasing his expropri- 
ated assets. 

In January, the government rejected as too 
low an offer from Banco Comerrial Portugues 
of almost Esl4bn for 80 per cent of BPSM, in 
addition to guarantees of further investment. 
BCP said it might have increased its bid if it 
had been allowed to make a more detailed 
examination of the bank’s liabilities. 

The remaining 20 per cent of BPSM is to be 
sold later to employees and small investors. 

TCI moves back 
into tbe black 

Tele-Communications Inc, the biggest US cable 
TV operator, moved back into profit in the 
third quarter, helped by a contribution from 
Liberty Media, with which it merged in 
August, writes Tony Jackson in New York. 

On sales up 23 per cent at ?1.29bn, TCI 
suffered a 21 per cent fall in operating prefit to 
5186m. 

However, after a $10lm contribution from 
Liberty and sharply lower tax. it made a net 
profit of 4 cents a share, compared with a 14 
cents loss. 

TCI said basic service customers had risen 
by 5.1 per cent over the past 12 months to 
11.3m. However, cable companies* profits have 
been hit this year by government-imposed 
reductions in cable rates. 

• TCI is withdrawing a planned 5500m offer- 
ing of preferred stock, due to difficult equity 
market conditions. 

US company wins 51% 
of HungarHotels 

American General Hospitality, a privately-held 
US company, has won an international tender 
for a 51 per cent stake in HungarHotels. Hun- 
gary’s last state-owned hotel chain to be priva- 
tised. writes Virginia Harsh in Budapest. It 
outbid Intercontinental, the Japanese-owned 
international hotel group. 

The State Property Agency. Hungary’s priva- 
tisation body, said it hoped to close the deal 
for HungarHotels. which owned 15 hotels in 
Hungary, by the end of this month. American 
General is believed to be paying between $5Qm- 
60m for the stake. 

The decision is a major blow for Interconti- 
nental which now faces the possibility of hav- 
ing no presence in Budapest, one of central 
Europe's most visited tourist and business 
locations. It operates HungarHotels* flagship 
Hotel Forum through a local franchiser. Last 
year it lost the Duna Intercontinental, another 
top Budapest hotel to the Marriott group of the 
US. 


American General operates its hotels 
through franchisers rather than under its own 
name, in the US it works with chains such as 
Marriott, Sheraton. Hilton and Holiday Inn, 
The SPA said two fifths of the purchase 
price would be used for modernising Hungar- 
Hotels' properties. A condition of the privatisa- 
tion is that the new owner would not be 
allowed to sell any of the hotels for three 
years. 

The SPA was advised by Credit Suisse first 
Boston, and Americas General was advised by 
Creditanstalt Securities. 

Expense managers in 
expansion move 

The Richbell Group, an international strategic 
investment company, has created what it 
claims to be the world’s biggest integrated 
provider of employee cost management ser- 
vices. writes Ttm Dickson in London. 

The deal involved Richbell's subsidiary Har- 
pur Group, an operator of corporate fuel char- 
ge-cards and fleet management services, buy- 
ing Gelco Payment Systems for 565m. The 
transaction values the combined group, whose 
shareholders include the quoted investment 
trust RIT Capital Partners, at 5223m. 

Harpur operates corporate fuel cards under 
the Overdrive and Dialcard names, while Gel- 
co's services include the outsourcing of 
accounting and employee expense claims in 
tbe US and Canada. The companies initially 
plan to expand in North America, the UK and 
Australia. 

Fuji Electric forecast 
cut after steep decline 

Fuji Electric, a leading 
Japanese maker of 
electric machinery, 
yesterday announced a 
steep decline in its con- 
solidated recurring 
profits - before 
extraordinary items 
and tax - for the first 
six months to end-Sep- 
t ember, and a down- 
ward revision in its 
forecast for the full fis- 
cal year, AP-DJ reports 
from Tokyo. Recurring 
profits were 28 per cent 
lower at Y3.73bn (538.6m), against Y5.16bn a 
year ago, net profits were down 52 per cent to 
Yl-25bn from Y2.61bn and sales were 2.7 per 
cent lower at Y384.4bn against Y374.37bn. 

For the full year, Fuji Electric has lowered 
its forecasts for consolidated earnings by 
about 10 per cent. Recurring profits are fore- 
cast to be Y13bn against an earlier forecast of 
YPLSbn and last year’s actual Y14.13bn; net 
profits are expected to be Y3.4bn (Y4bn and 
Y3.65bn); and sales are forecast at Y860bn 
(Y870bn and Y834bn). On the Tokyo Stock 
Exchange yesterday. Fqjl Electric shares fell 
Y4 to Y546. 

General Motors settles 
dispute with GE 

General Motors said yesterday it had reached 
an agreement with General Electric to avert a 
threatened boycott by GM of GE automotive 
products. Renter reports from Detroit 
Earlier, the Detroit Free Press newspaper 
had reported that GM had threatened to stop 
buying material if GE insisted on higher resin 
prices. Ms Linda Cook, a GM spokeswoman, 
declined to discuss details of the agreement 
but she said the company would work with GE 
to help reduce costs. "We believe we’ve 
reached an amenable agreement with GE that 
benefits their business as well as ours." Ms 
Cook said. 


Fuji Electric 

Share price CO 
600 - 

550 

500 

450 

400 L- 5 

NovOS 1994 
Source FT Grapnto 



prepares to open market 




Procter cuts 


Dominant position threatened as telecoms company faces increasing competition without a big partner, says Ted Bardacke 


Mexican telecom deals 

Mexican 

Overseas 

Value 

company 

partner 

(Sbn) 

Grupo Alfa 

AT&T 

1-00 

Banacci (Banamex) 

MCI 

1.45 

lirseoen 

Sprint 


GF Bancomer 

GTE 

* 

Protexa 

Motorola 

6^0 

Telmex 

Southwestern Bell/ 

Ongoing 


France Telecom 


* nor mojxoo 


disposable 
nappy prices 

By Richard Tomkins 
in New York 

Procter & Gamble, the US 
consumer products group, yes- 
terday said it was r aising the 
prices of some of its tissue 
products in tbe US by up to 8 
per cent because of higher 
pulp prices, but simulta- 
neously ann ounced an XI per 
cent cut in tbe price of its 
Luvs disposable nappies. _ 

The company also said it 
was turning Luvs into a uni- 
sex product instead of having 
different types of nappy for 
each sex. It said the resulting 
cost savings, combined with 
higher volumes flowing from 
the price cut, should have a 
positive effect on profits. 

Analysts say Lots has about 
13 per cent of the US dispos- 
able nappy market Pampers, 
another Procter & Gamble 
product, has 26 per cent, 
Kimberly-Clark’s Hnggies 30 
per emit and the rest is taken 
by private label products. 


T elmex, the Mexican tele- 
communications monop- 
oly, faces some big ques- 
tions about its competitive 
position following last week’s 
announcement by AT&T, tbe 
US long-distance communica- 
tions group, that it would form 
a joint venture in Mexico with 
the industrial conglomerate 
Grupo Alfa. 

The AT&T-Alfa venture will 
offer telecommunications ser- 
vices when the Mexican mar- 
ket is opened to toll competi- 
tion in 1997. 

AT&T, the largest US 
long-distance carrier, had been 
widely expected to form an affi- 
ance with Telmex, creating an 
extremely powerful team. 
Instead, the Alfa deal leaves 
Telmex without a big interna- 
tional long-distance partner. 

Tbe two other leading US 
long-distance carriers - MCI 
and Sprint - already have Mex- 
ican partners: MCI has a deal 
with Mexico’s largest bank, 
Bannmex. and Sprint is allied 
to the wiinlar telephone group 
lusacsIL 

Td meg's dominant position 
in Mexico - where the long- 


distance market is expected to 
produce revenues of $20bn by 
the end of the decade - means 
its ability to generate profits in 
future years is not in doubt. 

Yet analysts believe competi- 
tion will cut Tetmex's market 
share and operating margins. 

The group's profits are 
almost entirely derived from 
long-distance charges, which 
are among the highest in the 
world. Its loss-making local 
service is subsidised by the 
long-distance side - even 
though Telmex has made great 
strides since its late-1990 priva- 
tisation to rebalance rates. 

Competition will cut into 
Tehnex’s long-distance market 
share - by as much as 20 per 
cent in the first year alone, 
according to Baring Securities. 

The impact of that loss wifi 
be softened by the growth of 
the long-distance market, 
which is expected to expand by 
at least 12 per cent and per- 
haps as much as 22 per cent 
annually for several years. 

In addition, Telmex should 
be helped by a gateway agree- 
ment between Mexico and tbe 
US, its biggest international 


calling destination, governing 
the distribution of calls among 
carriers. Under the agreement, 
if Telmex is able to retain 75 
per cent of northbound traffic 
it will be guaranteed 75 per 
cent of southbound traffic as 
well, no matter which carrier 
generates the call in the US. 

Of more concern to Telmex 
is tbe expected fall in 
long-distance rates that compe- 
tition will bring. Rates in tbe 
US have fallen by about 50 per 
cent since competition was 
introduced over a decade ago 
and many are predicting a sim- 
ilar drop in Mexico. 

Mitigating this loss will be 
revenues Telmex will be able 
generate from charging third- 


party long-distance companies 
a fee for connecting their traf- 
fic with the basic local tele- 
phone network. 

T he details of the fee 
schedule governing 
interconnection are still 
being debated by tbe Mexican 
government and are unlikely 
to be announced until next 
year, making it impossible to 
estimate the earnings impact 
of increased competition. 

“The regulatory scheme will 
resubsidise Telmex to some 
extent . . . probably through 
an interconnection or access 
charge," says Ms Bette Mas- 
sick, a telecommunications 
analyst at S.G. Warburg. “We 


just don't know how big that 
subsidy will be, which adds to 
the uncertainty about exactly 
how profitable the company 
will be." 

Ms Massick predicts that, 
unless there is some big regu- 
latory surprise, T&Imex’s oper- 
ating margin will fall from the 
high 40s to somewhere 
between tbe low teens to the 
low 30s. 

This prospect scares some 
Mexican officials who worry 
that a fall in Telmex ’s share 
price could depress the Mexi- 
can stock market as a whole. 
Telmex accounts for approxi- 
mately half of the Mexican 
market's entire capitalisation. 

Teimex’s new long-distance 
rivals are likely to focus much 
of their attention on develop- 
ing customised services for 
both business and residential 
users. Sprint-IusaceU and 
AT&T-AIfa are expected to tar- 
get residential customers, 
while MCI-Banamex and a 
fourth big alliance, GTE-GF 
Ban comer, will initially focus 
on high-volume business cus- 
tomers. 

It is in these specialised ser- 


Tebnex 


Share price (Pesos) 



8 I ,. , ..l-i..., . - i - i. - j - j - i. - . 

15th Nov 1994 Nov 

Sovcec FT GrepMe 


vices where Telmex stands to 
lose by failing to link with a 
big long-distance partner. Nei- 
ther Telmex nor its two exist- 
ing international partners, 
Southwestern Bell of the US 
and France Telecom, have 
much experience in developing 
the sophisticated software plat- 
forms that support the custom- 
ised billing services which help 
boost market share. 

Indeed, analysts say that Tel- 


mex failed to strike a deal with 
AT&T because the US com- 
pany felt Telmex was not well 
equipped to to deal effectively 
with the rash of new competi- 
tion. 

A T&T would have found 
it difficult to be in 
charge of a joint ven- 
ture with a company as 
entrenched at Telmex, but it is 
expected to run the alliance 
with Alfa, a company that has 
numerous ventures with other 
foreign companies, including 
Du Pont, Ford, BASF and 

Kawasaki. 

Nevertheless, once the Mexi- 
can government defines the 
rules of telecommunications 
competition, Telmex will have 
considerable time to gear up 
for the challenge ahead. 

If Telmex decides that it still 
needs to move defensively, it 
could make a takeover run at 
Alfa . GF Inbursa, the financial 
group of Teimex's controlling 
shareholder Mr Carlos Slim, 
has become Alfa's largest 
minority shareholder, collect- 
ing at least IS per cent of Alfa 
stock over the past two years. 


U.S. $200,000,000 


Exterior International Limited 


Guaranteed Floating Rate Notes due 2001 
UncOTdilfonafly Guaranteed as to payment 
of principal and Interest by 

Banco Exterior de Espafia, SJV. 

(Incotporetod with limited Babllfyin The Kingdom of Spain) 

tita is hereby given that for the Six months Interest Period from 
to May 17. 1995 the Notes wffl cany an Merest 
0625% per annum. The Interest payable on the relevant 
*Se. May 17, 1995 will be U.S. $304.81 per 
- — ' amount of Notes. 


CHASE 


Zhasa Manhattan Bank, N-A. 
ion. Agent Bank 

y 17. 1994 


HRIC MORTBAfiE NOTES 4 PIC 
n 50 , 000,000 

Class A 
and 

£9,000,000 

Ctaaafi 

Mortgage Backed Floating Rate 
Note* due August 2021 
Nodes a tasty (pen tfw/ far (he 
Meat Parted tan November i5. 
1994 to February 15, 1995 lto Class A 
Notes and Class B Now «* cany 
Intaest rates ol 6J0S<\> and 7 tES'V, 
ws pactewly the Imresi pay** cn 
ffw item Wares! payment tlase. 
February 15. 1905 lor Vie Class A 
Notes wt be £1.556.94 par £97.970 
nominal aimurt are) tortha Oaas B 
Notes wa be ci.770 w per 000,000 
nominal amount 

By: Tbe Clan Manhattan Baafc.IL A. 

Lmtoo, AftaBmJr 
November 17. 1894 


U.S. $100,000,000 



DEN DANSKE BANK 

(Daa Daesfcs Bait aMSTl Afdieselskah} 

fteeoaM* « m* nuvjiJom 01 

Dent nart wtffi Wnrteu IfcuwWyl 

Perpetual Subordinated 
Floating Rate Notes 

In accordance provi&ix® ri 

the Noies. note* >5 i*'*» 9* ven mal 
lor the Interest Penod 'w Nouemba 
1 T. i»4 « Abr 17 • ’S**- No,Bi 

cany an Interest Rale *>t 6 J75% pet 
annum. The nwo& puvatw agamsi 
Coupon No 2i on tw irievanl mierey 
payment dale. >’ ™ dl 

beUS.53M.S2. 

By ite Otoe H m te rt w Bart. *A 

UHlM i taN Ba* Q 

November 17. 1994 chase 


Emory on Compact 
Disk 

Cwades of hbttrical futures prices 

aad funri mraal latamaljai 

i mmnfa t ri y al your fingertips! By 

everything jnu need in one eajy-to- 
nif ante CRB InbTccb helps yon perform 

unh-ik. hvtoaiog. 
nudeting. pnaenwiam atd Lota tear _ 

» YEARS OF HISTORICAL PRICES TOR 
CASH FUTURES. OPTIONS AND 
INDEX MARKETS 

S) YEARS OF FUNDAMENTAL NORMATtCfH 
OV® HDOMUXTIK 
Similar to tbe inform*** found In (be CUB 
lummudiry You Book, the TAt ihc 
luiurcs Men), te addition u> 
hsimal data. CUB teWTecb ibo provides daty 
prirt updates via KR-Quote. Kmgbi-RiAlB't 
software specifically d n j p M S dto 
download and napon end-of-day prices 
CDeaJy joorduatast 
INFORMATION Biuifer V«kU 
KR Hiue. IS Rea SDeet. London EC4Y IHY 
Td *4410)71 842 4083 


Guangdong international Trust 
& Investment Corporation 

1 mMnktJ imJcrihr Im W thr 
Piirfr » RrpriWir of Oh Ha I 


U.S. 5150,000,000 
Floating Rate Notes due 1998 
I n accordance with the provisions of 
the Notes, notice is hereby given 
that the Rale of Interest for the su 
month period ending 16th May. 
IW5 has been fixed at 6.075% per 
annum. The interest accruing lor 
such sis month period will be U.S. 
$ 33 . 5 ti per U.S. SUM Bearer 
Note, and U.S. S3 35 AD per U.S. 
SHl.ffllt Bearer Note and U.S. 
S3.35o.lM per U.S. SIWjUM Bearer 
Note on Iwh May. 1°95 against 
presem Jtiun tif Coupon No. -T 

Union Bank oT Switzerland 

London Brandt Agent Bank \5/ 
17th November. 1994 


<z> 

HSBC Holdings pic 

USS250.000.000 
Subordinated collared 
floating rate notes 2008 

The notes will bear interest ai 
5.875% per annum for the 
interest period from 17 
November 1994 to T7 May 1995. 
Interest payable on 17 May 1995 
wilt amount to US f 29.54 per 
USS 1,000, CJSS295.38per 
USS10. m and USS2, 953A2 
per USSfU0,OOQ note. 

Agent: Morgan Guaranty 
TVust Company 

JPMorgan 


ECU 550.500,000 

Kingdom of Belgium 

Floating Rate Notes due 1999 
Issued in two u-anriM* of 
ECU 200JEKKUXX) (In tranche) 

ECU ISO 400400 [2nd tranche) 

Fur the peril*) from November 17, JOSH to 
February 17. 1995 the Notes will tarry 
an inlereu rile of StVM per annum with 
an interest amount of ECU 1,493.40 per 
ECU KXMno Nett 
Hie relevant interest payment date 
be February I7.IU95. 

Agnlftabi 

ft 

Banque Pabihas 

ujkmwuio 





26 




FINANCIAL TIMES THURSDAY NOVEMBER. 17. 1994 


INTERNATIONAL COMPANIES AND CAPITAL MARKETS 


Japanese boost for foreign brokers 


By EmikO Terazono in Tokyo 


Foreign brokers operating in Japan saw a 
rise in revenue in the six months to Sep- 
tember due to a sharp rise in trading prof- 
its. in contrast to their Japanese counter- 
parts. who suffered declines in stock 
commissions. 

The Japan Securities Dealers' Associa- 
tion said the 48 foreign brokerage houses 
posted combined operating revenue of 
Y274bn (S2.78bn), up 18 per cent from a 
year earlier. The 215 domestic houses 
posted a 18 per cent fell in operating reve- 
nues to Yl,012£ba 

Foreign brokers derive the bulk of their 
profits from derivatives trading, and rely 


less on stock commissions than the Japa- 
nese houses. The foreign houses posted a 
31 per cent fell in combined recurring prof- 
its to Y23.8tan while operating profits fell 
23 per cent to Y24.6bn. The Japanese bro- 
kerage houses posted combined recurring 
losses of Y85Jbn while operating losses 
totalled Y90.7bn. 

Commission income at the foreign 
houses remained flat at Y128.9bn, while 
the domestic companies fell 11 per cent to 
Y806.4bn. Trading profits totalled Y532bn 
at the Japanese houses, down 62 per cent, 
while the foreign houses saw a 36 per cent 
rise in profits to Y101-2bn. 

Meanwhile. Nomura Securities saw 
interim consolidated pre-tax profits plunge 


84 per cent due to weak profits on bond 
trading at its overseas subsidiaries. The 
figure, based on US accounting standards, 
totalled YS.7bn. while revenue declined U 
per cent to Y291.1bn. After-tax profits 
plunged 94 per cent to Yl.6bn. 

Consolidated revenue from commissions 
fell 12 per cent to YlOO.gbn. reflecting 
lower trading volume on the domestic 
stock market. Higher interest rates in the 
US hurt net gains on trading, which 
declined 39 per cent to Y2l.3bn. Underwrit- 
ing and distribution revenues rose 39 per 
cent to Y57.5bn. 

Costs excluding interest expenses for the 
first half rose 2 per cent to Y21ibn while 
interest expenses fell 8 per cent to Y71bn. 


Half-time 
setback for 
East Japan 
Railway 


Study calls for exchange 
to clear OTC contracts 


By Gerard Baker 
in Tokyo 


Bangkok Land 
tumbles 83% 
at midway 


Casio overcomes strong yen 
to jump 63% at halfway stage 


By WUItam Barnes In Bangkok 


Bangkok Land, Thailand’s 
second biggest property com- 
pany, has reported a worse- 
than-expected 83 per cent drop 
in half-year net profits to 
Bt497m ($19.86m), compared 
with BtiLSbn a year ago. Earn- 
ings per share dropped to 
BtO.S3 from Bt4JB5. In the sec- 
ond quarter alone, to end-Sep- 
tember, profits fell 89 per cent 
to BtlB4m from Btl^bn in the 
same period last year. 

Bangkok Land said the 
unusually long rainy season 
had delayed its construction 
schedule, ft also made a 
Bt35Gm foreign exchange loss 
in the first quarter. 

The company's ambitious 640 
hectare new town. Muang 
Tong Thani, on the northern 
outskirts of Bangkok, so far 
appears to be a poor seller and 
a drain on resources. 

Earlier profits are thought to 
hare been boosted by the sale 
of development land. This can 
be booked as a profit when 
only a down-payment is made, 
because land counts as a fin- 
ished product even under 
stricter new Thai accounting 
rules. 

However, property compa- 
nies are no longer allowed to 
book full profits on partially- 
paid property, which previ- 
ously has been used by some 
developers to prop up results. 

In the full year to March 
1994, Bangkok Land reported 
net profits of Bta.QZbtL 


By Michlyo Nakamoto 
in Tokyo 


Casio, the Japanese manu- 
facturer of watches and calcu- 
lators, reported a strong jump 
in non-consolidated recurring 
profits - before extraordinary- 
items and tax - In the first 
half, helped by buoyant 
demand for its electronic 
terminals and cost-cutting 
measures. 

Recurring profits increased 
63 per cent to Y4.6bn ($46.83m) 
from Y2J3bn, while sales rose 5 
per cent to Y166.6bn from 
YT.58.5bii. Net profit rose 122 
per cent to Y3.4bn. against 
Yl.6bn a year ago, and the 
company raised its interim div- 
idend to Y12J> from Y5.82. 


Casio said exports suffered 
from the high yen while 
domestic demand remained 
weak due to the continuing 
sluggishness of private capital 
spending. However, Casio had 
a number of successful prod- 
ucts which helped it to avoid 
the worst effects of a difficult 
trading environment 

Children's calculators, which 
incorporate a simple message 
transmission function and a 
function allowing users to 
draw pictures, were extremely 
popular. Growth in these prod- 
ucts was nonetheless insuffi- 
cient to make up for a fall in 
ordinary calculators. 

The watch division was also 
depressed by price competition 
in the market for basic 


watches, which overshadowed 
strong demand for telephone 
pagers. 

Data processing systems, 
such as liquid crystal display 
panels and products using 
LCDs, saw a sharp rise in 
demand which took sales for 
the division up 23 per cent. 

The business outlook 
remains uncertain as a result 
of the strong yen, and a recov- 
ery in the domestic market Is 
expected to be moderate. 

Casio is forecasting a 6 per 
cent rise in sales for the full 
year to Y340bn from the previ- 
ous Y322.2bn. a 63 per cent 
increase in recurring profits to 
Yl2bn from Y7.4bn and a 42 
per cent rise in net profits to 
Y7bn from Y4.9bn. 


Yamaha Motor accelerates 


Y amaha Motor said aggressive 
cost-cutting was behind a 94 
per cent jump in recurring 
profits - before extraordinary 
items and tax - for the first six 
months to September. Reuter 
reports from Tokyo. 

Yamaha, the world’s second 
largest motorcycle maker, said 
parent recurring profits soared 
to Y3.GYbn (S3Q.6m) from 
Yl.55bn a year earlier, even 
though sales were flat at 
Y223.09bn, compared with 
Y223.65bn a year ago. 

Cost-cutting measures, such 
as using more interchangeable 


parts, saved the company 
Y5.8bn in the first half, said Mr 
Takehiko Hasegawa, Yamaha 
Motor president. Strong 
exports of components to 
China and other Asian nations 
also helped, he said. 

The company forecast parent 
recurring profits of Y4bn for 
the full year to March 31. up 
9.4 per cent from a year ago. It 
would be Yamaha’s first rise in 
annual profit In four years. 

But Mr Hasegawa said the 
company believed there was 
only limited room to boost 
profits further, due to the yens 


strength against the dollar and 
an uncertain outlook for 
the Japanese and overseas 
economies. 

"We were able to increase 
our sales prices in the first 
half, but it will be hard 
to do this in the second half 
because of the strong yen." he 
said. 

Because of the yens strength 
the company has lowered its 
forecast of motorcycle exports 
to 330.000 units in the year to 
next March from a May fore- 
cast of 375,000. Exports totalled 
388.000 units last year. 


East Japan Railway (JR East), 
the railway network serving 
eastern Japan whose shares 
were listed just over a year 
ago. yesterday reported 
a decline in profits for the 
six months to the end of 
September. 

The company said the weak- 
ness of the economy had cut 
demand for rail travel from 
both business and leisure trav- 
ellers. 

Recurring profits - before 
extraordinary items and tax - 
fell by 1.9 per cent to Y72J2bn 
<S735m), on turnover dawn by 
0.7 per cent at Y988-7bn. Net 
profits fell by 1 per cent to 
Y37.8bn. 

Revenues from sales of com- 
muter season tickets were 
almost unchanged at 
Y253.3bn. with an increase in 
income from Shinkansen - the 
"bullet train’' - passes offset- 
ting a slight fall in sales of 
other season tickets. Non- 
season ticket sales fell by L2 
per cent to Y615bn. 

Property rental revenues 
rose 7.1 per cent to YlLSbn, 
while train station retail out- 
let sales were up 0.4 per cent 
to Y23-5bn. 

Expenditures were heavily 
affected again by Interest 
costs. The company reported a 
slight fall in outstanding debt 
to Y5,010bn as of March 31 
1994. The company's debts are 
mostly those incurred during a 
period of heavy losses when it 
was part of the nationalised 
Japan National Railways in 
the 1980s. 

Eveu poorer prospects for 
the second half of the year 
forced JR East to revise down- 
wards its forecasts for the fall 
year to March 1995. 

The company now expects 
pre-tax profits of YlOl.Sbn. 
compared with an earlier fore- 
cast of Y112bn and last year's 
actual pre-tax profits of 
Yll4.9bn. 

Turnover is expected 
to be around Yl,964.4bn, 
against an earlier forecast 
of Yl.968.2bn. 


SA foods group 
lifts payout 


China fund takes stake in ink maker 


C.G. Smith, the South African 
foods group, said it expected 
real growth in earnings per 
share in the year to next Sep- 
tember. Reuter reports from 
Johannesburg- 

The forecast came as the 
company announced a 12.5 per 
cent rise in earnings per share 
to 106 cents for the past year, 
and raised its dividend to 36.8 
cents from 32.7 cents. 

Attributable profit rose to 
R499.3ZH (s 141.81m) from 
R443Jm. 

C. G. Smith said significant 
progress had been made In 
repositioning the group for the 
future. 


By Tony Walker In Beijing 


Zim, a new closed-end China 
fund, has joined Sicpa of Swit- 
zerland in taking a majority 
Si6m share of the Shanghai 
Printing Ink Factory, China's 
largest ink manufacturer. The 
investment gives the foreign 
partners 70 per cent of the 
joint venture. 

Zhonghua Investment Man- 
agement. a partnership which 
Includes Kamsky and Associ- 
ates and Oppenhetmer of the 
US and Electra Trust of the 
UK is targeting companies in 
high-growth consumer Indus- 
tries for investment 

Sicpa, which is helping to 


upgrade the Shanghai plant’s 
technology, is the world's larg- 
est privately-owned ink manu- 
facturer. 

Mr Wing Keong Siew, presi- 
dent of Zim, said the company 
had assembled a 350m fund for 
investment in the consumer 
sector, but expected to increase 
the fund to some 3200m. 

Zim’s strategy, Mr Wing said, 
was to invest in unlisted Chi- 
nese companies and joint ven- 
tures. In the case of the Shang- 
hai venture it had identified an 
opportunity, introduced for- 
eign expertise and was helping 
fund technological improve- 
ments with the fast-growing 
packaging industry in mind. 


Zim is one of some 25 China 
funds that have developed over 
the past several years with an 
estimated Slbn under manage- 
ment. These funds have tended 
to invest either in the B-sbare 
market or in China-related 
stocks on the Hong Kong 
exchange. 

But in a strengthening trend 
funds are seeking opportuni- 
ties for investment in unlisted 
companies that are becoming 
more freely available as a con- 
sequence of China’s drive to 
restructure its economy. Strug- 
gling state-owned companies 
are turning to foreign partners 
for assistance with technologi- 
cal upgrading and investment. 


More time sought 
for Qantas sale 


Legislation which could give 
more time for the flotation of 
the state's 75 per cent stake in 
Qantas, the Australian airline, 
was introduced yesterday, 
writes Nikki Tail. The amend- 
ment bill extends a deadline of 
Jane 30 next year for the com- 
pletion of the share offering, 
to the end of August 
Meanwhile, the Australian 
Trade Practices Commission is 
due to announce today 
whether Qantas and British 
Airways, which holds a 25 per 
cent stake in the Australian 
carrier, should be allow to 
“co-operate" on London- | 
Australia services. 


THE 


©RSflFi 


DAVID 

T HOMA S 

PRIZE 


RED NACIONAL DELOS 

FERROCARRILES 

ESPAfiOLES 


annul a gw *enia> m*g m 


US$500,000,000 
Floating rate notes due 1998 
Unconditionally guaranteed 
by THE KINGDOM OF SPAIN 


David Thomas was a Financial Times journalist killed on assignment in 
Kuwait in April 1991. Before joining the FT he had worked for, among 
others, the Trades Union Congress. 

His life was characterised by original and radical thinking coupled 
with a search for new subjects and orthodoxies to challenge. 

In his memory a prize has been established ro provide an annual study/ 
travel grant to enable the recipient to take a career break to explore a 
theme in the fields of industrial policy, third world development or the 
environment. 


fn accordance with the 
provisions of the notes, notice 
is hereby given that for the six 
I months interest period 17 
November 1994 to 17 May 1995 
the notes will carry an interest 
rate of 6% per annum. Interest 
payable on 17 May 1995 will 
amount to US$301.67 per , 
USS 10.000 note and US$3,016 70 
per US$100,000 note. . 


Agent: Morgan Guaranty 
Trust Company 


JP Morgan 


The theme for the 1995 prize, worth not less than £3,000, is: 
DOES FREE TRADE THREATEN THE ENVIRONMENT? 


, 15 % 

off electricity 


Applicants, aged under 35, of any nationality, should submit up to 1000 
words in English on this subject, together with a brief c.v. and a proposal 
outlining how the award would be used to explore this theme further. 

The award winner will be required to write a 1500 to 2000 word 
essay at the end of the study period. The essay will be considered for 
publication in the FT. 


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CLOSING DATE JANUARY 6 1995 


BANQUE (NDOSUEZ 
US 5150000000 

Subordinated Hosting Rate Notes 

due 1938 


Applications to: 

Robin Pauley, Managing Editor 
The Financial Times (L) 
Number One Southwark Bridge 
London SE1 9HL 


Nodes la hereby given pursuant to 
tfw Terms and Conditions of the Notes 
that for the six month period from 

November 17th, 1994 to May 17th, T995 
the Notes will carry an Interest rate of 




.Mananas 


fl.70% per annum. 
On Mav 17th. 


JiBiiSSSirJSSf* 3 ™ tao ** " a 


On May 17th, TSSS Interest of 
US Sm,43G.B6 will be due per 
US 36.000,000 Note for Coupon Nolu. 

Banque (ndoauea Luxembourg SA 
Fiscal and Agent Bank 




An ' international self- 
regulating exchange should be 
set up to dear many over-the- 
counter (OTO derivatives con- 
tracts, recommends the win- 
ning entry in this year's Ames 
Bank essay competition. 

The authors. Mr David Folk- 
erts-Landau and Mr Alfred 
Steinherr. say an or 

clearing house would help 
reduce credit risk and ensure 
liquidity in the OTC market, 
where two-thirds of transac- 
tions are conducted. They 
point to the success of clearing 
mechanisms at exchanges such 
as Liffb and the Chicago Board 
of Trade. 

The essay, “The wild beast of 
derivatives: to be chained up, 
fenced in or tamed?" is one of 
two concerning derivatives 
among the eight prize essays 
published by Am ex*, which 
announced details of the prize 
yesterday. 

Both authors work with 
supra-national banks: Mr Folk- 
erts- Landau is chief of rapiftU 
markets and financial studies 
division at the International 
Monetary Fund; Mr Steinherr 
is director of the financial 
research department at the 
European Investment Bank. 

They argue the development 
of derivatives has been "one of 
the most profound structural 
developments in financial mar- 
kets since the organisation of 
limited-liability equity marbabs 
early last century." 

Advances in data processing 
and communications technol- 
ogy, combined with develop- 
ments in statistical and finan- 
cial techniques, such as 
options pricing, have made 
possible the developments of a 
range of liquid derivatives 
markets. These have brought a 
range of long-term economic 
benefits, such as better pricing 
of financial risk, 
i However, they also point to 
! shortcomings in the present 
I regulatory, accounting and 
legal framework "that was 
designed for on-balance sheet 
finance". 


Periodic balance sheet exazo- 
inations - the focus of the tra- 
ditional supervisory structure 
for ha nks - are ill-suited to 
deal with the speed with which 
both on and off balance sheet 
positions can change. .. ■- , 
Recent efforts to improve 
regulation have focuse d on 
refining- capital requirements, 
increased disclosure and more 
effective supervision- .This 
approach - although a step in 
the tight direction - does not 
come to terms with the basic 
issue - “namely that deriva- 
tive finance . . has funda- 
mentally changed the relation- 


DERIVATIVES 


ship between regulators and 
institutions in favour of the 
industry," say the authors. 

They argue that broader 
industry should learn from the 
way exchange clearing bouses 
have ensured the financial 
integrity of trades in listed 
contracts by becoming a 
counterparty. 

On the exchanges, credit risk 
is managed by marking posi- 
tions to market and by effect- 
ing settlements through the 
payment of margin and netting 
arrangements. 

By contrast, counterparties 
in OTC deals need not gener- 
ally finance margin payments, 
so 7hs>t hanire and other inter- 
mediaries selling OTC products 
can be exposed to credit risk 
off their balance sheets. 

TO make matters worse the 
systems used by banks to mea- 
sure their credit risks are 
sometimes opaque and difficult 
for regulators to police. ” 

This lack of transparency 
raises the spectre of "precau- 
tionary withdrawals of funding 
from intermediaries that are 
perceived to be experiencing 
difficulties. " the disappearance 
of liquidity, and the possibility 
of systemic disturbance. 

In addition, the development 
of the derivatives market 
means market disturbances 
can be transmitted quickly to. 


and magnified ln,-\ . other, 
markets: - , . 1\ \ * 

The authors argue that. a 
clearing house- arrangement 
for tiie bulk' of OTC .fransac-- 
tions - involving probaWy 
fewer than 20 ccmtratis. - 
would be feasible.’ , 

Although OTC products, are 
typically -regarded as offering 
customers greater- choke and 
fimd&ffity - wiiht features such 
as strike price varying accord- 
fog to- particular' needs - the; 
authors daim that timeequar- ' 
ters of the 0TG market is made, 
up of relatively simple "plain 
v anilla " contracts, such as 
interest rate swaps. . 

They estimate that if twbh 
thirds of OTC transactions 
were routed through a clearing 
house, a maximum of $80hn of 
margin requirements would he / 
needed. 

"Most of this credit would 
end up on the balance sheets of 
the rfaaring banks so that off- - 
balance sheet credit positions 
would become an-balance sheet 
credits.” Moving derivative 
trading to an exchange would 
greatly improve market trans- 
parency and .solve some finan- 
cial disclosure issues. . . 

Mr Andrew Freeman, whose 
essay “The future of finance:, 
capitalism without owners" 
waa awarded, joint second 
prize, argues that "the coinci- 
dence of the gtobalisation of 
capital flows and the develop- 
ment of derivative instruments 
is wrutermiYiiing not only the 
basis of traditi onal financing - 
regulation, but also of corpo- 
rate capitalism." 

Mr Freeman, a former Finan- 
cial Times journalist now with 
The Economist, predicts that 
companies will issue new 
forms of financial sec uriti es - 
so-called "risk participations” 

- which will the rationale of 
the joint-stock company. 


. 'Finance and the International 
Economy: The Amex Bank 
review: Oxford University Press 
£2195 


Fairfax posts strong advance 


By NDdd Tail in Sydney 


John Fairfax, the Australian 
newspaper publishing group 
which now has about 43 per 
cent of its shares in the hands 
of Mr Rupert Murdoch, Mr 
Kerry Packer and Mr Conrad 
Black, yesterday announced a 
55 per cent increase in first- 
quarter profits, to AS39.4m 
(USS29.6Sm) after tax but 
before abnonnals. 

The improvement translated 
into a 40 per cent improvement 
in earnings per share, at 5 
cents. There was a small 
A$2.5m abnormal gain from 
the transfer of some magazine 
titles to a publishing joint ven- 
ture, leaving bottom line prof- 
its at A$41-9m, against A$25.4m 
last time. 

Sales in the three months to 
end-September were up by 14J2 


percent to AS239m, while oper- 
ating costs rose by 8.7 per cent 
to A$7A3m. Interest charges 
also fell by almost A$2m to 
A$8.85m. This left operating 
profits 52L3 per cent hi gher at 
A$S&2m. 

Mr Stephen Mulholland, 
Fairfax chief executive, said 
advertising volumes had been 
“well above last year for all 
publications," although, he also 
acknowledged that there was 
“some softness" in some circu- 
lation figures during the half- 
year to September. Advertising 
volumes at the Sydney Morn- 
ing Herald and the Melbourne 
Age were ahead of last year. 

Mr Mulholland said trading 
results since September had 
“continued to be favourable". 

Release of the figures came 
ahead of today's annual meet- 
ing in Melbourne, and amid 


continued speculation over the 
implications of Fairfax's 
unstable share register. 

Mr Conrad Blade, the Cana- 
dian media tycoon, now holds 
almost 25 per cent of the 
shares, and cannot go further 
under Australian foreign 
investment rules. 

Mr Packer, the Australian 
businessman, is pegged at 15 
per cent under media cross- 
ownership regulations. 

Mr Murdoch, who. first 
acquired shares in June, is said 
to hold around 3 per cent of 
the equity, although Mr Doug 
Halley, Fairfax finance direc- 
tor, said the company was not 
currently sending out notices 
allowing it to identify share 
purchases, and could not verify 
reports of recent purchases. In 
August, Mr Murdoch’s stake 
was around 2 per cent 


This announcement appears as a matter of record only. 



October 1994 


MAGYAR HITEL BANKRT 




1 r f jT> 

•i ^ 




V fr - 


Sr:-'-: 


(return 


IS**' 




MSCU11 


nc :r 


««v*4 ..... . 




* ^ 


US $ 30,000,000 




Medium Term Loan 


Credit Suisse 


Arrangers and Lead-Managers 

Union Bank of Switzerland 


Co-Manager 

Kredietbank N.V. Dublin Branch 


Participants 

Berliner Bank AG DEUTSCH-UNGARISCHE 

- BankgeseUschaft Berlin Group - BANK AG 

DG BANK Woctfoi ■ 

Deutsche Genossenschaflsbank AktiengeseLchSt 


■ L. * • 


Credito Italiano, London Branch 


Agent 


Union Bank of Switzerland 




). 


' \ 




financial times Thursday November 17 1994 


27 




■■ 





INTERNATIONAL CAPITAL MARKETS 


Mixed demand for Italy’s 
Y450bn multi-tranche deal 


By Conner Middelmann 
pe eurobond market sorane 

backtoKfeyesterdS'.S 

tatoSS * increase in US 
rates. The dollar sector 
ted the way, with several issu- 
ers capitalizing on thanSi 
resurgence in investor demand 
kj^bort-dated US dollar paper. 

The biggest deal of the day 

?™ e . ver : was Republic of 
J“lys long-awaited multi- 
tranche Y450bn offering con- 
sistang Of Yl25bn of T9 per 
rent three-year bonds. Y200bn 
“*£**■ c f at 10-year bonds and 
YL^on of 5.5 per cent 20-year 
bonds- The three and 20-year 
portions were lead-managed by 
Daiwa and Nomura, while the 
10-year tranche was led by 
Daiwa alone. 

Dealers reported healthy 
demand from Japanese retail 
investors for the three-year 


tranche and from Japanese 
institutions and insurers for 
the 20-year tranche. However, 
most said the performance of 
the 10-year tranche was disap- 
pointing, undermined in part 
by the large syndicate group 
for this tran che, which con* 

INTERNATIONAL 

BONDS 

tained a number of non- 
Japanese houses who sold 
their allotments back to the 
lead manager soon after the 
syndicate broke. 

In the dollar sector, the Hel- 
lenic Republic launched a 
$5G0m five-year global bond via 
joint leads CS First Boston and 
Salomon Brothers. The dea l is 
due to be priced today, with an 
indicated yield spread o! 
190-200 basis points over Trea- 


suries. While some dealers 
were sceptical that Greece, 
with its BBB-/Baa3 credit 
rating (the lowest of the 
investment-grade ratings), 
would entice investors, others 
said the deal's generous pric- 
ing would attract decent 

demand. 

“The main aim of this Issue 
is to penetrate the US capital 
market." said Mr Spyros Papa- 
nicolaou, head of the interna- 
tional banking department at 
the Bank of Greece. “It is 
important for us to offer a good 
deal and get good placement, 
even if it costs us a little 
more." 

Also tapping demand for 
short dollar paper, Landwirt- 
schaftliche Rentenbank, the 
Triple A rated German agricul- 
tural bank, made its eurodollar 
debut with $250m of 7% per 
cent three-year bonds via 


NEW INTERNATIONAL BOND ISSUES 


Amount 

Coupon 

Price 

Maturity 

Fees 

Spread Book namer 

Bqromt 

US DOLLARS 

m. 

% 

(4 



% 

bp 

HRHELT 1994 - 2 (oj** 

BS 7 S 

(a) 

2014 

- 

Lehman Brothers ML 

HoJtrte Rapubde 

500 

M» 

(WR 

Nov .1999 

O 60 R 

WflMSyfl CSF 6 / Salomon BrtKhere 

Ontario Hydro 

350 

7.75 

95 . 75 SR 

Dec. 1997 

D. 1675 R 

♦ 30 ( 7 H%-S 7 } CS fast Boston 

UardwtoacMWeiie Ramanbanh 260 

7.625 

99 A 5 R 

Dec. 1997 

0 . 187 SR 

* 15 ( 7 H%- 97 ) Nomura? Sakura RreWL 

Banco damarad 

75 

1 1.8254 

99 . 9 1 R 

Nov. 1997 

1 . 00 R 

+ 425 ( 7 X 44-971 Chase investment Bank 

Cererri Terndco QuemeXc) 

BS 

1200 a 

100 . 00 R 

Nov. 1996 

0 . 75 R 

+ 4 B 7 i 4 t 91 k- 9 Q Mans Lynch mtamattonai 

Clo fnvasfmants 

SO 

9.6254 

1 COS 3 

NOV. teas 

050 

*ZiaCT-t)g) Ctttxnk mtemadonal 

Bank of South AustroBaidte 

50 

WD 

99.785 

Nov. 1999 

020 

- JP Morgan Sacuoiaa 

Y 8 N 

Fiopubdc of Itady 

125 bn 

3.90 


Dec. 1997 

0 . 30 ft 

+lOS 6 %- 97 ) DaftM Europe,' Nornn Intt. 

FtejxCfc at rtaly 

200 bn 

5.00 

09 . 54 R 

Dec 2004 

0 . 325 R 

+ 29 t 4 V >%-041 Daiwa Europe 

RspubSc at tady 

129 xi 

S -50 

100 . 00 R 

DOCL 2014 

0 . 50 R 

+®( 5 %- 14 ) Daiwa Europe Nomura ML 

Rtso Kagatai Ccap^a)§ 

lObn 

1 J 75 » 

100.00 

Noreoca 

2 SO 

- Nomura Inter rational 

FRENCH FRANCS 

Montd Lynch & Ca 

ibn 

6.125 

99 . 861 R 

Dec. 1999 

O 30 R 

+ 53 PH 9 fc- 9 ^ Menfl Lynch CapLMda. 

ECU 

Eurafimatfl 

170 

a. 125 

99.3850 

Dec. 1999 

025 R 

- 5 ( 6 % - 9 ^ Barclays da ZotoS Wadd 

LUXEMBOURG FRANCS 
Repubic of Rnland 

Sbn 

0125 

102*0 

Dec *002 

2 . DO 

Kmdkatbank 

Final term and non-caflabto unless Mated. The yield spread (over relevant government bond) at launch b nuppferi by the bod 
manager. *UrtWsd. SConvortbto. Jftoattog rote note. (Sami-annuil coupon. R fbcad nwrfter price; teas ere shown at the revrifar 
lavaL a) Household Rovotang Home Equity Loan Trust Tranche At pneed at 1 -rnth Libor 423 - 24 tip. Tranche A 2 dattda not 

Expected average ttw 3 * yrs. b) Priced today at 190 - 200 bp over Treasimsa. 4 CaBahto on 2 SY 11 /BS to par. 4 Issue launched an 7 / 11 / 

94 was Increased to S 300 m. Cnfabtn on coupon gates after 2 yre at par. dl) 3 -rmh Libor t 35 bp. m Pricing: 2471 U 94 . Catabie hare 1 / 

4 / 96 , aubiect (a 14094 teadte. at par. t) Spread retatas to French Govt Ecu STAN'S. 



Nomura, priced to yield 15 
basis points over Treasuries. 

Ontario Hydro also came to 
the three-year sector with 
S350m of 7Y. per cent bonds via 
CS First Boston, priced to yield 
30 basis points over Treasuries. 


Although some traders felt the 
pricing was aggressive, others 
reported strong demand for the 
paper from European retail 
investors. 

Dealers expect more short to 
medium-dated US dollar issu- 


ance in the near term, includ- 
ing a $300m five-year deal 
today for the Japanese govern- 
ment-guaranteed Electric 
Power Development Company, 
with IBJ tipped as lead man- 
ager. 


Treasuries fall as data-fuelled rally runs out of steam 


Suhiiiii L*?; 


By Lisa Bransten in Mew York 
and Martin Brice in London 

US Treasury prices fell across 
the yield curve yesterday 
morning after failing to hold 
on to early gains in the wake 
of positive news on inflation. 

By midday, the benchmark 
30-year government bond was 
down fi at 93%, yielding 8.061 
per cent At the short end of 
the market, the two-year note 
declined & at 99* to yield 7.099 
per cent. 

Treasuries across the matu- 
rity spectrum were unable to 
sustain an early-morning rally 
spurred by reports that con- 
sumer prices increased less 
than economists had projected. 
The Labour department 
reported that consumer prices, 
excluding food and energy, 
increased only 0.2 per rent in 
October. Analysts had expec- 


ted a 0.3 per cent rise. 

Overall, consumer prices 
grew 0.1 per cent - the small- 
est increase since April - 
bringing the yearly inflation 
rate down to 05 per cent in 
October from 3 per cent in Sep- 
tember. 

GOVERNMENT 

BONDS 

However, neither the posi- 
tive inflationary news nor 
Tuesday afternoon's move by 
the Federal Reserve to boost 
the Federal funds rate 75 basis 
points to 5% per cent calmed 
the skittish market 

Although the interest rate 
increase was larger than expec- 
ted, the market was expecting 
a rise of at least 50 basis 
points, giving the Fed move lit- 
tle impact after an Initial rally 


on Tuesday, just after the 

annoimrempTit 

Also, In its announcement on 
the rate increase, the Fed 
clearly left the door open for a 
another rise if it continues to 
see signs of inflation. Such 
uncertainty about interest 
rates may keep some investors 
out or the market for fear that 
interest instability could 
undermine prices. 

Mr Robert Brusca, chief 
economist at Nikko Securities, 
believes the market is unsatisf- 
ied with the interest rate 
increase, although be does not 
see signs of inflation. "The 
bond market loves it when bad 
things happen," he said. 

■ UK government bonds were 
buoyed by favourable inflation 
data yesterday, but other Euro- 
pean government bond mar- 
kets dipped, following US 


Treasuries down in tbe 
absence of a lead from German 
bunds due to a national holi- 
day. 

■ GUts rose & of a point and 
the December long gilt future 
closed around 1Q2& as inves- 
tors reacted to figures which 
showed year-on-year underly- 
ing retail price inflation 
unchanged at 2 per cent, and a 
fall in the public sector bor- 
rowing requirement 

Mr Michael Saunders, econo- 
mist at Salomon Brothers, said: 
“The inflation figure was bet- 
ter than everybody had been 
hoping for.” 

The March short sterling 
future rose 19 basis points on 
the day to 92.95. suggesting 
that investors now believe 
there is less likelihood of a rise 
in UK base rates from the cur- 
rent 5.75 per cent Mr Saunders 


said: "Short sterling is moving 
to price in unchanged base 
rates. I would say it looks as if 
rates are on hold until next 
year now.” 

However, this view was not 
shared by Mr Nigel Richardson 
at Yamaichi, who believes 
there may be a base rate rise 
before Christmas. He said: 
"The authorities will have to 
play it safe, and that means 
raising base rates. Everyone 
seems to accept that base rates 
will have to go up further, and 
if you are going to do it you 
might as well do it early." 

However, be remains bullish 
on gilts. “Base rate rises don't 
have to be bad for gilts. In the 
international context gilts are 
looking a very attractive prop- 
osition.'’ he said. 

■ Yields on the 10-year bendi- 
mark Italian government bond 


rose yesterday as prices fell on 
political worries. The yield 
rose 14 basis points to 12.05 per 
cent from 11.91 per cent Mr 
Graham McDevitt of Paribas 
Capital Markets said: “Tbe 
same old theme of politics and 
the budget has come back. The 
government has called a confi- 
dence vote. This is a brutal 
way of passing the budget, 
because if things go wrong it 
could ntngp tht> government to 
fall 

■ Swedish government bond 
prices also fen yesterday, with 
the yield on the 11-year bench- 
mark bond rising 17 basis 
points to 11.01 per cent. Mr 
McDevitt of Paribas pointed 
out that the yield on Friday, 
before the “yes” result on the 
referendum on Swedish mem- 
bership of the European Union, 
was 1L1 1 per cent 


China turning to 
US for financing 


By Tony Walker to Beijing 

China is likely to turn 
increasingly to the US bond 
market for external financing 
of its ambitious infrastructure 
programme, according to an 
International Monetary Fund 
survey. 

The IMF, in its report* on 
trends in international capital 
markets, reports that China 
will “place more emphasis on 
bond financing relative to bank 
ftn»Tn»mp in view of the lower 
interest rates on bonds and the 
availability of longer maturi- 
ties" 

This view is consistent with 
recent statements by a senior 
Ministry of Finance official, 
who said China planned to bor- 
row some $20fra in the next 
five years in international capi- 
tal markets. 

The IMF report says the Chi- 
nese authorities have targeted 
the US, which they view as the 
“deepest market” and the one 
most likely to produce the lon- 
gest maturities. 

This has been borne out. the 
report said, by the “recent 
elongation” of maturities in 


the dollar market to seven 
years in November 1992 for the 
People's Construction Bank of 
China, and to 10 years in July 
1993 for the China Interna- 
tional Trust and Investment 
Corporation. 

The survey says rhina was 
“quite active" in international 
markets between 1982, when it 
resumed bond Issues, and 1989, 
when capital-raising abroad 
slowed. The pace picked up 
again in 1991 and accelerated 
in 1993. International bond 
placements at the end of last 
year stood at SSbu. 

Tbe IMF is critical of China's 
“10 windows" monopoly on 
international bond issues. This 
restricts organisations author- 
ised to borrow abroad to some 
10 financial institutions. 

However, it notes that the 
authorities are experimenting 
with “necessary first steps" to 
give enterprises Independent 
access to international bond 
markets. 

'International Capital Markets: 
Developments, Prospects and 
Policy Issues. International 
Monetary Fund, September 

1994 . 


French trading house 
joins DTB venture 


By Conner Middelniann 

Trifutures, the French trading 
house, has become the second 
Paris-based participant in the 
joint venture between the 
futures and options exchanges 
of France and Germany. 

Another French company. 
Compagnie Parisienne de R6es- 
compte, will start operating 
directly from Paris later this 
month. By February 1995. the 
DTB, the German futures 
exchange, expects to have 12 
Paris-based members. 


Germany's screen-based 
DTB and France's open- 
outcry exchange, Matlf, last 
year agreed to set up a 
co-operation programme, called 
Tradeus, which took effect this 
summer. 

The first phase of the 
co-operation involved the 
installation of DTB trading 
screens in the offices of Matif 
members. The second phase, 
which allows for two Matif 
products to be listed on the 
DTB, is expected to begin at 
the end of next year. 


m advance 


- -j: 


a 















WORLD BOND PRICES 


BENCHMARK OOVERNMEIVT BONDS 

Rod Day's Week Month 

■ Coupon Date Plica change YMd ago ago 


Italy 

■ NOTIONAL ITALIAN GOVT. BOND pTF) FUTURES 
(LUTE)* Lira 20 On lOOtha of 100 % 


Austrafla 

9*00 

0*634 

907500 

+0460 

1053 

1070 

1021 


Open Sen price 

Change 

Hi* 

Low 

EsL vd 

Open bit 

Belgium 

7.780 

1004 

903200 

-0480 

031 

032 

832 

Dec 

10130 10072 

-058 

101.68 

10038 

50171 

53263 

Careda* 

6.500 

06 AM 

83.6500 

- 0*50 

9.10 

9.15 

9.11 

Me 

10037 99.78 

-056 


99.84 

933 


Denmark 

7 JXO 

ISAM 

803700 


8.79 

097 

076 








France BTAN 

OOOO 

09/98 

102.0700 

- 

7 A 7 

7.60 

733 








OAT 

0750 

10 AM 

907403 

-0180 

8.14 

016 

004 

■ ITALIAN GOVT. BOND CBTPt FUTURES OPTIONS (UFFE) Ura 200 m lOOtha of 100 % 

Gatmany Bund 

7^00 

11 AM 

1007000 

— 

740 

7-51 

7.41 








Italy 

0500 

00 AM 

81.6800 

-0830 11 . 70 T 

11 £8 

11.71 




Dec 



Japan No 119 

4*00 

06/89 

1 Q 7 JKSO 

- 0.100 

4 JJ 8 

4.10 

437 








4.100 

12/03 

95*340 

-0150 

4.74 

4.78 

439 

10060 

0.63 

188 


0.41 


2 .ffi 


7*50 

10/04 

97*400 

- 0*60 

736 

756 

7 v 41 

10100 

037 

1.67 


065 


291 

Spain 

aooo 

05/04 

61.7100 

-0090 

11-20 

1138 

11.14 

10150 

n 9 fi 

1.48 


0.98 


332 

LKOtt 

oooo 

08/99 

90-23 

+ 3/32 

8.41 

050 

043 

Eri. «L HttL Cafe B 72 Pitt 420 Previous day's epan an.. Cab 27904 Pub 34837 



6.750 

11/04 

88-00 

+ 6/32 

835 

062 

059 









a.ooo 

10/08 

103-18 

+ 6/32 

057 

060 

057 








USTreaauy* 

7*75 

11/04 

89-17 

- 8/32 

7^4 

736 

737 









7.500 

11/24 

93-16 

- 6/32 

8.08 

pna 

7.80 








ECU (French Govi) 

6.000 

04/04 

84*400 

-0280 

052 

058 

048 

Spain 







londoi ckottfr "Not York mU-dfe 




YWd* Lecaf mafc* toandml 





t Ore* tndwlne reMidUtog tw olIU par am payabto by nenmuontto 





— — — — 





Prices US, IK to 3 »rifc oarea to doctofe 





Open Sett price 

Change 


Low 

Eat. vd. 

Open int 

US INTEREST RATES 






Dec 

8739 87.12 

- 0.09 

87 80 

87.05 

55.227 

81911 


LincMfena 


Ml* MB. 


FaUmfla « UerwnBon- 


8?a 

a 


Owwrti — 
Ti <»”* — 
Tim ffonffL- 


Omyear. 


Treasury Bflb and Bond Yiekfe 
5*8 Tvojear . 


0 JL 49 


BBSS 


-an 


6035 


88.38 


1.688 


3.396 


944 Tlnayar_ 
552 ft* jew _ 
MB UHnr 
859 3 Hot 


7.10 

7.41 

758 

750 

854 


UK 

■ NOTIONAL UK GILT FUTURES (UFFE)* £ 50,000 32 nde of 100 % 


BOND FUTURES AND OPTIONS 
France 

■ NOTIONAL FRENCH BOND FUTURES (MATIF) 


□ec 

Mar 


Opan 

101-28 

100-28 


Sett price Change 
102-04 + 0-03 
101-11 * 0-04 


High 

102-23 

101-28 


Low 

101-17 

100-28 


Esl vol Open art. 
110013 101623 
2570 7887 


■ LONG QLT FUTURES OPTIONS (UFPE) £50000 B 4 tha of 100 % 



Open 

Sett pries 

Change 

High 

Low 

EsL vd. 

Open btL 

Dae 

11132 

111.18 

-020 

111.80 

11090 

175362 

129.180 

Mar 

11046 

11038 

-030 

11068 

11014 

3331 

17355 

Jun 

10932 

10832 

-020 

10834 

108.62 

52 

3304 


Sufce 


CALLS 


PUTS 


Pries 

Dec 

Mar 

Dec 

Mar 

102 

0-37 

1-34 

0-29 

2-12 

103 

0-12 

1-07 

1-04 

2-49 

104 

0-02 

080 

1-58 

3-28 


Ear. <ML toM. Cl*s 961 B Puta 44 S 1 . Preulna fey* Open W- Ctob 76617 Putt MOT 


■ LONG TERM FRENCH BOND OPTIONS (MATIF) 


Strfsa 

Price 

Dec 

- CALLS — 
Mar 

Jin 

Nov 

— PITTS — 
Dec 

Mar 

Ecu 

110 

111 

112 

113 

114 

130 

059 

0.17 

035 

031 

133 

□32 

062 

037 

233 

014 

039 

098 

1-48 

137 

234 

2 J 8 

■ ecu BOND FUTURES (MATIF) 

Opan Sett price 
Deo 81.40 81.18 


• 0.20 


High 

81.48 


Low 

81.00 


Est vd. Opan tnL 
3405 B.B93 


. total, MS 27588 Pott SWOT . Prerioue <W Open MU CMS 288552 PUB Z7929S. 

Germany 

■ NOTIONAL rea MAN BUND FUTURES QJFFET 056250000 IQOtha of 100 % 


us 

■ US TREASURY BOND FUTURES (C 8 T) $ 100,000 32 ndB ol 100 % 


Dec 

Mar 


Open Sett (rice Change rtgh Low Eat vd OpentnL 

9058 90.17 -048 9070 8012 ' 15 S 379 174941 

89.72 8031 -045 8078 8950 4488 31648 


Dec 


Jun 


Opan 

Latest 

Change 

High 

Low 

Est. vol 

Open tot. 

97-14 

97-19 

- 04)4 

98-08 

97-14 

322.156 

391301 

97-03 

96-31 

- 0-04 

97-20 

9630 

9.550 

53.968 

96-19 

96-13 

+ 0-03 

97-00 

96-13 

2 S 5 

11.907 


■ BUMP RUUHfiS OPTIONS flJFFB PMSSOJOP potato cT 100 % 

Strike — 

Plica Dec 

9000 052 

9050 028 

MOD 014 

at yot tort, 0 * 1 17198 Putt 12116 . Prnvtoua dvy*» open MU Cafe 204814 Pin 230214 


Jan 

CALLS — 
Fab 

Mar 

Oec 

Jan 

PUTS 

Fab 

Mar 

063 

082 

038 

035 

1.22 

131 

137 

038 

063 

079 

0.61 

135 

132 

138 

024 

047 

062 

097 

133 

2.16 

231 


■ NOTIONAL LONG TERM JAPANESE GOVT. BOND FUTURES 

(UFFQ YIQOm IQOths of 100 % 

Open Close Change High low Eat. vd Open inL 
Dao 107.82 10756 107.75 612 0 

Mar 107.09 107.19 107.07 2480 0 

- LITE ua M HUtt raefad on APT. A 1 Opan tnuran Dee. an tot prmua day. 


UK GILTS PRICES 


eSd — IflM — 

Had PitoaE + nr- W» 


M 


Bid- - 19 & 4 - 

Rad R*aE+w- H* La* 


Homs 


(3 West 


. 1994 - 

» Ls 


Starts £UNMpNHwTWn| 

TMBOpclWtt 439 

12 pc 7896 . 


1157 


amapcaarttBWS— 

IIFapc 1895-;— 

Treni2%fBiMS£— - 

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Treas 13 * 41 * 1887 # — 11 -g 

BAKU «*1W I* 

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■wst= a 
KSSSSSs: , | 
JSSIset: 58 

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Tmtt I0%PC1899_ 

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104 

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SSA 


177 

651 


OnariaiilfapcttH- M® 

TrseiBB ft* 1669 — ■ 

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awBic2om#_ — - 
Trea 13 pc 2 « 0 — — 

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1051 

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7*1 

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831 

426 


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5*8 itni 
M2 98% 
852 10215 
8*8 10553 

659 107 % 
7.10 111 % 
7.18 1080 
7*2 104 % 
7.78 BSA 
7 . 7 * 11 ® 
754 105 H 
80 S 101 J 
8.13 117 U 
826 
854 

828 

840116%* 
832 123% 
142111JW 

840 1030 
MS 1130 

847107*2)8 

841 60% 


0 * 3106 %*! 

848 W» 
848 1i 
884 11! 
865 1 
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870 IDS 
863 BBJW 


1830 

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1 D 7 JJ 

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nw 
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48 1010 


ioo& 
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97% 
102 % 
105% 
107% 
110 % 
1068 
1038 
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104% 
1008 
1166 

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102 S3» 


h*d0(3%ac 1SB6-4 — 4.73 750 748 tj, DV 

OnMWB)9%pc20M— 899 Ml IB* *0 1258 101 U 

-nHS6%peZ004i* 7.88 3*6 88*8 105% 846 

8%pc2006 8*3 8*4 906 *% 1008 97 

0oar9%pc2005 855 8*0 1088 +% 1»*z 102% 

TMa12%5C 2003-5 — 1028 US 121 W +& 1«i 118% 

7%pc2D0e« 3*3 3*4 348 +A 1120 90% 

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FT-ACTU ARIES FIXED INTEREST lifl»CES 

Accrued 


FTice Indces 
UK Gits 


Wed 
Nov IS 


Day's 
change 56 


Tbe 
Nov 15 


xd acfc 
ytd 


— Low coupon yield BMdun coupon yield Wjpt coupon yield — 

NOV 18 Nov IS Yr. ago Nov 18 Nov 15 Yr. ago Nov 16 Nov IS Yr. ago 


1 

Up to 5 years (24) 

120.08 

+0.18 

11936 

135 

933 

Syrs 

045 051 831 052 

058 026 064 068 

639 

2 

5-15 years (23) 

13833 

+024 

138.58 

1.75 

11.48 

15 yrs 

8-45 048 638 056 

060 731 831 084 

7.19 

3 

Over 15 yass (8) 

158.75 

+030 

15639 

2.65 

1087 

20 yra 

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8.00 7.06 071 075 

731 

4 

toadeemabieG (6) 

17833 

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175.78 

038 

1047 

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5 

Al stocks (81) 

137.22 

+024 

13630 

134 

1033 


inflation 5% 

Inflation 10% 


kidmc-Mced 







New 16 Nov 15 Yr. ago 

Nov 16 Nov 15 Yr. ago 


6 

Up to 5 years (2) 

18029 

+003 

18633 

062 

537 

Up to 5 yra 

333 4.06 234 

237 2.97 1.15 


7 

Over 5 years (11) 

173 96 

+007 

17333 

1.07 

436 

Over 5 yra 

334 3.87 336 

3.84 339 237 


8 

Al stocks (13) 

17438 

+007 

17434 

133 

4.41 


— 5 year yield— — 

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*/- 


Debenture* and Loans 


9 Debs & Loan* (77) 128.17 40JS 127.71 2^8 082 8*8 962 7*6 9*5 9.S9 

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9*8 


018 


FT FIXED INTEREST INDICES 

Nov 18 Nov 15 NOV 14 Nov 11 Nov 10 Yr ago H^i' Lour 

Govt. Sacs. (UK) 91*9 91*3 91*2 91.03 91.45 103*4 107.04 B9*4 OK Edged 

Fixed Interest ioa22 107*2 107*6 107*2 107*4 123.78 133*7 108*0 5-day 

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2B and Foed meres 192& 6E acthfey hdtoes redmad 1074. 


GILT EDGED ACTIVITY INDICES 

Nov 15 Nov 14 Nov 11 


Nov 10 


Nov 9 


93A 
83.0 

13187 N1/1/B8 . 1 


75* 60* 91.8 84.0 

804 81* 82.4 81* 

I SOS3 <371/751 . Baafa 100: Oownvnanl Becomes 1 VI V 


FT/ISMA INTERNATIONAL BONO SERVICE 


Leted are ttm lateri hmnBond borett tx «Mch thpe to an adequate secondary mxM. Lataat pdcas at TflO pro on Nmembar IB 

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O The Frarere Una UL iw. Ftapoducdoi to ateta er n part n ary wrn rw parow e d tool mcen cornea Dm svpfed by Ife mri fa nd Saute Madox UnnnrttLiL 






FINANCIAL TIMES THURSDAY NOVEMBER 17 .994 


COMPANY NEWS: UK 


Hambros halved after 
£23m rise in costs 


capital may Land Securities’ 

seek all four .... 


shares fall 2% 


0 P 11 " 1 


By John Gapper, 
Banking Edtor 


Hambros, the merchant banic 
and financial services group, 
said it had no plans to lay off 
staff despite a £23m increase in 
costs which contributed to a 
near-50 per cent fall in interim 
profits. 

The company, which warned 
last month that the outcome 
would fhll below expectations, 
announced a drop from £39_5m 
to £ 21 3m in pre-tax profits for 
the six months to September 
30. 

Dealing profits fell £5m to 
Elfl-lm, but operating income 
rose from £ 2 00 m to £2 10 m 
despite market turmoil. 

Expenses rose from £145.7m 
to £168.4m, bat the company 
said that more than half that 
amount was accounted for by 
new activities and acquisitions. 
All costs were being examined 
“with the thoroughness that 


market conditions demand". 

Sir Chips Keswick, joint dep- 
uty chairman, said expenses 
had risen by £X5m in the mer- 
chant bank, where profits fell 
from £383ra to £22.6 hl How- 
ever. £8m of this rise came 
from Investment In new busi- 
nesses such as a private bank 
in Zurich. 

The remaining sum was 
largely because of a 6 per cent 
pay rise In ApriL “You could 
say that was a misjudgment. 
but at the time it looked rather 
reasonable," said Sir Chips, 
who said there were no plans 
for cuts among the 4,500 staff. 

Provisions for bad debts rose 
from £3.4m to £7.3m while prof- 
its from direct investments 
rose to £7.lm (£4.im), mainly 
because of a sale of Scotia 
shares. 

The interim dividend Is held 
at 4.5p, payable on earnings 
per share down from ll.Tp to 
43p. 


The shares closed I3p up at 
235p, partly because pre-tax 
profits were at the upper end 
of last month's estimate of 
between £18m and £23m. 

As disclosed in August, 
Hambro Countrywide, the 
estate agency chain, incurred a 
£750,000 loss compared with a 
£13m profit 

The ch a i n has grown to 750 
branches - or 6 per cent of the 
market - after acquiring 
Nationwide Estate Agents. 

Mr Christopher Sporborg. 
deputy chairman, said the 
chain aimed for a 10 per cent 
market share. That would be 
an “extremely profitable" busi- 
ness if the bousing market 
recovered to an average level 
of more than 1.3m transactions 
a year. The bank said the 
increase in tbe estate agency 
network should increase the 
number of insurance policies 
underwritten by Hambro 
Guardian, its insurance arm. 


regional 

licences 


By Simon London, 
Property Correspondent 


By Raymond Snoddy 


The Financial Times 
plans to publish a Survey on 


Latvia 


on Friday, November 18. 


The survey win be seen by leading international business people in 160 
countries worldwide. If you would like to promote your organisation to 
this Important audience please contact 


Patricia Surridge 
in London 

Tel: (071) 873-3426. Fax: (071) 873-3428 


FT Surveys 


Capital Radio, the largest 
company in the commercial 
radio sector, said yesterday 
that it might apply for all four 
of the regional licences to be 
advertised by the Radio 
Authority. 

Tbe suggestion came from 
Mr Richard Eyre, Capital's 
managing director, as be 
I announced pre-tax profits of 
£22.2m (£ll.7m), including 
£-J.23m from the disposal of 
operations, for the year to 
September 30. 

Capital would be unlikely to 
win all of the uew licences 
covering 7m people in 
the Yorkshire area. East 
Anglia, the east Midlands and 
the Solent but its interest 
shows a determination to 
expand. 

Capital, which has stations 
in Birmingham and the south 
of England as well as London, 
also made it clear yesterday 
that it was interested in major 

conurbations and that new 

licences were unlikely to 
satisfy* its ambitions. 

Under the points system for 
limiting the concentration of 
station ownership. Capital has 
the leeway to buy a number of 
new licences or even a 
national commercial station in 
the unlikely event that one 
became available. 

Mr Eyre ruled out 
diversification outside tbe 
radio industry*. 

Capital, which said its 
stations were now all number 
oue in tbeir markets, 
increased annual turnover by 
44 per cent to £51. 7m (£36m). 
The increase inclnded the 
effect of acquisitions and 
disposals. 

Earnings per share more 
than doubled to 22.8p (U.3p». 
The final dividend of 5p makes 
a total of 7.25p (5.75 p» for tbe 
year. 

Mr Ian Irvine, chairman, 
said yesterday tbe new 
financial year had begun well. 
He conceded, bowerer. tbat 
staff costs had risen as more 
people had been taken on for 
the sales organisation. Media 
Sales & Marketing. 


Shares in Land Securities fell 2 
per cent yesterday to 606p as 
the UK's largest property- com- 
pany said that it was increas- 
ing development activity and 
warned of lower profits as a 
result. 

The company plans to spend 
up to £3o0m over the next two 
to three years, the first boost 
to its development programme 
since the late 1980s. 

Land Securities does not cap- 
italise interest on develop- 
ments. so profits will be 
reduced by higher interest 
charges until the new 


buildings are occupied. 

In the six months to Septem- 
ber 30, Land Securities made 
an unchanged pre-tax profit of 
£li8.9m. After stripping out 
property trading profits, the 
figure increased by £ 2 . 9m. 

Mr Peter Hunt, chairman, 
said that interest charges aris- 
ing on development would 
make it difficult to match this 
result in the second half. 

He added that demand for 
business space was still patchy 
with no general increase in 
rental levels, although modem 
office buildings in good central 
London locations were already 
achieving higher rents, as were 
prime retail buildings. 


The -interim dividend Is 
increased by 3.8 per cent to 
6.85P. 

Analysts said this was disap- 
pointing, set against growth 
prospects available elsewhere 
in the sector, even allowing 
that Land Securities did not 
cut its dividend during the 
downturn. ’■ . . 

Acquisitions in the period 
amounted to £75m. ma in ly in 
the retail and industrial sec- 
tors. Mr Hunt said -that scope 
for. further acquisitions was 
now limited. 

Land Securities' develop- 
ment programme includes the 
construction or refurbishment 

of 600,000 sq ft of offices in 


central London, of which 45 
per .cent has been pre-let to 
tenants. 

The company is also proceed.' 
mg with tbe 600,000 sq ft- White - 
Hose Shopping . Centre oatslde 
Leeds, which is being jo&fiy 
developed with Evans of.Ee&b 
and Yorkshire Water. /* ; - :• 
The project will cost , about 
£ 100 m and three quaitas of 
the rental Income from the fin- 
ished scheme win accrue to toe 
company. -V - ' 

Net rental income for -the 

half-year increasedfrom naan 
to n985m. . : . ' 

Adjusted earnings per share 
advanced from \16.64p to 
16£lp. “ ■ ' ' : 


'S. 


Tax concession for ‘Dutch mixers' 


By Jim Kelly, 

Accountancy Correspondent 


UK multinationals with subsidiaries in tbe 
Netherlands through which they channel 
US dividends appear to bave won a vital 
concession over their status ahead of a 
new income tax treaty-. 

Ernst & Young, the accountants, said an 
announcement by the US Internal Reve- 
nue Service at a conference of the Ameri- 
can Tax Institute could radically reduce 
the treaty's impact on UK companies with 
so-called “Dutch mixers". 

The number of multinationals using 


Dutch mixers is unkn own, but Ernst & 
Young said it had notified 100 of the IRS 
statement arid was urging them to apply 
for tax relief. The accountants estimate 
that without the IRS concessions, UK mul- 
tinationals could have faced doubled tax 
bills on dividends from US su b s id iaries. 

Mr Chuck Merriman, internal tax part- 
ner with Ernst & Young, said: “Although 
no blanket relief will be granted by the 
IRS for all UK mixer companies, this is 
certainly a positive indication from the 
IRS that ruling requests will be seriously 
considered. " 

The US-Nether lands income tax treaty 


comes into force on January I and is in 
part designed to stop “treaty shopping^ by 
e xcluding some m n ttinat f o na l s -froth reap- 
ing the benefits of tax concessions. 

UK multinationals use Dutch mixers to 
maximize their UK tax credits by blending 
the flow of dividends from overseas sub- . 
sidiaries which cany differing levels of tax 
at source. 

Several applications for discretionary 
relief have been made under Article-26 (7) 
of the treaty. Mr Merriman said the IRS 
had indicated that tbe results of two cases 
were near and that they would "be favoura- 
ble to the applicants. ' 


Steel side 
lifts Adam & 
Harvey 


To buy back or pay out 

David Wighton examines the distribution of cash piles 


Adam & Harvey, the 
) international distribution and 
j steel stockholding group, lifted 
! pre-tax profits by 11 per cent 
• from £2.55m to ££.82m in the 
i six months to September 30. 

I Turnover rose from £ 21 . 3m 
I to £23.8m. Earnings per share 
i improved from 34.jp to 39.6p. 

1 Mr Gerald Stuart-Lee. chair- 
i man. said the profit increase 


B oots’ decision, to spend 
more than £500m buying 
in its shares has fuelled 
a fierce, if arcane, debate about 
the best way for companies to 
reduce excess cash holdings. 

Boots is following a trail 
blazed by the regional electric- 
ity companies which have 
spent more than £750m buying 
leek their shares over the Last 
year. Last month East Mid- 


resulted from a strong perfor- ‘ lands Electricity took a differ- 
xuance in steel stockholding, j ent tack by paying out £iS6.5m 


i “As a whole the group contin- 
i ues to trade profitably." The 
! group had benefited from 
: moves towards free market 
I economies in Africa, he added. 

The interim distribution, 
which will be paid a s a foreign 
income dividend, is up from 6p 
1 to 8.5p. 


ADVERTISEMENT 


EMRC AWARDS 1994 

GHANA COMMERCIAL BANK: Helen K. Lokko, Managing Director 


Ghana Commercial Bank was one of the 
winners of the 1994 Euromarket Award 
in the EMRC Autumn Conference. 
Mrs. Lokko received the Award on behalf 
of her Bank for introducing innovative 
techniques and for being in the forefront of 
commercial banking in Ghana. As the 
largest commercial bank in that country, the 
Bank is very much at the centre of the 
many exciting economic developments in 
the country. 

Mrs. Lokko is very proud of her bank's 
contribution to the economic development 
of Ghana. 

"Ghana Commercial Bank is involved in all 
aspects of the Ghanaian economy. Since it 
was set up in 1953 it has grown from 
strength to strength. In 1953 it had one 
branch and assets of (Ghana Cedis) 
GHC3.I3 million, in 1991 total assets 
stood ar GHC330.I20 million rising to 
GHC345.255 million In 1992 and 
GHC596.566 million in 1993 with 145 
branches scattered all over the country. 
Through the long years of its existence, 
die Bank has extended credit to all sectors 
. of the Ghanaian economy and 1 believe that 




Helen Lokkv presenting (he international acilvitiev of GIiwhi commercial Bunk to i hr u\ er 2U0 
purricipuhna businessmen, industrialists and bankers- 


the Bank has contributed enormously to 
Ghana's economic development." 


Ghana Commercial Baskin the forefront 
of Gh.w\'s economic development 
In many ways, the history of the Bank 
parallels Ghana's economic annals. At its 
inception, the Bank extended credit to all 


EMRC is organising in Brussels , 
capital of Europe, the next 

RBQPMIMAWH RESEARCH CBOB? International Event: 

EUROMARKET AWARD 1995 

February 16-17, 1995 - 

Business opportunities in EUROPE specially designed for 

EAST EUROPEAN and AFRICAN COUNTRIES 


sectors of the economy to stimulate socio- 
economic expansion but particular 
emphasis was placed on agriculture with 
funds being made available to many 
fcrmerc to acquire input and invest in new 
agricultural technology. Industry was not 
ignored and facilities were provided for 
construction of factories and roads. 

Today, the emphasis has shifted somewhat 
to industry in order to support the rapid 
industrialisation in whal is now West 
Africa’s most dynamic and fastest growing 
economy. 

The Bank is still very active in promoting 
the cocoa industry which is one of Ghana's 
most important single economic activity 
and a large foreign currency earner. The 


Bank neiertheiess finances small scale 
farmers and entrepreneurs, commercial 
companies cocoa exporters, etc. 

The Bank's activities have made it not only j 
Ghana'- largest commercial bank but also ] 
one of ihe large-t banks in West Africa. It 
also has a very actixe and competently 
managed branch in London which deals 
with the Bank's extensive worldwide 
international activities. 

Under the country's Economic Recovery 
Programme, the Bank has undergone 
restructuring. Its operations have been 
streamlined and improved and its branch 
network has been rationalised- 
Computerisation is in earnest and the Bank 
is already on SWfFT. Also, vigorous staff 
training programmes are being implemented. 
The Bank's dynamic growth and stable 
Husiness base give rise for future optimism. 
The Bank, which is owned by the 
Government of Ghana, will be partially 
privatized and 60^ of its share capital is to 
be floated in the Accra Stock Exchange. 

In the past 40 years, il was found necessary 
for the Government to be the principal 
shareholder. Ghana had a developing 
economy and the Government's active 
involvement in the economic process was 
essential. 

In recent years, however. Ghana has veered 
to a free economy with a stable economic 
base. The Government's active involvement 
in the economy has therefore become less 
crucial. 

Juan Dr Li Rot u 


■ as a special dividend, 
j Both methods have their 
| pros and cons, most of which 
! relate to tax. 

One advantage of the special 
i dividend is that its tax treat- 
[ menr is certain. East Midlands 
j obtained prior clearance from 
! the Inland' Revenue, which said 
the payment would be treated 
like an ordinary dividend - 
j having a tax credit attached 
I worth 25 per cent of the pay- 
ment. Tax exempt sharehold- 
ers. including pension funds, 
can reclaim the tax credit from 
j the Inland Revenue. The com- 
j pany pays the same sum bo the 
Revenue in advance corpora- 
tion tax which it can then set 
against its mainstream corpo- 
ration tax bflL 

In theory, if a company buys 
back its shares directly from 
investors most of the sum 
received is treated in the same 
way. But this only applies if 
the company buys the shares 
in the market or through a 
stockbroker acting purely as 
an agent. If it merely buys 
them from a market maker, as 
some of the electricity compa- 


nies did, there is no tax benefit 
far the shareholders. 

There is another potential 
snag . The Revenue has given 
no commitment that share- 
holders accepting repayment 
will get their tax credit and it 
can refuse to pay if the inves- 
tor sold for tax reasons. 

Tax experts believe It is 
likely that a few institutions 
who took advantage of electric- 
ity buy-hacks may fell foul of 
this rule. Those who sold 
shares to the company only to 
buy them hack in the market 
are particularly vulnerable. 
The Revenue could easily 
argue that the institution acted 
purely to get the tax credit 

But buy-backs are more tax 
efficient, assuming institutions 
get their tax credits. 

In most recent examples the 
companies' brokers merely 
stood in the market buying' 
shares until the money had 
been spent Knee the tax credit 
is only available to non-taxpay- 
ers, they buy most of the 
shares. Tim total amount 
claimable from the Revenue 
will therefore be almost 25 per 
cent of the purchase price. 

Yet a special dividend goes 
to all shareholders. Basic rate 
taxpayers get no credit, while 
top rate taxpayers face a bill of 
20 per emit of tbe dividend. So 
the total net flow from the Rev- 
enue to shareholders is likely 
to be less. 

Supporters of special divi- 
dends counter that they are 
more equitable than buy-backs 
where only institutions are 
offered the chance to sclL But 


because of their different tax 
statuses shareholders do not 
receive equal value from divi- 
dends, while under a buy-hack 
all shareholders receive the 
benefit of the changed capital 
structure. For example, 
because of the different tax 
treatment of interest and divi- 
dends, analysts calculate that 
by switching £500m of its capi- 
tal from equity to debt Boots 
will boost its post-tax profits 
by more than £i0m a year. 

Most observers agree that 
Renters adopted the ideal solu- 
tion last year, h distributed 
£350m to shareholders by offer- 
ing all of them the opportunity 
to sell part of their holding. 
Not only did the company treat 
shareholders equally, it gave 
them the option of receiving 
cash or enhancing their invest- 
ment. It also gave investors 
time to decide in contrast to 
what has been described as the 
“unseemly scramble" over 
Boots’ buy-back. 


U nfortunately the Reve- 
nue has since refused 
to give any other com- 
pany clearance for such a 
scheme. If there is an interval 
between the announcement of 
the buy-back and the closing 
date, the market price could 
rise above the offer price. So 
shareholders who accept the 
company's offer, rather than 
sell in the market, are clearly 
doing so for tax reasons. A way 
around this is unlikely to be 
found before the Budget which 
is expected to change the taxa- 
tion of dividends. 


Associated 
British Foods 


The Chairman reports. 


" An encouraging feature of our company s results chis year is rhe 
£33 million. 12 per cent, increase in operaring profits ar a rime 
when heavy competitive pressure continues at home and overseas." 


“Our United Kingdom manufecruring divisions increased profits by 
1 1 per cent ro £222 million ... British Sugar has again contributed 


if your company is successful on the European market and you wish to 
further develop Its potential ; the EMRC Conferences are the ideal place to 
meet with business people and European organisations. 

Registration of nominees for the '‘Euromarket A ward 1995" has started. 

For more information on EMRC Conferences and Events, please contact 


EMRC INTERNATIONAL ASSOCIATION: 

Av. Louise, 287 - 1050 Brussels - Belgium ! 
Tel: (00.32) 2.646.53.40 - Fax: (00.32) 2.640.69.45 j 


TATPROMSTROYBANK: Rafael Mingazov,, Chairman 

John Benson 

I Ml Rafael Mingazov. Chairman of ihe Rafael Mineazov considers the bank's 


M l Rafael Mingazov. Chairman of ihe 
Board of Talpromsiroybank is the 


Financial Stability - The Main Policy 

Z htpromsiroybank finances private 
companies in many fields of business and 
in many ways ii can be dubbed the business 
bank of ihe Republic. 

Despite its involvement in the profitable 
business world, ihe bunk is also assisting 
small businessmen and households with 
credits and other banking services. 

The bank's management regards, financing 
small businesses as one af the potentially 
more important aspect of their activities, the 
grass roots of future economic growth. 
The bank's broad base of operations provides 
it with a stable financial bake which is one of 
the more positive aspects. Since the 
economic reforms in the Russian Federation 
the number of banks has mushroomed to 


between two and rhrce thousand. Banks open 
and most of them close. That is one of the 
reasons why ii is so important for people 
working with banks taking out loans or 
depositing money io work with reliable and 
trustworthy banks such as Talpromsiroybank. 
Rafael Mingazov who was the Minister of 
Finance of the Republic during the years 
1982-1986 uses his contacts not only to 
promote the bank but also to promote' the 
economic interests of the Russian Federation 
in general and the Republic of Tatarstan in 
particular. During his sojourn in Brussels for 
the EMRC Award ceremony he took the 
opportunity noi only to conclude valuable 
business deals but also to interest Western 
financiers and business people to invest in 
the Russian Federation and In Tatarstan. 


excellent results.' 


“Retail companies produced profirs sharply higher.” 

"Our net cash resources increased by £109 million to £610 million.” 
‘Dividends .... increase by 7 per cenc.” 


Garry Weston 
Chairman 


SUMMARY OF RESULTS 

tAIl «ured in Accordance with FRS}> 


52 weeks to 
17 Sept. 1994 
£ millions 


53 weeks to 
18 Sept. 1993 
£ millions 


proud recipient of the prestigious EMRC 
Award. As head of one of the Russian 
Federation's large commercial banks and 
the largest bank in the Republic of 
Tatarstan Mingazov is a busy man. 
Tatpromstroybank is today a power house 
of activity and one of the pillars of the 
Republic's economy. The bank which in 
its present set up was founded in 1991 has 
12 branches scattered all over Tatarstan 
and a remover of 7.5 trillion roubles. 


growth as ail important for the financial 
stability of Tatarstan. ”We are an 
essential part of the economy of this 

country. Our economy, like that of the 
whole Russian Federation, is based on 
the principles of a market economy. As 
such, the important task of financing the 
economic development of the country 
rests with the private bank and in this I 
believe that our bank is in the forefront of 
financing economic development in our 
Republic.” 





Turnover 

Operating Profit 

Profit before taxation 

Profit attributable to the company 

Ordinary Shareholders’ Funds 

Interim dividends pet share 


4,478 

306 

324 

255 

■2,090 

16.0p 


4,386 
273 
338 
228 
1,878 
15. Op 


y . . 

- 1 •' • 


The above figures relate to die ongoing business and are an „r rJ rr u 

and accounrs, sent to shareholders on 16th November 199 ^ AmiUai Kporr 


Rafael Mingaw holding rhe "Eunmurket Awunl" Trophy, with u eroup of Russian bunkers. 


Associated British Foods pic 
Weston Centre, 68 Knighrsbridge, London SWlX 7LR 


J31 tWj 


) : 




[■•rnciini 


financial! Tii 

PnMsha* 



8lllb 






■ s 

III* - 

*r-.- 


W - 




1. 






! - - * r: m < 


wixeu 



U 


^ancial times 


THURSDAY NOVEMBER 17 1994 



29 


COMPANY NEWS; UK 


CSI plans relaunch as Saltire 


By Simon Davies 

C®m°n Street Investments, a 

groonymo 11 * With the 

of the late 

JuS; is to disappear from the 
SJS? ® xchiU >ee lists after a 
change that accompanies 
a substantial acquisition and a 
^ocial restructuring. 

Yesterday's announcement 
represents a relaunch of the 
mmi-conglomerate, whose 
P 1 ^ has fallen from a 
Peak of 4Q5p in 1987 to yester- 
day s I3p, following a disas- 
trous expansion policy. 

The company is to change its 
name to Saltire, to reflect the 
change. 

CSI is launching a i-for-i 
rights issue at I 2 p per share 
raising £10An to fund the cash 
dement of the £i6m acquisi- 
tion of Maplin Electronics, a 
consumer electronics distribu- 
tor and retailer. 


CSI’s existing £25.8» con- 
vertible prpfrr g n c e shares are 
also being restructured, with a 
substantially reduced coupon. 
This will cut the preference 
dividend burden £r cm n. S 1 * 1 a 
year to a peak of £Ll3m. 

Deferred preference divi- 
dends of £5m will be cancelled, 
although holders, primarily the 
Bank of Scotland, are rewarded 
with 20.5m new bonus scares. 
This enables CSI to resume 
ordinary dividends, and Mr 
Tom Long, chairman, was 
“hopeful that we will pay a div- 
idend from the 1995 results”. 

Maplin represents a fit 
with CSTs Altai. They source 
si m ilar products, but serve a 
different customer base. 

With the combined buying 
power of the two companies, 
cost benefits should accrue 
immediately. 

Maplin is expected to make 
profits of in the year to 


CSI - ■ 

Share price (pancoj 
35 * — - 



Source: FT GrapHta 

June 1995, which would put the 
acquisition on a prospective p / 
e of 9. 

CSI is paying £9£5m cash, 
£2.6m in new shares and a 
further £3. 55m earn out, 
assuming Maplin hits the 
profit target 


The enlarged group will have 
£27.5m of debt, representing 
gearing of 114 per cent, but the 
sale of non-core businesses 
would substantially reduce the 
figure. 

Maplin was 44 per cent 
owned by Brown Shipley Ven- 
ture Capital, with the remain- 
der held by senior manage- 
ment. 

• COMMENT 

CSTs management is adamant 
that there are no more skele- 
tons amid its residual non-core 
s ubsidiar ies, and the rationale 
for its acquisition looks sound. 
Robert Fleming expects the 
enlarged group to make a 
£7.5m pro-exceptional profit in 
1995, putting the shares on a pi 
e of 6.5. At this level, the 
shares look attractive, 
although it will take time for 
the management to rebuild the 
group's tarnished image. 


Boscombe transformation 


Boscombe Property is to 
become mainly a residential 
property management com- 
pan y thro ugh the acquisition 
of Newcrest Management Ser- 
vices. 

Consideration is cam, satis- 
fied by £1.88tn cash and the 
issue of LI3m shares at lOOp. 

Boscombe has applied to join 
the Official List and , following 
the reverse flotation, plans to 
change its name to Residential 
Property Trust 

It is also proposing to subdi- 


vide and convert every two 
existing ordinary shares Into 
85 new ordinary and 15 
deferred shares. The preference 
will be subdivided and con- 
verted into one new ordinary 
and 49 deferred shares. Hill 
Samuel Rank will place a nom 
ordinaries at loop each. 

Boscombe also announced a 
drop in pre-tax profits from 
£820903 to £93971 for the half 
year to September 30. 

Mr Stuart McDonald, chair- 
man, said the results were the 


first interims following the dis- 
posal of San Remo Towers in 
August 1993 and as such repre- 
sented "a satisfactory return 
from the investment properties 
retained". 

Gross rental income was 
£80,058, against £358^259 which 
mrlnfteri £279,215 from discon- 
tinued operations. Earnings 
per share were 47.6p (219.2p). 

Newcrest made pre-tax prof- 
its of £309,678 in the half year 
to end-September and had net 
assets at that date of £230,794. 


15% rise at Prop 
Partnerships 

Property Partnerships, the 
developer and hotel owner, 
announced a 15 per cent rise in 
pre-tax profits, from £994,000 to 
£Ll4m, in the six months to 
September 30. 

Turnover grew to £3. 5m 
(£3. 19m). At the operating level 
the hotels side contributed 
£416,000 (£238,000) while prop- 
erty investment gave £839,000 
(£845,000). 

The interim dividend is 2.7p 
(2.6p), payable from earnings of 
7.44p (6.5p) per share. 


Eurocamp’s dash for cover 

Michael Skapinker reports on the offer of an alternative to canvas 


I t was raining on the C6te 
d’Azur as Mr Richard 
Atkinson, managing direc- 
tor of Eurocamp, showed visi- 
tors around the 1,400-apart- 
menl wimple* he is offering in 
his brochures. 

The surrounding sea and 
rnrawiteim did little to lift the 
gloom, but there was one com- 
forting thought: at least we 
were not sheltering in tents. 

Mr Atkinson, who joined 
Eurocamp in 1976 as a camp- 
site attendant and led a man- 
agement buy-out In 3988, real- 
ises that not all holidaymakers 
share his enthusiasm for can- 
vas. “Let’s face it, not every- 
body fancies going camping,” 
he says. 

Eurocamp, Europe’s leading 
self-drive camping operator, is 
increasingly promoting alter- 
natives to tent holidays. It is 
attempting to raise sales of 
mobile home packages and last 
month launched a new brand. 
Euro Villages, which offers holi- 
days in 20 French apartment 
and studio resorts. 

The strategy follows a .sharp 
faB in profits and margins in 
1993 - a shock for a company 
which had enjoyed four years 
of Impressive growth. 

In 1968, the first year after 
the buy-out, pre-tax profits 


were 23.6m. By 1992, the year 
after Eurocamp's flotation, 
profits had reached £9.4m. Last 
year they fell to £6fan. Pre-tax 
profits represented 11 per cent 
of turnover In 1993, compared 
with 15 per cent in 1902. 

Mr A tkins on says a principal 
cause of the decline was ster- 
ling's foil against the French 
franc. About 80 per cent of the 
campsites which Eurocamp 
uses are in France. 

Sterling’s fell did not affect 
the price of holidays last year 
as the company had bought its 
. currency requirements ‘ for- 
ward, but it did adversely 
affect consumer attitudes to 
France. The poor continental 
summer in 1992 and the French 
lorry drivers’ dispute also 
depressed last year's bookings. 

Mr Atkinson says his com- 
pany was also befog damaged 
by longer-term trends. The 
first was that mobile home hol- 
idays were growing foster than 
the camping packages that 
were Eurocamp’s staple. 

The market for self-drive 
camping and mobile home holi- 
days grew by 65 per cent 
between 1989 and 1994. Over 
the same period, however, the 
mobile home share erf! that mar- 
ket almost doubled from 18 to 
34 per cent 


a— nocawp- 

Share price (penes) 



Mr Atkinson attributes the 
growth of mobile home pack- 
ages to the feet that they 
appeal to less experienced holi- 
daymakers. “The more the hol- 
iday market becomes a mass 
market, the more conservative 
customers are going to be: less 
confident and more likely to 
want basic comforts." 

A long with a greater 
emphasis on mobile 
Homes, Eurocamp is 
trying to raise quality of ser- 
vice. Its customer surveys 
found that service bad slipped 
in 1998. Campsite staff now 
receive two bonuses: one based 


an profits and mw on customer 
satisfaction surveys. 

Throughout its travails. 
Eurocamp has had a cushion 
available to few other UK tour 
operators: an international cus- 
tomer base. 

T his year, 45 per cent of 
bookings will be from 
abroad. The company's 
largest overseas markets are 
Germany and the Netherlands, 
where bookings have held up 
weD. Overall, bookings are up 
20 per cent this year and the 
company is confident of 
improved profits. 

Moving into holidays in 
apartments is essential to 
maintain growth, Eurocamp 
believes. It aims to capture 
families who grow out of camp- 
ing and parents with children 
too young to camp or with 
teenagers who find it boring. 

The EuroVillages pro- 
gramme, however, takes Euro- 
camp's offering closer to that 
of giants such as Thomson and 
Airtours, where competition is 
fierce. And while the Cftte d'A- 
zur resort, which is owned by 
the French group Pierre & Vac 
ances, has impressive sporting 
facilities, the rooms seem 
cramped. It probably all looks 
better in the sunshine. 


Cheap 
imports 
blamed for 
Youngs fall 

By Richard Wotffe 

Young & Co's Brewery 
yesterday blamed cheap cross- 
Channel imports for a 13 per 
cent decline in i n ter im profits. 

The sooth London-based 
company, which has a tied 
estate of about 180 pubs in the 
south-east, complained that 
illegal sales of continental 
beers had accelerated the 
trend away from pub drinking. 

Mr John Young, chairman, 
called on the government to 
lower beer duty to the levels 
in other EU countries. “TMs is 
supposed to be a truly Com- 
mon Market but British brew- 
ers - and therefore their cus- 
tomers - have to pay duty 
seven times higher than in 
France." 

Pre-tax profits in the six 
months to October I fell to 
£2JMm (£24S8m) on flat turn- 
over of £36.4m (£36. lm). Beer 
volumes are thought to have 
dropped by 5 per cent in the 
first half. 

Sales to non-Young outlets 
remained static, despite a 30 
per cent rise in the number of 
free houses taking Young's 
beers. Supermarkets and off- 
licence sales represent less 
than 1 per cent of turnover. 

Operating margins slipped 
from 10-8 to 9.3 per cent as 
Young’s lagers lost sales to 
other brands over the summer. 
The brewer said ft would be 
training staff to encourage 
drinkers to try its lager. 

Exports, which represent 2JS 
per cent of turnover, rose 35 
per cent in North America. 
The company said it was mak- 
ing good progress with a new 
export drive to Hong Kong and 

C hina. 

Profits were depressed by 
refurbishment costs, which 
rose 67 per cent to more than 
£700,000, but are expected to 
revert to about £400,000 next 
year. 

Interest costs remained at 
£L35m, and gearing stayed at 
about 30 per cent 

Earnings per ordinary share 
fell to 11.34P (12.52p); the 
interim dividend is maintained 
at 7325p. 


UK Land back 
in the black 

UK Land, the property 
investment and dealing group, 
turned in a pre-tax profit of 
£353,000 for the half year to 
September 30. 

There was a £38,000 loss last 
time, before a surplus of 
£44 Km following the writing 
back of creditors and guaran- 
tee liabilities extinguished 
under the company voluntary 
arrangement, which became 
final on September 7 1993. 

In line with its declared pol- 
icy there is no interim divi- 
dend, but the group expects to 
pay a final. 

Fully diluted earnings per 
share were 4p (nil). 


Buoyant markets help 
push Volex to £5.85m 


By Peter Paarse 

In a year when markets for its 
electrical iwterm^n pct foTi prod- 
nets and cable assemblies were 
“generally buoyant”, Volex 
Group reported a 22 per cent 
rise in pre-tax profits from 
£4Bm to £5£5m- 

However, stripping out an 
exceptional £662^)00 profit from 
the sale of surplus land, the 
pretax figure rose a more mod- 
est 8 per cent 

Although the data process- 
ing market h ad been expand- 
ing and was projected to grow 
at 15 per cent a year, the group 
drew attention to strong price 
competition in some of its mar- 
kets and rising commodity 
prices in its main raw materi- 
als - polymer and copper. 

Mr Oliver Chappie, chief 
executive since October 1993, 
said copper prices had risen 
50 per cent and polymer 30 


per ppwt fo the past 12 mnnihn- 

However, through efficien- 
cies in manufacturing and pur- 
chasing, the group manag wi to 
raise operating margins. Oper- 
ating profits grew IS per cent 
to £5.45m (£4£Sm). 

Net interest payable was 
£263,000. against £30,000, as 
borrowings at the half-way 
stage jumped to £8.5m 
(£800,000) for gearing of 20.6 
per cent 

Most of the rise derived from 
£2.7m of deferred consideration 
for Cable Products, bought in 
early 1992, and the £3.2m cost 
of increasing the group’s stake 
in Mayor, the Singapore-based 
maker of data and power cord 
assemblies, from 60 to 75 per 
cent Mr Chappie said Volex 
had the option to lift its stake 
to 100 per cent. 

In wiring systems, the rise In 
business from Rover “more 
than compensated for” the 


expected phasing-out of the 
Jaguar business, while the cus- 
tomer base was spreading to 
commercial, agricultural and 
off-road vehicles. 

Raydex, the specialist cables 
company, sustained most 
impact from raw material rises 
but successfully launched its 
highspeed data cable. 

Sales at Pencon, the UK 
power cords maker, were “dis- 
appointing", in spite of 
moulded plug fitting legisla- 
tion due to come into effect in 
the beginning of February 
3995. 

Mr Chappie said that com- 
puter companies, moving to 
just-in-time supply, had des- 
tocked. and the dry summer 
made the lawn-care market 
less buoyant 

Earnings per share rose 34 
per cent to 14Jp (I0.5p) and the 
interim dividend is lifted to 
&7p (6Jjp). 


Channel shares decline despite 
midterm advance to £902,000 


By Katrina Lowe 

Shares in Channel Holdings, 
the security components 
group, yesterday fell 6p to 46p 
despite a 12 pa - cent rise in 
interim profits. 

Mr Philip ling, chairman, 
said the short-term outlook for 
the CQR subsidiary was “con- 
strained by the uncertain level 
of overall demand in the UK 
intruder alarm industry." 


Acquisitions 
help Lynx 
leap to £2m 

A substantial contribution 
from acquisitions helped Lynx 
Holdings, the acquisitive com- 
puter services and leisure prod- 
ucts compa n y, to raise annual 
pre-tax profits from £619,000 to 
£&0lm. 

Lynx said that companies 
acquired during the year to 
September 30 had performed 
ahead of expectations, and had 
produced £1.44m of group oper- 
ating profits of £2m (£619,000). 

Overall sales of £21.5m 
(£10.8m) included £11.8m 
(£9.G3m) from continuing 
operations, £&32m from acqui- 
sitions and £L4m (£L7&n) from 
discontinued activities. 

The dividend for the year is 
raised 12 per cent to 1.4p 
(1.25p) via a final of 1.04p. 
Earnings per share came 
through at 4^p (4.27P). 

WMGO at £0 25m 

WMGO Group, transformed 
from the mmi sponsorship and 
financial marketing group into 
a busine&S e omwiiiniMitinna 
company, reported pre-tax 


Mr Patrick Rogers, chief 
executive, said he thought that 
the market had hoped for a 
larger profits rise and also that 
it had focused too much an the 
slowdown in the UK intruder 
alarm market 

CQR 'a profits in the first 
half were unchanged from 
a year ago and a similar 
performance was expected in 
the second half, Mr Rogers 
said. 


NEWS DIGEST 


profits of £254900 an turnover 
of £9.09m for the half year to 
August 3L 

The -figures Included turn- 
over of £3.51m from acquisi- 
tions, which provided operat- 
ing profits of £225,000. 

In the comparable period, 
pre-tax profits were £201.000 
from turnover of £5.22m, 
indlnfling £414,000 from discon- 
tinued operations which con- 
tributed £159,000 to operating 
profits. 

The company said that busi- 
ness was buoyant in all sectors 
and all group companies were 
experiencing an encouraging 
increase in new business. 

Earnings per share, allowing 
for the June placing and open 
offer, fall from 0.46p to 0-36p. A 
special interim dividend of 0-5p 
has already been paid. 

Burmah venture 

Turcas Petrolculnck, the joint 
venture between Burmah Cast- 
roL the lubricants, chemicals 
and fuels company, and Tnrk- 
petroi a Turkish fuel group, is 
to make an international offer- 
ing of 60.1m new shares, rais- 
ing $20m (02.1m). 

Burmah CastroL which will 
underwrite the issue, owns 42£ 
per cent of Turcas. Its stake 
will be increased to 40 per cent 
if it takes all the new shares. 


Group pre-tax profits rose 
from £808,000 to £902.000 
in the six months to September 
30. 

Shawley Antony, acquired in 
July, contributed operating 
profits of £35,000 on sales of 
£434,000. Total turnover 
amounted to £8.67m (£7.66m). 

The interim dividend is 
increased to 0-55p (Q.5p), pay- 
able from earnings per share of 
lBp (1.7p). 


and diluted to about 38 per 
cent if it takes no new shares. 

The money will be used to 
repay debt and improve mar- 
keting and distribution of fuels 
and lubricants. 

Argent deni 

Argent Group has acquired the 
freehold of TTbbett & Britten 
Group's new hi gh bay distribu- 
tion warehouse at Bicester, 
Oxfordshire, for Eltin. 

The unit wfll provide 217,700 
sq ft of temperature controlled 
warehouse on a 10 acre site; 

The price represents an ini- 
tial yield of 7.4 per cent rising 
to a guaranteed minimum of 9 
per cent at first review. The 
lease is for 25 years and wfll 
start on completion of the 
development in late 1995. 

Cosalt purchase 

Cosalt is expanding its work- 
wear division with the pur- 
chase, for about £L2m cash, of 
certain assets and the associ- 
ated workwear manufacturing 
business of the FUC Group, a 
subsidiary of Davis Service 
Group. 

Cosalt has also entered into 
a three year trading agreement 
with Sunlight Service Gkoup. 
FUCs sister company, for the 
supply of workwear garments. 







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FINANCIAL TIMES 



COMPANY NEWS: UK 


Unigate warns of dairy closures 


By Roderick Oram, 

Consumer Industries Editor 

Unigate, the food and 
distribution group, warned yes- 
terday that it would have to 
close more dairies to help it 
adjust to sharp Price increases 
by Milk Marque, successor to 
the MDk Marketing Board. 

Announcing yesterday a rise 
in interim pre-tax profits from 
£50 -3m to £53.7m, Mr Ross 
Buckland, nhairman , said the 
restructuring cost and job 
tosses were still being calcu- 
lated. Turnover was £892.3m, 
against El.Olbn, which 
included £141.4m from discon- 
tinued activities. 

Milk Marque's price 
increases were "a clear 
abuse. ..of its dominant supply 
position", he said. But he 
hoped to see some roll-back in 
prices after the dairy industry 
had sought redress through the 
government and the courts. 

The increases lifted Uni- 
gate's costs this year by £40m, 
with rise of between 4 and 19 
per cent depending on the 
product, giving an average of 
11 per cent Unigate reiterated 
its earlier warning that trading 
profits would be reduced by 
£10m in the full year. 

It was recovering some of the 



Tturer Huropnoss 

Doorstep threat: Boss Buckland with an early form of shop milk 
containers. Trice rises an abuse of dominant market position' 


costs after increasing the price 
of doorstep^ elivered milk by 
2p to 41p a pint in London and 
40p outside and supermarkets 
had passed on most of the 
increase. It had also closed its 
Worthing dairy. 

Unigate bag signed up farm- 
ers to supply directly more 


than half its milk needs. It 
pays a small premium over the 
Milk Marque price but 
achieves benefits such as lower 
transport costs and the ability 
to work with farmers to tailor 
their supplies to Unigate’s 
needs, Mr Buckland said. 

He declined to comment on 


speculation that Unigate might 
bid for Dairy Crest, the manu- 
facturing arm of the old MMB. 

In the six months to Septem- 
ber 30, Unigate Dairies' operat- 
ing profits rose £100,000 to 
£18.7m on sales of £229.6m 
(£227. 5m). Milk volumes, 
including acquisitions, rose 3 
per cent but underlying sales 
were down slightly. Doorstep 
sales were down 12 per cent at 
an annual rate while super- 
market sales rose. 

Fresh foods, including the St 
Ivel and Malton brands, lifted 
operating profits by £4-3m to 
£14.7m on sales of £382.3m 
(£362. 9m). 

Profits at Wincanton, the dis- 
tribution business, rose 
£100.000 to £10.7m on sales of 
£160m <£14&n). It won new con- 
tracts but competitive pres- 
sures affected rates. 

Profits from US restaurants 
fell by £1.6m to £6.1m as sales 
at its Black-eyed Pea chain fell 
by 5 per cent on a comparable 
restaurant basis. The chain, 
which Unigate still hopes to 
sell, is spending £10m by the 
end of 1995 on refurbishment. 

The interim dividend is 
increased by 0.3p to 6.3p, pay- 
able from earnings per share 
up from 15.2p to 16.4p. 

See Lex 


Boots used CSFB for drugs disposal 


By Nicholas Denton 

Boots passed over SG Warburg, 
its officially listed financial 
adviser, and turned to CS First 
Boston to bandle the £850m 
sale, announced this week, of 
its drugs business to BASF of 
Germany. 

"We wanted somebody with 
a dispassionate view of the 
market," the retail group said. 
“The reason we chose CSFB 
was that they had broad inter- 
national experience of the 
healthcare market" 


Hone of the parties would 
confirm whether Warburg had 
hid for the mandate on the sale 
of the pharmaceutical business 
but Boots did say that it had 
been prepared to listen to what 
anyone would say. 

Despite its absence on the 
deal with BASF, Warburg nev- 
ertheless managed Boots's 
£508m share buy-back, the larg- 
est ever on the London market, 
a role which played to its 
strengths in distribution. 

On Boots’ choice of adviser 
Warburg said: “Big companies 


like Boots are very sophisti- 
cated users of investment 
banking services. They don't 
just buy from one particular 
source." 

In a similar recent case, 
Reckitt & Colman used Gold- 
man Sachs of the US to sell the 
Colman mustard business 
while retaining established 
adviser Warburg to handle a 
US acquisition. 

US companies also look more 
broadly for advice and War- 
burg stands to benefit from 
that. The UK house pointed at 


its work last year restructuring 
Marriott, the US hotel group. 

Large UK companies have 
become steadily less attached 
to their established financial 
advisers named in the Craw- 
ford's directory of city connec- 
tions. Boots said CSFB had 
been hired over Warburg pre- 
cisely “because they weren't 
our traditional advisers". 

CSFB. while bringing what 
Boots hoped was a fresher per- 
spective to the sale, has previ- 
ously worked with Boots on 
disposals in the US in 1989-90. 


To wry Law shares tumble 
44p following loss warning 


By Bethan Hutton 

Shares in TO wry Law dropped 
44p to 86p yesterday after the 
independent financial advice 
group warned that it expected 
losses of £1.25m at the half 
year, compared with pre-tax 
profits of £565,000. 

Mr Alan Wesley, chief execu- 
tive, said poor stock market 
conditions had made investors 
nervous about making new 
commitments. The company 
has also been affected by the 


public's loss of confidence in 
financial advice following 
adverse publicity. 

However, Mr Wesley said 
that provisions made at the 
frill year to cover the extra 
costs of complying with SIB 
requirements on the review of 
pension transfer business 
would not be needed. The com- 
pany now expects to review 500 
cases rather than the previous 
estimate of 1.600, and it does 
not expect the impact of the 
review to be material 


DIVIDENDS ANNOUNCED 




Current 

payment 

Date of 
payment 

Cones - 
poncing 
dividend 

Total 

for 

year 

Total 

test 

year 

Adam & Harvey 

...Jnt 


Jan 6 

6 

_ 

17 

Capital Radio _ 

fln 


Jan 20 

4 

7.2S 

5.75 

Channel «... 

Int 

0.55t 

Jan 4 

05 

. 

12 

Esseut & Suffolk 

irtt 

40.8 

Dec 21 

_ 

_ 

4038 

Finsbury Growth fin 

2 

Dec 22 

2 

2.9 

23 

Ham bras ... 

int 

4.5 

Dec 23 

4.5 


15 

Land Securities 

int 

6.85 

Jan 5 

06 

_ 

24 

Lynx § 

— .....fin 

1.04 

Feb 1 

095 

1.4 

1.25 

Property Parte .kit 

2.7 

Jan ii 

2.8 

_ 

1& 

Unigate 

Int 

63 

Jan 6 

6 

_ 

173 

Votax 

tot 

6.7 

Feb 6 

6.5 

- 

18.1 

Vosper 

tot 

6.1 

Jan 17 

5.3 


18 

VTR 

fin 

255t 

Dec 31 

2-55 

4 

3.75 

Young & Co's _ 

Int 

7.25 

Dec 16 

725 

- 

15 


DMdwxta shown panes par share not except where otherwise stated. tOn 
increased capital §USM stock 


Trading income in the first 
four months of the year was 
down 10 per cent, with the big- 
gest decline in investment 
products. Pension income has 
remained steady, while general 
insurance business is 10 per 
cent lower. 

The company has acceler- 
ated a cost-cutting programme 
which had already been 
planned: it warned in Septem- 
ber that it would affect profit- 
ability in the first half. Staff 
numbers are to be reduced by 
15 per cent in the 12 months to 
July 1 1995, through compul- 
sory redundancies and natural 
wastage. About half that target 
has already been met 

Hie cost-cutting programme 
is also intended to cope with 
the effect of higher compliance 
and disclosure standards from 
the new year. Mr Cedi Law, 
chairman, said It was intended 
to maintain the interim divi- 
dend due in April 1995. 

There are few other quoted 
IF As, but the impact of indus- 
try-wide poor market condi- 
tions. adverse public percep- 
tions and regulatory changes is 
likely be even more severe on 
smaller firms. 


Everest Foods 
shares up 13p 
after AGM 

By Geoff Dyer 

Shares in Everest Foods rose 
l3p to 69p after the annual 
meeting was told that the 
potato chip producer would 
return to previous levels of 
profitability. 

Mr Bob Gilbert, chairman, 
announced that strong demand 
for an expanded product range 
bad led to increased sales and 
“acceptable margins" in the 
core business. 

Everest, which also owns 
Ashfords, the food distributor, 
reported a 47 per cent decrease 
to pre-tax profits from £2.Q9m 
to El.lm in the year ending 
May 31. 

The dividend for the year 
was cut to 2,fip (3.7p). A move 
to low-cost economy products 
by supermarkets had affected 
margins in the frozen chips 
business. 

Mr Gilbert said the group 
was currently realising the 
effect of efficiencies introduced 
in the manufacturing pro- 
cesses. This would improve 
profitability despite the rise to 
potato prices which had 
resulted from a potato short- 
age. 


WMI hopes 
to buy 
Attwoods’ 
UK side 

By Peggy Hoflinger 

Waste Management Inter- 
national, the London-quoted 
arm of WMX of the US, 
yesterday confirmed it hoped 
to buy Attwoods’ UK 
businesses if shareholders 
rejected the hostile £364m bid 
from BrowntogFems 
Industries to favour of a 
break-up plan. 

WMI said it would be likely 
to offer more tban £100m for 
tbe UK operations, based on 
publicly available information. 
Recently an independent 
surveyors' report published as 
part of Attwoods’ defence 
revalued the UK business from 
£97m to £ 130.6m. 

vvmTs interest comes as BFI 
is today expected to announce 
the terms of its final offer for 
the UK waste services group. 
Shareholders will have to 
balance what is widely 
expected to be a restructured 
offer from BFI with Attwoods* 
last ditch attempt to fend off 
the bid- 

Attwoods has promised to 
pay shareholders a cash sum 
upon the sale of the UK and 
European businesses. It then 
plans to seek a potential 
purchaser or merger partner 
for its US operations. 

These actions would deliver 
substantially more value than 
tbe current I09p per share 
offer from BFI. Attwoods 
argues. 

The break-up plan has been 
criticised by BFI for failing to 
produce the names of potential 
buyers or offers for the 
businesses. 

WMI said yesterday it could 
not provide a firm value for 
the UK operations until it had 
done doe diligence. 

BFI said yesterday WMTs 
comments "showed up the 
weaknesses of the break-up 
plan". 

Mr Philip Angel] of BFI said 
bis company was offering 1.5 
times revenue for the whole of 
Attwoods. 

WMI was suggesting, with 
an offer of £100m, a similar 
multiple for Attwoods best 
assets alone. “It shows the 
bankruptcy of the break-up 
strategy," be said, "because 
the other assets will come in 
less than that" 


Vosper advances 
as orders top 




By Andrew Bofger 

Vosper Thorny croft Holdings, 
the Southampton-based war- 
ship builder and engineering 
group, increased pre-tax profits 
by 13 per cent to £t0.3m in the 
six months to September 30. 

Sales grew by 12 per cent to 
£129m, with 82 per cent coming 
from exports. The group said 
more than 20 per cent of turn- 
over now rame from activities 
independent of warship con- 
tracts. 

The current order book is 
worth in excess of 2600m, 70 
per cent of which is for exp- 
ort 

Mr Peter Usher, chairman, 
said it was particularly satisfy- 
ing that the group bad won the 
competition for Sandown Class 
minehunters for the Royal 
Navy in July, and that the 
Ministry of Defimce bad placed 
an order for seven ships. 

He said: "This will provide a 
base load of about one ship per 


year until 2001. and will 
enhance our position in over- 
seas markets." 

Mr Usher said tins was a tur- 
bulent period in the history of 
the tfefewnB industry, with the 
ongoing bids for VSEL, the 
Cumbrian-based submarine 
maker, the recent sale of assets 
at Swan Hunter ami the forth- 
coming safe of Devonport and 
Bosyth dockyards. " 

T he r.bflrrrnfln said that if 
either British Aerospace or 
GEC won control of VSEL, 
Vosper would be to a "David 
and Goliath" situation, but 
jngfetarir “We are sufficiently 
well managed to be sprightly 
on our feet, to take on the com- 
petition.” 

Vosper has net cash of 
fliatm, compared with £ll6m 
at the year-end. The group said 
this gave it the financial capac- 
ity to bond lazge contracts - 
such as the next batch of Type 
23 warships, which it will bid 
tor. 




Bantings per shared 

10 per cent to,2L6p;$ ^ 

fire interim : dividend 
by 15 per-cent to - 

•„ COMMENT . 

Vosper to determined not to be \ : 
written, off as a smaall boaS- 
builder on tbe soolh soast, 
hence its emphasre yes te rday 
onbeangabtetoba®wara3ihfe- 
as big as the Type 23 at South-' 
ampton. For bigger vessels, 
such as new Royal Jfeyy land- - 
mg platform dock assault skip, - ' 
the group says it could still act 
as prime contractor, but have 
the construction done- else- 
where. Forecast fall-year prof- 
its of msm put tim shares^., 
unchanged = yesterday at. 743p, 
on a prospective multiple of 
14JS - a small premium to the 
market. The shares axe. under- 
pinned at this level .by the 
solid order hook, hut could 
advance further on news of 

gaining ftirtftgr Ki gTrifiranfr rayu 

traefcs. ■ 


GWR acquisition plan is 
blocked by Radio Authority 


By Raymond Snoddy 

GWR, the expanding 
Bristol-based commercial radio 
group, has had an acquisition 
plan blocked by the Radio 
Authority, even, though a simi- 
lar scheme involving Emap 
and Trans World Communica- 
tions was accepted. 

The GWR plan, tike the 
Emap deal, sought to use a 
loophole to the 1990 Broadcast- 
ing Act to own more radio 
licences than the Act allow- 
ed. 

The Emap scheme involved 
setting up a "deadlocked" com- 
pany between the media group 
and Schroders, its merchant 
back. Each owned 50 per cent 
of the share capital of the new 
company, which was designed 


to hold two Trans World radio 
licences. 

By e xcluding the two Radio 
City licences from Emap's 
total, the group was able to 
push ahead with a tod for 
Trans World. 

The Radio Authority view 
was that the device was legal, 
a view that survived a judicial 
review granted to the Guard- 
ian Media group, which owned 
20 per cent of Trans World. 

The High Court ruled that 
the Radio Authority had not 
acted outside its powers. 

After the judicial review, 
which appeared to clear the 
way for a rationalisation 
of the industry, GWR applied 
to the ' authority for 
permission to push ahead 
with a takeover on a similar 


. basis. This was rejected. 

The Radio Auflurily.view is 
that it wQl not authorise any 
further “deadlocked" company 
daaiH as a way around the con- 
centration of ownership rules 
until the government makes its. 
legislative intentions clear. 

It ia bettered the authority 
has been unable to get any 
view of what tbe. goveramsit 
has to mind train Mr Stephen 
DorreH, the National Heritage 
secretary. 

The government is planning 
either a green ora white paper 
on the media some time n^yt 
year, with the possibility of 
chang in g the rules on cross- 
media ownership in the 1995-96 
parliamentary session. 

GWR declined to comment 
last night 


NEWS DIGEST 


VTR expands 
52% to £I.34m 

VTR, which provides video 
post production facilities, 
raised pre-tax profits by 52 per 
cent from £884,144 to £l-34m 
for the year to August 31. 

The result included a 
£106,851 (£119,465) profit on 
the sale of equipment and was 
struck after write-downs 
which increased the 
depreciation charge by 
£102,038. 

Earnings per share 
increased from 7.3p to I0.5p, 
while a final dividend of 2.55p 
makes a total of 4p (3.75p), on 
capital increased by May’s 
£2j95m rights issue. 

Mr Philip Lovegrove, 
chairman, said that with all 
subsidiaries budgeted to be 
profitable, the board expects 
to report further growth in the 
current year. 


Christie 

continues 

recovery 

Christie Group, the business 
services company, has contin- 
ued its recovery with pre-tax 
profits of £55,000 for the half 
year to September 30. Profits 
last time were just £11,000. 

Mr Philip Gwyn, chairman, 
said growth was being seen in 
the principle markets of Chris- 
tie & Co. The group was also 
supporting new activities such 
as Quest far Quality and Ven- 
ders Computer Systems, which 
in their initial stages were loss- 
making. 

Turnover of continuing 
operations advanced to £8. 13m 
(£7.62m). Earnings per share 
rose from 0.05p to 0.23p. 

Essex and Suffolk 

Essex and Suffolk Water, the 
merged supply company con- 
trolled by Lyonnais Europe, 
announced pre-tax profits of 
£15.3m for the half year to Sep- 
tember 30, against a pro forma 
£12.flm. 


Turnover was £43.4m 
(£45 .3m). Earnings per share 
were llflp and an interim divi- 
dend of 40-8p is declared. 

British Empire Secs 

British Empire Securities and 
General Trust, which speci- 
alises to undervalued asset sit- 
uations, liffced .net asset value 
per share by 14 per emit, from 
BZ82p to 105.83P, to the 12 
months to September 30. 

Earning per share dipped to 
i.03p (l.l7p) but a proposed 
final dividend of 0.71p brings 
the total for the year to 0J6p 
(0A3P). 

Sec Endowment 

Securitised Endowment Con- 
tracts, which makes a market 
in assigned with-profits endow- 
ment policies, raised pre-tax 
profits by 52 per cent from 
£745,585 to £1.13m for the year 
to September 30. Turnover 
jumped 78 per omit to £19-3m. 

Saratoga per share came out 
at 5.43p (5.66p). A recom- 
mended final dividend of 2p 
makes a total of 3J5p. 

In line with indications in 
last year’s prospectus, the com- 
pany intends to move from toe 


USM to a fun fisting. The com- 
pany hopes that dealing s will 
begin to the latter half of next 

month _ 

The company is also imple- 
menting a corporate restruct- 
uring to facilitate the develop- 
ment of other trading 
activities, incorporating a 
change of name -to SEC 
Group. 

Finsbury Growth 

Net asset value at Finsbury 
Growth Trust expanded from 
ll£9p to ll&9p per share in the 
year to September 30. 

The 5J per cent rise com- 
pared with a modest gain over 
the same period of 0.3 per cent 
in the FT-SE-A All-Share Index 
and a fall of 0.4 per cent in the 
FT-SE 100. 

Net revenue dipped to £U)7m 
(21.37m), reflecting exceptional 
dividend income last time, a 
changed ACT rate, hi g he r man- 
agement fees and the absence 
this time of underwriting a™* 
dealing income. 

Earnings per share were 2j}p 
(2-94p)- The proposed final is 
held at 2p, maintaining the 
total at 2Jlp and requiring a 
transfer of £278,000 from reve- 
nue reserves. 


LVMH 


MOET HENNESSY* LOUIS VUITTON 

REPORTS 16.5 % RISE IN NINE-MONTH SALES 

In the first nine months of 1994, the LVMH Group recorded consolidated net sales of 
FF 18.8 billion, an increase of 16.5 % over the comparable 1993 period. The lower exchan- 
ge rates of certain currencies against the French franc hampered the growth in sales in the 
third quarter. On a constant currency basis, nine-month sales are up 14.4 %. 

By segment of activity, Group sales increased as follows : 


in FF millions 

1993 

1994 

Champagne and Wines 

3.067 

3,205 

Cognac and Spirits 

4,159 

4,244 

Luggage and Leather Goods 

3,946 

4,782 

Perfumes and Beauty Products 

4,366 

5,D85 

Other activities 

562 

1,470 

LVMH 

16,120 

18,786 


In the Champagne and Wines segment, sales volume rose by 10 %, in line with the progres- 
sion recorded in die first six months of the year. LVVTH's global brands - Dam Pdrignon. MoiFt 
& Chan do n and Veuve Clicquot - posted tbe strongest growth rates. 

In Cognac and Spirits . the growth in soles was hindered by the lower exchange rates of the 
Japanese yen and US dollar. As a whole, sales volume was 3 % higher than in the comparable 
1993 period. In the Japanese market, sales continued to improve despite the moderate pace of 
the economic recovery. 

In Luggage and Leather Goods, sales growth was limited by current undercapacity resulting 
from continued sustained demand. In 1995. the increase in Louis Vuitton's production capaci- 
ty should enable the company to fully meet the growth in demand. 

Finally, in the Perfumes and Beauty Products segment , sales of Parfums Christian Dior, 
Givenchy and Kenzo rose by IS % over the first nine months of 1993. The outstanding suc- 
cess of Christian Dior's "Tendne Poison" and "Hydra Star" was comforted in the third quarter. 
Three launches were successfully conducted by segment companies : "Insense Ultramarine" 
by Givenchy ; the in trod action of Kenzo perfumes in the US market ; and the European 

launch of "Kashdya de Kenzo". Guerlain is consolidated in the segment's financial statements 

since the beginning of the second half. 

Taking into account current sales growth and the activity outlook for tbe last quarter of the 
year, LVMH continues to aim at net income growth of over 20 % for the year as a whole. 

LVMH, THE WORLD'S LEADING LUXURY PRODUCTS GROUP 



f*v < 



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FINANCIAL TIMES THURSDAY NOVEMBER 1 


171994 


COMMODITIES AND AGRICULTURE 


Base metals soar in 
hectic trading at LME 


Copper 

LME 3 -month price <$ per tonne) 
3.000 


2,50 0 


Saudis to back oil quota roll-over 




rule 


By Kenneth Gooding, 

Mining Correspondent 

In one of the most frenetic 
days on the London Metal 
Exchange in living memory, 
prices soared yesterday as 
wave after wave of investment 
fund and speculative buying 
took copper, aluminium and 
lead to fresh four-year peaks 
and nickel and zinc to their 
highest levels for two years. 

Copper started the charge, 
surging by 3 per cent from its 
overnight price level, and. this 
triggered new enthusiasm for 
other LME metals. “Everything 
went berserk," said one trader. 

There were good fundamen- 
tal reasons for copper’s price 
rise, analysts suggested. But 
they questioned the ability of 
the other metals to sustain last 
night's price levels for long. 
“There has been indiscriminate 
buying by the funds because 


metals are supposed to be an 
attractive investment," said Mr 
Jim Lennon, analyst at Mac- 
quarie Equities. He pointed out 
that only copper and alumin- 
ium stocks on the LME were 
lower now than at the end of 
1993. Lead, nickel, tin and zinc 
stocks were all 20 per cent 
higher and nickel stacks were 
close to their record. 

Questions were also being 
asked about when the funds 
might take their considerable 
profits on copper and alumin- 
ium and possibly send prices 
pl umm etin g . Mr Ted Arnold, 
analyst at Merrill Lynch, said 
it would be reasonable to 
expect a great deal of profit- 
taking by December 16 so that 
the funds could include the 
benefits in their December- 
quarter results. "But maybe 
they have protected their prof- 
its by option trading and we 
might go into the New Year 


and face an even bigger even- 
tual drop." Mr Arnold added, 
however: "It takes a brave man 
to predict when the drop will 
come and by how much". 

There were some suggestions 
that copper's price was being 
manip ulated by an ar tifimally - 

created squeeze. There were 
rumours that a large Japanese 
trading house and one or two 
US financial institutions were 
involved. The tightness of sup- 
ply was indicated by the pre- 
mium being paid last night for 
copper for immediate delivery 
compared with three months 
metal - $7L5 a tonne. Asked if 
the LME was worried, Mr 
David King, the chief execu- 
tive, said: “We are always mon- 
itoring all markets but we are 
looking at copper more closely 
at the moment". The exchange 
has the power to intervene if it 
believes a “disorderly" market 
is developing. 



Jan 1994 Nov 

Sown: FT 

Nevertheless, most analysts 
insisted that the copper supply 
tightness was genuine. Mr Len- 
non pointed out that there had 
been a fall of 336,000 tonnes in 
combined LME and New York 
Commodity Exchange stocks 
since the start of the year. 
“Stocks could be at their low- 
est for 30 years in the first half 
of 1995.” he warned. The 
squeeze would only ease when 
new production capacity came 
into operation in the second 
half of next year. In the mean- 
time copper’s price could rise 
to more than $1.50 a pound 
($3,306 a tonne). 


By Matk Nicholson fn Riyadh 

Saudi Arabia will back a 
six-month roll-over of the 
Organisation of Petroleum 
Exporting Countries' present 
output ceiling of 2452m barrels 
a day at the oil cartel's meet- 
ing next week in Bali, Saudi 
officials said yesterday. 

The officials said they 
believed the proposal would be 
supported by almost ah other 
Opec members, with the possi- 
ble exception of Iran, which 
appeared likely to seek a roll- 
over of the present ceiling only 
for a further quarter. 


The Saudis believed that a 
maintained ceiling, which has 
been rolled over for more than 
a year already, would at least 
support present prices of just 
over $17 a barrel for Brent 
crude in a market they 
described as “balanced, leaning 
towards tight". 

The officials said crude 
prices were unlikely to firm 
significantly imfesg there was 
unexpectedly accelerated 
growth in Europe, the US and 
Asia or a particularly cold winr 
ter. They said only unexpected 
increases in non-Opec output, 
particularly from the North 


Sea. would be likely to soften 
prices significantly from their 
present range. “The lik elihood 
for a firming of prices is there 
- esp ec ially if there is a cold 
wave,” sajd one official. 

Secondary source estimates 
for actual Opec production in 
the present quarter are run- 
ning in the range of 24.7ffi b/d 
to 251m b/d, of which Saudi 
Arabia says It accounts for 

marginally und er 8m b/d. . 

Though Saudi officials would 
not give their estimates for .the 
call on Opec cal for the next 
quarters, they appeared com- 
fortable with projections of 


' demand at between 25&£tydl 
and 262 m b/a, with ar^ck 
drawdown of between 3B500: 
and lm b/d. V' ’ ' • •; 

Saudi policy-makers are 
backing the roll-ova- haying 
recognised thatOpecis caught 
between being unable to 
increase the ceiling without 
softening the market and befog 
unable to .win. agreement 
among members for any mean- 
ingful cuts in allocations. At 
best, they have concluded,' 
Opec can at present flerve as a 
”very -important fbalancfng 
foree” in the ofl market, hut 
not a price setter. • 


Wheat output drive goes into reverse 


EU to finance African mining investment forum 


By Kenneth Gooding 

The European Union is 
financing a forum to take place 
next month in Lusaka aimed at 
increasing European invest 
ment and co-operation in the 
Southern African mining 
industry. 

About 200 European compa- 
nies will attend the three- 


day, by-invitation-only event 
where they will be presented 
with details of nearly 200 pro- 
jects in ten of the SADAC 
(Southern African Develop- 
ment Community) countries: 
Angola. Botswana, Lesotho. 
Malawi, Mozambique, Namibia, 
Swaziland, Tanzania, Zambia 
and Zimbabwe. 

The EU points out that 


annual mineral production in 
the region is worth an esti- 
mated US$tim and the mining 
sector's contribution to gross 
domestic product is substan- 
tial. averaging 11 per cent for 
the region. 

Nevertheless, the potential 
for developing new small and 
medium-sized mines is large 
but this has not been realised 


because of lack of investment 
The region also offers great 
exploration potential 
Two thirds of the forum time 
will be given over to private 
meetings between European 
and African company represen- 
tatives and the EU says a com- 
puterised meeting scheduling 
system has been set up to facil- 
itate these discussions. 


N American newsprint price surge continues 


By Bernard Simon in Toronto 

Connecticut-based Champion 
International has kicked off 
this year’s fourth round of 
newsprint price increases in 
North America. 

Citing unexpectedly strong 
worldwide demand. Champion 
said that it planned to raise 
prices by about 9 per cent, or 
USSoO a tonne, on March 1. 
Other US and Canadian pro- 
ducers are likely to follow suit. 

The increase, a combination 
of a cut in discounts and an 


cosMtobnri£s prices 


increase in list prices, would 
bring the east coast newsprint 
price to about $600 a tonne, 
compared with $420 at the 
beginning of this year. 

Buyers are likely to resist 
the increase. It could prove dif- 
ficult to implement if predic- 
tions that the recent surge in 
demand may slacken in the 
first quarter of next year are 
borne out. For the time being 
however, producers appear to 
have the upper hand. 

Consumption by US daily 
newspapers climbed by about 5 


per cent in the first nine 
months of this year. Stone Con- 
tainer, the Chicago-based com- 
pany, has contributed to the 
scramble by cutting shipments 
from its Snowflake mill in Ari- 
zona, which is being converted 
to liner-board production. 

The squeeze on supplies in 
North America has been exac- 
erbated by strong overseas 
demand, especially in the UK 
and south-east Asia. According 
to the Canadian Pulp and 
Paper Association, Canadian 
newsprint exports rose 15 per 


cent in the first nine months. 

The short-term outlook 
hinges on labour developments 
in British Columbia. Workers 
at Fletcher Challenge Canada's 
three pulp and paper mills ear- 
lier this week voted in favour 
of a strike if no settlement was 
reached in protracted contract 
negotiations. 

Tensions have been further 
inflamed by a dispute over 
MacMillan Bloedel’s decision to 
seek bids from construction 
companies employing non- 
union labour. 


By Mart* Nicholson 

Saudi Arabia is restricting this 
year's subsidised wheat crop to 
2.8m tonnes and will reduced it 
future harvests to no more 
than 2m tonnes under a strict 
regime of subsidy cuts and 
tight control of wheat forming 
permits, according to Mr 
Abdallah Moammar. the king- 
dom's deputy minister of agri- 
culture. 

The grain harvest will be 
complete at the end of Decem- 
ber. but Mr Moammar said his 
ministry' and the state Grains 
and Silos Organisation had 
issued permits only for cultiva- 
tion of 2.8m tonnes of wheat, 
and lm tonnes of barley. “We 
know the farmers in these 
regions will meet these tar- 
gets,” he said. “If farmers pro- 
duce any more, that’s not 
going to be our responsibility.” 

Mr Moammar said the cash- 
strapped kingdom had been 
putting an end to years of 
hugely generous subsidies for 


wheat forming, which seen 
flrmnai harvests fait 4.7m 
tonnes and at one point made 
Saudi Arabia the sixth biggest 
wheat exporter. “There will be 
no more exports of -wheat,” the 
deputy minis ter said. 

The subsidy programme 
began in the mid-1970s when 
Saudi Arabia decided to plough 
some of its new oil riches into 
a strategic bid for food seifsnf- 
fidency. At the time the king- 
dom produced only 3,000 
tonnes of wheat a year. The 
policy was prompted partly by 
fears that the west might 
respond to the Arab oil 
embargo, backed by Sandi 
Arabia at the time, with a food 
embargo of its own. 

But Mr Moammar said file 

overproduction of wheat 
caused by over-generous subsi- 
dies, had Yuxv jn p * “too mnoh to 
handle. . . it was a waste cm 
both sides: of water and 
money." 

The deputy minister said 
wheat subsidies had been run- 


ning at $25bn a year before 
recent cuts - a sum justified 
not merely by the aim of food 
security but also as sharing 
some of the kingdom's 1970s 
and early 1980a oil bounty 
a mro the country while help- 
ing prevent a rush from rural 
to urban communities. “It was 
a high cost, but the eventual 
results have meant a lot to the 
kingdom," said Mr Moammar. 

He would not say how much 
of Saudi Arabia’s limited 
underground water supplies 
wheat forming had consumed 
- some estimates put it at 90 
per cent of annual use of fossil 
water - and denied that there 
was an immediate threat the 
kingdom’s overall water sup- 
plies. “It has still not reached 
the level where there should be 
major concern,” be said. “But 
it should be given attention 
from now. Now, with the con- 
trols being applied, this will 
help” 

He said subsidies of SB35 (S3 
US cents) a kilogram had been 


cut in recent years, to SB2, 
while licences .for wheat ctdti- 
vatian had been stridly can- 
trolled. “Harvests win continue 
to go down until we reach Shi 
tonnes,” he -explained, 
“because that will give us 
what’s needed for load con- 
sumption and 'strategic 
reserves." ' 

He said awnim! domestic con- 
sumption of wheat in the king- 
dom was 1.3m tonnes and 
national storage capacity was 
2.4m tonnes. 

Mr Moammar said some land 
formerly under wheat . had 
been left fallow since the raflv 
in both state subsidies pur- 
chases, while other farmers 
had began planting vegetables 
on the swathes of pivot-irri- 
gated circles of reclaimed des- 
ert that were once under 
wheat. “The whole agricultural 
development in the fctngifnrn is 
such an experiment," he said. 
“And it’s tfriw to sustain, this 
experiment, but you don’t need 
to expand it more.” 


Sji" ave 

!> r 


‘Small* reforms planned for EU sugar regime 


The European Union’s sugar 
marketing regime is workin g 
well and needs only minor 
changes to conform with the 
Uruguay Round accord in the 
General Agreement on Tariffs 
and Trade, agriculture commis- 
sioner Rene Steichen said yes- 
terday, reports Reuters from 
Strasbourg. 


“It's a reform, perhaps a 
small one. because at the 
moment we have no problem 
with this market,” he 
explained af ter the reinmt«inn 
adopted a proposal to modify 
the regime. 

Beet sugar production quotas 
would be maintained at exist- 
ing levels for the next six mar- 




keting years until the end of 
the Gatt accord in 2001. But 
quotas, or guaranteed prices, 
could be changed in view of 
market developments, Mr Stei- 
chfln added. 

The EU sugar regime pro- 
vided a stable price, in contrast 
to the world market, and the 
only budget expenditure was 




for - imports oifcane sugar/ the 
commissioner stated. The EU 
imports 1.3m tonnes of raw 
cane sugar at preferential rates 
from members’ former colonies 
in the African, Caribbean and 
Pacific regions. 

The regime is “self -financ ed" 
through production levies paid 
by farmers and processors. 


BASE METALS 

LONDON METAL EXCHANGE 

(Pncos hem Amalgamated Metal Trmftngj 
■ ALUMJWUM, 99.7 PURITY (S per lennef 


Precious Metals continued 

■ GPU? DOMEX POO Troy oz.:Sftroyoz.) 

sea Day 1 * Open 

price chaim Wflh low tot t 


GRAINS AND OIL SEEDS 

■ WHEAT LCE (E per tonne) 

S«» Day'S Opn 


SOFTS 

■ COCOA LCE (E/lQnngj 
Set! Days 


price change Iffipi Lon Hit Vd 


Cash 

CIcse 1S0&5-9.5 

Previous 1857-3 

Hgh/taw 1907/1306 

AM Official 1914-6 

Kelts dose 

Open mt. N/A 

Tout daily turnover N/A 

■ ALUMINIUM ALLOY (S per [a 

Close 1840-50 

Previous 1810-20 

High/tow 

AM Official 1845-65 

Kertj dose 

Open int N/A 

Tool dafly turnover N/A 

■ LEAD {S par tonne) 

Close 681-2 

Previous 672-3 

Ntfi/low 684 

AM Official 683-4 

Kertj dose 

Open *iL N/A 

Tatri daily turnover N/A 

■ WCKH. |S pj tonne) 

Close 7600-700 

Previous 7560-80 

WgMow 

AM Official 7700-10 

Kertj dose 

Open W. N/A 

Total dally turnover N/A 

■ TWI (S per tonne) 


3 tilths 
1924-5 
1875-6 
1637/1888 
1927-8 
1922-3 


187D-5 
1845-55 
1875/1 BE0 
1875-96 
187D-5 


Nm 

386.1 

-06 

• 

1 

1 

■n 

105*0 

+1*5 

105 *0 

104.® 

290 

43 

Dac 

953 

-3 

353 

950 

18.713 1.377 

DK 

Dec 

38&S 

-08 

387.8 

3®J 74*48 

18375 

JM 

10535 

♦0.78 

105-50 

104*0 

2*03 

1(0 

Hm 

978 

•3 

984 

975 

41462 1.733 

Ftfi 

Jan 

3865 

-06 

- 

■ 

- 

«*r 

10735 

40*0 

107.50 

106*0 

1*27 

GO 

Nay 

985 

-4 

993 

9*4 

14.875 2329 

Apr 

Mi 

me 

-05 

3913 

3895 27*69 

4*30 

May 

109.40 

+075 109*0 

1 8830 

1,839 

18 

Jri 

997 

-5 

1006 

989 

8.684 1*75 

Jn 

Apr 

3943 

■OS 

394J 

3811 10399 

458 

Jri 

11135 

+1.00 

- 

. 

114 

- 

Sep 

1010 

-5 

1017 

1009 

12.307 1.T71 

Aog 

JUD 

398.1 

-04 

396.7 

3S7* 10551 

1353 

Sip 

94.90 

+1.15 

9475 

94*0 

43 

16 

Dm 

1025 

-4 

1026 

1025 

9*43 45 

Od 

Tout 




168*00 24.4T7 

Total 





6*51 

325 

Total 




11X0® 8*71 

Total 


■ PLATINUM NYMEX (50 Troy oz.;! 


WHEAT CBT (5,000txi Kiln; cents/BOJO busheQ 


COCOA CSCE (10 tonnes; Sflonnesl 


MEAT AND LIVESTOCK 

■ LIVE CATTLE CMS (4Q.00Qbs: cena/ite) 

Sen day's opto 

price change Ugh Low tot *of 

Dec €9.975 -0.300 70.401 €9700 27.419 5*68 

Ft£J 63-075 -0.450 E950C 68200 9K?32 2*01 

Apr 69.425 -020 9209 60275 15*H 1.T08 

Jn 65275 -0200 2700 B725 5.421 199 

Aug 63289 -0325 64250 63700 1579 68 

Od 64 7TB) -0250 S.0S 64200 £26 18 

Total 77.29* 9*05 

■ LIVE HOGS CME {40,00Obs; cents/ft») 


Jn 

41 $4 

-13 

4175 

415* 17*«7 

5345 

On 

373/6 

-4/4 

377/6 

3724) 24,891 

6.1® 

on 

1272 

-14 

1280 

12® 

1*88 

2536 

On 

32*25 

-1.450 33*50 3? OCT 15.101 

2.082 

Apr 

4203 

-13 

421* 

420* 7*00 

88 

Itar 

3802 

-4/4 

389/6 

383/4 30*02 

5.006 

Mw 

1315 

-20 

1329 

1308 

41,161 

8*86 

M 

35.125 

•1AS0 36450 35.100 

11.781 

1*21 

JU 

42S3 

-13 

- 

- 1*87 

3 

N«T 

366/6 

-3/0 

368/4 

366/2 4*83 

518 

■ter 

13<2 

-19 

1352 

1338 

9.1® 

1*75 

Apr 

36*00 

•1*75 37A5D 36500 

5*72 

538 

Oct 

430.4 

-13 

432* 

432* 507 

7 

Jri 

335/2 

-2/6 

337/4 

3344) 10*90 

1.432 

Jri 

1366 

-19 

1377 

13® 

3*57 

6® 

Jn 

42.050 

-0875 42500 41.750 

2*34 

IS 

Jn 

43X4 

-13 

- 

- 10 

- 

Sap 

33918 

-3/2 

340/4 

339/4 3S3 

38 

Sep 

1389 

■19 

1400 

13® 

1.602 

63 

An B 

41775 

-9.475 42.125 41.400 

631 

41 

Total 




28331 

5*43 

On 

349/4 

-3/0 

34 9/4 

349/D 159 

1 

On 

1419 

•19 

1428 

1428 

5.108 

20 

Oct 

unsn 

-OL3DO 39250 36®0 

455 

48 

■ PALLADIUM NYMEX (100 Troy o^S/troyoz.) 

Trial 




7V® 13,160 

Total 





68*3811*88 

Trial 



37*85 

4*87 


Dec 157.10 -175 157.75 15620 1589 692 

MV 158.05 -120 15900 15775 3*63 508 

Jtan 15805 -120 • 544 93 

Sip 159.55 -1.55 16000 160*0 76 45 

TOW 8,172 1, 338 

■ SILVER COftCX flOO Thy oz.;Gents/tioyozj 

Hat 5222 +12 S2OJ0 S2QJQ 

dec 523 2 +12 5Z7JJ 51BJJ 5fl*14 15,569 

Jan ■ 5252 +12 S23.0 5210 87 


■ MAIZE CBT (5.000 bu min; cents/5gb bushel! 

Oac 216/8 - 217* 21612 95.727 25,728 

hr 227* -0/2 228* 227/2 78.048 9276 

mat 235* -Of* 236* 23*2 29787 1262 

■M 240* -012 240/2 238/4 39690 3,771 

Sap 243* -1/2 245* 243/2 3,719 272 

Dac 247* -1/4 243/2 347* 31050 1.788 

TW* 287,886 42288 

■ BAHUEY LCE (E par tonne) 


COCOA 0CCO1 fSDR'srtonne) 


■ COFFEE LCE (S/lormel 


■ POHK BELLIES CME flCJODfas; canta/lbs) 


7820-30 

767S-7 

7880/7710 

7840-6 

7770-5 


531* 

+1J 

ypn 

526* 34.6® 

6,118 

Nor 

100*0 

• 100*0 100*0 

. 

10 

537.7 

+1* 

541* 

534* 6*29 

n 

Jn 

102*5 

♦0.40 

4® 


543* 

+1* 

547* 

540* 7.798 

a® 

Itar 

105*0 

+0J5 105*0 104*0 

130 

10 




131,753 avou 

Nay 

108*0 

+1.00 

44 

- 






Sap 

93*0 

+1*0 

20 

. 






Nor 

moo 

+0.76 

52 

. 






Trial 



714 

20 


Close 
Previous 
High/low 
AM Official 
Kerb dose 
Open Int 


6215-25 6310-20 

6200-10 6300-5 

6390/8300 

6260-5 63S5-60 

8380-80 
N/A 


Total daffy turnover N/A 

■ ZINC, special high grade (S per tonne) 

Close 1188-7 1211-2 

Previous 1164-5 1189-90 

Mph/taw 1214/1193 

AM Official 1180-1 1204-5 

Kfcrti dose 1204-5 

Open Int N/A 

Total daily unsw N/A 

ffi COPPER, ffade A (S per tonne) 

Close 2913-6 2863-5 

Previous 2772-3 2754-5 

UgMow 2860/2775 

AM Official 2875-6 2820-1 

Kerb dose 2659-60 

Open Int N/A 

Total dally turnover N/A 

■ LME AM Official E/S retac 1*700 

LME doafcrg OS rata: 1*710 

spot I £720 3 nHfts 1.571 3 6 09*1.5801 9 raffisl *670 

■ MCH GRADE COPPBt (COMBQ 

osyto Open 

Close atange llgb tow M Vot 

Hm 136.10 +5.10 135*0 13350 1.01 167 

dec 134*5 +5*0 134.80 131 *0 31,192 2.684 

Jn 131-85 +4.15 131*0 13030 926 46 

Fell 13035 +4.00 130.40 12830 763 210 

Har 12BA5 +340 120,30 12750 15785 6*55 

Apr 12635 +150 12550 125,50 673 20 

Tetri 61,272 10*21 


PRECIOUS METALS 

■ LONDON BULLION MARKET 
fffrofln s/ppBad by N M RqgBdfloD 


ENERGY 

■ CRUDE 06. NYMEX (42*00 US gffis. S/barreQ 

UMt Days Open 

prim Ctaope MW tew lot Vat 

Dae 17*5 -003 17*8 17*0 45*03 31*182 

Jan 17*2 +0*1 17J5 17*7103,787 47,775 
» 17*7 -001 17*8 17*5 40*61 16*22 

Aa 17*8 +003 17.64 17*3 27,314 8,768 

Apr 17*4 +006 17*4 17*1 18.140 1*54 

Hay 17*2 40*1 17*6 17.48 13*81 1.79* 

TVW 388*01721*70 

■ C«UDE OR. ire B/banrf) 



Utari 

Safa 





priea 

c&aoffii 


Low tot 

VH 

Jaa 

1848 

-0*1 

1876 

18-45 28*72 12J48 

Fab 

16*5 

-0.14 

1061 

1034 88*15 38*10 

Bar 

16*4 

■0*9 

16,48 

16*4 24,178 

7*26 

Apr 

16*0 

+0*5 

1036 

1030 13*14 

2*55 

May 

16,16 

+0*3 

1035 

1016 5*82 

1® 

Jn 

1621 

+0*8 

1030 

16*1 3,150 

25 

Total 




146*90 80*78 

■ ICATINQ OIL irraei (42*00 US Bril; tfU8 BEb) 


La**wt Day's - opan 

price danga MgP toe tot Vat 

48.70 +0.10 48*5 48*0 37*34 17*20 

4020 • 4000 49*5 40878 0889 

*8*0 +0.10 50.10 40.75 23*48 7*04 

48-88 +020 5010 48.75 12.743 4,477 

49.4S +0*5 4045 48*0 9,166 2*28 

46*0 4030 48*5 4880 4*40 820 

184*80 4*114 


■ SOYABEANS CBT ROOCtai mft; Oris/goB hand) 

*N 55818 -1/4 562/4 555/4 4*37 5*68 

Jn 565M -2/4 570/4 5834) 54*38 31*70 

Itar 574* -2/4 579/0 572/6 Z7*07 4,788 

■fey 681/4 -2/8 586/0 580/0 14,146 1,772 

JM 586/1 -341 591/0 585/4 22*67 2*03 

Atffi 588/4 -3/4 992/0 588/4 1.747 238 

Total 138,118 47*BB 

■ SOYABEAN OtL C8T ffiftOOUba.- cantarib) 

On 28*1 +0.03 28*4 27*8 35*70 12*12 

Jn 27.11 -0*1 27*2 28.72 23.359 7*04 

28*3 41*7 28*0 25.75 18,723 8*47 
***T 26,18 -0*9 25*5 24*0 14*15 2*84 

Jal 24*4 -0*8 24.70 24*5 8*12 1*85 

An 8 W-lO -0.13 24*5 24*5 1,734 33 

Trial 110*18 20*81 

■ SOYABEAN MEAL C8T (100 tons; 8/ton) 

Dee 158* 4L4 1585 158* 31*08 8*01 

■rin 180* -06 161* 158* 20*01 5*83 

Her 164* -0* 185* 164* 19*06 2*86 

***r 168* 4L5 189* 165* 10*77 811 

•W 173.7 4L4 174* 173* 10*78 849 

AB8 175.6 4L4 176.1 175* 2*02 82 

Trial 160*86 19*20 

■ POTATOES LCE (E/torra) 


MW 

3290 

-35 

3290 

3270 

370 

13 

Jn 

3323 

-26 

3340 

32® 

3*87 2.412 

Itar 

3258 

-S3 

3230 

3241 

7*60 1.543 

May 

3243 

-60 

3266 

3225 

3*38 

374 

Jri 

3218 

-72 

3240 

.W.H) 

1*40 

® 

Sap 

3200 

-70 

3230 

3210 

2,158 

94 

Total 





25*37 4*21 

■ COFTS -C* CSCE (37,5O0R»,- cents/tbs) 


on 

176.10 

+4*5 

176*0 

169*0 

$6® 3*93 

Mar 

181*5 

♦4*5 

182*0 

174*0 15*46 8*32 

May 

184 00 

+4*0 

164*0 

177*0 

5*43 1*49 

M 

185*0 

+4*5 

185*5 

179*5 

2,0® 

245 

Sap 

186*0 

+150 

160*0 

181*0 

1*01 

58 

Oec 

187.® 

+3*0 

183*0 

183*0 

838 

25 

Trial 





32,18912,418 


Ml 

38*00 

-2*00 40500 36*00 

8*71 

1710 

Mar 

35*75 

-2*00 40m0 39*75 

1*42 

190 

May 

40100 

-1*50 41*00 40*50 

304 

25 

Jri 

40.7® 

-2*00 42300 40,750 

382 

® 

Aog 

39*50 

-2*00 40.800 39750 

87 

2 

Total 



10348 

1*81 



LONDON TRADED OPTIONS 

Strike price $ tonne — Cafe — ~ — Puts — 


CROSSWORD 

No.8,613 Set by HIGHLANDER 


* J J, 


FeP May Feb May 


Fats May Fab May 



San 

Oaf* 

opn 



P*e 

cfnga 

tew M 

Vat 

On 

149,75 

-1*0 152*5 14&75 38,780 

7*24 

Jn 

151.76 

-1*0 154*5 

161.75 24*30 

3*18 

Ml 

153*5 

-12S 154.75 1®.Q0 11*43 

2,1® 

Mar 

1/026 

-1.00 154*5 

153*0 8*70 

603 

Apr 

151*0 

-IS 151*0 

151*0 3*80 

15 

Bay 

151*5 

-1*0 

- 765 

- 

Trial 



93*27 14^91 


PM- 

105* 



. 

" . 


Air 

wyil 

+13* 

287* 

255* 

1*11 

406 

MW 


- 


- 

> 

. 

Job 

SO. 0 

. 

. 

. 


. 

Total 





1*12 

486 

■ FROGHTtBFFEX) LCE RlCVtrxtox point) 


■or 

1873 

+23 

1875 

1860 

250 

8 

Doc 

1650 

+50 

1850 

1620 

388 

45 

Jn 

1780 

+45 

17® 

1718 

1*71 

50 

Ar 

1899 

+41 

1700 

IE® 

928 

78 

Jri 

1496 

+25 

. 

. 

132 


Oet 

1600 

*47 

• 


17 


ton 

Oreo 

Prer 



2*66 

1® 

OR 

1634 

1830 






■ COwfcfci (ICO) (US centa/pCTjyfl 

Am. 15 Price Pm. day 

Cbfflp. daffy 189*7 17172 

15 day meaps 17557 177.58 

■ No7 PREMIUM HAW 3UQAH LCE (cente/lbal 

Jn 1100 

■ar 13.76 -0*9 80 

■ay 13*8 41*6 - 560 - 

M 1174 41*4 - 450 

T«ri 1,100 

■ WHITE SUOAB LCE (S/tonne) 

■w 382.40 -1*0 383*0 380*0 10*12 904 

MSI 377.10 -0.70 377.30 375.70 4*94 ZS3 

Aug 366*0 +0*0 389.10 367*0 3*94 300 

Oct 341.70 -030 342.40 34050 1,488 29 

DOC 340*0 4110 - - 100 - 

■tor 340*0 - 251 - 

*«■ 19*38 1*86 

■ SUGAR 11* CSCE (112,0Q0fcs; cents/fes) 

■ar 13*6 4L06 1104 1053 09,78910*67 

13.63 -0*5 13*7 13*8 30,031 2.353 
Jri 1X42 -0*1 13.44 13J4 18,706 1*09 

t» 12*2 4HT1 12*4 >278 18*44 828 

Mr 123 9 +0*1 1244 1235 3*43 407 

■ay 1232 +0*1 1232 1232 253 35 

Trial 168*6018*06 

■ COTTON NYCE (50,00abs: cants/toa) 

Dac 7440 -020 7440 74*5 15,813 6*49 

■ar 7S05 - 76.10 75.® 22*13 6*61 

■W 77*0 4L05 77.10 7570 7,782 441 

Jri 77*8 41*4 77.70 77.45 4*24 2® 

Od 7i*a +0.10 71*0 71*5 043 28 

D*C 7550 - 70*0 7515 3*57 t® 

Trial 54*5218*82 

■ ORANGE JUICE NYCE (IS.OOQte; certs/bs) 


■ ALUMINIUM 

IB9.7*J LME ft* 

1800 - 

1850 .. .. 

1900 ___________ 

■ COPPER 

(Grade A) LME Ffl 

*700 - 

2750 - 

2300 - 

■ COFFEE LCE Ja 

3300 — IS 

3350 17 

3400 IS 

■ COCOA LCE Dei 

950 fi 

975 - 

1000 . 


LONDON SPOT MARKETS 

■ CRUDE OB. F03 (per bomBt/Dec] +«■- 

Oubel Sl5.4l-5.46z -0.066 

Brent Blend (dtfedQ $10.65-6.67 41*6 

Brent Send pan) $16,554*7 -0.08 

W.T.I. (1pm est) $17-49-7*1 z 4L05 

■ 05 - PROPtASTB NWEprompi deftveni OF (tonne) 


Jan 

Mar 

Jan 

Mar 

183 

252 

170 

284 

171 

234 

iee 

318 

152 

210 

229 

350 

Dec 

Mri 

On 

Mar 

$ 

65 

3 

38 

- 

so 

22 

47 

- 

39 

<7 

61 

Jan 

Apr 

Jai 

Apr 

57 

80 

51 

107 

35 

68 

78 

138 

21 

54 

115 

172 


Premium Gesofine 

Gas 06 

Heavy Fuel Off 

Naphtha 

Jri Kiel 

Diesel 


$177-179 

$152-154 

$107-108 

$173-176 

$175-176 

$158-160 



Gold (Troy ozj 

Close 
Opening 
Morning fix 
Afternoon ftx 
Day's High 
Day's Low 
Previous doss 
Loco Ldn Mean 

1 month — - 

2 mo nt hs 

3 months 

Sflvar Fix 
Spat 

3 months 
6 month s 
1 year 
Gold Coins 
Krugerrand 
Maple Led 
New Sowuriyi 


$ price C squiv. 

386*0-386*0 
386.60-386*0 

3®*0 244*33 

388*5 246*33 

386 80-387.20 
385*0-385*0 
336.80-337.10 

i Grid LsmSno Rates (Vs US3) 

— 4*1 8 months 5*9 

-.-5.04 12 months 5.77 

.-,5*0 

p/lroy oz. US ett equiv. 
328*S 519.00 

334.75 52660 

339.70 534*0 

35240 552.60 

$ price £ equiv. 
387-330 248-249 

389-392.65 
«W3 57-60 


■ NATURAL flAS WVMEX <10*00 egrftSL; $ftnm8tu4 

Latest Owfa Op n 

price riaega Mpi lew tat 1M 

Dac 1*71 -0*64 1,749 1*70 25*31 15,758 

Jn 1.850 41*57 1*35 1*45 27,170 6.198 

T* 1*62 -OJ045 1*10 1*50 16.TO 1*17 

Mar 1*45 -0*32 1*® 1*45 13*70 2*84 

Apr 1*® -0*32 1*48 1*00 7,173 396 

MV 1.820 -0*17 1*30 1*15 7*68 383 

Total 147.751 28*80 

■ UNLEADED GASQUNE 

WWCt (42*00 IIS flan; BUS pafal 

Latest Day’s Opn 

pfce change low lot W 

D6C 57.10 4L47 57*5 36.75 Z3*77 14*11 

Da M.B0 -026 55*0 5470 23*64 6*54 

n* 54.10 4L26 54® 34.10 8*79 2*33 

*W 34*0 -0*1 54.40 54.10 4*23 802 

Apr 57*0 - 6*34 234 

way 5640 +0.05 5640 56.40 1*96 100 

Total 70*48 2A*TB 


HW 

111.25 

+0.10 

111*0 111*0 

161 

® 

Jan 

114*5 

■0.70 

115.40 113*0 

15,651 

1.4® 

Mar 

117.80 

-0.70 

116*0 

116*0 

6*14 

524 

May 

120*0 

-0.70 

121.00 

110*0 

1.709 

20 

Jri 

123*0 

■070 

124*0 

124*0 

918 

1 

Sap 

126*0 

-0® 


- 

1*05 

20 

Total 





27*98 2.1Z5 


Cotton 

Spot and shipment sales In Liverpool 
amounted to 424 tomes for the week ended 
November 11. againat none on the previous 
week. Ren ewed puchaatog to many apeCWfat 
atylea attracted much attandon. Americwi quaf- 
Itiee «9 »reS as lAsl and tome* growths moved 
ofl freely. 


VOUJIEDAYA 

Open Interest aid Volume data shown for 
contracts traded on COMEX. NYMEX Cet, 
NYCE, CME, CSCE aid IPE Crude 01 ae one 
day to Bream. 


INDICES 

■ REUTERS (Basa 18/9^1^100} 

IB Nevis month ago yam’xo 
2138.9 2139.0 2073.4 1621* 

M CM Futures (Baaa: 1967a100) 

No* 15 Now 14 month ago year ago 
233*5 2 SLW 229.72 22210 


Priotore Aigua. Tat Lon oat prt) 3S0 S7SB 

■ orret 

QoM bar troy oz)$ $388*0 4175 

Sliver (per tray octf 5Z5*c +3.0 

Rrilnum (per tray oz.) $414.75 -2.10 

PaBadhan (per troy oz) $156.50 -1*0 

Copper (US prod.) 134.0c +1.0 

Lead (US prod.) 4a 75c 

Tto (Kuria Lumpur) 1S.74r +024 

Tin (New Y orU) 294*c +4.0 

CriBe pve 11528p +ai9* 

Sheep OfVB wrigtffifA l04.07p +2*0* 

Pigs Pve weight) 7fi.73p +1-55* 

14m. day suga (raw) $336*0 -0*0 

Lfin. day sugar fwi^ $394*0 +7.00 

Tote & Lyte export E3Z7*0 +2.00 

Bariey (Eng. feed) Unq. 

Mata (US No3 YeBow) Unq. 

Wheat (US Dark North) El85.0v 

Pec^f 8725p +1*0 

(J«i)V B8.73p +1.00 

ftfflbw (KL RSS N01 343, Qm +1*0 

Coconut 00 phl£ S727Jq +3a0 

Prim OH (MtfayjS S72Z5u 

Copra (PHg S457.5>» -10.0 

Soyatxm (U^ Dl65*t +1* 

Cation OuBootCA’ Mok 77.90c +a® 

WwVhjps (843 Super) 455p 

f f >8f ^? BB ri** rihemhe MMad. p pmcerig. c cgitsAQ. 
i itogBgftg. m n ato jrian wrtalta. y NoriDcc. v NpWDro. u 
* Ja L , t Nw- 0 D»=/Ja# tend* Phrafcat. 5 OF 

Rorenton $ aacn nretat riaee. A Shnp flhe weiffA 
’ Dreiga on weak O mess we W pmkiu t 

- 14/11*4 CwieciBd Iwre >a wn Sir JO- 7*2 


ACROSS 

1 Quite large to look at and 
tovmg the necessary power 
1*2) 

10 Produces property results (7) 

11 Big fellow in gaol hit out (7) 

12 Nobody with time to turn pro- 

on piece of wood (5) 

13 Stealthily gets near to telltale 
drink (6*) 

15 Simple component on a rail- 
way (10) 

16 Ellis perhaps, having lost a 
pound? (4) 

IS Blackbird's dish? (4) 

20 hzqiafed old boy and almost 
hit Edward (10) 

22 Distributed late - told off (8) 

24 ®^ Bt ' clas 8 ~ bowled spot-on 
to) 

26 Sexual stimuli from end of 
movement in Beethoven sym- 
phony (7) 

27 Coiffures can be hard to dry 
off before parties (7) 

28 Plump with her shape for a 
patriarchal type (6,6) 

DOWN 

2 Cr imin al act of receiver (7) 

3 ffrtthe first indication of hes- 
itation from supporter (81 

4Runwifosfyte<4)^ 

5 Breathe new life into Green 


6 This wood is light - lift up a 
chunk (5) 

7 Passes last of the slips (7) 

8 “Showing signs of exposure to 
foe dements" one hears, if 
defeated (7-6) 

9 Stockaan's going over plant m 
west London (9,4) 

14 Firm friend with stall in same 
place? (10) 

17 Drop the fish - make a mid- 
ding (S> 

19 Rich source of oil has gone 
(4*3) 

21 Put on the Unfinished, sub- 
ject to sound of dap (?) 

23 wind is an unexpected event 
w 

2S Cook - a heartless leader (4) 
Solution 8,612 


S| a R a pJ 0 OHaaninQa 

a 13 0 D Cl n n 
aanaao QQQanaQE 

aBaa^aarsBQia 0 0 

a 

aaaa0 a ^| H g Q U 
aaaHQQQQ aomaBi 
OBtaBaann nrifa^nS 
















financial times Thursday November 17 1994 



LONDON STOCK EXCHANGE 


Report 


Economic news drives equity prices higher 


By Steve Thompson 

^LcSm L,” me tQ the ^cue of 
distSct .iSc'v tnarket sh0 ^g 

^-share Index fin- 
u 1 hif ? th ' , busy sessi0n a net 

the dav? h but weU b el°Tv 

shorti5 y »ir b St ,. of 31681 cached 
snortly before Wall Street ooened 

[° r business. Demand for equities 

FT S?°^H™ ned 10 ^ 

oowp E rf N1 J d 2a0 , uidex P ut on another 
powerful performance, closing 22 
stronger at 3.582.7. B 

v ^^?. econon ? ic details released 
yesterday pointed to lessening mfla- 
tionary pressures in the UK. This 
news, combined with the minutes of 


the recent meeting between Mr 
Kenneth Clarke, the chancellor of 
the exchequer, and Mr Eddie 
George. Governor of the Bank of 
England, which revealed that the 
two agreed there was no need for 
further increases In UK interest 
rates in the short term, gave a 
strong shot in the arm to gilts and 
equities. Before the economic news 
was announced. London's stock 
market had wilted after the late 
slide on Wall Street following the 75 
basis-point rise in the Federal 
Funds rate. 

The extent of the increase took 
the US market by surprise : most US 
analysts had expected the Federal 
Reserve to lift rates by 50 points 
and to warn of more rises tf eco- 
nomic indicators pointed to further 
inflationary pressure. 

But it was believed that yester- 


days higher than expected US retail 
sales figures and other economic 
data had tipped the balance in 
favour of the larger rise in the US. 

Leading dealers said the market 
had blazed ahead after the inflation 
news, with solid institutional 
demand driving the FT-SE 100 
above 3.155. a level regarded as a 
major upside break point. “It was 
all one-way traffic until we reached 
3.155," said one. N but once we got 
above that level It was all sellers; 
we seem to have reached a crucial 
trading level and we could face a 
bout of profit-taking tomorrow." 

On the other hand, the bead of 
marketmaking at one of the UK 
securities houses was unequivocally 
bullish of the London market. 
"There was never any real selling 
pressure and I feel that we could go 
further as long as Wall Street 


behaves" he said. 

Strategists adopted a positive 
tone about the market. Mr Ian Har- 
nett at Strauss Turnbull described 
yesterday’s inflation news as "the 
perfect background for the chancel- 
lor to present a positive Budget; 
fears of an interest rise in the near 
term have diminished substan- 
tially”. While Mr Richard Jeffrey, 
equity market strategist at Charter- 
house Tilney, said the economic sta- 
tistics were “a reminder that the 
UK is still doing very well”. 

Another bull point, observers 
said, was the upsurge in activity in 
the market in the past two sessions 
which have witnessed a series of big 
individual trades, via institutional 
trading programmes, bought deals 
and buy-backs. Tuesday's surge of 
activity included customer business 
worth an extremely heavy £2.62bn. 


the highest for many weeks and 
inflated by Boots’ £500m share buy- 
back and Goldman Sachs* £l60m 
trading programme. 

Turnover yesterday totalled 
S15-2m shares, with non-Footsie 
stocks accounting for 58 per cent. 

The water and electricity stocks 
came in for strong support from the 
institutions, the latter after the 
electricity industry regulator indi- 
cated bis willingness to see the indi- 
vidual regional electricity compa- 
nies sell their holdings in the 
National Grid. Optimism over divi- 
dend prospects helped drive the 
water stocks forward. 

• Hints of imminent moves in the 
VSEL takeover battle produced 
keen support for the group, while 
dealers reported more murmurings 
of possible predatory moves against 
S.G. Warburg. 



FT-SE-A All-Share Index 

7.625 
1.500 
1.575 
1,550 
1.525 
1.500 

1-475 Sap Oct- Nov 

Sousa- FTOtapfi® 1994 

■ Key Indicators 
Indices and ratios 

FT-SE 100 3146.5 +11.1 

FT-SE Mid 250 3582.8 +22.1 

FT-SE-A 350 1576.7 +6.S 

FT-SE-A AD-Share 156020 +6.30 

FT-SE-A All-Share yield 3.90 (3.91) 

Best performing sectors 

1 Engineering. Vehicles +2.7 

2 Merchant Banks +2.4 

3 Tobacco — — +1.9 

4 Budcfing Materials +1.5 

5 Water - +1.4 


Equity Shares Traded 

Turnover by volume (mOKmi. Excluding: 

Intra -market buaness and overseas turnover 
1.000 - 


FT Ordinary Index 2418.6 +10.2 

FT-SE-A Non Fins p/e 18.84 (18.80) 

FT-SE 1 00 Fut Dec 3151.0 0.0 

10 yr Gill yield 8.63 (8.65) 

Long gilt/equity ytd ratio: 8.71 (2.24) 

Worst performing sectors 

1 Life Assurance -0.8 

2 Property -0.7 

3 Extractive inds -0.2 

4 Household Goods -0.1 

5 Pharmaceuticals -0.1 


Bid move 
boost for 
VSEL 

VSEL was a clear feature 
among engineering shares, 
jumping 23 to 1405p following 
what was seen by the stock 
market as a dramatic shorten- 
ing of the odds on GEC's bid 
for the company escaping a 
monopolies reference. 

The catalyst was the interim 
results statement from defence 
contractor Vosper Thorn vcroft, 
which disclosed strong profits 


and dividend growth but - 
more importantly for VSEL - 
made it clear that Vosper was 
in a position to provide plenty 
of competing defence ship- 
building capability. 

GEC is bidding 1400p a share 
cash for VSEL in direct 
counter to a share offer worth 
1295p from British Aerospace, 
which put on a penny at 471p. 
The stock market has not ruled 
out a fresh offer from BAe, pos- 
sibly next week. 

Land Secs warning 

Land Securities, the UK’s 
largest quoted property group, 
tumbled 17 to 606p on turnover 
of 5.1m - the busiest session 


for 18 months - after warning 
about the second half. 

interim profits of £118.9m 
from £U6m a year earlier were 
In line with market expecta- 
tions, but Land said higher 
interest charges brought about 
by its increased development 
programme will make it diffi- 
cult for end of year profits to 
match those of the first half. 
Sentiment was also dampened 
by a slightly lower than expec- 
ted dividend of 6.85p. 

Mr Robin White at NatWest 
Securities said: “This is confir- 
mation from the major player 
In the sector that concerted 
rental growth has not yet 
returned." 

Mr Alan Carter at James 


-EQUITY FUTURES AND OPTIONS- TRADING 


Cape l, which issued a cautious 
note on the stock two weeks 
ago. said he was not surprised 
by yesterday’s statement and 
said: “The profits decline in 
subsequent years has been 
anticipated.” 

The decline in Land Securi- 
ties dragged MEPC. another 
leading property stock, lower 
by 8 to 408p. 

De La Rue hit 

Bank note printer De La Rue 
failed to maintain its sharp 
rise established after top of the 
range figures on Tuesday. Per- 
ceptions that the group's rat- 
ing was too demanding was 
compounded by a sober 



:■ ** r 
* «** = 



Stock index futures ended the 
day little changed, but once 
again trading volume was far In 
excess of the recent average. 
writes Jeffrey Brown. 


With two-way business 
remaining strong, contract 
numbers during pit trading 
hours totalled 16,708, against 
19,792 on Tuesday. 

(APT) 


■ FT-SE 100 INDEX FUTURES (LIFFE) £25 per fu» index point 



Open 

SaR price 

Change 

ttph 

Low 

Eat vol 

Open iriL 

Dec 

3132.0 

3151.0 

- 

3184.0 

3130.0 

18737 

54731 

Mar 

3157.0 

3167.5 

. 

3198.0 

31550 

32B 

4570 

Jin 

3213.0 

3188.0 

-1.0 

3213.0 

3213.0 

15 

80 

■ FT-SE MID 2S0 INDEX FUTURES (UFFE) £10 per hd Index point 




Dec 3593.0 36Q2 .5 25.5 3610.0 3593.0 7 4165 


■ FT-SE MID 250 INDEX FUTURES (DM LX) CIO per ftd hKtax point 


Dec - 3590.0 0 

AM open Internal Spine ere to previous Say. T Enact votane eMM. 


■ FT-seioo am ex option (uffe) pm?) eio perim w«» pofru 


2850 3000 3050 3100 3150 3200 32SO 3300 

CPCPCPCPCPCPCPCP 
Nm 19712 1 147l 2 1 n >2 2 51 S> 2 15>z 21»i 3 64 1 114 1 164 

Dac 2144 12b 172 21 133 3Ua 47>* Gfl 60b 48 98 131k 171^ 

Jan 239 32 2DI 43 154 5B 1S0I 2 73 100>2 83‘ 2 76 119^544 149*2 38b 188^ 

Feb 296fe 39 2f9> 2 52 1S3>2 65 152^ B4J 2 T22»j1£»lj 95 131*2 77 IBl^ 57*; 194*2 

Jm t 267 B8 208 129 157 176 113*z 234 

Cato 13.170 Pub 7.309 

■ BIRO STYLE FT-SE 100 INDEX OPTION (UFFE) CIO parlul totUx point 


2075 3029 3078 3125 3175 322S 3275 3323 

NOV 170 1 121 lb 711a ih 11*2 Vt 38 1>a lit 1 130*2 1 

Dac 192»| 17*2 lSlh 26>I 115 38 1 z 83 57 GB 80 35 109 20^ 143ij 11 1B4 

Jan 215*2 33 177»a44l 1 14S 61^ 1141? KUa 90 105 67 13Ha 50 184 35ia 199 

Mar 208 68*a 146»a 104 97 153*2 00*2 215 

Junf 254 85*2 194*2 133 144 178*2 102 233*j 

Cafe 4JS7 Pi« &30i ’ Undartyfo Index Hus. Premtaa shewn are head on semanert prices, 
t long dated eaUy matte. 

■ EURO STYLE FT-BE WD 250 INDEX OPTION (OML)Q £10 pee tufl Index point 


3400 3450 3600 3560 3600 3860 3700 3750 

Dae 104*5 78*2 70% 64*, 333. 

Cab a Pub d Senanem price* and vounas are atari at 43Wm. 


The FT-SE 100 December 
contract was 3152 at the 
official 4.10pm close, up just 
one point. The premium to the 
cash market was 3 points, 
short of fair value at 4 points. 

Propelled by favourable UK 
inflation data, the market 
opened strongly and by 
mld-moming the December 
contract was running at a 
premium to cash equities In 
excess of 20 points. 

But the general enthusiasm 
was tempered during the 
afternoon session when Wall 
Street, the immediate key to 
direction, made a faltering start 
to the day. 

The December contract 
managed to edge up a few 
further points in late, 
screen-based trading and 
traders took distinct 
encouragement from the level 
of volume, which moved above 

19.000 contracts. 

Stock option volume also 
powered ahead, rising to 
56.430 lots from 44,538 on 
Tuesday. FT-SE and Euro 
FT-SE trading exceeded 

30.000 lots. Forte was the 
most active stock option at 
2.450 lots, followed by two 
major banks, NatWest (1786) 
and Barclays (1736). 




FT + SE - Actuaries Share Indices 


The UfCSenes- 




Day's Year 

Ohr. 

Earn. 

P/E 

Xd act 

Total 


Nov 16 

chge* Nov IS Nov 14 New 11 ago 

yield % 

yiekrtb 

ratio 

ytd 

Return 


31486 

+0.4 31384 3066 3 30789 3120.0 

457 

897 

1693 114.66 

118557 


35825 

+05 3660.7 3538.1 35385 3436.7 

150 

5.75 

20.97 120.68 

134257 


35835 

+05 35835 35415 35403 3432.0 

3.88 

652 

19.52 125.77 

1339.86 


• 15787 

+0.4 1570.2 1562.4 1544.7 1552.0 

194 

868 

17.71 

56.49 

1225.58 


178687 

+05 178151 177752 1780.02 175968 

131 

459 

2556 

6154 

1381.75 


1752.84 

+05 1748^45 174846 1748.98 173953 

152 

5.56 

2300 

5125 

1369.88 

FT-SE-A ALL-SHARE 

15W.M 

+0.4 1553.90 153751 163839 1536.05 

190 

857 

18.09 

55.16 

123146 

■ FT-SE Actuaries All-Share 

Day's Year 

Div. 

Earn 

fYE 

Xd ad). 

Total 


Nov 16 

chge% Nov IS Nov 14 Nov 11 ego 

yle«% 

yk*d% 

ratio 

ytd 

Rental 

10 MINERAL EXTRACTIONS 6) 

2722.02 

2722.00 2676.00 2667.85 239800 

3.47 

602 

25.18 

89 83 

1096.93 


3865-47 

-05 3872.7B 378882 3767.55 306850 

3.32 

551 

2130 

98.62 

106865 


268350 

268251 264652 283867 2378.50 

161 

5.58 

22.32 

9844 

1112.18 

ifl Oil SxaLaiaOon A Prad(H) 

187879 

167258 1863.42 1808.74 1917.30 

2.22 

t 

t 

38.03 

1084.14 


Budding & Cor«ttiucflon(33) 
Budding Matla 6 MerchspZi 
ChomkaateC23) 

Diversified fndustrtai&<l 0) 
Electronic & Elect Et*4p(34) 
Engineering^ D 
Engineering. VeMctes(i2l 
Printing. Patw 6 P«*C<M] 

& Apparel (201 


1907.46 

+06 189653 188253 187182 1807.00 

444 

5.15 

2149 

88 97 

97633 

1057.60 

+0.6 1051.61 1047.18 105167 1129.30 

3.76 

5.30 

24.83 

36.57 

833.76 

1892.86 

*15 186659 185153 16S553 1875.70 

3.84 

116 

23.53 

70.57 

89855 

2331.89 

+0.1 2329.08 229754 227894 2092.10 

4.03 

4.51 

27.65 

79 58 

1034.8* 

182026 

+05 1811.57 1798.15 177755 198150 

5.03 

500 

23.76 

82.75 

938.18 

189844 

-0.1 199956 1881.45 IBS 455 2082.40 

188 

6.61 

>045 

6188 

930.63 

1832.51 

+85 1824.19 181950 181454 1689.40 

357 

5.39 

21.80 

54.20 

1052.38 

2388.63 

+2.7 232254 2304.82 2298.35 197950 

4.19 

1.46 

60001 

92.5* 

1167.34 

2852.38 

+0.1 284852 2812.10 2797.98 2429.80 

104 

5^44 

21.43 

77.09 

1125.07 

1573.43 

+0.1 157152 1566.78 157352 1888.80 

458 

854 

1753 

6159 

697.94 


CONSUMER GOOOSfB7) 
BrewerieeOT) 

Sprits. Wines 5 Ckiers(1C0 
Food Manufacfcj«ust23) 
Household Goods(ia) 

Health Caroffill 
Pna/maeeutlcata(i21 
Tobacco^) 


2799.13 +0.4 2768.10 276541 2751.30 2773.00 

2227.78 2215.28 2222.21 2002.90 

2877.75 +OS 2864.82 283628 2822.50 271 430 
2309-30 +05 229097 2288.83 2281.78 2287.10 

2367.81 -0.1 2380.50 23+5.56 2350.14 284020 

1593.84 +03 1689.43 157013 1578.39 187010 
3115.87 -0.1 31193030B2J4 3061.il 311130 
391051 +1 8 3842-20 3778.28 3758.31 *212.80 


410 

7.18 

455 

7.72 

188 

8.71 

455 

7.60 

3.88 

7.70 

117 

3.40 

4.33 

851 

5.55 

8.78 


1007 11151 
15.71 61.47 
17.13 101.23 
15.21 88.47 
15.67 69.99 
41.43 48.24 
1073 133.07 
li23 217.07 


968.94 
998 51 
96a 62 
975.33 
353 35 
928 59 
999.53 
892.70 


5ERVKJE9(219) 

astrlbuorapO) 

Leisure & Haiets(2S 
M e<&i(39) 

RetaUere. Food(i6) 

%taflem. GenanttMS) 

Support 5ervtces<4l) 
rrsrreportflC) 

Tther Services & BualnewgL 


1938.44 

2551.49 

208&24 

2902.10 

1787.41 

1636.09 

152083 

2291.61 

1287.87 


+0.41931.48 190024 
+1.3 251704 2501.38 
+03 2070702062.00 
+0.5 288061 2856.83 
-0.3 1782.16 175457 
+0.2 1832.89 160087 
-031531.11 152025 
+0.6 227655 226255 
+06 126058 126058 


1905.60 

2504.13 

206356 

2844.76 

1748.97 

160455 

1524.55 

2251.62 

1247.42 


1881.00 

264080 

182000 

2603.80 

1555.00 
1712.40 
1596.60 

2320.00 
1204.20 


352 

6.48 

18.65 

56.61 

956 18 

171 

7.19 

16.44 

8555 

688.67 

133 

4.74 

24.88 

57.69 

103148 

2.40 

5.17 

2256 

70.14 

1010.02 

185 

8.96 

13.80 

58.32 

107459 

357 

858 

17.87 

52.76 

880.85 

2.79 

8.47 

18.19 

38.15 

931.98 

3.72 

8.18 

19.13 

67 01 

90102 

199 

108 

4958 

28.63 

1091.68 


rnUTTESf38) 

3ectrtaty(17) 

Sag Distributions) 

‘elecommun»caBon 9 ( 4 ) 

VatflrfUJ 

»ON-FWANCW LS(g 37 L 

WANCIALS{104) 

lanksfiO) 
nsurance(l7) 
jfe Assurance® 
Merchant. Banks® 

*her FtnarwtaKZ+j 

’moertyfllL 


2454.34 
2572.14 
2018.59 
2043.78 
1862 26 


+032446.14 
+0.4 256075 
+032011.95 
-0.1 204531 
*1 A 185581 


2413.19 

2545.58 

195438 

2017.06 

182579 


2398.91 

2537.08 

193730 

1896.62 

1836.18 


247030 

214930 

2174.10 

2313.70 

183230 


455 

7.75 

15.68 89 78 

00 

161 

9.76 

1252 101. B5 

1077.77 

694 

t 

t 119.82 

946 11 

4.13 

7.07 

15.06 5052 

871.55 

522 

12.BS 

138 79.63 

946.08 


1681.73 +04 1675.48 165731 165074 16*588 339 637 1884 58.86 1194.63 


2240.33 

+0.5 223005 2206.71 218174 2283.80 

4.32 

8.99 

1134 

9034 

B91.87 

2997.94 

+0.7 2976 JM 292645 2899.60 288340 

4.03 

9.47 

1208 11139 

901.35 

1248.68 

+0.4 124451 1253.52 124350 143550 

5.44 

9.44 

12.12 

61 81 

862.32 

2399.91 

-OB 2418.83 239644 2357.41 2612.70 

553 

7.77 

15.70 127.82 

92179 

283740 

+2.4 2771.73 2753.42 274157 3063.90 

186 

10.12 

11.45 

97.76 

860.79 

190221 

+15 1880.31 1885.72 1864.06 170240 

3.06 

850 

14.42 

64.85 

1021 04 

>434.94 

-07 144139 144055 1440.15 1696.90 

456 

4.52 

27.72 

45.12 

822.83 


2772.34 +09 2745*8 272831 2725.27 2677.80 232 1.94 52.17 SB.18 933.98 


iucCTMENT THUSTSflgjL 


r-SE-A ALL*SHARE{B65) 

wily movements 

Open 


1560.20 +0.4 155330 163731 1530.39 1536.06 090 657 1809 55.16 1233.48 


930 


1030 


1130 1230 1330 1430 1530 16.10 Hlgh/day Low/day 


100 

*6d 250 

\ 350 


3133.5 3*34.0 

35623 3682.6 

15693 15893 


3154.2 3154.2 31565 31S1.2 3*67.4 

2SB&1 35719 36815 3584.4 3587J 

15783 15708 15815 15825 15855 


3180.4 3147.6 3168.1 312S.B 

3687.4 3683.0 3587.6 3661.3 

1582.6 1577.1 15855 1566.6 


i^iepm 0»'» tow. B58am . FT-SE 100 1884 Han. 352031 2S ) Uta: 28768 CM l 

Tmw « FT-SE 100 Ds)T3 

■ et-SE Actuaries 350 Industry baskets 

■ ■ ■ 4M M 44 Pin 14 m 

open 


gjdO 1QJD 1150 12J0 13L0P 1450 15J0 18.10 Ctoaa Proto n Change 


BWg 4 Cns«n 
PtwinaMutlcts 
Water 
SanKs 


996.6 

3086-9 

1882-3 

3014.1 


997.4 

3086.4 

1860.6 

3018.8 


1001.2 

3099^ 

1669^ 

30415 


1001.1 

3096.7 

1S72.6 

3036.0 


10035 

3101.6 

1881.4 

3039.0 


1005.6 

3096.7 
18815 
30465 


1006.9 

3102-9 

18815 

3 G 615 


1007.0 

3090.1 

1862.1 
3047.5 


1003.9 

3090.1 

16795 

30354 


1003^ 

aoea4 

1880.7 

3038.0 


995.6 
3091 5 
1854.8 
3013.7 


♦7.6 

-3.4 

+25.9 

+2i3 


CT RF usuaVi Shoe Irefces is pdMicd h SRuday esuee. Ltaa oi conswuens hib hum Hie Hnandet Ttaioi 

Mrmten ai mtonrawn sri BML me FT-SE AouMk Stare Mess Eenrtce. eNeli conere a rerga of etoctrorlc and papa-based 

UT*w* Ota SoutwaA s WnRNSTAT. R od, tatt 13-1 T&Mrenh gWU^EMAJDL^ _ _ „ 


producterlg 01 ^ , . . 
The FT ■eornes bay, 


terin n on tT -t ; Mil bl ccniaicMA wai me Ktatem a Aesrenes am me racuky « octuenes im a Oanaara •* or grouo aa ra 

cnmdtd by p* UrriOfl twettom ana npiftac a( Mm UmsM 108 *. Oita Flnanaal Tsnai Lww iro<. n nghts reeaw+d 

A Ri* HetnfflwW SW* m sauce m*na of the London StoA Ewtange m The RnarcU Ttoas Un«le 4 The FT^E Actums Share 

TT-O- «rt -FMlste; » cSpwM P* *** *** ** * ■*' ™ *B»*» 
kx^cas are eutwi 


■ Major Stocks Yesterday 



vd 

Oxt ng 

Days 


0005 

price 

chanqo 

31+ 

su 

333 

-2 

ASD4 0TOUO+ 

7.B00 

551, 

J; 

Afitoev Nauanerf 

1500 

424 

.J 

Man Rstar 

SOS 

43 


Avar Domeart 

1^00 

612 

•J 

Angttn Water 

1.000 

505 

-1 

Arpoe 

1.100 

354 

-7 

Argyll OtoudI 

a.700 

274 

-2 

Ago Wamf 

it O' 

275 

-1 

Assoc. Bra. Focriet 

37B 

553 

-J 

Assoc, an. Pone 

718 

275 

*2 

BAA+ 

1.800 

499 

*2 

BAT Indlt 

1AOD 

466*2 

-0*2 

BET 

2X00 

100 

-2 

BKX 

450 

352 

-3 

BOCt 

1.700 

427*} 

»7 

BPt 

0.700 


BPBIncb 

2 900 

310 


BTt 

7.700 

391*2 


BTRf 

1800 

314 

Bari or ScoOajxrt 

1.400 

218 

♦1*2 

Bocteyet 

6.300 

818 

4 

BaS3+ 

2.000 

5*1 


OueCedat 

3500 

308 

♦4 

Bootar 

i« 

411 

•C 

Boot ct 

T^U 

517 

-8 

Bowatarf 

1.000 

459 

•J 

Bra. Aaroapaevt 

2500 

471 

♦1 

BratohAMMt 

7.100 

388 

•12*2 

Brutal Ooat 

9500 

304*2 

+1 

Briltai Land 

812 

388 


BnUti Sleett 

10 POO 

157 


Bold 

768 

187 

rff 

Bwntai Caanrt 

406 

853 

£ 

Burwn 

Cette & Wtret 

8500 

OMO 


CadtMV Scfrweopmt 

1A00 

440 

«1 

Coidont 

2500 

293 

-15 

Cancel Ccnvra t 

W3 

888 

-2 

Coes Vly eta 

4.900 

200 *2 

♦>2 

Cornei Union! 

t.500 

540 


GoaMon 

90 

248 

-1 

Cottaarfovt 

1.000 

4€4 

-2 

SffU 

2W 

3.700 

423 

1014 

u 

-20 

Dorone 

1.500 

187*; 

-3 

Eastern Beraf 

V300 

810 

-4 

Ebs sAdiand Sea 

i.OOO 

603 

* 

Hectrocomps 

uco 

472 


GPOCrwaCtayi 

uw 

346 

-7 

Ernarpries Oilt 

2.500 

MO 


Euronirsta Unas 

1500 

272 

-12 

FM 

088 

162 


Faons 

4JM 

126 


Forey & Col LT. 
FortaT 

989 

1 500 

138 

232*3 

,2 

-*2 

Gai AcOdnnrt 
GerartBaif 

1.600 

6.500 

574 

288 

-a 

-*2 

Gtancrt 

7.100 

635 

-2‘1 

Glynaat 

252 

348 

-2 

Graiedst 

2JOO 

525 

•5 

Grand Msut 

5J00 

417 

+4 


1.600 

4^00 

574 

193 

-3 

amt ^ 

ipm 

642 

.11 

Gunmset 

3.100 

46B 


HSBC (75p Start 

4000 

702 

+12 

1 UlMNOGn 

155 

341 


Ha»ont 

12.000 

217*3 

+*2 

Hansons Croat tad 

4J00 

!«8 

-1 

Hays 

424 

233 

-1 

Hfedown 

2.000 

175 


IMI 

805 

327 

•5*; 

•ert 

2.000 

787 

-2 1, 

mencopet 

3300 

442 

.11 

Jarmson MaHiev 

H2 

580 


.Wngflsnat 

5.800 

475 

-1 

Ktak Saw 

382 

5« 


LattroMt 

13.000 

157 


Land Seamesf 

7.500 

608 

-17 

Laporu 

837 

728 

-1 

Legal 4 Generart 

«34 

437 

.2 

Llovds Aobey 

Uovds BaVn 

291 

335 

-3 

3.500 

SK, 

.1 

laSmo 

9.000 

148 

-*2 

LoncUn Elea. 

116 

73 3 


Lonmo 

1+400 


•3 

1 in^w 

1.900 

•7 

MEPCt 

2.800 

408 

-a 

VF1 

3 600 

143*j 

-*2 

Manweo 

1? 

819 

*3 

Mark* A Sooncat 

udsur Sect 

4J00 

410 

-2*2 

J36 

794 


Monson (Wnil 

524 

141 

-1 

NFC 

2.900 

177 

-2 

NatWest Bond 

4.000 

531 

-1 

Naacna Povrart 

3 10j 

504 

.1 

rmt 

1.700 

253 


Note Wesi W»terT 

728 

560 

•10 

Northern Bed 

112 

819 

.3 

Neetam Footat 

2 900 

217 

•7 

None** 

182 

n& 


Pearvont 

we 

621 

-i 

P&OT 

1.100 

641 

a 

nwngton 

1.400 

'88 


(Wool 

Prudenaart 

rvj 

5,000 

Ml 

323 

-5 

ftMCt 

S-n 

ini 

.10 

FTTZ+ 

6.800 

859 


Rota 

1.300 

232 

-3*7 

Rank Onjl 

2200 

416 

•l 

Recuo 4 CoOnort 

lpoo 

57ri 


Redtendt 

2.300 

475 

•5 

Reed Intlt 

706 

788 

.1 

Reniofcff 

497 

230 


ReutareT 

3.400 

488 

-1 

Rota Ftojcet 

Rvt B* Sa*Unat 

4.300 

1.100 

I78*j 

440 

•*3 

.1 

Rover frBuroicer 

JO 00 

2»9 

— i 

$aiiatourvt 

1 MO 

4S0 

.3 

ScrtodersT 

4 

1410 

.'2 

SiOOBh S Nea T 

786 

511 

-2 

Scot Hydroma. 

9« 

J28 

•i 

icontai Powwl 

1.900 

360 

•3 

Seeret 

12.000 

"IS 

.1*1 

Sedwwc* 

1 700 


Setooad 

216 

434 

.1 

S+vorn Trenrt 

566 

575 

.12 

5/kHI Tinitsporrt 

5.000 

712*3 


S-eriet 

1JM 

564 

*7 

Sauan Esre 
SmnfWHi 

552 

927 

227 

46« 

-J 

SnWP 4 Nephewt 

1.600 

140 Ij 

*1 

Sfnhl Beecnomt 

4^00 

«2Clj 

.h 

SeVJ Boettarn Uts T 

5.300 

388 *j 

-2 1 ; 

Sn«ns MS 

1.000 

459 

-l 

SaJTxm Etoti t 

576 

821 

-i 

Son a Wales Bret 

76 

815 

a 

Soutn Wmi Water 

155 

51-1 

tto 

Scu+i WnsL Bad. 

3J2 

795 

•9 

Soutant Woler 

BH 

«C 

• id 

Standad crmrtd t 

4 8,10 

JOl 

•J 

Srotehoide 

2.500 


•1>2 

Sun AmanceT 

2200 

33e 


TSN 

1.800 

229 

• 11 

H Grotipl 

900 

378*1 

-*7 

■reet 

2 100 

230*; 

•l) 

Tamur 

3.5«i 

131 


Tore LLvV, 

1.400 

*40 

•9 

Tovtor Woodnj* 

l.ioo 

129 


Tescot 

Ihomea Worwf 

5.000 


.2*2 

than Eurt 

• 100 

W8 

-3 

Ton+jnet 

2 000 

224 

-1 

Tretaga House 

.VOW 

83‘j 

r 1 . 1 

Ltoiqate 

3*4 

357 

*2 

Un4ev+rt 

632 

1134 

-2 

UnOMl Bta+nst 

si : 

319 

• 1 

Utd. Neewepera 

551 

530 

,1 

wiatorwl 

9.500 

215 

-0 

WateagBGit 

1.400 

$71 

-24 

WoKanet 

921 

67^ 

•2 

Weieh VVota 

5*2 

675 

.« 

Wrae. Water 

1 lUO 

3C1 

•a 

Mvttveatrt 

o: 

554 


weam naan t 

i rrvj 

355 

•5 

Wills Cv-rot-. 

JJ 

1 30 


Wlmpr-y 

vrotertevl 

j ;r«j 
510 

■38 

790 

.19 

VoAs/m D«l 

i ion 

747 

•3 

Yoa+rtirn Vluu 

67 

543 

-B 

Zenecet 

2.000 

80S 

-1 


Based on *Mume lot o ««W I >1 

secwit+s dean Cv-H«n 
y&fi&OOY tiA'i J Tr.idi-i i?T Cne 
ran as reunrtea ouw t tow* 1 V FT-SE 
100 ltd«« Co-i+uiuw' 


appraisal of the prospects for 
the National Lottery. 

De La Rue is one of the com- 
panies in the Camelot consor- 
tium which runs the Lottery', 
and one investment institution 
was believed to have been sell- 
ing heavily after deciding its 
benefits were overvalued. 

Once it began the rest of the 
market followed, taking the 
stock down 21 to JOl-lp with 
turnover reaching 3.7m, the 
highest for around four years. 

A division of opinion over 
figures from British Gas 
ensured that it was one of the 
most actively traded stocks in 
London. The shares closed a 
penny firmer at 303 l :p with 
9.8m changing hands. 

British Gas s third-qu3rter 
losses, calculated on an his- 
toric cost basis, fell to £lt>4m. 
from £225 m previously. The fig- 
ures were better than analysts’ 
forecasts of between £178m and 
£232m. But at least one leading 
integrated securities house 
said they masked a one-off 
£40m boost from lower gas 
prices and the company would 
suffer from heavier than expec- 
ted redundancies. 

However. Nomura argued 
that the benefits of the cost 
cutting would show through in 
1995 and 1996. while UBS told 
clients that Gas’s three- 
pronged strategy to reduce 
costs, achieve medium growth 
out of the exploration and pro- 
duction side and boost long 
term growth was proceeding 
faster than hoped, 'lie Queen’s 
Speech news that Gas’s monop- 
oly is to be abolished had long 
been discounted and analysts 
are expected to raise end of 


NEW HIGHS AND 
LOWS FOR 1994 

NCW WGHS m. 

COLTS ( 1 ) BANKS (If BJCO g 3SO Yizat/o. 
BREWERIES ( 1 ) R+5+rr i-u. DISTRIBUTORS 
( 2 ) Adam S HAT.O,. Fsso * Pnst. ELECTRNC 4 
ELECT EQUP Hi crcSOOR tLF.T Hmuec 
-Packard. i/oyuR Pfr+m. ‘.‘rroi 
ENQlNEERtNa ( 3 ) Bo.-rVK iC> Spra>- 5 areo. 
VSEL Cowun. ENa VEHICLES H) HsnSa 
IMear. EXTRACTIVE INDSpiGanv. Oc« 

BA. 3AIK3 CarcKLKEALTH CARE HI 
S K&n HMCrcsrn. INVESTMENT TRUSTS R 
Siuldn In-. Tv. R-.B Ami Cf'to. FVr-tfG W' 

Prf . I&£ 0 PN +--1 If A. Dv.. -f Ae .3 SaMCL 
Rlvw Rare Zero Pf . LEISURE S HOTELS 0 
Lorxacn .11. LIFE ASSURANCE ( 1 ) 

Ltoor, L*« Aksc. * Atn ca MEDIA (11 Ds.i| 

Uli A. 08 . EXPLORATION A MOO S) Aral 
Erj-gj Cj m Crusirer 
PHARMACEUTICALS ( 1 ) A«ra B PRTMO, 
PAPER 6 PACKG | 1 |bUK«. RETAILERS. 
OENERAL HI flarmw. TRANSPORT (11 
AODi+d Dn+ti . AMERICANS B) A met 
C/uranS. Cm Genera 
NEW LOWS ( 44 - 

GILTS fl) BREWBBES (1) Young N.V.. 
BUlLDma S CNSTRN d Btf+Vicn. Boot (H). 
BLDQ MAILS 4 MCHTS f 1 | Dr+oo IJ 1 Jl A. 
CHEMKALS SB We* SAarmV V.-aRngon. 
DISTRIBUTORS (ZJ Certtel itoi r Aucnons. 

Ham W. QtVERSIFtCD MDLS ( 2 ) PaSCte Dunlop. 
SWrttar IrySs . ELECTRNC & ELECT EOUP ( 3 ) 
FOtoVO Group. PreSAOC vales EXTRACTIVE 
INDS (Z) UrvTW. Rocx-jmxi HOUSEHOLD 
GOODS |1| Comwel PsAer A. INSURANCE (1 ) 
LomiobS Lamoer. INVESTMENT TR U STS p) 
LEISURE A MOTELS Bl Ben & WaBece Arnold, 
Prom Lmml OIL EXPLORATION A PROO P) 
Caromond Plrlm. Capiro Res.. OTHER 
FINANCIAL ( 11 1 o»V Ln. OTHER 8ERVS & 
BUSKS (1) L»B» InWBsa. PRTNO. PAPER A 
PACKQ ( 2 ) BBrorow. rtunuucrro. PROPERTY 
0 CLS. MEPC. RETAILERS, OENBUL (3) Rna 
Ait Dwtpe.. Ponnoga Fme Ars. Ggnot, 
SUPPORT 6ERV8 ( 3 ) CoifMl 9 gvgo Consul, 
Wnrrn* HovmtL TEXTILES A APPAREL | 1 ) 
hum 

year forecasts to above £900m. 

British Airways made up 
some of its recent market 
underperformance, bouncing 
12V* to 386p in turnover of 7.1m 
for a two-day advance of 20. 

Dollar recovery and renewed 
focus on the strength of the 
airline’s core business helped 
investors to shrug off more 
gloomy tidings on the USAir 


front. Legendary US investor 
Warren Buffett announced in 
an SEC filing that his Berk- 
shire Hathaway group, which 
like BA has a big stake in 
USAir. could shortly take an 
earnings charge against the 
shareholding. 

Eurotunnel retreated 12 to 
272p. with turnover in Paris 
running at nearly five times 
the level of the l.2m shares 
traded in London. 

International conglomerate 
Hanson saw a surge of dealing 
after traders suspected that 
Hoare Govett, the company’s 
broker, had published an 
enthusiastic recommendation. 
Hoare was unavailable for 
comment. The stock, 
restrained by a block of 4.2m 
shares traded just before the 
end of dealing on Tuesday, 
ended the day marginally 
firmer at 232 %p with turnover 
hitting 12m. 

BAT Industries advanced 8 1 /* 
to 466V*p, with Smith New 
Court backing the shares. 

Motor industry engineers 
sprang to life, with GEN up 11 
to 642p, T&N gaining 11 at 
229p, and BBA adding 9 at 207p 
in 4.5m turnover, as the engi- 
neering sub-sector attempted 
to shake off a prolonged period 
of stock market w eakness . 

An 81-page study on the 
recently integrated FT distrib- 
utors sector from NatWest 
Securities helped to underpin 
relevant stocks. Inchcape 
moved ahead 11 to 442p, while 
Parnell Electronics, the ambi- 
tious components distributor, 
jumped 17 to 530p. 

The prospect of Euro Disney 
falling off the CAC 40 list of 


leading French stocks weak- 
ened the shares in London. 
They declined 4 to lOSp. 

Institutional buying in Lad- 
broke brought turnover of 13m. 
The shares added 2 at 157p. 

Profit-taking in Boots, which 
has announced the sale of its 
pbarmaceuticals division and a 
£500m share buy-back, saw the 
shares give up 8 to 517p. 

Hopes of a share buy-back 
continued to underpin trading 
in Great Universal Stores. The 
shares appreciated another 4 to 
574p. 

Dairy group Unigate finned 2 
to 357p. after a 6.S per cent 
increase in interim profits. 

Profit-takers moved in on 
Vodafone, which has been 
strong ahead of next week’s 
interim results, pushing the 
shares down 51* to 215p. There 
was said to be heavy switching 
into BT and Cable and Wire- 
less, both of which benefit 
from the upturn in the dollar. 
C&W jumped 5Va to 399p, and 
was also heavily traded in the 
options market. 

Merchant bank S.G. War- 
burg jumped 24 to 671p as the 
benefits to the securities arm 
from an active market were 
compounded by resurgent 
takeover talk. 

Financial advice group 
Towry Law, fell 44 to 86p after 
warning it expected to make a 
half-year loss of £l-25m, com- 
pared with a profit of £565,000. 

MARKET REPORTERS: 

Peter John, 

Joel Kfbazo, 

Jeffrey Brown. 

■ Other statistics. Page 27 


LONDON EQUITIES 






- - 

Cato 

— 

— 

Puts 

— 

Option 


Jib 

A|* 

Jid 

Jan 

Aft 

ju 

tfcODoran] 

600 

26 

38 

46*7 

16 

34 

35 

I’M* 1 

650 

7 

17 

24*7 

48*1 

53*1 

65 


:so 

20 to 

27 V 7 

33*7 

6*7 

11*7 

17 

1*274 | 

260 

9*5 

17 

22*7 

16 

21 

27*7 

AS DA 

BO 

a 

9'7 

10*1 

t*> 

3*7 

4 

r» i 

70 

2 V, 

4’7 

5 

8 *: 

8*7 

9 

But Airway 

•so 

31 

4217 

49*7 

r*~ 

13*7 

20 ** 

r 385 ) 

390 

14 

26*7 

33 V; 

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■ llrKtertyng umrXY pnea. Piwrw j me *0»n OB 
twtM t Jertemen: pnm. 

NORirtKt Toiai erntreett. &B.4iJCail». 
ZicffiPm. r.1S» 







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Grus (Sv 
% 

52 anek 

Mgb Low 

fkV Mnea India (34) 

207840 +04 

206745 2091.85 2088.70 

209 

2387/40 178202 

■ Regional indices 

Atnca 1 I 61 

336359 -07 

3341 84 3389112 286316 

4.12 

3711-87 2304.45 

Auartt&a ,7| 

2589.87 +1.0 

2641.46 2688.97 227128 

1.85 

301363 217168 

Navi Amtnx iii> 

1602 ,*7 -01 

160420 iPI&a 184260 

0.83 

3OT9S 1468.11 


'.op,»9hi THe F^>Nvul TrnVA LaWed 1904 

F-o^rns in arorrart s»5* rwnr*r n| -WTOOr".’'! Bear, LIS 0<*»i 3<w Vriuta. 1000 W 31H2/B3 
Pimx+cu GOU Md-I+N m*. Nov 16 759 0 ij a* ■> duigt. » 1 — v#a Bjat 242 i T Pinal 
lj«i O'sVru mh fen itn ttNioa 


RISES AND FALLS YESTERDAY 


RtaM FMto Same 


British Fttads 

62 

2 

7 

Othtx Fbrac Intwost — 

a 

0 

14 

Mineral Extraction 

80 

30 

88 

General Mnnutactiaem — 

170 

BO 

372 

Consumer Goods 

49 

27 

111 

Services, — 

114 

62 

318 

Unities 

31 

4 

9 

Financials - 

144 

31 

189 

Investment Trusts 

171 

22 

272 

Outers 

51 

28 

37 

Totals 

880 

286 

1415 


Dam based on those c onpaiim nsad cm the London Shorn Sendee. 


TRADITIONAL OPTIONS 

Flral Dealings November 7 Expiry February 8 

Last Dealings November 18 Settlement February 23 

Calls: Air Loo, Bttfere, Calluna. Gutfstream Re&, Magnum Power, Royal Bh. Scot, 
Signal, Tadpole Tech., Tutov* Ofl Puts: Magnum Power, Signet Put 8 Cel: Rorflme 


LONDON RECENT ISSUES: EQUITIES 


issue 

price 

P 

Am 

Wid 

UP 

MkL 

cap 

(Dn.l 

1984 

Hgh Low Stock 

Ctose 

price 

P 

+/- 

Nat 

div. 

Dfir. Gra 
ccw. yld 

P/E 

net 

_ 

F.P. 

082 

eh 

4 AFTA Wmta. 

6 


- 

_ 

_ 

_ 

. 

F.P. 

17.4 

88 

70 Abbust Latin Am 

87 

+1 

- 

- 

. 

_ 

- 

F.P. 

208 

83 

52 Do Wsnaras 

52 


- 

- 

- 


- 

F.P. 

11.2 

187 

180 ^Adara Pmtg 

186 


Q 26 % 

B .1 

14 

109 

100 

F.P. 

68.0 

93 

851 ; BZW CommodUes 

88 


- 

- 

- 

. 

- 

FJ>. 

6.10 

47 

39 Do Wits 

39 


- 

- 

- 

- 

- 

F.P. 

56-1 

104 

85 $CaHune 

104 

48 

- 

- 

- 

. 

260 

F.P. 

30.3 

287 

280 ChachJB Ctaia 

285 


RN &.86 

22 


13.0 

63 

F P 

12.1 

68 

65 Enoanta 

60 


RN 0.71 

5.3 

1.4 

02 

- 

F.P. 

65.1 

155 

108 FBborac CTtek 

155 

44 

RN 0.75 

2 £ 

06 

52.1 

100 

F.P. 

110 

100 

100 Finsbury Scdr C 

100 


- 

- 

- 

- 

H 5 

F.P. 

34.0 

126 

ill Gantea Wbritaftop 

112 


RN 4 .B 

22 

5.1 

IDlB 

- 

F.P. 

1 « 

35 

22 Group Dv Cap Wta 

22 

-1 

m 

- 

- 

ern 

- 

FJ> 

2 BJ) 

62 

56 Hambros Sm Aston 

56 


- 

- 

- 

- 

- 

F.P. 

2.70 

30 

27 Do Warrants 

27 


- 

- 

- 

- 

100 

F.P. 

303 

102 

98 Hoare Govett 1000 

101 


- 

- 

_ 

_ 

- 

F.P. 

29.7 

100 

90 INVESCO Korea C 

99 


1 - 

- 

- 

- 

160 

F.P. 

107.5 

223 

205 Irish Permanent 

220 

44 

uN 9 J) 

2.0 

5.5 

7.7 

- 

F.P. 

50.3 

493 

475 Prolific Inc A/L 

486 


- 

- 

- 

_ 

135 

F.P. 

59.5 

149 

136 Servteair 

14 B 

+3 

RN 3.8 

1.3 

02 

HA 

175 

F.P. 

224.4 

126 

117 TLG 

126 


VW 3.5 

2-0 

05 

18.1 

170 

F.P. 

19 8 

173 

*68 Tew-Clne Cefi 

168 

-+ 

RNS .44 

22 

4.0 

11.6 

- 

F.P. 

6.01 

62 

57 Whitctxacl 

60 


RN 1 « 

3.0 

2.0 

12 ^ 


RIGHTS OFFERS 


issue 

price 

P 

Amotatt 

paid 

up 

Latest 

Renur*. 

date 

1904 

High Law 

Stock 

Closing 

price 

P 

+or- 

20 

ra 

9/12 

41 2 Pm 

tpm 

Fh&en 

1 pm 


310 

n 

20/12 

41 pm 

18pm 

Kenwood App 

20 pm 

+1 

27 

Ml 

26/11 

3 l;pm 

2 ' 2 prn 

Martin Inti 

3 pm 


500 

W 

12/12 

50 pm 

16pm 

Matthew Dart 

2 ipm 


26 

ru 

22/11 

Upm 

! 4 pm 

Novo 

Upm 


85 

m 

23/12 

15 pm 

11pm 

Prassac 

11pm 

-2 


FINANCIAL TIMES EQUITY INDICES 

Nov 18 Nov 15 Nov 14 Nov n Nov 10 Yr ago 'High tow 

Ordinary Share 2418.6 24084 2379.7 2365.0 2384.1 2363.8 2713.8 2240.8 
Orel div. yield *58 4.29 4.35 4.37 454 3.93 451 3.43 

Eon. yld. % (u» &20 6.23 6.30 6.34 858 450 851 3.82 

P/E ratio nel 18.64 18.66 1854 1823 1838 ZT 53 38 A 3 16.94 

P/E ratio ml 18.18 18.11 17.89 17 78 17.93 2556 3050 17.08 

1 W 1994 . Cvdrurv 6 lu,e wfe» snee eaneH uliu n: high 2713 a 2 / 02 / 84 : low 484 260/40 
FT Oro«ary Share moe« Mre data 1 / 7 / 35 . 


Ordinary Share hourly changes 

Open 9.00 1000 11-00 1 SOO 1350 1450 1350 1650 High Low 
2408.1 2407.6 2420.5 2422.1 24282 24295 2431.5 24288 2420.7 2432.1 2402.7 


Wow 16 Mov IS Nov 14 New IT Nov 10 Yr ago 


SEAO Bargane 

Eqiity twnotfw (£m)t 
Equity ba^alnat 
Sharee traded imOT 
t&OJding em^nanwi o 


31,156 30.763 

- 2629.1 

- 34.603 

805.4 

es me o w aria a s (un 


25.659 23587 

8875 1080.0 

30.137 27530 

4366 435.4 


24.490 28725 

11395 14535 

29.443 31569 

S215 6655 


A Prime Site for your 
Commercial Property Advertising 

Advertise your property to approximately 
1 million FT readers in 160 countries. 

For details: 

Call Emma Muilaly on +44 71 873 3574 
or Fax: +44 71 873 3098 


r 


i 

t 



« 



























































































►.ill 




FINANCIAL TIMES THU RSD AY NO VEM BER 1 7 1 994 


LONDON SHARE SERVICE 


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38 


CURRENCIES AND 


MARKETS REPORT 


WORLD INTEREST ftAT ES_ 


Dollar steady as market sentiment improves 


The dollar yesterday responded 
cautiously to the larger than 
expected rise in US interest 
rates cm Tuesday, writes Philip 
Gawith. 

While most analysts said the 
75 basis point rise in the fed- 
eral funds rate, to 5.5 per cent, 
was good news for the dollar, 
there was little evidence of this 
in the marfrpt 

Although the dollar managed 
to reach a high of DMi.56 in 
Europe, it then gave back its 
gains to close in London at 
DMl.5510, not far above the 
DM1.5445 where it stood before 
the rate rise. Against the yen it 
closed at Y9&38, from m225 
before the Fed's move. 

One casualty of the firmer 
d o ll ar hfls been sterling, which 
gave up more ground to finish 
at JL5713, from 81 . 5826 . At the 
beginning of the month it was 
around $1.64. Against the 
D-Mark. It finished at DM2.4371 
from DM2.4456. 

Analysts were slightly mys- 
tified about sterling's weak- 
ness, which comes against a 


backdrop of exceptionally good 
economic news. 

UK interest rate markets, 
however, had a better day 
prompted by a benign set of 
economic data,, and bullish 
inflation comments from the 
Treasury and Bank of E n gla n d. 

Volumes were heavy, and 
prices moved sharply, with the 
March 95 short sterling future 
trading around 85,000 lots to 
settle at 92.95. 16 basis points 
up on the day. 

In Europe, the D-Mark was 
firmer against most currencies. 
Against the French franc it fin- 
ished at FFr3.448 from 
FFr3.437. 

■ The recent conjuncture of 
Fed intervention to support the 
dollar. Republican gains in the 
mid-term elections, and higher 

■ Pmn4 hi Haw York 


Mavis 

— Ltenr — 

- Ptev. dote -■ 

EBpot 

15719 

15720 

1 nrtti 

1.5715 

157T9 

3 mOI 

1J5712 

15713 


15667 

15644 


interest rates, have all com- 
bined to improve short term 
sentiment towards the dollar. 

Mr Ian Gunner, international 
economist at Chase Manhat- 
tan, commented: “For the next 
couple of months it will be 
very difficult to sell the dollar 
for the reasons people having 
been selling it this year." He 
said the Fed's aggressive move 
had laid to rest fears that it 
was behind the curve in com- 
batting inflation. 

Mr Gunner was cautious, 
however, about the extent of 
the dollar's upside. *T still get 
the impression that there are a 
lot of dollars to sell out there, 
particularly from central banks 
diversifying out of the dollar as 
a reserve currency.’' 

Mr Mark Austin, trader at 
Midland Global Markets, said 
the lack of movement in the 
dollar reflected market ner- 
vousness about the extent of 
any likely rally. “A feature of 
the dollar throughout the year 
has been disappointment. It 
has tended to give back gains 


Short Stalling 

March 19% contract, bid price 

93.0 - 



92.2 1 1 1 

October 1994 Nov 
SounS# FT Graphite 

quite quickly." 

The dollar has now risen 
from a low of around DM1.49 
when the Fed intervened to 
support it earlier this month. 
Mr Austin said it was encour- 
aging that it had managed to 
hold onto these gains, but he 
was cautious about the medi- 
um-term outlook. "The struc- 
tural problems are still there. 
Is it enough to persuade for- 


eign companies to buy suffi- 
cient US assets to offcet the 
large capital outflows?" he 
asked. 

Mr Austin said most trade 
yesterday had appeared to 
come from US funds, with little 
evidence of activity from lon- 
ger term investors. 

Mr Gunner said that while 
there was room for a 
short-term correction in the 
dollar, there was interest to 
buy it "on the dips". He felt 
higher interest rates had put a 
"very strong floor” under the 
dollar. He predicted that, over 
three months, it could rise as 
high as DM1.625. On the down- 
side. DM1.51 was a likely floor. 

Conceding the shift in senti- 
ment, Swiss Bank Corporation, 
told clients that the range for 
the dollar had now moved to 
DM1. 53-59. SBC. who remain 
long term dollar bears, cited 
the prospect of another cut in 
German rates as a further fee- 
tor supporting the dollar. 

A feature of recent dollar 
gains is that they have been 


Europe 

Austria 

Belgium 

Denmark 

Finland 

France 

Germany 

Greece 

Ireland 

Italy 

Luxembourg 

Netherlands 

Norway 

Portugal 

Spain 

Sweden 

Switzerland 

UK 

Ecu 

SOftf 






17-2532 17.0933 

17.1561 

03 

17.1432 

04 

. 

. 

115.1 

Austria 

(Sch) 

109205 

+0.042 

180 - 230 

10.9745 

10.9180 

10.913 

0.8 

10.6965 

03 

10709 

1.1 

1045 



-0.1889 

226 - 875 

50.4220 49.8390 

501252 

07 

500552 

OB 

409152 

05 

116.9 

Belgium 

(BFr) 

31.9195 

*0.1195 

050 - 340 

32.0800 31.9050 

31.8995 

08 

31857 

08 

31.6845 

07 

1055 





95773 95189 

9.5271 

03 

95419 

-05 

05214 

01 

118.7 

Denmark 

(DKr ) 

6.0648 

+0.0233 

620 - 875 

6.0919 

£0820 

6.0688 

-04 

SA898 

-05 

6.0883 

-04 

105.2 




222 - 407 

7/1910 7.3970 


- 

- 

- 

- 

- 

88.7 

Finland 

(FM) 

4.7295 

*0.0325 

245 - 345 

4.7735 

4 7010 

4.7378 

04 

4.7245 

04 

4.7235 

01 

835 





8.4242 85579 

85874 

0.3 

8.3597 

05 

8.2916 

0.9 

109.9 

France 

IFFO 

5.32 85 

*0.0181 

260 - 270 

5.3510 

5.3280 

5J2S9 

0.1 

5.3225 

05 

6-305 

04 

106.1 


2X371 

-0.0085 

358 - 383 

2.4528 2.4334 

2.4367 

07 

2.4315 

05 

25993 

1.6 

120.1 

Germany 

ID) 

1.5510 

*0.0058 

505 - 515 

1.5600 

1.5505 

1.5502 

08 

1.5481 

08 

15335 

1.1 

1065 




997 - 812 

377288 374.753 

. 

- 

- 

- 

- 

- 

- 

Greece 

(Dr) 

238550 

*0.85 

700 - 000 

239.750 238.700 

239.1 

-12 

239.675 

-1.4 

241525 

-15 

604 

(ff) 

1.0173 

-0.0014 

168 - 178 

1.0205 1.0153 

15171 

02 

1.0168 

02 

15185 

-0.1 

104.6 

Ireland 

OD 

15446 

-00089 

441 - 457 

1.5486 

1.5366 

1J5448 

-02 

1.5453 

-02 

15409 

02 

- 

(U 

249851 

-1154 

475 - 727 

2510.07 248954 

2601.61 

-2.7 

2613.01 

-2-7 

2563.51 

-2.7 

745 

Italy 

(U 

158825 

+3.76 

800 - 850 

1594.00 1586.00 

1591.7 

-25 

159B.2S 

-23 

1632-75 

-25 

745 

(LFr) 

50.1552 

-0.1 6S9 

228 - 876 

504220 495300 

501252 

07 

60.0552 

0.8 

49.9152 

0.6 

116.9 

Luxembourg 

(LFr) 

31.9195 

*0.1195 

050 - 340 

32.0800 31.9050 

31.8995 

08 

31.857 

0.8 

315845 

07 

1055 

(FT) 

2.7333 

-a 0087 

320 - 348 

2.7472 2.7288 

2.7319 

OB 

2.7275 

08 

2.693 

1.5 

1207 

Netherlands 

(H) 

1.7395 

*0.0068 

390 - 400 

1.7475 

1.7390 

1.7387 

0.6 

1.7388 

0.7 

1.7223 

1.0 

1055 


10.6649 

-0.0395 

813 - 68S 

10.7379 106399 

10.8640 

ao 

10.6B85 

-OI 

108855 

OO 

86.5 

Norway 

(NKr) 

6.7873 

*0.0233 

863 - 883 

8 B20J 

8.75SS 

£7965 

-1.6 

08133 

-1.5 

65438 

-08 . 

955 

(Es) 

248.737 

-0.8 

532 - 941 

£60094 248525 

250487 

-3.3 

253.847 

-7.0 

- 

- 

- 

Portugal 

(Bs) 

158.300 

+0.62 

000 - 400 

159.020 158.200 

150825 

-4.0 

159^5 

-42 

18355 

-35 

955 

(PU) 

202517 

-056 

831 - 003 

203.735 202.408 

203-247 

-2.0 

203.912 

-2.0 

200527 

-1.B 

B5.8 

Spain 

(pta) 

129.140 

+0385 

110 ■ 170 

129.580 128.110 

129.365 

-2.1 

133.05 

-12.1 

132.09 

-25 

805 

(SKi) 

115551 

-0.03 

450 -651 

115147 115003 

115741 

-25 

11.6166 

-2.1 

11.7611 

-1.8 

76.4 

Sweden 

(SKr) 

7.3538 

*0.0332 

488 - 506 

7.4200 

7.3457 

7-3665 

-2.1 

7J93B 

-Z 2 

75188 

-22 

81.6 

(SFr) 

2-0502 

-£0064 

492 - 511 

2.0512 25490 

2.0471 

15 

2.0396 

2.1 

1.9973 

2.B 

121.3 

Switzerland 

(SFr) 

14048 

*0.0053 

044 - 051 

1.3130 

13044 

1.3028 

2.0 

12983 

2.0 

1571 

2 2 

107.1 

(G) 



. 

. 

■ 

- 

- 

- 

- 

- 

79.7 

UK 

(D 

1J5713 

-0.0113 

710 - 716 

1 5755 

15636 

1 5712 

0.1 

15709 

OI 

15774 

03 

835 


1-27B6 

-1X004 

788 - 803 

1.2858 15768 

15797 

0.0 

15798 

05 

15741 

04 

- 

Ecu 


12280 

-0.005 

275 - 286 

1.2285 

1-2225 

1228 

ao 

1.2282 

-0.1 

1.235 

-03 

- 


Argentina (Paso) 1-5711 -00118 707 - 714 1.5755 1.5638 

Brazil (FBI 1.3058 -00141 039- 078 1.3140 1.3009 

Canada (CS) 2.1430 -00136 422-438 2.1503 2.1354 2.142 08 

Mexico {New Peso) 5.4218 -0.0383 168 - 267 5.4348 5.4022 

USA (S) 1.5713 -00113 710 - 710 1.5755 1.5636 1.5712 0.1 

PocMcAGiMa Ont/ Africa 

Austnda (AS) 2.0927 -0008 913 - 941 £0987 2.0801 24948 -15 

Hong Kbng (HKS) 12.1448 -00868 418 - 480 12.1770 12.0888 12.1358 0.8 

India {Ha) 493917 -03S8S 783 - 050 49.3050 492783 

Japan (Y) 154.584 -0882 507 - 6G1 155.661 164.280 164.134 35 

Malaysia (MS) 4.0298 -0.0273 280-312 4.0378 4.0106 

New Zealand {NZS) 2.5358 -0.0165 331 - 381 2-5426 2.5260 2.5402 -22 

PhBppinas (Head) 38.4184 -01168 182 - 185 38.8185 38.1310 

Saudi Arabia {9 s !) 5.8834 -0.042 920 - 948 54091 54648 

Singapore {SSI 2-3138 -0.0157 126 - 150 24215 24047 

S Africa (Com.) (R) 5.5432 -0.0288 409 - 454 54604 5.5195 

S Africa (HnJ (R ) 5.4874 40001 804 - 143 64143 6.4705 

South Korea (Wont 1251.46 -841 114- 177 125548 124541 

Taiwan (TS) 414859 -0.1944 725 - 993 414968 414691 

Thailand (Bt) 394285 -04689 111 - 419 39.4300 39.1420 

TSCR ram lor Now 15. BttMter spread! In 9m Pound Spot table mow arty DM Ion Owes decanal pH 

market ten era: knpied by curort intraoat rata. Stertog index crtcUrtnd by 9 m Bank of England. Base a> 

ms md the DoUr Spot taHes derived tain THE Wkl/REUTERS CL09NQ SPOT RATES. Some wrtuee 


2.1407 0.4 2.1383 04 
14709 0.1 14661 0.3 


2.0975 -09 2.1114 -09 

12.1316 04 12.0864 0.5 


153.119 34 147494 4.3 


24495 -24 24694 -14 


Americas 

Argentina (Peso) 04999 -0.0002 998 - 999 1.0000 0.9998 

Brazil (Rfl 04310 -0.003 300 - 320 0.8340 0 8300 

Canada (CS) 1.3639 -00012 836 - 641 14665 14625 

Mexico (New Peso) 3.4505 -0 0003 480 - 530 3.4530 3.4480 

USA {£) - - 

Paddc/Mddle Easi/Africa 

AuStreBa (AS) 1.3318 *0.0044 312 - 324 1.3328 1.3275 

Hong Kong (HK3) 7.7292 *0.0007 287 - 297 7.7297 7.7287 

India (Rs) 314700 -0.0025 675 - 725 31.3750 314675 

Japan (Y) 96.3800 *0.155 500 - 100 98.7400 984500 

Malaysia (MS) 24645 *0.001 640 - 650 24850 24625 

Now Zealand (NZS} 14137 *0.0017 124 - 150 1.8155 1.8124 

Phrtppines (Peso) 24.4500 *0.1 000 - 000 24.7000 244000 

Saudi Arabia (SR) 3.7507 *0 0002 505 - 508 3.7508 3.7505 

Stegapore (SS) 1.4725 *0.0005 720 - 730 1.4736 1.4717 

S Africa (Com) (R) 34278 *0.007 270-285 3.5295 3 4215 

S Africa (Fin) (R) 4.1350 *0.03 250 - 450 4.1450 4.1100 

South Korea (Won) 796.450 *0.1 400 - 500 798800 795.700 

Taiwan (TS) 284750 +0.064 715 - 7B5 264836 284500 

Thatald (Bt) 25.0280 *0.008 230 - 330 25.0300 25.0250 

TSOH rate lor Nov 15 Bkfrbfbr spreads a, dw Donor Spar tnUa mow arty Ihe baton 
tan ore MipBed by euiM btaa rata UK. Iratand & ECU am quoted ki US cuiency. . 


1.0000 0.9998 


■cae. Forward me* are not dtaedy tana to o» 
rarage 1885 - 10OBU. onar and M d-ram In bath 
n imkM by the F.T. 


South Korea (Won) 796.450 

Taiwan (TS) 284750 

ThaBand (Bt) 25.0280 


I -0.1 14631 04 14874 -04 834 

i -04 3.4533 -04 3. 4607 -04 

95.7 

i -0.7 14343 -0.8 14471 -1.1 88.1 

! 04 7.728 04 7.7337 -0.1 

l -2.7 31485 -2.7 - - 

3.4 97.48 3.7 9<475 34 160.7 

i 1.4 2457 14 2485 -04 

) -0.7 1.8171 -04 14261 -04 

I -1.1 17612 -1.1 3.7757 -0.7 

14 1.4875 1.4 1.461 14 

I -54 34754 -5.4 3.7403 -65 

I -8.1 44075 -7.0 4445 -74 

i -44 80245 -34 821.45 -3.1 

i -04 26435 -U9 

i —14 25.1485 -14 2S-553 -2.1 

I otocaa. Forward ram ere not (fireedy tand to Om metal 
an nomnd Indices Nov 15. Bore neogr 1880U100 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 


Nov 16 


BFr 

DKr 

FFr 

DM 

K 

L 

H 


NKr 

Ea 

Pta 

SKr 

SFr 

E 

CS 

$ 

Y 

Ecu 

Batgken 

[BFr) 

100 

19.00 

1658 

4539 

2528 

4978 

6.449 


2155 

4955 

4045 

2353 

4.087 

1.994 

4572 

£132 

3085 

2.448 

Denmark 

(OKi) 

52.64 

10 

0783 

2547 

1.087 

2819 

2588 


11.19 

281.0 

2125 

12.12 

2.151 

1.049 

2549 

1549 

1025 

1589 

Franca 

(FT*) 

5854 

1159 

10 

2500 

1518 

2982 

3566 


12.74 

2975 

242 A 

13.80 

Z450 

■ 1.195 

2561 

1.877 

184.7 

1.487 

Germany 

(DM) 

2067 

3.926 

3.448 

1 

0.419 

1028 

1.128 


>592 

1025 

83.60 

4.759 

0545 

0412 

0883 

0.847 

63-70 

0506 

Iratand 

Q£) 

49.32 

9570 

0229 

2586 

1 

2454 

2587 


1048 

2445 

1995 

1158 

2.016 

0983 

2.107 

1545 

152.0 

1507 

hniy 

04 

2510 

0382 

0335 

0097 

0041 

100. 

0109 


3.427 

9.964 

£129 

0463 

0082 

0040 

0588 

0083 

£194 

0049 

Nett km lands 

(Ft) 

18-35 

3.487 

3.082 

0588 

0572 

9135 

1 


3500 

9150 

7454 

4528 

0750 

0386 

0784 

0576 

58.57 

0449 

Norway 

(WO) 

4756 

B539 

7551 

2577 

0554 

2341 

2564 


10 

2335 

1903 

1083 

1.923 

0.938 

Z010 

1.474 

1455 

1.152 

Portugal 

(E» 

2017 

3RRP 

3585 

0978 

0409 

1004 

1599 


>588 

100 

8158 

4544 

0524 

0402 

0882 

0532 

82.16 

0494 

Spain 

(Pta) 

24.72 

4588 

4.125 

1.196 

0501 

1230 

1547 

I 

5554 

1225 

100 

5592 

1.010 

0.493 

1.058 

0.774 

7850 

0605 

Sweden 

(SKi) 

43-43 

8560 

7546 

2.101 

0.881 

2181 

2568 

1 

3529 

2165 

175.7 

10 

1.775 

0588 

1.855 

1580 

133.9 

1.063 

Switzerland 

(SFr) 

24.47 

4.648 

4.082 

1.184 

0496 

1218 

1533 


3500 

1215 

9098 

£834 

1 

0.488 

1.045 

0.788 

7041 

0589 

UK 

K) 

5016 

9.529 

8569 

2.427 

1.017 

2466 

2.733 


1066 

2407 

2025 

1155 

2.050 

1 

2.143 

1571 

154.6 

1528 

Canada 

(CS) 

23.41 

4.447 

3. 90S 

1.133 

0.475 

116S 

1575 


L074 

116.1 

94.68 

5590 

0967 

0487 

1 

0733 

72.14 

0573 

US 

IS) 

31.93 

6.066 

5527 

1545 

0847 

1589 

1.740 

1 

3.786 

1685 

1295 

7562 

1506 

0537 

1564 

1 

98.41 

0782 

Japan 

(V) 

32.46 

0184 

5.413 

1570 

0658 

1814 

1.788 

I 

L89S 

1805 

1315 

7.471 

1.326 

0.847 

1588 

1.016 

ioa 

0.794 

Ecu 


4085 

7.780 

0815 

1.979 

0528 

2033 

2528 

1 

3581 

2025 

1602 

£406 

1.689 

0514 

1.745 

1579 

125.9 

1 



Margined Foreign Exchange 
Trading i 

Fast Competitive Quotes 24 Hours 
Tfel: 071-815 0400 or Fax 071-329 3919 


INVESTORS - TRADERS - CORPORATE TREASURERS 

SATQUOTE™ - Your single service for real time quotes. 
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; French Frew. Nonnpan Knew, end 9wd 
: WJTUHB3 EMM) DM 125,000 per OM 


per 10: Brtglai Franc. Yen. Encode, Lira i 


I (IMM) Yen 124 per Yen 100 



Open 

Luteal 

Chanae 

High 

Low 

Eat vol 

Open kit. 


Open 

Lutes 

Change 

High 

Low 

EaL vol 

Open kit 

Dec 

05430 

06439 

*0.0008 

06440 

05417 

33,040 

92.103 

Dec 

15156 

15182 

*05027 

15182 

15153 

21544 

71,077 

Mar 

08445 

0.8460 

*00008 

08460 

08429 

1538 

7579 

Mar 

15250 

15265 

*05023 

1.0270 

1.0244 

524 

£570 

Jun 

” 

0.5485 

-00045 

06486 

■ 

5 

1510 

Jun 

15356 

1.0355 

*00006 

15357 

1.0055 

6 

718 

■ SWISS FRANC FUTURES (IMM) SFr 125500 per SFr 



m snn 

UNQ WIUR 

IBS (IMM) ! 

DS250Q per 

£ 




Dec 

0.7640 

07659 

*0.0005 

07684 

07828 

23,198 

49,100 

Dec 

15728 

15580 

■05088 

15754 

1.5648 

15,120 

46.197 

Mar 

07878 

07892 

*05001 

0.7892 

07685 

402 

2527 

Mar 

15890 

15682 

■00078 

15898 

15638 

122 

742 

Jun 

07723 

07730 

■0.0005 

0.7730 

07723 

38 

252 

Jun 


15830 

-05118 


15830 

29 

20 


I FUTURES 
&0PTI0NS 
TRADERS 

►»JU .IX ETYMEVT 
A 1 1 nU’ETmit bEBVh.'E 


38 DOVES STREET, LONDON WIX SRB 
TEL 01716291138 FAS 0171 495 0022 


UK INTEREST RATES 


LONDON MONEY RATES 

No* 18 Over- 7 din 


Interbank Staring 
Startng COt 
heaaury Bate 
BankBSa 


IK clearing bank bare lending rate 5\ per cant from September 12. 1994 


EMS EUROPEAN CURRENCY UNIT RATES 


Over- 

7 days 

One 

Thfw 

Star 

One 

rtgw 

notice 

month 

months 

months 

yaw 


in 

nf 

U) 

3ft- ft 

ft -8 

ft - ft 

7A-7A 

- 

- 

B»-5H 

6 -5ft 

■A ■ ft 

7ft -7fr 

- 

* 

ft - ft 

5%-SH 



- 

- 

ft - ft 

3H-5p 

ft -ft 

. 

45J-4U 

6A - ft 

ft -ft 

ft -5ft 

ft - BA 

7ft - 7ft 

8 - 41] 

5>4-ft 

- 





Up to 1 

1-3 

3-6 

6-0 

9-12 

month 

month 

nk* 


In - i i 

ft 

4 

a\ 

3* 

ft 


Nov 16 

Ecu can. 
rates 

Rate 

against Ecu 

ChwipB 
on day 

% *7- from 
can. rata 

% spread 
V weakest 


2.19672 

2.14663 

*050039 

-258 

£82 

Belgium 

40.2123 

395968 

*0.005 

-2.03 

555 

Germany 

154964 

151500 

*050037 

-1.77 

558 

Iratand 

0808828 

0.788738 

*050185 

-152 

4.49 

France 

QSfljUK) 

657389 

-050848 

054 

2.67 

Denmark 

7.43679 

7/48436 

*050579 

064 

256 

Portugal 

192554 

195534 

-0.13d 

159 

151 

Spate 

154.250 

158510 

-0557 

352 

050 

NON HIM MEMBERS 





Greece 

284513 

294.738 

-0.088 

11.43 

-7.37 

Italy 

1793.19 

195014 

-4.72 

950 

-5.4B 

UK 

0.788749 

0783827 

*0001902 

-057 

£60 


LIVE FROM LIFFE - 0839 35-35-70 

Dial new end beer the Footete move with Ore commentary horn Ufle, as It happens. 
For details of all UBfe Ones and our financial Information services, can 071-893 9100. 
Calls are charged at 39p/odn cheap rue. 49p/min an otha- tiro**. 

Futures P^cr Ltd. 19/21 &e>t Tower St. Lond on EC3R5AQ. 

■■■ Futures Call ■■■ 


W±1jM X\X-FREPSPECULAnON 


To obalo }our free Goklc m how yore Rrenta Boatnakcr ere bdp 
iw. art Mdwt Many or hnjenkta 000714X87233 w retc 
his IS Into Be. 94 1 GnawnorGmlcM, kmtaiSWlWIBD. 


Oerta of Tax dep. (C100.000J 1*a 4 3^ 34* 3I3 

Cana oflta dap. under £1 001000 li ftpe. DapoaOB trthdmm to com Lpe. 
fta under rate rtrtecount MtaSpc. ECOD bM rate Sop. Export Aranea Make day Oct 31. 
19M Agreed ran fcr period Nov ZB. 1884 to Dec 23. 1984. Schemas B S H rjspc. Ftaen raw fer 
peMOa 1. 1884 to Oa 31. 1894. Schama IV 5 V ineape. Finance Houea Saw Rate flpc tarn Nov 

■ THHEB MOUTH STULWO WflUMS (UFFE) E500400 points of 100% 



Opwi 

Sottprica 

Change 

High 

Low 

Eat vd 

Open Int. 

Dec 

9357 

9359 

+0.10 

83.73 

90.56 

47413 

138893 

Mar 

92.77 

9255 

+0.18 

9351 

82.72 

87124 

77931 

Jun 

92.18 

9256 

*015 

92/42 

92.14 

27048 

58389 

Sap 

91.73 

9153 

*015 

9158 

91.71 

22368 

58399 


Eoi eanart rata are by tta Eracpeen O unmia airaL Curranctea are in Oe a cenra ng reteare toenpai. 
Itarearaeae tfienpae ere fcr Ecu; apoeWira change danotee a weeh emeney. O ta gwi e e elione ate 
■ado Henman two apraaac die percenreas oaterenco between me octal mart* rate Ecu carom ram 
lor e cureney. and dw meadmun panrftM p maent e pe dntetton of me cuneneyV raerint ram from m 
Ecu oenM rate. 

(17iB/S2} Scaring end tartan In ouapandad from BWL AcfuafriMnt crtc utett d by dw Financial Urnaa. 


■ PHILADELPHIA 82 EfS OPTWWS C31 450 (conte per poind) 




Traded on APT. AM Open manat tft ora Ira pravfcua day. 


■ SHORT STHttNIG OPTIONS (LiFFE)ES00.000point3 of 100% 


Stita 

Price 

Dec 

— CALLS - 
Jan 

* Feb 

Dac 

— PUTS — 
Jan 

Fet> 

152B 

4.43 

454 

£24 

058 

0.70 

1.16 

1560 

£55 

£11 

£62 

082 

1.44 

£01 

1578 

1.19 

155 

259 

154 

255 

3.15 

1500 

0.45 

058 

1/48 

£84 

4.17 

4.69 

1525 

012 

0.48 

055 

£79 

£12 

653 

1590 

- 

018 

0.45 

£11 

£27 

£55 


Strike 

Pnce 

Dec 

- CALLS - 

Mar 

Jun 

Dec 

— PUTS 
Mar 

9350 

054 

058 

058 

006 

083 

9376 

0.08 

004 

004 

014 

084 

9400- 

002 

001 

002 

033 

1.06 


Previoua OsWa «eU Calm N/APute IWA . Pm. day's ocan ire. CBBa N/A Puts NAV 


Market-Eye 

Provisional Jinarcia! infcnriation direct 
to your PC lor .1 I ow fixed cost. 

FREEPHONE 0800 321 321 


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also daily gold and silver faxes 

Tram Chill Analysis Lid J: "'' Anne Whitby 

7 SA'al.'ow Shoot, London '.Vi R 7KD, UK - Tel: 0 ’ 7 1-734 7 ! 72 

exchange rate specie lisis Is: ever 20 years 0171 

2>gg : c'*d by inc ?*r,zr.o'- invi's'm*-.: Au7\c?.ty 


TSSL i; 


arggsEE 


Eat wL total. Gate 32369 An 17388 Prevtoui eta’s open kit. Can 3*7888 Puts 212320 



Open 

Inwwt 

Change 

High 

Low 

Em. «X 

Open krL 

Dec 

9£89 

33.89 

-0.01 

9354 

8357 

176550 

411.383 

Mar 

9359 

9358 

-0.01 

93.44 

9357 

155.154 

424574 

Jun 

92.90 

9£B9 

-ao3 

92,97 

9259 

8£438 

309588 

a US TUASURY BILL PUTURBS (IMM) 81m per IMM 





24 HOUR 

f OKt.IGN I \L tl.WW 
'Lon ilon 


dlKRSNCY MANAC8M8NT 
CORPORATION PIC 
II Old Jewry 
Loadaa GC2R HX) 

Tat OM 465 0100 
Fee D1| -972 0770 


Adam & Company ..— 5.75 

ABed Trust Berir .4.75 

AIBBank... 5.75 

•Henry Anabadnr 5.75 

BankofBoroda — 475 

Banco BSho ^zesva- 5.75 

Bonk of Cyprus 5.75 

Banket Ireland 575 

BankofMa 57S 

Bark of Scottmd _575 

Barclays Bank 575 

BABkoftMEatf 575 

OBnuain Shipley 8 Co Lkl 475 

CLBanfcNadortand... 475 

CWbarkNA..- 575 

OydttdateBank 475 

TheCo-operadve Bank. 6.7G 

Couna&Co 5.75 

QaBLyonnato 575 

Cmus Popular _47B 


DircanLanrio 475 

Bran- Bank Unaiad— 475 
Hrend*l& Gan Bank _ 84 
•BntttatfteiiRtg 4 00 - 475 

Gtooba*- — 475 

•QUmees Mahon 575 

Habit Bank AG Zurich . 575 

OHartbraa Bank -575 

Hertabto & Oen tar Bk. 575 

■MSamuBL — 575 

CHoan&Ca ..~475 

Hongkong & Shanghai 573 
JuamHodgaBank...- 475 
•Laapefd Jaeaph & Sona 4^ 

UoytfaBarh .-47S 

Meghipj Bonk LM 476 

MUandBank 575 

•Mount Barking 6 

NaMfesknirakr £75 

•Rea Brothera £75 


*Radugh«QwrertH 
CaporeSon Limited te no 
longaroudiariaodu 
a Hanking tnaauton. 8 
Hoyt* BicfSaMand- 5.75 
•6tn9i&VAnanSeca.57S 

TS8 - 478 

•UrttadBcofKuMll-. 575 
UntyTruaJBartrPte— 5,75 

Western Trust >£75 

WMteamyUkawr....47S 
YoriuNraBank 575 

• Members of London 
tmeetnant Banking 
AssadaBon 

• madmmsrafcn 


Dec 

94.48 

94.48 

- 

9451 

04.46 

1,480 

M«r 

9£98 

9356 

*051 

9450 

9356 


Jun 

9354 

9350 

-001 

9354 

9350 

622 


Al Open in taraat age. are tor prMout day 
■ ■UIMIARK OmORS (UFFQ DMIm potato al 100M 


•FOREX •METALS 'BONOS -SOFTS 

Objective analysis for professional investors 

0962 879764 

FiCr.Ms House. 32Southgjtc Street. Winchester. 

Hunts S023 9EH Fjr C424 774C67 


Strike 

Pries 

Dac 

Jan 

CALLS — 
Feb 

Mar 

Dm 

Jan 

PUTS — - 
Fab 

Mar 

9478 

0.11 

006 

008 

0.11 

004 

020 

052 

025 

9800 

052 

052 

003 

004 

020 

041 

042 

043 

9SS 

0 

0 

051 

052 

0/43 

064 

085 

0.88 


Eat. voL tetri. Oafla 6750 Pub 7724 Aamwa chare open tat- OH* 217S3B Putt 203730 
■ EURO SWISS PtUNC OPTIOItt (LFFEJ SFr 1m pahtB ot 100* 


Strike 

Price 

DM 

- CALLS - 
Mar 

Jut 

Dac 

9575 

. 021 

013 

on 

002 

9600 

054 

005 

005 

0.10 

9820 

051 

OQZ 

002 

052 


Ett. voL totsL Crtta 0 Putt 0. ProvkM ctare open tat, CaBt 2815 Ana 1815 


SURPLUS 

OFFICES? 


Far practkttl advice - poridre aettoo- pretaware 
based tats. We wB let yrrar ATB(t property fast 
Coatacfc Rkkard Writer 


l OMXr'c ^nr rohfKi-TXEs ' 



Tel: 071 493 7030 
Fmc 071 499 627? 


Signal 


O 130+ioftwaniappSciUons O 
© REAL TIME DATA FROM $10 A DAY O 
O S^ul SOFTWARE GUIDE O 
CaH London O 44+(0)71 2?1 3»6 
• tor your gulda and Signal price Dot. 


84 7M . , 


limited mostly to Europe. The 
yen has largely stood its 
ground. Analysts attribute this 
to high real interest rates in 
Japan, with the central bank 
resisting US pressure to ease 
policy, and ongoing trade fric- 
tions. 

■ Analysts said the strong 
rally In short sterling futures 
had been prompted by good 
inflation news; both in the 
form of a very good underlying 
retail Inflation figure for Octo- 
ber, and bullish inflation sig- 
nals emerging from the min- 
utes of the September monthly 
monetary meeting. 

In its dally operations, the 
Bank of England provided 
£305m of late assistance, after 
forecasting a £500m shortage. 

■ OTMH CUBMHCM8 

Nw 16 £ S 

itaOSSY 171800 - 171 J23 109430 - 109330 
Iran 2777 JD - 278040 174400 - 179400 

Kurarit 0.4686 - 44718 02889 - 02987 

Poland 372445 ■ 373014 237040 - Z3734D 
Rusria 483742 - 4851.17 314400 - 315UH 
UAE 5.7674 - 57790 35715 - 35785 


7JSU 420 

7 JO &20 


areok ago 

J 

wfMktna 


4ft 

8525 

£50 

4V4 

6528 

350 


■ SLEORFT London 
hitabaiifc rung — 

weak ago 

5% 

■ 5ft 

58 

: sft • 

6K 

efl 

w 

US Defer COr 

£46 

£70 

&00 

£59 

weefcago 

6 AS 

£50 

£88 

£49' 

SDR Ltekad Da 

3* 

84 


■ 4 

weak ago 

3M 

. « 

3» 

4- 


ECU Utaed Oe add rate* i irate 6ta? 3 mtf* 

wMOTOflttadiareta 810 m quoted Mtfwfta W Ay 

«tty. •nwtartMMwBertMraTltaBBikofTrtta.avdreraiiodtatartWtaOT^t 
lSre»e»riioetatatta<tt»ostelilPwR«^«*^ rt ^ t ^ 0 W“wri ; • 


EURO CURRENCY INTEREST RATES 

Nov 16 Short 7 ttaya On* Throe 


Belgtai Frenc 
□nHah Krona 
D-Mark 
Dutch QuBder 
Ranch Frenc 
Foriuguaaa Be. 
Spanish Peseta 



Swtea Frenc 
Can. Dolor 
US Dolor 
teflon Lire 
Yen 


4S-4H 4tt 
SV-S>a A 
Si - 4» 5 ■ 

5-48 5 i. 

6^-6V 5ii 
- 8*8 9*8 

75* -7i 7* 

5V-5»o SV 
34-34 3> 7 f 
54-4% 54 

54 - 5A 54 
B - 7*2 6S» 

2*4 -24 24 

Vk’ ZM 34 

t cal ter the U9 D 


Opon Sattprice 

8429 94u30 

9320 93.97 

83.48- ■ 33.51 

83.16 93.18 


■ <R 4tt-4H' SU-fP* »2-Sre. 

5? BV-S*! 6V-8, SV-8V 

4% 5-*% SA-Sfi 5^|-6li 

*« 6V -5d 5V-S4 5^-54 

54 5,4-54 5%-£P2 

BU ft- 93^ 1ft * 9% 1ft -10 

74 74 - 74 8 -TV ft-ft 

• ft 5 ft-ft 8 A- 6 i 8 S-BJJ 


34 sh-34 

ft 3%-SV 


3Ut3U 

ft -ft ft -ft. 


ft- »" 

ift -ift 
- ft - B 
ft- 74 
.44-44 
ft- 7 
flH.-flfi 
.ft .-ft 
28-28 
ft - A 


■ ft 5% -ft. ft -ft ft -ft. ft- 7 

> s4- ft - ft -.5a - sa . re*- m - 8ft 

■ ft ft.- ft 64 - 34 - 9 - ft .ft.-ft 

■ 2 \ 24 -ft 2% -24/ ft -24 28 -2iJ 

-8U''ft-ft* ft-ft ft-ft ^ft-4 

rtr raid Y«V rtfMis; ten defs* nodcn. 

•aai (MATT) Pmte Imertierk ofterraJ rate ~ 

Change High Low/. BA. vol Open hL 
+a03 94v31 MM 10^23 - 4£022 ' 

*OJB 93.89 93l84 21548 38,728 

*0.04 9352 93.48 " 7.771 20, STB 

+a02 93J!1 93.13 - £905 21,109 


lOWTH ■UROPOUJMKLIFFB- Sim potetl of 10(Ht - 

Open SaB price Change High - Low . EaL vol Open bit 

93.93 93JK -008 8393 . :8392, , . 205 . 248Q- - 

93.42 9£38 -All 93-42 .9341 89 1388 

92JM 92. BS -0.12 9294 32.94 " 60 354 

9SL59 92JI -008 SL50 8Z58 120 . 81 

IOWTM WROmWC Wnm— ILFFE)* OMIm polnte crf .100% ~ • • 

Open Sett price Change rtph Low Esc. vol . Open fm. 

MM 94.82 -0.03 M^4 94.S2 11874 138215' 

94.66 94v61 -0J» WL68 - 94.60 • 34825 172408 

9434 94Z7 -008 9434 94.28 24708 118439. 

93^5 9358 ' -009 83.96 9358 . 1 14200 8Z828 

tONTH MMWdUWA BfTJWni HITW8 (UFFE) LIQOdm polntaof tfflm 
Opon Sett price Change ' High Low BP. vol Open int 

91^0 91.12 -006 91-23 91.10 3697 - 31967 

9060 9058 -005 9066 90.53 4W1 ' 34820 

9000 80» ' ■ -0.05 9010 - - 8955 - 1230/ 1S9B7 

8951 8955 -006 0954 8951 1058. 20971 

fOimi WWW <MBWPBfUICW»T1WW(L^SFi1rop«^ Of 10076 
Opon Sett price Change Mgh Low' EaL vd open bit 

9551 9654 . .+051 9654 9659 1792 18825 

9557 9554 -053 35. 87 9851 ' 6909 19670 

9559 9554 -002 9657 9559 ' 984 5044 

94.96 9551 -051 95.01 9456 ' ' 282 2894 

lOWTH WCU wmw»(LIFFE)Ecu1mpolnta of 100M • 


Open Sott price 
9454 9452 

94.68 9451 

9454 9457 

9355 9358 

I MOUTH BWWOUWAI 
Opon Sottprica 
9150 91.12 

9060 9058 

9000 8859 

8951 8955 

1 MOUTH WWW WWW 
Opon Sottprica 
9651 9654 

9557 9554 

9559 9554 

94.96 9551 

! MONTH WCU WIUR 



Open 

Sottprica 

Chreiga 

HfiN 

LOW 

Eat vd 

Dm 

9359 

9453 

*051 

94.07 

9359 

1292 

Mar 

9354 

9357 


83-74 

9351 

1083 

Jun 

93-15 

S£18 

- 

9355 

93.13 

221 

Sep 

9258 

9259 

-001 

62.75 

92.63 

223 


■ UFFE ftrtum fradod on APT 


c Ihe. Com me rc ia l Company ofSalonica tPJL-C. 

Notice is hereby given Thar the eighty third Annual General Meeting of the 
Company will be held at the Company’s office in Athens (Greece). Kerkyres street 
49. on Thursday the 15th day of December L994 at 12.00 noon, for the following 
purposes: 

1) To receive the report of the Directors and the audited Accounts of the 
Company for the Financial Year ended 31st December 1993. 

2) To propose the following rcaoluboa for the leelection of Directors, of which 
special notice has been given to the Company in accordance with sections 293 
and 369 ot the Companies Act 19SS : Tut Mrs. Charlotte I. So porta who has 
oitained the age of 70 years, be reelected as Director of the Company. 

3) To approve the reappointment of Mr. Antonios F. Co umbo oils and Mrs. 
Marion P. Papatbanuskm who offer themselves for reflection as Dhectois of 
the Company. 

4) . To decide about the appointment of the auditors of the Company. 

5) To approve that the remsneretian of the Andhois shall be fixed by the Board 
and » determine the remuneration of the Directore. 

6) Different subjects of a daily order. 

fa accordance with article 21 of dw otkks of association, shareholders desiring to 
be present and to vote at the meeting, must deposit their shares at least five days 
before the meeting at the offices of the Company at Thessaloniki, or the 
Company's office in London, Messrs. Qwntrey VeOaoott (CD. Tzaveflas), 10-12 
Russell Square, London WCLB 5LF. or M Meespierson, Amsterdam. 

Any membe r of the Company entitled to attend and vote at the meeting, may 
appoint another person (member of the Company or dot), as his proxy to attend 
and vote instead of him. 

Salon! cn. November 10th. 1994. 

On behalf of the Board 
Charlotte J. Sa porta (Mrs.) 

Director 


Polly Peck International (Finance) N.V. 



(Netherlands Antilles) 

Notice of Meeting of holders of the Company's 

714% Guaranteed Redeemable 
Convertible Preference Shares 1994/2005 
("Preference SharesT 

T o*» Mjon Thursday DecemberL 1994 at 10.00 ajn. (New York time) oi the office 
? Na**® 1 0°®'- attorneys. 701 Park Avenue. 43rd floor. New York, New York 7 D1 78. 
arBjM oi I ho meeting wffl be. among other things, dsctaskm of a proposed 
OrtWMIon agreement among PPI HoW.nBa B.V. end its major credtnre andan 
amendment of ihe aroetes of association o) the Company. 

Th e agenda and other documents relevant to ihe meeting may be oMtfned 
Dy shareholders of the Company ensued to attend the mooting at Ihe office of 
theCompany at Da Ruytenude 56A. Curasao, as from November 23. 1994 upon 

ratBfa^p^BfshaBholdaship.Ck)p^ofth0agsiTdao/lftemeetlngwffl^Q 

Wt, ° 3e Preterwla} Sharos d Wattod m an acwnmt with 

Preference Sharehoidere who wish to attend end. » Ihe extent ortifled thereto, to 
vnta a mameetiRg must deposit ihelr shares with the Principal Paying Agent, 
SS *®, N - * »***• GotananStrS-lSitai^? 

Eured0 " * Cmfal, prow » 

By: The Board of Managing Directors 

al Potty Peck International (Finance) N.V. 

Curasao. November 17. 1994 





Advertise your property to approximately 
1 million FT readers in 160 countries. 
For details: 

Call Emma Mnlialj oa 
+ 44 71 873 3574 
or Fax: +44 71 873 3098 


Petroleum Argus Oil Market Guides 

'Co:r,p[~hcnsive explanations c ? r - f // 

„ ni , Petroleum Argus 

!±ALL. NOW for sury-sur pjc - 



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2S Cheeham Place 
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195020 105453 19*159 2MB93 20 

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122799 2671 D 
102042 25710 

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211830 5710 
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44832 1277 

1904.14 177 


1739874 471 
29822 471 
14017 4/1 
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3820.73 

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9455 

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5459 

4306 

4975 

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29400 3l/1 

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5B«-SWaV7? 5705B 57056 66637 9*151 471 


JSE Bdd 96/78) 21875V 

JSEMLCBS^q 96505V 


21685 21645 
69090 67945 


tonMQtvB^/gOr 111976 112530 112957 113975 8711 
NMMSE (3071265) 302.76 30524 301.73 35931 31/1 

w5lMI*B»l n 72717) 161450 150920 149920 1BB&90 31/1 


SMae 8k W (3171055 121995 
SBC 8nS (17467) 92348 


120554 120151 
91652 B1751 


14034 31 n 
108325 31/1 


tU40adt<MG6er 834978 639150 6383Z7 7191.13 309 

1WUD9 

Bvtfnk SET pff4/7$ 149.15 149965 147754 178973 471 

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Ml CmtfJn 19961 274215 270095 270025 2809300 1371 
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is CM m W (W70» 62&T 6275 62*5 84860 2711 


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JCapaOv* (3171206 M 33998 33150 3H.10 571 
brings Bnaftr/I/SQ 17938 19055 17958 181.79 2W 

■ C9C-40 8TOCK OBC WTOMUMATIF) 

Open Sett Prica Change l-fltfi Low 

Nov 19KL0 19675 -90 1074.0 10390 

One 18685 18690 -95 19890 19590 

Mr 1062,0 1992.0 -95 1001.0 1982.0 

Open iuh 9pm lor protect ay. 


99001 216 

250753 8/3 

281250 206 

92129 4M 

174900 14/2 
644650 TVI 

BS&37 2JA 

20800 2B710 

133475 an 

113872 27710 
97637 27/10 

519403 19/3 

1199a *M 

1208970 24/3 

50150 4/4 

128948 5710 
113948 5H0 
2992S 21/3 
1*105 21/4 


Eat. voL Open W. 
29.527 24572 

478 25,567 

35 9033 


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DJ IncL Day's High 3871 <5 Oft« Pi I Low J/W zj 0785 07 I JhooimcaW 
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StpSTi - " - P °*«553 *6651 *62.35 48250 *3832 48250 

(201 (4/41 (2/2/94) 

MusBttsV 55*53 555 38 55057 58110 5)055 58110 

Cam* d/<l (28710/94) 

ftarctf 426* *275 *251 4604 41J0 4940 

(1461 <*/*) CS663) 

NYSE Coim 254 S£ 25*. V 25305 28771 2*3.1* 2E7.71 

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pa 026*1 

HASOU Crrp 76952 7E8 1* 76212 80183 693 79 BBU3 

H973i WBt l'!W 


■ RATIOS 

Dow Jones led. Dtv. Vbkl 

S S P Ind. Dlv. yield 
S & P hid. P/E ratio 

■ STAMP ABP AHP POORS 

Open Lalesl ( 
Dec 465.70 466J0 

Mar 489.30 469.10 

Jvn - 472.00 

Open ntmsl 8gm> are U* pram 


Nets ii Nov 4 Oa 28 Year ago 

2.78 2.70 2.70 2.71 

Nov 9 Nov 2 On 26 Year ago 

2.39 2.39 2.39 2.41 

20.93 20.95 200 2 20-Si 

l BOO INDEX HJT1WB8 5500 rimes Index 
Change High tow Est vot Open en. 

*0.65 467.60 48525 650O5 206060 

+0.50 469.30 408.10 3.000 28282 

- 472.00 - 239 3559 

u nay. 


■ *WW YORK ACTIVE STOCKS 

Tuasstj Sucks Qoh Change 
tredsd Mce cn day 
RJfl Na OtBC O 8930,300 68 +8 


RJfl Kaoteco 
Cnysier 
K Kart 
Nome Depot 
Teutons 
Case Corp 
Ford Uoor 
Comtaq 
Gen Uoen 
Phto Marti 


Sucks Ctose Change 

tredsd Me* cn day 

9930,300 68 +8 

6,839200 50 -1 

4969 000 14ik -■* 

4.39*500 *?»» +« 

4514.400 H-v +18 

3.761 M 19»4 

3J77J00 28H -*k 

13*9,900 *08 -8 

3.248 1200 38<1 +8 

3.187.100 B3%* +1 


■ 7 B 4 P9 W ACTTVrrr 

• Vokjnw inttUom 

Nov 15 No* U No* 11 
NewYvkSE 336336 2BQ.380 21H 4Z8 
Knex 19779 17376 16557 


NYSE 

Issues traded 

Rises 

Fails 

imaged 
New Highs 
New Lews 



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40 


FINANCIAL TIMES THURSDAY NOVEMBER 17 1994 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


nu 

MX to Stock 

1 ?* 

125*1 


W. tf to Owe 

Bta % E UBi Hgk Im M i 

IMS U 21 B3 12% (112% 12% 
aia 1® 29 2SJ 17% 17% 17*1 
1« 24 22 4848 74% 72*2 73 

IDS 1701 52 SI 5* 51% 

12 B A A 
100 4® 31 532 47% 47% 47% 
0.76 14 17 5B01 32% 32% 32% 
0.50 39 11 90 13 12% 12% 

OS 16 12 23 20% 20% 20% 
11 473 15 14% 14% 

044 16 23 119 23% 3*2 23% 


*&% l25|ALLata* 

SiSE 

38 % 3 §S 

33 25% Han. 

13% n%«nm 
23% 17% MUM 
19 n% Aqmtan 

31 22ACEUI , _ ... 

&h flAOIGrttox 1.09110 8 481 
10% e^AOHMRix 080114 
10% 8%ACMe*!tox 099145 
12 7%ABI MSox 1X8 13.7 
11% 7% AM torn 14913.7 
9% BAOIKMrix 072 &9 
15% EAtawO 044 3.7 24 
13% 8% Anne Bad 12 

28% 23 Heart* 090 11 14 
13% 5%A(ria 03E 18 2 
19% 11% taaon 27 1284 

16% 15% MBS Ear* an 4® o 197 16% 16% 1€ 

M 46*2 Ad Man 1D0 03 40 54% 34% 34% 

10012® 8 42» 25 24% 24% 

019 10 IB IS 9% 5% '* 
0.10 05 17 
1.47 13 12 32 

Z» 00 6 2202 
046 U 12 1596 
068 &1 10 3209 
1 34 

0» 2.1 22 1584 



31% 16%AM9c 
6 % 5MNU&V 
20 15MnM 
84 48% Aegon ADR 
65% 44 AataaL 

36% 25% Mac* 

22% 16% Mam x 

4 1% Ahoikc 
60% 38% MAC 

30% IBMrtmRlx OX 18 9 3891 

28% 16%MrgnM 

17 14% MfettJB 
30% ?1% MTtft 
18% 13% Atoka W 
21% 16% AtaiyM 
17% 13% MM 
28% 19% AtoQ® 

24% 17% AIDAr A 

30% 25% Wa 
X% 19% AknMx 


3% 5% "5% 
10% 18% 1B% 


17% 17% 17% 
1 % 1 % 1 % 


46% 46 48% 
19% 19 18 


27% 27% 27% 
15% 15% 


17 


65% 49%MESa> 

30% 23% MW) 

22% 14AMII 
M$ 17M8B0bUaf 
28% 19%MbbP 
25% 13% Ata Con 
29% aOArigea* 

4% Amu 

27% 17%AtaaC« 

10% 9A8nC8S 
27% 21% Mdfettb 
40% 33%AkBgx 
11% A«mr 
29% 24 MM Op 

7% 4% Ariosto 
35 21% Man 
90% 64% Men 
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6 . 



*TNANCIAL TIMES 


THURSDAY NOVEMBER 17 1994 ★ 


41 



NYSE COMPOSITE PRICES 


NASDAQ NATIONAL MARKET 4pmebaeNomi0Br1B 


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ROJbA 22 171 23% 23% 23% +% 

Itagfigen 1 10 2% 2% 2% 

RepWaato 71067 u4% 3% 3SI +& 
RaandM 19 830 13% 13% 13% -% 
Rattan 037 321721 46% «% 46 +% 
Aaron tac 9 70 5% 5% 5% 

rarer F« OX io 42 X%d32% x% 
ReedwS 1® 31 2191 53%dS2% 52% -% 
RHpa 612 14 174 8% 8 8%*% 

Radfiffk 6® 5 10 17% 15% 18% +% 

Rotsewkx 644 IB 1565 14% 14% 14% -ft 

Ron® 6® 10 50 13% 13% 13% -% 

AdschMed 2B 547 26% 25% ® 

Itausa 60 57 202 18% 17% 18% +% 

RPtf kto. 656 10 738 19% 18% 19% +% 

RS Re 0® 13 6 23% 23 23% +% 

RyaiFrtay 121601 7 6% 8% 


-s- 

SOBCO IX 82010 48% 48% 48% -% 
Sandmen 6X13 U4u20% 19% 20% +% 
SdtawA Q® 23 202 28% 28 28.', 

SdMcdL 2135078 51% 51% 51% -% 
SCISyem 17 80 18% 18% 18% -% 
Sdos 61264 8% 6% 6% -% 

SdtnQi 652 132613 20% 20% 20ft -ft 

Score Bid 6 482 4% 4% 40 +0 
Seetedx 1®10 12 34% 33% 34% +1 

S’gtoa 87343 25% 25% 25% 

SSCp 618 2D 34 19% 19 19*2+% 

SetMlaB 0J6 6 243 3 2% 3 +% 

Setadtaa 1.72 9 10 24% 0% 24% +% 
Sequert 121 240 19% 19 19% +% 

Sequela 5 319 4ft 3% «ft +ft 

Sen Tech ii 34 7% 5% 7% +% 
SenRra IB 3 4% 4% 4% 
Serena* 022 13 11 15% 1B% 18** 
ShrMed 684 0 8306 u31% 29% 3DH +1 ft 
SHLSytan 24 236 5ft 5ft 5ft +% 
Sncrewood 24 B22 17% 16% 17% +% 
anMzP IS 355 7% 7% 7)2 -ft 
Stans On 244257 28% 27% 27% -1% 
StanaTuc 3 10 3 0 3 

Sgnrt) 638 151422 35% 34% 34% 

SlgmaDas 19 887 7% 8% 7% 

GteNBc 00 16 435 12% 11% 12 

SacMQi 28 2320 21 20% 20% -% 

Stepan 640 15 350 11% 11% 11% +% 

Sndtdkl 21 607 27% 26ft 27% +% 

SmudeBv 257618 13% 13% 1% -0 

SanwetsP 13210 5% 4% 5% +*2 

SOMCa X 658 16 7B4 22% 22% 22% -% 

SDuna 00 B 735 18% 18% 18% 

Sptogd A 0® 21 M38 14% 14% 14% 

St JudeUd 640 1829® 40% 39*2 40 -% 

BPtaffc 630 10 226 19*a 18% 18% -% 

Sfcy01 1 257 1% 1% 1% 

States 3813882 24 Z% 22% -% 

SbteSk 0® 128879 X% 31% 31% -% 

SMUcro 14 1877 IC5% 24*g 24*g ■% 

SUItagtax 60 10 15 17%flB% 17 

SMTec on 14 573 12% 12% 12% 
StaldyUSA 0® 12 SOI 10% 9% 10 +% 

State 43 240 20% 20 20% 

Sbaabra 1.10 10 78 22% 21% 2% +% 
SfeuUDy 132716 8% 6% 6% +% 
Sbytar 028 25 6469 36% 35% 36% +1% 
StffraD 18 15 14% 13% 13% -% 
SasteraaB 6® 14 30 0% 23% 23% 
SaranABcxOM »1(BB 19% 19% 19% -f^ 
SummftTn a 3® 30% 29% 29» -ft 
Sanspart H 23 4% 4ft 4% -% 
SUfffc 1417182 34 33% 33% +*2 

EwMTra 271012 44 43% 43% -% 

Sybrakto 3813327 47% 46% 48% -% 

SymaSBC 111 93Sul9ft 18 18% +% 
symny 6« >5 29 18% 1B% 18% +% 

Synenxn 16 72 5 4% 4% 

Synergai 1210 5% 5% 5ft +ft 

SyraCta 117 463 17 15% 16% +1 

SyatmScfi 612 19 955 13% 13% 13% -*a 
Syoan&co » 752 20% 20% 20U +ft 
Syoasad 48 50 7% 6% 7 +% 


- T - 

T-CeflSC 4 436 2% 2% 2% 

TJdwePr 652 X 20 32% 31% 32% 4% 

TBCCp 1421B4 10 8% Oil +ft 

TEA Cette 844 25 234 23ft 0 23 -% 

TechDBta 181114 18% 17% 17% •% 

Tecunaeb 0® B 134 48041% 41% -4% 

Tekatac 17 100«£7% 27 27 -% 

Telco Sys 351786 17% 16% 17 +% 

laKknA 1784082 23% 22% 23% +% 

Tatabk 20 1844 4% 0% 4% +% 

TbMb 33 3318 47% 46% 46% -% 

TetalCfc 001 81 870 12% 12% 13% -% 

Tata Tec 35 0 8% 8% 8% 

TtarfhADROl?! 20 1167 26% »% 26% 

Three Core B310G55 42% 42% 42% +% 
18 15 152 6*2 5% 8% 

TJtat 022® 13® 18 A? 17 -I 

Token Mad 5 597 7% 6% 7 +% 

TcftyoMar 034 34 34 57% 57% 57% -% 

Ton Mown 40 843 12% 12% 12% 

TcppaOo 0® 11 1936 5% d5% 5% +% 

raster 21411 4% 4% 4% +% 

TraaWrid 14 81 12 11% 11% -% 

Tremlcle 10 12 21 37% 38% 36% -% 

Irican 16 242 2% 2 2 -% 

Trimble X 3® 14% 13% 13% +% 

TruteoBkC 1.10 13 117 ® 19*? 2D +% 

Ttenal® 8® 14 619 7% 7% 7% -% 

TyrftM 008174 02 0 22% 22% -% 


- II - 

USHKxx 684 200826 47% 46% <7% +1% 
Unflab 29 1 543 4% 4% 4ft +ft 

UDUeeGS UJ2 12 10 16 15% 16 +% 

USTst 200 14 3718 U0 61% 64% +3% 
UnUadSl 040114181 10% 9% 10 -% 

Unfiog 60 18 3® 18% 17% 17% -% 

unarm X 10® 187 44% 44 44 -% 

US Banco in 182227 23%d23% 23ft -ft 
US Energy 5 338 4% 3% 4 +% 

UST Cap 1-12 a 135 10%fl0% 10% 
IMiUed 14 » 8% 8% BA -% 

UUTatov 18 197 52% 52% 52% 

Uttt 19 S 3% 3% 3% -% 


- V- 


Vtenol 

0® Z7 74 17 16% 16% 


VngidCdi 

1® 289 28% 26% 28% 

+% 

Wrtbna 

191416 22 21 21% 


Wear 

M 650 0 24% 24% 

-1% 

VtanrpM 

IS X 17% 16% 16% 


Vtoteo0c 

3352157 34 23% 23% 


VUtTach 

153233 12% 12% 12% 

ft 

VdNdB 

617 181182 18% 18% 18% 

ft 


-w- 



HamerEn 610 17 822 24% 23% 24% +% 
ten ted! 47 952 6% SJi 6% +ft 
WsstdUSB 67B 82X2 17%d17% 17% -% 
WacbFBdSL OM 7 977 17%dl7% 17% +% 
WtekMA 622 17 IS S 24 24 -% 

VbuaaiPM 624 15 ®7 24% 24% 24% -% 

1M>-40 2® 25 118 43 42% 42% 

Kite 4 159 3% 3% 3% -ft 

Wat Ota A® ID 731 28% 28 28% -% 

KfaaiBne 00 10 344 31 30% 31 -% 

TWPUb 10 684 12% 11% 12 4% 

m vS& 2 296 15 14^ 14^ +ft 

Wet Soma io a 3% 3% 3% 

mm 696 182941 43% 43 43% +% 

WmsSononn 4810BS 30% 28% 29% -1% 
HUBtenL 02B 13 170 16% 18 16ft +ft 
Wbntf ft« 222455 22% 21% 21% +% 
WPP BB® 60 221117 3% 3ft 3% +ft 
Wynan-GthOAD 1 11B S% 5% 6% -% 


-X-Y-Z- 

ata* ®2B32®0% 58% 59% % 
aracap 1 B7B 2% 2% 2% 4% 
Wte 694171 1842 19% 18% 18% -% 
York Radi 0 248 4% 3% 3% -% 

ZknsUBi 1® 8 0 37%d383| 37 % +% 


WORLD STOCK MARKETS 


FINANCIAL TIMES 



. Thursday Novemb^l^^ 


AMERICA 


EUROPE 



Dow volatile in reply 
to inflation figures 


Diffident response to Fed rate rise 






Wall Street 


US share prices sustained 
another period of volatility yes* 
terday morning amid confu- 
sion about the implications of 
a lower than expected increase 
in consumer prices and Tues- 
day's tightening of monetary 
policy by the Federal Reserve, 
writes Lisa Branstm in New 
York. 

By lpm the Dow Jones 
Industrial Average was up 5.05 
at 3K31.4L The more broadly 
based Standard & Poor's 500 
gained 0.14 at 465-17, while the 
American Stock Exchange 
composite put on 0.35 at 44&20. 
The Nasdaq composite was up 
04)1 at 769.QL Trading volume 
on the NYSE came to 174m 
shares. 

The Dow rose by more than 
10 points in early trading after 
the Labor Department reported 
consumer prices for October, 
excluding food and energy, 
rose by 0.2 per cent, while ana- 
lysts had expected a 02 per 
cent increase. Overall, con- 
sumer prices were up 0.1 per 
cent last month, bringing 
yearly inflation down to 2.6 per 
cent, from 3.0 per cent in Sep- 
tember. Economists had for- 
cast a 0J. per cent increase in 
overall prices. 

Neither the stock nor the 
bond markets were able to sus- 
tain the morning gains. At one 
stage the Dow was down more 
than 6 points before bouncing 
back. 

Mr Richard McCabe, chief 
market analyst at securities 
firm Merrill Lynch attributed 
the volatility to uncertainty 
about the impact of the Fed’s 
75 basis point increase in the 
fed funds rate. 

"It's sort of a double-edged 
sword, 1 ' he said, adding that if 
the move cooled the economy 
it would keep inflation from 
eroding corporate earnings, 
but if the Fed continues to 
raise rates it would damage 
firms' ability to borrow. 

In the near term, he gain 
whatever happened In the mar- 
kets over the next few days 
could determine whether the 
market staged as end-af-year 


rally. "Whichever way it starts 
to go, youll get a following 
and you will see more money 
going in that direction," he 
said. If it does hold up or go 
up, maybe it will blossom into 
a late November-early Decem- 
ber rally." 

Still, he forsaw overall weak- 
ness in most of the stock aver- 
ages over the medium to long 
term. 

Shares of Exxon rose $% to 
$60% on news that the oil com- 
pany had signed a contract 
with the Indonesian state- 
owned oil and gas company to 
develop a natural gas field in 
.the South China Sea. Mobil, 
which is also to negotiating for 
a part of the project, gained $% 
at $84. 

Interest sensitive hanks lost 
ground in the aftermath of the 
Fed's rate increase. Citicorp 
fell $% to $45%. Chase Manhat- 
tan. lost $% to $36%, Chemical 
gave up $% to $36% and 
NationsBank dropped $% to 
$47%. 

National Gypsum jumped 
$12fi at $454 after Delcor 
offered to buy the company for 
$43% a share or $940m cash. 
News that the construction 
materials company would be 
purchased, for what was consid- 
ered a premium price pulled 
shares of its competitor, USG, 
up $1% at $21%. 

Early in the day. General 
Electric shares rose $% at $49% 
on news that it had hired 
BlackRock Financial Manage- 
ment to help its subsidiary. 
Kidder, Peabody, to sell its . 
mortgage- backed securities 
portfolio. 


shar es valued at C$248 -8m. 


Brazil 


Shares in S3o Paulo rose LI 
per cent in light midday trade 
as positive sentiment after 
Tuesday's gubernatorial elec- 
tions triggered buying. 

The Bovespa index of the 55 
most-active shares was up 550 
at 50,037 by 1 pm in turnover of 
RSl52.1m 

Analysts were optimistic 
that president-elect Fernando 
Henrtque Cardoso's economic 
reforms would receive a boost 
after exit polls showed that 
candidates from the Social 
Democratic Party had won 
elections in three major states. 

The elected governors are 
seen as paving the way for con- 
gressional approval of eco- 
nomic reforms. Telebras pre- 
ferred moved forward 1.6 per 
cent to R$43.70i 


Mexico 


Stocks rebounded after previ- 
ous session losses, helped by 
rising prices of blue chips, 
especially the ADR of Telmex. 

Also helping the upward 
movement was a slight cut in 
domestic interest rates. 

The IPC index recouped 12.08 
at 2,471.23 In light turnover of 
lL9m pesos on volume of 1.1m 
shares. 

Telmex L series shares, 
available to foreign investors, 
were up l.l per cent at 9.16 
pesos. 


Equity markets throughout 
continental Europe reacted dif- 
fidently to the 75 basis-point 
rise in US short-term interest 
rates, with many finding it dif 
ficult to make any headway. 
While the absence of Germany, 
closed for a national holiday, 
may have played a small part 
In the day's aimless search for 
direction, the main cause 
seemed to be a feeling that the 
Fed might not have acted deci- 
sively enough. With fears that 
the US economy is still expand- 
ing more quickly than desir- 
able. the thought in some quar- 
ters is that it might not be too 
long before the Fed has to act 
a gain. 

MILAN was preoccupied by 
the progress of parliamentary 
confidence votes on the pen- 
sion package, although losses 
were tempered by some 
renewed buying by domestic 
funds, and hopes for a more 
buoyant December account, 
starting today. The Comit 
index fell 3.12 to 640.41. 

Ferruzzi provided a flurry of 
excitement, gaining L58 or 4.5 
per cent at U.,347. as specula- 
tion resurfaced of a merger 
with Montedison, its industrial 
subsidiary, as part of the 
group's restructuring. Montedi- 


| FT-SE Ac 

tuarfe 

6 Share Indices 



1 

Nov 16 
tort? changes 

Opm 

1QJM 

1130 1230 

THE EUROPEAN SERIES 
1330 tUO 1630 Cb» 

ft-se EuratnGk 100 
FT-3E Eurofratk 200 

T354J06 

141830 

135339 

141831 

135436 135538 
141833 142135 

1357.17 

142134 

1361 JO 
142532 

135833 135839 
142148 142132 



Nov 15 

Mw 14 Nw 11 

Homo 

Hn9 


FT-SE Ernbsck 100 
FT-SE E u toO ik K 200 


bm ion evram wh* km ■ ikut. t» ■ i«mi imu* wa . \ma m- wrca t Paw 


son reacted negatively to the 
rumours, declining L17 to 
LI 237, as analysts questioned 
the benefits for the company. 

Banks were mostly lower as 
recent bid fever subsided. BCI 
shed Lll to L3.557 with the 
expiry of its unsuccessful bid 
for Ambroveneto, which gave 
up L66 to L4288. 

Credito. however, picked op 
L17 to Ll.677 as its bid for con- 
trol of Credito Romagnolo 
remained on the table. Romag- 
n olo d ipped L246 to L16.047. 

ZURICH was higher as inves- 
tors switched from financials 
and insurance issues and into 
industrials, which found 
renewed support in the 
strength of the dollar. The SMI 
index rose 17.5 to 2,609.4. 

Nestle was a beneficiary of 
the strong dollar in the run-up 
to its financi al year-end. gator 


mg SFr26 at SFrl.221 and 
reversing the recent downward 
pressure. 

Holderbank rose SFrlS to 
SFrl.068, extending a long 
period of gams on positive 
expectations for 1994 results 

and speculation that a bank 
would soon issue covered war- 
rants on the shares. 

BBC was SFrlO firmer at 
SFrl .109 ahead of ntn*» ^n onth 
figures due tomorrow which, 
are expected to show double- 
figure operating earnings 
growth but flat sales, com- 
pared with a very strong year- 
earlier performance. 

Cfba, which confirmed on 
Tuesday that it was in talks to 
acquire a sizeable minority 
stake in Chiron, the US bio- 
technology group, rose SFrl8 
to SFH71, with strong demand 
seen from London investors. 


PARIS found the going hard ; 
and ended the day with the. . 
CAO40 index off 4.33 at 
1,950 .20, having traded in a 
range between LJ964 and L929. 
Turnover remained moribund^ 
at about FFr&Sbn. •••.»-• "" 

Asa, the insurer, went ^ 
against . the trend with an ~ 
advance of FFr7.30 to FFr269.00 
after announcing a. rise tn 
nine-month turnover to 
FFI73bn from EFrfSbn.' 

However, this was among 
the few exceptions to the drift 
downwards. Confirmation that 
tiie Renault privatisation was - 
only LI- times subscribed by - 
retail investors may also have 
contributed to weakness - the . 
car maker Is due for lis t ing 
today. Euro Disney, which 
could find its place In the 
CAC-4G threatened by Renault 
dropped another 5 per cent to 
FFiSjBO. 

AMSTERDAM could, also 
barely bring itself to move and 
the AEX index slipped back 
just dll to 412.10. 

The la* 1 * of momentum wax 
reflected in the performances 
of doDar-sensitive issues such 
as Royal Dutch and Unilever, 
both of which fell on the day, 
by 40 cents and 70 cents respec- 
tively to FI 189.70 and F119&1D. 


- Elsewhere; 7 Phfifps.- which 
was theday’s most active 
stock, dipped 50 cate to 
FI 54.00, wfaflePolygram added 
the same amount at FI 77.00, 
and announced 'that: it ‘ had 
acquired a IJS reccstfing com- 
pany foar iSSrit- • 

MADRID gaveupaar^gaiiis 
to .end Jower and &elgeaeral • 
index - finished' 2.48rdowirai 
302.76. Bepsoi ttre&dSeteSB to. 
Pta3,956 after' posting lower 
than expected ntoe-pfonth 



OSLO was higher- in : lively 
trading oh small adrancarln 

of 

country’s referendum on 
November 28. The polls, how- . 
ever. stQl show oppopflnfat of 
EU membership rstateng the' 
upper hand. . The All-share 
index flashed 1£6 higher at 
805JSL: V • . ' ; • 

STOCKHOLM turned. back 
from its best levels on profit- 
taking, and 'the AffibsvSiiden 
index wak finally 9 JO ahead at 
L5I4L50. Vbhro “B" put on SRr5 
at SKrl<£L50 as investors teas- , 
sessed the group’s rifne-mouth 
results. •' 






j; 


irtH 




Written and wfltad. by John PHt 
and Mchael Morgan . 


r.o • . .... 


ASIA PACIFIC 


", • • "* % 
.«S-* ... -• -• 


Region mostly hesitant awaiting US trend 


„ ■ 


Tokyo 


Canada 


Toronto stocks were mixed at 
midday in directionless trading 
as investors tried to take posi- 
tions after the rise in US inter- 
est rates. 

The market took some sup- 
port from a stronger gold and 
precious metals index, which 
rose 3&6 to 9.71&58, but was 
pressured lower by weaker 
North American bonds and 
plunging oil and gas stocks. 

The TSE 300 was down 0.18 
to 4J68.74 in volume of 25 An 


SOUTH AFRICA 

Johannesburg picked up mod- 
estly, feeling the benefit of 
a firm London market and a 
weaker financial rand, 
although golds ended little 
changed on bullion price 
uncertainty. The overall index 
was 34 better at 5,888, indus- 
trials rose 42 to 6,850 and 
golds eased 1 to 2,107. 

De Beers finished 10 cents 
lower at R99.9Q, stm lacking 
direction, while Anglos rose 
R2toR24&50. 

M-Net gained 50 cents at 
K12.75 after an initial dip fol- 
lowing results. 


EMERGING MARKETS: 1FC WEEKLY INVESTABLE PRICE INDICES 


DoSar terms 


Local currency terms 


Marfnt 

No. of 
stocks 

Nov. 11 
1904 

% Change 
over week 

% Change 
on Dec 93 

Nov. 11 
1994 

% Change 

igiOf MfitfUblr 
Ufta wvutW 

% Change 
an Dae *93 

Latin America 

(207) 

73123 

+0.3 

+137 




Aitjentina 

(24) 

885.55 

-33 

-ion 

54345078 

-33 

-109 

Brazil 

(57) 

436^7 

+5.9 

+87.5 

1^87y490^34 

+5.0 

+'1345.7 

ChBe 

(25) 

813.48 

+OU 

+47.4 

1^4341 

+00 

+409 

Cotambia' 

(11) 

7S&49 

■42 

+239 

1,169l55 

4.7 

+202 

Mexico 

(67) 

902.91 

-22 

-103 

1^3836 

-13 

-08 

Peru* 

(11) 

190.18 

-0.5 

+57^ 

25372 

-30 

+593 

Venezuela 1 

• (1?) 

474.06 

-e.o 

-19J 

135135 

-9.0 

+303 

Aria 

(558) 

26390 

-2-9 

-9^ 




China 4 

(18) 

99.42 

-31 

-334 

107.01 

-31 

-343 

South Korea® 

(158) 

154.78 

+1.1 

+310 

18316 

+13 

+293 

Philippines 

(19) 

31834 

-37 

-8-5 

389.09 

-6.1 

-109 

Taiwan, China 1 

00) 

148.63 

+1.8 

+9-9 

145.78 

+31 

+93 

India 7 

(7ft 

12830 

-5.0 

+39 

141.48 

-30 

+93 

Indonesia* 

Oft 

10345 

-35 

-130 

12835 

-33 

-93 

Malaysia 

1104) 

28330 

-34 

-104 

26732 

-38 

-20.7 

Pakistan* 

(1ft 

396.42 

+1A 

+32 

55134 

+13 

+4.4 

Sri Lanka” 

(ft 

19317 


+107 

20389 

+04 

+93 

Thailand 

(5ft 

428.35 

-4*4 

-103 

424.52 

-43 

-131 

Euro/Mid East 

(12ft 

11389 

+2-8 

-27.8 




Greece 

(25) 

21337 

-31 

-5.0 

34531 

-13 

-103 

Hungary" 

(ft 

17385 

-1.4 

+8.1 

231.42 

-13 

+14.6 

Jordan 

(13) 

154.71 

+1 A 

-6 £ 

22035 

+13 

-53 

Potencf* 

(12) 

48348 

-7.7 

-409 

71434 

-6.9 

-353 

Portugal 

(25) 

12339 

+1J5 

+138 

13738 

+13 

-0.6 

Turkey'* 

(40) 

127.74 

+72 

-39.9 

319028 

+73 

+50.6 

Zimbabwe” 

(ft 

284 UO 

-0.8 

+30£ 

324.08 

-1.0 

+61.7 

Composite 

(890) 

352.82 

-09 

-08 





Mt “ “* at M MM By chancre are pareancaps acm m m* ton As envious Friday. In t*tfsr Doc 1983-100 mupt Aon iwretf 

wNdijncplFali T 1931; BjOac 31 1990: &Jm I 5 fSM MOoc 37 1932: &Jmn 9 mss flU» 4 1991; OV*oa 8 1992; OtSap SB 1990; ftUr I Wt fH» 
Dac 31 MSS aVDo C 31 rssft OSJDoc 31 OSes (iSAug 4 1939; r>4Muy a 1901 


M anila has fallen by 17 per cent in local currency terms since the start of the year, and 


by 6-5 per cent in dollar terms, according to IFC data, although more recently the 
equity market has found support due to the strength of the peso against the dollar. 


eqony market has tound support due to the strength of the peso against the dollar. 
JJjs proved to be a testing time for companies closely linked to the dollar, such as 
FLDT and PNB, which have seen respective 15 per cent and 19 per cent falls in their 
shareprices over the last month. 

According to Asia Equity, the appreciation of the peso could wen continue for the rest 
or the year, possibly ending 1994 at between 23 to 24 pesos to the dollar. However, a 
flE prea atiqn could well begin early in 1995, following an expected balance of payments 


Asia Equity forecasts that the index will correct to 2,800 in the short term, pressured by 
further weakness m the major blue chips and property stocks. 


Afternoon baying by dealers 
helped share prices recoup ear- 
lier losses resulting from 
profit-taking by institutional 
investors, and arbitrage 
unwinding, and the Nikkei 225 
average finished with a mar- 
ginal decline, writes Emiko 
Terazono in Tokyo. 

The index was off 85.02 at 
19.306.66 after a day's high of 
19,444^9 and low of 19,252.15. 
Hedge selling by institutional 
investors depressed futures, 
prompting unwinding of arbi- 
trage positions. 

Cross trading, or the selling 
and buying of shares by inves- 
tors realising profits while not 
altering their stock portfolios, 
boosted activity. Volume 
totalled 240m shares, against 
218m. Traders said the amount 
of “real” stock transactions 
were minimal . 

The rise in US interest rates 
and the subsequent apprecia- 
tion of the dollar failed to 
affect sentiment. “Investors 
were using the Federal Open 
Market Committee’s meeting 
as an excuse for inactivity," 
said a dealer. 

The Topix index of all first 
section stocks dipped 3.14 to 
L52550 and the Nikkei 300 lost 
059 at 280.21, while falls led 
rises by 502 to 446, with 216 
issues unchanged. The ISE/ 
Nikkei 50 index edged up 0.27 
to 1.260.77. 

Earnings related announce- 
ments affected share prices. 
Pioneer Electronic fell Y150 to 
YZ^eo on concern over its con- 
solidated earnings. However, 
Matsushita Electric Industrial, 
winch saw its consolidated net 
income for the first six months 
jump 49 per cent, gained Y30 at 
Y1.560. 

Nishimatsu Construction, 
which announced that it was 
expecting to post a record high 
recurring profit for the current 
business year, moved ahead 
Y40 to Y1.040. Murata. a 
machinery maker, put on Y50 
at Y3£80 following reports that 
Its consolidated after-tax prof- 
its would surge 40 per cent 

Steel issues were actively 
traded. NKK, the day's volume 
leader, finned Y2 to Y278, but 
Sumitomo Metal Industries 
slipped Y5 to Y336. 

Profit-taking depressed some 
high-technology shares. Fujitsu 


receded Y10 to Yl,040 and 
Hitachi softened Yl to Y973. 

Privatisation stocks were 
firm, with Japan Tobacco up 
Y5.000 to Y996.000 and Nippon 
Telegraph and Telephone 
adding Y 1,000 at Y877.000. East 
Japan Railway, however, lost 
Y3.000 at Y469.000. 

In Osaka, the OSE average' 
declined 28.19 to 21,409.28 in 
volume of 602m shares. 


Roundup 


Much of the region was in hesi- 
tant mood, awaiting further 
indications of Wall Street’s 
likely performance in coming 
sessions. 

HONG KONG weathered a 
near day-long bout of profit- 
taking, amid disappointment at 
Wall Street's overnight fall 
after the US interest rate rise, 
before some late buying tipped 
the market back Into positive 
territory. The Hang Seng 


inflgT , which shed 61 points in 
morning trade, ended a net 
2658 higher at 9,59224. 

Improved earnings prospects 
and foreign buying helped 
HER International to rally 20 
cents to HK37.55, while Sea- 
power Resources added 4 cents 
at HK$OS3 on bargain hunting. 

SEOUL was lower after a 
consolidation of financial 
shares, as institutional inves- 
tors became defensive and indi- 
vidual investors began selling. 
The composite index dipped 
7D5 to 1018.75. 

Unfounded rumours of debt 
defaults by unlisted construc- 
tion companies pressured some 
banks and securities houses, 
which have extended or guar- 
anteed loans. The ftnanrial 
sub-group index fell 12.99 
points to 728.76. 

SYDNEY ended a touch 
easier after negative sentiment 
from the bond and futures 
markets spilled over, into 


stocks and pushed the market retreated 7.68 to lj89.79* 
off Its highs. The All Ordi- BANGKOK, was , slightly 
narias index lost 11 at 1£40.3. - lower om. profit-taking in 
Stocks were mixed overall, finance stocks, as the market 


- .. _ 


with resources issues finishing- entered a period ef cotisbfida- - 
a shade firmer but Industrials turn. The SET index eased 7J6 - 
closing lower. Western Mining to 1,489-15. .;•/ • 

picked up 10 cents to A87.65 KARACHI nank; ehaijilygt 
and MIM was 6 cents ahead at the closers local mrostas^fe;- 
A42.60 as they continued to institutions kept to fte- sEpe-;-' 
rebound after the heavy seOing - Ones, short of . .cash. l 

last week. unnerved by pcStical tensidfe ^ 

KTTAT.A LUMPUR saw wtofr- ' 'The KSE 100«hare ihdex 
spread profit-taking drag eued 17.27 to 2J6L64.' 
equity prices back after initial TAIPEI remained pxi 
gains. The composite index, pied ahead of next mi 
which had risen by 40 points .elections and the wei 
over tiie previous two sessions, index gave up 35.02 at 6 


TAIPEI remained preoccu- 
pied ahead of next month's 
elections and the weighted 
index gave up 35.02 at 6346.78 



.• ?• .‘V —■ 

- • • ‘ , “ 


■£.S-- - . . . _i. ; ---T» 


declined from a day's best off . as nervous investors continued 
1,079.64 to dose 6J9.down an to drift out off the market 


• ■ 


the day at 1,063 J5. 

SINGAPORE held on to 
gmau gains at the dose and 
the Straits Times industrial 
index ended 5£2 up at 2J14&50, 
off an intraday peak of 2^353.92. 
However, the UOB OTC index 
tracking Malaysian stocks, . 


. BOMBAY rdraunded L94 per 
cent on rmijewed buying by 
domestic mutual funds and _ ; 
speculators .after the sharp . 
falls of the previous week. The . 
BSE 30-share index, which lost 
more than 280 points last week 
recouped 7&30 at 4,113.79. 


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FT- ACTUARIES WORLD INDICES 


Jointly compled by Tho Financial Tkma LbL, Goldman, Sadw a Ca and NatWM SocurUn Ud. In eonfunca i on w«h ttw tafitute of Actuaries and ttw FaeUty of Aetuaries 
NATIONAL AND 

REGIONAL MARKETS TUESDAY NOVEMBER IS 1 B B< — MONDAY NOVEMSS) 14 1904 DOLLAR MOEX- 


REOIOIIAL MARKETS 
Rguns m paronlhases 
8fww number of Dnss 
of afock 


Australia (68) 187.40 

Austria (16) 17&27 

EMgkm {36) 187^3 

Brazil (28) 18&20 

Canada (109 130^8 

Danmofc (339 249J4 

Finland (24) 192.44 

Franco (lOij I7a78 

Genrany pH) 14338 

Hons Kong (56) 3H760 

Ireland (14) 20140 

Italy (59) 77.99 

Japan (46ft 16628 

Malaysia (97) S3SJO 

Mexico (18) 200426 

Nemarfand (IQ) 2T6JS1 

New Zealand (14J 7A30 

Norway (23) 196.10 

Singapore (44) 393.62 

South Africa @9) 335S8 

Spain (30) 14137 

Sweden (36) 341.20 

Swteartand (47) 16133 

Thaiand (46) 176*1 

Untied Kingdom (204) 201.56 

USA (SIS) mi7 


Americae (664) 177.77 

Europe (707) 172.88 

Nordic (1 IQ 229.45 

Pacific Basin (793) 166.03 

Euro-Pacific (1500) 188A4 

North America (01Q 18660 

Europe Ex. UK (503] 154.00 

Paste Ex Japan p2Q 253^7 

World Bl US (170Q 170.67 

World Ex. UK (2019) 173.65 

World Bl Japan (17559 18&51 


Da/s 

Pound 



Local 

Local 

Grass 

Gtangs 

M 

Sterling 

tnctax 

Yen 

Index 

DM 

Index 

CUTency 

Index 

K dig 
on day 

Dtv. 

VMd 

1.3 

16083 

103.94 

13450 

147.79 

1.0 

any 

04 

187.01 

11089 

14333 

14350 

05 

1.12 

ao 

168.78 

103.89 

134.44 

13152 

0.1 

451 

03 

174.44 

11551 

14950 

28554 

05 

a?2 

-08 

122.71 

8133 

10554 

12025 

-05 

254 

09 

23359 

15451 

20052 

20458 

15 

1.45 

-13 

18039 

11048 

15451 

189.70 

-05 

OJ* 

08 

15098 

10852 

13750 

142J2S 

0.7 

3.05 

09 

13450 

89.40 

115.68 

11558 

05 

1.79 

13 

30331 

240.71 

311.49 

384.87 

1.8 

3.11 

-04 

187.76 

124.43 

16152 

181.77 

-05 

352 

OO 

73.06 

46.42 

B2.66 

PO.99 

-0.1 

1.70 

09 

14041 

97.03 

12557 

97.03 

0.7 

0.79 

33 

501 50 

33257 

43059 

523.50 

32 

158 

-1.1 

1877.68 

1244.43 

161029 

7G6154 

-15 

155 

07 

20152 

13353 

17251 

17020 

U7 

140 

-06 

GOBI 

46.13 

5959 

6350 

-0.7 

457 

05 

18350 

12151 

15752 

18012 

05 

154 

09 

368.77 

24450 

31656 

267.01 

0.7 

158 

06 

314.17 

20632 

26053 

30059 

05 

2.13 

13 

134.31 

89.01 

115.18 

138.65 

15 

4.18 

02 

22537 

149.76 

103.70 

26150 

0.7 

153 

-02 

153.01 

10151 

13152 

131.58 

-0.1 

15S 

M 

165.45 

109.65 

14159 

17150 

15 

253 

1.1 

18853 

12S.15 

16155 

16853 

15 

458 

-02 

178.18 

11007 

162.79 

mi? 

-05 

258 

-02 

16054 

11058 

142.83 

147.74 

-05 

250 

07 

162-06 

107.40 

13657 

1S251 

05 

3.06 

ai 

214.96 

14257 

18455 

212.78 

05 

159 

1.0 

15055 

10359 

133.40 

10753 

05 

1.13 

03 

15018 

10453 

13555 

12558 

05 

157 

-03 

174.72 

115.79 

14954 

18559 

-05 

257 

05 

14437 

9552 

123.73 

13158 

05 

257 

1.7 

24356 

16155 

20650 

229.79 

15 

253 

08 

16090 

10557 

137.13 

12027 

05 

157 

0.4 

16258 

10752 

13951 

14354 

05 

2.09 

03 

17880 

117.04 

15155 

17858 

05 

ZS9 

06 

16438 

10954 

14158 

14757 

Out 

229 


MONDAY NOVEMBER 14 ISM 

US Pound 1 

Dollar Stertefl Van DM Ct 

Max Index Index index i 


247.10 231.17 


142.75 13154 


201.17 18830 

77 39 72.96 

154.89 144S0 


21350 200.01 

74J6 8694 


141.87 13254 
240.68 225.16 


178.18 188.69 

171.75 16057 
22031 314.42 

16A33 153.73 
167.34 15856 
isaai 174A6 
15X24 14335 


172.97 16131 
18737 175.85 




Local 



Year 

Yen 

lnd« 

DM Currency 52 week 52 week 
tndm Index Ugh Low 

ago 

10286 

13252 

14855 

189.15 

14036 

15455 

11052 

142.71 

142.75 

19659 

167.40 

174.44 

104.07 

134-38 

131.08 

177.04 

151.58 

151.74 

115.57 

149-23 

28084 

_ 



82.01 

10550 

12951 

145.31 

12054 

134.01 

15X74 

19852 

202. S3 

275.79 

23057 

237.99 

12123 

15654 

190.43 

201.41 

HOBS 

11951 

10558 

136-OS 

14153 

18557 

159.34 

16082 

8851 

114.68 

114.68 

150.40 

12037 

132.10 

23752 

30656 

378X12 

50656 

34159 

39453 

125.18 

161.62 

18221 

Z1&60 

172.05 

17754 

4852 

62.66 

92.40 

97.78 

57.83 

6257 

9037 

124.44 

9037 

17010 

124.54 

145.99 

322.77 

41650 

61158 

621.63 

430.71 

4ra.78 

126052 

132651 

764158 2647.08 

169658 

187454 

13352 

171.77 

189.10 

223.30 

187JJ1 

19158 

4651 

60.08 

6452 

7759 

5952 

5093 

12158 

15657 

17857 

211.74 

166.52 

178.18 

242.73 

31354 

285.17 

40158 

294.66 

31100 

20758 

86751 

30050 

342.00 

20555 

217.89 

8014 

1133? 

13757 

155.79 

12088 

137.11 

148.74 

19356 

20954 

24258 

17553 

19028 

10152 

13157 

131.71 

17056 

14004 

147.06 

10851 

13856 

166.95 

_ 

re. 


12457 

11855 

16051 

15309 

IBS ,55 
190.55 

21456 

19004 

1fl1.11 

17095 

186.68 

1BO01 

11056 

143.15 

14606 



_ 

10858 

13759 

15152 

17058 

154.79 

15751 

14250 

184.14 

21156 

23351 

173.19 

187^0 

10024 

132.02 

10652 

17086 

134.79 

15458 

104.11 

134.44 

124.56 

175.14 

143.88 

15004 

11029 

150.16 

18037 

192.73 

1^57 

185J0 

9554 

123.11 

13059 

16012 

13094 

139.17 

15084 

20654 

228.08 

29021 

23254 

24153 

10552 

13650 

12850 

17086 

14558 

157X36 

10751 

13096 

14047 

17059 

15096 

104.76 

11095 

15151 

177.71 

19550 

17034 

17945 

10006 

14063 

14755 

180J0 

15085 

166.71 




({vice 


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issua , structured finance, ns 


products and investment management. 




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