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FINANCIAL TIMES 


_£yrgpe^ Business Newspaper • ' THURSDAY OCTOBER 20 19.94 


D8523A V 



Former BCCI chief 
Jailed for 1 1 years 
over bank fraud 


Swaleh Naqvi (left), for- 
mer chief executive of 
the Bash of Credit and 
Commerce Internation a l, 
was sentenced to a jail 
term of 11 years and 
three months by a fed- 
eral court in Washington 
for his role in the xnolti- 
billion-dollar fraud at the 
collapsed bank closed 
three years ago by inter- 
national regulators. He 
was ordered to pay $255.4m restitution. Page 16 

Cfuystor’s Vietnam venture; US carmaker 
Chrysler plans a 5100m joint venture in Vietnam to 
build minivans, the first such project since the US 
economic embargo was lifted earlier this year. 

Page 16; Vietnam wobbles, Page 6 

Top Job losses loom at UK Treasury: About 
one in four of the UK Treasury’s senior staff will 
lose their jobs under sweeping reforms in its struc- 
ture and operations designed to make it focus on 
strategic issues determining public spending. 

Page 16; Treasury wants to hand tasks to SIB, Page 
10; Editorial Comment, Page 15 

Digital Equipment, US computer manufacturer, 
reported smaller-than-expected losses for its first 
fiscal Quarter, raising hopes that it would return to 
profit by mid-1996 after four years of heavy losses. 
Compaq results, Page 20 

Adams ban may mads The UK government is 
poised to lift within days the exclusion orders ban- 
ning Gerry Adams, leader of Shm Fein, the political 
wing of the IRA, and other prominent Northern 
Ireland republicans from visiting the British main- 
land. Page 9 

Nolda of Finland, Europe's biggest maker of 
mobile telephones, reported pre-tax profits of 
FM2L29bn ($50m) in the first eight months of the 
year up from FM466m at the same stage last year 
on the back of continuing heavy demand for hand- 
sets and network equipment Page 17 

OH camp staff shot dead: A Frenchman and a 
Spaniard have been killed by unidentified gunmen 
at an oil camp owned by the Sanafrach oal company 
near Tebessa in eastern Algeria. They were under- 
stood to be working for the French ofl services com- 
pany Scblumberger PegeB. .... ...... . 

Bonn boiler blast kills 4: Four people were 
killed and three badly injured when a coal-fired 
boiler in a Bonn power plant burst daring routine 
maintenance. 

Booker's salmon catch: British food group 
Booker will become the world’s largest fanner of 
Atlantic salmon with its $12Llxn agreed bid for 
Marine Harvest International of the US. Page 17; 

Lex, Page 16; Attempt to leap to the top. Page 26 

US ready to dofy Bosnia arms bam Trans- 
atlantic tensions over policy towards former Yugo- 
slavia were fuelled by a ‘White House statement 
that the US was prepared to defy its allies and take 
unilateral action to authorise arms supplies to Bos- 
nia, Page 3 

Escape for Jumbo: An Ausett Australia 747-300 
jumbo jet bound for Japan with S3 passengers 
crashed during an emergency landing at Sydney 
international airport when its nose wheel collapsed. 
No one was seriously injured. 

Baghdad bomb blast: A powerful bomb 
explosion damaged Iraq's Ministry of Religious 
Affairs in Baghdad, severely injury six people, 
according to Iraqi television reports. 

Corruption probes face Inquiry: An official 
inquiry is to be held Into complaints shout the 
behaviour of Milan’s anti-corruption magistrates. 

Two complaints relate to probes into the activities 
of prime minis ter Silvio Berlusconi's Fininvest busi- 
ness empire. Page 3 

N-pfant executive found dead: Vladimir 
Turusio, a deputy director at the Mayak plant 
which produces weapons-grade plutonium, has been 
found dead in the closed Urals city of Ozersk with a 
crushed skull The atomic energy ministry said it 
was not clear whether he had been murdered- 

Selling slows reforms: China Is slowing the 
pace of economic reform while it tries to curb infla- 
tion and head off possible social unrest, a World 
Economic Forum meeting was told. Page 6 

Papal book: Pope John Paul’s book. Crossing Ok 
T hreshold of Faith, the first by a re ign i ng pontiff, is 
published in 36 countries today. Proceeds will go to 


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Russia urged to adopt radical budget 

Austere approach aimed at reducing inflation to 1% a month 


By John Lloyd in Moscow 


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Russia’s most important 
economic ministries will today 
urge the cabinet to adopt a “big 
bang” approach to fiscal reform, 
marking a sharp shift away from 
the previous gradual approach. 

The finance ministry and the 
ministry of the economy are pro- 
posing a draft budget aimed at 
bringing down the level of infla- 
tion to 1 per cent a month in the 
second half of 1995. Cabinet bud- 
get discussions start today. 

The plan requires the govern- 
ment to cease taking credits from 
the central bank. It will meet 


strong opposition from some of 
the most powerful ministries - 
including defence, agriculture 
and energy. However, the finance 
and economy ministries have 
broadly agreed the approach, and 
expect to push it through the cab- 
inet meeting by arguing that the 
country has no choice. 

Mr Alexander Shokhin. deputy 
prime minister for the economy 
and one of the architects of the 
budget, said yesterday that to 
continue the present policy of 


gradual reform might mean stabi- 
lisation in two or three years - 
“but it would mean periodic cri- 
ses like the one we had last week 
when the rouble fell". 

The budget debate comes at a 
time of heightened tensions 
between Mr Victor Chernomyr- 
din, the prime minister, and Mr 
Boris Yeltsin, the president. On 
Tuesday, there were rumours 
that Mr Chernomyrdin had 
resigned, but he and the govern- 
ment denied this. Mr Shokhin 


said “there are forces around the 
government who try to profit 
from the absence of the prime 
minister". 

Mr Chernomyrdin returned 
from his Black Sea holiday last 
night. He will present the budget 
to a special session of the Rus- 
sian parliament next Thursday. 

According to figures from the 
finance ministry, the draft bud- 
get forecasts an income of 
Rbsttltrln and expenditure of 
Rbs208trln - that last figure 


slashed back from around 
Rbs260trin in earlier drafts. The 
budget deficit would be around 
8.3 per cent of gross domestic 
product. Mr Shokhin made clear 
that the success of the new strat- 
egy would require strong support 
from the International Monetary 
Fund and the World Bank. He 
said he hoped for loans of some 
S8bn from the IMF in the form 


Continued on Page 16 
Editorial Comment, Page 15 


Gaza and West Bank sealed after Hamas attack on Tel Aviv bus 

Israel firm on peace despite blast 


By Juflan Ozaruie in Tel Aviv 

Israel insisted that the Middle 
East peace process would not be 
halted by a suicide bomber's 
attack an a commuter bus In Tel 
Aviv yesterday that left at least 
22 people dead and 42 wounded. 

The 9am rush-hour attack by 
Hamas, which opposes peace 
with Israel, suggested that the 
mffifanrt fclamir group is intensi- 
fying its cam p ai g n of violence. 
But Israeli offi cials said negotia- 
tions with the Palestine libera- 
tion Organisation would con- 
tinue. 

US President Bill Clinton said 
the bombing was “an outrage 
against the conscience of the 
world" and Mr Yassir Arafat, the 
PLO chairman, condemned the 
attack and offered to help track 
down those responsible. 

Mr Arafat’s statement high- 
lighted the growing tension 
between the PLO and Hamas, - 
which has mounted an open.chal- ~ 
tenge to his authority and vowed 
to “set Gaza ablaze” if the PLO 
continued arresting its members. 

Israel immediately sealed off 
the Gaza Strip and West Bank, 
preventing tens of thousands of 
Palestinians travelling to their - 
jobs in Israel 

Mr Yitzhak Rabin, Israeli 
prime minister, cut short a visit 
to Britain, flew back to Israel and 
convened an emergency security 
meeting. 

However, Mr Ephrahim Sneh, 
the health minister, said the FLO 
peace talks would not be halted: 
“We will continue the day and 
night war against terrorism. We 
will fight them and defeat them 
and kill them, but we are not 
going to grant Hamas the politi- 
cal victory of stopping the peace 
process." 

The blast came two days after 
the initialling of a peace treaty 
between Israel and Jordan, which 
had raised hopes that political 
and economic barriers were foil- 
ing in the Middle East A signing 
ceremony Is due to be held next 
week, and Mr Clinton has said 
that he will attend. 

Israel’s opposition right-wing 
political parties furiously critic- 
ised the government in parlia- 
ment. Mr Benjamin Netanyahu, 
Likud party leader, said Mr 
Rabin was responsible for allow- 



Rush-hour carnage: Israeli police inspect the wreckage of the Tel Aviv commuter bus which was ripped apart by a bomb blast 


Hamas strikes new level of 
terror In (srael_ M ,. WMH ..Page 7 

ing Gaza to become “a terrorist 
haven to prepare murderous 
deeds”. He demanded the imme- 
diate construction of a fence 
around Gaza. 

Hamas, which last week kid- 
napped and killed a 19-year-old 
Israeli soldier, warned of more 
attacks and said yesterday’s 
bombing had “lifted the spirits of 
the Palestinian people”. 

The bomb blast created car- 
nage and destruction in one of 
the busiest shopping streets in 
cosmopolitan Tel Aviv, known 
for its cafes and boutiques. Bod- 
ies, severed limbs, shredded 
clothes and possessions were 
strewn across the street near the 
city's main shopping mall and 
crushed under the smoking 


wreckage of the commuter bus. 

Witnesses said some of the 
dead had been sitting at outdoor 
cafes sipping coffee or walking 
along the street The bomb threw 
up flames 40 feet high and recal- 
led missile attacks by Iraq during 
the Gulf War. 

“There was a huge blast and I 
was lifted, off m; feet,” said Sarah 
Pal, in a second storey apartment 
opposite the blast. “There were 
pieces of glass flying across the 
room and smoke everywhere and 
at first I though it was a Scud.” 

Angry residents gathered, 
chanting anti-Arab and anti-gov- 
ernment slogans. “We don’t want 
Arabs to come to our city," said 
Daniel Minis. “Gaza must be 
closed and Rabin should get out 

In a sign of the deep sense of 
national tragedy Israelis, for the 
first time, huztg black flags from 
their balconies - a mourning rit- 


ual regularly displayed by Pales- 
tinians. Thousands of volunteers 
overwhelmed emergency blood 
banks set up after the bombing. 

Prof Yona Alexander, a terror- 
ism expert based in Tel Aviv, 
warned that the “worst terror 


was yet to come". He said yester- 
day’s attack had boosted the con- 
fidence of Hamas. It had under- 
scored the terror group's message 
that it had "a long arm and could 
decide where and when it is 
going to strike”. 


Brussels 
plans law 
to improve 
money 
transfers 


By Lionel Barber in Brussels 
and John Capper in London 

The European Commission 
yesterday overrode opposition 
from the banking industry and 
proposed legislation to make It 
easier, cheaper and quicker for 
small businesses to transfer 
money across borders. 

The decision marks the end of 
a long campaign to persuade 
European banks to improve their 
performance in the transfer of 
small-value payments - those of 
under Ecu 10.000 ($12,588) - 
through self-regulation. 

The Commission still hopes 
banks will enact the measures 
voluntarily, although it is set- 
ting a deadline of December 1996 
for EU ministers to pass the leg- 
islation. 

The proposals from Brussels 
would ban double charging - 
cases where banks charge cus- 
tomers for receiving cash as well 
as for sending it - and require 
banks to provide detailed, writ- 
ten information on services to 
customers. 

Money would have to be cred- 
ited to the recipient’s account 
within six working days, unless 
the customer and originating 
bank agree it can take longer. A 
study this year showed some 85 
per cent of transfers already met 
this target. 

Mr Raniero Vanni D’Arcbirafi, 
commissioner responsible for the 
single market, said yesterday the 
Commission bad little choice but 
to legislate because banks had 
not done enough to reduce the 
costs of cross-border payments. 

There are 170m of these trans- 
fers a year and the number may 
triple by 2000, he said. It was 
vital to reduce costs for small 
businesses operating internation- 
ally and to show the European 
public that the single market 
was working. 

However, the European Bank- 
ing Federation said action had 
been taken on the basis of a 
"flawed" study carried out this 
year for the Commission. It said 
smaller banks were likely to stop 
offering services if legislation 


Continued on Page 16 
The long wait and high cost of a 
small transfer. Page 2 
Editorial Comment, Page 15 


US mortgage group to raise 
$20bn in global bond markets 


By Richard Lapper In London 

The US Federal National 
Mortgage Association yesterday 
announced its intention to bor- 
row S2Qbn on the international 
capital markets, launching what 
it claimed was the “largest global 
funded programme in the world”. 

The association, better known 
as Fannie Mae, is the largest sup- 
plier of fends for American home 
mortgages and one of the world's 
biggest issuers of long-term debt 
It has borrowed SlOObn since the 
end of 1992, and is seeking to 
fund expansion of its $2l4bn port- 
folio of mortgages. 

Hie com pany made its debut in 
global bond markets four months 
ago when it issued $L5bn of ten- 
year global debentures, 60 per 
cent of which were bought up 


by International investors. 
Lehman Brothers, the US invest- 
ment bank, is arranging the new 
facility, with ten other interna- 
tional banks involved in the the 
Issue. 

Fannie Mae is a shareholder- 
owned company chartered by the 
US Congress. Funding pro- 
grammes approaching this scale 
are normally the province of sov- 
ereign or supra-national borrow- 
ers, such as the World Bank. 

Mr James Johnson, Fannie Mae 
chairman, said the programme 
would tap “important new mar- 
kets abroad”. Fannie Mae did not 
detail the amounts or currencies 
of the maturities it plans to issue. 
But it clearly expects to reduce 
its borrowing costs. 

Funds obtained under the 
global bond issued in the summer 


CONTENTS 


were obtained for five basis 
paints less than would have been 
the case in the US market, said 
Ms Linda Knight, Fannie Mae 
senior vice-president and trea- 
surer. A basis point is one hun- 
dredth of a percentage point 

The programme will give Fan- 
nie Mae access to international 
clearing systems to allow it to 
trade and settle securities in its 
own time zone. 

Fannie Mae has a triple A rat- 
ing from credit rating agencies. 
Since 1988 it has built up a 
domestic market in so-called 
“callable" bonds - which can be 
redeemed before maturity. 

Another US mortgage provider. 

the Federal Home Loan Mortgage 
Corporation, known as Freddie 
Mac, launched its own fl.Sbn 
global issue in July. 


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HE FINANCIAL TIMES LIMITED 1994 No 32,502 Week No 42 


LONDON - PARIS - FRANKFURT - NEW YORK * TOKYO 



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FINANCIAL TIMES THURSDAY OCTOBER 20 1994 ^ 


NEWS: EUROPE 


Proposal would link EU with its North African and Mideast neighbours 

Brussels urges wider trade zone 


By David Gardner in Brussels 

The European Commission yesterday 
called on the EU to create a Euro- 
Mediterranean Economic Area with 
its North African and Middle Eastern 
neighbours, to establish the biggest 
free trade zone in the world, and help 
stabilise the Union’s southern and 
eastern flanks. 

Brussels wants the EU to devote aid 
worth Ecu5.5bn (£4.3bn) in 1995-99 to 
lay the ground for this project and 
raise Mediterranean policy to near the 
same strategic importance as east and 
central Europe, which should get 
around Ecu7bo over the same period. 
The EU's eastern neighbours cur- 
rently receive nearly five times more 
aid than the states to its south and 
east, officials say. 

June's s ummi t of EU leaders in 
Corfu invited the Commission to 
come up with a new "southern" strat- 
egy. which Brussels now hopes will be 
endorsed by December’s Essen sum- 
mit. 

Mr Manuel Marin, commissioner in 
charge of relations with the EC's Med- 
iterranean neighbours, said that “in 


broad terms, what we would be offer- 
ing is something like the EEA” - the 
1993 European Economic Area free 
trade zone between the £U and the 
European Free Trade Association 
(Eftal. 

The main difference would be that 
whereas four of the seven members 
of Efta - Austria. Finland, Sweden 
and Norway - are poised to enter 
the Union next year, membership 
would not be on offer to Euro-Med 
partners. 

The target countries are the 
Maghreb and Mashraq states 
(Morocco. Tunisia, Algeria, Libya: and 
Egypt, Jordan, Syria, Lebanon) and 
Israel. Relations with Cyprus, Malta 
and Turkey remain inside the context 
of eventual membership negotiations. 

The Commission argues that it is 
essential to “rebalance" the EU’s rela- 
tionships with its neighbours, now 
weighted towards bringing six central 
European states into the Union 
around the end of the century. Ger- 
many. in particular, has used its cur- 
rent presidency of the EU to put in 
place the building blocks of this “east- 
ern” strategy. 


This was underlined by yesterday’s 
visit to Brussels by Mr Laszio Kovacs, 
Hungary's foreign minister, who 
underlined his government’s wish for 
full Hungarian membership of the 
Union “before the end of the century.” 
with accession talks starting in 1997. 

to Mr Marin’s view, “the only coun- 
try which can launch a realistic 
attempt to rebalance Europe's rela- 
tions with its neighbours is Germany, 
we think the German presidency 
understands that" 

France’s EU presidency in the first 
half of next year is expected to host a 
Euro-Med ministerial conference to 
begin establishing the economic mod- 
ernisation, trade access, and mutual 
security priorities of the new policy. 
The French, moreover, will be suc- 
ceeded by two Mediterranean presi- 
dencies of the EU - Spain and Italy - 
under whose stewardship the strategy 
should be finalised. 

A full free trade zone, senior Com- 
mission officials said, would take 
10-15 years to establish, by which time 
up to 40 countries encompassing 800m 
people could be involved. Officials say 
the transformed prospects for Middle 


East peace, plus growing instability 
and migratory pressure in the 
Maghreb, have prodded the EU in 
equal measure to review its policy. 

They add that any substantial boost 
in aid will inevitably be tied to com- 
mitments from the EU's southern 
neighbours to help control illegal 
mi grants a pd illicit drugs coming into 
Union territory. 

“Many countries will insist that If 
we're going to provide around Ecu5bn 
then drugs immigration control 
must have a central part, without 
doubt” Mr Marin said. 

The commissioner also argues that 
it is Important to move now, before 
southern EU member states become 
over-nervous about next year's 
enlargement to the north, and the 
planned expansion to the east, and 
the consequent shift In the Union’s 
centre of political gravity 

Southern EU states prefer aid to 
trade concessions for North Africa 
and the Middle East, while their 
richer northern partners take the 
opposite view. Mr Marin observes, 
arguing for a synthesis as “an anti- 
body to North-South disintegration". 



Commissioner Marin: “We are 
offering something like the EEA" 


The long wait and high cost of a small transfer 


By John Gapper In London 
and Lionel Barber in Brussels 

Few services offered by 
European banks have been of 
as low quality as their trans- 
fers of small sums of cash 
across borders. As the Euro- 
pean Commission recognised 
in proposing legislation yester- 
day, it not only costs a lot to 
send cash, but takes a long 
time. 

Money transfers are tradi- 
tionally done by banks sending 
money to “correspondent" 
banks in the destination coun- 
try'. The correspondent bank 
transfers it to the appropriate 
account - usually at another 
bank - via the automated 
clearing house which is used 
for domestic payment trans- 
fers. 

In some countries, this can 
take an extremely long time. In 
Italy in the 1980s, foreign 
banks were told that it would 
take a standard 28 days to 
clear a payment. Although 
standards have improved 
markedly, some banks are 
happy to delay the clearing of 


European banks expect telephone services to grow 


Almost all the banks in Europe which have not 
already developed telephone banking facilities 
are p lanning to do so within the next six years 
according to a survey published today, writes 
Alison Smith. A poll by Datamonitor. the 
market research group, found that 65 per cent 
of banks already offered telephone banking and 
a further 30 per cent of total respondents were 
planning to provide such a service. 

Across 12 European countries, the target 
markets seen by banks for the telephone service 
were primarily those In the 25-44 age group. 

Beyond that core, however, banks in different 
countries diverged more significantly in their 


target markets. Those in Austria, France, 
Germany and Sweden, for example, saw the 
18-24 age group as the third target area, while 
banks in Finland, Ireland, Spain and the UK 
cited the 45-54 age group as more of a priority. 

The 83 banks which responded to the survey 
expected increasingly to provide general 
insurance, mortgages, personal loans and 
financial advice over the telephone where they 
did not do so already. The poll found that 
telephone banking had penetrated the retail 
banking market most extensively in Sweden 
and Belgium, and made least impact in Italy 
and Portugal. 


cash to gain interest. 

Banks had little incentive to 
compete for such business - 
and raise standards - until 
recently. There are relatively 
few transfers of small sums - 
defined as up to EculQ.000 
(£7,870) - within the EU. They 
account for only OS per cent of 
total domestic payments in the 
UK, and 4 per cent in Belgium. 

The view among most banks 
was. as Mr Tim Sweeney, direc- 
tor general of the British Bank- 


ers Association, put it this 
week, “that old British 
response: 'there’s no call for it 
guv'". This meant that banks 
displayed little urgency either 
in making payments or raising 
standards. 

Some of the results could he 
seen in the study carried out 
for the European Commission 
earlier this year which found 
that banks charged an average 
Ecu25-4 to make an urgent 
transfer of EculOO, and the 


money took an average of 4.15 
working days to reach the des- 
tination bank and be cleared. 

The study found widespread 
double chain ing ~ the receiver 
of the cash is charged as well 
as the sender. This occurred in 
36 per cent of urgent transfers. 
Customers were also given 
inadequate information, with 
only 21 per cent of branches 
giving an accurate guide to 
transfer times. 

This led to the commission 


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To confirm your attendance at a reception, please cafl or fax one of the 
numbers above. 


losing patience after a three- 
year effort to raise standards. 
The decision to proceed with 
legislative action is a setback 
for Mrs Christtane Scrivener, 
commissioner for consumer 
affairs, who argued that a vol- 
untary code of conduct would 
be more suitable. 

But Mr Raniero Vanni 
D’Archirafi. commissioner 
responsible for tbe single mar- 
ket. argued successfully that 
legislation was a necessary 
step to help consumers and 
s mall businesses to take full 
advantage of the 1992 pro- 
gramme for the free movement 
of goods, services, capital and 
people. 

The proposed EU directive 
must be approved by a quali- 
fied majority of EU ministers, 
by the end of 1996 at the latest 
Customers will have to have 
accounts credited with the sum 
transferred in six days; there 
must be full disclosure of costs: 
and double-charging will be 
banned. 

European banks mounted a 
strong lobbying campaign 
against legislation. Ms Diane 
Tnnmirri, the official responsi- 
ble for payment systems at the 
European Banking Federation, 
yesterday argued that small 
banks might withdraw services 
and that efforts by large banks 
to raise standards could be dis- 
rupted. 

Despite tbe results of the 
commission's study - which 
the federation says are flawed 
- there is evidence that banks 
are at least starting to improve 
standards. Several partner- 
ships have been formed among 
European banks in the past 
two years to provide more effi- 


EU BANK TRANSFERS 

Number ol 

% Of 

woridng days 

payments 

for payments 
to arrive 

arrived 

Same day 

era 

1 

2.0 

2 

9.7 

3 

27.1 

A 

19.2 

5 

16.1 

6 

9.7 

6+ 

15.4 

Sane: An? Ban*** fesaarcfi tx Bnp—n 
Commission 


cient transfers. 

These include a partnership 
between National Westminster 
Rank of the UK, Commerzbank 
of Germany and: Society Gen- 
erate of France; and another 
among Lloyds Bank of the UK, 
Banco Bilbao Vizcaya of Spain 
and Credit Agricole of France. 
Girobanks and Co-operative 
banks have also formed pay- 
ment links. 

The commercial bank effort 
which has gone furthest is the 
Inter Bank On-line System 
(Ibos) developed Jointly by 
Royal Bank of Scotland and 
Banco Santander, which offers 
virtually instantaneous and 
relatively low-cost transfers 
between accounts at banks 
which are members of the sys- 
tem. 

Such services have started to 
develop because banks have 
seen efficient cross-border pay- 
ments as a means of drawing 
in small businesses who oper- 
ate increasingly across bor- 
ders. But yesterday's decision 
shows that the impact of such 
initiatives has been too slow to 
hold the commission back. 


State SPD may 
defy party line 


By Judy Dempsey in Berlin 

Social Democrats in the east 
German state of Mecklenburg- 
Vorpommern are determined 
to keep open the option of 
forming a government with the 
Party of Democratic Socialism, 


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the reformed communists, in 
spite of strong pressure from 
the federal SPD leadership to 
form a grand coalition with the 
ruling CDU, state officials said 
yesterday. 

The SPD won 29.5 per cent of 
the vote, giving them 23 seats 
in Mecklenburg-Vorpommern 
in Sunday’s state election, just 
above the PDS, which won 22.7 
per cent and 18 seats. The 
CDU. which won 37.7 per cent 
of the vote and 30 seats, 
formed the last government in 
coalition with the Free Demo- 
crats but the FDP foiled to get 
re-elected to the state parlia- 
ment. 

Mr Harald Ringstorff, leader 
of Mecklenburg-Vorpommern's 
SPD, has been told by the par- 
ty’s federal leadership to start 
coalition talks with the CDU. 
“We will start talks with the 
CDU tomorrow," an SPD 
spokesperson said. “But if we 
do not succeed, we will keep 
the door open to the PDS 
despite pressure from Bonn.” 

The SPD federal leadership 
has since June tolerated the 
SPD/Green coalition in the 
eastern state of Saxony-Anhalt, 
whose minority government 
relies on the support of the 
PDS. but it is unwilling to 
allow formal coalition with the 
former communists. 


EUROPEAN NEWS DIGEST 

Turkic states 
grow closer 

Turkey and central Asia’s Turkic republics yesterday ended a 
two-day summit in Istanbul with pleas for negotiated settle- 
ments to regional conflicts and improved trade and infrastruc- 
ture links Leaders from Turkey and the five Turkic states of 
the former Soviet Union signed a declaration reaffirming the 
need for regional political consultation but did not mention 
Turkey’s earlier idea of creating a Turkic federation reaching 
from tie Mediterranean to China, 

They were also careful not to antagonise Russia, insisting 
that the summit was not an attempt to undermine the CIS. 
Moscow has criticised Turkey's attempt to strengthen its pres- 
ence in the region, but Turkey’s President $fiieyman Demirel 
sqiri his objective was “not to create a sphere of influence but 
a zone of co-operation”. Representatives from Azerbaijan, 
Kyrgyzstan. Turkmenistan, yg^akhstan , Uzbekistan and Tur- 
key emphasised instead the need to strengthen trade links and 
improve the region’s poor transport infrastructure. They said 
a new Silk Road should be built to connect the region’s 
markets. Turkey also used the forum to press that the pro- 
posed oil and gas pipelines between the Caucasus and Europe 
should cross Its territory rather than Russia. John Barham, 
Ankara 

Curb on money laundering 

Monaco has signed an accord with France to co-ordinate 
efforts against money laundering. The agreement will require 
banks, insurance companies and bureau de change agencies in 
the principality to hand over details of bank accounts and 
transactions wherever they have suspicions. It will for the 
first time open communication between Trackfin. the French 
agency responsible for tracking laundered money, and Siccfin, 
its equivalent in Monaco. It follows similar agreements signed 
between France and other countries including the US. Austra- 
lia, Belgium and Italy over the past few years. Siccfin was set 
up last year following the introduction of a banking law in 
line with international guidelines designed to clamp down on 
money laundering. Andrew Jack, Monaco 

Brescia steel aid approved 

The European Commission has approved an Italian govern- 
ment aid package to help steelmakers in the Brescia region 
restructure. The Commission said in a statement the Ecu410m 
(£323m) plan would add 5m tonnes in capacity cuts to the Urn 
already achieved as part of an EU-wide rescue package for the 
European steel industry. The EU has demanded 19m tonnes of 
capacity cuts by November 8 for the overall package to go 
ahead. The Commission said the Italian plan involved L6O0bn 
In aid to help close down steel mills in the Brescia region and 
L190m to help re-employ redundant workers. The Italian plan 
is a revamped version of a package earlier deemed by the EU 
to breach its aid rules. Reuter, Brussels 

French coal mining set to end 

Charbonnages de France (CdF), the state monopoly producer 
of coal, said yesterday it was confident of winning the support 
of a majority of unions for its plan to abandon mining entirely 
by the year 2005. Only 10 per cent of miners in the main 
Lorraine coalfields heeded a strike call on Tuesday by the 
left-wing CGT trade union. French coal mining has been in 
rapid decline for some time, and CdF - which had 41,000 
employees producing X&5m tonnes in 1986 - now produces 
only just over 10m tonnes with 16,000 employees. Under last 
July's government plan, which is only opposed by the CGT out 
of the five unions represented at CdF. employees can take 
redundancy money or stay on at CdF. which after 2005 will 
continue to run its electricity generating plants with coal 
imported from outside Europe. The latter is half the real price 
of French coal which is heavily subsidised, though the govern- 
ment is making a start to the planned phase-out of domestic 
mining by slashing this year’s subsidy from FFr6.4bn (£770m) 
to FFrL4bn next year. David Buchan, Paris 

Cleaner water costs mount 

Plans to improve drinking water in the EU, mainly by elimi- 
nating more lead, could cost member states more than 
EcuSObn (£39m), a draft Commission document reckons. “The 
estimated potential investment costs of the proposed changes 
in the [drinking water] directive are almost entirely associated 
with the change of the [limit] value for lead,” the draft 
proposal says. “These costs could be of the order of EcuSObn.” 
But “it will be for member states to decide to what extent 
individual householders should replace lead pipes within their 
property," the text says, adding that they could be given 15 
years to bring their water up to scratch. According to Commis- 
sion estimates France’s bill could be as high as Ecu44£bn and 
to England and Wales the costs could run to Ecul0.7bn. The 
draft proposal keeps the existing limit for individual pesticides 
but scraps a limit on the cumulative total. The European 
environmental bureau, which groups 150 environmental 
groups from 23 European countries, attacked the decision. 
Reuter, Brussels 

ECONOMIC WATCH 


French industrial output rises 


France 

Ind u st ria l production 
Annual % change 
6 


French industrial production 
rose 2.3 per cent in July and 
August compared with June, 
according to figures released 
yesterday by Insee, the 
national statistics office. The 
increase was stronger than 
expected by private econo- 
mists and eased fears of a 
slowdown in France's recov- 
ery from recession. Insee tra- 
ditionally puts data from July 
and August together because 
many companies close for 
summer holidays. Figures 
from the period are treated 
with caution because of a 
high level of seasonal adjust- 
. ment None the less, the fig- 

ures. showing a year-on-year increase of 52 per cent in indus- 
trial output and a t9 per cent rise in manufacturing output, 
appeared to confirm official predictions of continued healthy 
growth. John Ridding, Paris 

■ German producer prices rose 02 per cent last month, after 
re mainin g unc h a ng ed in August Producer prices rose 06 per 
cent yearon-year. 

■ Dutch non-seasonally adjusted unemployment rose to an 
averaged 484,000 in July-September (7.6 per cent of the labour 
force) from 421,000 (6.6 per cent) a year ago. 

■ Swedish retail sales rose 03 per cent in August compared to 

August 1983 after a 4.7 per cent decline the month before- 



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RENANCIAL TIMES THURSDAY OCTOBER 20 1994 
— : — — 

White House move highlights 
differences in Bosnia policy 

US ready for 
unilateral end 
to arms ban 


NEWS: EUROPE 



Polish privatisation back on track 



By Brace Clark 

Mr Willy Claes. Nato’s new 
secretary-general, yesterday 
insisted that serious differ- 
ences with the United Nations 
over air tactics in Bosnia could 
be bridged in spite of the fail- 
ure of talks in New York this 
week 

However, trans-Atlantic ten- 
sions over policy towards for- 
mer Yugoslavia were fuelled 
by a statement from the White 
House that the US was pre- 
, pared to defy Its allies and take 
unilateral action to authorise 
arms supplies to Bosnia. 

Mr Claes told Nato ambassa- 
dors in Brussels that his hopes 
of a compromise with the UN 
rose after a telephone conver- 
sation with Mr Boutros Bout- 
ros Ghali, UN secretary- 
general 

Nate, under strong pressure 
from the US, is demanding the 
right to make more draconian 
use of its aircraft over Bosnia. 
It wants the right to cany out 
air strikes more rapidly, wnrf 
without prior warning, In 
response to any provocations 
by the Bosnian Serbs. 

The British and French com- 
manders in charge of UN 
ground troops in Bosnia insist 
that they are the best judges of 
how to protect their own men 
and humanitarian convoys in 
the war zone. 

In support of the case for 
caution, they have pointed out 
that children were playing in 
the area where Nato aircraft 
struck a Serb tank last month. 

Instead of the current proce- 
dure, under which UN com- 
manders specify exactly which 
target the Nato aircraft should 
atm at, the Atlantic alliance 
wants its pilots to be given a 
range of at least four targets. 
'Talks in New York on Mon- 
day revealed big differences 


between General Bertrand de 
Lapresle, the UN commander 
in former Yugoslavia, and 
senior Nato officials. 

However Mr Claes - in one 
of his first diplomatic initia- 
tives since taking over Nato’s 
top job - said hie had ironed 
out some of the problems in a 
telephone talk with Mr Boutros 
GhaH. 

Diplomats said there was 
room for compromise over the 
issues of how much warning of 
impending air strikes to give 
the Serbs and the selection of 
targets. 

Yet the prospects for interna- 
tional co-ordination over Bos- 
nia were clouded by a state- 
ment from the White House 
that President Bill Clinton 
might act alone in authorising 
arms deliveries to Bosnia's 
leadership. i 

Ms Dee Dee Myers, White 
House spokeswoman, said the 
US was lobbying for a UN reso- 
lution lifting the embargo but 
added that if that "doesn't suc- 
ceed by November 15 . . , then 
we would look at ways to per- 
haps lift the embargo unilater- 
al y. 

"Our preferred position has 
been a multilateral lift,” she 
said. "We certainly are going 
to pursue doing it mattflater- 
aUy, working with our allies, 
particularly countries that 
have troops on the ground.” 

Mr Malcolm Rtfirinri, defence 
secretary, defended the UN’s 
decision not to call in air 
strikes after a shooting inci- 
dent in eastern Bosnia this 
week in which the driver of a 
UN aid convoy was killed. 

He said ground forces had 
made a "vigorous” response by 
firing back at the convoy's 
attackers. This demonstrated 
that "there were other means 
available” besides air power as 
a response to provocations. 


Premier Waldemar Pawlak: 
approved list of companies 


By Christopher BobinsW 
k» Warsaw 

Mr Waldemar Pawlak, 
Poland’s prime minister, yes- 
terday removed one of the last 
obstacles to the long delayed 
mass privatisation programme 
by approving around 100 com- 
panies for inclusion. 

The decision, which brings 
the number of companies to be 
transferred to the private sec- 
tor at one fell swoop up to 460, 
has hero awaited by the priva- 
tisation ministry since July. 

Poland had promised both 


the International Monetary 
Fond and the World Bank that 
the plan would so ahead. Both 
institutions, worried about the 
fate of the programme, had 
insisted it be implemented 
before freeing funds to finance 
the recent agreement to cut 
cut Poland’s commercial debt 
by 49.5 per cent 
Mr Pawlak, who heads the 
Polish Peasant party, junior 
partner in the government, 
has argued that the plan gives 
too great a role for foreign 
managers and includes too 
many plants in key sectors. 


The previous government 
approved 380 companies more 
than a year ago. About a dozen 
companies were removed from 
the present tranche before the 
prime minister signed it 
The government plans to 
establish around 15 national 
investment funds (NIFs), run 
jointly by foreign and local 
managers, which are to be 
handed equity in the 460 com- 
panies. Shares tn the ftmds are 
then to be distributed to the 
population at large for a nomi- 
nal fee. Next year's budget 
assumes that income from the 


fees will run to 4,OOObn zlotys 
(£l08m). 

Fund managers for the pro- 
gramme have already been 
shortlisted and these include 
Klein wort Benson, Barclays de 
Zoete Wedd and Charterhouse, 
as wen as Polish banks and 
local consultants. 

The nest step is for the gov- 
ernment to establish the Nffs 
formally and appoint supervi- 
sory boards which will then 
chose management groups. 

The funds are to stay in exis- 
tence for 10 years, with man- 
agers paid an annual fee as 


well as a performance bonus 
in NIP equity and cash at the 
end of the period. The aim is 
to privatise the companies as 
well as improve management, 
modernise plant and generally 
enhance their value. 

The scheme has become an 
indicator for international 
financial institutions and 
investors of the government’s 
intentions on privatisation. It 
leaves abother 5,000 or so com- 
panies to be privatised includ- 
ing sensitive sectors such as 
petrochemicals and telecoms. 


EU policies ‘main threat to E Europe exports’ 


By Anthony Robinson, 

East Europe Ecfitor 

The trade and industrial 
policies of the European Union 
were yesterday singled out by 
the European Bank for Recon- 
struction and Development 
(EBRD) as "the wurin threat to 
eastern European exports and 
investment”. 

In its first “transition report” 
on the shift from centrally 
planned to market economies 
throughout the former Soviet 
bloc the EBRD states, "the 
main threat to eastern Euro- 
pean exports and investment 
comes from actual threatened 
and ’latent’ trade remedy 
action employed for purposes 
of managing trade to support 
industrial policy objectives in 
the EU”. 

It warns of the uncertainty 
that such policies arouse in 
exporters and potential inves- 
tors and adds that so-called 
■'voluntary export restraints” 
imposed by the EU on the for- 
mer communist states "can 
strengthen bureaucracies and 
existing exporters at the 
expense of new entrants”. 

At the end of May 1994, some 
19 anti-dumping measures 
imposed by the EU were in 
force along with 12 other trade 
restrictive measures, the 
report shows. "The mere threat 
of limited market access may 
generate sufficient uncertainty 
so as to reduce investment in 
competitive sectors,” the 
report adds. 

The report also criticises the 


Milan’s anti-corruption 
magistrates face inquiry 


By Robert Graham in Rome 

Mr Alfredo Bitmdi, the Italian 
justice minister, has ordered 
an inquiry into a series of com- 
plaints made about the behav- 
iour of Milan’s anti-corruption 
magistrates. 

The move comes at a time 
when the highe r magistrates’ 
council the governing body of 
the judiciary, looks set to 
shelve a complaint lodged by 
the Berlusconi government 
over a newspaper interview 
given by Mr Francesco Saverio 
BorreUi on October 9. In the 
interview Mr BorrelH said the 
investigative net was closing 
round Mr Silvio Berlusconi 
the prime minister, and he also 
attacked Mr BiimdL 

The complaints are under- 
stood to cover seven separate 
aspects of the Milan magis- 
trates' activities during the 
course of the year but mostly 
since the Berlusconi govern- 
ment took office in May. Two 
of the complaints concern the 
conduct of investigations into 
the activities of Berlusconi’s 
Fininvest business empire. 


The first incident relating to 
Fininvest was the very public 
search of its offices on March 9 
and attempts to secure the 
arrest of top Fininvest manag- 
ers before the general elec- 
tions. Mr Berlusconi com- 
plained at the time that the 
action was politically moti- 
vated. 

The second complaint was 
about the inquiries into the 
ownership of Telepift. the cable 
TV channel 10 per cent owned 
by Fininvest Mr Fidele Confa- 
lonieri, Fininvest chairman, 
has complained this is a vindic- 
tive effort to smear Finin vest's 
name rather than a serious 
inquiry. 

“The desire to put all the 
complaints against Milan 
together and to carry out this 
investigation just when the 
frjgfr w magistrates' council is 
moving to shelve the Barren! 
affair does not seem to be a 
correct use of authority,” said 
Ms Elena Faciotti, head of the 
magistrates asso c iati o n. 

While the government 
appeared determined to open a 
new front in thefr long- running 


confrontation with Milan mag- 
istrates, the right-wing coali- 
tion yesterday signalled its 
readiness to soften its position 
on another - cuts in pensions 
contested by the trades unions. 

The government held a day- 
long meeting of all key mem- 
bers of the coalition and eco- 
nomic ministers to find an 
agreement on concessions to 
be made to the unions. Mr Ber- 
lusconi signalled in advance 
his willingness to make 
rhang EH in the plans for pen- 
sion reforms. But be insisted 
any changes involving extra 
spending would have to be 
compensated by alternative 
cost-cutting measures. 

The populist Northern 
League and the neo-fascist 
MSI/National Alliance have 
pressed for amendments to 
ease hardship cases. The gov- 
ernment has been obliged to 
soften its stance on pensions 
after the widespread obser- 
vance of last Friday’s four-hour 
general strike, which saw more 
than 3m persons demonstrat- 
ing in the major cities up and 
down the country. 


Europe Agreements (BA), 
which are bilateral trade agree- 
ments between the EU and 
individual central European 
countries. By setting very high 
local content rules the BAs 
"have investment-deterring 
effects” on assembly 
operations in Easton Europe 
which use cheap but skilled 
local labour to assemble fin- 
ished products incorporating 
parts imported from other EA 
countries. They also discour- 
age greater trade between the 
former Comecon states, it says. 

In spite of the hurdles that 
the EU continues to place in 
front of the economies in tran- 
sition, however, the report 
shows how much progress has 
been made over the past five 
years. The private sector now 
accounts for more than half of 
all economic activity in nine of 
the 25 countries surveyed and, 
with the exception of Ukraine, 
most states have managed to 
avoid hyper-inflation. 

Inflation is down to low dou- 
ble tflgits in most of central 
Europe and the Czech Republic 
is first in line to bring price 
rises down to single figures 
this year or next Unemploy- 


TRENDS IN UNOSPLOYMENT AND INFLATION 


Unemployment 

(96 labour force) 


Inflation 

(average 96 change) 



end-year 


consumer prices 


1993* 

1095" 

1993* 

1995™ 

Albania 

17A 

ISA 

65 

16 jQ 

Bulgaria 

16.4 

10.4 

73 

44.1 

Czech Republic 

3.5 

5.7 

208 

08 

Estonia 

2.6 

8.0 

69A 

15.0 

Hungary 

12-1 

11A 

22 A 

16_9 

Latvia 

5A 

13.0 

109 

15.0 

Lithuania 

1.4 

9.0 

390 

300 

Poland 

15.7 

16A 

35A 

22.7 

Romania 

102 

15.1 

256.1 

58.6 

Slovak Rep. 

14.4 

149 

232 

12A 

Slovenia 

14.5 

i&o 

32-3 

1443 

Russia 

1.1 

05 

896 

198 

Ukraine 

-Estimate "AreflK 

04 

re forecast 

12A 

4735 

9oun 

338 

« EBRO 


meat, whose rise over the past 
five years has been one of the 
clearest Indicators of the 
shake-out from the Soviet-style 
heavy industries and arms 
plants which littered the 
region, is now starting to ease 
off in the fast-track reforming 
states. 

Foreign equity investment, 
which totalled only fl2hn until 
the end of 1992, remains hi g hl y 
concentrated on Hungary. But 
the Czech Republic, Poland 


and other states with restruc- 
tured economies and gr o w ing 
domestic markets are attract- 
ing growing volumes of invest- 
ment 

Set against the benefits of 
greater choice of goods, the 
end of queueing and shortages 
and greater employment free- 
dom, however, are negative 
social factors such as the 
growth of crime, more social 
and job insecurity and rapidly 
widening income differentials. 


On the evidence garnered 
from the 25 highly diverse for- 
mer centrally planned econo- 
mies in which the EBRD now 
operates, the most important 
elements conducive to a suc- 
cessful transition have proved 
to be "transparency of govern- 
ment action, macro-economic 
stability and progress in priva- 
tisation," Mr Nicholas Stern, 
the EBRD's recently appointed 
new chief economist said. 
Other important factors 
include progress in taxation 
reform, with the introduction 
of VAT and graduated persona] 
and corporation income taxes, 
and finanriai market and Hinir 
reforms. 

The report indicates a grow- 
ing split between the group of 
central European countries 
closest to EU markets, quickest 
to adopt macroeconomic stabi- 
lisation and micro-adjustment 
policies, and the slower, more 
distant parts of the former 
Soviet empire where reform 
started later from a less cultur- 
ally prepared base. 

The Czech Republic, Hun- 
gary, Poland, Slovakia, the Bal- 
tic states and Slovenia have 
made most progress to date. In 


these countries the decline in 
production which followed 
market reforms and the col- 
lapse of the Comecon markets 
is over. Poland, the first to bite 
the bullet of macro-economic 
stabilisation in 1990, was the 
first to return to growth in 
1992. But all are now in the 
early stages of what should be 
a prolonged rise in production, 
investment, foreign trade and 
income. Official statistics, still 
biased towards the declining 
state sector, under-record the 
real rates of income and output 
growth, the report odds. 

The EBRD identifies an 
intermediate group, including 
Kyrgysxtan and Russia, which 
has made "spectacular prog- 
ress” in privatisation but 
re mains far behind in fiwaneinl 
sector reform and enterprise 
restructuring. 

Beyond lie Ukraine and sev- 
eral other Commonwealth of 
Independent States members 
which have been slow to 
embark on monetary and other 
essential structural reforms 
and reluctant or unable to pri- 
vatise. Growth here is not 
likely to resume until around 
1996. 





of private and public 
investment means 
better infrastructure, 

environment 


.*v‘ 


> - 4 « V 

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Brussels ban 


THURSDAY OCTOBER 20 >994 


NEWS: WORLD TRADE 



British bankers try out a royal sales pitch 


on shipping 
lines ‘cartel’ 


By Charles Batchelor, 
Transport Correspondent 

The European Commission 
yesterday blocked the Trans- 
Atlantic Agreement (TAA), a 
shipping “conference’ 1 which 
set cargo rates and capacity 
levels across the north Atlan- 
tic. because it infringed Euro- 
pean Union competition rules. 

The decision represents a 
victory for exporters who com- 
plained the agreement had led 
to excessive charges for ship- 
ping container cargoes and a 
defeat for the 15 large shipping 
lines which set up the agree- 
ment in 1992. 

The ruling is. however, only 
the first stage in resolving this 
dispute because the ship- 
owners established a modified 
arrangement, known as the 
Trans-Atlantic Conference 
Agreement (TACA), in July. 
Earlier this month they made a 
further concession by offering 
to remove capacity constraints 
from the TACA. 

But shippers, companies 
which export goods across the 
Atlantic, said this was simply a 
delaying tactic and threatened 
legal action against the Euro- 
pean Commission if it did not 
speedily issue a ruling on both 
agreements. A second objec- 
tion to the TAA/TACA - that 
they set rates for containers on 
their land journey to the port, 
thereby increasing costs - is 
still rejected by the ship- 
owners. 

A decision on the TACA is 
expected wi thin the next few 


weeks. The British Shippers' 
Council, representing export- 
ers, said the commission's rul- 
ing established an important 
principle which would have 
implications for similar confer- 
ence agreements covering 
trade with the Far East and 
Africa. 

“This underlines the fact 
that European industry has 
been unnecessarily damaged 
over the past two years,” said 
Mr Chris Welsh, head of the 
council. Shipping rates rose by 
an average 50 per cent in 1993 
and between 10 and 15 per cent 
this year, he added. 

Shipowners involved in the 
TAA had been expecting the 
co mmiss ion ruling but hope 
that the TACA ruling will be 
in their favour. They were last 
night still awaiting full details 
of the commission decision. 

If the TACA is also rejected, 
however, there could be a 
return to lower transatlantic 
shipping rates and a resump- 
tion of the losses which 
plagued this route in the late 
1980s. 

The TAA/TACA groups IS 
large shipping tines which 
account for S5 per cent of sail- 
ings across tiie north Atlantic, 
It was introduced to stem con- 
siderable losses by the ship- 
ping lines and its members 
include Nedlloyd, Maersk, 
P&O, AP Moeller and Hapag- 
Lloyd. Exporters say these 
losses were exaggerated and 
the conference has been used 
to push through excessive rate 
increases. 


Nestle bridles at 
Thai price curbs 


By Victor Mallet in Bangkok 

Thailan d has put instant coffee 
on a list of products subject to 
price control, prompting veiled 
suggestions from Nestle, the 
Swiss foods multinational, that 
foreign investors would take 
offence at such a backward 
step on the road to free enter- 
prise. 

Nestib - whose Thai subsid- 
iary Quality Coffee Products 
has more than 80 per emit of 
the local instant coffee market 
- angered the government by 
raising prices 10 per cent in 
July and by refusing commerce 
ministry demands to reverse 
the price increase. 

The dispute came to a head 
this week when the cabinet 
authorised the ministry to put 
instant coffee on the list of 
controlled consumer products. 
Instant coffee had been 
removed from the list two 


years ago along with ZOO other 
products as part of an eco- 
nomic liberalisation drive. 

“This restrictive measure 
applied to a non-essential prod- 
uct may prove prejudicial to 
Thailand,” said Mr Andreas 
Schlaepfer, managing director 
of the Thai Nestlfe group, “par- 
ticularly since this case has 
attracted the attention of for- 
eign investors in the region." 

He said the 10 per cent rise, 
the first in three years, was to 
offset higher operating costs 
and was unrelated to rising 
world coffee prices. “It’s not a 
monopolistic situation at all," 
he said. “There are two other 
factories here, with large 
installed capacity and the right 
technology.” Businessmen in 
Bangkok believe Uestli has 
fallen foul of the Thai govern- 
ment's attempts to control 
inflation, which reached 5.3 per 
cent in September. 


By John 77i omhffi in 
St Petersburg 

Behind the pomp of Queen 
Elizabeth's visit to Russia, 
British and Russian business- 
men have been getting on with 
the “development of capital- 
ism." the title of a seminar 
held on the royal yacht Britan- 
nia. Some 50 Russian business- 
men and bankers have been 
invited on board the yacht, 
moored on the Neva River, just 
out of sight of the Russian 
cruiser Aurora where the first 
shots of the Bolshevik revolu- 
tion were fired. 

British Invisibles, an 
umbrella body promoting 


invisible trade, had been quick 
to exploit the publicity sur- 
rounding the Queen’s visit to 
stage a sales pitch for the vir- 
tues of British banking, legal, 
accounting, and management 
consulting services. It was 
their eigtb such foreign event 
this year and the third occa- 
sion on which they had utilised 
the royal yacht 

A string of British advisers 
represented included Klein- 
wort Besson, Robert Fleming, 
Clifford Chance, Freshfields, 
Smith New Court. Ernst and 
Young, and Coopers and 
Lybrand. 

With S500m of foreign portfo- 
lio investment pouring into 


Russia every month, the Brit- 
ish delegation said equity 
could provide a cheap and 
effective means of raising 
funds to finance the growth of 
Russian companies. However, 
they cautioned that substantial 
preliminary work including 
accounting and legal studies 
would be required first 

A discussion on financing 
the growth of a hypothetical 
Russian company sparked 
lively debate and highlighted 
the differences in business cul- 
tures. It also emerged that 
some of the Russian guests had 
their own sales pitches to 
make. 

Mr Cyril Smirnov, president 


of Astro Bank, a large local 
commercial bank, suggested 
that the Russian b anking sys- 
tem could provide sufficient 
funding and that companies 
did not need the assistance of 
outsiders. A university lecturer 
said Russian managers needed 
re-education and training 
before they would be up to the 
task- 

Many of the Russian guests 
blanched when the subject of 
prospective fees was raised. A 
margin erf 5 to 7 per cent to 
raise SlOm of fresh capital 
clearly seemed excessive to 
some - no matter how much it 
would help fuel future growth. 
An interpretation of both busi- 



British Trade Minister Richard Needham speaking at an energy workshop in Jakarta yesterday, flanked by Indonesia’s Energy 
Minister Ida Bagus Sudjana. The two ministers signed an agreement on technical cooperation in the energy sector. British Gas said 
tt expected to announce a $350m joint venture next month to build a 400MW power plant in Indonesia. The company is in talks with 
Bakrie Brothers, a private Indonesian telecommunications and plantations group and has agreed the venture in principle. However, 
financing has not yet been agreed. British Gas may hold less than 50 per cent of the plant, which win begin construction early next 
year. The plant will be designed, built and operated under British Gas management British Gas already has a number of activities 
in Indonesia, where power demand is expected to rise 14 per cent a year to 2004. noun: R*n« 


Asia’s developing nations hungry 
for private investors’ billions 


By Manuela Saragosa 
in Jakarta 

Asian governments at the 
World Infrastructure Forum in 
Jakarta yesterday called on 
private investors to take a 
leading role in financing ambi- 
tious plans for development of 
their transport and telecommu- 
nications sectors. 

Indian offi cials said that by 
1997 their country wants to 
achieve its target of allocating 
telephones on demand, a pro- 
gramme requiring investment 
of more tha n $8bn. “This is 
beyond the capacity of the gov- 
ernment funding and genera- 
tion of resources." he said. 
••Private investment and asso- 
ciations of the private sector 
would be needed in a big way 
to bridge the resource gap." 

The officials said that for the 


telecommunications sector to 
play its assigned role in the 
country’s development, it 
needs to increase its telephone 
connections to 60m from the 
present 8m “as rapidly as pos- 
sible". 

That will require an esti- 
mated investment of S60bn. 

While basic telephone ser- 
vices are still lacking. Indian 
officials said they are also 
inviting private investment to 
set up value-added services. A 
tender is being prepared to 
invite technical and financial 
help in setting up cellular 
mobile phone services outside 
the main cities of Bombay. 
Delhi, Calcutta and Madras. 

Indonesia said it needs 
$l2.5bn over the next five years 
to develop transport infrastruc- 
ture. including roads, railways, 
inland waterways, sea port 


facilities and airport facilities. 
Indonesia also announced 
plans to invest more than Slbn 
by the year 2005 on water pro- 
jects in Jakarta. Of this, $2 00m 
would be spent on distribution 
improvements alone. 

“Under these circumstances, 
efforts should be made to 
encourage and stimulate pri- 
vate sector participation,” an 
Indonesian official gijd 

Some 44 per cent of the 
requirement for Indonesian 
transport infrastructure devel- 
opment is expected to come 
from the private sector. The 
remainder is expected to come 
from state-owned companies, 
the government and foreign 
loans. 

The Indian government yes- 
terday announced it is tender- 
ing for nine projects amount- 
ing to 167km of a high-speed 


tram system in the Delhi area. 
It is also offering projects on a 
build -eperate-transfer basis for 
five bypasses, with an esti- 
mated cost of $70m, eight 
bridges which will cost about 
S147m and nine express- 
ways costing an approximate 

S3-5bn. 

The Philippines listed 175 
potential projects worth over 
S14bn which are likely to be 
tendered on a build-operate- 
transfer basis for highways, 
transportation, power genera- 
tion. water systems, tourism, 
industrial estates and waste 
management 

The Asian Development 
Bank estimates that Asia 
needs about S3,000bn In infra- 
structure investment between 
now and 2010 if each country is 
to achieve its projected eco- 
nomic growth target 


Ericsson rings the bell in Chinese market 

With telecom sales doubling each year, financing expansion is a big headache, writes Christopher Brown-Humes 


Ericsson’s sates in China 


Mr Lars Magnus Ericsson, the 
founder of the Swedish tele- 
communications group that 
bears his name, would not 
have been surprised at the 
group's success in China. He 
may. though, have been puz- 
zled that it took so long to 
materialise. A 1906 photograph 
shows Mr Ericsson welcoming 
the first Chinese delegation to 
the group's Stockholm bead- 
quarters. It is only now - after 
the hiatus caused by the Chi- 
nese revolution - that the 
group's efforts to develop the 
market have really started to 
bear fruit. 

The rapid development of the 
Chinese telecommunications 
market has been a boon for 
equipment suppliers worldwide 
- but few have benefited as 
much as Ericsson. The group, 
which employs 1,400 in China, 
has seen sales in its fastest- 
growing market double every 
year over the last three years, 
a feat it hopes to repeat again 
this year. Last year China was 
Ericsson's sixth biggest mar- 


SKrbn 
4.0 - 



Souro: Eccsaon 


ket, accounting for SKr3.8bn 
l$520m) of group sales of 
SKr63bn. 

Ericsson’s Chinese business 
centres on three areas: AXE 
switches for public networks, 
mobile telephone systems and 
office switching systems. In 
mobile systems, the group 
boasts a 60 per cent market 
share, a dominance in line 
with its leading global posi- 


tion. In fixed systems, where 
the leading supplier is France's 
Alcatel, it claims a market 
share of about 20 per cent and 
in office systems 30 per cent 
By comparison, it is weak in 
mobile handsets, which is dom- 
inated by Motorola of the US. 

A steady inflow of orders 
over the last three years culmi- 
nated in August in Ericsson's 
biggest contract in China so 
far - a $400m contract to 
extend the phone netwoik in 
Guangdong province. China’s 
most dynamic province. 
Guangdong accounts for half 
Ericsson's sales to the country. 

“We have 3.5m fixed lines 
already installed in China and 
a further 2.5m on order.” says 
Mr Uldis Zervens, Ericsson’s 
director for east Asia. On the 
mobile side, the group has 
capacity installed or on order 
for 1.5m subscribers. 

Most of the equipment comes 
directly from Sweden. But 
increasingly important are the 
group's joint venture collobora- 
tions in China with local part- 


ners. Ericsson already has five 
joint ventures, comprising 
three manufacturing units and 
two service companies, and 
more are planned. 

The biggest collaboration is 
in Nanjing where the group 
produces radio base stations 
for mobile systems and AXE 
switches with its partner, 
Panda Electronics. Guangdong. 
Beijing and Dalian are the sites 
for the other four ventures. 

The Nanjing joint venture 
got off the ground only after 
nearly three years of talks with 
the Chinese authorities. The 
decision-making involves three 
tiers of government - federal, 
provincial and local - and up 
to 15 different organisations, 
even though the end-customer 
has until now always been part 
of the ministry of post and tele- 
communications. At the state 
level alone, five different min- 
istries are involved. 

In theory the Chinese cake is 
big enough for everyone. In 
practice, competition is tough, 
says Ericsson. 


At present there are only 
about 30m fixed lines in a 
country of l.2bn people - a 
penetration rate of just 2^ per 
cent of the population. But the 
authorities are ambitious, plan- 
ning 10m new lines a year to 
achieve 8 per cent penetration 
by 2000. 

The constraint Is that the 
enormous development poten- 
tial is matched only by the 
huge difficulties of financing it. 
Even though telecommunica- 
tions is a priority area, there 
are clear indications that the 
authorities wish to restrict the 
availability of credits and guar- 
antees for equipment supplies. 
This could pose problems for 
companies such as Ericsson 
although it could also provide 
an opportunity if it results in 
foreign operators being given 
more access to the country’s 
market 

Mr Zervens says project fin- 
ancing looms as Ericsson's big- 
gest Chinese headache. New 
rules of the Organisation for 
Economic Co-operation and 


Development, the 25-member 
industrial nation grouping, 
mean tt is much harder to get 
soft loans for the development 
of fixed networks; at the same 
time western commercial 
banks and credit guarantee 
agencies are reaching the lim- 
its of their China exposure. 
One result is that Ericsson has 
had to subsidise some of the 
loans itself. 

“So far we have been able to 
handle this but we see it as one 
of the major challenges for 
next year," says Mr Zervens. 
He says one way around the 
difficulty would be for Ericsson 
to take some finanrin? risk on 
to its own books, a path it 1ms 
reluctantly taken with other 
countries in the past 

Another is for China to let 
foreign operators gain a foot- 
hold in the market - a break- 
through that came all the 
closer last week when Cable 
and Wireless of the UK became 
the first foreign company to 
gain a concession to play a role 
in operating telecom networks. 


ness cultures was put forward 
by Mr Igor Kostikov, the man- 
aging director of a local stack- 
broking firm. “Russian manag- 
ers are reluctant to accept the 
loss of control that goes with 
raising equity capital. But they 
als o worry about taking on the 
liabilities of corporate debt. 
They feel that it is enough to 
survive at the moment and do 
not yet see the need to grow," 
he said. 

Sir Brian Pearse, chairman 
of British Invisibles, expressed 
cautio ns optimism. “We do not 
think that there can be any 
quick fix for Russia but we are 
saying very clearly that we 
will be here for the long term." 


UK Export* to the 
former USSR 

{$ million) 

1.200 



WORLD TRADE DIGEST 

Kantor plea to 
Japan on cars 

US Trade Representative Mickey Kantor is seeking an 
initiative by Japanese carmakers in order to resolve tne U5- 
Japan trade dispute on vehicles. Mr Kantor said Japan s car 
industry could help break a deadlock in stalled bilateral trade 
talks by outlining a new multi-year programme to buy more 
foreign-made car parts. 

“I believe both (the US and Japanese) industries are per- 
fectly capable of working this out between themselves, if 
encouraged by both governments,” he said. Mr Kantor said 
Washington will start a probe into Japan's car spare parts 
market under Section 301 of US trade law soon, the financial 
daily Nihon Sblmbun reported. Under the bilateral 

eco nomic framework talks, the two nations have not yet 
agreed on ways to open Japan’s car and car parts market. The 
US ha s demanded that a yardstick be created to measure 
future results of market-opening steps, while Japan has 
opposed such a plan, saying the government cannot control 
the flow of private sector trade. Reuter, Tokyo 

Pirelli in $5. 8m cable project 

The US cables and systems subsidiary of Pirelli, the Italian 
industrial company, is to collaborate with US companies, 
research institutes and the government in building the world’s 
first prototype high temperature superconductor power cable. 
The new generation of cables, if developed successfully, should 
allow electricity utilities to increase the amount of power 
transmitted along existing routes, at lower costs and without 
environmental damage. Pirelli Cable Corporation will manu- 
facture the cable itself. The project, which will cost $5Bm and 
last four years, will be co-funded by Pirelli, the American 
Superconductor Corporation, a Nasdaq-quoted US compaity 
which will manufacture the superconductive wire, the Electric 
Power Research Institute, the US electricity utilities' research 
body, and the US department of energy. The department's 
research laboratories at Los Alamos. Oak Ridge and Ames will 
also work on the project Andrew HiU, Milan. 

UK minister’s peace mission 

Mr Michael Heseltine, UK trade and industry secretary, yester- 
day proposed that Malaysian, and British companies work 
together to exploit opportunities in Europe and in the Asia-Pa- 
cific region. “There is great scope if you seize the opportunity 
to use the UK as a springboard into Europe." said Mr 
Heseltine, the first British minister to visit Malaysia since it 
lifted a ban on doing business with British companies in 
September, hi February Dr Mahathir Mohamad, the Malaysian 
prime minister, banned British companies from government 
contracts in retaliation for British press reports which hinted 
at corruption among senior figures in Malaysia. Mr Heseltine's 
two-day trip to Malaysia is being seen as a peace-making 
exercise. In hour-long talks with Dr Mahathir the British 
minister stressed Britain’s extensive trade and cultural links 
with Malaysia and its willingness to transfer technology to 
Malaysia’s fast expanding economy. Mr Heseltine carefully 
avoided any public reference to the trade ban. merely saying 
that in politics there were ups and downs. Kieran Cooke. 
Kuala Lumpur. 

CONTRACTS AND VENTURES 


Telecom Italia. Italy's state-controlled telephone company, 
has signed a six-year agreement with the Italian subsidiary of 
Pharmacia, the Swedish pharmaceuticals company, to supply 
and install telecoms equipment, and manage the subsidiary's 
telephone network. The value of the deal, the latest in a series 
of outsourcing agreements signed by Telecom Italia with com- 
panies in Italy, was not given. Andrew Hill, Milan 

MAC Alenia-Marconi Communications, a British-Italian 
radio communications joint venture, has won a contract to 
supply a satellite communications station in Argentina tor 
Telintar, the country’s international telecoms company. The 
station will link Argentina. Brazil and the US via the Intelsat 
satellite. MAC is a joint venture between subsidiaries of Fin- 
meccanica. Italy's state-controlled engineering group, and GEC 
of the UK. Andrew HiU, Milan. 

San Miguel Corporation, the Philippine beer-and-food 
group, yesterday signed an agreement with Hebei Bada Group 
of Bao din g City in Hebei province for a new joint-venture 
brewery in China, its third in that market. The Philippine 
group will have a 70 per cent controlling interest for its initial 
investment of S21m. San Miguel's other joint-venture brew- 
eries in China are in Guangzhou and Shunde in the southern 
province of Guangdong. Jose Galang, Manila. 

Swiss-Swedish conglomerate Asea Brown Boveri yesterday 
moved its Chinese headquarters to Beijing from Hong Kong 
and pledged to invest S500m over an unspecified period. Reu- 
ter. Beijing. 

Oman will soon award contracts for the engineering and 
design work of its S6bn liquefied natural gas export project 
pe project is being developed with foreign partners led by 
Royal Dutch/ShelL Reuter, Dubai. 

■ Mitsubishi yesterday said It expects to sign an agreement 
today with the Philippines' state-owned power concern for a 
300.000KW coal power plant order.The $376m plant in Masin- 
loc, about 150 miles north-west of Manila, is expected to be 
completed in 1998 with funds from the Asian Development 
Bank and the Export-Import Bank of Japan. 


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FINANCIAL TIMES THURSDAY OCTOBER 20 1994 

ADVERTISEMENT 


5 






Emergence of a new international financial services supplier 

More banking services and leasing offers for automobile customers and dealers / Geographic expansion i High earnings power for the 
Volkswagen group and its shareholders / By Norbert M, MassfeHer 


i 

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'IcBrrt M MjhMci 

Owm*< d BC Bom m 

Manjg^-npfti d 

Pvunoal S«v*n AG 


With the estab- 
lishment of 
Volkswagen Fi- 
nancial Services 
AG, Brunswick, 
as the holding 
company for its 
financial services 
sector the Volks- 
wagen group is 
defining more precisely its traditionally 
successful strategy in this field. Initial 
business figures for fiscal 1994 point to 
continuation of the positive trend in 
growth for the companies belonging to 
Volkswagen Financial Services AG. The 
new holding will be altering its refinanc- 
ing strategy and expanding its interna- 
tional scope. Its several hundred thousand 
customers will also benefit from this, con- 
tinuing to enjoy easy-on-the-pocket fi- 
nancing facilities. Over the coming 
months Volkswagen Financial Services 
AG as one of the leading suppliers of 
automobile-related financial services on 
the European market intends launching 
fresh products. At the same time it in- 
tends further internationalising its finan- 
cial services and intensifying cooperation 
with its global distribution network. 

This May Volkswagen Fmanz GmbH 
was transformed imo a public limited 
company with retroactive effect from 
January 1. 1994. The GmbH (private lim- 
ited company) had been set up about two 
yeans ago in preparation for die pic. The 
new public limited company combines 
the Volkswagen group's European finan- 
cial services companies, nine in all. un- 
der a new roof as fully-owned subsidiar- 
ies of Volkswagen Financial Services AG 
(see chart). 

Independent refinancing 

Steady growth in latter years, the dimen- 
sions reached in the consolidated ac- 
counts and, of course, the stable contri- 
bution toward profit have led to the iden- 
tification of financial services as a stra- 
tegic area of operations within the 
Volkswagen group alongside automotive 
business. A major factor is that the fund- 
ing of our business has reached a dimen- 
sion making it absolutely imperative for 
us to tap the most economical sources of 
refinancing worldwide. We shall grasp 
this opportunity. As a fully-owned 
Volkswagen subsidiary, we have mostly 
availed ourselves of group credit lines so 
far; but now we are increasingly talking 
about borrowing capital independently 
from outside sources. 

High percentage of Volkswagen's 
consolidated accounts 

The Board of Managing Directors of 
Volkswagen Financial Services AG was 
responsible for total assets of DM 18.1 
billion Europe-wide as of June 30. 1994. 
This corresponds to 22.4 percent of 
Volkswagen's consolidated accounts. 
Approx. 2,100 people are employed, 60 
percent of them in Germany. With a port- 
folio of 1,412.000 leases and financing 
agreements on June 30, 1994 a new 
record was posted. In the first six months 
of the year the number of new leased or 
financed vehicles increased by 23.1 per- 
cent over the year-earlier period. This 
boosted the share of vehicles leased or 
financed by us to around 30 percent of the 
group's total delivery volume in Europe 
alone, which also represents a new 
record. 

Meanwhile, roughly half of all aggre- 
gate leasing or financing transactions by 
customers with the Volkswagen group 
pass through our books. We shall not rest 


until the other half, or at least a large pro- 
portion of it. is similarly entered in our 
accounts. 

Setting our sights on new markets 

One of our major strategic objectives is 
the geographic expansion of Volkswagen 
Financial Services AG. In various Euro- 
pean countries the Volkswagen group 
maintains no production or import com- 
panies of its own. working instead with 
independent importers. On these markets 
the group sells roughly 400,000 cars a 
year, more than 19 percent of its total 
sales. We aim to become more active in 
this segment. Joint ventures, either with 
our local importers or other partners, 
would be conceivable. 

Along the entire automobile chain of 
value added, from the making of a car 
through the distributive stages to the end 
customer using the product, the 
Volkswagen group's financial services 
participate in the earnings potential cre- 
ated. 

Above and beyond this our major stra- 
tegic assignment is also to promote sales 
of group products. We aim to create per- 
manent customer bonds. With our finan- 
cial services products we enter into a di- 
rect. and above all long-term relationship 
with our customers. Satisfied customers 
show a great degree of Ipyalty. This is il- 
lustrated by the high proportion of follow- 
up leases which our dealers conclude. 

We exploit the "regular customer" as- 
set to sell new products. Since November 
1990, for example, the V.A.G Bank has 
engaged in deposit-taking business. At 
that time a credit card duo. Visa Card and 
Mastercard/ Eurocard was introduced for 
the first rime in Germany. Customers 
have the choice of receiving their cards 
from the Volkswagen or Audi banks, both 
of which are branches of the V.A.G 
Bank. 

Credit balances can be accumulated on 
the "PlusMinus Account" which goes 
with these cards. The deposits are avail- 
able on demand yet still earn an attrac- 
tive rate of interest. If necessary this ac- 
count can also be used as a loan account 
The deposits accepted by the YA.G. Bank 
allow us to fund part of our sales financ- 
ing business at favourable rates from 
within our own group. 


With the PlusMinus Account facility 
we are now heading for total deposits of 
almost DM one billion. And further de- 
posit products are in the pipeline: In 
January 1 995 for example a range of term 
deposits will be launched. These include 
an automobile savings plan, a deposit fa- 
cility which will earn an attractive rate 
of interest. With this customers can save 
up to buy a Volkswagen product. 

Strategic importance of the 
distributive channel 

Card business is not only of considerable 
significance for our private and corporate 
customers, it also represents an important 
customer service for our main sales out- 
let, the Volkswagen, Audi. Seat and 
Skoda panners. These are more than 

14,000 dealerships and garages Europe- 
wide. with over 200.000 customer con- 
tacts a day. 

In Germany we have begun equipping 
the first 600 dealers with Eurocash ter- 
minals. Customers can use these for cash- 
less payment of services and spare parts 
with both their Eurocheque -card and 
credit cards; it is naturally cheapest for 
the dealer if they use our cards. We in- 
tend installing these terminals in broad 
sections of our distributive organisation, 
also internationally. 

Another example is the "Aulo^ Leasing- 
Financing" system ( ALF). ALF offers our 
dealers comprehensive. EDP-based sup- 
port enabling them to specify a vehicle 
together with the customer in a matter of 
seconds and draw up tailormade financ- 
ing or leasing terms for it. 

We also assist our dealers in financial 
matters affecting therm personally. Besides 
traditional dealership purchasing finance 
we also offer general financial instru- 
ments for their operations. Examples of 
this are financing for the purchase of real 
estate, new building projects and build- 
ing alterations and business equipment 
and fittings. 

Business start-ups in East Germany 

Following reunification it was difficult for 
many people setting up automobile 
dealerships and garages in East Germany 
to develop locations in suitable parts of 
town; this was where our company \folim 


GmbH came in. It purchased land and 
built premises on it for automotive opera- 
tions. which have Initially been rented out 
to the future owners. • 

Good business development 

The positive way in which business has 
developed for Volkswagen Financial 
Services AG encourages us to look opti- 
mistically to the future. The aggregate 
result generated by the companies con- 
solidated under Volkswagen Financial 
Services AG today contributes a double- 
figure percentage toward the annual prof- 
its of the Volkswagen group. This has a 
long-term and "stabilising" effect for the 
Volkswagen group. Moreover, the earn- 
ings prowess of Volkswagen's financial 
services sector should also be of interest 
ro the group's shareholders. 


FINANCIAL SERVICES AG 


Poised to improve on previous year's good result 

Further growth in 1994 ForVA.G Bank and V.A.G Leasing / First half-yearly accounts of Volkswagen 
Financial Services AG / By Peter Schneider 



Retni £d*tt>dc' 

Moltx-i o> tv Bawd U 

MjriaiicnWN (A 

Vufknsqw ftianedi SenaK AG 


As at June 30, 
1994 Volkswagen 
Financial Serv- 
ices AG posted 
total assets of 
DM 18.1 billion. 
This sum does 
not contain lease 
assets of DM 2.2 
billion belonging 
to two holding companies in Germany 
which are not liable to consolidation. 
Whilst administering parts of V.A.G 
Leasing's lease assets, these companies 
do not engage in operative business with 
our lessees. The accounts are prepared 
according to German commercial law in 
close conformity with the method of 
itemization customary in banking busi- 
ness. The companies in Great Britain 
and the Czech Republic will not be con- 
solidated until the end of the year. 

The balance sheet dearly reflects our 
four major spheres of business. The as- 
set item Lease Assets in the - amount of 
DM 5.5 billion comprises a portfolio of 

498,000 vehicles for lease. Leasing busi- 
ness is conducted by almost all the com- 
panies forming the sub-group. The lar- 





1 


VOLKSWAGEN 

FINANCIAL SERVICES AG 

• 






VAG Flnancement SA 
France 


Volkswagen 

Financial Services (UK) Ud. 
United Kingdom 


VAG Bank GmbH 
Germany 







FISEAT SA 

Spain 


SkoFIN s.r.o 

Czech Republic 


VAG Leasing GmbH 
Germany 








FINGERMA S.pA 

Italy 


StoFIN s.r.o 

Slovak Republic 


Volim GmbH 
Germany 





• 


gest share is accounted for by the German 
company V.A.G Leasing, with lease assets 
of DM 5.2 billion. 

Regional differences in market pen- 
etration emphasise that the concept of 
ownership is still very pronounced in 
some countries. Another reason for vary- 
ing leasing ratios on an international 
comparison is ihat the leasing market 
must be underpinned by a smoothly func- 
tioning resale market for second-hand 
cars. 

Claims of DM 8.2 billion from lend- 
ing ro customers refer to a portfolio of 

914.000 finance agreements. In the first 
half of 1994 no fewer than 246,000 new 
finance contracts were closed. This puts 
us well on the way towards further rais- 
ing last year's substantial figure. 

In regional terms the German V.A.G 
Bank accounts for the largest share, with 

613.000 vehicles and total receivables of 
DM 5.9 billion. The other European com- 
panies have total claims of altogether DM 
2.3 billion. One is naturally inclined to 
compare our financing portfolios in the 
various countries; but for full comparabil- 
ity absolute vehicle deliveries by the 
Volkswagen group must be taken as the 
benchmark. 

High equity ratio 

The downturn in the automobile industry 
has naturally had an impact on our deal- 
ership financing. As they were holding 
fewer vehicles and demonstration cars in 
stock, dealers needed less credit. Our port- 
folio of receivables from purchasing fi- 
nance has dropped to DM 2.8 billion. 

On the liabilities side of ihe balance 
sheet the item Customer Deposits reflects 
card business totalling almost DM one 
-billion from the rapidly expanding 
Volkswagen and Audi Card System. This 
automobile-related product, which was in- 
troduced four years ago. is on offer only 
in Germany at present. On June 30. 1994 
we were servicing I ! 1 ,000 PlusMinus Ac- 
counts, for which a total of 130,000 card 
duos had been issued. 

Our share capital and reserves amount 
to DM 1.4 billion. Counting the subordi- 
nated loans of DM 0.1 billion. 
Volkswagen Financial Services AG posts 
an equity ratio of 83 percent. This places 
it in an excellent position by industry 
standards. 

So far the individual companies have 
refinanced their lending operations locally 
and almost exclusively through the 
Volkswagen group or in the interbank 


market. Of the DM 13.9 billion funds 
from outside sources 44 percent were 
made available by the group. We raise 
outside funds according to the principle 
of matching maturities. 

Our customers include private per- 
sons. individual commercial clients and 
major accounts. We work together with 
several hundred thousand finance and 
leasing clients, enabling us to spread 
risk broadly. Of course we are also Feel- 
ing repercussions from the economic 
downswing, with a marked increase in 
our bad debts this year. Adequate loan 
loss provisions have been made. 

In the first half of 1994 the sub- 
group posted sales and income of DM 

4.0 billion. DM 3.1 billion of this re- 
ferred to sales from leasing business and 
DM 0.6 billion to interest income from 
financing transactions; these are the two 
major items. Lease income is naturally 
higher as the rental instalments also 
contain a depreciation element in addi- 
tion to interest earned. Sales of second- 
hand vehicles at the end of the contrac- 
tual period are also reflected in turno- 
ver. 

At present no statement can be 
made on the sub-group's interim result. 
Not until the annual accounts are drawn 
up will the review of loan loss provi- 
sions required in banking business be 
complete. For the year as a whole we 
are aiming at profit in the nine-figure 
region. 


Balance sheet structure of 

VOLKSWAGEN 


FINANCIAL SERVICES 

AG 

June 30, 1994 

DM bn 

So 

Lease assets 

5.5 

30.4 

Claims from lending 

S.2 

453 

to customers 



Claims from 

2.8 

15.5 

purchasing finance 



Other assets 

1.6 

8.8 

1 

Total assets 

18.1 

100.0 

Equity capital 

1.4 

7.7 

Subordinated loans 

0.1 

06 

Customer deposits 

0.8 

4.4 

Card business 



Miscellaneous liabilities 13.9 

76.8 

Other liabilities 

1.9 

10.5 


Better banking and leasing terms through global refinancing 

Efficiency on the capital markets / New finance company in the Netherlands / Bond issue in Czech Republic / By Klaus R. Zapf 



JrL 

MM h lilfi 
WMrtw al BoarJ tt 
M.vuy rrvn t» 

V* a«K« MD was the creat jon 

of a unit eligible to operate on the capi- 
tal market. This exploits all funding 
possibilities on the national and interna- 
tional interbank market as well as wiih 
institutional investors in Germany and 
abroad - a particularly important aspect 
for us - without the help of our parent 
company, Volkswagen AG. 

Since we are financing attractive 38 - 
sets. namely lendings to over a million 
borrowers and lessees, we are confident 
of being able to tap new sources of li- 
quidity for the Volkswagen group as a 
whole. This means that we can place the 
funding of our lending operations on a 
broader basis. 


The second major reason for the spin- 
off is that we intend clearly separating fi- 
nancial services from the automotive di- 
vision of the group in balance sheer 
terms. This will, for example, enable the 
Volkswagen group to show more clearly 
than before just how high its equity ra- 
tio in core business really is. Ar the end 
of June 1994 the equity ratio in the con- 
solidated accounts was 1 S J percent. But 
without the financial services division it 
worked out at around 24 percent 

In search of independent rating 

To approach the money and capital mar- 
kets directly, without the support of 
Volkswagen AG. we need independent 
rating. We aim to have the first rating 
carried out by Standard & Poors as soon 
as possible, at the latest once the annual 
accounts are available for 1994. We shall 
then have ourselves assessed by Moody's, 
initial talks suggest that we shall receive 
the same quality rating as our parent 
company. 


There are several 
reasons why 
Volkswagen's fi- 
nancial services 
sector was spun 
off into Volks- 
wagen Financial 
Services AG. One 
important aspect 




Refinancing strategy 

With regard to our refinancing strategy 
one example will serve to illustrate the 
significance which we attach to this task. 
Given a binding volume of around DM 
18 billion Europe-wide, purchasing 
credit by just one per millc less would 
lead to a positive profit contribution of 
DM 18 million. True to Lopez policy we 
shall therefore optimise our procurement 
of funds on the international money and 
capital markets. 

Our refinancing strategy is geared to 
specific principles. The first is that we 
fund our lending at matching maturities 
whenever possible, although we will 
naturally take advantage of favourable 
interest rate patterns. We have pursued 
this policy in 1994 with considerable 
success. Transformation profits will have 
a not insignificant influence on our 1994 
results. 

Another principle refers to the way 
in which our subsidiaries refinance their 
leadings. So far they have raised funds 


in the market independently for the most 
pan. wiih The exception of the leasing 
company, which funds its operations 
mainly through the group, partly for tax 
reasons. In future, too, we shall essen- 
tially' be adhering to our policy that all 
business is local. 

However, local refinancing is always 
judged in terms or the finance capital 
which Volkswagen Financial Services 
AG can raise on the international mar- 
kets. 

Within the framework of our funding 
strategy the V.A.G Bank occupies a spe- 
cial position at Volkswagen Financial 
Services AG because as a fully-fledged 
bank - the only one in the sub-group, in- 
cidentally - it naturally has better bor- 
rowing possibilities. 

A bank also enjoys tax advantages. 
What is more it can accept deposits, an 
aspect which is becoming increasingly 
important. At present we are heading for 
total deposits of almost DM one billion. 
We shall therefore make use of this in- 
strument to extend our banking activities 



beyond Germany with a view to 
optimising our refinancing. 

New finance company in the 
Netherlands 

Following the establishment of 
Volkswagen Financial Services AG and 
the move towards independent rating, we 
are taking a second logical step by setting 
up a finance company. This company will 
have its registered seat in the Netherlands. 
It is called Volkswagen Financial Services 
N.V.. Amsterdam. 

Through this finance company we in- 
tend raising short, medium and longer- 
term funds on the Euromarkets using 
various capital market instruments. For 
example, we plan to take out a subordi- 
nated loan through the N.V. as cushion 
capital comparatively soon to adjust our 
equity capital to the requirements of 
strong growth. 

Banks require a minimum capital ad- 
equacy ratio of eight percent, and in fu- 
ture this will also apply to finance com- 


panies with a bank belonging to their 
consolidated group. At the moment 
Volkswagen Financial Services has core 
capital of 6.0 percent, ft is our aim to 
scale down the core capital to a ratio of 
around 4.5 percent and to flank our 
growth with cushion capital from vari- 
ous sources. 

Bond issue by the Czech 
company 

For our company operating in the 
Czech Republic, SkoFin s.r.o. Prague, 
wc are in the process of preparing a 
bond issue or probably altogether Kc 
one billion, the equivalent of around 
DM 60 million. The reason for this is- 
sue is the difficulty in raising long-term 
funds on the interbank market. Unfor- 
tunately the lending market in our 
neighbour to the East has not yet at- 
tained the necessary depth. Floating of 
this issue would make SkoFin the first 
foreign company in the Czech Republic 
to fund its operations in this manner. 



THURSDAY OCTOBER 20 I9W 


NEWS: INTERNATIONAL 



Manila 
acts to 
tighten 
liquidity 

By Jose Gafang in Manila 

The monetary authorities is 
the Philippines are moving to 
tighten liquidity in the finan- 
cial system to keep Inflation 
within targets prescribed by 
the international Monetary 
Fond. 

The move follows the visit of 
Mr Michel Camdessus. IMF 
managing director, during 
which an excess of nearly 8 
per cent in the money supply 
target was discovered. 

Under the IMF-supervised 
economic programme 
approved on June 24, reserve 
money (currency in circula- 
tion, plus deposits and 
reserves kept by banks with 
the central bank) was targeted 
at 148. 7bn pesos (£3.7bn) for 
September, in line with an 
inflation rate target of 8-5 per 
cent by end-1994. 

A review conducted late in 
September found that reserve 
money bad reached some 
lOS.Sbn pesos, nearly 8 per 
cent over target. Inflation, 
which had risen to 9.9 per cent 
in August, slipped to 8.6 per 
cent in September. 

Mr Roberto de Ocampo, 
finance secretary, pledged to 
Mr Camdessus to bring down 
the liquidity level, bat did not 
cite any specific reason for the 
surge. Analysts said the 
increase was being traced to 
the spate of initial public 
offerings on the local stock 
market and the refusal of 
some banks to roll over place- 
ments in Treasury bills on 
expectations of a new rise In 
interest rates. 

Mr Camdessus, at the end of 
his visit on Tuesday, told offi- 
cials the economy had been 
performing well with a first- 
half growth rate of 5.1 per 
cent, bat “continued vigi- 
lance" was needed against a 
resurgence of inflation. An 
IMF team, originally due in 
Manila in late November, is 
now being asked to delay its 
review to December. 

The authorities appear confi- 
dent of meeting toe end Octo- 
ber reserve money ceiling of 
162bn pesos under the IMF 
programme without fuelling 
any big increases in rates. 


Vietnam wobbles on the capitalist fast-track 

The party old guard signals its concern about unbridled reform as national assembly convenes, writes a correspondent 


W hen the World Cup 
football semi-final 
was taken off Viet- 
nam's state-run television 
channel in July and replaced 
with a eulogy to the dead 
North Korean leader Kim li- 
sting, it was a dear sign that 
Vietnam's communist old 
guard was beginning to stir. 

Hardline politburo member 
Nguyen Due Binh apparently 
ordered the change from bis 
hospital bed while reformist 
prime minister Vo Van Kiet 
was on a trip to Ho Chi Minb 
City in the south. 

While the change of pro- 
gramme irritated Vietnam's 
football lovers, more funda- 
mental tensions between 
reformers and conservatives 
are expected to emerge over 
the next 10 days as Vietnam's 
National Assembly convenes a 
landmark session in the capi- 
tal, Hanoi, starting today. 

Inflation, a swelling budget 
deficit and a review of the last 
four years of virtually unim- 


peded foreign investment are 
expected to top the agenda. 

Hanoi-based diplomats say 
the session could also yield a 
handful of ministerial reshuf- 
fles reflecting the fact that offi- 
cials are starting to be made 
accountable for economic mis- 
management as Vietnam 
undergoes adjustment of its 
once centrally planned econ- 
omy along market lines. 

liey say a prime candidate 
for demotion is finance minis- 
ter Ho The. widely blamed for 
failing to check a swelling bud- 
get deficit and making prom- 
ises of central government 
funding to provinces that were 
never fulfilled. 

“He's ripe for sacking,’' said 
one veteran economist and 
government adviser. “He’s 
made some very contradictory 
decisions." 

Vietnam reacted nimbly to 
the sudden disappearance of 
aid in 1083 from its main bene- 
factor, the former Soviet 
Union, achieving remarkable 



VI 

Economic reformer: Vietnam's prime minister Vo Van Kiet 


success in slashing annual 
inflation from four-digit figures 
to a respectable 9J9 per cent 
The country's staple exports of 
crude oil, rice, coffee and rub- 
ber have helped maintain a 
much- needed flow of foreign 


exchange. Incomes, particu- 
larly in the cities, are rising 
fast. Foreign investment has 
poured In, reaching a total con- 
tracted amount of $20bn 
(£6.3bn) last month. 

But this year there was an 


al arming rise in Imports in the 
first six months, resulting in a 
trade deficit of $2QQm. Other 
disappointing economic statis- 
tics have soured the optimism 
of the past two years, fuelling 
conservative cans for a re-as- 
sessment of doi moi, the term 
used to refer to the economic 
reforms officially sanctioned in 
1988. 

Diplomats say the news has 
worried government planners 
and fractured the previous 
fragile consensus among poli- 
cy-makers that the pace of 
reform should quicken. 

Other signs of hardening 
attitudes indude the banning 
last week of a collection of 
short stories on the grounds 
that a prize-winning story was 
infring in g “the policy and reli- 
gions faith and national soli- 
darity of the party and the gov- 
ernment”. 

What worries the conserva- 
tives - understood to include 
Communist party secretary Do 
Muoi- is the potentially dam- 


aging social consequences of 
some market reforms and the 
possible erosion of tbe party s 
position. r _ . . 

"They’re saying [reform Kj 
the worst of all worlds." said 
one economist. “It’s seen as 
representing the devaluation of 
'socialist orientation', uncon- 
trolled foreign investment and 
too much domestic business. 1 ' 

Diplomats and local econo- 
mists say that the future direc- 
tion of reform could hinge on 
the tenor of Mr Kiet's opening 
speech to the national assem- 
bly. “It’s probably the most dif- 
ficult speech he’ll have to 
make," said the economist 

Mr Bust is understood to be 
keen to push through the rub- 
ber stamp assembly higher 
growth, increased reform of 
the banking system, further 
restructuring of lumbering 
state-owned enterprises and 
increased mobilisation of the 
private sector. 

The mood at the session is 
likely to be sombre. A press 


release issued last week by the 
standing committee of the 
aSemblv rapidly dispensed 
S the glowing rhetoric of 

'CSSSt mister Phaa 

Van Khai. an avowed reform- 
ist. was reported in toe local 
press as bavins warned the 
standing committee of the 
national assembly Utst week at 
a preparatory meeting^ “very 
beavy^duttes in the rest of the 
year". 

Foreign investors say a sign 
that some sort of reassessment 
was imminent has been uncer- 
tainty in the last four months 
over whether any more foreign 
banks would be licensed to 
operate branches in Vietnam. 
“No one is sure about the pace 
of progress." said one investor, 
who requested anonymity. 

Vietnam has allowed branch 
licences to nine banks. US 
banks Citibank and Bank of 
America are believed to be on 
top of a waiting list of about 20 
hoping for branch status. 


Police in Karachi 
on alert after 
political violence 


By Farhan Bokharf 
m Islamabad 

Pakistani police and other 
Investigation agencies were 
last night closely monitoring 
the security situation in the 
city of Karachi, where three 
days of violence this week 
have left at least 29 people 
dead. 

Among the dead, 16 belonged 
to rival factions of the MQM 
(Mohajir Qaumi Movement), an 
ethnic party of Urdu-speaking 
immigrants from India, which 
split in a power straggle more 
than two years ago. The other 
13 victims Included three 
policemen. 

The larger faction of the 
MQM has been involved in a 
bitter power struggle with 
members of a breakaway group 
which formed a separate party 
last year. 

Members of the two factions 


have been targeting each other 
in sniper attacks and 
ambushes, in an effort to estab- 
lish their authority in the city. 

While the larger faction of 
the MQM still appears to have 
the support of a large number 
of people, it is not clear if 
either of the two sides is gain- 
ing ground decisively. 

Efforts by the Pakistani gov- 
ernment to negotiate an end to 
the violence have so for pro- 
duced no results. 

But the killings have once 
again sparked fears among the 
city's businessmen, worried 
that security fears will deter 
investors away from Karachi 

Senior officials say privately 
that at least part of the vio- 
lence has resulted from the 
involvement of unemployed, 
educated youth. 

The city has Pakistan's fast- 
est growing population living 
in slums. 


Push to bring inflation under control 

Beijing slows reforms 


By Tony Walker in Begins 

China is for the moment 
slowing the pace of economic 
reform while it seeks to bring 
inflation under control and 
head off possible social unrest 
Chinese officials told a meeting 
of the World Economic Forum 
yesterday. 

Senior Chinese officials, 
including Mr Wang Zhongyu, 
minister of the State Economic 
and Trade Commission, indi- 
cated that a need for stability 
was preoccupying the leader- 
ship, which he said, had made 
the anti-inflation fight its most 
important priority for the rest 
of the year. 

A World Economic Forum 
official said alter the two-day 
session organised by the Swiss- 
based consultative group and 
attended by government and 
business leaders that his 
impression was that the Chi- 
nese had entered a "period of 
pause. For the moment, what 
concerns them is taming infla- 
tion. They feel they need a 


period of slower growth rather 
than starting a new phase of 
reform." 

China's State Statistical 
Bureau announced on Tuesday 
that the cost of living nation- 
wide was 27.4 per cent higher 
in September than the same 
month last year. Economic 
growth for the past two years 
has averaged over IS per cent 
Growth of 11-12 per cent is 
forecast this year. 

Beijing introduced price con- 
trols last month on staple food- 
stuffs in an effort to break the 
inflationary cycle. Food prices 
have risen sharply in the past 
year. 

The World Economic Forum 
official noted that reformist 
impulses in Beijing had been 
subdued in comparison with 
last year, when Chinese offi- 
cials were discussing ambi- 
tious plans for reform of the 
banking system and state 
enterprises. "Now," the official 
said, “there is a mood of con- 
solidation and caution." 

Officials had deflected ques- 


tions about plans to force state 
enterprises into bankruptcy 
under a pilot programme 
announced earlier this year 
and meant to target some 100 
faltering enterprises in 18 
cities. The authorities have 
been reluctant to bankrupt 
enterprises because of fears of 
social unrest among laid-off 
employees. 

Government economists esti- 
mate that of the 11,000 large 
and medium-sized state enter- 
prises about one-third are in 
the red. with another one-third 
barely breaking even. The 
State Statistical Bureau said 
this week that in the first nine 
months of this year, some 44.5 
per cent of state enterprises 
had made losses. 

State-owned enterprises have 
been hard hit in a government 
austerity prog ramm e instituted 
in July last year and aimed at 
calming an overheating econ- 
omy. Many enterprises are 
starved of working capital and 
in some cases are having diffi- 
culty paying employees. 


Two Europeans 
slain in raid on 
Algerian oil site 


Gunmen burst into an oil camp 
in eastern Algeria on Tuesday 
night and killed the only two 
Europeans there, officials and 
diplomats said yesterday, Ban- 
ter reports from Tunis. 

The deaths of the two men, a 
Frenchman and an Italian, 
bring to at least 66 the number 
of foreigners killed in civil 
strife between Moslem funda- 
mentalists and the army-domi- 
nated authorities. 

In Rome, the Italian foreign 
ministry said a Somali was 
also wile d at the camp near 
Tebessa, operated by Sona- 
trach, the Algerian state oil 
company. But in Algiers, an 
Italian embassy spokesman 
said he could not confirm this. 

The two Europeans worked 
for Schlumberger, a French 
company, which named the 
Frenchman as Philippe Hetet. 
38, and the Italian as Mauro 
dell 'Angelo. 30. 


The company said in Paris: 
“There were four employees at 
the site. They were attacked by 
a group of armed men. Two of 
the employees were killed." 

The first foreigners were 
killed in September last year, 
shortly before the fundamen- 
talist Armed Islamic Group 
(G1A) warned non-Algerians to 
leave the country or be killed. 

The GLA, one of several 
groups battling to overthrow 
the authorities, sees foreign 
workers as supporting the gov- 
ernment and the economy. 

Italy's foreign ministry said 
the attackers burst into one of 
the oil company's buildings, 
set fire to it and told the Alge- 
rian nationals to flee. They 
then killed the others. 

Last week, gunmen shot 
dead a South Korean business- 
man near his home in Bordi 
el-Bahri, about 25km east of 
Algiers. 


TENDER NOTICE 

PROCUREMENT OF TELEPHONE CARDS 

The HUNGARIAN TELECOMMUNICATIONS CO. LTD (HTC) now invites sealed bids for 
the manufacture, assembly, supply and delivery of telephone cards. 

The procurement of telephone cards is scheduled for 1995-96. 

The quantity of telephone cards, HTC intends to purchase in the coining two years, is as follows: 

- 1995: 12 million pcs 

- 1996: 15 million pcs 

The above quantities are subject to modification by HTC by plus or min us 15 (fifteen) per cent as 
the actual demands require. 

For the supply of 1995: 

As a result of Bid evaluation, two Suppliers will be awarded. The first ranked Supplier will be 
requested to deliver 70 (seventy) per cent of the quantity indicated above for 1995, while the 
second ranked Supplier will be requested to deliver 30 (thirty) per cent of it. 

For the supply of 1996: 

Late 1995 the two awarded Suppliers shall compete again for the higher portion (70 per cent) of 
the deliveries as indicated above for 1996. 

Interested companies and consortia, who have the capability to complete this project may inspect 
the Tender Documents and may purchase them from 20th October, 1994 at the following 
address: 

INTELTRADE CO. LTD. 

Mr. Tam£s Vincze, Sales Executive 
Budapest, DL, Medve utca 25-29., 1027 Hungary 
Tel: (+36-1) 202-6883 
Fax: (+36-1) 201-0017 or 201-0008 

upon payment of a non-refundable fee of USD 400 (domestic companies shall pay HUF 44,000). 
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Tender No.: IT-205/VT 

The tender documents will be available upon presentation of the receipt of the effected 
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above receipt to Inteltrade and undertakes to pay the mailing costs. 

Bids shall be delivered to the above address not later than 10.00 a.m. 20th December, 1994. 

All bids shall be accompanied by a bid security of not less than 100,000 USD or its equivalent in 
any freely convertible currency. 

Only those bidders will proceed to the evaluation of their bids who meet the postqualification 
criteria which is stipulated in the Tender Documents. 


FOR SALE 

Two S-76A+ Helicopters 

Excellent Condition. Dual IFR. offshore equipped, SAS Phase HI. 
All essential airframe modifications and bulletins are complete. 
All engineer modifications complete for TBO 3000 hours. 
Both helicopters painted and refurbished (1990) 
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THURSDAY OCTOBER 20 1994 


NEWS: INTERNATIONAL 


Hamas strikes new level of terror into heart of Israel 


T he devastating bomb 
attack on a bus in Tel 
Aviv yesterday marks 
the increasing confidence and 
power of Hamas, the militant 
Islamic group, which has 
Pledged to destroy the peace 
process, the state of Israel, an d 
usher in an Islamic republic 
based on Koranic law. 

An anonymous caller told 
Israel radio that the bombing 
had been carried out in the 
name of some 400 Hamas activ- 
ists expelled by Israel for sev- 
eral months to a no-man's land 
In Lebanon in December 1992. 
He said he wanted to thanfc the 
government for deporting the 
Hamas members where they 
bad received training in sabo- 
tage and explosives. “We know 
bow to carry out attacks ° n| 1 
we will carry out other 
attacks," be said. 

The threat is very real, in 
the past fortnight, Hamas has 
struck a new level of terror 
into the heart of Israeli society, 
spraying a busy Jerusalem 
shopping promenade with bul- 
lets and killing two people; kid- 
napping and killing a 19-year- 
old Israeli soldier; and carrying 
out yesterday’s attack in the 
commercial centre of Tel Aviv. 

Its Increasingly successful 
military campaign against 
Israeli civilians and soldiers 
has come to dominate the polit- 
ical agenda of both Mr Yassir 
Arafat, the Palestinian leader, 
and Mr Yitzhak Rabin, the 
Israeli prime minister. 

The attacks have shown that 
Hamas has the political initia- 
tive and can Influence the pace 
of the peace process. Further- 
more it has now laid down an 
open challenge to Mr Arafat 
for the. leadership of the Pales- 
tinian people and defied him to 
take repressive measures at 
the risk of civil war. 

Experts on the extremist 
movement which has a grow- 
ing support base of between 
20-40 per cent of Gaza's 850.000 
residents, say Hamas does not 
want Mr Arafat and Mr Rabin 
to suspend the peace process. 

Rather their strategy is to 
cripple it, thereby ensuring 
that Mr Arafat fails to deliver 
on his promises to his people of 


The attacks have now come to 
dominate the political agenda of 
both Yassir Arafat and Yitzhak 
Rabin, writes Julian Ozanne 


Moslem and Jewish militants: the bloody path to peace 


new jobs, alleviation of poverty 
and a gradual assumption of 
legitimate Palestinian rights. 
These include the return of 
Israeli-occupied land, the right 
of return of up to 4m Palestin- 
ian refugees and the establish- 
ment of an independent state, 
with Arab East Jerusalem as 
its capital 

Each time Hamas carries out 
an attack Israel seals off the 
Gaza Strip, preventing tens of 
thousands of Palestinians from 
travelling to their jobs inside 
IsraeL Last week Israel briefly 
suspended peace talks follow- 
ing the kidnapping of the 
Israeli soldier. Such moves 
play into the hands of Hamas 
by showing Palestinians how 
weak Mr Arafat is. and how 
dependent on Israeli goodwill 
Israeli demands for Mr Ara- 
fat to smash the military wing 
of Hamas are also easily 
exploited by the Islamic group 
as Mr Arafat doing Israel's 
dirty work for them. Last 
week’s mass arrests of Hamas 
activists in Gaza by Mr Ara- 
fat's security forces were met 
with demonstrations and riots, 
accompanied by threats of civil 
war. Hamas's military wing 
warned Mr Arafat that if he 
continued arresting its sup- 
porters it would reply “by set- 
ting the Gaza Strip ablaze". 

Hamas continues to benefit 
from the very limited gains 
Palestinians have reaped from 
the peace process and the poor 
performance so far of the inef- 
fectual Palestinian authority. 
Like other militant Islamic 
groups, Hamas thrives on 
despondency, poverty and the 
failure of secular Arab govern- 
ments to restore pride and eco- 
nomic wellbeing to their peo- 
ples. 

Many Palestinians feel Mr 
Arafat gave up the Palestinian 
struggle in return for a virtual 
bantustan in a part of the Gaza 
Strip and the West Bank town 




rt* 




INTERNATIONAL NEWS DIGEST 

NTT opens lines 
to other carriers 

NTT, the Japanese telecommunications group, said yesterday 
it was willing to connect its domestic lines with other carriers, 
opening Japan's market to fresh competition. 

NTT's president, Mr Masashi Kojima, told a news conference 
negotiations on cost sharing and other Issues with new tele- 
communications carriers were still needed before the lines 
were connected. But he said; “NTT has said to all operators 
that its basic stance is that it is willing to connect its lines to 
every operator if there are such requests." Mr Kqfima made 
his announcement a day after one of the new carriers, Japan 
Telecom, requested government intervention to resolve a two- 
year-old dispute over opening up NTT's call lines. Mr Kqjima 
said: "We hope we can settle the issue soon, possibly within 10 
days, without troubling the minister of posts and telecommu- 
nications." Heuter, Tokyo 

Hint of Australian rates rise 

Mr Benue Fraser, governor of the Australian Reserve Bank, 
yesterday foreshadowed another increase in interest rates as a 
way of maintaining an underlying rate of inflation of 2-3 per 
cent for the rest of the financial year 1994-95. 

“I am confident appropriate adjustments will be made in 
monetary policy that will deliver a 2-3 per cent underlying rate 
of Inflation," he told a federal parliamentary committee. Mr 
Fraser also said the government could do better to reduce its 
forecast budget deficit for 1994-95, The budget has estimated a 
deficit of A$11.7bn (£5.8bnj for the year, representing 2.5 per 
cent of GDP. He warned a better performance on the fiscal side 
did not reduce the need to tighten monetary policy when 
necessary. A strong: jobs growth reported last week had inten- 
sified pressures on the government to raise interest rates. 
More than 75,000 new jobs were created in September, 
reflecting an acceleration in economic activity. Emilia Tagcaa, 
Melbourne 

Kuwait compensation appeal 

Iraq's latest threatening moves towards Kuwait have deprived 
the UN of badly needed ftmds to pay compensation to victims 
of its 1990 invasion - by ensuring the UN embargo on Iraqi oil 
sales remains in place, a senior Kuwaiti official said yesterday. 
Mr Abdul Rahman al-Houti. chairman of Kuwait's public 
authority for assessing compensation, appealed to countries 
holding Iraqi assets to transfer 30 per cent of the funds to the 
UN comp ensa tion commission so that urgent claims can be 
paid. The commission, meeting this week in Geneva to assess 
claims from those forced to flee Kuwait and property claims 
below $100,000, has paid out Iras than $3m (£2m) bo far. Total 
claims to the Commission amount to nearly $l70bru including 
Kuwaiti of over $l02bn. Frances WUtiams, Geneva 

South Africa blocks land deals 

Mr Derek Hanekom, South Africa's land minister, yesterday 
announced the withdrawal of authorisation for land transfers 
to leaders of the former black homeland of Lebowa who had 
allegedly bought large amounts of state-owned land for per- 
sonal use. The move was a response to claims on Tuesday that 
tens of thousands of hectares of land in the former homeland 
bad been privatised and handed over to tribal chiefs immedi- 
ately before last April’s elections, when Lebowa was formally 
rein corpora ted into South Africa. The money used to pay for 
tbs land allegedly came from a special government fund that 
had been budgeted for drought relief for local Banners. The 
controversy highlights the problems feeing the government as 
It starts to grapple with the politically divisive issue of land 
redistribution. Mark Suzman. Johannesburg 

Singapore curbs on credit cards 

qinraoore has imposed curbs on credit card advertisements in 
arT-dtemot to encourage thrift among its people, officials said 
vptferdav The Monetary Authority of Singapore has told 
S>k«! that their advertisements for credit cards cannot 
inriude sifts, special discounts and incentives that encourage 
5S^S^dfo& to an earlier crackdown, the MAS - the 
ofaeentral bank, ruled in September that any 
ot fimmSalfostihition that issued unsolicited, pre-ap- 
proved r credit cards faced a fine of 83,500 (£2,330). AP, 
Singapore. 


of Jericho. Months after the 
PLO was supposed to have 
taken over the West Bank and 
held elections, Mr Arafat's 
peace negotiators remain 
locked in negotiations with 
Israel in Cairo. 

Furthermore, after three 
months in power, Mr Arafat 
has yet to put together a credi- 
ble government capable of 
tackling the massive task of 
rehabilitating the derelict Gaza 
Strip and combating an unem- 
ployment rate of 40-50 per cent. 
Part of bis failures are self-im- 
posed - a result of centralisa- 
tion of power and an aversion 
to transparent government. 
International donors, choking 
on their own bureaucracy, are 
also to blame for the slow drip 
of promised emergency funds. 

As Mr Arafat struggles to 
deliver real economic and polit- 
ical change. Hamas continues 
to provide better services 
through, its social welfare net- 
work of schools, clinics and 
kindergartens. Hamas also 
offers a strong moral message 
and a religious certainty in a 
period of upheaval and 

Ins tabili ty. 

In a recent interview, Mr 


Hamas 

Mfitant Palestinian 
(atomic organisation 
dedicated to 
destruction of Israel 
and creation of an 
Wamic state based 
on Koranic law. 

Emerged m 1967 at 
start of Palestinian 
uprising. Originally 
supported by Israel 
as a counterweight 
to PLO. Maintains a 
political whig, a big 
network of schools 
and dirties and an 
underground mSItary 
whig known as the 
kz al-Deen af- 
Oaseam brigades, 
which claimed 
responsibility for 
yesterday's attack. 

Raises money from 
Palestinians inside 
occupied territories 
and in Jordan. Israel 
has never proved its 
claim that Hamas Is 
financed by Iran. 

Source FT, Heutar 

Mahmoud Zohar, a leading 
Hamas spokesman in Gaza, 
said his organisation welcomed 
the return of Mr Arafat to Gaza 
because bis obvious failures 
would expose the moral, eco- 
nomic and political bankruptcy 
of secular Arab government 
and encourage Palestinians to 


ym* 

Soptember-Octobor 
a Israel and PLO sign peace accord, 
a Bloody clashes in Gaza fri one of wont days Ul WWinBl 
confrontation In recent years; throe taraeS aokflam die. 
a Two Hamas members tailed by brattl amy. 
a Israel and PLO bogln tsUcs an impteraenUng Palestinian 
and taraail troop withdrawal from Gaza and Jericho, 
a two bract soldiers abducted and kBed by Hamas, 
i hBI two 


Mtf-ruie 


• Novamber-Deoetnber 

9 Hamas kite senior ana Injures former Israeli right-wring MP. 

9 braefle kB two Hamas leaders. 

• a Setters living around Hebron shoot imp crowds of P ateMiiuana ; 

another settler fro* at Arab tad; at least six PttfestWans kfflod. 
a Guontta attacks bus near Tal Aviv, one braail dne later to 


a Two Jewish settlers kffied in Hamas ambush. Setters dot 
a Setters shoot deed three PttestMans bi Hebron, 
a Israel misses dead&ie tor start of troop withdrawal from Gaze 
and Jericho. 

a Two setters Idled by Arab gunmen. 


April-May 

a Bus blast kiffa etgfrt Israelis and wounds 45; suicide bomber dee; 

Moslem mttants datfn responsftrtity; occupied territories sealed, 
a Bus Hast ta03 fnrK Moslem mfitenls daJm responstuety; taraail 
troops remain in Gaza and Jericho, no sign of observer force in 
Hebron. 

a isaon army roinds up more than 300 suspected Hamas 

supporters. 

a Israel and PLO sign a gr eement for sen- rule In Gaza and Jericho; 
Israel hands over mMaiy base m Gaze and the town of derttio 
to Palestinian police. 

a Two taraail sokSera are luted in drtve-by shooting m Gaza 
dttmed by Hamas and biamic JUtad. Right-wing Israeli 
politicians demand senpping self-mle. 

June-August 

a Pens makes pubfc a totter agreeing not ro harm Palestinian 
institutions in Jerusalem; Israeli n gh t w ig accuses government of 
laying groundwork for future Palestinian state wen Jerusalem as 
capital. 

a Setters pour into Hebron and hot attar on Israeli soldier and 
setter are luted by Arab guarifea. 

9 Arafat receives tumultuous welcome in Gaza on hb historic 


IANON 


January-March 

a brad and PLO reach partial agreement on implementing pease 
accord, focusing on border crossings of autonomous areas, 
a Three braaits wouidad by Istenk: mutants, 
a Setter sprays gunfire on kneeAng Arab worshippers m a mosque 
ki Hebron, kffing about 30 before being beaten to death. Talks 
on Gsza-Jertcho autonimous regions stalled for weeks, 
a Israeli amoy MBs four Palestinians in Hebron gun battle in Hebron; 
ensting dashes leave another dead aid tt least 50 injured 


Septomber-October 

a bratti soldiers ha Palestinian after ha stabs soldier in Hebroa 
a Two Jerusalem residents kited and more titan a dozen injured; 
Hamas ctatms respowMty. 

a Nobel committee decides to award peace prize to braefi Prime 
Minister Yifrhak Rabin, Peres and Amtat. 
a taraal suspends talks with PLO toflowng kidnapping of Israel 
sokker by Hamas extrerresta and holds Arafat responsible tor 
sale return. Kidnapped soldier idled by oaplore. three of whom 
are kQted m the clash with the break army rescue team, 
a Tal Aviv bus bomb kits at least 22 and injures about 40; Hamas 
claims responsibility, Israel seats oil West Bank and Gaza. 



JORDAN 


turn to the Is lamic solution. 
"Arafat's return hastens the 
coming of the Taiamfn state," 
he said. 

But it is not just Mr Arafat's 
failings that contribute to the 
flow of recruits to Hamas. 
Hatred and suspicion of Israel 
remain deeply rooted in the 


hearts of many Palestinians. 
Even amongst PLO supporters. 
Hamas is viewed as a "libera- 
tion organisation", fighting a 
legitimate battle against con- 
tinued Israeli occupation of 
their land and denial of their 
rights. 

Mr Arafat will now come 


under renewed pressure from 
Israel to deal a decisive blow to 
Hamas. For Israel, peace 
means increased security. Dur- 
ing last week's kidnapping cri- 
sis Mr Rabin said “Arafat must 
choose between making peace 
with Israel or making peace 
with Hamas”. It is an acute 


EGYPT 


dilemma for Mr Arafat, while 
still trying to find his feel os 
leader of a people in a nascent 
state. If Arafat dues not move 
against Hamas he risks allow- 
ing Israel to continue dragging 
its feet in peace talks and thus 
ensuring the vacuum which 
Hamas so readily exploits. 



ING BANK OPENS IN SHENZHEN y CHINA- ING Bank’s new office in Shenzhen, China, is now fully 
operational It is part of the strategic development of our Asian network, which now includes offices in eleven countries 
- and it reinforces our leading position in Emerging Markets Banking in Eastern Europe and Latin America as well as 
Asia, ING Bank is part of ING Group, the largest financial insti- ^ 

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office, contact JackFan on tel: 86.755.2299775; fax: 86.755.2298239. 11N vJT JtSA.JN IV 



THURSDAY OCTOBER .0^,4 


NEWS: THE AMERICAS 



US trade deficit narrows to $9.7bn in August 


By Nancy Dunne In Washington 

The US trade deficit for goods and 
services narrowed to S9,7fan in 
August, hut the merchandise trade 
deficit was the second largest since 
July 1987 at $l43bn. 

US exports of aircraft and capital 
goods helped boost foreign sales of 
goods and services for the month to a 
record So9.8bn, up from $56.3bn in 
July. Imports rose too, but more 
slowly, from S67.5bn to almost 
SG9.6bn. 

Mr Ron Brown, the US commerce 


secretary, said substantial jumps in 
exports of aircraft, motor vehicles and 
parts were “rebounds from unusually 
low levels in July related to planned 
shut-downs In some aircraft and auto 
plants.” 

He said the growth trend in exports 
“reflects both the underlying competi- 
tiveness of the US export sector and 
accelerating recoveries in some 
of our major trading partners. In 
particular, our goods trade deficit 
with western Europe declined by 
$748m in August' 1 

For the first eight months of 1994, 


the trade deficit rose by 51 per cent 
over the same period a year ago - 
from S47.75bn to S72bn. Any signifi- 
cant improvement will require a nar- 
rowing of the bilateral deficit with 
Japan. 

Instead, the gap has continued to 
rise, hitting S41.9bn during the first 
eight months of the year, compared 
with 537hn during the same period 
of last year. US officials have 
been warning Japan for months that 
the deficits are “politically unaccept- 
able” 

Any slowdown in the US economy 


next year could produce new calls for 
import curbs on Japan from the new 
Congress. Mr Lawrence Chimerine, 
chief economist with Economic Strat- 
egy Institute, a Washington think 
tank, attributed the rise to record vol- 
umes of imports and “only a limited 
acceleration” of US exports to Japan. 

“Earlier predictions of a decline 
were incorrect because they did not 
factor in that the US cannot produce 
many of the products it buys from 
Japan and that Japanese companies 
are not raising dollar prices in propor- 
tion to the strong yen.” he said. 


Deficits were also recorded with 
China (S3.2ba). Opee countries 
(SLSbn) and western Europe (SL6bn). 
Surpluses were achieved with Austra- 
lia (8Q-7bn), Argentina ($02bn), and 
Egypt (SO^bnX 

Merrill Lynch economists yesterday 
predicted improvement, saying: 
“Europe and Japan are coming out 
of their slumps mid should grow 
faster than the US next year for 
the first time since 1990. That 
should lead to rising US net exports 
and a shrinking us c urr ent account 
deficit” 


To stay in power, Aristide will have to win the countryside, writes Ted Bardacke 


Where Haiti’s rulers are made or broken 



I f Haiti's newly re-instated 
President Jean-Bertrand 
Aristide is going to stay in 
office, the politics of his sur- 
vival will have to be played out 
largely in the country's devas- 
tated rural areas. 

Seventy-five per cent of 
Haiti's population live in the 
countryside where successive 
governments have used their 
control of land tenure, espe- 
cially in the rice-producing 
Artibonite valley where nearly 
all the country's irrigated land 
is located, to enrich their sup- 
porters. 

President Aristide is expec- 
ted to nurture his constituency 
there too, but his still sketchy 
agricultural policy and the 
skewed rural economic pat- 
terns caused by military rule 
and the embargo will make it 
difficult. The military govern- 
ment. which held power for the 
past three years, virtually 
abandoned the valley, prefer- 
ring to make money from con- 
trolling both legal and contra- 
band rice imports. 

Before the military. Francois 
“Papa Doc” and later his son 
Jean Claude “Baby Doc" Du va- 
luer siphoned off the spoils of 
the valley into their paramili- 
tary force, the Tontons 
Macoutes and set off a migra- 
tion of peasants into the shan- 
tytowns of the capital Port-au- 
Prince. There they formed the 
backbone of the popular organ- 
isations that spearheaded Baby 
Doc's downfall in 1986. 

Although Baby Doc had initi- 
ated a World Bank-designed 
economic reform package in 
1982, import permits were stiD 
needed for rice and other 


grains and were difficult to 
obtain. However, the govern- 
ment that replaced him. led by 
General Henry Namphy. under 
pressure to be recognised by 
the US and maintain the flow 
of foreign lending, opened the 
country to rice imports, setting 
off a guerrilla rice war of road- 
blocks and shootouts. 

By the time of Mr Aristide's 
election in 1990 rice imports 
from the US were worth S39m 
(£24.6m) annually and satisfied 
a quarter of domestic demand 
The peasant groups involved in 
this rice war were the main 
supporters of the lavalas ( flash 
flood) movement that swept Mr 
Aristide to power. 

President Aristide's first gov- 
ernment attempted to wrest 
political power away from the 
military-appointed rural 
strongmen, but did not touch 
their economic power by pro- 
moting land reform. According 


to some of his rural supporters. 
President Aristide lacked a 
coherent agricultural policy 
and therefore the country- 
remained open to rice imports, 
hurting lavalas’s ability to 
transform itself into a work- 
able governing coalition. 

“The Artibonite is where you 
make or break a government 
in Haiti,” says Mir Anil Juste, 
an agronomist and historian of 
the valley. “If yon can control 
the production and distribu- 
tion of rice you can control the 
country." 

But President Aristide will 
find controlling the valley an 
awesome task. Land disputes 
are ongoing and violent, as no 
one knows who has the right 
to form what plots and there is 
no working system of land 
titles. The government owns 
most of the land but has in the 
past rent it for nominal sums 
to powerful allies who in turn 


rented tracts to local peasant 
sharecroppers. Some plots 
changed hands as many as 
three times a year *wd planting 
an area did not guarantee the 
right to harvest it 

“The first thing people will 
do when the embargo is lifted 
and the price of cement tells is 
build walls around land they 
control but do not necessarily 
own.” says an agricultural offi- 
cial. “Aristide may try to help 
the peasants through credits 
and such but land reform is 
out of the question. How do 
you know what land to give 
away if you don’t know what 
land you have?” 

Annual rice production has 
fallen from 125m tonnes during 
Mr Aristide's year in office to 
less Qian 80m tonnes since the 
embargo was imposed. The 
emergency food aid that 
flooded tbe cities during the 
embargo have meant that 


much of the rice produced in 
the valley had no market, 
according to officials at the 
World Food Programme. 

In an effort to jump-start pro- 
duction, the Inter-American 
Development Bank has ear- 
marked more than $l7m for 
rehabilitation of the irrigation 
system in the Artibonite, while 
the World Bank has a 
long-term project to map the 
area to settle land disputes. 

In return, international lend- 
ing agencies are expecting that 
President Aristide, as he has 
publicly pledged to do. will 
keep the country open to food 
and other imports. Tariffs on 
legally imported rice will be 
cut in half "for a transitory 
period” until being eliminated 
altogether, according to the 
Aristide economic plan 
approved by lending agencies. 

There is a consensus among 
agricultural economists that. 



even as Haiti increases its rice 
production it will need to 
maintain rice imports to feed 
its population But Mr Juste 
says President Aristide has not 
decided what kind of political 
alliance he wants to build in 
the Artibonite. “There is a vac- 
uum of agricultural policy that 
will be filled quickly by the 
World Bank and the IADB.” he 
says. 

Mr Juste and others in the 
valley still too afraid of repres- 
sive measures to give their 
names say the productive pro- 
grammes of the multilateral 
institutions can help construct 
democracy in Haiti only if they 
put a premium on helping 
small producers while break- 
ing the grip of landholders who 
have become accustomed to 
making money off rents and 
political power rather than 
from producing food. 


Canada seeks 
to make big 


spending cuts 


By Bernard Simon in Toronto 

Mr Paul Martin. Canada's 
finance minis ter, has given 
notice that hefty public spend- 
ing cuts will be the prime tool 
to reach the Liberal govern- 
ment’s deficit-reduction tar- 
gets. 

He told the House of Com- 
mons late on Tuesday he was 
determined to cut the federal 
budget deficit to 3 per cent of 
gross domestic product by the 
fiscal year ending March 3i 
1997. from 5.4 per cent this 
year. 

“It is a target we will meet, 
come hell or high water." Mr 
Martin said. 

The target implies a reduc- 
tion in the budget deficit from 
a projected CS39.7bn (829.6bn) 
in tiie current fiscal year to 
about C$25bn in 1997. Mr Mar- 
tin estimated the government 
needs about $3.lbn in spending 
cuts or tax increases next year 
and another C$6u3bn in 1996/97. 
He plans specific proposals in 
his next budget due in Febru- 
ary. Business leaders have pin- 
pointed the budget is seen as a 
critical test for investor confi- 


Together with Italy add Swe- 
den. Canada has the heaviest 
debt burden among industrial 
countries. 

Interest payments are proj- 
ected to reach CS4i.3bn this 
year, over a quarter of total 
federal spending. 

Financial markets are likel) 
to focus on Ottawa’s willing- 
ness to take the axe to federal 
social programmes, which con- 
sume about one-quarter of this 
year’s CSL66bn budget, and on 
transfers to tbe provinces for 
health, welfare and education, 
totalling CS27bn. 

The government published a 
discussion paper on sweeping 

social-security reform this 
month. It contained few spe- 
cific proposals, but it has run 
into strong criticism from 
other political parties, special 
interest groups, and the 10 
provinces, which would be 
directly affected by federal 
spending cuts. 

The business community has 
generally applauded Mr Mar- 
tin’s stand. But some observers 
are concerned that bis cabinet 
colleagues may be less enthusi- 
astic about painful and 


Sharp decline in 
Mexican reserves 


By Damian Fraser in Cancun 

Mr Miguel Mancera, governor 
of Mexico's central bank, 
announced yesterday that the 
country's foreign currency 
reserves had fallen to $17.2 bn 
(£10Bbn), S7Jbn less than at 
the end of last year. 

The reduction since 
December follows central bank 
intervention to defend the 
peso after the assassination 
of presidential candidate 
Mr Luis Donaldo Colosio and 
subsequent nervousness over 
the August presidential elec- 
ties. 

Reserves were reported to 
have been as high as $3Jbn in 
early February, indicating the 


extent of Bank of Mexico’s sup- 
port for the currency. 

Mr Mancera said at a bank- 
ers' conference in Cancun that 
intervention since May had 
been sporadic and in small 
quantities and that reserves 
have been relatively stable 
since then. 

Mexico’s foreign currency 
reserves are published only 
three times a year, and are 
considered an important indi- 
cator of confidence in the cup 
rency. Despite central bank 
intervention, the peso has lost 
nearly 10 per cent of its value 
against the dollar this year and 
is now trading close to its 
lower limit against the US cur- 
rency. 


# 







The buck rogers stop here 


.^Mring out of the flight deck windshield of a 747, the sight that greeted me 
was blackness, interrupted by incandescent bursts of lightning. Only the tightened seatbelt prevented me 
from hitting my head on the ceiling, the turbulence was so severe. In the left hand seat, the glow of the 
instrument panel lit the pilot's face, impassively statue-like, the concentration total. 

As the computer voice droned '400 feet* my eyes were inexorably drawn back to the night- 
Blackness still. More lightning. No runway. '500 feet’ chanted the computer. The pilot remained 
expressionless. '200 feet,’ Where was the runway? My eves screamed at the windshield- 

“ TOO Feet.' Why doesn’t the pilot pull up? *50 feet.’ Absurdly.. I suddenly noticed how damp my palms 
were. Then two things happened simultaneously. 


"The pilot uttered his first words 'runway in sight’ and tbe wheels touched the ground m the smoothest 
landing J can ever recall. When I climbed out of my seat, I can't remember what I was more impressed 
with; the absolute reality of the world's most advanced pilot training simulators or the calm, unflappable 
nature of the pilot who had just been tested. " 

Eveiy day. SAA pilots are tested in tbe most punishing conditions possible. Not just to separate the 
men From the flyboys. But to ensure that they remain the finest commercial 
pilots in the world, in tune with tbe most advanced equipment. Allowing 

you to sit back, relax and discover why SAA has been voted "Best Carrier SOUTH AFRICAN AIRWAYS 
to Africa" six years in a row. AFRICA’S WARMEST WELCOME. 





x 








itMrs 



tnadu sej 

bi,' 

ending * 





irp decline i 
xic;in reserve. 




FINANCIAL TIMES 


THURSDAY OCTOBER 20 1994 


NEWS: UK 


MPs decide against 
probing Thatcher son 



By James Blitz and 
Jimmy Burts 

One of parlia- 
ment’s most 
powerful select 

committees 
yesterday 
decided not to 
investigate 
allegations that Mr Mark 
Thatcher, the son of the former 
prime minister, received eiqw 
($19m) in commission from an 
arms deal negotiated by the 
British government in the 
1980s. 

As Labour MPs continued to 
put pressure an ministers to 
reveal more about the Al- 
Yamamah deal forged by the 
HE and Saudi Arabia in 1984, 
the all-party public accounts 
committee agreed that an 
investigation of Mr Thatcher’s 
involvement would be outside 
its remit. 

Mr Robert Sheldon, chair- 
man of the committee, is 
understood to have told MPs at 
yesterday that the committee 
could examine only issues 
affecting taxpayers’ money. He 
said newspaper allegations 
about Mr Thatcher had shown 
no impropriety as far as public 
money was concerned. 

Mr Sheldon told MPs that 
there would be no change In 
his decision to withhold publi- 


Mr Tony Blair, leader of the 
opposition Labour party, yes- 
terday sought to pnt ft on a 
“"war footing" against the 
“ruthless and unprincipled" 
Conservatives in his first 
speech to MPs since becoming 
party leader. 

In a morale-boosting address 
to a crowded meeting at West- 
minster, Mr Blair promised 
“inclusive” leadership in 
return for strong support and 
strict parliamentary disci- 
pline. 

His remarks were seen as an 
attempt to ease tensions 
between modernisers and 


traditionalists ahead of a 
shake-up in the shadow cabi- 
net planned for later today. 

Mr Blair toM MPs that the 
run-up to the general election 
had begun, and warned them 
to avoid complacent accep- 
tance of the party's command- 
ing lead in the opinion polls. 

In a clear indication of his 
confidence in the party’s abil- 
ity to take the fight to the 
Tories, be said there were “no 
no-go” areas, even on Issues 
not traditionally regarded as 
strong Labour territory. “We 
are up against a ruthless and 
unprincipled party.” 


cation of a report by the 
National Audit Office into the 
UK-Saudi arms deal. He 
assured MPs that the office’s 
report contained no reference 
to Mr Thatcher. 

As Labour MPs continued to 
raise questions about the Al- 
Yamamah deal, Mr John 
Major, the prime minister, 
insisted yesterday that there 
was no substance to allega- 
tions in a confidential docu- 
ment that Mr Thatcher had 
profited from the contract 
• A parliamentary inquiry 
into allegations that Tory MPs 
received cash for tabling par- 
liamentary questions was in 
chaos last night after seven 


Labour MPs withdrew in fury 
that it would not be open .to 
the public. 

As the government faced 
mounting pressure over accu- 
sations erf “sleaze” the MPs - 
who mate* tip the Labour con- 
tingent on. the powerful com- 
mittee on privileges - pro- 
tested that justice had to be 
seen to be done. 

The all-party committee, 
which gyamtni»« cases of par- 
liamentary misconduct, is due 
to interview two Tory MPs 
over reports that they received 
£L000 in return for tabling par- 
liamentary questions. The two 
MPs have denied the allega- 
tions. 


Ban on 
Adams 
may soon 
be lifted 

By David Owen 

The government is poised to 
lift orders banning 

Mr Gerry Adams and other 
prominent members of the 
nationalist Sinn F6in in North- 
ern Ireland from visiting the 
Bri tis h mainland 

The move is likely within 
days and would be part of the 
government's staged response 
to the IRA ceasefire in North- 
ern Ireland. 

The decision may be agreed 
at a meeting of Mr John Major 
and cabinet colleagues today. 
Ministers will use the meeting 
to conduct a detailed stock- 
taking of th* situation in 
Ulster after last week’s loyalist 
ceasefire. 

London is considering open- 
ing a “reversible” dialogue 
with republican leaders. Senior 
ministers have come to recog- 
nise that they may never be 
given an unequivocal pledge 
that the IRA ceasefire Is per- 
manent 

Ministers have acknowl- 
edged that such talks could be 
under way by Christmas. Sr 
Patrick Mayhew, Northern 
Ireland secretary, said last 
week that. the loyalist ceasefire 
made it harder for the IRA to 



John Toner, manager of Belfast’s refurbished Buropa hotel, 
yesterday. He said it had been bombed 32 times since 1971 


return to violence. Moderate 
unionists, whose support for 
the peace process is vital, 
are not expected to object 
to an early move to lift the 
pyriTirinn orders because many 
see them as a denial of the 
integrity of the union between 


Northern Ireland and the rest 
of the HE. 

The eyrlnginn order against 
Mr Adams, file Sinn Ffcin presi- 
dent. was made last October 
under a law of 1989. The gov- 
ernment refused in January 
this year to revoke iL 


Samsung faces plea to 
recognise a union 


Union leaders agreed yesterday 
on a united approach to 
attempt to persuade South Kor- 
ean industrial group Samsung 
to recognise a union at its new 
£450m Cleveland electronics 
complex, Chris TJghe writes. 

The northern region Trades 
Union Congress executive 
agreed at its monthly mpaHwg 
that the TUC. on behalf of all 
member unions, should 
approach Samsung. 

Union leaders in the region 
hope the company, which 
expects to employ 3,000 people 
at its new Wynyard complex, 
will agree to recognition of a 
single union, in the way Nis- 
san did when it selected 


nearby Sunderland as its Euro- 
pean car plant site a dwaflft 
ago. 

The collective approach is 
intended to avoid a onion 
free-for-all. The unions said 
they had worked closely with 
the tftflm of agencies which 
helped win the Samsung proj- 
ect 

Initial fnrfinntinnR from Sam- 
sung are not encouraging for 
the unions; at the company’s 
television plant in Bfflingham, 
Cleveland, there is no union. 
“We don’t believe a union is 
necessary,” said Mr Walter 
Measor, general affairs director 
of Samsung Electronics Manu- 
facturing UK. 


Lloyd’s keen on out-of-court deal 


By Ralph Atkins 
Insurance Correspondent 

Lloyd’s ctf London is prepared 
to make a fresh attempt at 
reaching an out-crf-court deal 
between loss-making Names 
a-nd the professional agencies 
they are suing, Mr Peter 
Middleton, chief executive of 
the insurance market, indi- 
cated yesterday. 

If there is a “s tro ng mood 
and some optimism" that a 
deal is possible, he and Mr 
David Rowland, Lloyd's chair- 
man, “will do everything that 
we can to see that that settle- 
ment is readied,” Mr Middle- 
ton said. 

His comments, at a confer- 
ence organised by accountancy 


and hanking co mpany Smith & 
Williamson, followed the open- 
ing this week of the latest 
court battle mounted by 
Names, whose assets have tra- 
ditionally sup p ort ed the insur- 
ance market 

The Feltrim Names Associa- 
tion is claiming t flzsm in dam- 
ages for losses incurred in the 
late 1980s as a result of “spiral” 
Ins ura nce by which underwrit- 
ers agreed to cover others for 
excessive losses from catastro- 
phes. 

Earlier this year Names 
rejected a Lloyd’s settlement 
offer worth £9 00m. Subse- 
quently the Gooda Walker 
action group won damages it 
says are worth £SOfm. 

Mr Middleton believed the 


Gooda Walker case had not 
acted as the catalyst for an out- 
of-court settlement for other 
legal actions largely because 
the level of damages had yet to 
be agreed. A final level may* 
not be set for some weeks. 

But he said that “in a couple 
of weeks” he and Mr Rowland 
would assess the strength of 
support for a deal among 
Names' groups and the errors 
and omissions insurers, who 
provided Lloyd's managing and 
mpmh grs agencies with cover 
against negligence awards. 

The insurers feel that the 
action groups may have to 
accept that they will never 
recoup a large part of their 
losses - because the errors- 
and -emissions cover is not suf- 


ficient and much of it is under- 
written by other Names. 

Mr Rowland and Mr Middle- 
ton, who are keen to mark a 
break from Lloyd’s past 
losses, are Teluctant to 
mafefr an pnhanrod central con- 
tribution to any settlement 
offer. But there is optimism 
among Lloyd’s authorities that 
it may be possible to strike a 
deal before the end of next 
year. 

By then Lloyd's hopes to 
have established Newco - a 
company set up to take on the 
liabilities outstanding from 
policies written in 1985 and 
before, including many US 
asbestosis and pollution 
claims. That may clarify the 
position of many Names. 


9 


UK ECONOMIC DIGEST 


Retail sales rise 
beats forecasts 


UK retail sales rose foster than (Sty of London expectations 
last month, but official figures released yesterday indicated 
that shops were having to cut prices to attract customers. 
Sales volumes rose by an estimated and seasonally adjusted 
0.5 per cent between July and August, outpacing City- forecasts 
of 0.3 per cent The government’s Central Statistical Office 
said volumes were also 3.7 per cent higher than in the same 
month last year. The volume of sales was largest in food, 
Nothing and household goods, where price competition and 
discounting is fiercest. 

Such pricing strategies appeared to affect the seasonally 
adjusted values of retail sales, which rose at almost the same 
rate as volumes, by 3A per cent from the same month last 
year. Mr Richard Brown, deputy director-general of the British 
Chandlers of Commerce, warned that retailers were achieving 
volume increases by aggressive discounting. “Retail sales 
growth is being bought at the expense of profitability.” he 
said. 

Mr John Major, the prime minister, said in Birmingham that 
the foundation had been laid for “the most sustained growth 
with low Inflation that this country has ever seen in the 
post-war period". He said the absence of a “feelgood factor” 
was a good sign, because “feelgood factors” were "usually a 
prelude to a hangover". 

House prices set to recover 

House prices are poised to stage a modest recovery, increasing 
by 6 per cent by the end of next year and rising by almost 50 
per cent by the end of the decade, says a forecast from UBS. 
the broking group. It said the Increases would still “represent 
the weakest housing recovery since the second world war." 

Even so, UBS expects prices to outpace income growth, 
forecasting an average rise in house prices of 8 per cent a year 
to the end of the decade, when the average price of a home 
would be £92.000 (5145,360}. 

Government borrowing falls 

An unexpected boost in tax receipts brought government bor- 
rowing down to £4.08bn ($6.44bn) last month, edging slightly 
below City forecasts of £4.3bn. September's figure brings the 
public sector borrowing requirement for the first six months of 
the financial year to £l9-5bn, down from £23 .9 bn in the same 
period last year, indicating that the Treasury is still well on 
course for its forecast of £36.lbn for the PSBR in 1994-95. 

Receipts from taxes, excise duties and other income totalled 
£19.26bn for September, representing a 20 per cent increase 
from £l6.llbn in the same month last year. 

Manufacturing orders buoyant 

Manufacturing companies are enjoying buoyant domestic 
orders and are p lanning to invest more in plant and equip- 
ment, says the latest survey from the British Chambers of 
Commerce. But the proportion of companies working at full 
capacity has jumped sharply and is not far short of the 
pre-recession levels reached in 1989. 

Tanks group to shed 235 jobs 

Vickers, the supplier of tanks to the British army, is to cut a 
total of 235 jobs at its twin plants in Leeds and Newcastle 
upon Tyne, and 65 jobs are to go from Newcastle-based Inter- 
national Research and Development, part of Rolls-Royce Indus- 
trial Power Group. 


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FINANCIAL TIMES 


THURSDAY OCTOBER 501«4 # 


Treasury wants to hand tasks to SIB 


By Norma Cohen, 

Investments Correspondent 

The Treasury has proposed 
devolving more of its regula- 
tory powers to the Securities 
and Investments Board, the 
chief regulatory body for finan- 
cial services. At the same time, 
it wants to take on additional 
duties regulating occupational 
pensions and insurance. 

The Treasury's proposal to 
devolve more of its duties to 
SIB is seen as a vote of confi- 
dence in SIB's activities, which 
have aroused antagonism from 
some parts of the financial ser- 
vices industry. 

The Treasury yesterday pro- 
posed three key areas in which 
it felt SIB could expand its 
role. The Treasury said its 
director of finance regulation 
and industry should review 
whether additional work could 


Aim 

Tha Treasury’s overall aim is to 
promote rising prosperity baaed on 
sustained economic growtti 


Mission statement 

In seeking to meet this gton we wat 

•maintain astaSstsrvecroecamrric 
environment, 

•improve the long-term performance 
of the economy and the outlook for 
tabs, tn strategic partnership 
with others; 

•maintain a professional, wetf raotl- 
vatad and outward-looking 
organisation, committed to 
continuous Improvement 


be passed to STB without pri- 
mary legislation. 

In particular, the Treasury 
would pass to SIB the 
day-to-day responsibility for 
overseeing the listing depart- 
ment of the London Stock 


Exchange, a move which 
would make SIB more like the 
Securities and Exchange Com- 
mission in the US. 

However. such a 
development is unlikely to be 
welcomed by the London Stock 
Exchange, which is already 
under pressure from SIB to 
alter some of its rules on the 
transparency of transactions. 

Moreover, the move would 
create additional expense for 
the stock exchange because 
unlike the Treasury whose 
costs are paid for out of tax 
revenues, SIB must recover the 
costs of its oversight from the 
regulated bodies themselves. 

The Treasury also said it 
would like to pass to SIB 
responsibility for determining 
whether the rules and 
operation of overseas 
exchanges that wish to 
conduct investment business 


in the UK are as rigorous as 
those of domestic exchanges. 
While SIB aLready has a 
consulting role in making such 
derisions, the Treasury is the 
final arbiter. 

Also, the Treasury has 
proposed that SIB take on 
responsibility for determining 
which territories offer 
equivalent investor protection 
to that in the UK. Investment 
businesses from equivalently 
regulated territories may be 
allowed to operate in Britain. 

Senior Treasury officials had 
been hinting for months that 
they believed that 
responsibility for regulation of 
occupational pensions and 
prudential supervision of life 
assurance companies should be 
concentrated in its department. 

Yesterday’s document said: 
“In particular we see 
considerable logic and 


attractions in the suggestion 
that the Treasury might 
eventually take on more 
responsibility, for example, for 
the regulation of pensions and 
insurance. Such a move would 
bring responsibilty for 
regulating all the key financial 
institutions and markets into 
one department, the Treasury.” 

Sources familiar with the 
Treasury plans said that the 
department expects to provide 
oversight for the proposed new 
Occupational Pensions 
Regulator to be created 
through legislation later this 
Parliamentary session. 
Currently, responsibility for 
occupational pensions rests 
with the Department of Social 
Services, while the Department 
of Trade and Industry is 
responsible for the prudential 
supervision of life insurance 
companies. 


Top official speaks of ‘stressful period ahead’ 


By Andrew Adonis 

Sir Terence Bums, the Treas- 
ury’s top civil servant, was 
frank yesterday about the pros- 
pect of job cuts. "We shall have 
a difficult and stressful period 
ahead." he wrote to staff. 

One senior official likened 
the impact of the report about 
restructuring to that of the 
visit of the International Mone- 
tary Fund in 1976, the crisis 


year of the last Labour govern- 
ment. 

Behind the cuts lies a radical 
reorientation of the Treasury's 
activities. The number of direc- 
torates will be reduced from 
nine to seven, with a lesser 
emphasis on economic fore- 
casting and a large reduction 
in the effort the Treasury 
makes to ‘'shadow” the Spend- 
ing departments. 

Even Conservatives close to 


the Treasury are divided about 
the plans. Mr Andrew Tyrie. an 
adviser to both Lord Lawson 
and Mr John Major in their 
periods as chancellor of the 
exchequer in the Thatcher gov- 
ernment said: ’’Unlike much of 
the civil service the Treasury 
ain't broken, so there must be 
doubts about the wisdom such 
a fundamental culL" 

By contrast Mr Graham 
Mather, president of the Euro- 


pean Policy Forum and a Tory 
member of the European par- 
liament said the proposals rep- 
resented a "historic opportu- 
nity" to reshape Whitehall and 
strip out unnecessary adminis- 
trative tiers. He likened the 
review to the radical Treasury- 
driven reform process in New 
Zealand, which has led to 
senior officials serving on indi- 
vidual contracts tied to perfor- 
mance targets. 


For most observers the key 
Issue is whether the reforms 
will limit the Treasury's capac- 
ity to control the spending 
departments. The review 
insists the Treasury must "con- 
tinue to exercise the firmest 
possible control over public 
expenditure” but can do so 
without the "current panoply 
of detailed controls over 
departmental gifts, ex gratia 
payments, projects and so on.” 


Stoical 
bureaucrats 
await axe 


Stiff upper lips were in 
evidence yesterday at the 
Treasury as officials reacted 
philosophically to news of job 
cats, Peter Marsh writes. 

"One has got to be intellec- 
tually honest about this,” said 
one official whose job is in the 
firing line. "There are one or 
two details about the propos- 
als which I disagree with, but 
the overall goal of cutting 
down on management layers 
in the civil service is some- 
thing hard to argue against” 

Such stoicism was the order 
of the day throughout the 
department, with officials 
mindful that the medicine 
they are being forced to swal- 
low is precisely the stuff they 
have dosed oat to .other gov- 
ernment departments for a 
decade. 

"A lot of people can see the 
logic behind the moves, even if 
the costs in human terms are 
uncomfortable.*’ said another 
high-ranking civil servant. 

There was some concern, 
however, that the proposals 
may jeopardise the tradition at 
the Treasury that promising 
young officials can expect pro- 
motions over an unbroken 
civil service career. "Anyone 
in the bottom layers who saw 
themselves as having a job for 
life is bound to be .disap- 
pointed,” said a long-standing 
Treasury official. 


Stores chief admits supermarkets have been ‘greedy’ 


By Ned Buckley 

The chairman of Britain’s 
biggest supermarket group has 
admitted that big food retailers 
were "greedy" in the 1980s and 
allowed prices for basic foods 
to “drift upwards", opening a 
gap for cut-price discount 
chains. 

The comments from Mr 
David Sainsbury. chairman of 
J..Sainsbury. came as Mr Hen- 
rick Gundelach, managing 
director of Netto, the Danish 
discounter which has been 
operating in the UK since 1990, 
said that discount competition 
in the grocery market would 
increase. 

He told a conference organ- 
ised by Verdict, the retail 


Superstore growth 


Stores total 


SupBVan m ratal outlet urti at feast 23.000 
Ml ft scans space on one Mud Scare*: Verdict 


research group, that the num- 
ber Of discount chains would 
increase from four to between 
eight and zo. 

Mr Sainsbury suggested that 
big grocery retailers had been 
wrong to desert town centres, 
and were finding new ways of 
trading successfully from high- 
street stores as well as from 


the greatly increased number 
of out-of-town superstores. 

Mr Sainsbury said at the 
annual convention of the Insti- 
tute of Grocery Distribution 
that in their rapid expansion 
since the mid 1980s grocery 
retailers had "allowed the pen- 
dulum to swing too far in two 
areas". 

He said: “The major food 
retailers in the 1980s concen- 
trated heavily on meeting the 
increasing demands of custom- 
ers for convenience, service 
and quality, and in so doing we 
allowed the prices on some 
basic commodities to drift 
upwards." 

His remarks broke some- 
thing of a taboo. Superstore 
chains such as Sainsbury, 


Tesco and Safeway, owned by 
Argyll, have always strenu- 
ously denied accusations that 
they "overcharged" customers, 
allowing them to make "exces- 
sive" profits in the late 1980s 
and early 1990s. The accusa- 
tions resulted largely from the 
fact that the retailers’ operat- 
ing profit margins were three 
or four times those of continen- 
tal European food retailers, at 
up to 8 per cent 

But superstores did not 
achieve such margins by put- 
ting a few pence on a packet of 
sugar or a carton of milk. 

They achieved them partly 
by expanding their ranges to 
include a far bigger proportion 
of high-margin goods. 

At the same time retailers 


reduced costs by exploiting the 
economies of scale of larger 
stores, centralising their distri- 
bution through large regional 
warehouses and investing in 
check-out scanning and power- 
ful computer systems. 

His comments help explain 
the so-called "price war" in the 
grocery market over the past 
year. While there have been 
promotions on other products, 
superstores have focused on 
cutting prices on basic goods 
in an effort to squeeze out the 
discounters. 

But while skirmishing on 
basic food prices goes on, 
superstore groups are continu- 
ing to emphasise advantages 
ranging from choice and qual- 
ity to large car parks and baby- 


changing facilities. By continu- 
ally adding higher-margin 
products and services, super- 
store groups are limiting the 
damage done to overall gross 
profit margins by price compe- 
tition on basics. 

That ability to protect mar- 
gins enabled Mr Sainsbury, 
along with Mr David Reid, 
finance director of Tesco. and 
Mr Colin Smith, chief execu- 
tive of Argyll, to predict that 
the long-term outlook was 
bright for the big groups. 

Ail three admitted that it 
was becoming far more diffi- 
cult to win p lanning consent 
for out-of-town stores. They 
suggested superstores were 
moving from their “expansion" 
stage to “maturity”. 


UK NEWS DIGEST 


Biggest cable TV 
franchise unveiled 

Ireland. The announcement was made b> Sff Geo 6« n 
commission chairman, in Belfast. The bnt^***** 
almost certainly offer telEcommwucahonsserv u^s 

not be required to cable the entire Province. The , will, ho 
ever, have to say what parts of the area they intend - 

by what means and by what timetable. Under the 1990 Broad 
casting Act, cable licences normally go to the highest 0 
In addition to the bid price, a franchise operator has to pam - 
per cent of qualifying revenues for the final five jears ot tne 
15-year licence. 

Tribunal urged for fraud cases 

A tribunal to deal with all criminal, civil and regulatory 
aspects of serious fraud was called for yesterday by the former 
judge in the Guinness trials. Lord Justice Henry, who presidea 
over the trials arising from the 1986 Guinness takeover of 
Distillers, said at a conference that the need to avoid duplica- 
tion of investigation and adjudication in white-collar crime 
pointed to the creation or “forensic one- stop-shopping for 
fraud cases. 

He said issues of guilt, punishment by Imprisonment or fine, 
civil liability, payment of damages and restrictions on compa- 
nies' ability to continue in business should all be adjudicated 
in one process. The closest the western world had to such a 
model was the Securities and Exchange Commission in the US 
where, within a statutory framework of racketeering Jaws 
much more hostile than anything in the UK. a commission 
suggestion of a plea-bargain became an offer the defendant 
could not refuse. The US system was "brutal but effective”. 

Controls for weapons plants 

The atomic weapons establishments at Aldermaston and 
Burghfield, about 40 miles west of London, are to be subjected 
to licensing by the Health and Safety Executive. Mr Roger 
Freeman, a defence minister, said the government accepted 
"in principle” the executive's recommendation that the plants' 
immunity from safety licensing should be removed. 

The announcement followed the release on Monday of the 
executive's first published annual reports on four nuclear 
weapons plants. Officials said the introduction of licensing 
was intended to reassure local residents that everything possi- 
ble was being done to maintain safety at the plants. The 
executive's report about Aldermaston disclosed that produc- 
tion of warheads for the Trident submarine system was shut 
down last year after an incident during manufacturing. 

800-mile heritage trail launched 

An 800-mile heritage trail stretching from the Republic of 
Ireland through Wales and England to Normandy was 
launched at Stonehenge yesterday by Viscount Astor, the 
minister responsible for improving facilities at the ancient 
stone circle. The trail will link 50 heritage sites between 
Lismore in southern Ireland and G alllard in France, once the 
seat of King Richard "the Lionheart". "The trail helps to meet 
the need to develop untapped tourism potential without 
destroying the natural and cultural heritage which is co criti- 
cal to generating tourism in the first place," said Lord .Astor. 


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11 








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FINANCIAL TIMES THURSDAY OCTOBER 20 1994 ★ 

MANAGEMENT: MARKETING AND ADVERTISING 


A recent announcement by 
AC Nielsen Japan, the Jap- 
anese arm of the US mar- 
and television rat- 
ings group, ia causing havoc among 
™* country’s television and adver- 
tising communities. 

At issue are the company's plans 
to launch, nest month a television 
ratings system using the socaHed 
people meter, which measures rat- 
ings based on individual viewers’ 
opinions. 

Although Japan's television 
advertising market is the 
largest in the world, with, turnover 
last year totalling Yl^fflbn teuton). 
Japan is cure of the few countries 
where television commercial rates 
are stiH based on household ratings. 

Nielsen's announcement >»nc 
stoked up the debate between the 
country's corporate advertisers, 
which are eager for more detailed 
and timely information, and the 
television networks, which are try- 
ing to stop the move. 

Companies’ needs for more 
detailed data on who is watching 
what have been heightened by the 
downturn in Japanese corporate 
earnings and lower advertising 
expenditure. “Our advertising bud- 
get has fallen around 30 per ™»n+ 
since 1990, so we would be inter- 
ested in getting information on indi- 
vidual viewers,” says Toyota Motor, 
the leading car maker. 

Under the household ratings sys- 
tem, automated data is relayed from 
3,600 households across the nation. 
But the information does not help 
companies that want to ta rget con- 
sumers of particular age or gender 
group. “In an age where a house- 
hold has about four television sets, 
household-based ratings are really 
of no use,” says Striseido, the coun- 
try’s largest cosmetics company and 
a leading advertiser. 

The system is supplemented by 
individual ratings based on diaries 
in which viewers indicate the chan- 
nels they watch. However, the 
Japan Advertisers' Association 
(JAA) claims the figures are useless 
because the diaries are fined in dur- 
ing just one week a month and rely 
heavily on viewers’ memories. 

Nielsen’s people meter, by con- 
trast, requires every viewer to push 
a button on top of the TV set aarfi 
time he or she watches television. 
Each member of a "Nielsen family" 
will have a separate button and a 
heat sensor will warn viewers by 
beeping if the number of buttons 
pushed and the nmnhpr of people in 
front of the set do not match. 

The television networks, mean- 
while, which are also irritated that 
Nielsen bad foiled to consult thorn 
before its announcement, argue 
that the people meter is an imper- 
fect tool, and refer to developments 
in the US, where American net- 
works are questioning the system’s 
acc u r a cy. They further argue that 


Emiko Terazono and Diane Summers 

on controversy in Japan over new 
plans for monitoring television viewing 

Ratings 

rumpus 



the people meter 
still relies on the viewers' 
diligence to press the machine’s 
buttons. 

According to Brian Roberts, man- 
aging director of AGB Television, 
the company that operates a “peo- 
ple meter" for toe BBC and JTV in 
toe UK very similar to Nielsen's 
controversial Japanese model, 
much depends on how scientifically 
the sample of television viewers is 
selected and how well these viewers 
are instructed in how to use toe 
meter. 

ACS is now also able to log "time- 
shifted" programmes on its model 
of the people meter. "If you record a 


programme and play it back within 
seven days, our clever probes pick 
that up,” he says. Official British 
viewing figures now include this 
“off-air" viewing. 

The mate problem in m on itori ng 
television viewing in the f utur e is 
going to be keeping track of which 
station a set is tuned to - with toe 
proliferation of cable channels, this 
is already a problem in the 
US. 

AGB Television recently unveiled 
a new "picture-matching" system 
that win weak by collecting samples 
of digitised television pictures, 
rathe* than relying an measuring 
the frequency of the signal - an 


increasingly complex task, with so 
many channels now in existence 
and frequent changes in frequen- 
cies. 

The ultimate dream of advertisers 
must be “passive metering” - a 
machine that will he able to tell for 
itself who is sitting in front of the 
TV. Roberts believes that thfc tech- 
nology will be expensive to develop 
and is still same way off. 

He also considers that passive 
metering would riye researchers lit- 
tle more information than they get 
now with the people meter, and tha t 
the technology could be seen as 
unacceptably like having Big 
Brother in the homes of sample 
viewers. 

The issue in Japan, however, is 
more than Just a simple technologi- 
cal debate. Behind the wrangling is 
an attempt to prise (men toe ratings 
market, which is effectively con- 
trolled by the television networks, 
by Dentsu and Hakuhodo, the two 
largest advertising agencies, by 
Video Research, the ratings agency 
which has a virtual monopoly in its 
field. 

Given the that ratings 

have over programme schedules 
and advertisement rates - not to 
mention expensive ratings service 
fees - corporate advertisers are 
happy to lend their support Foreign 
advertising agencies, trying to pai n 
a foothold, are also behind the 
move. 

For Nielsen, the move is a big 
step in trying to regain a foothold 
in toe ratings business. Althou gh 
the company first introduced to 
Japan co u c op ^ of television rat- 
ings in 1960, It Inst out when Video 
Research was set up by the net- 
works advertising a g^W*** two 
years later. 

There is also much at stake for 
the advertisers, which have taken a 
risk by confronting Dentsu and 
Hakuhodo. According to brokers 
James Capel in Tokyo, these two 

hgndip mare than one-third of all 

advertising budgets in Japan. "To 
sever a relationship with the two 
agencies will have grave repercus- 
sions since they usually control the 
best advertising slots and have a lot 
of information which we would 
nriss oid on," says an advertiser. 

For many companies, television 
remains the most effective medium 
to reach consumers. The negotia- 
tions between the networks and 
advertisers have so far been han- 
dled delicately. 

Akihiro Ito, secretary-g enera l of 
toe JAA, says the association will 
now stand back and wait for the 
outcome of Nielson's launch next 
month. 

However, the broadcasting associ- 
ation - which has so fbr foiled to 
dissuade Nielson — plans to keep up 
the pressure will announce a 
statement of its opposition before 
the launch of the people meter. 


A battle over 7m 

merchants 

Richard Tomkins on US advertisers’ public feuds 


C omparative advertising, 

they call it: promoting your 
products by doing down a 
rival’s. But in the US, where the 
practice scons to have taken a 
particularly nasty turn, one recent 
campaign might better be 
described as a hare-knuckle fight. 

For the last three weeks Visa 
International and American 
Express, two of the world's 
biggest payment card 
organisations, have been 
conducting a public dung in g 
match in which they have used 
fan-page newspaper 
advertisements to abase one 
another’s products. 

The story started last month 
when American Express, famous 
for its charge cards, decided to 
launch an assault on the market 
with a new product caBed the 
Optima True Grace card. 

In advertisements, American 
Express said Optima True Grace 
offered an advantage unavailable 
to holders of other credit cards: an 
interest-free grace period on new 
purchases even if the monthly bill 
was not paid in fblL Most canls, it 
said, changed interest from the 
moment of purchase if holders did 
not pay off the fall balance. 

At the end of September. Visa 
started hitting back. In newspaper 
advertisements across toe US, it 
yelled: "American Express is 
offering you a new credit card, but 
yon don’t have to accept it. Heck, 
7m merchants don’t." In sma ller 
type beneath toe main message, it 
said 7m merchants accepted the 
Visa card that did not accept 
Optima True Grace. 

After a couple of weeks, 
American Express’s piflww* 
snapped. It started running 
full-page cou n t e r b lasts to the Visa 
campaign, asking: “Why is Visa 
incorrectly claiming 7m more 
lMT rJiun te than Ampr i ram 

Express? (We challenge Visa to 
name them.) Answer: So you won’t 
notice the $Ufon unnecessary 
i n ter es t they charge you." 

Both sides vigorously defend 
their advertisements. Visa says It 
win be happy to name the 7m 
merchants which do not accept 
American Express if Aim»riB>n 
Express will pay for the space. 
American Express says tills is a 


American Express 
isoferiigyou 
anwcrefflcaio, 
but you don’t 
hare to accept it 


Heckjmfflion 
merchants dont 



TOamwjUMTUUst 

CHUEU 

APPLY FOR THE NEW 

Optima* 

True Grace Card 

FROM 

American Express. 



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red herring because most Visa 
agents are outside the US and 
have never seen, nor will ever see, 
an American. The real Issue, it 
says, is the interest charges. 

"We are firing a missile directly 
into Visa's home base. We are 
going right afro* its market Visa’s 
scared as hell about it That’s 
what these ads are about” says 
American Expres s’ s Thomas 
Ryder, president establishment 
services worldwide. 

One obvious drawback of 
responding to a rival’s adver tis ing 
claims in this way is that ft can 
draw attention to a product that 
would otherwise have gone 
unnoticed. An increasingly 
popular alternative is to lob a 
lawsuit at the offending party. 

Last week Hertz, the car rental 
company, employed the technique 
in an attempt to stop its rival Avis 
from running a television 
commercial promoting an airport 
valet service. The Avis 
advertisements offer a 
ch auffeur- driven lift from car 
rental parking lots to airport 
terminals across the US, but 
Hertz's suit says many airports do 
not alio w such a service because it 
adds to congestion. Avis has filed 


a counter claim. 

Even so, the public name-calling; 
does seem to have become 
unusually loud of late. In another 
newspaper advertisement, AT&T, 
toe US telecommunications 
company, has been contradicting 
the claims made by rival MCI 
Communications for a discount 
calling plan, saying: “Yon never 
save 40 per cent off your bilL (Yon 
actually save an average of only 
13 per cent).” 

The National Advertising 
Division of the Council of Better 
Business Bureaus, the US 
industry’s self-regulating body, 
says the outbreak is probably 
coincidental rather than 
Indicative of a trend. Debra 
Goldstein, the division's acting 
director, says opinions remain 
divided about whether 
comparative advertising provides 
the consumer with additional 
valid information or whether it 
simply gives competitors free 
advertising time. 

"There are pros and cons an 
both sides,” Goldstein says. "But 
many advertisers may fed it just 
turns the consumer off, publicly 
airing a feud. No one wants to 
listen to that” 


Tvvek. Typar; Sontara : 

Home improvements 
you might not know you had. 


Astral! round an imaginary suburban home is a good way to demonstrate 
the versatility of non-woven fibre sheet systems. 









TYVEK high density polyethylene sheet 
roof linings help save energy. This 
tough, lightweight mfcrofibre material 
shuts out wind, ran and dirt, but is 
water-vapour permeable. Roofs 
breathe, avoiding condensation and 
interior dampness problems. The entire 
rafter space can be used to Improve 
insulation, and there is no need to treat 
woodwork with toxic chemicals - good 
reasons why house builders choose 



TYVEK HD over conventional rooflining 
materials. In northern Europe, some go 
even further and completely enclose 
timber-framed homes in TYVEK 
Housewrap to seal-off the elements. 


TYPAR is a non- woven polypropylene 
sheet material with equally versatile 
characteristics. It helps stabilize foun- 
dations and eliminate damp. Its excei>- 
tfonal strength and filtration capabBities 




are exploited by architects, engineers, 
builders and others in a wide range of - 
geotextile applications, from road- 
works and drainage systems to land- 
scaping, root and weed control. 

But it isn’t oniy an outdoor product 
Step inside, and you’ll find TYPAR too, 
of a very different type. Hs dimensional 
stability makes it an ideal backing for 
tufted carpets: ITs easier to work with 
than woven materials and leasts 
pattern distortion which allows manu- 
facturers greater freedom to create 
intricate designs for you. 

MetfroMBtryiBlMyara - 

Our SOlflARA process, which produces 
softer, fabric-like sheet materials from 
a variety of fibres, has replaced wovens 
and knits in many industrial and medi- 
cal applications. A woodpulp and 
polyester version gives surgical gowns 
and drapes superior 
barrier properties. 

Another converts into 
lint-free, non-abrasive 
wipes for deanrooms 
and electronic equip- 
ment. SOMTARA’S 
household duties 

range from everyday ^ fmtk m 

items like soft, strong, jj 
wet-wipes for the " wna*** 




youngest members of the family to bed- 
ding, upholstay and wan paper- improve- 
ments which you can’t readily see. 

An-wqftwprfctiM 

But you don’t have to look far for 
TYVEK indoors. Differentgrades of the 
material that insulate roofs are 
processed to make envelopes, labels, 
printed materials, decorative items - 
even specialized clothing. 

Check the mailbox: TYVBCs light- 
weight, waterproof, tear-resistant 
qualities are increasingly in demand 
for tough, secure envelopes that 
ensure their contents reach you in 
good condition. Special grades are 
widely used in the medical world for 
reliable sterile packaging. 

Check your wallet or handbag: these 
same waterproof, tear-resistant 
properties make TYVEK a good choice 
for print items like 
licenses, permits, season 
tickets, labels and even 
maps that need to be 
all-weather durable. Or, 
you can admire the 
benefits of this versatile 
product on quite a 
)||M . different scale on your 

wall: art reproductions 
on TYVEK have a sur- 




face texture that closely replicates 
original oils. Beyond the home, brightly 
printed TYVEK is used for signs, 
banners, promotional clothing, even 
competitors’ numbers in marathons 
- as well as by industry for more down- 
to-earth applications, such as durable 
wiring diagrams, templates, and 
assembly and service Instructions. 


HecjcbMe w ri w araatter 
t&e viar Btb BrfSsb like it 

The barrier properties of "TYVEK- 
ProJech” garments are widely speci- 
fied in industry for work with hazar- 
dous materials. Hopefully, you won’t 
need this at home, but you might 
appreciate the environmental friendli- 
ness of “TYVEK-RecycteMaiT. These 
strong, lightweight overalls are ideal 
_ for the DIY enthusiast As the name 
suggests, DuPont recycles them, so 
there's no waste. After use, just stuff 
the overall in the pre-paid TYVEK envel- 
ope which is stitched to its interior and 
mail it to us. we take care of the rest 


But to get some idea of the sheer 
scope for innovation that TYVEK offers 
imaginative manufacturers, you might 
also check the fridge. A British brewer 
has devised an ingenious way of trap- 
ping tiny nitrogen bubbles in canned 
beer using a special TYVEK liner. 
Poured at home, it gives the traditional 
"head" of foam that British beer- 
drinkers expect in pubs. 





table, more efficient modern living. 
And they're likely to play a bigger part 
in the future as we and our customers 
develop new and even better ways of 
exploiting their potential. 

TYVEK, TYPAR and SOHTARA are manu- 
factured by DuPont Nonwovens. 
DuPont is one of the world's leading 
industrial companies, supplying ma- 
terials and products to almost every 
industry sector from 40 production 
and development facilities in Europe 
alone. 

DuPont Rtenwovens 

P.O.Box 50 

CH-1218 Lb Grand -Saconnex (Geneva) 
Tel. ++41/22/71751 tl; Fax 71751 09 



Almost certainly, somewhere in and 
around your home, the benefits of 


TYVEK, TYRAR and S0NTARA are contri- 
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12 


THURSDAY OCTOBER 20 >*» 


financial times 

TECHNOLOGY: STEEL TAKES ON ALUMINIUM 


Clash 


of two 
metals 


Andrew Baxter on how the 
world’s steel industry is 
fighting back against 
aluminium and other rivals 


T ucked away in a luxury 
Colorado Springs hotel in 
October, some 350 execu- 
tives from the world's big 
steelmakers bad the chance to view 
some interesting slides brought 
along by colleague Jeff Edington. 

These were no holiday snaps. 
Edington, British Steel’s executive 
director for technology, was show- 
ing delegates at the annual Interna- 
tional Iron and Steel Institute con- 
ference the wings from a Hawker 
Harrier jumpjet fighter and the tail- 
fin of an Airbus 33a 
In both cases, carbon fibre (a com- 
posite material challenging both 
steel and aluminium) had replaced 
aluminium as the material used. 
Edington’s point was that steel, the 
world's most versatile structural 
material has no automatic right to 
its position in the market place. 

“ Our product is a low cost, highly 
sophisticated material with a lot of 
development potential left in it The 
market is ours to lose. If we lose it 
we can only blame ourselves for 
lack of technical and business cre- 
ativity and innovation.'' he says. 

The upbeat outlook of Edington 
and other steel industry executives 
about the future of their product 
might seem to be misplaced. The 
public perception of steel is of an 
industry in decline, twisted by sub- 
sidies. wracked by controversy over 
job cuts, and tarnished with an 
old-fashioned image. 

Some in the industry admit they 
have let producers of rival materi- 
als, notably al uminium , gain too 
much ground in recent years, and 
may have been distracted by their 


own industrial problems from pro- 
moting their products more effec- 
tively. and developing new markets. 

Now, with steel demand rising, 
they have a chance to prove the 
public perception of the Industry 
wrong. Lenhard Holschuh, the insti- 
tute’s secretary general, predicts 
world consumption of steel will rise 
by 03 per cent and 3.4 per cent this 
year and next, and by an average 
2.8 per cent a year to reach an 
unprecedented 750m tonnes in 2000. 

Some observers believe this may 
be too op timis tic, although there is 
general agreement that much of the 
increased demand will come from 
developing countries. Nearly half of 
the steel consumed In 2000 will be 
used in Asia, says Holschuh. 

Apart from the geographical fac- 
tors. achieving these growth predic- 
tions will depend critically on the 
success of some of the product 
development and marketing initia- 
tives, involving both steelmakers 
and users, currently under way. 

The initiatives highlighted at Col- 
orado Springs show how steel- 
makers are working to defend their 
patch in the three key industrial 
battlegrounds: 

• In the automotive sector, an 
international industry consortium 
of about 30 steel producers is 
designing an ultra-lightweight steel 
car body. 

• In packaging. European steel- 
makers are co-operating to develop 
an all-steel beverage can made from 
a special lightweight high-strength 
steel (see accompanying article). 

• In construction, some steelma- 
kers are trying with considerable 



success to convince architects to 
use steel frames rather than con- 
crete in office and industrial build- 
ings. Others are battling with steel- 
producing rivals to supply the rein- 
forcing bar or welded mesh on 
which the concrete depends. 

In the US, one of the biggest 


recent success stories for steel- 
makers has come in the residential 
housing market, says John Ewing. 
US Steel's managing director for 
business development. 

In 1991 just a few hundred steel- 
framed homes were built in North 
America. But a task force formed by 


the American Iron and Steel Insti- 
tute identified an opportunity 
because of problems with materials, 
such as tiie rising cost and falling 
quality of lumber, and environmen- 
tal issues raised by forestry and 
scrap. Steel in contrast, can boast 
that it is fully recyclable. 


The Industries 5 main buyers 


Steel 

JAPAN 

UK 

US 

Autdmo8ve& transport •' 

26% 

15% 

24% 

Cans 8 containers 

3% 

7% 

6 % 

construction ' 

47% 

21 % 

34% 

. Engineering 

14% 

22 % 

21 % 

Other 

10 % 

35% 

15% 


Smae« MunoBand hen ond SM i«BBm 


Aluminium (EU) 



Last year, about 13.000 new 
homes in North America used all- 
steel frames, and another 80.000 
used steel in interior walls, so 
steel’s penetration is still tiny com- 
pared with the 1.3m housing starts 
in the US alone last year. Ewing’s 
target is for 25 per cent of all new 
homes to use steel framing in 1997 
and 6 per cent to use steel roofing. 

The lesson is that to achieve busi- 
ness success the steel industry does 
not always have to develop new 
grades of steel - such as the mod- 
em types of steel wire that allow 
suspension bridge spans now to be 
increased to nearly 2km, or the 
many new grades of coated steels 
used in car bodies. 

Edington believes a “system solu- 
tion” will become increasingly 
important Steelmakers must think 
of their products as part of an engi- 
neered system consisting of various 
materials that together give custom- 
ers value, he says. The system 
would have to cope with recycling. 

Two other important driving 
forces for the steel industry, he 
says, are environmental pollution 
arising from using the end-product, 
most notably in the car industry, 
and process automation aimed at 
reducing costs and improving the 
quality of the final product 

In can-making, for example, pro- 
duction rates are increasing and 
decoration in up to six colours is 
added at 1,800 cans a minute, so 
dimensional accuracy and surface 
finish are paramount In many mar- 
kets, says Edington. accuracy and 


surface quality will have to con- 
tinue to be improved. . 

Outside the big three industrial 
markets, steel has recently had 
mixed fortunes. In white goods, the 
development of pre-painted and 
laminated steels, and repeated qual- 
ity improvements are hailed by 
steelmakers as factors enabling 
to win the battle with materi- 
als such as plastics. 

The challenge for the steel indus- 
try will be to cope with customers’ 
demands for increasingly diversi- 
fied and functionally sophisticated 
steel, but still generate a profit, 
says Minoru Tanaka, executive 
vice-president at Nippon Steel. This 
has led the Japanese steel industry 
to reassess its approach to quality 
and performance standards, produc- 
ing reasonably-priced products that 
perform adequately rather than ex- 
ceed the minimum required quality. 

In railway rolling stock, alumin- 
ium has become the standard mate- 
rial for m ainline carriages such as 
Germany’s ICE high-speed trains. 
“It’s lighter, and the image of the 
material seems to be mare modern,” 
says Rolf Schraut, head of research 
and development at Duewag, the 
Siemens rolling-stock subsidiary. 

However, stainless steel produc- 
ers are fighting back. One, Ger- 
many’s Krupp Nirosta, has devel- 
oped a stainless steel for the side 
wall of a high-speed train, working 
in cooperation with Duewag and 
Deutsche Rahn. It says it has the 
same rigidity and weight as a wall 
Ti yyfa of aluminium. 


fi 


BEVERAGE CANS 



Promoting a can-do 
approach 


AUTOMOTIVE 



On course for a 
head-on collision 


CONSTRUCTION 



Back in the frame 
for building 


A luminium is a relatively young 

metal that has established itself by 
taking over from traditional 
materials. It has replaced wood and steel 
in windows and cladding, copper in 
electrical cable and. above all. substitutes 
for steel in beverage cans. 

In the US. 95bn cans of beer or soft 
drinks are consumed every year, a can a 
day for every man. woman and child. And 
99 per cent of the cans are made of 
aluminium where once they were made of 
steelThis bas left the aluminium industry 
with a problem: about 10 per cent of global 
demand for its metal comes from one 
product in one country. So it is spending 
heavily to spread the gospel of the 
aluminium beverage can around the 
world. 

To promote the use of aluminium cans 
outside the US. the industry leans heavily 
on its green credentials, claiming that the 
cans may be recycled on a closed loop 
system (from cans to scrap and back to 
cans again). The relatively high value of 
aluminium as scrap - the cans are worth 
six to 20 times more than any other used 
packaging material and are the most 
valuable used package found in household 
waste - enables the industry to spread the 
word that can-recycling gives collectors a 
decent income. 

Last year, for example, the US 
aluminium industry is estimated to have 
paid S900m for used cans, money that 
benefited individuals, schools, church 
scout troops and so on. This is not simply 
altruism - the industry needs this 
recycled metal because it is a cheap raw* 
material for new cans. As much as 95 per 
cent of the energy needed to produce new 
aluminium is saved by recycling old metal 
because aluminium “stores’’ energy. The 
average smelter uses as much power as a 
town of 500,000 people to produce new 
aluminium. On top of that there are 
capital savings because a re-melting plant 
costs only one-tenth as much as a smelter. 

Steel producers argue that the high cost 
of new aluminium means it makes 
economic sense to use aluminium cans 
only if more than 60 per cent of them are 
recycled. Few markets achieve this leveL 
In the US the recycling rate is about G6 
per cent which means that last year 
roughly 600.000 tonnes of al uminium 
worth about S900m escaped, possibly to be 
thrown away. In Europe the estimated 
minimum recycling rate last year was 
about 30 per cent. 

in Europe aluminium bas won only half 


the available beverage can market and it 
is there that the steel industry, perhaps a 
little late, is fighting back hardest 

Steel beverage cans are as green as 
aluminium, the industry’s message goes, 
mainly because they can be attracted by 
magnets and are therefore easily rescued 
from waste. Cans are selling at roughly 
the same price - about $58 (£37) per 1,000 - 
although steel prices could come down 
more quickly as it has greater potential for 
light weighting. 

Innovative packages such as British 
Steel Tinplate's recently-launched Ecotop 
can, with a push-button, all-steel 
easy-open end could give steel beverage 
cans more appeal in consumers' eyes. 

John May, marketing manager at British 
Steel Tinplate, points out that the US steel 
industry, when it gave way to aluminium, 
did not have available the continuous 
casting technology the European industry 
is using to produce high-quality tinplate 
today. Recent technological developments 
in steel-can m aking have led to significant 
energy and materials savings. 

Steel beverage cans now have wall 
thicknesses of less than 0.1mm and are 30 
per cent thinner than those made of 
aluminium. Steel soft drinks cans are 25 
per cent lighter than four years ago, yet 
the industry is developing a steel can 30 
per cent lighter than now . and lighter 
than aluminium cans on the market 

Steel suffered a setback recently when 
Coca-Cola Schweppes, the UK’s biggest 
soft drinks group, switched its canning 
lines to aluminium, because of the metal’s 
lighter weight. Nick Mason at the CRU 
international consultancy group says that, 
as steel is much denser and heavier than 
aluminium it is possible to use longer or 
wider al umin ium coils. A typical 
aluminium coil will yield 12 cans per 
width compared with seven from a steel 
coil. So nearly twice as many tin plate 
coils are needed to make the same number 
of cans. That means more storage space 
and more handling, if steel is used. 

Nevertheless. May insists his industry 
does not suffer from a "siege mentality” 
about the beverage can battle which is 
only one part of the packaging sector. 

Steel has about 15 per cent of the UK 
packaging market and aluminium 5 per 
cent In beverage cans, in the Netherlands 
100 per cent are steel, in France it is 95 per 
cent and in Belgium SO per cent. 

Germany’s market is 85 per cent steeL 

Kenneth Gooding 


T he motor industry urgently needs 
lighter, stronger materials to meet 
demands for more economical and 
environmentally-cleaner vehicles. The 
lighter the car, the less fuel it consumes 
and tbe smaller the amount of pollutants 
ft emits. 

But manufacturers are also being pulled 
in another direction. Legislators want 
more safety features, such as airbags and 
side-impact anti-intrusion bars. 

Consumers increasingly want 
air-conditioning, compact disc systems 
and other comfort features. These add 
weight - and lots of it 
The first Volkswagen Golf of the early 
1970s weighed on average 750 kg. Thanks 
to all its extra systems, today’s Golf 
weighs around 1,000 kg. 

If VW could pare the car’s weight hack 
to 1974 levels while retaining modern 
convenience and safety features, the 1994 
Golf would travel about 17 per cent 
further on each gallon. 

Volkswagen’s executive cars division, 
Audi, jolted the world steel industry with 
its launch earlier this year of the A8, a 
luxury car with an all-aluminium 
bodyshell comprising a skeleton-like 
frame made of extrusions and castings, 
clad in pressed aluminium panels. The 
body structure is said to be nearly 40 per 
cent lighter than the steel equivalent 
Audi and its partner Aluminium 
Company of America (Alcoa) have 
installed specialised production facilities 
allowing output of up to 30,000 cars a 
year. 

More disconcerting yet for steel makers 
is that VW/Audi says it sees no reason 
why even high-volume cars such as the 
Goff should not have aluminium bodies 
early next century, while Alcoa says it is 
prepared to spend Slbn (£S00m) or mote 
on a partnership with any car maker 
seeking to produce aluminium-bodied cars 
in annual volumes of 100,000 units or 
more. 

In North America major car makers 
such as ford are also pressing ahead with 
development programmes for 
aluminium-bodied cars. In addition, a 
consortium of more than 20 steel-makers 
from around the world has embarked on a 
collaborative project aimed at designing 
the lightest possible steel bodyshell for 
cars. It has engaged Porsche Engineering 
Services, the US consultancy engineering 
arm of the German sports car maker, to 
lead the project which is setting out to 
show that a 20 per cent weight saving in a 


steel bodyshell can be achieved by 
optimising design using current pressing 
and body-welding systems, and 35 per 
cent by designing from scratch and 
utilising advanced technology. 

Even though VW/Audi has such a big 
commitment to aluminium body 
structures, it is keeping its options open. 
It is collaborating with Mercedes-Benz, 
BMW and the German and French steel 
industries in their own parallel 
programme to see whether thin, 
high-strength steels can achieve the same 
weight saving as aluminium, but at lower 
cost and using conventional pressing and 
welding equipment If it can be 
demonstrated clearly that this is so, steel 
makers say they believe other 
steel-favouring factors should prove 
decisive: easy repairability within an 
established repair infrastructure; easier 
painfcabfltty: and easier and cheaper 
recycling. 

A recent report by tbe Iron and Steel 
Institute maintains that whereas 
automotive steels are routinely shredded, 
melted and reformed into new products, 
aluminium body parts comprise different 
alloys with low tolerance both towards 
each other and outside contaminants, and 
so have to be recycled separately or 
downgraded into lower value products. 

In terms of energy conservation alone, 
the implications of even a 20 per cent exit 
in body weight are enormous. Applied 
across tbe world car population, 
according to Ludwig Hamm, Porsche's 
head of body engineering, fuel savings 
would equal the annual consumption of 
more than 6m cars. 

It is not only in the area of weight 
saving that steel makers are seeking to 
preserve their automotive markets. Steel 
makers have been investing heavily in 
mills to produce a variety of coated steels. 
A major part of this investment, around 
825bn worldwide, has gone into zinc 
coating lines. What began, in the 1960s, 
as a limited supply to the automotive 
industry of hot-dipped galvanised sheet 
for use in exposed under body parts has 
grown into the wholesale supply of steels 
with deep two-sided coatings. 

The approach bas helped to roll back 
part of the challenge to steel from the 
plastic composites sector, much of whose 
appeal has rested on its non-corroding 
qualities but which continues to suffer 
considerable problems of recyclability. 

John Griffiths 


T he great steel skeletons that thrust 
towards the New York sky 
epitomise the North American 
building site. Steel frames are a must for 
constructing office Mocks, industrial units 
and residential flats in the US. But this is 
not so for much of western Europe where 
reinforced concrete is preferred for 
multi-storey buildings in many 

countries 

The exceptions are in the UK and 
Sweden where use of constructional steel 
has risen sharply over the past decade, 
supported by new building design 
techniques and developments in fire 
resistant paints and sprays for steel 
products. 

Now European steel producers are 
working hard to increase market share in 
countries such as France, Spain. Belgium, 
the Netherlands, Germany and Italy. They 
estimate that if steel frames were used as 
widely in other European countries as in 
Sweden and Britain, constructional steel 
demand would increase by SL8m tonnes a 
year, a rise of 45 per cent. 

Some 57 per cent of multi-storey 
buildings in the UK and 90 per cent of 
single-storey factories and warehouses 
were estimated by British Steel in 1991-92 
to have been constructed with steel 
frames. In Sweden the corresponding 
proportions were 50 per cent and 80 per 
cent In Germany they were 11 per cent 
and 20-25 per cent and in Italy 11 per cent 
and 20 per cent 

Marketing campaigns have been 
launched in these countries by the large 
European steel producers and fabricators. 
These emphasise the speed and simplicity 
of using steel as a building material, the 
relative fall in the price of the metal and 
the introduction of new European building 
codes on fire protection that they hope 
will overcome some of the prejudices of 
developers against steel frames. 

Concern that steel loses strength when 
heated and therefore responds less well in 
big fires than reinforced concrete has held 
back development of steel in Europe. 

EU building codes developed by CEN. 
the European standards institute, will 
provide developers with guidance on the 
most efficient and economic fire 
prevention regimes for steel-framed 
buildings. Also, much work has gone into 
developing fire-resistant paints and sprays 
that can be applied to steel beams. 

Derek Tordoff. director of the British 
Constructional Steelwork Association, 
says: “European developers traditionally 


have thought that steel needed to be 
covered by concrete to be protected 
properly.” 

Retardants now include in tumescent 
paints that expand when heated into & 
thick coating that insulates the steel from 
heat and flames. Beams and pillars can 
also be covered by a mineral-based 
vermiculite spray that expands when 
heated and is widely used for insulation. 

Improvements in construction design 
aided by computers have made it much 
easier for architects to solve problems by 
design rather than by changing one 
material for another. 

At its best steel construction should be 
as simple as building in Lego. Ready to 
assemble prefabricated parts, cut perfectly 
to fit need to arrive on site in the right 
order and with the appropriate fastenings. 

Builders in North America have become 
accustomed to constructing with a 
standard range of components, which 
be assembled in various imag inative 
designs, but can be supplied by any one of 
a large number of manufacturers. Delivery 
problems are overcome quickly by 
switching suppliers while sub-contractors 
are content to handle products they are. 
accustomed to without having to develop 
special techniques and procedures. 

However, concrete has supporters too, 
and has also benefited from increasingly 
sophisticated design and prefabrication 
techniques. 

Steel is used alongside concrete for 
floors and cladding, and new design 
techniques have enabled developers to 
reduce the thickness, and therefore the 
cost, of the concrete flooring that sits on 
steel beams. 

Europe is a big prize. British Steel and 
the British Constructional Steelwork 
Association have combined with other 
large European steel producers and 
fabricators to develop common solutions 
and data on technical issues. 

Advisory teams of structural engineers 
have been established in countries such as 
Trance and Germany, with financial 
support from the Eurofer Steel Producers, 
to mak e design and technical support 
available to smaller countries. 

Production of constructional steelwork 
in western Europe is expected to be about 
5.7m tonnes this year - about the same 
level as last year but S per cent below 1992 
levels and 29 per cent lower than during 
1990. 

Andrew Taylor 


-i 


rj 







FINANCIAL times THURSDAY OCTOBER 20 1994 


13 


\ 


ARTS 







% 


.lft V 


i i 


Cinema/Nigel Andrews 

Talent in search 
of a signpost 



O n some days a critic 
wonders if his hea d is 
wound on the right 
way. The consensus 
among reviewers of 
nuentin Tarantino’s Pulp Fiction 
seems to be that the new fihw is 
even more violent than his Reser- 
voir Dogs, “but at least it is funny." 

Pardon me while I clutch at com* 
prehension. You mean: it is all right 
to watch people being shot, stabbed, 
tortured, sodnmised or drug-injected 
if we laugh at it, but not if we take 
it seriously? 

When Pulp Fiction won the Palme 
d’Or at Cannes this year, my shak- 
ing pen recorded the view that this 
was “another shameful crawl to 

PULP FICTION (18) 

Quentin Tarantino 


THE CLIENT (15) 

Joel Schumacher 


L’ENFER (15) 

Claude Chabrol 


THREESOME (18) 

Andrew Fleming 


Hollywood" from a festival not for 
the first titna thus grovelling. But 
the jury decision also reflected pop- 
ular response. The Palais audience 
roared happily - frigh tening ly hap, 
pily - as Pulp Fiction screeched and 
gear-shifted through its 2K-bour, 
tbree-stories-in-one traffic of under- 
world hit men and hoodlums. 

It roared when gangster’s moll 
Uma Thurman, having OlTd on her- 
oin. has a needleful of adrenalin 
stabbed into her chest by desperate 
escort-bodyguard John Travolta, 
anxious that she should not die 
while he is on the job. It roared 
when a kidnapped young black has 
his brains scattered over a car 
thanks to Travolta's slippery trigger 
finger. And it giggled when boxer 
Bruce Willis, running from his boss 
after refusing to throw an impor- 
tant fight, is captured by a sodomi- 
tic, weapon-wielding pawnshop 
owner and friend. 

Let us be clear. Tarantino is a 
brilliant talent Reservoir Dogs was 
scary perfection as a thriller dis- 
turbing in the right way, morally 


True Romance, Natural Bom Eulers 
- are piecing together an epic psy- 
chopathology of violence for Amer- 
ica, a country asking for one. 


Pulp Fiction is brilliant too. But it 
is a different brilliance: a dribbling, 
prolix, self- gratifying, one-handed 
brilliance. Tarantino's dialogue is 
still the best in American cinema, 
wild with colloquialism, non-sequi- 
tur and the shared references of a 
popculture generation. But in ear- 
lier films this dialogue served a 
pressure-chamber exploration of 
character as well as the mad lore 
and logic at the criminal mind. 

In Pulp Fiction the verbal riffs - 
on everything from French names 
for hamburgers to the sexual impli- 
cations of a foot massage - are just 
that Swirls of pretty inanity: as dis- 
embodied from each other as are 
the film's own sundered story-sec- 
tions. It is daring to show one lead- 
ing character’s death and then to 
jump to another tale in which the 
same character is alive. It says “Up 
yours" to the Aristotelian unities. 
But it also says “up yours" to an 
audience now so jaded that it is 
prostrate and giggling in the film's 
back seat It no longer cares where 
the vehicle is going so long as the 
shootings and expletives keep hap- 
pening. 

The film opens and closes with a 
sequence in a diner in which Urn 
Both »nd Amanda Pl nfflmflr play 
two debut crooks planning a 
hold-up. The diner setting is a mis- 
fortune. It recalls another movie: it 
reminds us that Barry Levinson in 
Diner pioneered this Daft Language 
Of The Young syndrome years ago 
and also gave us characters who 
had mhufc, lives and ferimg g, pulp 
Fiction is a joyride from nowhere to 
nowhere, with a man at the wheel 
who could be the director with the 
best sense of direction in America. 

Should you see Pulp Fiction? Yes, 
you still should- It is 150 wrinuteg of 
talent in search of a signpost 
★ 

The &ient, by contrast, is all sign- 
posts and no teisnf Taking a John 
Grisham bestseller about a fright- 
ened boy witness in a murder trial, 
who tries to stay mum while being 
cajoled by the FBI and menaced by 
the Mafia, director Joel Schumacher 
(Cousins, Flathners) approaches the 
{dot’s twists and turns like a first- 
tune cab driver struggling with his 
A-to-Z. 

This way for the boy’s meeting 
with caring, motherly lawyer Susan 
Sarandon, who agrees to take his 
case for toe one crumpled dollar in 
Ms pocket (Can I have her business 


teous FBI man played by Tommy 
Lee Jones: an actor who seems to be 
spending his entire career (see The 
Fugitive, Natural Bom Killers) 


stomping down corridors spraying 
orders at people. And this way - 
into the lawyer’s car and off into 
the night - for the climax in a 
boatshed where most of the mam 
cast meet over the dead body under 
toe concrete. 

Dr Johnson once said that If a 
play is a set in the king's bedroom, 
then everyone must have his busi- 
ness in the king's bedroom. I felt 
much the game about thte hnatahari 
But by this point in a sluggish, 
pedestrian thriller I was glad for toe 
company and the sense that every- 
thing was about to be over. 

* 

Claude Chabrol's LTSnfer, based on 
an uncompleted movie project by 
Henri-Georges Clouzot of The 
Wages Of Fear (he died six days 
into shooting in 1964), is brilliantly 
acted by Francois Cluzet He plays a 
young husband eaten up - almost 
literally to judge by toe pale, thin- 
ning alrin and deepening fauial faul- 
tifnwi — by irrational jealousy of Ms 
beautiful wife (BnvnHmnelte B&tft). 

Chart, who was the young musi- 
cian in Bound Midnight, makes the 
near-impossible role Irresistible. He 
is required to hear voices, talk into 


mirrors, throw tantrums at his 
guests (he runs a small country 
hotel) and do physical damag e to 
himself apd his wife- fairing at my 
notes later, I saw the comment: 
“ Clearly needs professional help.” 
But this refers to the character, not 
Cluzefs performance. LTSnfer, 30 
years after it was penned^ has fallen 
foul of an age when psychiatry 
would seem the answer to a clear 
case of clinical disturbance. 

Chabrol’s direction does not help 
disbelief-suspension. It Is nervously 
poised between sly naturalism - his 
favoured mode in masterworks like 
Le Boucher and La Femme Infidele - 
and the halfhearted expressionism 
that the material seems to solicit A 
surreally stark hotel corridor (out of 
Fifties film noir); sudden blackouts 
between scenes; or toe shot of a 
chair-slumped Cluzet reflected in 
the rectangular mirror over a man- 
telpiece, looking for all toe world 
like a parody portrait-painting: 
“Whistler’s Mad Uncle," perhaps. 

What the film needed was a coher- 
ent visual strategy. Or even - given 
the grim relentlessness of the sub- 
ject - a telling subplot that could 
provide variety as well an oblique 


second perspective on the theme. 

But better Chabrol’s Hell than the 
Hollywood Heaven of Andrew Flem- 
ing’s Threesome. This story's trian- 
gular complications - two college 
boys and the girl accidentally 
assigned the second bedroom In. 
their campus duplex - are solved by 
some pathetic, sanitised stabs at 
bisexuality. Boy one (Stephen Bal- 
dwin) fancies girl (Lara Flynn 
Boyle); girl fancies boy two (Josh 
Charles); boy two fancies boy one. 

Audience fancies exit door. While 
the gay boy gets the amatory short 
straw - basically, of course, be is a 
mixed-up heterosexual - toe others 
climb Into bed for much pawing, 

COOing and p latTtnriinigrng none Of 
which would offend Aunt Edna. 

French classics are an option 
when all else fails. Bresson’s 1974 
Lancelot Du Lac (PG, Everyman 
Hampstead) is an aching l y beautiful 
film, despite some clunk-clank com- 
bat scenes that may summon irrev- 
erent thought of Monty Python. 
And Cocteau’s 1950 OrphFe (PG, 
National Film Theatre) is still toe 
greatest of all films that explore and 
proudly exhibit that Illusionist 
looking-glass we call cinema- 


neutral in toe right way. (Film-mak- 
ers should play artist and story- 
teller not judge or jury). And his address?) This way for the first 
screenplays for other directors - glimpse of the barking, self-righ- 


H ow much shall circum- 
stances in which a work 
was created affect our 
response to it? Such was 
the question which might have 
arisen at toe Kodan Quartet's rfvet- 
Ingly played recital (sponsored by 
the David Cohen Charitable Trust) 
at the Wigmore Hall on Monday, 
commemorating the 50th anniver- 
sary of toe premature deaths of four 
of Czechoslovakia's most intriguing 
composers. In the event, the music 
was of such fascination that no spe- 
cial pleading was needed. 

All of them were Internees In the 
Nazi-commandeered ghetto of Ter- 
ezfio. near Prague where, to convince 
outsiders that aD was well in the 
Jewish community, the authorities 
promoted vigorous artistic activity. 
Ironically, this "Liberal attitude" 
was toe catalyst to music of a radi- 
calism outlawed in Germany itself 
ftnti of a quality comparable to that 
of their contemporaries Schoenberg, 
Bart (5k and Jand&tk. 

Of the four the best known is 
probably the Polish-born Viktor UlL 


Music in London 

The Kocian Quartet and Welser-Most 


maim. His opera The Emperor of be heard not from the Terezln 
Atlantis was performed in London period but in music composed over 
only a year or two back and his 20 years earlier, Krfisa’s String 
Third String Quartet frilly con- . Quartet of 1921, an ambitious sum- 
firmed the favourably impression 


made then. Like Pavel Haas’s more 
expansive Third String Quartet 
with which it was paired in the 
concert's second half, Ullmann’s 
quartet is pervaded by that wlstfol 
Viennese weltschmerz found in Mah- 
ler and early Schoenberg, yet in its 
quixotic reversals of mood and sar- 
donic humour offers something dis- 


brtie the crisis situation of its ori- 
gins, a characteristic of Hans KrSs- 
a’s sometimes quirky Theme with 
Variations. Strangely perhaps, the 
greatest emotional intensity was to 


matron of all the main composi- 
tional trends of its time, with its 
post-modeiuisb references to the 
Brahms “Lullaby" and “Silent 
Night" it might have been written 
yesterday. 

Antony Bye 

Performances of Schumann’s orato- 
rio Scenes from Goethe's Faust are 


on toe South Bank. So was the plan 
of having the American Thomas 
Hampson sing Faust; his big, 
resplendent voice should have dom- 
inated the first two parts of the 
work, the quasi-drama tic ones. It 
was fori luck Hampson fell ill 


just days before the London Phil- 
harmonic concert on Monday. 

In the event, listeners to the live 
broadcast on Radio 3 probably 
heard the piece to better advantage 
than those of us in the Festival 
Han Sampson's replacement was 
Simon Keenlyside, who - tike 
Nicholas Folwell in Weber's 
Euryanthe on the previous evening 
- had bravely agreed to learn the 
part at short notice. It was under- 
standable, but disappointing, that 
his attractive, intelligently used 
baritone lacked the authority to 
impose itself on the music. 

The conductor Franz Welser-Mttst 
did little to accommodate him, 
either by way of trimming back toe 
orchestral sound or mitigating his 
tempi, which tended to be doggedly 
brisk. Margaret Price's Gretoben 
and Kurt Rydl’s Mephistopheles 
were safe and strong, but Ian Bos- 


tinctly pa rsAnq) and unnerving. 

So too does toe Tlio of Gideon rare, so it was an excellent choice 
Klein, only 28 when he died, a con- for the "Deutsche Bomantik" series 
rise, folk-inflected study tt la Bar- 
tok. Its cool objectivity seems to 


tridge was another souffnmt, and 
after a plucky start his Ariel simply 
ran out of voice. The rest of toe solo 
team were good, and the London 
Philharmonic Choir tolerably 
secure; the boys' chorus sounded 
frafl. 

Far Part 3, the elevated “Chorus 
Mysticus" that Mahler was to set so 
much more dramatically in his 
Eighth Symphony, Wriser-MOst at 
last relaxed a little. So did bis sing- 
ers: Keeniyside’s Doctor Marianus 
was fine and fervent, and each of 
Goethe's other mystical figures was 
gracefully sung. We began to appre- 
ciate Schumann's curiously gentle 
lyricism better. 

That was rather late, however. 
We had been taken at a jog-trot 
through much of the earlier music 
(composed later, in fact), with little 
chance to dwell upon Its luminous 
moments. Yet hardly anything in 
the Scenes is “symphonic"; the vari- 
ous movements are more like 
expanded mood-pieces. 

David Murray 


Theatre/Alastair Macaulay 

True West 


N ow the two brothers of 
Sam Shepard’s tense and 
riveting play True West 
need one another, now 
they are split by mutual jealousy. 
At first, they seem as different as 
Apollo and Dionysus, or Jekyll and 
Hyde; more crucially, they resem- 
ble Tom Sawyer and Huckleberry 
Finn. Then, as the power struggle 
within their sibling rivalry devel- 
ops, they start to swap characters. 
It appears - enthralling! y - that 
each brother is fatally incomplete 
without the other; and “fatal" 
becomes more or less toe word. The 
play, which started virtually with- 
out plot, winds op in a crescendo of 
action. 

Congratulations to Leeds’ West 
Yorkshire Playhouse and to direc- 
tor Matthew Warchus for staging 
this play, and to casting two super- 
lative actors. At the performance I 
saw, Marie Rylance was Austin (the 
younger, more educated, citified 
writer) and Michael Rudko was Lee 
(the older, wild, lone traveller from 
the desert). But they exchange 
roles at alternate performances, 
and I am impatient to see them in 
reverse. Soon, I will have the 
chance: True West comes to Lon- 
don’s Donmar Warehouse in 
November. 1 look forward also to 
seeing again, in two small roles, 
the excellent Marcia Warren’s eco- 
nomically eloquent account of their 
Mom, and David Henry as (ungrate- 
ful role) the film-producer Saul 
Simmer. 

No, True West Is not a great play. 
It moves in terms of dichotomies 
and parabolas: too schematic. Only 
occasionally does it relax and add 
the kind of unnecessary detail that 
puts flesh on its lean bones. One 
such passage Is Austin’s hilarious 
slow narration of how their father 
lost his teeth. Two more such pas- 
sages occur when their Mom talks 


of (a) Picasso, (b) Alaska. Later - of 
course! - we see that Picasso and 
Alaska are Just another pair of She- 
pard's dichotomies (dviUsatUm ver- 
sus the wild, education versus 
nature.) For that matter, Mom and 
the unseen Dad are themselves also 
artificial polar opposites. All which 
is clever, interesting, but not 
always real. 

Yet True West, as they say, brings 
up a whole lot of stuff. No-one can 
miss the point of the image early 
on when Austin mounts a step lad- 
der to spray his mother’s house 
plants, while Lee chucks the beer 
cans he has finished onto the floor. 
Or the chaos later on, when toe 
brothers turn the room Into an 
urban desert: Lee attacking a bro- 
ken typewriter with u golf club, 
Austin making toast simulta- 
neously in ten stolen toasters. Even 
at its most diagrammatic, toe jeal- 
ousies of brother and brother are 
shockingly potent 

Warchus’ production highlights 
such moments, but allows the act- 
ors to give performances very dose 
to sheerest transparent Rudko is 
so mueh the dangerous, needy, 
plaintive, coyote-like hobo from the 
desert that I cannot imagine how 
he will bring off the opposite role. 
Rylance, despite one or two more 
calculated moments, nonetheless 
gives an astonishing performance. 
Just the way he breathes as, early 
on. he watches Lee, speak volumes: 
as does the way bis soft grainy 
voice suddenly finds a driving 
charge of passion, as he confronts 
Us worst shock of defeat and injus- 
tice. I know no male actor today 
who can so catch my heart in my 
throat This production clinches 
what 1 have felt for some timet that 
the West Yorkshire Playhouse is 
the most vital and refreshing 
English theatre outside London 
today. 


Dance/Clement Crisp 

Lucinda Childs 


I n New York in the early 1960s 
dance experiment was centred 
on Jodson Church. There the 
earnest and the eager set 
about forging a new dance - post- 
modern, post-Cunningham - which 
sought a radical re-shaping of 
everything 8i»t "dance” had meant 
up to then. 

It was, I suppose, symptomatic of 
its time, and marked by a Puritan- 
ism that accorded well with current 
theatrical and musical austerities. 
One of Jndson’s formative figures 
was Yvonne Rainer, who declared 
“No to spectacle; No to virtuosity. 
No to transformations and magic 
and make-believe ...” (I saw a Rai- 
ner performance, which was ernd- 
fyingly boring, and offered no sub- 
stitute for anything at all - least of 
all dance). An ideal had been stated 
for many who followed in her 
unlovely footsteps. 

This year Lucinda ChHds, one of 
the most acclaimed Jndson gradu- 
ates, is making a first British visit 
with her company. Sophie Con- 
stant! reported here on her Edin- 
burgh Festival debut; on Tuesday 
night, as the Dance Umbrella sea- 
son got under way, Miss Childs and 
her troupe came to the South Bank 
- a glum and not inapt location. 
The Childs manner offers small 
cells of activity which repeat and 
repeat, re-align and slowly mutate 
- it is no accident that she uses 
minimalist scores as accompani- 
ment - so that the viewer is made 
aware of a cumulative structure. 

This bnflding-blocks approach to 
dance would be more fascinating - 
as the Shades entry in Bayadere is 
fascinating in its repetitions and 
augmentation - were the blocks 
themselves of interest But to pile 
up banalities, to shift their direc- 
tion, to pass them among a cast 


like so many tiny austerities, is not 
so much architecture as parsimony. 

The mqfor piece in Tuesday's pro- 
gramme was Available Light, 
almost an hour of routines set 
below and on a bridge-structure. 
First made as a museum installa- 
tion in Los Angeles a decade ago, it 
has a score by John Adams which 
is vastly more enterprising in the 
working out of its patterns than 
Childs’s movement sequences. Ten 
dancers (looking like sci-fi labora- 
tory assistants In overalls that 
reveal pallid inner legs and arms) 
tread and re-tread their well-worn 
paths. Virtuosity is Rainer-ishly 
denied - the cast look unstretched 
- and the development of these 
ideas is simple-minded. (“Those 
two have just turned and run. That 
means that the other two in blade, 
and then the four in red, will do 
the same” - and they do). Miss 
Childs manifests herself twice, 
Cunningham-fashlon, but even to 
these unambitious technical sur- 
roundings, her performance has a 
constrained air. 

The second piece, Concerto, dates 
from last year and uses Goredti’s 
harpsichord concerto. It lasts nine 
minutes, and its dancers, to smart 
black shirts and trousers, nip along 
predestined tracks with something 
like vivacity. (The trams are mov- 
ing faster). Here Childs' style 
matches toe motor energy of the 
score in recurring patterns of 
action, if not to emotional density. 
The piece is short enough for the 
message to seem intriguing without 
turning into an acreage of tape- 
loop repeats. Brevity is not the soul 
of post-modernism - but it is a tre- 
mendous bonus here. 


Lucinda Childs Is at the Queen Eliz- 
abeth Hall until October 20. 


1 \ iNTERNATlONALn 

ar 

rs 

Gil! 

DE 

i ->l 


■ ATHENS 

Megaron Sat George Oemertzts 
violin recital. Sun, Mon: Kurt Masur 
conducts Leipzig Gewandhaus 
Orchestra In two programmes, 
including works try Mahler, Prokofiev 
and Richard Strauss. Tuss: McCoy 
Tyner Jazz Trio. Next Wed and 
Thurs: Wolfgang GOnnenwrtn 
conducts Mozart programme 
(01-728 2333/01-722 5511) 


■ BOLOGNA 

Teatro Communafe Sat Sure 
Marek JanowsW conducts Orchestra 
of the Teatro Communale in works 
by Webern, Hindemith and Brahms. 
Mon: Trio Wanderer plays piano 
trios by Beethoven and Chausson. 
Tues (Palazzo dm Congress!): Royal 
Flanders Ballet presents Giselle, 
stag ed by Robert Denvers and 
Menla Martinez. The opera season 
begins on Nov 26 (information: 
051-520999) 


■ GENOA 


Teatro Carlo FeRoe Tomorrow 
evening. Sat afternoon: Alain 
Lombard conducts symphonies by 
Mozart and Brahms (No telephone 
bookings, information: 010-589329/ 
010-5381 225) 


■ LONDON 

THEATRE 

• The Prime of Miss Jean Brocfie: 
Patricia Hodge takes on the role of 
the formidable schoolteacher whose 
mix of romance and wOfuteess 
Inspires her pupfls. Alan Strachan 
directs the first major London revival 
since the original 1968 production of 
Jay Presson Allen’s stage version of 
Muriel Spade’s novel Now in 
previews, opens on Tues (Strand 
071-930 8800) 

• The Sisters Rosonsweig: 

Michael Blakemore directs Maureen 
Upman, Janet Suzman and Lynda 
Bellingham fai Wendy Wasserstein’s 
Broadway hit comedy about three 

American Jewish sisters who have a 
mid-fife reunfan In London (Old Vie 
071-928 7810) 

• The Winslow Boy: Peter 
Barkworth Is kfoatfy cast as the stiff 
upper-tipped father battling Whitehall 
to prove the innocence of his son, 
who has been expelled from naval 
ooUegs. A waH-made production of 
Terence Rattigan's well-made 1946 
play (Globe 071-494 5065) 

• The Seagull: Judi Dench heads 
a splendid cast in Pam Gems’ new 
version of the Chekhov play. In 
repertory with a new production of 
The Devil's Disciple, Shaw’s 1697 
satire on melodrama (National, 

OfiviBr 071-928 2252) 

• The Chfidran's Hour Howard 
Davies directs the National Theatre's 


new production of Lffiian Herman’s 
1934 drama, about a vengeful 
schoolgirl who accuses her teachers 
of having a lesbian affair and sets in 
motion the collapse of their world. 
The cast is headed by Harriet Walter 
and Claire Higgins (National, 
Lyttelton 071-928 2252) 

• The Queen and fc Sue 
Townsend’s stage adaptation of her 
own best-seifing novel in which the 
Royal FamOy are sent to live on a 
fun-down housing estate. Max 
Stafford-Qartfs Royal Court 
production has just transferred to 
the West End (Vaudevffle 071 -836 
9987) 

• Arcacfia; Trevor Nun directs 
Tom Stoppard’s complex but often 
funny drama which won the 1994 
Ofivfar Award for best play 
(Haymarket 071-930 8800) 

• The Slab Boys Trilogy: the first 
London revival since 1982 of John 
Byrne's Comic trilogy, wNch follows 
the fives of three Paisley boys from 
desperate youth to despairing 
middle- aga The three plays can be 
seen incSriduafly - the first is easily 
the best - or as a complete package 
on certain Saturdays (Young Vic 
071-928 0363) 

• What A Performance: the title 
recalls toe catchphrase of Sid Feld, 
the talented comedian who died in 
1946 of a heart attack at toe age of 
45. David Suchet of Poirot fame 
tfons a cheeky (pm in William 
Humble’s stage biography which 
refives toe best sketches and 
backstage Ufa of the star (Queens 
071-494 5040) 

• She Loves Me: the charming 
1983 Masteroff, Bock and Herrick 
musical about two longtime pen pals 
who don’t know they work in the 
same parfumerie. RuthJe HsnshaB 


and John Gordon Sinclair head the 
cast (Savoy 071-836 8888) 

OPERA/DANCE 

Covent Garden The Royal Opera 
tea just unvelted the first two parts 
of its new Ring production, staged 
by Richard Jones and conducted by 
Bernard Haitink, with cast headed 
by John TomBnaon, Ekkehard 
Wlaschiha, Pool Sming, Robert tear, 
Deborah PoJaski, Ufla Gustafson and 
Jane HenscheJ. Next performances 
of Das RhelngoW are tonight and 
Tues, and of Die WalkOre on Sat 
and Oct 29. Turandot is revived on 
Mon with Gwyneth Jones in the title 
rote, and a new production of 
Gounod’s Rorrfao et Jufistte opens 
on Oct 28. The Royal Baflet presents 
Anthony Dowell's new production of 
Sleeping Beauty on Nov 3 (071-304 
4000) 

Coliseum Nicholas Hytner’s English 
National Opera production of Die 
Zauberfldte is revived tonight with a 
cast haoefad by NeH Archer, 

Rebecca Caine, Quentin Hayes and 
John Conned. A new production of 
Massenet's Don Quichotte, staged 
by Ian Judge and conducted by 
Emmanuel Joel, can be seen 
tomorrow and next Fri (rune tifl Nov 
9). Final performances of Tosca are 
Sat, next Tues and Thurs, with 
Rosalind Plowright In the title role 
(071-836 3161) 

Sarfier's Wells American 
performance group Mombc is fa 
residence till Oct 29 (071-278 8916) 
Queen Elizabeth Had Tonight 
Lucinda Childs Dance Company. 

Sat, Sun: Stephen Petronio 
Company (071-928 3002) 

CONCERTS 

Barbican Tonight Michael Titeon 


Thomas conducts London 
Symphony O r ch e stra in Mahler’s 
Fifth Symphony. Sat, Mon and Wed: 
Andras Schfff and friends play 
chamber music by Schubert and 
Janacek. Tues: Georg Solti conducts 
LSO In a Brahms programme, with 
vfolfn soloist Itzhak Perlman. Next 
Thurs: Perlman violin recital 
(071-638 8891) 

South Bahk Centre Tonight: Yehudi 
Menuhin conducts RPO in works by 
Britten, Bgar. Mendelssohn and 
Mozart, with ceflo soloist Lynn 
Harrell. Tomorrow: Owain Arwei 
Hughes conducts LPO In Dvorak, 
Bruch and Brahms, with violin 
soloist JoaJom Svenheden. Sat 
Andrew Davis conducts BBC 
Symphony Orchestra and Chorus in 
Schumann and Berlioz, with viola 
soloist Nobuko Imai. Sun: Tokyo 
Philharmonic Orchestra. Oct 27, Nov 
1, 2, & Mariss Jansons conducts 
toe LPO (071-928 8800) 


■ MADRID 
Teatro Urtco La Zarzuela Next 
Thurs: Victoria de tos Angeles song 
recital (pi-429 8225) 


■ MILAN 

Teatro ala Scaia Tonight: final 
performance of Monteverdi's 
L’facoronatione di Poppea, 
conducted by Rfacardo Muti and 
staged by Gilbert Oeflo. Sun: Kronos 
Quartet Oct 27: Georg Sofa 
conducts London Symphony 
Orchestra (02-7200 3744) 


PRAGUE 


Rudolfrnum Tonight tomorrow: 
Vaclav Neumann conducts Czech 
Philharmonic Orchestra in works by 
Smetana, Jan Kubefik and Janacek. 
with violin soloist Miroslav VBfmec 
and bass-baritone Ivan Kusnjar. Sun: 
Leos SvarovsXy conducts Brno 
State Philharmonic Orchestra In 
Smetana, Dvorak and Brahms. Next 
Wed and Thurs: Robert Stankovsky 
conducts Martinu, Hummel and 
Haydn, with trumpet soloist Hakan 
Hardenberger (02-2489 3352) 

• A 10-day Dvorak Festival opens 
tomorrow with a performance of The 
Jacobin at toe National Theatre, 
followed by recitals and choral and 
orchestral concerts at a variety of 
venues around the city. Tickets and 
information available from the 
RudcXfinum (02-2489 3352) or 

Bohemia Ticket International at Na 
Prikcpe 16 in the efty centre 
(02-2421 5031) 


■ ROME 

Myung-Whun Chung conducts the 
Orchestra defl’Aceademfa Nazfanale 
di Santa Cecilia on Sun, Mon and 
Tues fa works by Haydn, Britten and 
Shostakovich, with soprano Barbara 
Hendricks. The orchestra’s 
programme for toe pre-Christmas 
period Includes Krystian Zmemtan, 
Vladimir Sphrakov and Cecilia 
Gascfla as soloists, with the 
conductors Georges Prfitre, 

Christian Ttvstemarm, Gennady 
Rozhdestvensky and Carlo Maria 
Ghillni. All concerts take place at the 
Audrtorio dJ Via della Condliazfone 
(06-68801044) 


ARTS GUIDE 

Monday: Berlin, New York and 
Paris. 

Tuesday: Austria, Belgium, 
Netherlands, Switzerland, Chi- 
cago, Washing to n. 
Wednesday: France, Ger- 
many, Scandinavia 
Thursday: Italy, Spain, Athens, 
London, Prague. 

Friday: Exhibitions Guide. 

European Cable and 
Satellite Business TV 

(Central European Time) 
MONDAY TO FRIDAY 
NBC/3uper Channel: FT Busi- 
ness Today 1330; FT Bustneas 
Tonight 1730, 2230 

MONDAY 

NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

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

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports 1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430, 




'OCTOBERS 1 ‘ 50J 


14 


★ 


Let gnat-size robots 
do the dusting 



BOOK 

REVIEW 


Readers who 
are intrigued 
by the plethora 
of articles and 
programmes 
about 'informa- 
tion superhigh- 
ways' and want 
to know more 
about what they really mean 
will find Out of Control an 
excellent introduction that cap- 
tures the genuine spirit behind 
the publicity. 

This book by Kevin Kelly. 
California's leading new wave 
techno-journalist, lives up to 
its title as it weaves wildly 
between l.OQl subjects: from 
electronic banking to the art of 
beekeeping, from the Gulf war 
to post-Darwinian evolution. 
But in the process it conveys 
brilliantly the end-of-millen- 
nium excitement felt by many 
techies about the coming con- 
vergence of computing, com- 
munications and biology. 

The first primitive manifes- 
tation of this convergence is 
the information superhighway 
or I-way. It may lead to the 
creation of artificial life some 
time in the next century, Kelly 
argues. 

In Kellyspeak. out-of-control 
is the ultimate accolade for a 
complex system, whether it is 
a communications network, a 
robot or an artificial organism. 
It means that the system is 
evolving beyond the original 
specifications of its (human) 
designers, developing of its 
own accord into something 
more capable and powerful 
than they could have devised 
by themselves. 

Kelly concludes the book 
with "Nine Laws of God” 
which should be followed by 
anyone aiming to create an 
out-of-control system. The first 
two Jaws give the essence of 
his message: 

1. “Distribute being". The spirit 
of a beehive, the behaviour of 
an economy and the thinking 
of a supercomputer are distrib- 
uted over a multitude of 
smaller units, whose interac- 
tions give the whole system a 
life that is far more than the 
sum of its parts. 

2. “Control from the bottom 
up". The collapse of centrally 
planned, Soviet-style econo- 
mies shows that no system can 
run for long on commands 
passed down from the top, 
Kelly says. “A mob can steer 
itself, and in the territory of 


OUT OF CONTROL - 
The New Biology 
of Machines 
By Kevin Kelly 

Fourth Estate. £16.99, 520 pages 


rapid, massive and heteroge- 
neous change, only a mob can 
steer." 

Imagine that you are given a 
million units of intelligence - 
call them neurones - to start a 
system of artificial life. You 
will achieve more in the long 
run if you distribute the intelli- 
gence equally among 10,000 
creatures, giving 100 neurones 
to each, than if you create 100 
super-beings with 10,000 neu- 
rones each. The reason is that 
a myriad of different creatures 
can work together and evolve 
in a way that is impossible for 
a small number of beings, how- 
ever intelligent each may be. 

Robots to help around the 
house are a good illustration of 
Kelly’s many-is-beautiful phi- 
losophy. He is not keen on the 
idea of a few humanoid robots 
trundling around like R2D2 in 
Star Wars, serving us beers or 
vacuuming our carpets. 

instead, Kelly enthuses 
about the prospect of filling 
our homes with vast numbers 
of unobtrusive Insect-like 
"microbots" - an idea pio- 
neered by Professor Rodney 
Brookes at the Massachusetts 
Institute of Technology. For 
example a tiny “gnatbot" 
(Kelly loves coining words) 
will live In the corner of the 
television screen and come out 
to eat the dust off the glass 
when the TV is switched off! 
Slightly larger cleaning robots 
will hide under every piece of 
furniture, programmed to 
emerge when they detect that 
the humans are away. 

Out of Control is far from 
perfect, ft contains inaccura- 
cies. unsupported generalisa- 
tions and non-sequiturs galore. 
Seme passages are madden- 
ingly short others (such as the 
chapter on “Post-Darwinism”) 
ramble on far too long. And 
Kelly, who is executive editor 
of Wired, the Californian maga- 
zine for network surfers, is not 
critical enough about the 
futuristic speculations of his 
friends and contacts. 

Indeed the harshest criticism 
in the book is aimed at the late 
George OrwelL “No one has 
been more wrong about com- 


puterisation than Orwell in 
1984." Kelly writes. “So far 
nearly everything about [com- 
puters] indicates that they are 
the end of authority and not its 
beginning.” 

Yet, for all its faults. Out of 
Control is a joy to read, both 
for its detail and for the enliv- 
ening impression it provides. 
One reason the book works so 
well is that Kelly obviously 
had fun writing it. His joie 
d'icrire carries lie reader hap- 
pily through all 520 pages. 

There is a striking contrast 
between Out of Control and 
The Quark and the Jaguar, 
another important science 
book published w»is summer. 
Both are wide-ranging books 
with complexity theory and the 
emergence of order from chaos 
as central themes. 

But Murray Gell-Mann, the 
Nobel prize-winning author of 
The Quark and the Jaguar (Lit- 
tle, Brown, £18.99), laboured 
long and hard on his book, 
repeatedly rewriting passages 
to make them as clear as possi- 
ble. After all the effort, much 
of Gell-Mann’s prose is indeed 
reasonably readable but it does 
not bubble like Kelly's. As a 
famous physicist, Gell-Mann is 
concerned to maintain his sci- 
entific reputation, and so 
resists the kind of bold but 
plausible speculation that 
makes Out of Control so fasci- 
nating. 

fa terms of content rather 
than style, however, Kelly 
could have borrowed a few 
thoughts from Gell-Mann, par- 
ticularly the latter’s emphasis 
on the all-important role of 
chance in the evolution of 
every system in the universe. 

Kelly is too optimistic to con- 
sider the risk that sheer bad 
luck could wreck his rosy sce- 
narios. If the out-of-control bio- 
computer systems of the future 
do take on a life of their own, 
will they necessarily develop 
in the benign human-friendly 
way that he predicts? 

fa the end. Kelly’s infectious 
optimism suppresses such 
doubts. Out of Control leaves 
the reader with a sense of 
heightened anticipation, 
looking forward to riding on 
the information superhighway 
to a symbiosis of people and 
machines some time in the 
next century. 

Clive Cookson 


H igh pay is better 
than low pay: but 
low pay is better 
than no pay. 

Obviously we would all like 
good, well-paid jobs. But for 
many people these are not 
available, partly because the 
labour market has shifted to 
the disadvantage of workers 
with low marketable skills. 
Meanwhile, low-paid jobs bring 
some benefit to the national 
economy, and some gain in 
self-respect and morale to 
those who have them, in the 
way that dole payments do not 
Every economic gathering pro- 
claims that jt should be made 
worthwhile for people to work 
rather tban live on social secu- 
rity, but few explain how. 

The deterrents are some- 
times summarised in terms of 
a “tax wedge” between the 
gross wage and net payments 
after tax and social security 
contributions. In the UK. the 
wedge for low-paid workers 
has been much mitigated as a 
result of several past Budgets. 
But it does amount to nearly 30 
per cent on to the cost of 
employing workers at about 
£200 a week - the lower end of 
the middle tnmmp distribution 
range, which is where many of 
the problems lie. 

Social security contributions 
are a tax on labour incomes. 
Indirect taxes such as val- 
ue-added tax can be regarded 
as levied on wages pins profits. 
So there might be a modest 
effect on labour demand by 
switching from social security 
to VAT, but nothing like one- 
for-one. It is doubtful if a shift 
to income tax. which is 
another tax on labour, would 
have any notable effect at alL 
As far as employee disincen- 
tives are concerned, the Insti- 
tute for Fiscal Studies is right 
to say in its Green Budget that 
the Tpaiti deterrent to accept- 
ing a low-paid or part-time job 
is not so much anything in the 
tax system, but the withdrawal 
of benefits once earnings start. 
In Britain the Thatcher and 
Major governments have put a 
lot of emphasis on making it 
more worthwhile to work and 
more difficult to live on bene- 
fit Yet the proportion of the 
non-employed (unemployed 
plus working-age people out- 
side the labour force) has 
increased from one cycle to 
another. Labour's Co mmiss ion 
on Social Justice, chaired by 
Sir Gordon Borrie. is bound to 
say something on these mat- 
ters in its report due to be pub- 
lished on Monday. 

The worst disincentives are 
shown in the chart. A man 
with one child earning £6 an 
hour is no better off on a 
part-time job because of the 



Conritfcr. if you trill a pnttrr 
plant, a train, and a blast 
furnace. Thry'rr nothin g in 
rommnn r.rrrpl \rmddo. In 
fact, creating prtnluris and 
systems Jar imlttslrial grmrth 
in fmiustn\ Power and 
Tmnspf trial ion has made us 
into one nf the leading com - 
panics in the field of Elcr- 
tmmerhanics. In Italy, our 
fuuwbase, uv'rv irorkn l with 
Fuel i (he state citrine com- 
pany) to pnxlucc some $0% 
of the electricity consumed in 


the connin'. In the L nit nil 
States, we hold 30% of the 
railway signalling market 
and are the miip/fW «ivA/ 
leader. II e are known for our 
capacity to offer timely 
responses to question/; which 
are crtfistanth ■ enticing and 
specific solutions to the prin- 
cipal problems posed h i - ecu- 
numic decelupment in more 
than TO countries around the 
world. 1 world that moves, 
just like us, and even, we 
might say. thanks to us. 


IN 


A MOVING WORLD, 
WE ARE 
THE MOVERS. 




1 8 BUSTS? POTEB TI1ISPI1TITIII 

C A N I C A I R ! 


FINANCIAL TIMES 


THURSDAY 


Economic Viewpoint 


Taxes, benefits 
and jobs 

By Samuel Britt an 


Net income of couple on Family Credit and Housing Benefit 


Total net income £ per week) 
200 


□ CWdSww* Hfcwtfycwft □ HouHflfl Benefit 

Q Income Support ■ Earnings alter tax ■ Council Tax Benefit 



withdrawal of Income Support, 
pound for pound, until he 
reaches a threshold of 16 hours 
worked. At this point Family 
Credit, specifically designed to 
make it worthwhile to take 
low-paid jobs, comes into 
effect. But much of the 
intended gain is negated 
because the withdrawal rate of 
Housing and Council Tax Ben- 
efit Is added tc the withdrawal 
rate of Family Credit. 

The table shows that the 
combined effect of withdraw- 
ing Housing and Council Tax 
Benefit amounts to an implicit 
mar ginal tax rate of 89% per 
cent for every extra pound 
earned. If Family Credit is also 
received, the implicit marginal 
tax rate also rises to more than 
97 per cent The worst affected 
are spouses of unemployed 
people who stand to lose 
Income Support pound-for- 
pound if they go to work. 

These interactions are made 
unnecessarily complicated 
because Housing Benefit is 
administered by local authori- 
ties for the Department of the 
Environment, while Family 
Credit is administered by the 
Department of Social Security; 
a fusion of the two benefits - 
which now serve a similar pur- 
pose - is surely overdue. 


The IFS also suggests a rent 
credit in place of Housing Ben- 
efit, which would pay the rent 
for a family working less than 
16 hours a week. Above that a 
boosted Family Credit should 
take over the job. An addi- 
tional advantage - which may 
be psychological - Is that there 
would no longer be an obvious 
sum which offset rent for 
households with even a modest 
income from work. Thus peo- 
ple would be more inclined to 
bargain seriously over rents 
and to move out of over-ex- 
tended accommodation. As for 
Council Tax Benefit, this is 
simply a bribe to local govern- 
ment voters alienated by the 
poll tax saga: and the sooner it 
is phased out and fed back into 
the general social security bud- 


T*W TOfiD 

Gross earnings increase by 

£1.00 

Income tax nses by 

National Instance rises by 

-ttZDp 

•tUOp 

Net income 

Housing Benefit withdrawal 
(at 6696) 

CouncS Tax Benefit b&s 
by 20% of 7 Op 

0.70p 

-0/lSWp 

-Q.14p 

Leawrjg 

O.IOVip 

NB: if Family Credit is also being 
received, marginal tax rates increase to 
more then 97% 


Sovrva: IFS Green Budget 


get, the better. 

Even apart from the Housing 
Benefit complication. Family 
Credit has the defect of not 
being paid to single people or 
families without children. The 
least the Borrie Commission 
could suggest would be to 
amalgamate Family Credit and 
Income Support, thus bringing 
together benefits for those in 
and out of work. Once it occurs 
the absurdity of both the 100 
per cent cut-off for the unem- 
ployed person taking work and 
the exclusion of childless fami- 
lies would become apparent 

Borrie is almost certain to 
advocate the integration of 
benefits and taxes for pension- 
ers. This should be a trial run 
for a wider amalgamation. But 
the acid test will be whether he 
advocates the amalgamation of 
working-age benefits. 

The Conservative govern- 
ment will shy away from this 
minimum reform because of its 
preoccupation with the so- 
called Job Seeker's allowance, 
which will amalgamate the 
contribution-related Unemploy- 
ment Benefit with the means- 
tested Income Support on 
which most unemployed people 
in practice rely. 

Ministers did. however, come 
out at last week’s party confer- 


nC e with a s*™*. , ® ;, “ £ 
icrease the incentives . 
mg-term unemployed to t,|K 
™ the nun-lta* «.™- 
mv. Although ‘he> 
uried their initiative m . 1 1 u. . 
f anti-European rhetoric, they 
id envisage a ’claim-and^f 
iheme under which somrtwdj 
ftuTruus to full-time »«rk 
rould gain a bonus of up t 

l Tbis villi be the light at the 
nd of a long tunnel. Rirt-nm- 
rs will still have every; pound 
Ywrl; from 


T he scheme is typical of 
the minimalist reform 
that civil servants. 

with the Treasury 
breathing down their necks, 
produce for Conservative min- 
isters. Apart from the obvious 
drawback of being long 
deferred for someone now fa 
part-time work, the scheme has 
the further disadvantage of 
being once-for-all. In other 
words, those workers remain- 
ing at the lower end of the 
income distribution range will 
soon exhaust their gain. 

What conclusions emerge if 
one draws back from the mass 
of confusing detail? As the 
Green Budget points out. there 
is a choice. For any given level 
of basic benefits there can. at 
one extreme, be a cut-off rate 
of 100 per cent for every extra 
pound earned. The result 
would be an extreme work dis- 
incentive for a limited number 
of people. The other extreme 
would be a Basic Income for 
all. which would be withdrawn 
only at the income tax rate. 
The latter however would have 
to be much higher than it is 
now (or some other tax such as 
VAT would have to be very 
hi gh in its place). The result 
would be a less prohibitive, but 
still very heavy, disincentive 
spread over far more people. 

The present system for 
income-related benefits is more 
like the 100 per cent cut-off 
rate than the Basic Income. 
Most reforms amount to mov- 
ing slightly towards the latter, 
hut still with high cut-off rates. 
There could also be a less 
inquisitorial administration. 

There is in any case no cost- 
free option. The art is to do the 
most good for any given trans- 
fer from the main body of tax- 
payers. Unfortunately the 
Tories have too many moralis- 
tic hang-ups about reform and 
Labour too many Inhibitions 
about “selectivity" to do this 
as well as they might 


LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SE1 9HL 

Fax 071 873 5938. Letters transmitted should be dearly typed and not hand written. Please set fox for finest resolution 

Asylum seekers are dealt with fairly in UK 


From Mr Nicholas Baker MP. 

Sir, Your editorial, "Without 
charge" (October 19) about 
detention of asylum seekers 
contained a number of inaccu- 
racies. May I set out the rele- 
vant figures in their context: 
22*570 applications for asylum 
were made last year which is 
below the 1991 peak of 44.000 
but well above the 1988 figure 
of 4,000. More than 90 per cent 
of asylum seekers are not gen- 
uine refugees under the 1961 
UN Convention to which 
Britain adheres. Each applica- 
tion is considered carefully on 
its merits in accordance with 
that convention. 

Powers of detention under 
the Immigration Act 1971 are 
exercised only where there are 


good grounds for believing that 
the person will not comply 
with any conditions imposed, if 
released. Detention is author- 
ised initially by a chief immi- 
gration officer - not by an 
immigration officer as you say 
- and is reviewed by an immi- 
gration service inspector 
within 24 hours. There are 
then monthly reviews at 
increasingly senior levels. I do 
not find it surprising that in 
22 of the cases referred to in 
the Amnesty International 
report, release was granted 
before the case was finally 
resolved. This is surely evi- 
dence in itself of the effective- 
ness of the reviews. 

You say “some detainees 
(hut not all) are eligible for 


bail". Following changes made 
by the Asylum and Immigra- 
tion Appeals Act 1993, anyone 
refused asylum can appeal to 
independent appellate authori- 
ties and anyone who has 
appealed can apply for balL 
It is not the case that immi- 
gration officers ignore their 
obligation to tell detainees of 
the reason for their detention. 
All detainees are told orally, in 
a language which they under- 
stand, of the reasons for deten- 
tion. In addition, anyone who 
is refused entry or is being 
removed as an illegal entrant 
or is the subject of a deporta- 
tion order is given notice in 
writing, setting out their rights 
of appeal and giving details of 
the free advice and assistance 


available to them. 

Britain complies with its 
obligation under international 
conventions to which it is a 
signatory. Our system has to 
deal fairly and promptly with 
genuine refugees and at the 
same time combat bogus asy- 
lum claims. Powers of deten- 
tion are necessary fa some 
cases. We seek to detain as few 
people as possible and less 
than 1.5 per cent of asylum 
seekers are currently detained. 
Detention is a necessary part 
of a policy of firm and fair 
immigration control. 

Nicholas Baker. 
immigration minister. 

Home Office, 

SO Queen Anne's Gate. 

London SWlH SAT 


Legal challenge to state 
aid can be easily launched 


Main point 
of pay-offs 

From Mr Michael D 
Varcoe-Cocks. 

Sir, fa a comment on rolling 
contracts. Lex (October 19) 
writes: “Defenders of rollers 
say they do not necessarily 
reward failure as boards can 
insist on a reduced pay-off if 
performance is poor”, and sug- 
gests that the departure from 
Automated Security (Holdings) 
of its chairman and chief exec- 
utive gives it “the chance to 
show whether that is so". 

Lex completely misses the 
fact that the starting point has 
to be the service contract If a 
company has performed 
poorly, pay-off can be reduced 
only if the contract provides 
for compensation to be reduced 
for poor performance. 

Of course, if it could be 
shown that the executive 
breached the terms of his 
employment, that would be 
another matter. But how many 
service contracts (“rollers" or 
not) set out a required stan- 
dard of performance? Even 
then it would be a very diffi- 
cult task to prove that a com- 
pany's poor performance was 
caused directly by one or more 
senior executives. 

A person who tries and fails 
should not receive perfor- 
mance-related benefits, but it 
must be wrong to try to daw 
back contractual entitlements 
which are not performance-re- 
lated. 

Michael D Varcoe-Cocks, 

5 Bmckenbury Road, 

London W6 0BE 


From Mr Tony Hockley. 

Sir, fa an otherwise excellent 
comment upon the European 
Commission and state aids 
(“Controlling state aids". Octo- 
ber 19) you fail to recognise 
that some progress has already 
been made. Despite the Com- 
mission's approval of the stag- 
gering sum of FFr20bn in aid 
to Air France, it is now easier 
than in the past to pursue a 
legal challenge to the decision. 

For its part, the Commission 
has moved from acting as a 
“rubber stamp" for aid 
schemes, to much more thor- 
ough investigation. It is indica- 
tive of this that the published 
decision on the state cash 
injection into Air France in 
1992 was less than four para- 
graphs long, whereas the more 
recent decision runs to 17 
pages and provides detailed 
commentary. 

It is true that most of the 
conditions imposed by the 
Commission upon Air Trance 
were, in fact, proposed by the 
airline itself. Nevertheless, the 
aid will be granted in three 
phases and will be dependent 


From Mr Tom O’Leary. 

Sir, Mr A Lister’s suggestion 
(Letters, October 8) that the 
millennium should be cele- 
brated in the UK by the gov- 
ernment removing every traffic 
cone from every road by 
4.30pm on December 31 1999 Is 


upon Air France meeting these 
conditions, fa addition the 
Commission has gone as close 
as is legally possible to secure 
the privatisation of Air France 
by making eventual privatisa- 
tion a condition of approval. 

The weakness in the policing 
of state aids does not appear to 
be in the Commission, which 
has worked hard to make liber- 
alisation a reality. Following 
the decision to allow the Air 
France aid, Sir Leon Brittan 
told reporters that the French 
had threatened the Commis- 
sion with an "empty chair pol- 
icy", and the French govern- 
ment said that it would stop at 
nothing to ensure that the aid 
was approved. We can only 
hope that successful legal chal- 
lenges to decisions on state 
aids and further market liber- 
alisation will give the Commis- 
sion stronger grounds to resist 
political menaces in future. 
Tony Hockley. 
economic adinser. 

Air Transport Users Council 
Kmgsioay House. 

103 Kingsway. 

London WC2B 6QX 


admirable. However, whoever 
heard of any government 
department or associated con- 
tractor working between 
December 24 and January 3? 

Indeed, it is only to be hoped, 
because of the debate concern- 
ing whether the millennium 


Frustrated 

electorate 

From Mr A D Gatling . 

Sir, Far from leading to the 
government's defeat in the 
next election (“Brittan and 
Howe hit back on EU", October 
14). I suspect that in the next 
two years Conservative strate- 
gists will come to realise that 
an anti-federal stance will rep- 
resent their only chance of 
winning the next election. 

' As one who spent a consider- 
able amount of time canvass- 
ing in the Euro election, I can 
advise Lord Howe and Sir Leon 
Brittan that present policy 
over Europe is deeply unpopu- 
lar with the majority of toe 
electorate, who are frustrated 
at having no democratic way 
of expressing their resentment 
at the steady encroachment of 
their national Identity and 
institutions. 

They also resent being 
described as “right wing" for 
opinions which are held across 
the whole political spectrum. 

A D Gatling, 

White Lodge, 

Berwick St James, 

Salisbury, 

Wilts SP3 4TZ 


should be celebrated at the end 
Of 1999 or 2000. that public ser- 
vices and industry don’t decide 
to bridge the entire year 2000. 
Tom O’Leary. 

Apdo m 

San Pedro de Aleamara, 

29670 Spain 


Good idea - but will there be anyone working? 


| 1 






T 


; U)}\ 


: in Ui 


FINANCIAL TIMES THURSDAY OCTOBER 20 1994 


15 


financial times 

Number One Southwark Bridge, London SE1 9HL 
Tel: 071-873 3000 Telex: 922186 Fax: 071-407 5700 

Thursday October 20 1994 


Re - engineering 
the Treasury 


The long-standing objective of Hie 
UK Treasury has been the 
achievement of sustained grow th 
and higher living standards. The 
ma nife st shortfall of Treasury per- 
formance against objective In the 
post-w ar period makes an unan- 
swerable case far radical reform of 
the institutional structure of 
Whitehall’s most powerful depart- 
ment. The results of the funda- 
mental expenditure review 
a n no unced yesterday by Treasury 
permanent secretary Sir Terry 
Burns are, at least by British stan- 
dards, genuinely radical But so 
were the Treasury policies that 
culminated in sterling's departure 
from the European Exchange Rate 
Mechanism. How are we to judge 
these sweeping reforms? 

The striking feature of the UK 
Treasury is the sheer breadth of 
its remit. Unlike the US, France 
and Germany, it still retains ulti- 
mate control over monetary pol- 
icy. Unlike the French finance 
ministry it is the chief source of 
economic advice in government 
and does not leave control of pub- 
lic expenditure to a separate min- 
istry. Its role is central. To that 
extent the current review pro- 
poses a wider reform of govern- 
mental machinery than appears at 
first sight 

No doubt a New Zealand admin- 
istration would have taken a more 
vigorous axe to the various parts 
of this highly centralised machine. 
Tet the current review could 
hardly be called soft, since it seeks 
both to decentralise mnrfo of the 
Treasury's second-guessing role, 
while dismissing a quarter of the 
department's top civil servants. In 
so far as objectives are being clari- 
fied and senior dvfl servants are 
given a less clattered strategic 
role, this is all to (he good. Yet 
there must be some unease at the 
proposals to push part of the task 


of controlling expenditure back 
onto the spending departments. 

There is, admittedly, some merit 
in devolving responsibility for 
public sector pay, in that a Trea- 
sury pay policy driven by public 
expenditure concerns makes for 
poor staff management and leads 
to results that can be remote from 
labour market reality. In their 
wider monitoring role Treasury 
officials’ concerns are all too often 
with short-term objectives. The 
absence of a public accounting dis- 
cipline that provides protection 
for capital projects as against cur- 
rent expenditure notoriously exag- 
gerates that fault- 

Tbe control of public expendi- 
ture Is. nonetheless, one of the 
teatta that the Treasury has done 
well by international standards, at 
least since the second half of the 
19709, when a catastro p hic failure 
of control led to the arrival of the 
International Monetary Fund. And 
while the Treasury is often 
accused of being remote, it does 
have the advantage of indepen- 
dence in dialing with the depart- 
mental clash of vested interests. 

All history suggests that any 
relaxation over public spending 
has a nasty way of ending up in 
tears. Those who have watched 
the Treasures performance with 
increasing disillusionment over 
the years might feel that it is pro- 
posing to loosen its grip In an area 
where it has done rather well in 
order to devote more resources to 
policy activities where its record 
has been Atonal. A more funda- 
mental worry is that Job insecu- 
rity at the top of Whitehall will 
dramatically transform the notion 
an independent civil service. Criti- 
cism of the Treasury can be over- 
dona But in view of the record, a 
reform of the Treasury driven 
from within is bound bo raise 
more than the odd doubt 


Paying the price 


Europe's banka have lost their 
struggle against legislation which 
is intended to ensure quick and 
cheap transfers of cash across bor- 
ders. Given that a quarter of a 
Ecoioo payment can be expected 
to disappear in charges, mid small 
businesses face considerable 
uncertainty over how long a pay- 
ment will take, it is hard to fed 
too much sympathy for them. 

The service has been performed 
so badly for so long mainly 
because banks had little i n c entiv e 
to do better. Cross-border pay- 
ments were a marginal and barely 
profitable activity, accounting for 
a tiny proportion of a bank's 
transfers of cash. The business 
also had perverse incentives: the 
longer a bank delayed the transfer 
of cash, the mare money it gained 
in interest 

In the past- two years banks 
have woken up to the feet that 
they could be missing a trick. As 
the European market becomes a 
reality for small companies, banks 
have realised that they can attract 
customers by providing efficient, 
transfers. A company making 
many transfers to another country 
may value such efficiency above 
many other kinds- 

Yet competition has been pain- 
fully slow to raise standards 

among the mass of banks. A study 
carried out by the European Com- 
mission shows that charges are 
high mid services opaque. It would 
have been preferable for hanks to 
implement the voluntary charter 


proposed by Ms Christians Scriv- 
ener, the consumer affairs com- 
missioner, but there was also a 
case for Commission action. 

The proposed directive does not 
appear excessively harsh in most 
respects. It is feasible for banks to 
dear cash into an account within 
six days; it is also reasonable to 
require them to provide dear 
information about charges and 
transfer times. The Commission 
has avoided any move to set levels 
of charges, which may well 
remain high until the business 
becomes less marginal 

In one respect, the directive is 
too prescriptive. It says that banks 
should be banned from double- 
charging, or levying a charge on 
the receiver of the money as wall 
as the sender. It is reasonable to 
prevent banks doing this when a 
customer has dearly instructed 
than not to do sa to do otherwise 
Is dose to fraud. But there may be 
cases where customers are happy 
to split charges, and many small 
banks rely cm being able to charge 
for receiving payments. 

Given the efforts of larger banks 
to improve services, it seems 
unlikely that they will be per- 
turbed by the directive. Banking 
groups argue it creates an uncer- 
tain legal background for their 
business in the next few years. 
But any large bank investing in a 
project that does not meet the 
Commission’ a minimum standards 
might as well abandon it as 
uncompetitive anyway. 


East needs west 


The collapse erf the Soviet system 
was a victory for those who argue 
that market forces create a more 
efficient, dynamic and creative 
economy than centralised com- 
mands. But the European Bank 
for Reconstruction and Develop- 
ment (EBRD) observes in its first 
Transition Report that, despite 
some successes, much remain s to 
be done if that victory - now irre- 
versible - is to be fully exploited. 

The central European countries 
that took harsh measures to 
restore macroeconomic stability 
and backed them up with privati- 
sation, legal banking and other 

institutional reforms are already 

emerging from recession with 
much more efficient and produc- 
tive economies. 

In others, notably Russia, per- 
formance remains mixed. There 
privatisation has moved a he ad, 
but the reforms needed to stabilise 
the economy remain seriously 
incomplete. Ukraine is on the 
starting block, while in the war- 
tom Caucasus the economic base 
has been largely destroyed and 

energies have yet to be focused on 

reform 

Much has been achieved by the 
governments and the 450m people 
who lire and work in the- 25 coun- 
tries surveyed by the EBRD. But 
the review is also right to call on 
wealthy states, which already 
have functioning market econo- 
mies, to help the re-integration of 
the transitional economies into 
the network of global trade and 


inv estm ent 

As the report makes dear, the 
record of the European Union in 
this respect leaves much to be 
desired. Mired in recession for the 


the Maastricht treaty, the EU has 
approached trade negotiations 
with nit-picking narrowness. It 
has also been far too ready to 
impose anti-dumping and other 
restraints an trade in “sensitive" 
products, such as steel textiles 
and processed foods, which make 
up the bulk of exports from cen- 
tral Europe. 

The countries In transition des- 
perately need easier access to EU 
markets, and the higher foreign 
investment this would attract, to 
offset the unemployment caused 
by the restructuring of their obso- 
lete Soviet-style economic 
systems- Without finer access for 
their exports and more invest- 
ment, tt may prove impossible for 
countries in the region to achieve 
the east Asian levels of growth 
needed to narrow the gap between 
living standards on both sides of 
Europe. 

Five years after the collapse of 
communism, the EBRD’s review 
underlines how slow western 
Europe has been in rethinking the 
future shape of a wider Europe, 
$m-h changes to western thinking 
and institutions are essential if 
western Europe is to seise the 
opportunities offered by the large 
potential markets and cost-effec- 
tive labour on its doorstep. 


T his week’s sale of Kidder 
Peabody to rival Wall 
Street securities house 
PaineWebber has created 
a new member among 
the elite of the US retail brokerage 
business. 

By acquiring Kidder, Paine- 
Webber boosts the size of Sts army 
of stockbrokers to 6,600. Only Mer- 
rill Lynch (with about 12^500 bro- 
kers), Smith Barney (11,200) and 
Dean Witter (7,300) are bigger. 

These brokers are the front line of 
the retail investing industry. For 
PaineWebber, the extra hands will 
allow the firm to compete more 
effectively with the other giants erf 
the financial services industry - the 
mutual fund groups, banks, insur- 
ance companies and discount bro- 
kers - which are scrapping for the 
right to manage t frp trillions of dol- 
lars Americans have invested in 

fjnpnrtol assets. 

Retail investment broking in the 
US has nut always been so competi- 
tive. little more than a decade ago, 
it was a relatively simple business. 
Its targets were people like the den- 
tist from Des Moines with a little 
money to spare. He could buy a 
certificate of deposit from a hanft or 
a government bond from a broker 
and know that his money was 
secure. If he wanted to risk his capi- 
tal he could buy one of the few 
mutual funds sold by fund groups 
or, more likely, invest it directly In 
the stock market through a broker 
like PaineWebber. 

Today, the Des Monies dentist has 
been joined by millions of other 
Americans who want to invest in 
securities. They can. choose from a 
vast array of in ve stm ent products 
sold by a variety of financial inter- 

wwriwirtot 

The fastest growth has been 
recorded in the znntnal fund busi- 
ness, amid intense competition 
between financial services provid- 
ers. in 1980, just 6 per cent of US 
households invested in a mutual 
fond. Ownership levels had lumped 
to 27 per cent erf households by the 
end of 1992 (the most recent date for 
which date are available). Today, 
mutual fund assets total $2^00bn, 
up from only $50bn in 1977, and 
more *ham double the total just five 
years ago. 

Mr Joe Grano, head of Paine- 
Webber’s retail broking force, says 
(he flow of money in recent years 
into investments such as mutual 
funds has been “mind-boggling”. 
"There has been a mad rush by 
non-tradition al competitors to 
get into our business,” says Mr 
Grano. 

These “non-traditional competi- 
tors” include discount brokers, 
banks, specialist fond groups and 
insurance companies which are 
fighting over the retail dollar with 
faD-serrice brokers such as Paine- 
Webber and Merrill Lynch. 

The discount brokers have pros- 


Patrick Harverson on US retail investment brokers’ 
fight against the giants of the financial services industry 

Competition for 
the investor's dollar 


pared in recent years by offering 
investors low-cost services. Since 
frepd commissions were abolished 

in 1975, firms such as Charles 
Schwab. Fidelity Brokerage and 
Quick & Reilly have been steadily 
winning business from the full-ser- 
vice brokers. 

Although dwarfed by the full-ser- 
vice firms in the size of their brok- 
ing forces and assets, they now 
account for about 14 per cent of 
retail broking commissi on s in the 
US, up from about S per cent 10 
years ago. Firms such as Charles 
Schwab have been particularly suc- 
cessful in winning mutual funds 
business from the big brokers by 
offering investors an easy way to 
buy into a wide range of mutual 
funds with low commissions and 
“no-load" funds that charge no com- 
mission. 

Insurance companies are also 
beginning to make their presence 
felt in the retail market Mr BH1 
Hartman, securities industry ana- 
lyst at JP Morgan in New York, 
says that insurers have a built-in 
advantage over other financial ser- 
vices firms because of their long 
experience in selling specialised tax- 
effident investment products direct 
to investors. 

Mr John Steffens, executive 
vicepresident of Merrill Lynch, the 
second largest mutual fund man- 
ager in the US, is taking the threat 
from the insurers seriously. “The 
insurance companies have some 
definite advantages, because they 
have significant relationships [with 
customers], big asset bases, and 
large distribution systems in 
place.” 

The biggest threat to foil-service 
brokers’ retail investment business, 
however, comes from the hanks. 
They can sell investment products 
through their large branch net- 
works, which offer growing compe- 
tition to the brokers’ own distribu- 
tion networks. 

Banks are relatively recent 
entrants Into the retail hra aft tmmit 
market after decades in which regu- 
latory barriers kept the banking 
and securities industries apart Five 
years ago, banks managed mutual 
fund assets worth $43Abn. By April 
of this year, that figure had jumped 
to $219.4hn, or 10 per cent of the 
mutual fund market 


US retail Inve stmen t ma rket the main players 


full-service brokers 


MarrS Lynch: biggest with 12^00 brokers and $1 -4bn profits in 1993 
PafneWabboK recently expended to 6300 brokers 


Discount brokers 


Chattels Schwab: dominant in dtacoiatt sector, la law-coat or no-fee 
broWng 

Quick & Reify: 750,000 customers 


Mutual fund groups 


fWeBfir Investments: the bluest fund group, with S272bn fimds under 
-management, and 7m customers. Also own a discount broker 
* Vanguard: $132bn of muteaMond assets under management 


' PNC Bonk: foe biggest bunk sefflngfmd* Enough branch network with 
$19.5bh fund assets under management 
. HatfomBante' sdcond biggest wtth yi3.7bn in assets 


Insurance companies 


Prudential: biggest US insurer wBtiiS3?2bn to total assets under 
management __ 

-MMJMk $?63brt to fund assefcs'W^fnowageinera 


The growing competition in the 
retail investment market is encour- 
aged by demographic trends which 
are increasing the demand for 
savings products, says Mr Grano of 
PaineWebber. As the number of 
retired people expands, the working 
population will have to save more 
to pay for care of the elderly, he 
says. In the next 30 years, the num- 
ber of people over 65 will double. 

He also expects a rise in 
demand from the generation of 
baby-boomers, now passing the age 
of 40. “They are entering a period of 
their life when they have the most 
earning power and disposable 


income,” he says. 

Financial services providers are 
coming up with an ever-wider array 
of products tailored to their custom- 
ers' needs. These range from 
futures and options, to new forms of 
pension plans and funds investing 
in emerging market 

Technology is revolutionising the 
industry by providing investors 
with new ways to make investment 
da-feintis and to acquire financial 
information. They can initiate 
transactions and monitor the per- 
formance of their investments on a 
laptop computer at home or in the 
office, 24 hours a day. 


Mr Roger Servisoo, head of the 
Fidelity group's discount brokerage 
unit, says 71 per cent of phone 
calls to the fond group - the largest 
in the US - are answered by com- 
puters which use automated 
response technology to provide the 
caller with the information 
required. 

These new techniques also allow 
brokers, fond groups and their com- 
petitors to improve efficiency and 
save money. Without automated 
response technology, says Mr Semi- 
son, the company would need to 
hire an extra 4,000 employees. 

By allowing firms to cut their 
costs, technology also enables them 
to charge lower fees to their cus- 
tomers, a crucial advantage in a 
business that has become so price- 
sensitive. 

Yet not all investors are chasing 
the lowest commissions: while some 
want inexpensive, efficient transac- 
tion-based services, other are 
looking for high-quality profes- 
sional investment advice, which 
does not come cheaply. 

A s Mr Steffens of Merrill 
Lynch puts it: “The mar- 
ket is getting more seg- 
mented. Some people are 
looking for an increased 
level of service. Others are looking 
for rock-bottom prices just to exe- 
cute a trade." 

Mr Servison believes investors 
are Increasingly seeking the latter. 
“Price seems to be winning out over 
advice. On the brokerage side you 
see it in the accelerating gains in 
market share the discount brokers 
are enjoying over foil-service firms. 
On the mutual fond side, you see it 
in the increasing shore of the mar- 
ket the no-load business is win- 
ning.” 

That view, however, is contested 
by the full-service brokers. Mr Stef- 
fens says that future prosperity lies 
in building long-term relationships 
with Investors by providing than 
with a broad range of products 
backed by expert advice. 

Long-term business trends are 
working in the big brokers' favour, 
believes Mr Grano. He says that 
more than 20 years ago, brokers 
mostly concentrated on handling 
investors’ trades. Ten years ago, 
they worked on attracting inves- 
tors’ assets. Today, says Mr Grano, 
success lies in finding solutions to 
investors’ problems, and meeting 
their individual needs. 

“The ’70s were a transactional 
era. The ’80s were an asset-gather- 
ing era. The ’90s are a problem-solv- 
ing era,” 

If he is right, the fall-service bro- 
kers may yet hold their own against 
the competition over the rest of the 
decade. With thousands of highly 
paid brokers, costly branch net- 
works and hundreds of millions of 
dollars invested in technology, they 
cannot afford to be wrong. 


Rising pressure on German unity 



PERSONAL 
VIEW 


In the run-up to last 
Sunday's German 
elections, contro- 
versy over Europe 
was conspicuous by 
its absence. This did 
not happen out of 
negligence or lack 
of concern. Ger- 
many’s main political parties sim- 
ply could not find enough uncom- 
mon ground. So they left it to the 
marginal parties <rf a scattered left 
to raise the subject the Greens 
quarrelled with the Brussels techno- 
crats, while the recycled commu- 
nists sounded their perennial anti- 
capitalist refrain. Only an. the eve of 
the elections was there a hint erf 
discord. The leaders of the opposi- 
tion Social Democrats announced 
that, if they won power, they would 
renegotiate the terms for a future 
European currency to guarantee 
monetary stability. 

To be pro-European is not only 
part of political correctness in Ger- 
many. It also reflects a widely 
Shared poti on Of national interest, 

economic well-being and psycholog- 
ical reassurance. Germany regards 
the idea of constructing Europe 


around an “inner core" as a practi- 
cal matter, not a religious question. 
However, spelling out Germany's 
European agenda until the end of 
the decade will not be easy. 

Germans agree there is no alters 
native to buflding Europe. However, 
it will not be without too and tears 
- as the issues of economic and 
monetary union, European defence 
and the integration of the more eli- 
gible central European countries 
wifi remind ns in coming years. 

Find, Germany under Chancellor 
Helmut Kohl will press for early 
admissi on faro the EU of its imme- 
diate neighbours to the east It wffi 
be much less enthusiastic about 
countries further away. Between 
the Grach Republic and the neigh- 
bouring German LBnder of Bavaria 
and Saxony, cross-border trade in 
goods and services is growing fast 
Much German capital investment Is 
flowing to tie Bohemian lands. The 
direct line between Munich in the 
south and Dresden in the east stiQ 
goes via Prague. 

Poland has courageously adopted 
market reform. Yet it still has not 
much to offer that would •mafcn it an 
indispensable member of the EU. 


Germany's interest in seeing Poland 
in the Union has much to do with 
geography. It wants a stable neigh- 
bour to help to absorb any trouble 
in the former Soviet Union, 
Hungary, atm struggling with the 
communist past, is badly in need of 
some reassurance against the old 
demons of its Balkan neighbour- 
hood. The trig problem for German 

Germans agree there 
is no alternative to 
btdlding Europe - 
hut it will not be 
without toil and tears 

policymakers in this part of Europe 
is that the Common Agricultural 
Policy of the past is incompatible. 
financially and otherwise, with the 
German view of the future. But in 
tpumB of German fanners and their 
political muscle, the CAP has not 
yet outlived its usefulness. 

How to make European security 
effective after the waning of the Pax 
Americana wiQ be even more con- 
troversial. The Social Democrats 


will not raise their sights about 
deploying the Bundeswehr, the Ger- 
man armed forces, outside Nato 
except under massive United 
Nations pressure. However, Mr 
Kohl’s Christian Democrats are 
starting to understand that serious 
trouble in various parts of the 
world may require quicker action 
than the UN can famish. 

The Free Democrats, junior part- 
ners in the governing coaltion. will 
tread uneasily over security mat- 
ters. They wOl give up hope only 
gradually of international problems 
simply melting under the pressure 
of Goman goodwill Now that the 
constitution no longer provides a 
pretext for inaction over “out of 
area” Bundeswehr deployment Ger- 
many will agonise about the 
national interest in Europe as well 
as to the wider world. 

Last, but not least, the effects of 
the Maastricht treaty will force the 
Germans to confront the D-Mark's 
future. This issue readies deep into 
the collective memory of a nation 
that has had two catastrophic infla- 
tions this century. German society 
has a highly developed need for 
security, and Germans share with 


their French, neighbours a distrust 
of politicians managing their 
money. Any suspicion of cross- 
breeding between the D-Mark and, 
say, tiie drachma would turn Ger- 
many into a hothouse of rebellion. 
The Germans may play safe and 
stick to the D-Mark and their trust 
in the Bundesbank, but that may 
not please all their neighbours. 

Five years after the fall of the 
Berlin Wall Germany is facing the 
consequences for the whole of 
Europe of German unification and 
the end of the cold war. Politicians 
and the wider public still tend to 
believe that what is good for Europe 
is also good for Germany. But the 
choices ahead will develop a divi- 
sive edge. The 1994 Bundestag elec- 
tions may have been the last ones 
to provide a vary nearly unanimous 
German view of Europe. 

Michael Stunner 


The author is director of Titifturtg 
Wissensc/ufft imd PoKtffc, the Ger- 
man foreign affairs and defence pol- 
icy institute based in Ebenhatisen 


Observer 


Communist 

capitulation 

■ What do Lord Prior, chairman of 
GEC, Robert Kuok, the Malaysian 
tycoon owner of the South China 
Morning Post, and communist 
official Zhang Raffa have in 
common? 

They are governors of Beijing's 
newest club. Appropriately known 
as the Capital Club, it is not only 
located in the Chinese capital but 
is also housed on the 50th. floor of a 
h iifliHng mTIpJ Hip Cajrifal Manginn. 

Membership fees - $SJ000 for 

individuals and 57,500 for corporate 

members - are also pretty 
Cflpital-mtaislve. 

Officially opened last Saturday, 
the clnb is one trf a growing band in 
Bejpng and other Chinese cities 
where the new business e£te can 
rub shoulders with Chinese 
politicos. In this case, other 
governors include the vice mayor of 
Bering, who is a dose confidant of 
Deng Xiaoping, and the vice-mayor 
of Shanghai 

Sadly, members erf the new and 
much-hyped London Capital Club 
should not expect teriprocity, 
however. The developers of the 
Chinese venture, dub Corporation 
of America - specialists in 
“member-sensitiva staff” according 
to the bumf - have nothing to do 
with Dieter Kfostermann, the Hong 
Kong-based chairman of the 
confosmgiy shnflar-sounding CCA 
Group which is behind the London 


project 

Klostennaxm, who broke away 
from the American group in 1380 to 
set up his own Far Eastern 
operation, will presumably see his 
old associates’ first incursion into 
Asia as something of a provocation. 
He has his own plans for Beijing - 
if there is anyone left to sign up. 


Sea trials 


■ Golfers in search of the ultimate 
water hazard need look no more. 
Royal Caribbean Cruise lines has 
designed an 18-hole golf course 
complete with sand traps, trees and 
Scottish heather to go on top of its 
latest ship. Legend of the Seas. 

Royal Caribbean insists that it 
“isn't one of those miniature golf 
courses with windmills, pirates and 
volcanoes”. The all-weather course 
has been designed to be as 
challenging as some of “the great 
courses of the world”. Admittedly, 
the longest hole is 32 feet and the 
tees are only five-feet wide, but the 


is a big demand out there. 

ft has even dredged up same 
statistics to prove that the number 
of rounds of mtai-golf played in the 
US has risen from 100m in 1990 to 
170m this year. 


Envy party 

■ Conclusive evidence that 
Germany's once madeqp Green 
party has arid out to the political 



'Kiss me and 1 turn into a 
publisher* 

establish me nt. 

The dedicated environmentalists, 
who now constitute the third 
largest parliamentary group ha the 


November 4 and 5 for the party 
conference. Now the proceedings, to 
be held in Cologne, will be squeezed 
into the one day, November 5. 

Tim reason? A rather large 
number of the delegates apparently 
wish to attend the annual press tedl 
in Bonn the previous evening, a 
huge but tedious event attended by 
the massed ranks of the great and 
good. 

Tickets cost DM250, black tie is 
obligatory, and about the best 
entertainment is to be had watching 


self-important politicos fall over 
each other to secure their picture in 
a Sunday newspaper. All that 
mould-breaking understandably 
produces a thirst for some 
clampers. 


Gated 

■ So Bill Gates, Wunderkind 
entrepreneur, co-founder of 
Microsoft and the richest men in 
the US, is not Invincible after alL 
His well-flagged book on the future 
of the Information highway, titled 
The Road Ahead, has taken a wrong 
turn on the way to publication. 

ViHng, which is thought to have 
paid an advance of more than &5m 
for the rights to publish Gates’ 
musings, now says that the book's 
release has been postponed - from 
November to next March. 

Also delayed - again -is the 
launch of Microsoft's next version 
of Windows PC software, which was 
originally scheduled for release in 
1993 and is not now expected until 
May or June 1995. Gould the latter 
have proved something of a 
distraction for the first-time author? 


Show jumper 

■ Pity poor old Malcolm Barr, 
chairman of Barr & Wallace Arnold 
Trust, who is currently besieged by 
his two rebcJHous nephews. 

Young master Nicholas and 
master Robert are calling for the 
heads of no less than the chief 


executive and finance director and 
claim they have the backing of a 
majority of the shareholders of the 
leisure and motor distribution 
group. 

For uncle Malcolm, 68, the 
prospect of losing his chief 

executive is an uncanny reminder 
of Ids other job as chairman of 
Leeds Permanent building society. 
He has been searching for a chief 
executive since February 1993, 
when Mike Blackburn escaped to 
run the Halifax building society. 
After 22 years on the board of the 
Leeds, Malcolm retires in Januar y - 
an event which may in itself speed 
up one of the longest running CEO 
searches in recent times. 

But the question remains whether 
Barr & Wallace will still be bis 
Ettfe earner m retirement After an, 

to lose one chief executive may be 
regarded as a misfortune: to lose 
two might look like carelessness. 
Perhaps he should take a few tips 
from Iris loyal son-to-law, show 
jumper John Whitaker, on how to 
stay in the saddle. 


EU who? 


trying to sell Europe to Asia's 
booming economies. A study by the 
European Commission into the 
European Union's image in 
south-east Asia found. . mo image at 
an — *■ 


Union’ was an insurance company " 
sighs one Eurocrat e 





16 


SHEEKFRAME 

Specified 
Worldwide 


Tel: 0773 862311 


FINANCIAL TIMES 

Thursday October 20 1994 


A WORLD LEADER 

BOWENS in photographic 

” UGHTING 

INietNAtlONAL 




Cuts follow government expenditure review 

UK Treasury to shed 
one in four senior staff 


By Philip Coggan, 

Economics Correspondent 

The UK's Treasury mandarins, 
one of the elite groups of White- 
hall. are set to become some of 
the earliest victims of the British 
government's fundamental 
expenditure review. 

Around one- in-four of the Trea- 
sury's senior staff are set to lose 
their jobs as part of a review of 
the financ e ministry’s functions 
and operations. 

Although many of the depart- 
ing staff can probably look for- 
ward to senior jobs in the City, 
on top of redundancy packages, 
the review is causing much dis- 
quiet among Treasury officials. 
Some believe that the ability of 
the Treasury to do its job will be 
undermined. 

Part of the rationale for the 
review, which was overseen by 
the industrialist. Sir Colin South- 
gate. chairman of Thom EMI, is 
that the Treasury should stop 
"second-guessing" government 
departments on small items of 
expenditure. Instead, the Trea- 


sury should concentrate on the 
strategic issues that determine 
the long-run path of public 
spending. 

The review also suggests that 
the Treasury should hive off 
some of its duties, such as the 
supervision of Civil Service per- 
sonnel management and pen- 
sions, to other government 

Treasury wants to hand tasks 

to SIB Page 10 

Editorial Comment — Page 15 

departments. Mr Kenneth Clarke, 
the chancellor of the exchequer, 
has even suggested that the Trea- 
sury’s much-cherished economic 
forecasting function be subject to 
the market testing programme in 
two years, a proposal dismissed 
by Sir Colin. Market testing 
would require Treasury econo- 
mists to compete with private 
sector analysts and academics to 
provide forecasting. 

Cuts at the UK Treasury will 
do little to make a dent in the 
government's budget deficit, fore- 


cast by the Treasury to be £36bn 
($56-88bn) in 1994-95. The running 
costs of tire Treasury will be just 
£81m this year. 

But with all government 
departments forced to make a 
fundamental review of their 
expenditure, the Treasury, guard- 
ian of the nation's purse strings, 
had to set an example. 

Trade unions fear the Treasury 
cuts could be the precursor to 
widespread Civil Service cuts, 
although Sir Terry Burns, the 
economist who is tie Treasury’s 
top official, was playing down 
tears yesterday. 

The review follows several 
years of substantial changes at 
the Treasury. After sterling's 
humiliating departure from the 
European exchange rate mecha- 
nism in 1992, a new policy frame- 
work was established, giving 
greater power and influence to 
the Bank of England. The min- 
utes of the September 7 monetary 
meeting show that the Bank’s 
governor, Mr Eddie George, was 
the prime mover behind the 
recent rise in UK interest rates. 


Former BCCI chief jailed 
for 11 years by US court 


By Richard Waters in New York 

Mir Swaleh Naqvi, former chief 
executive of the Bank of Credit 
and Commerce International, was 
sentenced to u years and three 
months imprisonment in the US 
yesterday for his role In the 
multi-bUUon dollar fraud at the 
collapsed bank. 

He was also ordered to pay 
$255 -4m restitution. 

The sentence, at a federal court 
in Washington, was the maxi- 
mum permitted under a plea bar- 
gain agreement between Mr 
Naqvi ’s lawyers and the US 
Department of Justice. It makes 
Mr Naqvi the most senior BCCI 
officer yet jailed over the fraud. 

The sentence will be reduced 
by the three years and one 
month Mr Naqvi has already 
spent in detention in Abu Dhabi 
and the US. The Justice Depart- 
ment said it would apply for a 


further reduction if Mr Naqvi 
assists with its BCCI investiga- 
tions over the next year. 

Federal pre-sentence reports 
described the banker as destitute, 
so his ability to pay the restitu- 
tion is in doubt 

Mr Naqvi pleaded guilty in 
July to three criminal charges of 
fraud and conspiracy at BCCI, 
which was closed by interna- 
tional regulators three years ago. 
He admitted he engaged with 
other BCCI executives in a racke- 
teering conspiracy to control sev- 
eral US banks. 

Mr Naqvi will face additional 
charges in New York tomorrow, 
when he is due to be arraigned 
before a state court Prosecutors 
acting for Mr Robert Morgen- 
thau, the New York district attor- 
ney, are pushing for a further, 
higher sentence. 

The move is seen in part as an 
attempt to force him to help with 


their inquiries into the affair. 

Mr Joseph diGenova. Mr 
Naqvi's lawyer, said his client 
had already given considerable 
help to a number of investigators 
since being being sent to the US 
by Abu Dhabi five months ago. 
These included the Federal 
Bureau of Investigation, the 
Internal Revenue Service and the 
Immigration and Naturalisation 
Service, he said. 

Mr Naqvi has also been inter- 
viewed before two federal Grand 
Juries in the past three weeks, in 
Atlanta and Washington. 

One investigator, who has fol- 
lowed the BCCI case from the 
start, said the Grand Juries were 
considering whether to indict 
junior BCCI employees, implying 
that the Justice Department has 
halted investigations into 
whether outsiders, including 
prominent figures in tile US, may 
have aided tile fraud. 


Russia 


Continued from Page 1 

of a standby agreement and the 
addition of a third tranche to an 
economic reform loan of which 
they have already drawn down 
S3bn. If the strategy proved suc- 
cessful, he hoped for a further 
$6bn loan to stabilise the rouble. 

"If the IMF decides not to 
advance these loans, or does not 
agree with our schedule of how 
the loans should be paid, then 
this approach would certainly he 
put in doubt,” Mr Shokhin 
said. 


Brussels plans transfer law 


Continued from Page l 

was enacted. The Commission’s 
study found Europe's businesses 
and customers pay an average 
Ecu25.4 per EculOO cross-border 
payment, Ecu2 more than they 
paid a year ago. The average 
total time for a transaction is 
almost five working days. 

Mrs Christiane Scrivener, the 
commissioner who initially sup- 
ported a voluntary code of con- 
duct, bailed the proposed legisla- 
tion. “We could not pot np with 
this situation for ever; at some 


point we had to act,” she said. 

Mrs Scrivener urged ministers 
to agree legislation as soon as 
possible, and noted that it 
required a simple majority only 
rather than unanimity. Internal 
market ministers will consider 
the proposal at a meeting in Lux- 
embourg in October 31. 

The Commission wants full 
disclosure of the costs of cross- 
border transactions to custom- 
ers; but It does not prescribe 
maximum char ges because this 
could encourage cartels and run 
foul of competition law. 


Chrysler 
plans 
$100m 
venture in 
Vietnam 

By Our Vietnam Correspondent 


Chrysler, the US carmaker, is 
planning a $lOOm joint venture in 
Vietnam to build minivans and 
possibly four-wheel drive 
vehicles. 

The venture would be the first 
by a US carmaker since the lift- 
ing of the US economic embargo 
on Vietnam earlier tfrf-s year. The 
negotiations f«mn as other inter- 
national vehicle makers are con- 
sidering projects in the country, 
in spite of difficulties in find frig 
local partners with experience in 
the industry. 

Mr Robert Eaton, the Chrysler 
chairman, arrived in Hanoi on 
Tuesday to meet Prime Minister 
Vo Van Kiet and the ministers of 
transport and heavy industry to 
discuss the project The compa- 
ny’s interest in Vietnam follows 
an early entry into the China 
market where production of the 
Bering Jeep began in September 
1985. 

In May, Mitsubishi Motors 
became the first Japanese car- 
maker to enter a joint venture in 
Vietnam, quickly followed in 
June by Renault, the French 
state-owned group, which signed 
a letter of intent to begin car 
assembly in the country. 

BMW, the German carmaker, 
has a contract to assemble cars 
in Vietnam and Mercedes-Benz 
hopes to do the same. 

Vietnam is eager to avoid dom- 
ination of its motor industry by 
one country and has yet to decide 
how it will divide up shares of 
the motor assembly and manu- 
facturing industry. 

In Chrysler's case, industry 
sources suggest that the joint 
venture partner is most likely to 
be a division of the heavy indus- 
try ministry rather than a Viet- 
namese motor manufacturer. 

Until two months ago, Chrysler 
was pursuing negotiations with 
Mekong Corporation, a three-way 
venture between Japan, Korea 
and Vietnam, to build a 
four-wheel drive vehicle. 

However, the deal apparently 
fell through when the Korean 
partner made dear it was unwill- 
ing to relinquish sufficient equity 
control to Chrysler. 

Since then, Chrysler has been 
hunting for other partners, deter- 
mined to set np some sort of 
facility in Vietnam. It was 
reported yesterday that the com- 
pany has already decided on a 
site for the venture. 

If Chrysler wanted to sell 
domestically it would have to 
find a way round recent foreign 
currency regulations stipulating 
that revenue from any product 
sold in Vietnam must be in dong, 
the local currency, which is not 
freely convertible. 

As an emerging market Viet- 
nam is being viewed with great 
interest by several of the world’s 
leading vehicle makers. 

Less than 5 per cent of the 
country's 72 million people drive 
cars. 


FT WEATHER GUIDE 


Europe today 


An active front win generate heavy showers In 
parts of southern France and the Balearics. In 
addition, the central and eastern Mediterranean 
will be unsettled. Southern Italy, southern 
Greece and Albania will have downpours during 
the afternoon and evening. Sunny periods in 
Spain will become more frequent from west to 
east but the south-east might have scattered 
showers at first It will be dry north of the Alps, 
though temperatures win only be around IOC in 
Germany. The Low Countries and northern 
France will have a lot of cloud but rain will be 
confined to Scotland, northern England and 
Ireland. It will continue dry and virtually 
cloudless in Poland, Chechoslovakia, and most 
of Russia. 

Five-day forecast 

Heavy rain win increase a risk of flooding in 
southern Italy and southern Greece on Friday. 
During the weekend, other sections of Greece 
are expected to experience heavy rain. An 
active frontal system will give rain In northern 
France, the Low Countries and England. Central 
and southern Spain will become more settled. 


TObAY’S TEMPERATURES 




No other airline flier, to more cities in 
Eastern Europe. 

© 

Lufthansa 


Situation at 13 GMT. Tempw&wos maximum tar day. Forecasts try Mateo ConsJt of N&hertands 

15 Rangoon 
Z1 Reykjavik 
25 Rio 
14 Rqma 
33 S. Frsco 
18 Bead 

24 Sfewapora 
29 Stockholm 

12 Strasbourg 
10 Sydney 
-1 Tangier 

13 Tel Aviv 

Karachi sun 35 Nairobi shower 27 Tokyo 

Kuwait fat 32 Naples thund 21 Toronto 

L Angeles t at 24 Nassau shower 30 Vancouver 

Las Palmes sun 26 Naw York fair 18 Venice 

Lima cloudy 21 Nice rah 19 Vienna 

Lisbon fat 16 Nicosia fair 26 Warsaw 

London cloudy 15 Oslo sun. 5 Washington 

U&bourg fair 15 Paris drzd IS Wellington 

Lyon showw 16 Perth lair 25 Winnipeg 

Madeira fair 25 Prague sun 9 Zurich 



Maximum 

Bojirtg 

fair 

16 

Caracas 

doudy 

31 

Faro 

fair 

23 

Madrid 


Cdstus 

Belfast 

shower 

13 

Cardiff 

rain 

14 

Frankfurt 

star 

15 

Majorca 

Abu Dhabi 

sun 

35 

Belgrade 

fair 

15 

Casablanca 

.doudy 

22 

Geneva 

fair 

15 

Malta 

Accra 

shower 

29 

Berlin 

sun 

9 

Chicago 

drawer 

14 

G&xattar 

shower 

21 

Manchester 

Algiers 

thund 

22 

Bermuda 

shower 

27 

Cologne 

sui 

16 

Glasgow 

shower 

14 

Manila 

Amsterdam 

doudy 

13 

Bogota 

Ctoudy 

21 

Dakar 

fair 

30 

Hamburg 

fair 

10 

Melbourne 

Alberts 

cloudy 

22 

Bombay 

far 

34 

Dates 

doudy 

25 

HeJshW 

sun 

2 

M*dooC»y 

Atlanta 

tdr 

24 

Brussete 

doudy 

15 

Delhi 

sui 

31 

1 long Kong 

doudy 

26 

Miami 

B. Aires 

Infer 

21 

Budapest 

sun 

13 

Dubai 

sun 

34 

HortoMu 

doudy 

30 

Mian 

BJwm 

doudy 

15 

C-fiawm 

sun 

9 

Oubfti 

rata 

13 

Istanbul 

doudy 

19 

Montreal 

Bangkok 

fair 

33 

CdfeO 

sui 

30 

Dubrovnik 

rain 

20 

Jakarta 

fair 

32 

Moscow 

Barcelona 

doudy 

19 

Capetown 

Mr 

22 

Ednbwgh 

rain 

13 

Jersey 

shower 

14 

Mvtich 


thuid 

shower 

shower 

cloudy 

doudy 

cloudy 

fair 

shower 

shower 

fair 

sui 

Shower 

thuid 

shower 

fair 

rah 

fair 

sun. 

drzzl 

fair 

sun 


fair 91 

shower 8 
doudy 25 
rah 22 
fair 20 
doudy 19 
doudy 32 
sun 7 
fair 15 
cloudy 26 
shower 21 

W 28 
doudy 23 
shower 12 
shower 
fair 
sun 
sun 


13 

15 

12 

6 


Mr 19 
12 

13 

14 


sho*ar 

"S 


THE LEX COLUMN 


Defence manoeuvres 


GEC may well want to retain the 
freedom to make a hostile bid for Brit- 
ish Aerospace as a way of chivvying it 
Into friendly talks on merging their 
defence interests. But actually moving 
ahead with a hostile bid can never 
have been more than a last-ditch 
option. BAe would have been able to 
use its immense strategic importance 
to create the most almighty political 
stinfr The ensuing fig fr t would have 
been more bitter even than GEC’s two 
bids for Plessey in the ZSSOs. 

This does not mean Lord Weinstock 
frill believe BAe’s promise to resume 
friendly talks provided GEC gives it a 
free run in its bid for VSEL. If BAe 
bags the submarine maker, it win be 
under little pressure to accede to 
GEO'S Ha mandV VSEL’s rash pile will 
strengthen BAe’s balance sheet, while 
earnings should be enhanced as the 
submarine group’s profits could be set 
a gain id- BAe’s fav allowances. 

A bid by GEC for VSEL must there- 
fore remain a hi gh possibility. Lord 
Weinstock would probably have to pay 
more than VSEL was worth as a 
stand-alone entity. But he might be 
able to justify such a bid to himself on 
the grounds that it would keep BAe 
vulnerable and open to approaches. 

Lord Weinstock's hopes of restruct- 
uring the UK defence industry 
through a mega-merger may not be an 
ideal option. Far better to reorganise 
Europe's industry through a series of 
cross-border mergers. The snag is that 
concerns over national sovereignty 
mak e such deals politically impossi- 
ble. But if BAe wants to escape GEC’s 
affections once and for all, it will have 
to advance beyond its current mish- 
mash of continental alliances. 

Smiths Industries 

A third of the 12 per cent increase in 
S miths Industries pre-tax profits last 
year was due to acquisitions and 
exceptional items. But it would be 
churlish to take issue with Smiths * 
achievement in attaining record prof- 
its and earnings per share at this 
point in the economic cycle. With half 
of its turnover deriving from the 
deeply troubled aerospace sector. 
Smiths’ management has deftly 
avoided the substantial problems 
encountered by other companies in 
the sector. 

Smiths’ success lay in defending or 
pnhancfng margms fn its three core 
business areas. In aerospace, for exam- 
ple. turnover slipped but margins were 
maintained at more than 10 per cent 
In medical systems, they rose to an 


FT-SE Index; 30S0.8 1-24.5) 


Booker 

Share price rdafera to the 
FT-S6AAB-Ster»Jndflsr 
no 1 — 


too 



60 — 


50 l 


1 1 itu i i i iu i l»minm l nm u u i dmt »»■>* > J 
1981 92 83 94 

Source: FT GrapNfa 


enviable 232 per cent in the free of 
rising costs and the difficult US 
healthcare environment. Despite 
Smiths* small size compared with 
international competitors, its concen- 
tration on profitable niches has evi- 
dently insulated the group from the 
full force of recession. Moreover, tire 
amp le cash generated by the core busi- 
nesses has been sensibly deployed on 
a succession of unspectacular but 
well-timed industrial nmi healthcare 
acquisitions. 

At present, the gronp’s aerospace 
activities are dormant in profits terms. 
After a drastic restructuring, the 
awakening promises to be spectacular, 
even if recovery in the sector is still 
some years off. But investors should 
not be deterred by the delay. Analysts 
expect the group to make pre-tax prof- 
its of £130m-£133m in the year to next 
July, putting the shares on a modest 
premium to the market. 

Booker 

Given that Booker’s dividend cover 
last year was L3 times and falling, 
shareholders have more than a pass- 
ing interest in its quality of earnings. 
Salmon fa rming hag become a highly 
cyclical, commodity business with 
wide price fluctuations and regular 
bouts of disease. So the relaxed reac- 
tion to the proposed acquisition of 
Marine Harvest is testimony to the 
persuasiveness of new chief executive 
Mr Charles Bowen. 

The deal will spread Booker’s 
salmon risks by bringing in Chilean 
production and adding sales in the 
fast-growing US and Japanese mar- 
kets. Disease control has also 
improved significantly over the past 


few years. Yet it is hart to argue the 
aHiui!riti n n will reduce Booker's risks 
as a group. The purchase will more 
than treble its salmon production to 
nearly HOOm a year. Though Booker 
argue this is modest in the context of 
group sales of £3.5bn, fish fanning will 
contribute about a tenth of its profits. 

Although Booker cannot el i m i n ate 
salmon cycles entirely, it is currently 
Tpairiwg good money. It is also con- 
vinced it can cut costs faster than the 
2-3 per cent a year tell in prices it 
predicts. But even after cost savings of 
around £3m a year, the £76m purchase 
price will not look a bargain if the 11 
times multiple proves to be calculated 
on peak earnings. There was a real 
bargain to be had in 1992 when Uni- 
lever sold the Marine Harvest salmon 
business for but Booker passed 
up the chance. 

UK housing 

The gap between the bulls and bears 
on the outlook for the currently mori- 
bund UK bousing market is surpris- 
ingly wide. Predictions for house price 
inflation range from a 30 per cent 
increase by the end of 1999 to nearly 
50 per cent Bulls and bears alike can 
root out evidence to support their fore- 
casts. The bears stress falling tax priv- 
ileges for mortgage holders, high lev- 
els of indebtedness and negative 
equity, and a weak demographic out- 
look. The continuing fall in numbers 
employed is still undermining job 
security and confidence. Finally, they 
argue there has been a structural shift 
in attitudes: low Inflation provides lit- 
tle incentive to see housing as a specu- 
lative asset rather than a living space. 
The bulls, led by UBS, question the 
weight given to such factors and say 
underlying macro-economic growth 
will drive house prices upwards. Most 
importantly, they believe the UK’s his- 
toric inability to hold down prices dur- 
ing economic upturns guarantees gal- 
loping house inflation. 

The buOs’ scenario would be under- 
mined if the government delivers on 
its rhetoric. If inflation remains law, 
then housebuilders. D1Y merchants, 
white goods manufacturers and the 
like face a gloomy end to the century. 
No matter which scenario {moves accu- 
rate, toe mortgage lenders, geared for 
a peak of 2m property transactions a 
year, look chronically over-staffed. 
Even UBS’s optimistic model predicts 
only 1.8m transactions by 1997. With 
high operational gearing, toe tenders 
should be seeking to cut at least 10 per 
cent of overheads, if not more. 


IN-DEPTH RESEARCH 

depends on teamwork. Simple 
enough in theory, perhaps, but 
practice is quite another matter. 



Every stock recommendation is ultimately under- 
pinned by pure information. The question is, how 
good is the information? How astutely is it analyzed? 

At Lehman Brothers, our analysts, the insti- 
tutional investors that we serve and the companies 
we have under coverage all contribute to a process 
in which investment hypotheses are formed, 
challenged and refined until they can withstand the 
scrutiny of multiple perspectives. 

QUALITY RESULTS, THE 
BENEFITS OF TEAMWORK 

Within the firm, an analyst who identifies a stock 
with unusual potential confers with colleagues in 
related fields to pool information and insights. This 
teamwork is an essential step in turning potential 
into a recommendation. Validation is sought from a 
variety of sources. The companies we cover proride 
valuable feedback on trends as well as fundamental 
data. Our analysts then go to these companies’ 
competitors and suppliers to test and substantiate 
the information. Similarly, we consult with the 


very institutions who rely on our investment 
conclusions. 

Additionally, our international network of ana- 
lysts interact with each other to share information 
on industries, clients and economic trends to ensure 
that Lehman Brothers' perspective is strengthened 
by global sectoral research. Like continuous distil- 
lation, the process is repeated until the research 

team is satisfied — or the idea is discarded. 

AN INVITATION TO 
SAMPLE OUR THINKING 


If you would like an example of the recom- 
mendations that result from this approach, contact 
your local Lehman Brothers representative for a 
copy of our Global Portfolio Perspective, a comprehen- 
sive overview of market, economic and political . 
trends, as well as specific investment opportunities 
by industry group. 

If your company has a problem or opportunity 
that could benefit from the quality of thinking we’ve 
described, we are ready to work with you. 


Lehman brothers 



by Ldun Mtn tawnudonal (Earopd. . 


* 


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;>euvre$ 

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brother. 

FINANCIAL LIMES 

CREATING THE WORLD’S 
MOST LUXURIOUS CLOTHS 

TYPEWRITERS 

WORD PROCESSORS 
PRINTERS 

COMPANIES & MARKETS 

(f^ /Ceftt r r (oJ^/t 

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©THE FINANCIAL TIMES LIMITED 1994 TIXUTSClZiy OCtObCT 20 1994 

LANOHOLM SCOTLAND- DSI3 OB N 

TEL: 03873 003 1 1 FAX: Q3073 80720 


IN BRIEF 


Volume gains for 


Nokia rings up a five-fold profit increase 



jk 







US telecoms 

Third-quarter results from a clutch of US 
teleco mmun ications companies showed continued 
fast growth in the volume of traffic, but also bore 
the scars of increased competition. Page 20 

AMR profits beat forecasts 

Shares in US airlines jumped sharply yesterday 
after AMR, the parent company of American Air- 
lines, the first US carrier to report its quarterly 
results this season, produced profits far in excess of 
analysts' expectations. Page 20 

Falling costs lift Metsa-Serta 

Metsa-Serla, the Finnish forestry group, sain yester- 
day its profits after financial items had more than 
trebled in the first eight months of the year, to 
FM382m ($82. 7m) from FMi24m in spite of fiat sales 
’ and a drop in operating profits. Page 18 

KOP seeks to strengthen capital base 

KansallifrOsake-PankM. Finland's leading commer- 
cial bank said it wanted to strengthen its capital 
base by FM3bn ($648. 4m). The move is a final 
attempt to shake off the legacy of the country’s 
hanking sector crisis, which has brought it four 
years of losses. Page 18 

Higher prices help Gengold 

Gengold, the gold division of South African mforng 
house Gencor, shrugged off the labour unrest that 
dented its previous quarter’s figures and reported a 
sharp 42.8 per cent rise in after-tax profit for the 
three months to September. Page 21 

UBS rejects Elmer board proposal 

Union Bank of Switzerland yesterday rejected Mr 
Martin Ebner’s proposal that a director be 
appointed specifically to represent the bank’s regis- 
tered shareholders. Page 21 

Airbus Finance In $1 ba loan launch 

Airbus Finance Company, the sales finance com- 
pany recently established by Airbus Industrie, the 
European aircraft-building consortium, yesterday 
publicly launched a Slbn syndicated loan, its debut 
transaction. Page 22 

Forte separates County Hotels 

Forte, the UK hotels and leisure chains, yesterday 
reshuffled its hotel portfolio, putting 80 of its lower- 
grade properties in a new company which will not 
carry the group's name. Page 23 

Crwfits roll at Ealing 

The latest instalment in the history of Ealing Stu- 
dios, the home of classic British films such as Pass- 
port to Pimlico and The Lavender HiU Mob, ended 
yesterday when BBRK Group, its parent, went into 
administrative receivership. Page 24 

Heavenly chorus 

EMI Music, a New York-based offshoot of Thom 
EML the music and rentals group. Is strengthening 
its interests in the "Christian music" field by pay- i 

Lng$i5.5m cash for Star Song, which has a "strong I 
roster" of Christian artists. Page 23 

Pungent vowth 

Consumption of garlic in southern England has 
overtaken that of northern France, thanks to mar- 
keting by an Isle of Wight grower. Page 28 


Companies m this Issue 


AMR 20 KOP 18 

Accor 18 Kidder Peabody 15 


Alcatel 10 

Amgen 20 

Aminex 23 

Anglovaal 21 

Arthur Andersen 20 

BAe 2*. IT 

BBRK 24 

BT 20 

Banco ctt Napoli 21 

BankAmerica 20 

Barclays 24 

Bell Atlantic 20 

Booker IT 

CNP 21 

Chrysler 18 

Compaq 20 

Cummins 21 

DFS Furniture 24 

Digital Equipment 17 

Ericsson 4 

Forte 23 

Frogmore Estates 24 

GEC 17 

GTE 20 

Genentech 20 

Gengold 21 

Gtenchewton 24 

Go-Ahead 24 

Harrington Kltbrtdo 24 

Havelock Europa 23 

Inert ec 21 

Indosat 21 

J. Salnsbury 10 

JP Morgan 15 

Johnson & Johnson 20 


Mariwt Statistics 


XArmal reports senes 32-33 

Benchmark Govt bonds 22 

Bond futures and options 22 

Bond prices and yields 22 

Commodrtfes prices 28 

OMdenda awwunwt, UK 24 

BrtS currency rates 38 

Eurobond prices 22 

Rxed interest hdtees 22 

FT-A wom Indices Back Pup* 

FT Gold Males trie* 31 

FT.TSMA bit! bond sve 22 

FT-S6 Actuates indices 31 


LeCreuset 24 

VjBgak & General 24 

Lotus Development 20 

MAS 21 

MCA 15 

MCI 20 

MIM Holdings 21 

Marine Harvest Inti 17 

Matsushita 18 

Merrill Lynch 16 

Metsa-Serta 18 

Monsanto 20 

NTT 7 

Neste 18 

Nesttt 4 

Nokia 17 

Pacific Teiesia 20 

Paine Webber 15 

Ptrea 4 

Rhflne-Poutenc 18 

Riyad Bank 21 

Royal Air Cambodge 21 

Saga Petroleum 21 

San Miguel 21 

SeaffeM 24 

Smith New Court 24 

Smiths Industries 18 

StarSong 23 

TateftSnfca 18 

Thom EMI 23 

UBS 21 

VS EL 24, 17 

WMX Technologies 20 

Wamford Invs 23 

Waterglade Vnb 24 


Foreign sxcftanga 38 

eatspricss 22 

Lift equity options 31 

London share service 32-33 

London trad) options 31 

Managed lunds service 34-35 

Money markets 36 

Maw bill bond Issues 22 

New York dare service 33-39 

Recent Issues, UK 31 

Start-term tat rates 38 

US Interest raws 22 

World Stock Markets 37 


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By Hugh Camegy In Stockholm 

Nokia, Europe's biggest manufacturer of 
mobile telephones, yesterday announced 
a near five-fold increase in profits in the 
first eight months of the year as its 
spectacular recent growth continued. 

The Finnish group reported pre-tax 
profits during the period of FMP. 39bn 
($50m) up from FM466m at the same 
stage last year. Net sales rose to 
FMX&2bn from FMl4.ibn. but Nokia said 
this represented a 40 per cent increase in 
turnover after accounting for exchange 
rates and restructuring. 


The result, driven by fast-growing 
demand for Nolda's telecommunications 
network equipment and its mobile hand- 
sets, was ahead of expectations. 

Mr Jorma Ollila, chief executive, said 
the outlook for the rest of the year was 
favourable. Nokla's ordinary shares 
jumped 5 per cent in Helsinki to close at 
FM632 after starting the day at FM600. 

Sales of mobile telephones surged by 
64 per cent, underscoring Nokia's posi- 
tion as the world’s second largest manu- 
facturer of mobiles after Motorola of the 
OS. 

The mobile division's sales reached 


FM5.03bn in the first eight months, com- 
pared with FM3.6Sbn in the same period 
last year. 

Turnover in the teleco mmunicati ons 
division jumped more than 50 per cent 
to FM4-22bn from FM2L74bn. Nokia said 
growth was strongest in Europe - 
mainly in Gennany and the UK - and in 
the Asia Pacific region. 

Mr Ollila anticipated the world market 
for mobile telephones would continue to 
show volume growth of between 50 and 
80 per cent for at least the next two 
years. "We are concerned that strong 
growth like that can have its problems - 


the organisation can become very 
stretched. But we are not taking every 
contract, we are very careful that we 
can deliver what we have promised,” he 
said. 

Since taking over at Nokia two years 
ago, Mr Ollila has focused the group, 
once a sprawling industrial conglomer- 
ate. on telecommunications. 

A problem continues to be its loss- 
making consumer and industrial elec- 
tronics division, which saw sales foil in 
the period to FM4.1bn and which 
returned a further loss. 

Nokia does not give details of divi- 


sional profits in interim results, but Mr 
Ollila said the division should return to 
profit in the last four months and he 
intended to keep it within the group, 
partly to help Nokia explore opportuni- 
ties in multimedia products. 

But Nokia announced it was consider- 
ing floating off most of its 60 per cent 
holding in Nokia Tyres in Helsinki. The 
company is also 20 per cent owned by SP 
Tyres UK. part of the Sumitomo Croup. 
It had net sales in 1993 of FM862ra. 

Nokia also announced it would invest 
FM3l0m in expanding its production 
facilities in Finland. 


William Dawkins previews corporate Japan’s results 


Clues to 
recovery 
in coming 
weeks 

V aluable clues to the qual- 
ity of Japan's economic 
recovery will emerge over 
the next six weeks, when more 
than 1,300 listed companies 
report their interim results. 

The government’s Economic 
Planning Agency declared at the 
start of September that Japan 
had pulled out of its worst post- 
war recession, co nfirming what 
many securities houses in Tokyo 
had king believed. 

Economic indicators since then 
have been inconclusive, as might 
be expected at the bottom of a 
shallow growth curve. So the lat- 
est reports from corporate Japan 
will be the real test of op timism 
It will also show whether foreign 
fund managers were right to cash 
in on the high yen and the mar- 
ket's high prtce/eamings ratios to 
turn from net buyers of Japanese 
shares in August to sellers in 
September. 

The headline profits figures for 
the six months to September will 
provide less guidance about the 
health of the industrial economy 
than what companies say about 
business conditions. Forecasts of 
recurring profits - taxable earn- 
ings before extraordinary items - 
the most widely used perfor- 
mance gauge, vary widely. 

This is because Japanese com- 
panies have great latitude to pad 
out recurring profits with sales 
from securities holdings, or to 
reduce profits by taking extraor- 
dinary charges at the moment 
they feel most suitable. 

Some heavy oneoff charges are 
expected, such as a Yl75bn 
($l,8bn) securities loss from 
Hanwa, a steel trader, represent- 
ing an estimated 3.8 per cent of 
the entire market's annual prof- 
its, according to S-G. Warburg in 
Tokyo. In theory, companies can 
bury such charges indefinitely, 
so coming dean now can he read 
as a confidence in better condi- 
tions ahead, believes Mr Tom 
HiU Warburg equity strategist. 

Companies themselves believe 
that recurring profits will rise 7 
per cent in the full year to March 
1995, on stagnant or slightly ris- 
ing sales, according to the Tokyo 
Stock Exchange. If they are right, 
this confirms an improvement on 
the 16.2 per cent fall in recurring 
profits and 5.4 per cent decline in 
sales for the year to March 1994. 

Market forecasts, in contrast, 
are all over the place, ranging 
from a steep profits decline to a 
dramatic recovery. 

Several trends are clear. Capi- 
tal goods producers, including 
car, electrical equipment and 
semiconductor makers, have 


Another corner turned 


Recuhmg profits 

Profit an activities bafrxB eKtraortfinary toms and tax (1990=100) 



77 78 7880816283848088878889 90 91 82 83 94 95 


Operating margin (M) 

. Manufacturing companies 
5LD- 



1974 75 78 77 78 79 80 81 828384888887 88 89909182938495 
Souse 3 G UMug SacunOM. Bank of JfcpvL 

LWcn Bonfc ol P ro te w Uml Mttnmi Yoon Id Much 31 


revised profits forecasts upwards 
in recent weeks, cm the strength 
of strong demand for exports plus 
a mild pick-up in domestic 
demand for items such as per- 
sonal computers. Luckily for 
them, the yen has risen less 
steeply during the current finan- 
cial year than in 1993-94, giving 
Japanese exporters scope to 
adjust to the pressure on margins 
on overseas sales. 

F or the first time since 
signs of an economic 
upturn emerged early this 
year, the current recovery is 
starting to resemble Japan's clas- 
sic pattern of a revival from 
recession led by exports and 
manufacturing. Exports rose 8-3 
per cent in the six months to 
September, according to the 
finance ministry. 

Yet the interim reporting sea- 
son may also throw light on deep 
structural weaknesses not pres- 
ent in previous recoveries. 

First, there is the poor state of 
the financial sector, part of 
which will be revealed tomorrow 
when securities houses report 
their ftamfrigs, lower than expec- 
ted because of weak stock market 
turnover. Much more important 
to the economy at large will be 
the banks’ interim results, due 
late next month .These will con- 
firm that weak demand for loans, 
as well as banks’ own caution 
over new lending, is a constraint 


on economic growth, points out 
Mr Robert Burghart strategist at 
Smith New Court Securities. 

Second, there is the continuing 
risk of deflation. Manufacturers 
and service companies alike have 
taken an axe to labour costs. 
They have frozen recruitment, 
failed to replace retired staff and 
cut annual bonuses, which can 
represent up to a third of total 
remuneration. This has been 
good for profits, because labour 
costs have fallen faster than 
wholesale prices over the past six 
months. But labour cost cuts 
have depressed consumer 
de m a nd and helped to drag down 
prices further, so hitting consum- 
er-related companies' profits and 
encouraging further cost cuts, 
the clastic deflationary spiral 

Consumers may. however, be 
cheered by recent income tax 
cuts, so popular fears of deflation 
are exaggerated, argues Mr Jason 
James, equity strategist at James 
Capel Pacific. 

Yet corporate cost-cutting still 
has further to go, as shown by 
the fact that manufacturing 
industry’s operating margins, at 
2.6 per cent of turnover last year, 
are still well below the 3.8 per 
cent average for the previous two 
decades. If tax cuts can hold off 
deflation, those cost reductions 
should feed through into the 
much more robust corporate prof- 
its rise that most forecasters 
expect next year. 


BAe offered GEC talks on 
merging defence interests 


By Robert Poston in London 

British Aerospace has told GEC 
that it would be prepared to 
resume talks on merging the two 
companies’ defence interests, 
which were abandoned a year 
ago. if GEC does not attempt to 
stymie its £497m ($735ra) bid for 
VSEL, the shipbuilding company. 

According to businessmen 
close to both companies, the offer 
was made at a secret meeting on 
Tuesday between Mr Dick Evans, 
BAe’s chief executive, and Lord 
Weinstock, GEC’s managing 
director. It is understood that 
GEC was unimpressed and there 
was no agreement between the 
two companies. "It's a Mandy 
Rice-Davies situation," said a 
financier dose to GEC. "They 
would say that, wouldn’t they." 
He was doubtful that the offer of 
defence merger talks would have 
been carried through. 

The meeting was held at BAe’s 
request, following reports that 
GEC was considering both a bid 
for VSEL and for BAe itself. 


Mr Bob Bauman, BAe’s chair- 
man, said yesterday that he had 
a policy of “never commenting" 
on confidential meetings. 

Last week. BAe made a recom- 
mended takeover offer for VSEL. 
BAe said last night that it 
remained “totally committed” to 
this bid. GEC will decide in the 
coining week whether to make a 
cash offer for VSEL. 

A hostile takeover bid by GEC 
for BAe, which Lord Weinstock 
was considering last week, has 
become extremely remote, after 
the rise in BAe’s share price from 
454p a week ago to 478p. yester- 
day- A financier with a close 
knowledge of the company said: 
“GEC has decided not to go for a 
hostile bid.” GEC will make no 
statement on the issue, because 
Takeover Panel rules would pre- 
vent it from making a hostile bid 
for 12 months following any such 
statement 

GEC cannot decide whether to 
go for VSEL until it has reviewed 
confidential information on the 
shipbuilder's finances, which was 


given to Lazard Brothers, GEC's 
merchant bank, earlier this week. 

Lord Weinstock's main ambi- 
tion is to engineer the merger of 
GEC's and BAe's defence inter- 
ests. to create a super-contractor 
to rival any defence company. 

“This is the longest game of 
corporate cat and mouse that I 
nan remember." said a financier. 

If BAe were to buy VSEL, its 
balance sheet would be strength- 
ened and that might make it 
more difficult for GEC to prize 
out BAe’s defence interests. 

On the other hand. GEC is con- 
cerned that any bid by it for 
VSEL could be frustrated by a 
reference to the Monopolies and 
Mergers Commission, as GEC 
already owns shipyards. 

GEC may decide to give BAe a 
free run and then make a very 
low bid for the £2J3bn UK govern- 
ment contract to build the next 
generation of five Trafalgar class 
nuclear-submarines, which VSEL 
is hoping to win. 

Lex, Page 1G; DTI warns oil 
Brussels, Page 24 


Digital encouraged by 
smaller quarterly loss 


By Louise Kehoe 
'm San Francisco 

Digital Equipment reported 
smaller than expected losses for 
its first fiscal quarter as revenues 
grew modestly. The results raised 
hopes that the computer manu- 
facturer would achieve its goal of 
returning to profitability by mid- 
1995 after four years of heavy 
losses. 

Digital reported a net loss of 
J131m. or 98 cents per share, com- 
pared with a net loss of $154m, or 
SI. 14 per share, for the same 
period last year. Total operating 
revenues for the quarter were 
$3.12bn, up nearly 4 per cent from 
$3.01bn from the same stage a 
year ago. A one-off gain of about 
S65m from a change in account- 
ing methods, was partially offset 
by one-off losses related to sev- 
eral small divestments, the com- 
pany said. 

Analysts had been anticipating 
a loss of around $1.31 per share, 
so Digital's first-quarter perfor- 


mance was viewed favourably, 
and the company's share price 
gained $2V* at $31 7 /» at mid-ses- 
sion. A small sequential Increase 
in gross profit margins also 
raised confidence in Digital's 
ability to return to profitability 
by the end of its fiscal year. 

“While we are not satisfied 
with any loss, the current quar- 
ter's results contain many 
encouraging signs that give us 
confidence in our current plan to 
move the company towards its 
objective of sustained profitabil- 
ity.” said Mr Robert Palmer, pres- 
ident and chief executive. 

Revenues from product sales 
were up 6 per cent at $1.6bn 
while service revenues were vir- 
tually flat at $1.47bn. “This is the 
first time in six years that we 
have seen three consecutive 
quarters of order growth,’’ said 
Mr Palmer. Sales of computers 
based on Digital's Alpha micro- 
processor more than doubled 
over the year before and now rep- 
resent 19 per cent of product rev- 


enues, said Mr Palmer. Digital is 
counting on strong sales of Alpha 
systems to replace revenues from 
its older proprietary minicompu- 
ters. 

Digital's personal computer 
sales also grew strongly, nearly 
doubling to about 22 per cent of 
product revenues, or about 
$363m. Digital continued to cut 
costs in the first quarter, with 
sales and general expenses down 
4 per cent at 8836m, partly as a 
result of shifting sales to indirect 
channels, via third parties. 

The company eliminated about 

4.000 jobs during the quarter. Its 
workforce now stands at approxi- 
mately 73 BOO, down from 115.000 
two years ago. The company said 
that it is on track to achieve a 

20.000 reduction by the end of the 
fiscal year, but noted that job 
cuts are behind schedule “in two 
major European countries” 
which executives declined to 
identify, due to labour union dis- 
putes. 

Compaq results, Page 20 


Booker expands in salmon 


By Roderick Oram in London 

Booker, the British food group, 
will become the world’s largest 
former of Atlantic salmon with 
its $122. lm agreed bid for 
Marine Harvest International, a 
US company 27 per cent owned 
by Hanson, the UK group. 

The deal will more than qua- 
druple Booker’s salmon interests 
whicb will now account for 
about one-tenth of group profits. 
Booker, with about 7 per cent of 
world production, will leap 
ahead of Norsk Hydro and other 
Norwegian producers with whom 
it is engaged in a price war. 

Booker’s share of Scottish pro- 
duction will rise from about 9 
per cent to just under 25 per 


cent, Mr Charles Bowen, chief 
executive, said. A counter-bid 
from Norway or Asia could not 
be ruled out but was unlikely, he 
said. No other bidders had been 
flushed out by Marine Harvest’s 
announcement several weeks ago 
that it- was discussing an offer at 
about $10.60 a share. Booker is 
offering $10.20 for the shares. 

Booker has 84 per cent of 
Marine’s equity in the net. 27 per 
cent from Hanson and less than 
8 per cent from the family of Mr 
David Clarke, chief executive of 
Hanson Industries. 

Most of the assets Booker is 
buying were in the salmon fann- 
ing business Unilever sold to 
Marine in October 1992. Hanson 
is retaining Marine's shrimp 


business with a net asset value 
of S25^m which it will sell or 
liquidate. Booker will reimburse 
Hanson for losses on the sale 
over S&5m. Booker is paying for 
Marine from existing credit lines 
and the placement of 10.5m new 
shares, equal to 4.9 per cent of 
its existing equity. 

Marine gives Booker produc- 
tion in Chile, considered the 
world’s best and cheapest fish 
farming location, and access to 
US and Japanese markets. Its 
Scottish farming is aimed at 
Europe. 

Marine's salmon operations 
made operating profits of $19. 9m 
on sales of 889.3m in the year to 
September 1993. 

Leo, Page 16; Details, Page 26 


Thu announcement appeals as » matter of record only 

Management Buy-out 
CADCentre Ltd 

CADCENTRE 

£7,000,000 

Fully underwritten by: 

3i Group pic 

Equity provided by: 

3i Group pic 

’ . - - University, of Cambridge 
St John’s College, Cambridge 
Trinity College, Cambridge 

Debt provided by: 

• . Barclays Bank pic, Cambridge 
; Advised by: 

Coopers & Lybrand, Corporate Finance, Cambridge 
Mills Reeve 



iamun lm ImJautr 

3i pic, 91 Waterloo Road. London SEI SXP.Tei:07l 928 3131. Fax: 071 Kisooss. 
3i Grav pte and 31 pk are repihttd in ihr ctmdn« armmuim |«kb by SJB 










18 


FINANCIAL TIMES THURSDAY OCTOBER 20 1994 


INTERNATIONAL COMPANIES AND FINANCE 



Accor expects deficit in first half 


By John Ridding 
in Paris 

Accor, the French hotels and 
travel service group, said yes- 
terday that it would report a 
loss for the first half of the 
year, compared with a net 
profit of FFno9m fS20.6ton) in 
the same period in 1993. 

The company declined to 
comment on the size of the loss 
ahead of an official announce- 
ment next week. It said, how- 
ever. the deficit reflected the 
lack of exceptional gains on 
the disposal of assets which 
have boosted profits in previ- 
ous years. 


Shake-up 
puts Neste 
in black 


By Hugh Camegy 
In Stockholm 

Neste, the state-owned Finnish 
oil and petrochemicals group, 
yesterday confirmed a strong 
return to profitability this year 
with figures showing a swing 
to a pre-tax profit of FM879m 
(S190m) in the first eight 
months of the year from a loss 
of FMl.3bn in the same period 
last year. 

Sales were down sharply at 
FM32.96bn from FM42.Sbn, due 
in part to tower crude oil 
prices. However, operating 
profit jumped to FMl.Sbn from 
FM454m. and Neste said it 
expected profitability to be 
sustained at the same levels 
during the rest of the 
year. 

The tumround - and much 
of the fall in sales - was attri- 
buted to the effects of a broad 
restructuring programme 
designed to return Neste to 
profit, and prepare the 97-per 
cent state-owned group for a 
partial privatisation. 

Part of the fall in sales was 
blamed on the merger in 
spring of Neste's petrochemi- 
cals and polyolefins operations 
In a 5060 joint venture with 
Norway’s Statoil. The merged 
company is called Borealis. 
Neste has also reduced 
operations in its main trading 
division, which saw sales in 
the first eight months fall to 
FM17bn from FM24bn. Neste 
says it will concentrate its 
activities on oil and energy. 


Accor said the first-half per- 
formance would be affected by 
the seasonal nature of the 
hotels business. However, the 
economic recovery in some of 
its principal European markets 
was expected to have a positive 
impact in the second half of 
the year. 

Industry analysts said they 
were not surprised by the pros- 
pect of the loss. “Since it 
became apparent that there 
would be no exceptional gains, 
the announcement is not a 
shock,” said Mr Herve Guez. 
an analyst at Smith New 
Court. 

Another hotels analyst said a 


poor operating result would 
fuel concerns about the group's 
recovery prospects. 

The forecast loss is the latest 
step in a results decline at the 
hotels group which has seen 
profits fall from FFr802m In 
1992. 

The company has been hit by 
the Impact of recession in its 
principal markets and has lit- 
tle exposure to the UK, where 
recovery has come earlier than 
on the continent 

Profits have also been hit by 
a heavy debt burden which 
totalled about FFrl3Jbn at the 
end of last year, excluding the 
debts of Motel 6. the US chain 


in which Accor has a control- 
ling 39.5 per cent stake. 

The high level of debts, 
partly due to the company's 
1991 acquisition of Wagons-Uts 
of Belgium, have prompted a 
programme of asset disposals. 

The group recently suffered 
another setback, losing out to 
Forte of the UK In a battle for 
control of the Meridien chain 
of luxury hotels owned by Air 
France. 

It has also been at odds with 
Suez, its principal shareholder, 
over the conditions concerning 
an increase in the industrial 
and financial group's share- 
holding. 


Alcatel, Telefonica break ties 


By John Ridding 

Alcatel, the French tele- 
communications company, yes- 
terday announced it had 
bought a 13.2 per cent stake in 
Alcatel Standard Electrics, its 
Spanish subsidiary, horn Tele- 
fonica, the Spanish telecommu- 
nications operator. 

The purchase of the shares, 
for Pta22.23bn ($17&3m). satis- 
fies a recommendation by the 
European Commission that the 
Spanish operator eliminate 
shareholding ties with its 
transmission equipment sup- 
pliers. 

The recommendation, made 
in 1990, followed the acquisi- 
tion by Alcatel of Telettra of 
Italy. The acquisition gave 
Alcatel, through its Spanish 
subsidiary and the Spanish 


operations of Telettra, about SO 
per cent of the country’s trans- 
mission market. 

Sir Leon Brittan, then com- 
petition commissioner, had 
expressed concern about 
Alcatel's dominance of the 
Spanish transmission market. 
His recommendation that 
equity ties with Telefdnica 
should be broken was aimed at 
preventing distortion of the 
market. 

Mr Pierre Suard, chairman of 
Alcatel and Mr Candido Velaz- 
quez Gaztelu. his counterpart 
at Telefonica, said the break in 
the equity relationship would 
not affect the co-operation 
between the two groups. 

As a result of the deal. 
Alcatel will now hold 99.62 per 
cent of Alcatel Standard Elect- 
rica, with the balance held 


by Spanish shareholders. 

Yesterday's announcement 
coincided with a statement by 
Alcatel on the re-organisation 
of its mobile communications 
and network systems 
operations. It said the move 
was aimed at Increasing effi- 
ciency and the speed of reac- 
tion to clients' demands. 

As part of the reorganisa- 
tion, Mr Pierre Guichet, chair- 
man of Alcatel CfT, the tele- 
coms equipment division, will 
become president of Alcatel 
Mobile Communications. 
Alcatel Network Systems, 
which covers the development 
and manufacture of telecoms 
infrastructure equipment, will 
be organised into five product 
lines. 

It will be headed by Mr Jozef 
Cornu, president of ANS. 


Profits trebled at Metsa-Serla 


By Hugh Camegy 

Meisd-Serla. the Finnish 
forestry group, said yesterday 
its profits after financial items 
had more than trebled in the 
first eight months of the year, 
to FM382m (982.7m) from 
FM124m in spite of flat sales 
and a drop in operating profits. 

The rise in earnings 
stemmed from a steep fall in 
net financial expenses, to 
FM153m from FM504m, as 
interest charges tumbled and 
the group made a net exchange 
rate gain of FM68m. 

However, Metsa said an 
upswing in the forestry indus- 
try that began at the beginning 


of the year had gathered 
strength during the summer. It 
said demand and prices were 
rising and that profitability 
would be stronger In the last 
four months of the year. 

It forecast full-year profits at 
least double 1993's FM303m. 

In the first eight months, 
sales reached FM6bn. virtually 
unchanged from a year ago. An 
increase in expenses and losses 
from associated companies 
pushed down operating profit, 
to FM535m from FMB28m. 

In the three main business 
areas - encompassing paper, 
paperboard, corrugated board, 
tissue and chemicals - both 
sales and operating profits 


were down. Sales of sawn 
goods and pulp, however, rose 
to FM1.55bn from FM1.32bn, 
while operating profit rose to 
FM282m from FM137m. 

Metsa said it would spend 
more than FM700m on. new 
investments over the year. 

It has a 28 per cent stake in a 
500,000 tonnes-per-annum pulp 
mill being built at Rauma in 
Finland, and is expanding a 
sawmill at Kyro. 

The group said it had taken 
an extraordinary charge of 
FM44m in the eight-month 
accounts to cover its share of a 
fine for price fixing imposed by 
the European Union on Euro- 
pean board manufacturers. 


Matsushita 
moves to 
keep control 
of MCA 


By MichJyo Nakamoto 
In Tokyo and Alice 
Rawsttiom in London 

Matsushita, the Japanese 
electronics group, yesterday 
affirmed its determination to 
retain control of MCA, its Los 
Angeles-based entertainment 
business, in spite of demands 
from MCA's senior manage- 
ment to take control of the 
company. 

Mr Yoichi Morishita, chair- 
man of Matsushita, held five 
hoars of talks in San Francisco 
on Tuesday with Mr Lew Was- 
serman, veteran MCA chair- 
man, and Mr Sidney Sheln- 
berg, president. 

The US duo, the longest 
established management team 
in Hollywood, tabled a request 
for managerial control. Mr 
Morishita rejected the request 
by telling them: “As long as 
Matsushita holds 100 per cent 
of the shares we can not cede 
control." 

The San Francisco show- 
down followed months of 
strained relations between 
MCA and its Japanese parent 
company. Mr Vasserman and 
Mr Sheinberg have criticised 
Matsushita for allegedly block- 
ing their plans to expand 
MCA’s entertainment interests 
at the same aggressive pace as 
rivals such as Time Warner 
and Viacom. 

Tuesday’s meeting followed 
a few days after the news that 
Mr David GefTen, the billion- 
aire music mogul who founded 
MCA's Geffen Record subsid- 
iary, and Mr Steven Spielbergs 
the director of its latest box 
office hits, Jurassic Park and 
Schindler's List, were joining 
forces with Mr Jeffrey Katzen- 
berg, former head of Walt Dis- 
ney’s film studios, to form an 
entertainment company. 

The potential loss of Mr Gef- 
fen and Mr Spielberg bas 
intensified the pressure on 
MCA and Matsushita to 
resolve the US company's 
future. 

However, some DS entertain- 
ment industry analysts specu- 
lated that Mr Wasserman, 81, 
and Mr Sheinberg, 59, may 
have over-played their hand 
by giving Matsushita the 
chance to replace them with a 
younger management team. 






KOP seeks to strengthen 
capital base by FM3bn 


By Christopher Brown -Humes 
(n Helsinki 

Kanfiallis-Osake-Pankki, 
Finland's leading commercial 
hank, said yesterday it wanted 
to strengthen its capttal base 
by FM3bn ($848.4m>. The move 
2s a final attempt to shake off 
the legacy or the country's 
h ankin g sector crisis, which 
has brought the bank four 
years of losses. 

Tt intends to launch a FM2hn 
share issue - its third big 
equity offering in the past two 
years - and raise a further 
FMibn in capital gains from 
asset sales. 

Part of the aim is to support 
an expected growth in lending 
as the Finnish economy recov- 
ers. 

However, the issue will also 
restore the bank's distributable 
equity and allow it to pay 
interest on FM1.75bn of pre- 
ferred capital certificates held 
by the state. Otherwise, the 
government has the option to 
convert the certificates into 


shares, increasing its stake in 
the bank from 15 to 3G per 
cent 

The share issue, at FM6.4Q a 
share, will lift the bank's capi- 
tal adequacy ratio above 11 per 
cent from 9.2 per cent. It is 
being informally guaranteed 
by Repo la and Pohjola. KOP's 
leading shareholders who have 
said they will subscribe for at 
least FMibn of the offer. 

“This share issue is the cul> 
initiation of our capitalisation 
programme." said Mr Pertti 
Voutilainen, KOF chief execu- 
tive. He said there would also 
be a further effort to squeeze 
costs to cut annual operating 
expenses by FM300m. 

The capital-raising pro- 
gramme follows a worsening of 
the bank's performance In the 
first eight months of the year, 
when operating losses rose to 
FM1.3bn from FM696m in the 
same 1993 period. Cumulative 
losses over the 1991-1994 period 
exceed FM9bn. 

The bank said its figures bad 
deteriorated in the second four 


months because of losses 
linked to the construction 
group Puolimatka. 

A charge of FMSOOm against 
Puolimatka was the main item 
in a total bad debt charge of 
FM2.67bn, compared with 
FMl.96bn in the same 1993 
period. However, this year's 
figure was struck after full 
utilisation of a FM9Q0m provi- 
sion in the 1993 accounts for 
future write-offs. 

The bank's figures were also 
hit by FMi60ra in bond losses, 
compared with gains of 
FM340m in the same 1993 
period. This lowered net 
income from financial 
operations by 7 per cent to 
FMl.48bn. 

KOP says expected net oper- 
ating losses of between 
FiVUOOm and FMSOOm in the 
final four months should 
largely be offset by realised 
and unrealised investment <9 
gains. It still hopes to make a 
profit next year, although it 
expects to remain in the red 
for the first few months. 


Rfadne-Poulenc to sell division 


By David Buchan in Paris 

Rhdne-Poulenc. the French 
chemicals group, plans to sell 
its acetics business as part of a 
strategy to get out of making 
intermediate and basic chemi- 
cals. 

Rh6ne-Poulenc management 
has convened a meeting for 
October 27 at the works coun- 
cil at the group's Panlies ace- 
tics plant in south-west France 
to explain the move. An 


ann ouncement will be made 
later that day. 

Rhone-Poulenc gave no fur- 
ther details, except to confirm 
the impending sale was in line 
with the intention of Mr Jean- 
Rene Fourtou, president, to sell 
$lbn-S1.5bn in assets over the 
next 18 months. These would 
be chiefly in intermediate or 
basic chemicals for which his 
group had no in-house use or 
where the scale of its activity 
was dwarfed by that of others. 


Acetics form part of Rhone- 
Poulenc’s organic and inor- 
ganic intermediates division, 
which last year recorded sales 
of FFr14.1 bn ($266m). It is esti- 
mated that acetics accounted 
For just over FFrilbn of this. 

Other main producers of ace- 
tics are British Petroleum and 
Hoechst. but according to one 
report in Paris. Union Carbide 
of the US might be interested 
in buying the unit from Rhdne- 
Poulenc. 


Acquisitions spur Smiths by 12% 


By Paul Taylor In London 

Smiths Industries yesterday 
reported better than expected 
full-year profits, buoyed by 
acquisitions and a particularly 
strong performance by its med- 
ical systems business. 

Pre-tax profits for the year to 
July 31 rose 12 per cent to 
£117.2m (5185.17m) from 

£l04.6m. The shares gained 7p 
to close at 447p. 

Sales advanced 4.6 per cent 
to £759 .3m, including a £16.9m 


initial contribution from acqui- 
sitions such as Deltec, a US 
medical equipment manufac- 
turer, which was purchased for 
S150m in June. 

The group spent £ 129.4m on 
acquisitions during the year, 

Spending on research and 
development reached a new 
peak of £122m from £118m last 
year, of which Smiths funded 
£44m and customers the rest. 

Operating profits of £1 13£m, 
up from £102 .8m last year, 
included a £2. 5m contribution 


from acquisitions. For the sec- 
ond year running, medical 
systems contributed more to 
group results than the aero- 
space division which saw trad- 
ing profits fall 4 per cent to 
£38 -9m on sales of £374.2m. 
down from £392 An. 

Earnings per share grew by 
11.3 per cent to 26.6p, from 
23.9p last year, and a final divi- 
dend of 8.4p, from 7.55p, is pro- 
posed, making a total of 13p. 
up from 11.85p. 

Lex. Page 16 








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20 


F IN ANCIAJL TIMES THURSDAY OCTOBER 20 1994 ^ 


INTERNATIONAL COMPANIES AND FINANCE 


Volume grows at US telecom groups 


By Tony Jackson 
In New York 

Third-quarter results from 
several US telecom- 
munications companies 
showed continued fast growth 
in the volume of traffic, but 
also bore the scars of increased 
competition. 

Bell Atlantic reported a 58 
per cent rise in the number of 
its cellular phone customers 
and a 9 per cent increase in 
minutes of use on its local net- 
works. 

However, the Philadelphia- 
based company suffered a loss 
or Sl.STbn in the quarter after 
previously announced extraor- 
dinary charges of S2.l5bn. 
incurred in what Mr Raymond 
Smith, chairman, called “an 
aggressive. multi-year cam- 
paign to respond to competi- 
tion in our traditional mar- 
kets". 

Underpin" net earnings for 
the quarter were down 29 per 
cent at $276m. 

Pacific Telesis announced a 
8.7 per cent rise in minutes of 
use. but flat revenues and 
a 2 per cent rise in net 
earnings for the quarter, to 
$314m. 

The San Francisco-based 


MCI Communications 

Share price (S') 



company warned that it would 
be difficult to achieve earnings 
growth next year, as a result of 
“regulatory rulings, increased 
competition and strategic ini- 
tiatives'’. 

Mr Phil Quigley, chairman, 
said "a price cap on call 
changes which is being intro- 
duced next year as part of Cal- 
ifornia's new regulatory frame- 
work would cut revenues by 
around SlSBm, with an initial 
$45m impact on this year's 
results". 

In addition, the company will 
drop its local toil charges by 40 
per cent from the start of next 


year, when new competitors 
will be allowed into its market. 

GTE. the biggest US local 
phone company, said Its cellu- 
lar customers rose by 48 per 
cent and minutes of use in its 
local networks by 9.6 per cent. 

These factors “more than off- 
set lower, more competitive 
telephone pricing," the com- 
pany said. 

Operating profits were up 8 
per cent at a record SI -25bn for 
the quarter, while earnings per 
share before special items 
were also up 8 per cent at 64 
cents. 

MCI Communications, the 


second largest US long- 
distance telephone company, 
in which the UK telecommuni- 
cations company BT has a 20 
per cent stake, said its third- 
quarter earnings showed an 
underlying increase of 15 per 
cent to S220m. or 38 cents a 
share, on sales up 1 2 per cent 
at $3.41bn. 

Traffic grew 10.2 per cent 
over the year, while interna- 
tional business was up more 
t h an 20 per cent. 

MCI also reported strong 
growth in the use of toll-free 
800 numbers in the US. Sales in 
the 800 business market grew 
almost 20 per cent while MCTs 
1-800-COLLECT consumer ser- 
vice. introduced last year, had 
doubled its number of calls 
since the start of the year. 

MCTs newest 800 product, an 
international directory 
enquiries service launched ear- 
lier this month under the name 
Of I -800-CALL-INFO, came 
under fire yesterday from 
AT&T, MCTs bigger rival. • 

In a formal complaint to the 
US Federal Communications 
Commission. AT&T said the 
service was illegal because it 
charged customers for a call to 
an 800 number. MCI denied the 
service was illegal 


WMX moves 
back to black 
with $212.8m 

By Laurie Morse 
in Chicago 

WMX Technologies, the 
international waste haulier 
and processor, reported third- 
quarter income of S212.Sm. or 
44 cents a share, up from a loss 
of Sl27.1m. or 26 cents, in the 
same 1993 quarter. 

The 1993 third-quarter loss 
was the result of a $285m 
charge for a restructuring at 
WMX’s struggling Chemical 
Waste Management subsidiary*. 

WMX’s third-quarter sales 
were S2.6bn, up from S2.3bn a 
year earlier. 

In addition to Chemical 
Waste. WMX is the majority 
owner of WMX International, 
Rust International and Wheela- 
brator Technologies. Chemical 
Waste this week reported that 
it earned Sl5m. or 7 cents a 
share, in the third quarter, 
recovering from last year's 
third-quarter loss of S359.9m, 
or Si .72. Excluding special 
charges. Chemical Waste 
earned 4 cents a share in the 
1993 third quarter. 

WMX said Chemical Waste 
still suffered from low volumes 
In its core hazardous waste 
businesses. In June, state regu- 
lators sharply restricted the 
use of the company’s Barnwell. 
South Carolina, low-level radio- 
active waste processing facili- 
ties, dampening earnings pros- 
pects. 

WMX last week agreed to 
buy back the 45m shares, or 
about 21 per cent, of Chemical 
Waste that it does not already 
own for S8.85 a share, substan- 
tially above an initial offer of 
S7.S6 made in July. 

For the first nine months of 
the year. WMX earned S5 78.6m, 
or 81.20, on sales of S7.4bn. 
That is up from S2S9.8m, or 60 
cents, on sales or S6.7bn in the 
same 1993 period. 

Mr Dean Buntrock. WMX 
chairman, said that revenue 
growth in Waste Manage- 
ment's North American 
operations helped offset weak- 
ness at Chemical Waste and in 
some international sectors. “1 
am pleased tu say we are con- 
tinuing the progress we 
reported earlier this year and 
our results are in line with our 
expectations at this point in 
the year." he said. 


Boost for US airline shares as 
AMR profits beat forecasts 


By Richard Tomkins 

Shares in US airlines jumped 
sharply yesterday after AMR, 
the parent company of Ameri- 
can Airlines, the first US car- 
rier to report its quarterly 
results this season, produced 
profits far in excess of ana- 
lysts' expectations. 

AMR said net earnings after 
preferred stock dividends shot 
up to SlS8m in the quarter to 
September from S102m last 
time, and fully-diluted earn- 
ings per share rose from S1.34 
to $2.27. It was the airline's 
best result in five years. 

Analysts had been predicting 
earnings per share of SI .75 to 
S2, and AMR’s shares rose S2Vi 


to S54‘.i. UAL shares were 
ahead $4' » to S91 and Delta Sl'.i 
at S47V*. 

AMR said improved eco- 
nomic conditions were one rea- 
son for the increase, but the 
main factor bad been a small 
increase in revenues combined 
with a big decrease in costs. 
AMR'S passenger division flew 
slightly more passengers than 
in the same period last year, 
but reduced capacity' by 5 per 
cent. 

American Airlines has been 
cutting costs by dropping 
unprofitable routes, reducing 
its fleet and shedding jobs. It 
said operating expenses 
declined by 22! per cent in the 
quarter to S3.74bn. partly 


because jet fuel costs were 3.2 
per cent lower. 

One drawback to the profits 
improvement is that it will 
make it harder for AMR to per- 
suade its labour unions of the 
need to accept higher produc- 
tivity and pay cuts. Mr Robert 
Crandall, chairman, said; “In 
light of our earnings, some 
may ask if the company stiff 
needs to change. The answer is 
that it dearly does." 

However, he also lavished 
uncharacteristic praise on the 
airline’s employees, saying the 
results were “a commentary on 
the hard work and commit- 
ment of our people, who are 
offering our customers 
first-rate service". 


Monsanto hit by higher costs 


By Tony Jackson 

A rise of almost 20 per cent In 
raw material costs contributed 
to a 14 per cent drop in operat- 
ing income at Monsanto, the 
US chemicals group, in the 
third quarter. 

Other factors were lower 
margins in Roundup herbicide, 
lower bulk prices for the artifi- 
cial sweetener aspartame 
(NutraSweet) and the absence 
of income from discontinued 
businesses. However, the com- 
pany was on its way to "an 
outstanding 1994", Mr Richard 


Mahoney, chairman, said. 

Worldwide sales of Roundup 
were well ahead in the quarter, 
though a tilt in volume 
towards lower-margin markets 
as a result of weather condi- 
tions had reduced profits. 
Operating profits in pharma- 
ceuticals were maintained on a 
4 per cent rise in sales. 

Sales of the controversial 
substance BST (bovine somato- 
tropin), used to increase milk 
yields, were well ahead of 
expectations, the company 
said. Introduced to the US mar- 
ket early this year, Posilac - 


Monsanto's version of BST - 
had got off to “a very good 
start", a spokesman said. 

Net earnings for the quarter, 
helped by a S2ffn tax settle- 
ment, were up 22 per cent at 
Sll6m, or 99 cents a share. 

• Full-vear net earnings from 
Rohm and Haas, the speciality 
chemicals producer, should 
beat their previous record of 
S230m set in 1388, Mr Lawrence 
Wilson, chairman, said yester- 
day. Net earnings in the third 
quarter were 855m, compared 
with a loss of $23m, bringing 
the nine-month total to S211m. 


BankAmerica meets expectations 


By Patrick Harverson 
in New York 

BankAmerica. the second 
largest bank in the US, yester- 
day reported a 13 per cent 
improvement in third-quarter 
earnings to S547m. or 81.36 a 
share. 

The results, boosted by the 
contribution of the Chicago- 
based Continental Bank, which 
BankAmerica acquired earlier 
this year for ?1.9bn, ivere in 
line with analysts’ estimates. 

BankAmerica said the addi- 
tion of Continental's busi- 
nesses had given it unproved 
access to US wholesale custom- 


ers. especially in the Midwest, 
where the bank has set up a 
new subsidiary - Bank of 
America Illinois - and relo- 
cated its corporate banking 
operation. 

Net interest income at the 
San Francisco-based bank rose 
to Sl.Pbn in the latest quarter 
from Sl-88bn a year ago. 

However, without Continen- 
tal's S40m contribution, net 
interest income would have 
fallen sligbtly in the quarter as 
an increase in loans failed to 
offset a fail in the bank's net 
interest margin from 4.72 per 
cent to 4.31 per cent. 

Credit quality improved in 


the period, with BankAmerica 
having to set aside only SllOm 
as a provision for loan losses in 
the quarter, compared with 
SI 78m a year earlier. 

Non-interest income, mean- 
while, increased $6Sm to just 
under Sl.lbn, with just over 
half of the improvement 
derived from Continental. 

Growth in this area was pri- 
marily due to sales of equity 
interests in Burns-Fry Hold- 
ings. and a Malaysian branch 
of the bank. 

BankAmerica shares eased 
$*'* to S44°'« on the New York 
Stock Exchange in early trad- 
ing yesterday. 


Advance of 
16% at US 
healthcare 
group 

By Richard Tomkins 
in New York 

Johnson & Johnson, the US 
healthcare group that has 
recently agreed to buy East- 
man Kodak's diagnostic prod- 
ucts division and the Neutro- 
gena skin care company, saw a 
16 per cent increase in net 
profits in the third quarter in 
spite of a big increase in its 
tax charge. 

The profits growth was Zed 
by the group's pharmaceuti- 
cals division, which increased 
sales by 21 per cent in the US 
and internationally because of 
strong performances from new 
drugs, such as Risperdal, an 
anti -psychotic medication for 
schizophrenia. The division 
had sales of SI .3 bn. 

The consumer division saw a 
22 per cent increase in interna- 
tional sales, mainly because of 
a strong performance from its 
operations in Brazil where the 
local economy is recovering. 
Domestic growth was softer 
at 5 per cent, leaving total 
sales 13 per cent ahead at 
S1.4bn. 

The professional division, 
driven by rapid international 
growth, increased sales by 12 
per cent to Sl-3bn. 

Overall, group sales rose by 
15 per cent to S4.04bn, of 
which 2 percentage points 
were attributable to the recent 
weakness of the dollar against 
other currencies. 

International sales advanced 
by 22 per cent - much faster 
than domestic sales, which 
rose by 9 per cent. 

Pre-tax profits rose by 22.5 
per cent, bnt after the increase 
in the tax charge, earnings per 
share were 17 per cent ahead 
at 82 cents. 


BT in joint 
transatlantic 
video service 

By Raymond Snoddy 

British Telecom has combined 
with four North American 
organisations to operate the 
first commercial transatlantic 
fibre-optic video service for 
broadcasters and production 
houses. 

The new company, Atlantic- 
Vision, will operate its service, 
using the recently completed 
cable, from early next year. A 
service is already available 
using satellite. 

When fully operational 
AtlanticVision will compete 
with satellite transmission of 
pictures across the Atlantic by 
professional users. 

The Vyvx. a subsidiary of 
WtlTel, the US tele- 
communications company, and 
BT have entered an agreement 
with Teleglobe Canada, the 
international telecommun- 
ications group, to provide the 
television transmission links 
between the UK and the 
US. 

Links between the UK and 
Canada will be provided under 
a separate agreement between 
Stentor, an alliance of 
Canada's leading telephone 
companies, BT and 
Teleglobe. 

Charges will be S600 for 15 
minutes and the new 
organisation claims that the 
undersea network will offer 
“the fastest and most 
cost-effective secure link 
between North America and 
northern and eastern 
Europe". 


Compaq impresses with 
88% jump in third term 


By Louisa Kehoe 
in San Francisco 

Compaq Computer lived up to 
high expectations with an 88 
per cent jump in net income 
for the third quarter, achieved 
on a sales increase of 63 per 

cent 

Net income for the quarter 
was $201m, up from S107m in 
the third quarter of 1993. Earn- 
ings per share rose 79 per cent 
to 75 cents, compared with 42 
cents in the same period last 
year. Revenues increased to 
S2B4bn from $1.75bn. 

Sales growth was strong 
worldwide, the company said. 
North American sales grew by 
57 per cent, Europe by 50 per 
cent and Japan, Latin America 
and Asia-Pacific sales grew at 
a combined rate of 12 2 per 
cent 


More than half of Compaq’s 
sales are in North America. 

During the quarter, Compaq 
continued its expansion by 
beginning production at new 
facilities in Jaguarina. Brazil, 
and Shenzhen. China. This 
week Che company announced 
plans to establish a sales and 
marketing subsidiary in South 
Africa. 

Third-quarter gross margin 
declined to 23 per cent from 
26.5 per cent in the second 
quarter, but the drop was 
anticipated due to aggressive 
price cuts. Mr Eckhard Pfeiffer, 
president and chief executive, 
said he expected to maintain 
this level of profit margins for 
the remainder of the year and 
I99S. 

He has set a target for Com- 
paq to be the worldwide PC 
industry leader by 1996. By 


most measures, however, this 
goal has already been achieved 
with Compaq outselling its 
largest competitors. IBM and 
Apple Computer, for the year 
to date. 

Mr Gian Carlo Bison, senior 

vice-president for North Ameri- 
can marketing, declined to 
comment on a legal dispute 
between Intel and Advanced 
Micro Devices. Compaq’s two 
suppliers of microprocessor 
chips, that threatens to inter- 
rupt AMD's production. He 
said, however, that Compaq 
was talking to "a variety of 
potential suppliers" of micro- 
processors. 

For the year to date, net 
income rose to S624TQ, or S3.U, 
against S3llm. or Sl-22. Reve- 
nues advanced to S7.6bn from 
S5bn in the first nine months 
of 1993. 


Lotus places blame for 60% 
decline on European operations 


By Louise Kehoe 
In San Francisco 

Lotus Development has 
reported a sharp drop in earn- 
ings for the third quarter. The 
US personal computer software 
company blamed problems in 
its European operations for the 
reversal. 

Net income before non-recur- 
ring charges was $?.3m. or 15 
cents a share, 60 per cent down 
on Sl8.3m. or 41 cents, in the 
same period last year. Revenue 
for the quarter was S235-2m, a 
2 per cent decline from £240. lm 
in last year's third quarter. 

Lotus took charges of S67ita 
for the acquisition of Soft- 
Switch and Edge Research, two 


software development groups, 
during the quarter. The com- 
pany also took a S9m charge 
for restructuring its European 
operations. The net loss for the 
quarter, after charges, was 
$66.4m, or $1.39 a share. 

‘Third-quarter results 
proved disappointing, primar- 
ily due to poor performance of 
our European operations," said 
Mr Jim Manzt president and 
chief executive officer. He also 
cited slower than expected 
sales through a volume pur- 
chase programme for corporate 
customers. 

The problems in Europe 
stemmed from slow demand 
for Lotus' office PC applica- 
tions programs and a manage- 


ment shuffle, said Mr Edwin 
Gillis. chief financial officer. 
During the period Lotus 
appointed a new manager of its 
European operations and cut 
about 90 jobs, he added. New 
products, launched in Septem- 
ber. were expected to boost 
demand, he said. 

Revenues from communica- 
tions programs, used for elec- 
tronic messaging, now account 
for about one-third of revenues 
and sales of these products 
grew 72 per cent, year on year. 

Net fosses, after charges, for 
the year to date were S35.3m, 
or 76 cents a share, compared 
with net income after charges 
of S25.9ui. or 59 cents, in the 
first nine months of 1993. 


Amgen posts strong 
growth in sales 


By Tony Jackson 

Amgen, the California-based 
biotechnology company, 
reported strong sales growth in 
its two main products in the 
third quarter, leading to a 23 
per cent rise in underlying 
earnings to $114m. 

Sales of Epogen, for kidney 
failure, rose 25 per cent, 
and of Neupogen, used to boost 
the immune system. 15 per 
cent 

Group sales were 20 per cent 
ahead at 8426m. Amgen said 
sales of Neupogen in the US 
were up 11 per cent at S2l5m, 
and international sales up 29 
per cent at S55m. Epogen sales 
totalled $iS7m. 

Earnings per share for the 
quarter were 82 cents, com- 
pared with an adjusted 65 
cents last year. 


Mr Gordon Binder, chair- 
man, said: l am confident that 
the strong patient benefits of 
Epogen and Neupogen will 
enable us to achieve 
double-digit sales and earnings 
growth in 1995 and that these 
breakthrough products, as well 
as others being explored 
through in-house discovery 
and external collaboration, will 
continue to fuel growth in later 
years.” 

Amgen said that during the 
quarter it made a preliminary 
submission to the US authori- 
ties for a new drug, neuro- 
trophin-3, developed in partner- 
ship with Regeneron Pharma- 
ceuticals. 

The drug treats peripheral 
neuropathes, found in patients 
undergoing cancer therapy and 
in diabetics. 


Arthur Andersen parent 
turns in record revenue 


By Jim Kelly 

Arthur Andersen Worldwide 
Organisation, the global profes- 
sional services firm, yesterday 
announced a 12 per cent rise in 
revenues to a record $6.7bn. 

Mr Lawrence Weinbach, 
managing partner and chief 
executive, said growth had 
been very strong in the Asia 
and Pacific region, at 50 per 
cent, and in the Americas, at 
14 per cent 


"During the next five years 
the organisation will continue 
to invest heavily in worldwide 
training and expect to continue 
an annual investment of over 
six cents of each revenue dol- 
lar," he said. 

Andersen Consulting, the 
consultancy unit, saw revenue 
rise by 14 per cent to S3.2bn 
and Arthur Andersen, the 
accounting services unit, lifted 
revenues by 10 per cent to 
S3.5bn. 


Genentech 
ahead 116% 
at $33.6m 

By Tony Jackson In New York 

4 

Genentech. the US 
bio-technology company, 
bucked the trend of bad news 
from its sector with a 116 per 
cent rise in net income in the 
third quarter to $33.6m, or 28 
cents a share. 

The company attributed 
much of the growth to its lat- 
est product, Pulmozyne, which 
treats cystic fibrosis. 

On Monday, shares in two 
smaller biotech companies. 
Gensia Pharmaceuticals and 
ProCyte. more than halved on 
the news that new products 
had failed in clinical trials. 
However, Mr Kirk Raab. 
Genentech chairman, said; 
"Important clinical develop- 
ment progress during the quar- 
ter should help us maintain 
our rate of growth." 

The company said sales of 
Pulmozyne. in its third quarter 
on the market had been S2lm, 
compared with S18.7m in the 
second quarter. The drug was 
launched in France and Ger- 
many in the quarter, and sells 
in IS countries. 

Sales of Activase, used to dis- 
solve blood clots, were $65. lm, 
against $63 .5m. However, sales 
of Genentech's two human 
growth hormone products, Pro- 
tropin and Nutropin, were 
down to $54. 6m from $55.4m. 

Group revenues in the quar- 
ter were 8193.8m, an increase 
of 17 per cent. Research and 
development expenditure was 
$73-2m. against $72.3m. or 38 
per cent of revenue. 



BEAR 
STEARNS -7* 



Bracco s.p.a. 


has acquired 


Squibb Diagnostics 

a Division of Bristol-Myers Squibb Company 


We acted as financial advisor to 
Bracco s.p.a. in this transaction. 


Bear, Steams & Co. Inc. 


October 1994 


SWEDBANK 
(Sparbanken Sverige AB) 
USS 150.000.000 
Undated Subordinated 
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Notice is hereby given that the 
notes will bear interest or 
f.5625% per annum from 
20 October 1994 to 20 April 
199$. interest payable on 20 
April 1995 will amount io 
USS382.33 per USS 10.000 note 
Agent: Morgan Guaranty 
Trust Company 


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FINANCIAL TIMES THURSDAY OCTOBER 20 1994 


tl .7 "i,| 

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INTERNATIONAL COMPANIES AND CAPITAL MARKETS 


HU' fur 60 " 

K:m n l>^ratio t 


HU 


* .« Mi nit:' 


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, i. ' * , 


UBS rejects Ebner board proposal 


1 u* 


By Ian Rodger In Zurich 

Union Bank of Switzerland 
yesterday rejected Mr Martin 
Boner’s proposal that a direc- 
tor be appointed specifically to 
represent the bank’s registered 
shareholders. 

Pursuing its proxy battle 
with the maverick Zorich 
banker, the bank diawinh^ 
Mr Ebner’s warning that the 
bank could come under the 
control of drug barons or other 
undesirable groups voting 
restrictions bad been removed 
from its shares. 

The UBS hoard last month 
proposed splitting its regis- 
tered shares and bearer shares 
into a new class of bearer 
shares with equal voting power 
and no voting restrictions. An 
extraordinary general meeting 
will be held on November 22 to 
vote on the proposal. 

The board made clear that 
its purpose was to remove the 
disproportionate voting power 

' Record sales 
help C ummins 
to $61. 9m 

By Laurie Morse 
in Chicago 

Cummins, the Indiana-based 
diesel engine maker, yesterday 
said third-quarter income rose 
to $61 .9m, or $1.48 a share, 
from last year's $40. 7m, or 
$l.U. 

Sales for the quarter were a 
record $l-2bn, up from $98&3m 
in last year’s third quarter. 

Strang sales In US medium- 
duty and heavy-duty truck 
markets lifted results. The 
company said it expected 
North American heavy-duty 
truck production to reach a 
record 205,000 units in 1994, up 
20 per cent over 1998. 

Cummins has 34 per cent of 
that market, and 35 per cent of 
the North American medium- 
duty truck market 
Its power generation group 
recorded sales of $249m in the 
quarter. 

The company recently 
acquired Power Group Interna- 
tional, based in the UK, whose 
businesses are less cyclical 

* than those of Cummins’ other 
business segments. 

For the first nine months 
earnings rose to $l#2.7m, or 
$4.43. on sales of $3.5bn, 
against $130.0m, or $3.54, on 
skies of $3.1bn last time. 

Riyad Bank falls 
15%toSR559.ini 

Riyad Bank, Saudi Arabia’s . 
second largest bank, saw net 
profits drop for the first nine 
months of 1994, Reuter reports 

from Manama, 

Net profits fell 15 per cent to 
SR559.lm ($l49m) from 
SR657.7m in the same period in 
1993. 

Shareholders' equity rose to 
SR7.47bn from SR897bn. Cus- 
tomer deposits fell to 
SR26.31bn from SR26.83bm 
Total assets also dropped to 
SR52.15bn from S854.i3bn. 


held by the registered shares. 
These shares have 51.1 per cent 
of all votes and can be voted 
only by Swiss nationals , but 
they represent only 17.3 per 
cent of the bank’s capital. 

Mr Ebner is nhgirmqn of BK 
Vision, an investment fund 
that is UBS's largest share- 
holder with an 18 per cent 
holding in. the registered 
shares. He has said he is trying 
to rally the support of other 
shareholders to vote for 
changes in the bank's strategy 
at the annual meeting next 
spring: 

Mr Nikolaus Senn, ffTiairmaw, 
said the nomination of a board 
member to represent the regis- 
tered shareholders would be 
superfluous it as he expected, 
shareholders approved the 
board's motion. 

He said a Swiss banking law 
coming into effect at the begin- 
ning of the year would provide 
greater safeguards against 
undesirable takeovers 


than the registered shares. 

Mr Robert Stutter, UBS chief 
executive, explained the bank's 
rejection of Mr Ebner’s call for 
it to focus more on investment 
and private banking. He said 
the bank’s strategy of under- 
pinning its Wholesale financial 
activities with a strong Swiss 
retail base ensured a more star 
ble earnings performance and 
a higher share rating than 
those of leading US and UK 

hanlfo 

Mr Sluder dismissed ca l l s for 
compensation to registered 
shareholders for the loss in 
value of their shares because it 
could only come unfairly at the 
expense of the bearer share- 
holders. 

Analysts advised against 
buying the registered shares in 
recent months because of the 
abnormal premium they 
acquired. 

“Those who bought despite 
thin advice did so at their own 
risk," Mr Stutter said. 



Nikolaus Sam: new law win 
provide greater safeguards 


Higher prices help Gengold to 
lift profit by 42.8% to R127m 


| By Mark Suzman 
in Johannesburg 

; Gengold, the gold division of 
South African mining house 
Gencor, shrugged off the 
labour unrest that had dented 
its previous quarter’s figures 
and reported a sharp 4Z8 per 
cent rise in after-tax profit for 
the three months to Septem- 
ber, up to RL26.8m ($36m) from 
a disappointing Rwiftm 

The company’s mines bene- 
fited from a 4 per cent rise to 
the average gold price received 
and improved overall produc- 
tion. These were more than 
sufficient to offset a slight 
decline to yield. 

Overall gold production rose 
by 32 per cent to 15,731kg, up 
from 15^42kg, while the aver- 
age gold price received rose to 
R44.614 a kg from R42,744/kg. 
Total tonnage milled was 2.7m 
tonnes, up from 2.6m tonnes. 


Mr Ton Dale, deputy manag- 
ing director of Gencoris gold 
division, said the company had 
benefited from the of elec- 
tion-related unrest to the June 
quarter. However, he said 
working costs were up due to 
increased mitring activity and 
a higher wage bill. 

Of the group's bigger mines, 
Beatrix performed best, 
increasing after-tax income to 
R3L3m from R20.7m to spite of 
a slight drop in yield to 6.1 
grammes/tonne from 6.2 
grammesftonne. 

Kinross also showed substan- 
tial improvement, raising after- 
tax profits to RSl.lm from 
R2L5m. Winkelhaak improved 
Its after-tax figures to R2L5m 
from Rifl-g m , while Buffelsfon- 
tein’s improvement was less 
dramatic, boosting profits to 
Rl6Jm from R14£m. 

• Gold mines to the Anglovaal 
group increased attributable 


profit slightly for the Septem- 
ber quarter, raising attribut- 
able profit of R4fi_gm. up from 
R455m in the previous three 

mnnth« 

As usual, the bulk of the 
profit came from heavyweight 
producer Hartebeesfontein, 
which in spite of Iowa- yields 
achieved managed to raise 
after-tax to R 42.1m from 
R40.4m. 

Loraine, the group’s other 
big mine, managed to exploit 
higher grade ore to reduce its 
operating loss to R228.0Q0 from 
R2.75m. However, after-tax 
losses rose sharply to R2^5m 
compared with R277.00Q previ- 
ously as the uyne provided for 
R2.2m in rehabilitation costs 
and was forced to pay RL8m to 
tax on non-mining income. 

Of the smaller mines. East- 
ern Transvaal increased its tax 
profit slightly to R&2zn from 
R5.4m. 


Saga and Statoil in assets swap 


By Karen Fossfl Jn Oslo 

Saga Petroleum, Norway's 
largest ind ep endent oil group, 
and Statoil, the Norwegian 
state oil company, yesterday 
announced details of a planned 
asset swap programme 
designed to facilitate a 
NKr40bn ($8Jbn) development 
of three gasfields in the Norwe- 
gian. Sea. 

The two companies signed a 
letter of intent covering the 
complex arrangement, with the 
aim of completing a detailed 
purchase and sales agreement 
on November 1. 

Saga confirmed it would take 
over operational responsibility 
for StatoU's North Sea Fenris 
oil field and Statoil would buy 
15 per cent of Saga's 50 per 
c en t shareholding to the field, 
increasing its Fenris stake to 
35 per cent 


The company will take over 
10 per cent to two exploration 
licences to the Fenris area. 

Saga will also acquire from 
the state a 7 per cent interest 
to each of the two licences 
comprising the Smo erbukk and 
Smoerbukk South gasfields. 
This transaction will need par- 
liamentary approval 
to return, Statoil will acquire 
two Saga shareholdings, 5 per 
cent and 0.625 per cent, to the 
Norwegian Sea Heidrun oil- 
field. Statoil will also take over 
the operation of Saga's Mid- 
gard gas field, comprising two 
licences. 

Midgard, Smoerbukk and 
Smoerbukk South are situated 
in Haltenhflnkflri off the coast 
of mid-Norway. 

“This is a pioneer agreement 
which is very important for the 
two companies ... and for the 
development of Haltenban- 


ken.” said Mr Harald Norvik, 
chief executive of Statoil. 

"I think we will see more 
and more of these deals to 
fliture." 

The joint Haltenbanken 
development will compete with 
North Sea fields to supply con- 
tinental Europe with natural 
gas. 

Mr Asbjoem Larsen, chief 
executive of Saga, said his 
company would be an equal 
partner to the co-ordinated 
development of the three 
fields. 

One aim of the companies is 
to cad even Anther Haltenban- 
ken development costs, which 
were estimated in 1992 at 
NKr50bn. They plan to com- 
plete a detailed development 
concept by late 1995 mid, if 
plans are approved by energy 
authorities, production can 
start in the year 2000. 


Indosat 
shares rise 
on Jakarta 
SE debut 


By Manuela Saragasa 
In Jakarta 

Shares In Indosat, the 
Indonesian state-owned satel- 
lite telecommunications com- 
pany, made their debut on the 
Jakarta Stock Exchange yes- 
terday after a listing of Ameri- 
can Depo si tary Shares to New 
York earlier this week. 

Indosat shares ended the day 
in Jakarta at Bp8,47fi, up from 
the initial price of Rp7,00D. 

ADSs, equal to 10 Indosat 
shares, were trading at $38^5 
around midday yesterday, up 
$1.12 on the day and 19 from 
the initial price of $32.05. 

Some brokers claimed the 
unexpectedly high opening 
price on the Jakarta exchange 
was orchestrat e d to stimulate 
domestic demand. 

“The first trade was a well- 
rehearsed transaction," said 
Mr Andrew Vaughn, head of 
research at GJ&. Gob Ome- 
traco in Jakarta. 

However, the fact that inves- 
tors were prepared to pay 
almost 20 per cent more than 
the initial public offering price 
to both cities is a sign of confi- 
dence to the company’s future. 

Brokers say Indosat is one of 
Asia’s most profitable compa- 
nies. It employs about 1,600 
people and recorded net prof- 
its or Rp237tm (9109mJ to 1992 
against Rp20&5bu in 1991. 

Indonesia is expected to 
invest about $10bn by the year 
2000 to expanding telecommu- 
nications across its archipel- 
ago of more than 18,000 
islands. 

Indosat raised about $lbn in 
its New York float, or 25 per 
cent of the company’s stock. It 
listed 10 per cent of its stock 
to Jakarta. A report on the 
initial public offering of the 
shares to Jakarta is expected 
to show that the shares won 
more than twice subscribed. 

• American Depositary 
Receipts of Philippine Long 
Distance Telephone, the Phi- 
lippines’ biggest telecommuni- 
cations company, were listed 
yesterday to New York and on 
the Pacific stock exchange in 
the US, writes Jose Galang in 
Manila. 

Each of the ADRs represents 
one share of common stock. A 
total of 22m ADRs were listed 
at an opening price of $59^0 
each, corresponding to the 
common stock's closing price 
on October 18. 

Citibank, which packaged 
the programme, said holders 
of the stock would be entitled 
to exchange without charge 
their shares for the corre- 
sponding amonnt of ADRs. 
Citibank will also provide 
depositary facilities for the 
ADRs and will act as custo- 
dian bank in for the 

PLOT shares. 

PLDT said its common stock 
“will benefit from the 
increased visibility and liquid- 
ity afforded by the NYSE fist- 
ing". Trading to PLDT com- 
mon shares in the US will be 
suspended. 


NEWS DIGEST 


Moody’s lowers 
Banco di Napoli 
credit rating 


1083 ■ 
Sauce; FT OwMts 


Kodak unravels a multi-billion dollar web 


, Banco di Napoli, one of 

Banco di Napoli Italy's largest banka, 
has had its credit rat 
Share pries @ra) mg downgraded by 

2,800 Moody’s, the US credit 

9400 j rating agency, because 

As il of pressure on the 

2.200 ill — bank's profitability and 

Tl-ft rL. “deteriorating asset 

• 1 Lif W quality”, writes 
1.800 — WIr~% Andrew am to Milan. 

1,600 — P-* 1 Salomon Brothers, the 

, ,1 International invest- 

1 Q93 . Q4 ment bank, was yester- 
rn ,-jrrrfftm-m. ^ &rced *° im P rove 

Source: FT ^ ^ g 

issue of Banco di Napoli five-year floating-rate 
notes, which it had sold to investors just 
before the Moody's announcement on Tuesday 
night Salomon, which said it had no prior 
warning of the downgrade, also offered to buy 
back the floating-rate notes from angry inves- 
tors. 

Moody’s downgraded the rating of Banco di 
Napoli for long-term senior deposits to Baal 
firm A 2, and to Baa2 for subordinated depos- 
its, from A3. The ratings for senior and subor- 
dinated debt of the hantr and its subsidiaries 
were also lowered. 

The downgrade comes as a further blow to 
Banco di Napoli, one of Italy's longest estab- 
lished banks. Las t iw on th, the hank announced 
disappointing first-half results, after making 
heavy provisions against bad loans. Since 
than, the bank's share price declined 17 
per cent, although it held firm yesterday. 

CNP rises 14.9% to 
FFr691.5m in first half 

Caisse Nationale de Prevoyance. the French 
state-owned insurance group, achieved net 
profits of FFrttLSm ($130.7lm) to the first half 
of the year, a K9 per cent rise over the same 
period in 1993, writes John Ridding in Paris. 

Mr Pierre Darnis, chairman, said the 
increase to profits was achieved on revenues 
of FFr39.6bn, a rise of 19 per cent over the first 
six months of last year. 

The insurance group is being prepared for a 
partial privatisation, which is expected to take 
place by the end of the year. Under the terms 
of the operation, the government will reduce 
its 425 per cent direct holding to the company. 
However, the state will retain control of the 
group through indirect investments via the 
post office and the Caisse des Depots, the state 
ffnarydfll institution. 

Observers believe the state will sell about 30 
per emit of CNP’s capital, which would bring 
estimated receipts of about FFr4bn. Analysts 
have valued the company as a whole at about 
FFri2bn. 

CNP, which specialises to life insurance 
products, has enjoyed rapid growth over 
recent years, increasing its sales by more than 
50 per cent to 1993 to FFr64Jbn. It achieves 
most of its sales through post office and 
savings bank branches and through tax 
offices. 

MEM Holdings bounces 
back to black in quarter 

Higher commodity prices and a cost-control 
programme have allowed MM Holdings, the 
Australian metals producer, to return to the 
black to the quarter to September, writes 
Brace Jacques to Sydney. 

The company yesterday announced it had 
turned a A$24.7m loss into a A$l6.6m 
(US$lZ20m) profit in the period, on a 28 per 
cent increase in sales to A$530.8m from 
A$413.6m. 

Directors said sales volumes for most prod- 
ucts, notably copper and zinc, were up sharply 
and while prices were higher, they were offset 
by currency movements. The company’s cost 
of sales increased 185 per cent to A$463.5m. 

MW’s asset sale programme had raised 
A$584m since July last year, strengthening the 
group's balance sheet and providing flexibility 


to frmd new projects, the group said. 

The result followed a tax provision of 
A$l2.1m, compared with A$35m, and excluded 
a net foreign exchange gain of A$15m against 
A$2.3m. There were no abnormal Items, 
against a A$17£m loss last time. 

Incitec profits hit by 
Australian drought 

Widespread drought cut net profit of Incitec, 
the Australian fer tilis er and chemicals group, 
by 7 per cent to A$29.6m from A$3L8m in the 
year to September, writes Bruce Jacques. 

Directors said second-half earnings were par- 
ticularly lilt by drought which eroded margins 
to the fertiliser business. But this was par- 
tially Offset by expansion in the industrial 
chemicals business. 

The directors expected tight conditions to 
continue but have declared a special dividend 
of 28 cents a share to pass franking tax credits 
to shareholders. 

The ordinary dividend has been reduced to 
20 cents a share from 23 cents. 

The result followed a 5.2 per cent sales 
increase to A$675m. Tax provisions took 
A$l&3m compared with A$l2.4m, and depreci- 
ation A$22.9m against A$24.8m. Interest 1 
expense took A$5.4m against AS&Sm. , 

San Miguel plans third 
brewery in China 

San Miguel Corporation, the Philippine brew- 
ing and food group, has formalised plans for a 
new joint venture brewery to China, its third 
to that market, writes Jose Galang to ISanffa. 

The company signed an agreement with 
Hebei Bada Group of Baoding City in Hebei 
province for the establishment of the brewery 
under a company to be called San Miguel Bada 
Baoding Brewery. 

The Philippine group will have a 70 per cent 
controlling interest for its initial investment of 
$21ni. 

San Miguel’s other joint venture breweries 
in china are to Guangzhou and shmirie in the 
southern province of Guangdong. 

Hie new plant, which is scheduled to start 
operations to 1996, will have an initial produc- 
tion capacity of 700,000 hectolitres a year, to be 
“expanded eventually to 2m hectolitres", the 
group said yesterday. 

MAS in joint venture 
with Cambodian carrier 

Malaysia Airlines (MAS) says it 
forming a joint venture with 
Royal Air Cambodge (RAO, the 
Cambodian carrier, which could 
involve taking up an equity 
stake, writes Kieran Cooke 
in Kuala Lumpur. 

Mr Tajudin Ramli, the Malaysian entrepre- 
neur who gained control of MAS earlier this 
year through a highly-leveraged M$1.79bn 
(US$681m) deal, said the Joint venture with 
RAC would be similar to one recently formed 
between MAS and Air Maldives. Under that 
agreement Air Maldives is leasing an Airbus 
A300 with crew from MAS. 

Mr Tajudin hafl tlyit MAS intends to 
take a 49 per cent stake in Air Maldives and 
turn it into a fully-fledged international car- 
rier. The size of the stake MAS intends to take 
fa RAC was not disclosed. 

Last year, Singapore Airlines (SIA) said it 
was canridering taking a 40 per cent stake in 
RAC, but SIA recently withdrew from the deal 
saying that it had been unable to agree terms 
with the Cambodian carrier. 

Saudi groups improve 

Two of Saudi Arabia's cement companies have 
reported higher profits for the first nine 
months of this year on the back of a construc- 
tion spree following the Gulf war to 1991, Reu- 
ter reports from Manama. 

The Southern Province Cement Company 
reported a 5.6 per cent rise to net profit to 
SR218m (458.1m) up from SR206.4m in the cor- 
responding 1993 period. The Arabian Cement 
Company said its net profit for the first nine 
mouths rose to SRS4Sm from SR77.3m a year 
earlier. 




By Richard Waters 
rn Now York 

Paying off $5bn of debt and 
retiring $7bn worth of swaps 
and options must rank as one 
of the biggest balance sheet 
restructuring operations. For 
Eastman Kodak, which is 
undertaking the process, the 
result is likely to be a charge 
to earnings that runts into the 
hundreds of millions of dollars 
- though its derivatives strat- 
egy has cut the company’s bor- 
rowing costs over a number of 
years. 

Kodak took on the debt to 
1988 to finance its purchase of 
Sterling, a drugs company. On 
top of this debt - a mixture of 
fixed-rate and zero-coupon 
bonds, much of it callable - 
the US photographic products 
company layered an array of 
interest rate and currency 
swaps, along with interest 
options. Its overall aim at the 
time was to restructure the 
debts, in part to take advan- 
tage of arbitrage opportunities 
between the corporate debt 


and derivative markets. 

“There were two objectives - 
one was to reduce borrowing 
costs, the other was to receive 
cash,” says Mr Jesse Greene, 
Kodak's current treasurer. 

One arbitrage exploited by 
Kodak in the late 1980s, for 
example, involved the use of 

DERIVATIVES 

callable debt linked with 
options to create synthetic 
fixed-rate debt The company 
issued callable bonds, then 
sold call options in the market 
to receive an immediate cash 
premium. 

If interest rates fell, Kodak 
could pay off the bonds at the 
call date - but at the same 
time, the buyer of the option 
could exercise its own call on 
Kodak. The effect for the com- 
pany was indistinguishable 
from issuing straight fixed-rate 
debt at the outset, except that 
it received premium income on 
the option. This arbitrage 
strategy is thought to have 
saved the company 10-15 basis 


MERCURY OFFSHORE STERLING TRUST (SICAV) 

14 , rue I Jon Thye*. L-2636 1-iurmbMug. R.C Luanbouzg Pfc*. B. 2* 990 

PAYMENT OF DIVIDEND 

Notice is hereby given to shareholders that a final dividend for the 
war ended JOth September. 1994 of 0.62p for the Pacific Fund, 

I ■'9p for the U.K. Fund and 3.7lp for the Reserve Fund has been 
declared by the Board. This dividend will be paid on 7th 
December. 1 994 to registered shareholders of the Fund who were 
on the register at 30th September. 1994. 

This dividend will bo paid from 7th December. 1994 to bearer 
shareholders of the Fund against presentabon of coupon no. 8 for 
the Pacific fund, coupon no. 8 for the U-K. Fund and coupon no. 

I I for the Reserve Fund at any of the compan/s paying agents 
including its paying agent in the United Kingdom: 

S.G.WARBURG & CO. LTD. 

Credits Paying Agency, 2 Finsbury Avenue, London K2M 2PA 
Irom whom claim forms can be obtained. United Kingdom lax 
will be deducted from claims in the United Kingdom at ihe rata of 
per cent, unless claims arc accompanied by an affidavit. 

reuronowr 1994 MERCURY OFFSHORE STERLING TRUST (SICAV) 


points on its borrowing costs. 

As a result, about $2Bbn of 
the $7.5bn notional value of 
Kodak's derivative instruments 
at the end of last year com- 
prised options linked to calla- 
ble debt. 

Elsewhere, Kodak bad taken 
advantage of a variety of arbi- 
trages to reduce its borrowing 
costs. It had, for example, 
swapped $135m of fixed rate 
dollar bonds into yen-denomi- 
nated instruments, and $46m 
into D-Marks, to both cases to 
reduce its costs. 

The overall holdings of deriv- 
atives to which this sort of 
opportunistic debt manage- 
ment policy gives rise can look 
tike a grab-bag. That the 
notional value of the instru- 
ments - at $7bn - is higher 
than the value of the debt, and 
the mix of instruments is so 
broad, testifies to the layering 
of different approaches over 
time 

Such an approach to debt 
management is common 
among big companies with 
sophisticated treasury 


operations, says Mr Irving Wil- 
son, a managing director at CS 
Financial Products who has 
worked on balance sheet 
restructuring. 

According to Kodak and CS 
Financial Products and Leh- 
man Brothers, its advisers, 
unwinding the derivatives 
positions has been relatively 
straight forward and not 
resulted in unusual costs: 
swaps have been to the liquid 
US dollar, yen and D-Mark 
markets making it easy to 
reverse trades without affect- 
ing overall market spreads. Mr 
Greene says to most cases the 
unwinding was done with the 
original counterparties to the 
though ths com- 
pany accepted outside bids for 
parts of the portfolio. 

For Kodak shareholders, 
there will be one simple way to 
assess how successful Kodak 
has been with the programme. 

In its quarterly reports for 
the end of June. Kodak 
revealed that its long-term bor- 
rowings had a fair value that 
was about $24lm above the 



European Investment Bank 

ItaSan Lira 500 BSiofi 
Boating Rate Notes due July 7997 

Notice to the Holders 

Nonce s hereby given mat the Notes wfl carry an interest Raw of 
8.50% per annum for tte period l8.tO.T994 to 18 Q1 1995. 

* ITL 108.611 perfTL 5.00CL000 nominal 

• m. 1,086,1 1 1 per ITL 50,000,000 nominal 

Luxembourg, October 20. 1994 


value at which they were 
recorded to the company’s 
accounts (since the debt was 
issued at a time when interest 
rates were higher than at pres- 
ent, Kodak would to theory 
have to pay this amount to buy 
the debt back). Its swaps and 
options, meanwhile, were 
showing a fair value some 
$37Qm below the level at which 
they were recorded. 

The message: the whole debt- 
retirement package would have 
cost $611m at that time - that 
was at least an advance on the 
end of 1993, when lower pre- 
vailing interest rates meant 
the cost to the company of 
retiring the debt would have 
been nearly $L2bn. 

Kodak has reported pre-tax 
costs of $162m from unwinding 
its various positions. Bond 
yields have risen slightly from 
their June levels, bringing 
down the cost of the pro- 
gramme. However, the mes- 
sage from quarterly report is 
that there are several hundred 
million dollars worth of 
charges still to come. 


Bradford 

aBincley 

S200.000.000 
Floating rate notes 
due 1999 

Notice is hereby gioen that 
the notes will bear interest 
at 6.01042 % per annum from 
18 October 1994 to 18 Janaary 
1996 Interest payable or 18 
January 1995 tall amount to 
SISI JO per 910,000 note. 

Agent; Morgan Guaranty 
Trust Company 

JPMorgan 1 


This announcement appears as a matter of record onto 

/XW 

LAPORTE 

W/ 

$115,000,000 

Laporte pic 

Senior Notes due 2001-2006 


Private placement of these securities with institutional investors 
has been arranged through the undersigned. 


Wertheim Schroder & Co. 


October 1994 





• i ) ♦ 


*v‘ 



22 


FINANCIAL TIMES 


THURSDAY OCTOBER 


20 IW4 6 


INTERNATIONAL CAPITAL MARKETS 



Spread of Argentina’s $500m global issue surprises 


By Graham Bowfay and 
Richard Lapper 


The Republic of Argentina 
launched its long-awaited 
global eurobond offering yes- 
terday, with a SSOOm issue of 
five-year fixed-rate bonds. 

Syndicate managers 
expressed surprise at the 
spread, of 33?'/* to 350 basis 
points over US Treasuries, 
offered on. the bonds. “Argen- 
tina was expected to come at 
around 275 to 300 basis points 
but because of the deal's size 
and the difficulty of the mar- 
kets. it has had to come higher. 
But even then it is struggling," 
said one syndicate manager. 

However, joint lead manager 
Deutsche Bank said the pricing 
accurately reflected demand 
and current market conditions. 

"The pricing is a realistic 
assessment of how the demand 
is building. We tried to match 


price insensitive retail demand 
in Europe, for whom the cou- 
pon is more important, and 
institutional demand in the US 
which is more value sensitive," 
said a syndicate official at 
Deutsche Bank. 


INTERNATIONAL 

BONDS 


He said 80 per cent of 
demand came from retail and 
institutional investors in 
Europe, with the remainder 
coming from the US. 

The bonds. Argentina's first 
significant dollar issue since 
December 1983, will be priced 
today. 

The National Bank of Can- 
ada launched a 5200m offering 
of five-year floating-rate notes, 
increased to §250m because of 
the huge demand for the issue. 

The bonds were priced to 


yield 20 basis points over three- 
month Libor. 

Fannie Mae, the US mort- 
gage agency, announced its 
Intention to borrow $20bn in 
international markets, launch- 
ing what it claimed was the 
"largest global funded pro- 
gramme in the world”. 

Lehman Brothers, the US 
investment bank is arranging 
the new facility, with 10 other 
international banks involved 
in the marketing and distribu- 
tion of the issue. 

The association made its 
debut in global bond markets 
in June, issuing $l-5bn of 10- 
year global debentures. 

Abbey National said that it 
plans to return to the US mar- 
ket following the success of its 
SSOOm offering of yankee bonds 
launched on Tuesday. 

Mr Gareth Jones. Abbey 
National treasurer, said that it 
would look to do a global offer- 


ing of $l-5bn early next year. 

Salomon Brothers was forced 
to raise the coupon on the 
$100m offering of five-year 
floating-rate notes launched by 


Banco di Napoli on Tuesday 
after Moody’s, the US credit 
rating agency, downgraded the 
Italian bank. 

A Salomon syndicate official 


said: “The market has now sta- 
bilised and at these cheaper 
levels I think we are going to 
see more investors coming in 
to buy the paper." 


NEW INTERNATIONAL BOND ISSUES 


Amount 

Coupon 

Price 

Mafcrfty 

F«M 

Spread 

Saak rumor 

Borrower 

rn. 

% 



% 

bp 


US DOLLARS 








MBNA MCCT n. S. 1994 C(al)T 

870 

(a2) 

{32} 

Mar0DO4 

045 

- 

MutS Lynch InternatlonaJ 

MBNA mcct n. aiMd Olblji 

522 

m 

W 

M&xzxe 

0225 

- 

Memfl Lynch International 

Reoutftc at Aigertrd 

600 

IO« 

(«3R 

Nov. 1999 

o.ean 

t?m 5yr) 

DeutsctWGok&nan/JP Mrgn 

NadoraO Baffft of Conaos^ft 

250 

m 

9S.88R 

Now. IMS 

0L2CR 


Goldman Sachs bnemettonal 

Bcaportftnana^l 

200 

sera 

100-00 

Nov. 1999 

undseL 

- 

Goldman Sachs International 

Cffntrai Pueoo/CefrtraJ Noutjiren 

100 

10.75* 

99.652 R 

Nov. 1867 

1.00R 

♦40Q(B%%-97) Qffbank lntematoonai 

D-MARKS 








Urribancn 

100 

9.7S 

10100 

Nov. 1997 

1.80 

- 

Commerzbank 

SWISS FRANCS 








Govt AssM-Backed Secstf) 

100 

<676 

100.00 

Jan. 1996 

unotod 

- 

UBS 

LUXSWBOWG FRANCS 








BectricitO de Fiance® 

2hn 

7.75 

10200 

Fetx20OO 

1.75 

- 

BGL 


manager, moating rats note- kSerrt-annual coupon. R: 0x«d re-ofer price: tees am shown at the re-offer level ajb) MBNA Master 
Oedt Cant Oust, at} Class A. Expected maturity: OctOl- Average Me: 7 yra. aS} Meed (star, indicated coupon: l-rnth Ubor +26-28bp. 
S3) Class B: S4Sm, expd mat Nov01, ave Bfa 7 XX yra, 1 -mtfi Ubor +4S-4ahp. bl] Class A. Expected maturity: 15/10/97. Average Mk 
2.97 yrs. 02} Priced fetter, Indicated coupon defy fed funds +33-36bp. b3? Class a- 227m. enpd max IVlt/97. eve Me 305 yra, 1-rnth 
Ubor - around 35bp. c) Priced today at 337V4-350bp over Ta. d) Increased by SSOm to 5260m at 9807R. di) 3-mth Ltoor +20hp. e) 
Redemption formula: par x 0-9557 x Aral OS Commodity tnda xfto tte nature ♦ 2150.48. g short 1st coipan. g> Lang 1st coupon. 


European sector weakens as profit-taking continues 


By Conner Mlddelmann 
In London and Frank McGurty 
In New York 


Profit-taking continued to 
weigh on European govern- 
ment bond markets yesterday, 
and dealers said trading would 
remain range-bound and direc- 
tionless until there were new 
fundamental factors to inspire 
them. 

Prices in Europe opened on a 
softer tone after US Treasuries 
had weakened overnight, and 
continued to slip throughout 
the day. However, “there 
hasn't been a lot of selling 
pressure - we're in a consoli- 
dative phase.” said Mr Paul 
Campayne, bond strategist at 
Paribas' Capital Markets, 
adding. “The markets moved 
up sharply in a short period of 
time, and now they’re taking a 
breather." 


ping by nearly ‘/a point after 
the December bund future 
breached key technical support 
at 90.50. It fell as low as 90JX) 
before closing around 90.42, 
down 0.40 point on the day. A 
break of the next key support 
level at 90.00 could open the 


GOVERNMENT 

BONDS 


After an August growth rate 
of 8.2 per cent, analysts have 
been railing for a September 
rate between 63 per cent and 
7.5 per cent; however, talk yes- 
terday was of a number of 
about 8 per cent “In the wake 
of these rumours, a number 
below 7.5 per cent would proba- 
bly support bunds," said a 
dealer. 


of the yield curve; moreover, 
they said there had been active 
two-way dealings in the new 
gilt which is trading on a 
when-issued basis. 


■ German government bonds 
once again set the pace, slip- 


way to 89.80 or lower, traders 
said. 

"hi the last two days, we've 
lost all the gains seen in the 
wake of the German elections.” 
said Mr Andrd de Souza, inter- 
national bond strategist at Pai- 
neWebber. “Now we’re await- 
ing M3 for farther direction " 

Rumours that September M3 
money supply growth, expec- 
ted to be published late this 
week or early next week, 
would not . be as low as 
expected also spooked the mar- 
ket 


■ UK gilts shadowed bunds 
tower yesterday, with profit- 
taking reinforced by slightly 
disappointing retail sales num- 
bers. 

“In the pre-auction phase dis- 
appointing news is often used 
as an excuse for the market to 
cheapen up." said Mr Chris 
Anthony, gilt analyst at ABN 
Amro Hoare Govett The Bank 
of England is due to auction 
£2.5bn of 8 per cent gilts due 
2000 next Wednesday. 

Dealers reported some shifts 
by investors into the 10-year 
sector from the ultra-long end 


■ While Swedish bonds eased 
in line with most other mar- 
kets on continued profit-tak- 
ing. most traders were looking 
to today's meeting of the new 
Riksbank policy-making coun- 
cil. 

“Following the inflation 
report, the odds have short- 
ened for a tightening at this 
meeting,” said Mr de Souza at 
PaineWebber. On Monday, the 
central bank published a 
report warning of rising infla- 
tionary pressures, and market 
participants have been gearing 
up for another interest rate 
bike in the coming weeks. 


B US Treasury bonds gave 
ground yesterday morning 
even though August trade data 
produced no surprises and the 


dollar held fairly steady. 

By midday, the benchmark 
30-year government bond was 
ft lower at 96ft, with the yield 
rising to 7.893 per cent On the 
short end, the two-year note 
was down ft at 99%. to yield 
6.619 per cent. 

The weak tone which had 
been established the previous 
session carried over into the 
opening. Bonds across the 
yield curve were showing mod- 
est losses even before the Com- 
merce Department released the 
latest figures on the US perfor- 
mance on trade. 

The report had minimal 
impact Bonds held steady at 
their lower levels on news of a 
S9-7bn trade deficit in August 
close to what economists had 
been forecasting. The figure 
represented a narrowing of 
July's upwardly revised trade 
gap of $11.19bn. 

However, the data itself was 
less important to the bond 
market than on the value of 


the dollar, which would be 
likely to fall on an unexpect- 
edly wide deficit. Traders were 
worried that a weaker dollar 
would diminish the attraction 
of US-denominated securities. 

In the event, the currency 
was performing fairly on the 
foreign exchange markets. It 
improved against the D-Mark, 
but slipped against the 
yen. Traders were showing 
some concern that the US 
deficit with Japan in August 
was a tittle larger than fore- 
cast. 

As the afternoon began, the 
bond market was turning its 
attention to the announcement 
of details on next week's Trea- 
sury auctions of five-year and 
two-year notes. 

There was some concern that 
the government would increase 
the normal size of the five-year 
sale at a time when the mar- 
ket’s ability to absorb the extra 
supply was still an open ques- 
tion. 


Airbus Finance m 
$lbn loan launch 


By Graham fiowtey 


Airbus Finance, the sales 
finance company recently 
established by Airbus Indus- 
trie, the European aircraft- 
building consortium, yesterday 
publicly launched a $lbn syn- 
dicated loan, its debut transac- 
tion. 

The seven-year revolving 
credit facility carries an inter- 
est rate of 30 basis points 
above Libor for the first four 
years of the loan and 35 basis 
points over Libor for the 
remaining three years. 

The loan is guaranteed by 
Airbus Industrie’s four share- 
holders, Aerospatiale, Daimler- 
Benz. British Aerospace and 
Coostruccion.es Aeronauticas. 

Eventually it is hoped that 
AFC. which will provide 
finance to Airbus Industrie's 
customers for the purchase of 
aircraft, will become a sepa- 
rately-rated stand alone com- 
pany. 

The company intends to 


Finnish chemicals group 
valued at up to FM5bn 


By Martin Brice 


The international offering of 
shares in Kemira, the state- 
owned Finnish chemicals 
group, is expected to value the 
company at up to FM5.16bn 
(Him}. 

The sale of 25 per cent of 
shares in the group is expected 
to raise between FMi.ibn and 
FMLSbn. making it Finland’s 
biggest initial public offering. 

Global co-ordinator and 
book-runner Merrill Lynch 
reports good interest. It has 
two teams marketing the deal 
to international investors, with 
final pricing due in November. 
Merrill has been involved in 
Finnish international equity 


WORLD BOND PRICES 


BENCHMARK GOVERNMENT BONDS 

Red Day’s 

Coupon Date Price change 

Yteid 

Weak 

400 

Month 

ago 

Australia 

9.000 

09704 

920500 

-0.180 

1021 

1020 

10.10 

Belgium 

7250 

0443 4 

S3. 0700 

-0.480 

&32 

8145 

803 

Canada * 

6.500 

08/04 

838600 

-0.500 

9-11 

9.00 

9.02 

Denmark 

7.000 

12434 

88-5000 

-0000 

8.75 

804 

920 

France BTAN 

8.000 

05/98 

1Q201OO 

+0010 

723 

7 AS 

7.58 

OAT 

&500 

04/04 

83.5000 

-O01O 

8.04 

8.11 

822 

Germany Treu 

7.500 

09/04 

100.6000 

-0080 

7.41 

756 

7.71 

Haiy 

8.500 

oa/04 

81.5900 

-G.440 

n.71f 

11.78 

11.75 

Japan No 119 

4.800 

06ffl9 

102.8650 

+0.060 

407 

418 

307 

Japan No 164 

4.100 

12/03 

902160 

+0l310 

46© 

<78 

4.50 

Nathortantte 

7050 

IQ/04 

980800 

-0.460 

7.41 

752 

704 

Spain 

8.000 

05/04 

81.9500 

-0.450 

11.14 

1109 

1124 

UK Gits 

8000 

08/99 

90-18 

-4/32 

8.43 

8.42 

8.86 


6.750 

11/04 

87-22 

-14/32 

829 

859 

9.04 


9.000 

10/08 

103-14 

-16«2 

857 

8.59 

8.97 

US Treasury ' 

7050 

08/04 

97-04 

-10/32 

7.67 

708 

755 


7.500 

11/24 

95-16 

-14«2 

709 

7.89 

7.83 

ECU French Govt) 

8.000 

04/04 

84.1900 

-0280 

8.48 

8.60 

801 

London dosing. “New York mu-day 




Yield* Local market atano 

t Ores* (induring vrthndring ira jt 1L5 per c»m paydfe 

try navMldent^ 




Italy 


■ NOTIONAL ITALIAN GOVT. BOND (BTP) FUTURES 
(UFFE)- lira 200m IQOte of 10096 


FT- ACTUARIES FIXED 

Pnca Irxficos Wea 

UK Gfltto Oct 19 


INTEREST INDICES 

Day's Tua Accrued 
change H Ota 18 interest 


xd ad), 
ytd 


— - Low coupon yield — — Medium coferan yleW — — ■ High coupon yieM — 
Oct 19 Oct 18 Yr. ago Oct 19 Oct IB Vr. ago Oct 19 Oct IB Vr. ago 


Dec 

Mar 


Open Sea price Change 
99.56 99.49 -0.35 

98.70 98.69 -0.29 


High 

99.84 

9890 


Low 

9935 

98.70 


Eat. vtx Open inL 
27080 6132S 

648 3495 


■ ITALIAN GOVT. BOND <BTP) FUTURES OPTIONS QJFFE) UraZQOm lOOtfts at 10096 


1 Up to 5 years (24) 

2 5-15 years (22) 

3 Over 15 yean (B) 

4 Imedeeniabtes (5) 

5 Ail stocks (60) 


119.10 

-0.lt 

11924 

0.99 

9.83 

5 yrs 

851 

8.48 

601 

857 

853 

828 

8.72 

8.67 

8.44 

>39.45 

-asj 

139.77 

7.69 

>0.86 

15 yra 

8.47 

8.41 

6S2 

8.80 

855 

7.07 

804 

&78 

729 

15509 

-0.55 

15751 

1.95 

1057 

20 yra 

a 43 

808 

7.05 

300 

855 

7.13 

8.73 

8.65 

7.31 

18022 

-1.03 

162.10 

4.19 

803 

Imectt 

850 

8.40 

720 







138.50 

-025 

13606 

1.50 

10.48 

















— 

^ Inflation 

S% — 

— 

— i 

— MtaHon 1094 - 

— 



Striko 


• CALLS — ' — 


- PUTS - — 

- Index-linked 






Price 

Dec 

Mer 

Dec 

Mar 

8 Up to 5 years (2) 

185.95 

•0.01 

185.94 

023 

507 

9900 

1,75 

2.60 

1.32 

201 

7 Over 5 years (11} 

17324 

-021 

173.61 

008 

<36 

9950 

1.45 

2.37 

1.52 

3.18 

8 AH stocks (13) 

17308 

-0.19 

17401 

002 

4.41 

10000 

120 

116 

1.77 

3-47 








Oct 19 Oct 18 Yr. ago 


Oct 19 Oct 18 Vr. ago 


3.83 

304 


3.82 

303 


225 

an 


2.82 

3.64 


2.81 

163 


199 

2.92 


Eat vuL local. Cals 662 Puts 1681 Previous day's opan 1 nt_ eras 22977 Piss 27419 


Debentures and Loans 


5 year yUM 15 ywr yMd 25 year yield 

Oct 19 Oct 18 Yr. ago Oct 19 Oct 18 Yr. ago Oct 19 Oct 18 Yr. ago 


9 Deha 4 Loans (77) 128.17 -031 12807 202 

Average gross redemption yt*cj are sdomi above. Coupon Bonds: Low: 096-7*496: 


8.95 9.62 9.79 7.7TJ 9.57 9.58 

Medknr 896-109496: topr. 1196 and over. T Rot yksd. ytd Year to dais. 


8.01 9.52 9.48 


a.13 


Spain 

■ NOTIONAL SPANISH BOND FUTURES (MSFF) 


Rtoac US. UK tn Xteds. odiera to dsomd 

US INTEREST RATES 


Sxrac UU8 Mamattorml 


Lunchtime 


Pnra rate — 

Beta lean rata 

fcdJwd* — 

FMAndsati 




Traawry Bids 





Tlwa moMh._ 

aw 


Sh noom 

Onoyear 

ai8 

<07 


Dec 

Mar 


Open 

87.458 


Sea price Change 
87.08 -050 

86.16 


High 

87.48 


Low 

88.80 


EsL vol. Open Int 
67,324 75.485 

50 


FT FIXED INTEREST INDICES 

Oct 19 Oct 18 Oct 17 Oct 14 Oct 13 Yr ago High* Low- 


GILT EDGED ACTIVITY INDICES 

Oct is Oct 17 oa 14 


Oct 13 


Oct 12 




6.62 

603 

7.67 

790 


UK 


Govt. See*. (UK) 91.60 91.78 9208 91.89 81.73 10331 107.04 89.54 GRt Edged bargains 89.6 91.4 97:9 1016 105.3 

Rxad interest JOS-55 109.03 703.09 IQ&SS 70122 724.08 7 3137 700.50 5-day swags 97.6 99.3 99.2 96.6 90.8 

* tor 1»L Oousmmsra Secures tatfi tmes compUton 127AO Gfi/SSJ. tow «- 1 B (3/l/?g. Rxed Mwssi high since oonpfcKxc 13337 pi ifeM . tom 6033 Q/I/7SI . Bam KXk Qovsmmww SeOstwa 1S7HV 
26 snd Foam intents iffl. SE ecBvtfy maces rttosssd 1974. 


■ NOTIONAL UK GILT FUTURES (UFFEJ* £50,000 32r*te at 10096 


BOND FUTURES AND OPTIONS 


France 

■ NOTIONAL FRENCH BOND FUTURES (MATIF) 


Dec 

Mar 


Open 

101-24 


Sett prtoe Change 
101-19 -0-13 

100-22 -0-13 


High 

101-27 


Low 

101-08 


Eat vol Open int 
58643 93803 

0 48 


FT/1SMA INTERNATIONAL BOND SERVICE 


LWed so tea latest nanfeionai 


■ LONG G8.T FUTURES OPTIONS CUFFS) £50.000 friths of 10036 



Open 

Sen price Change High 

Lovr 

EsL vol. 

Open int 

Dec 

iii.es 

111.52 -026 

111.72 

11126 

129099 

130520 

Mar 

111.86 

11Q.76 -026 

110.88 

110.70 

1.146 

10.964 

Jim 

11010 

109.98 -0.28 

110.10 

110.10 

2 

681 

■ LONG TERM FRENCH BOND OPTIONS (MATIF) 











Pnce 

Nov 

Dec 

Mar 

NOv 

Dec 

Mar 

110 

1.83 

2.05 

2.47 

0.09 

008 

1.65 

ill 

0.78 

- 

100 

029 

0.91 

2.12 

112 

029 

0.90 

1.41 

002 

104 

2.88 

113 

oar 

0 51 

1.04 

re 

1.95 

- 

114 

- 

025 

0.72 

. 

- 

- 


txxxte tor wrirti itiere ki an oteqrate seconday mariot Latest price* at 79» pm on OctotMr 19 

B id Offer Ct®. YWd issued 9d Offer Chg. VMM 


tewed Bid Otter Chg. YMd 


Strike 

Price 

Dec 

■ CALLS 

Mar 

Dec 

- PUTS 

Mar 

101 

1-41 

2-2S 

1-03 

2-45 

102 

1-07 

1-58 

1-33 

3-14 

103 

0-44 

1-31 

2-06 

3-51 


US. DOLLAR STRAIGHTS 

Atbey tot Thxrary 6% CJ3 — 1009 89% 

/iwrta Ruvnca 7% 98 1000 IX 

Asate8%X 400 1(0 


fix. vol. TOO), eras 8357 Piss i*E. PwOous (toy's opwi mt. Cals 7««3 Puts 43023 


Bank of Tckjc B% 96 . 

s% 03 

8FCE7%07. 


WSrGasOSI . 
Canada 8 96 


Ecu 

■ ECU BOND FUTURES (MATIF) 


Oran} Kang fin 5% 88 , 
Chn»8% 0 * 


Dec 


Own 

81.16 


Settprice Grange 

81.14 4X26 


rtgh 

81.24 


Low 

81.00 


Eat vol. Open Int 
1,568 7.088 


Cand Bxqoe B 98 - 
Cre«fijncfe9%*. 
D«nOA5%98 


_ IX xn4 

. tax 83*8 

_1S0 101 If 
1500 9% 

7000 ia& 

- 500 89% 

1000 86% 


89 h. 

100\t 

183% 

102 

83% 

101 % 

K>% 

183% 


-% 

-* 

-4 

-h 

■H 


Ek. VC* tots, eras 16.3*6 Puts 20.063 . Previous day's open MU COIs 201.6*3 Puts 333J12. 


Germany 

m NOTIONAL GERMAN BUND FUTURES (UFFE)* OM25OA00 lOOths at 100% 


US 


■ US TREASURY BOND FUTURES (CBT) SlOaOOO 32nds ot 100% 


Erat Japan Rahay 6% CM . 

ECSCS'sBB 

EC 8»* 96 

B8 7% 98 

BBS 1 * 97. 


!» 101 % 

- 300 106% 
1X0 95% 

- SB 89% 

193 102 


IX 101% 
.250 101% 


Dec 

Mar 


Open Soil price Change 
90 74 90 37 41.45 

89.80 89.57 -0,47 


High 

90.74 

89.80 


Low 

90.20 

8930 


Eat vol Open InL 
143912 179042 

275 4268 



Open 

Latest 

Change 

High 

Low 

Eat voL 

Open Int. 

Dec 

96-30 

98-21 

-0-12 

98-30 

38-17 

304.035 

40358? 

Mar 

98 08 

97-31 

-0-12 

96-08 

97-26 

1,416 

27,140 

Jun 

97-15 

97-10 

-0-14 

97-15 

97-09 

2 

11,180 


Bee da Frame 0 98. 
EuofrnaBfei 96 


10X 105% 
- 200 104% 


EHm Bark Japan 8CG _ 
Bport Dev Carp 9^ 98 — 
Federal Nri Mart 7A0 04 . 
HnteXjAW. 


IX 

500 


RmrtiExponfl%9S 


- ISO 
. 1SX 

am 


ira 

99% 

IX 

86 % 

38% 


85% 

102 

105% 

95% 

89% 

102 % 

102 % 

101 % 

105*2 

W4% 

1X% 

1X% 

108% 

96% 


■ BUND FUTURES OPTIONS (UFFE) DM250,000 potrita of 100% 


Stnhe 

Price 

Nov 

Doc 

CALLS — 
Jan 

Mar 

Nov 

Dec 

PUTS — — 
Jan 

Mar 

9000 

0.61 

1 19 

1.02 

1.37 

024 

0.82 

1.48 

1.80 

9090 

023 

0.93 

0.81 

1.1S 

0.48 

108 

1.74 

2.08 

9100 

0.15 

0.69 

0.63 

005 

0.78 

1.32 

2.06 

228 


Japan 

■ NOTIONAL LONQ TERM JAPANESE GOVT. BOND FUTURES 
(UFFQ YlOOm 100»ha ot 100% 


firt Mater C 
Gen Bee Capm 9% X _ 
GM«C9%». 


ax ico% 

1500 88% 


Ell. lets. CJlto 26410 PUB IWiB. Prevtous day's OtXVi Int. Catto 286999 Puts 26QTO9 


Open Close Change High Low Eat vol Open Int 
Dec 107.45 - - 107.67 107.45 2875 0 

Mar 106.77 - - 106.77 108.77 18 0 

- oontraca crated an APT. AM Opet news at Sgs. are tor prevtaja day. 


MBkJepen Rn 7% 97 
WerAmarDsv 7% W _ 
tsyfl%23 


300 103% 
2X )Q2% 


. 2X 100% 


JapaiDsv 8kB%01 
Kansal Sec Per 10 98 . 


Korea Bee Fotiw 6% X 
LTC8 fin 8 97 


200 101 % 
3SX 78% 
-5W 102 

- 350 104 

1350 85% 


IX 

05% 

103% 

102% 

101 % 

101 % 

78% 

102 % 

104% 


-% 

-% 

-% 

-% 

-4 

-% 

-% 

-% 

-% 

-% 


UK GILTS PRICES 


Maaudoa Beo 7% 02 . 

Norway 7% 97 

C**bio7%(H 


. 200 100 % 
10X 95% 


Hftn 


- Wd.. 

W Red PrfceCtor- 


-.1994-. 
H%n u» 


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-.HeM— — 1994 _ 

tel Red FnceC rtt- M(p low 


._YWd._ 
til B1P 


— 1994 _ 
i£ Wyi tow 


OstB Mrtofea* 8% 01 . 
PartFCroa 7% 95 — 
ftKt»jas%E. 


1000 100% 

3000 9S% 


330 102% 


SnetW* (U*a IB to n* Tears) 


rnm sec 1994** 

607 

- 

IXftfll 


13* l«5 

11SI 

566 

101% 


Ertfl 3pc Gtj 1990-85 . . 

304 

556 

98114 


10*4pC 1995 

997 

U9 

I02U 


Trt»12%pci»Stf. - 

1201 

6031O6mt 


t-«C 19% ^ 

CSS 

roc 

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15%pc 19963. 

>3fiJ 

733 


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&tM3',pci9K3...- 

1U0 

7.40 168,* id 

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OBmasknlOpe 1996 ... 

9 59 

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104'«te 


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701 

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110% 

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907 

791 

105ft 

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8M 

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101 A 

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fieas 9ij*l999tf 


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7.49 

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347iii7,a 
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JSi B%*2005 

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Treas 12 %* 2003--5 

TlS 7%K20Mfr 

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UUA 1^eaa11%9CBB3'7,..- 

96% rreaa 6‘iPC 2007 tt 

noA ia%* 2004-e 

1I4A 101% Treat 9* 2008 Tt 

HOA IMA 
13113 11833 
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106* 9Sh 

33, 1 S 


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100 % 


4*0 7.47 72% 

900 axiosw 

7.70 856 87B 

8 54 856 99% 

B3S 884 I05ii 
1077 897 12l)|al 

825 857 «3U 
837 803 95)j 

taiS 897 115fi 
8.57 858 99,’, 

1052 897 128, % 

871 856 103% 


-% 88ft 
-ft 725,1 
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-ft 1«tt 

-ft 

-ft >43A 

-a lull 

-ft 111% 
“A 136/, 
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ML 
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2W 

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3.45 

347 

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159 

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364 

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372 

170 

374 


4J0 208 

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381 IQ8L4 
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383 »57% 
3J3 12m 
3M 138,% 
387 132% 

384 11 Oft 
366 109ft 


-% 

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MW 1UA 

176% 183% 
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1ia% 107% 
i«*« NBA 
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175% ««% 
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157ft 134% 
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123ft 106% 
133/1 105% 


OuSbecHydo9% 88. 
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Sdrabtiy 8% X 

SAS 10 99 


. 200 100 % 

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SNCFS^W . 
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.150 


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State Bk NSW 8*2 06 ■ 

Sweden 95 . 


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1081 

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frsJs lOboc 1999 

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153 

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hsas 13|K 2000 

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fee 20033 *u.. 

a-w 

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Tras 0oc 2009 

140 

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Prospective tmI redertptton me on projected Inflation or (1) 10%, 
aid (2) 596. Figure* (n pmrtrmm snow WJ oase (or 
indedng (te 8 month* prior to issue) ana haw been adjusted to 
Mea retain? of apt to 100 tn Fatmoty iBB7. Cecverdon 
factor 1945. RPl Itr February 1094: 142.1 and lor September 
J994: 145.0. 


SW»lE)?Wt&%95_ 
Tokyo See Pan* 6% 83 . 
T*yo WeOopda 8%W- 
Tojnta htetor 6% 93 . 


_ 200 102% 

. 25® 88% 


. no 

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US 

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Unfed Kingdom 7% 02. 

Wond Bank 8%V» 

Wohd Bank 8% 37 


.200 102 % 
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1500 103% 
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101 % 

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100 % 

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100 % 

86 

106% 

103% 

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105 

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SWSS mANCSTRNQHIS 

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10X 95% 

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IX 107% 
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Myundd Ifeear Rnft% 97 IX lO^j 

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93% 

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659 

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104% 

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HSBC Hotehgs 1100 02 C 

153 

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586 

R0A7WQ RATE NOTES 






801 


876 
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877 
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Span 5% 02. 


1X000 102% 
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160000 70S* 
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125000 105% 


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102 % 

110 

105 

113% 

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Bel Qanada 10% 9SCS >50 KM% 

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Bee da Franca 9% WCS 275 102% 

Gen Bee Captal 10 96 CS 300 IX 

HW tel fin 10 01 Cl 400 102% 


Desdnar Rrtree ft 98 UU 10X 

Farm del Stet 0.1097 tgj 

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fount} 


return to the syndicated loans 
market and also to eventimlb 
tap the international capital 
r p Morgan said. 
X PMor^an^AFcl financial 
adviser and has played a toy 
role in the design of the 

The loan is being placed 
among selected relationship 
hub tf Airbus Industrie and 
banks of Airbus* four share- 
holders. Banks are being 
invited to participate at levels 
of either S60m or S30m with 
participation fees of 1-5 basis 
points or 6.25 basis points 

respectively. . 

On the undrawn part of the 
facility. AFC will pay a com- 
mitment fee payable quarterly 
in arreare at 12.5 basis points 
in the first three years and 15 
basis points thereafter. Addi- 
tionally. there will be a fee of 
2 5 basis points per annum if 
the use of the facility exceeds 
50 per cent and a fee of 5 basis 
points If use exceeds 75 per 
cent. 


as. 


Havdoel 

caters j 


offers from Outokumpu, the 
mining and metals group, Val- 
met. the paper machinery and 
engineering group, and Rautar- 
uukki, the steel group, within 
the past year. 

The group. Finland's eighth 
largest by sales, will offer 30m 
shares, at between FM37 and 
FM44 each. Postipankki is han- 
dling the domestic and Nordic 
side, and the US tranche is 
being handled by Merrill 
Lynch with Goldman Sachs. 
UBS and S.G. Warburg. 

The rest of the world is being 
handled by Merrill with Indo- 
suez. UBS, Postipankki, 
S.G. Warburg. ABN Amro. 
Dresdner, Daiwa, James Capel 
and KLeinwort Benson. 


•- 

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financial times Thursday October 20 1994 


23 



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1 inicais uroif 
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C ' 




COMPANY NEWS: UK 


Forte creates separate 
County Hotels chain 


By Michael Skaplnkfir, Leisure 
fndu ®*rtes Correspondent 

Porte yesterday reshuffled its 
hotel portfolio, putting 80 of Its 
lower-grade properties in a 
new company which will not 
carry the group's name. 

Forte said 60 of its Heritage 
hotels and. 20 uhbranded prop* 
erties would be placed in a new 
company called County Hotels. 
The hotels will be promoted 
separately from the rest of the 
group. Forte intends to look for 
a buyer or joint venture part- 
ner for them. 

Forte’s Heritage group of 
hotels win be halved in sfae to 
51 properties which wQl be in 
the three- and four«tar catego- 
ries. The Heritage hotels are 
traditional properties in rural 
locations, historic cities and 
market towns. 

Q The group also announced 
that it would refocus its Forte 
Grand hotels, making them 


partners for the Meridien 
chain. Forte won control of 
Meridien last month, tfeffta+Tp g 
Aocor of France. 

The Grand hotels are 26 of 
Forte's first class properties. 
They indude the Waldorf in 
London, the Bath Spa and the 
Balmoral in Edinburgh. Snmn 
of the more t raditiona l (hand 
hotels, such as the Compleat 
Angler in Marlow are to be 
moved into the Heritage group. 

The Grand hotel group does 
not include Forte’s most luxu- 
rious properties, which are 
part of the Exclusive group. 

The reshuffle leaves Forte 
with the following brands; 

• Exclusive: these are 17 lux- 
ury hotels, including the Plaza 
A then fee and George V in 
Paris, the Sandy lante in Bar- 
bados, the Hyde Park in Lon- 
don and the Rite in Madrid. 

• Forte Grand: 26 hotels. 

• Forte Heritage: 51 hotels. 

• Meridien: 54 hotels. Meri- 


dien. properties are in several 
cities in which Forte has bad 
no presence, including Tokyo, 
Singapore, Jakarta. Bangkok 
and New Delhi. 

• Forte Crest 30 hotels. These 
are four-star hotels in city cen- 
tres arid at airports, offering 
business facilities. 

• Forte Posthouse: 65 hotels. 
These are modem three-star 
hotels, many near large towns 
and motorways. 

• Forte Agip: 18 hotels. A 
joint venture with Agip, the 
state-owned Italian petrochem- 
ical company. These are mod- 
died on Forte Posthouse. The 
difllti ftps 17 fttifolfl in Italy and 
<me in Hungary. 

• Forte Travelodge: These are 
budget hotels, mainly on 
motorways and main roads. 
Forte opens its 100th US Trav- 
elodge on Monday. It ni«n has 
two in the Irish Republic and 
is building two in Spain, ft has 
436 Travefodges in the US. 


Havelock Europa recovery 
gathers pace with £1.56m 


By James Buxton, 

Scottish Correspondent 

Havelock Europa, the store- 
fitting company, trebled pre- 
tax profits to £l-5&n in the first 
six months of this year, on 
turnover ahead 24 per cent to 
£ 15 . 7 hL 

The results, up from £505,000 
previously, continued the 
recovery in the Scottish-based 
company's fortunes, which 
began last year after two years 
of losses. 

The shares rose 18p to 188p. 

Mr Norman Lessels, chair- 
man, said Havelock was prof- 
iting from In crea sed riRmanri 
from retailers and financial 
services companies, and gain- 
ing market share in its indus- 
try, from which a number of 
players bad dropped out 

Mr Hew Balfour, chief execu- 
tive. said the company had 
added Tesco to a list of clients 
which included Boots, Wool- 
worths, Safeway and House of 
Fraser. Financial services cus- 
tomers made up 20 per cent of 
turnover, compared with 11 per 
cent in 199L 

Mr Balfour said the company 
was seeing the success of a 
strategy devised in 1992. It was 
benefiting from improvements 
in manufacturing efficiency. 



Hew Balfour seeing success of strategy devised in 1992 




ad ditional investment in com- 
puter-aided design and alli- 
ances with other companies, 
such as AT&T; which is a size- 
able force In automated cash 

rnsphniMi. 

The company had net of 

£2. 4m on June 30, compared 
with set debt of £2.lm a year 
earlier. 

It is to pay its first interim 
dividend since 1991, of lp, and 
a total of not less than 2.75p 
(2p) is forecast for the year. 

Earnings per share improved 


from 1 Jp to 52p. 

Mr «>lri that the sec- 

ond half would, as usual, be 
stronger in terms of turnover 
than the first, althoug h the 
imbalance between the two 
halves would not be as pro- 
nounced as in 1993. The order 
book was buoyant. 

Allied Provincial, the compa- 
ny’s broker, is forecasting pre- 
tax profits of about £4m and 
earnings per share of 12.4p for 
the ftall year, rising to £5m and 
14p respectively in 1995. 


Star Song’s 
evangelical 
choir joins 
EMI stable 

By Graham Defter 

“Where artistry meets 
ministry” is a long way 
di vorced from the nsnal record 
company hyperbole. K is. 
nevertheless, the corp ora te 
slogan of Star Song 
Communications. 

Star Song is based in the 
Co un tr y & Western capital of 
Nashville bat its artistic and 
moral rep er t oire is definitely 
of an evangelical nature. 

EMI Music, a New 
York-based offshoot of Thorn 
bmt, the music and rentals 
group, la s tr engthenin g its 
interests in the “Christian 
music” field by paying (L&5m 
(£9£m) cash for Star Song, 
which has a ffirong rost er” of 
Christian artists mwf 
distribution agreements with 

several other leading US 
Christian music companies. 

EMI is already the largest 
farce in this specialist market 
following its purchase in 1992 
of Sparrow Corporation. 

Star Song wfll operate as a 
separate label within the EMI 
Stable, and wurii ri niw its 

“ gMti w urcrtmvmry * Mr Sbm 

Moser, its current president, 
wffl remain as chief executive 
officer. “Where artistry meets 
ministry is more than a nice 
slogan to os. Wears dedicated 
to taking Christ-centred music 
to a worldwide audience.” 

Mr Jim Fifield, bust Music’s 
chief executive, said that 
Sparrow had exceeded 
expectations since its 
acquisition. “Star Song's 
extremely diverse and strong 
roster wffl complement 
Sparro w ’s and their combined 
strength will create new 
growth o p portuniti es.” 


Healthcare’s dash for growth 

Richard Wolffe on prospects for a market valued at more than £7bn 


Warnford slips 
to £2.22m 

Profits of Warnford Invest- 
ments slipped from to 
£2 .22m after tax in the six 
to June 24 and direc- 
tors of the property invest- 
ment concern said the w^mid 
half figure would he about the 
same as for the first 

Gross rents and service 
charges totalled £5. 53m 
(£5.79m) and earnings per 
share came to 5-78p (6.01p). 
The dividend is held at 2.75P. 

Mr George Ross Goobey, 
chairman, is retiring on 
December 25 and will be 
replaced by Mr Michael Ross. 


W hile economists 
argue over the 
impact of the UK’s 
demographic tune-bomb, one 
market is already evolving to 
cope with the inexorably rising 

of old ftp * 

The combination of an age- 
ing population and a shift in 
government healthcare policy 
frap hp |paj to create a residen- 
tial and nursing care market 
which, is conservatively valued 
at mare than £7bn. 

Forecasts suggest that 
demand will rise by 15 per emit 
before the year 2000, adding 
between 80JX0 and 80,000 beds 
to today's stock of 540,000. 

In the wake of community 
care le gislati on gad the closure 
of long-term NHS beds, the 
healthcare sector has reacted 
in a piecemeal fashion, with 
thousands of small operators 
concentrating on supplying 
local needs. 

Tte traditional jTnugn domi- 
nates the rnarirwt for caring for 
the elderly: a cottage industry 
of husband-and-wife teams 
offering small numbers of bed s 
in converted houses. 

Corporate groups account for 
just 8 par cent of the sector. 
However, they are attempting 
to establish themselves with a 
series of acquisitions, which 
analysts expect to continue for 
the foreseeable future. 

This week shareholders 


approved APTA Nursing Ser- 
vices’ reverse takeover of Mid- 
land Assets to create a 628-bed 
company specialising in sub- 
acute care. The new company, 
APTA Healthcare, predicts 
that its number of beds will 
grow to 898 by April 1996. 

Court Cavendish, which 
came to the market in July 
1993. spent £13 .5m on acquisi- 
tions last year, almost dou- 
bling its number of beds to 
1,200. The company plans to 
add another 500 beds under its 
acquisition programme. 

In July, CrestaCare paid 
C1P,fim for Scotcare. the Scot- 
tish nursing homes group, 
boosting its beds by 32 per cent 
to more than 2J50Q. 

M eanwhile, the larger 
companies. Including 
Westminster Health 
Care and Takare, are concen- 
trating cm bonding their own 


Ashbourne Holdings, one of 
the UK’s largest nursing 
homes businesses, last month 
announced plans for a stock 
market Dotation, which it 
hoped would give it a value of 
between £8Gm and £9Qm. 

Ashbourne aims to raise up 
to £50m to dear its debts and 
launch an ambitious expansion 
programme, which includes 
the construction of three 
homes next year. 

However. Mr Harald Hen- 
drikse, analyst at Smith New 
Court, warned that the market 
might be reluctant to invest in 
another nursing home busi- 


“I expect a lot of takeover 
and merger activity in the 
future. There are too many 
small groups,” said Mr Roger 
Hjirriman. h ealt hca r e analyst 
at UBS. 

“I see the exis ting quoted 
companies doing a lot of capi- 
tal raising to build new prem- 
ises, buying other people’s 
premises, and merging with 
Others to get the marimnm 
benefits of scale.” 


“Although Ashbourne is a 
very high quality company, 
they are going to find it tough 
to’ come to the market, because 
people think there are too 
many companies out there.” 

Professional care is costly for 
both the state and the individ- 
ual. Fees for those on welfare 
benefits average close to £290 
per week, but private patients 
pay an average of 10 per cent 
above that State support only 
begins when the patient’s 
assets dip below £8,000. 

The cost of insurance can 
also be prohibitive. PPP Life- 
time charges £117 a i rnnfh to a 
65-year-old man who wants 
cover for weekly foes of £300. 

Last month, Bupa, the UK’s 
biggest private health insurer. 


NEWS DIGEST 


Derwent 
Valley rises 
to £3.8m 

An exceptional profit of fti ssm 
from associates anghipri Der- 
went Valley Holdings, the 
property group, to hoist pre-tax 
profits from £1.1 2m to £3. 77m 
in the first half of 1994. 

Net rental income, benefiting 
from recent acquisitions, grew 
45 per cent to £A65m (£3J22m). 

The exceptional credit arose 
from settlement of the residual 
liability in Danington Derwent 
Investments, following the dis- 
posal of that company's invest- 
ment properties in 1993. 

Adjusted earnings per share 
were 6.46p (4-78p). The interim 
dividend is l.58p (adjusted 
US25p) on increased 

Exmoor Dual 

Exmoor Dual Investment 
Trust, the split-capital trust 
which invests mainly in simi- 
lar trusts, had a net asset 


value of 74.8p per ordinary 
share at August 31 compared 
with 70-4p a year earlier. 

Net revenue slipped from 
£947,798 to £814£59 for earn- 
ings of 9.2Sp (10.74p) per 
income share and UBp (L3p) 
per ordinary share. 

A final dividend of 2.3p 
(2.75p) per income share brings 
the total to 9.05p O055p) while 
the gingfe final dividend per 
ordinary share is 1.59p (LB5p). 

Para Food 

Pure Food Products, a subsid- 
iary of Acatos & Hutcheson, 
the edible oils group, only paid 
£1.1 3m for the contracts and 
stock of Hobson’s oils »T>d fats 
operations, ft has agreed to pay 
£950,000 for the plant and 
machinery. 

Avis Europe 

Avis Europe achieved revenues 
of £202m in the half year to 
August 31 and earnings before 
interest and tax were £33xn, 
CQva Holdings, its parent com- 
pany said. 

CQva also announced that it 


had reached agreement over 
fbture payments due In respect 
of the sale of Avis Lease in 
1992, so that the amounts no 
longer depended on the perfor- 
mance of Avis Lease. 

Reekitt & Colman 

Reckitt & Colman has 
announced an 868 per cent 
take-up of its rights issue to 
fund the purchase of L&F 
Household. The company baa 
received acceptances in respect 
of 408m of the 47m units of 
non-interest bearing converts 
foie loan stock. 

These were offered to quali- 
fying shareholders at a price of 
500p per unit, payable in two 
instalments. 

Cairn Energy 

Cairn Energy, the Edinburgh- 
based oil and gas explorer, has 
completed the sale of another 
tranche of shares in Cairn 
Energy USA 

This transaction brings the 
total raised to about £178m 
after allowing for expenses and 
tax and leaves Cairn Energy 


announced that it was moving 
into the long-term health-re- 
lated insurance market 
Westminster Healthcare is 
considered the tavoured stock 
in the sector at the moment, 
thanks to its 50 per cent rate of 
private residents. The com- 
pany is seen as a high quality 
operation; its homes boast 
such extras as Jacuzzis. 

S ome 85 per cent of Tak- 
are ’s patients, on the 
other band, are cared for 
out of public funds, which 
means the company is 
restricted by the fee limits 
imposed by focal authorities. It 
has to rely on a low-cost sys- 
tem to secure Its long-term 
future. 

However, shareholders can 
expect nursing homes compa- 
nies to demand yet more cash 
over the next two years as the 
dash for growth continues with 
acquisitions and new building 
projects. 

“It is going to get more com- 
petitive as housebuilders come 
back into the market, making 
it tough to find new sites for 
nursing homes,” said Mr Hen- 
drikse. 

“In 18 months' time it is 
probably going to be quite diffi- 
cult, but if they scale down 
their expansion, nursing home 
companies can basically 
become utilities." 


with a bolding of 168 per cent 

Petrie Parkman have placed 
1.93m shares in CEUSA at $7 
each and has also exercised its 
option to acquire a further 
250,000 shares in addition to 
the L68m originally agreed. 

River & Mercantile 

Net asset value at River & Mer- 
cantile Extra Income Trust in 
the year to September 30 
declined from 123.79p to 97.74p. 

Earnings per share worked 
through at &4p (98p). 

The fourth interim dividend 
of 1.96875P makes an 
unchanged total of 7875p for 
the year. 

Aminex 

Amlnex, the Dublin-listed oil 
and gas exploration group, 
turned post-tax losses of 
l£124,8G0 into profits of 
E48L778 (£476,159) for the half- 
year to June 30. 

Oil and gas revenue was 
boosted from X£55,764 to 
I£388m, largely by Amkomi, 
the company’s joint venture in 
the Komi Republic of Russia. 


Strong recovery from June 1994 quarter 

- Tonnage milled at planned levels 

-Average gold price received 
R44 614 per kilogram 


# 

Gengold 


Gold price received 4% up on previous 
quarter. 

Working costs per kilogram 2 % up on 
previous quarter. 


SUMMARY OF GOLD MflVlING COMPANIES' RESULTS FOR THE QUARTER ENDED 30 SEPTEMBER 1994 



PI 

^UdNwSr 

Co Lad 

The GrooMai 

Mew lad 

MiGoid 

SLHrtma) 

SI. HUM 
field Mne 

Ud 

SftUMWhg 

c#5r 

UatalGofd 

Wh4nl.Mli 








mam 

SMBtare 

SMTUME 


M220M»U 

W33U2M 

nrmws 

same* 

tawed dare* 

BrootrMwUmfeBd 
9*000 000 ortSnsrr 

IIWW—i 

ISZSBOOOaanprar 

Tl asatseeanMy 

B 000 000 onflow 

WOOD 000 erdnary 

OyxGaUHofcSngf 

Unfed 

ISSOOOaSanSney 

8835 000 ontavry 

3 BZS 095 * A’ cum prd 
3425 038*9* cum praf 
IfflSWtr euro prof 

tiOQSOOerdtaeiy 

29000 000 unJkiuy 

12 190000 anbury 

) Operating results | 

Gold produced Sept 94 

(kg] Jun84 

3304 

3224 

2836 

2882 

620 

640 

3010 - 
2850 - 

643 

681 

66 

46 

1330 . 
1299 

287 

363 

1063 

930 

2 €58 

2403 

Yield (eft! Sept9« 

Jim 34 

ftl 

W 

00 

03 

49 

58 

45 

6 £ 

43 

6 J 

V 

I* 

67 

7«S 

w 

12 

V 

fts 

6,7 

Ore milled Sapt» 

(tons) Jun94 

542000 

520000 

471000 

456000 

125 500 
120000 

485000 

440000 

102100 

101000 

49000 

29000 

200 000 
172000 

288 000 
272000 

170000 

163000 

400000 

358000 

Gold price received Sapt94 

IRfcsJ Jun94 

44724 

42780 

44709 

42745 

44745 

42783 

44647 

42861 

44558 

42580 

43804 

43790 

44300 

42 665 

44398 

42786 

44 438 
42617 

44 ESS 

42680 

Wbfiing costs (BAel Sept 94 

JunB4 

25082 

24166 

39310 

38253 

38897 

35480 

27739 

27126 

35022 

33633 

Mariano costs 
arecapttaBwd 

34 672 

32 889 

33806 

24198 

34036 

35470 

33285 

34664 

1 HnamcM rastets tBOOQ> - uuauJted 


Waiting revenue Septs* 

Jun 94 

147 7B9 
138680 

126796 

122765 

27772 

27734 

134842 

123628 

28729 

29321 


S3 232 

55 897 

11875 

15 831 

47238 

39742 

118791 

104027 

Working coats Sept94 

Jun 94 

82870 

77908 

111483 

106097 

24116 

23347 

S3 493 

77306 

23162 

22904 


46114 

42722 

9028 

8784 

36180 

32967 

88472 

83298 

Sundry income -net 8ept94 

Jun 94 

2983 

2753 

2909 

3017 

1123 

1725 

3634 

2867 

646 

541 

287 

384 

2225 

2387 

1428 

683 

839 

643 

2690 

3496 

Tribute and royalties Sept 94 

- paymentaftreGeipts) net Am 94 

22165 

20802 

621 

820 

2 S6 

<31 

40 

<8361 

29 

22 

- 

0511) 

(53021 

80 

1 

280 

222 

206 

818 

Taxation Sept 94 

Jun 94 

14406 

21956 

1304 

1173 

968 

2282 

23556 

28506 

2472 

5 203 

— 

8474 

14242 

2994 

6384 

4077 

3190 

11 156 

9813 

Capital expenditure/ Sept 94 

(reooupmwTta) Jun 94 

13633 

10293 

10701 

10587 

1689 

2652 

7157 

5366 

684 

749 

80380 

74781 

971 

622 

12151) 

(1 273) 

1748 

778 

5727 

6593 

Distributable Sept 94 

income Jun 94 

17 678 
10474 

5665 

4005 

1886 

1281 

24(80 

IB 151 

2948 

984 


9509 

5980 

3354 

3438. 

8794 

3208 

6820 

7003 

Dividends Sept9* 

Jun 94 

Refer Note 1 

15400 

2860 

32400 

4800 


14 919 

9797 

6600 

15834 

^neVphrOrtSrtey SqptM 

snare tcontaj 

Refer Motel 

61 

36 

16 

11 

133 

SO 

18 

8 

- 

99 

62 

26 

26 

21 

11 

130 

57 

Capital expenditure 








Estimated for jhs 

next six months tRm| 

206 

178 

40 

17.3 

22 

12 &D 

29 

- 

2.7 

225 


re« > c»mpamra prime source of revenue n from Hie Beatrix mine. 
For the’ three months ended 30 September 1964 etmbutabto 
earnings per share amounted to 36 cents, compared with 26 cents 
for the previous quarter. 

760W^June 1994: 78 OOOI tone of surface material at • grade of 
0A Uune 1994c OA) prams per ton were treated durino** quarter, 

* Cumulative expenditure Capitalised to date amounts id B2 OOOrmKcini, 
foSESSeof imerert of B368 million. As previously W«ted up to 
R900 million, including R*33 million of finance costs, could be 
required to finance the mine to break-even. 
approximately R25 million per month of short termbndglng fen* 
tocovw working costs and interest payments, until the values In the 


ilnity 

should be available before the end of calendar 1994. 

ASMMm 

Treatment of slimes by Free State Consolidated Gold Mines 
(Operations) Ltd yielded a profit of RX9 m3!ion tor the quarter, vriiich is 
included under tribute and royalties. 


By ordsr of tbs respective boards 
Geneor SA Lsnftsd 


5 . Stafontain - Forward wairr 
Contracts closed duringtha quartan 
168 KJ fog rams 
Price: R44 177/fcg 


parrTKSavsge 
Senior Dfvmonal Secretary 


Outstanding contracts: 
66 Kilograms 
Price: R44 67S*g 
Expire on or before 
20 October 1934 


ft The companies are incorporated m the Bapubfic of South Africa with 
financial year ends on 30 June. 


General MMng BUIding 
S Hotted Street 
•JfthannedMftj 2001 
(POBcxeiaao, M tg hsfto u n 2 tg 7 T 

(Tel toil) 3709111) 


Johann -bum 
18 October 1994 


London oBo* 

Gencor (UJU Limited 
30 By Place 
London EC1NSUA 
{Tel {071) 404-0873) 



GHC0R 

GROUP 


NOTICE OF MEETING OF HOLDERS OF 7% 
CONVERTIBLE SUBORDINATED DEBENTURES DUE 1999 
OF RIEDEL ENVIRONMENTAL TECHNOLOGIES, 

INC. TO BE HELD ON November 9, 1994 

PUEASE TAKE NOTICE that a meeting of the boklere (the ‘Holdere") of 
796 Cpnratflde Subonfluated Debentures doe 199P (the ‘Debentures”} of 
Riedel E n viron mental Technologies. Inc- (the *Cowpany*) wffl be held at 
the offlees of Chernies! Bonk, 450 West S3td Street, 15th Floor, New York, 
New York, on Novembers, 1694 at 10.00 am, Eastern Standard Hme. 
Tains used hi the Terms and Conditions of the Debentures have the same 
meaning In this notice. 

The propose of tins meeting Is to obtain the consent of the Holdera to a 
waivw of the requirements erf Section 6(a) of tire Terms and Conditions Co 
allow the Company to sellaD die ontstawfing shares of Riedel 
Environmental Services, tea ('02?') to Canocie Environmental Services 
Carp. pCaDonle*). The sale in volw s sobstontrafiy all of the assets of the 
C omp an y. Section 6(a) imposes restrictions on the Company's ability to 
sell all or eobetanlisllyali its assets. 

Any each waiver of Section 6(a) will be enae ft afae and binding on all 
HoWera, whether or not they have given their consent or were present at 
the greeting of the H olde re , and tm all holdera of coupocs whether or not 
notation of such amendments is made on the Debentures. 

Chemical Bank as the Fatal Agent under the Debentures is entided to 
make onch reasonable regulations for tbe meeting of Holders that it 
fftwrw aAnmiiCp h, aAt itinn to those aet forth in the Texms and 
CcodUona. Hie Fiscal Agent has established the following regulations for 
the purpose of determining who shall be entitled to vote at such, meeting 
or any actyouannem thereof. 

L Ute bolding af Registered Debentures shall be proved by the regfaffly 
books mamtSJiiied in accordance with that certain Fiscal Agency 
Agreement dated as of October 11, 1969 by and between the Company 
and Chemical Bank or by a certificate or certificates of die Fiscal Agent an 
its capacity aa the Casmpgny’s agent for the maint e nan ce of such books. 

2. rim holding of Bearer Debentures mqy be proved by the production of 
toe Bearer Debentures at the meeting- In addition, holders of voting cer- 
tifictes and proxies named in a Mock voting taBOTcttoa with respect to 
Bearer Debentures may vote at the meeting. 

& Aecotmiholdejs ci Enzodear and Gedel to whom Debentures ate cred- 
ited in the relevant clearing system should notify the relevant clearing sjs- 

tm to infium the Fiscal Ageot no later than 48 hoots before the sched- 
uled time fto toe meetiiig of the xombear of votes to be cast for and aggiaai 

the rraotntkm. 

4. If a Debentarehokier wishes the Fiscal Agent to appoint a proxy to vote 
on las behalf at the meeting, be most deposit hta Debentures whit 
Chemical Bank (Lcmdoq) no later tins 48 hoots before the scheduled 
time of tte meeting. apccifrhigwhBtoer the vote(s) attributable to anefa 
Debentures should be cast tor or a^inst the waiver. Chemical Bank 
(London) will that Issue a (dock voting fastnictioo to apnny of its 
choice, tnstxuctingauch proxy to cast each vo«Ks) fat the specified man- 
ner. 

& Written insmnnentH appointing proxies, regular on their face, are pre- 
wmwt wBil y nu hv 

Copies of the pnny atatemmt mailed to shareholdem of the Campmy 
containing taftxinalic® reganflng the proptxwd rale by the Company of ah 
of the oumtaocBng shares of stock of BEStoCanonte, reasons for such 
sale, terms of the proposed sale and other information regarding the 
Company may be obtained from WBUam Cox, Vice President and Goteral 
Counsel of die Company at 46U North Otamxel Avenue, Portland, Orman 
97217; phone (508) 286-4666; facsimile (503) 2S3-26Q2. 

Dated 20 October 1994. 



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FINANCIAL HMES 


THURSDAY OCTOBER 


20 1994 



DFS beats flotation 
targets with 14% rise 


By David Blackwell 

DPS Furniture, which makes 
and sells upholstered furni- 
ture, lifted both annual 
profits and sales to record lev- 
els. 

But at yesterday's close the 
share price remained below 
last year's flotation price of 
260p, even after a 3p gain to 
259p - a market value of 
£270m. 

Mr Graham Kirkfaam , chair- 
man, said yesterday that the 
results had exceeded the tar- 
gets set at flotation and repre- 
sented a 25-year history of 
increased profits. They con- 
firmed the company’s position 
as the ‘'leading specialist in 
upholstered furniture in the 
UK". 

Pre-tax profits for the year to 
the end of July, excluding 
exceptional and property dis- 
posals. increased by just over 
14 per cent to £22.7m, com- 
pared with El93m in the previ- 
ous 53 weeks. 

Sales were 18 per cent ahead 
at £134 .9m (£ll4.2m). Operating 
margins were almost 
unchanged at 1642 per cent 

Net cash increased from 
£16.1m to £26 An. Mr Chris Fer- 
ris, finance director, said 
expansion plans would be met 
from operating cash flow. “We 
have never borrowed and in 
view of the cash generation 


DFS Furniture 


380 



there is no need to do so," he 
said. 

While admitting that its cash 
pile is large, DBS believes it 
would not take many freehold 
retail opportunities to bring it 
down quickly. The group, 
which now employs a work- 
force of 680. opened three 
branches last year, taking the 
total to 29. It is planning to 
open in Swindon this year, and 
to add a further four outlets in 
1995-96. 

Capital expenditure this year 
is expected to remain steady at 
£6An. Net interest receivable 
fell from £L8m to £886,000. 

Exceptional charges of 
£l36m related to the costs of 
the flotation. In the previous 
year there was a charge of 


ei 3 .4m for one-off payments to 
directors and pension contribu- 
tions. 

Earnings per share grew to 
]A39p (13.02p). A final dividend 
of 49p is proposed, taking the 
total for the year to 7J2p, 
against 6.4p. 

• COMMENT 

The retreat of the shares from 
the year’s high of 354p in Janu- 
ary looks like the result of dis- 
appointment at the rise in 
interest rates, lower durable 
goods sales ^ the continuing 
weak housing market Even so, 
the DFS management has 
delivered everything it prom- 
ised at the flotation, perform- 
ing well In a difficult year. Its 
approach is inherently conser- 
vative: it lilies freehold proper- 
ties paid for out of strong cash 
flow. The in-house manufac- 
ture of 15 per cent of its sales 
puts it in a strong position 
when dealing with other sup- 
pliers. Expansion plans are 
constrained, mainly by Ihe diffi- 
culty of finding and training 
the right staff - with only 7 
per cent of a fragmented mar- 
ket there is plenty to play for. 
Estimated profits of £26m this 
year - a prospective p/e of 15.7 
- leave it at a slight premium 
to the sector, which seems fair 
enough for a retailer with a 
strong format and plenty of 
room to grow. 


Dissident’s appointment to 
board ends row at Seafield 


By David Blackwefl 

The row between dissident 
shareholders and Seafield, the 
Dublin-based transport and dis- 
tribution company, came to an 
end yesterday with the 
appointment of one of the dis- 
sidents to the board. 

Mr Jonathan Glanz, a solici- 
tor, has become a nonexecu- 
tive director to represent the 
interests of Fidex International 
Trust, the offshore trust that 
holds 18 per cent of Seafield. 

At an extraordinary meeting 
last June the dissidents failed 
to oust Mr Brian Chilver, chief 


executive, and Mr Bichard 
Hayes, a director. Yesterday 
Mr Chilver said the two sides 
had gone through a “good cool- 
ing off period". 

"The appointment of Mr 
Glanz is a positive move and 
all shareholders will see it as 
that," he said. 

The row and the subsequent 
withdrawal from merger talk* 
of Imari, a private Irish trans- 
port company seeking a listing, 
cost the group £86,000. 

Nevertheless Seafield 
reported pre-tax profits of 
£220.000 on turnover of £7.98m 
for the six months to end-June, 


compared with losses of £1.0Sm 
on turnover of £169m. 

The improvement reflected a 
reduction in interest payable 
from £1.5Tm to £359,000 since 
disposal of the group’s prop- 
erty interests. 

The group now operates a 
fleet of 150 lorries and trailers 
and owns about lm sq ft of 
warehousing. Sh yy a distribu- 
tion contract for Waitrose 
pndpri last year the group has 
increased efficiency and low- 
ered costs, lifting operating 
profits to £667,000 (£505,000). 

Earnings per share were 
0-33p (L6p loses). 


Le Creuset 8% lower at £l.lm 


By Peter Pears® 

Pre-tax profits at Le Creuset, 
the London-listed housewares 
manufacturer, fell by 8 per 
cent in the first half of 1994 as 
a result of “weakness in the 
French barbeque market" and 
the strength of the French 
franc against the dollar and 
the pound. 

On turnover which grew by 
10 per cent to 221.3m (£19 An), 
pre-tax profits were £1.07m, 
against £1.1 6m. 

Mr Keith Divail, UK finance 
director, said that operating 


profits of £l.6m would have 
exceeded last time's £1.87m 
without the effect of the cur- 
rency losses and the barbeque 
problems. 

With the French economy 
“very quiet" in the first quar- 
ter - the barbeque buying sea- 
son is from January to April - 
customers had been buying 
cheaper barbeque* than the 
current Le Creuset models. 
Prices were sharply reduced, 
putting margins “under severe 
pressure". Mr Divall said Le 
Creuset wanted to gain market 
share, by having products at 


different price points, possibly 
in partnership with others. 

On the currency question. 
Mr Divall said the group’s cost 
base was mostly in francs, as 
was 40 per cent of its income. 
Dollars and sterling accounted 
for 30 per cent each. He did not 
expect currency to have the 
same drastic effect over the 
foil year, however. 

The story in the UK and the 
US was brighter with increased 
sales and “very satisfactory" 

d eman d. 

Earnings advanced to 5p 
(4-8p) per share. 


the Leeds 


NOTICE OF EARLY REDEMPTION 
Notice to the Holders of 

£50,000,000 Subordinated Floating Rate Notes Due 1998 

(the “Notes") 
of 

LEEDS PERMANENT BUILDING SOCIETY (the “Society”) 

NOTICE IS HEREBY GIVEN THAT, in accordance with Condition 4(b) of the Notes, 
the Society (having obtained prior Relevant Supervisory Consent (as defined in 
Condition 4(b) of rhe Notes)) will redeem all of the outstanding Notes at their principal 
amount on the next Interest Payment Date, 30th November. 1994. Payments of principal 
in respect of the Notes will be made on or after 30th November, 1994 at the specified 
office of any of the Paying Agents listed below against presen canon and surrender of the 
Notes, by a sterling cheque drawn on, or, ac the option of die holder, by transfer to a 
sterling account maintained by the payee with, a bank in London, subject in all cases to 
any focal or other laws or regulations applicable in the place of payment, but without 
prejudice ro the provisions of Condition 6 of the Nores. Coupons due on 30th November, 
1994 should be presented and surrendered for payment in the usual manner. 

Each Note presented for redemption should be presented together with all unmatured 
Coupons appertaining thereto. (Jnmatured Coupons due after 30th November, 1994 
(whether or not attached) shall become void and no payment shall be made in respect 
thereof. 

Notes and Coupons maturing oner prior to 30th November, 1994 will become void unless 
presented for payment within a period of' 10 years in the case of Notes and five years in 
the case of Coupons from the relevant date (as defined in Condition 6 of the Notes) 
relating thereto. 

The specified offices of the Paying Agents are: 

Principal Paying Agent: Other Paying Agenn 


Baring Brothers & Co., Limited 
(Broadgate Branch) 

155 Bishopsgatc 
London EC2M 3XY 


Dai-lchi Kangyo Bank (Luxembourg) SLA. 
PO Box 43 

9, Boulevard ED. Roosevelt 
L-2430 Luxembourg 


Issued on behalf of Leeds Permanent Building Society. ZOrh October; 1994 


Last credits 
for Ealing 
as receivers 
are called in 

By Alice Rawsthom 

The latest instalment in the 
chequered history of Ealing 
Studios, the home of classic 
British films such as Passport 
to Pimlico and the Lavender 
H5D Mob, came to an end 
yesterday when BBRK Group, 
its parent company, went into 
administrative receivership. 

BBRK, a group of film 
li ghting and special effects 
businesses, bought Ealing 
Studios two years ago in a 
gfi-im deal with the BBC. 
BBRK has since tried to revive 
the old Ealing tradition by 
relaunching the studios as a 
centre for film production. 

However, yesterday BBRK 
was forced to call zn 
administrative receivers for 
all its subsidiaries including 
Ealing. The studios are now 
being run by Casson Beckman, 
the insolvency practitioner, 
which said the full extent of 
Its liabilities would not be 
known unto early next week. 

The receivership comes as a 
blow not only to Ealing itself 
but to the entire British film 
industry which has recently 
made some progress in its 
yttfmpk to relaunch the UK 
as a production centre for the 
Hollywood film studios. 

Ealing has long been 
regarded as a totem for the 
industry’s fortunes. The 
studios were established in 
Ealing , an inconspicuous 
suburb of west London, in 
1907 and within five years 
became the biggest film 
production centre in the UK. 

Ealing’s heyday was in the 
1940s when, under Sir Michael 
Balcon as head of production, 
it turned out a string of 
classics - including Kind 
Hearts and Coronets and 
Whisky Galore - to entertain 
the British public during the 
second world war and 
post- war years. 

The Balcon formula of 
waspish comedies free from 
violence and bad language 
seemed anachronistic by the 
1950s. The BBC bought the 
Studios in 1957 and Ruling had 
anew lease of life as the 
source of classic television 
drama series such as Colditz 
and The Singing Detective. 

Since selling the studios in 
1992, the BBC has continued 
to nse Ealing for dram a 
production, while BBRK has 
tried to drum up film 
contracts. 

Casson Beckman said it 
Intended to continue with the 
productions now being shot at 
Baling, including a BBC 
drama series and a new film 
version of Jane Eyre, directed 
by Franco Zefferelli and 
starring William Hurt 

Barclays acts 
to create a 
stronger divide 

By John Gepper, 

Banking Editor 

Barclays has implemented 
changes promised by Mr 
Martin Taylor, the bank's 
chief executive following bis 
appointment a year ago, to 
create a stronger divide 
between bead office functions 
and tbe UK clearing hank. 

The bank’s head office 
personnel department is to be 
split, with many functions 
passing to UK banking serv- 
ices. Mr John Davies, current 
deputy director of personnel, 
will become personnel director 
for the UK bank. 

Within the Barclays group, 
Mr John Cotton will become 
tiie director of group human 
resources. Tbe bank said be 
could bead a small central 
unit that would oversee broad 
personnel policy issues and 
manage senior personneL 

Mr Howard Trust, the legal 
director of BZW, Barclays’ 
investment banking arm, has 
been appointed to a new 
position of group general 
counsel from next January. 

L&G moves 
into investment 
trust market 

By Bethan Hutton 

Legal & General is joining the 
ranks of unit trust managers 
expanding into the main- 
stream retail Investment trust 
market Its first offering is a 
recovery investment trust, to 
be run by the same manager 
as its existing UK Recovery 
unit trust 

The £89m unit trust, 
managed by Ms Lesley Hooper, 
has been in the top qnartile of 
UK equity growth unit trusts 
over one, three and five years 
to October l, according to 
Micropal statistics. 

The group hopes to raise 
between £25m and £50m for 
the new fund from a placing 
and public offer, opening 
towards the end of November. 


DTI says bid for YSEL affects UK’s ‘essential security interests^ 


BAe instructed not to notify EU 


By Robert Rice, 

Legal Correspondent 

The UK government yesterday 
warned Brussels not to inter- 
fere in British Aerospace’s 
agreed bid for VSEL, the Bar- 
row-based submarine maker. 

Mr Michael Heseltme, trade 
and industry secretary, has 
written to the European Com- 
mission stating that it would 
not be appropriate for Brussels 
to vet the merger under the EU 
Merger Regulation as the bid 
“affects the UK’s essential 
security interests". 


Asserting rights under 
article 223 of the Treaty of 
Rome, which allows member 
states to take measures to pro- 
tect their essential interests, 
' the government has also writ- 
ten to BAe instructing it not to 
notify Brussels of the deaL 

Undo 1 EU merger rules, BAe 
and VSEL had until yesterday 
to pre-notify Brussels. 

Normally, failure to notify 
the Commission could result in 
the companies being fined up 
to 10 per cent of their turnover. 
Brussels sources said yester- 
day, however, that neither 


company would be in jeopardy 
if the? were acting an the UK 
government’s instructions. 

The government could have 
allowed them to notify the deal 
and then request the merger be 
dealt with by the UK competi- 
tion authorities, arguing that 
issues of national security 
were involved. 

However, the government 
decided that the notification 
process itself, which involves 
companies supplying vast 
quantities of information about 
their finances, the structure of 
markets and research and 


development, would not have 
been in the national interest 
The Commission’s response 
is not expected untilnext 
week. But Mr Colin Overbury, 
former head of the EC Mer ger 
Task Force and a consultant to 
City lawyers Allen « Oy er y» 
said Brussels had shown itself 
to be flexible where defence 
issues were involved 
The crucial question would 
be whether other member 
states objected to the merger 
on grounds that it adversely 
affected their defence procure- 
ment or defence industries. 



County Hall’s final step into private sector 


By Smon London, 

Property Correspondent 

County Hall, once hom e to the 
controversial Greater London 
Council, took its final step into 
the private sector yesterday, 
more than eight years after the 
government first tried to sell 
the site. 

Frogmore Estates is paying 
£17.5m for tbe three remaining 
buildings and land next to 
Waterloo Station, which it 
plans to turn into a mix of flats 
and offices. 

Tlie de al completes the dis- 
posal of County Hall (above), 
following the sale of the 
riverside building to Shiray- 
ama, a Japanese developer, in 
1993. 

While details of this transac- 
tion were never disclosed, the 
government appears to have 
raised about £8Qm for the site 
as a whole, far less than origi- 
nally hoped. 

County Hall Development 
Group - a consortium which 
included the London & Metro- 
politan property group, mer- 
chant bank Lazards and the 


COUNTY HALL 

Sept 1906 - London Residuary Body appoints Ffohard EUs to find buyer for 
County Hafl sits 

June 7988 - County HaB Development Group bid of about £770 m accepted 
by LRB 

Sept 1S89 - Lambeth Cowed turns down planning applications for hotel and 

office development 

Sept-Nov 1989 - Public Inquiry 

July 1990 - inquiry inspector rules against CHDG plans 

Oct 1990 - CHDG goes into receivership 

Sept 1991 - Mr Michael Kesettne, environment secretary, approves amended 
planning application 

March 1992 - £20m bid by London School of Economics rejected by LRB in 
favour of £60m offer from Shcrayama for main riverside budding 
July 1992 - LSE makes ££5m bid for whole site, rejected by LR8 with 
government approval 

Oct 1993 - Shirayama completes purchase 

Nov 1993 - Remaining buikfinga sold to Frogmore Estates for Cl 7.5m 


BBC Pension Fund - agreed to 
pay about £17Qm in 1988. 

Planning delays and the 
downturn in the property mar- 
ket caused the plans to be 
abandoned and the company 
was put into receivership in 
1990. 

The London School of Eco- 
nomics, the UK’s leading social 
science university, bid £6Sm in 


1993 and campaigned to get the 
government to accept its plans 
to relocate to the site. 

However, tbe government 
finally rejected the LSE's pro- 
posals in September 1992, after 
foe finflnriai viability of its bid 
was questioned. 

Shirayama is converting the 
riverside building into a 600- 
bedroom hotel and leisure com- 


plex. The hotel will be man- 
aged by Mr Richard Branson's 
Virgin Group and is scheduled 
to open early in 1997. 

Frogmore plans to convert 
the two buildings adjoining 
the riverside building into 
about 300 apartments. Under 
previous plans these build- 
ings would have been demo- 
lished. 

The company will seek the 
approved of Lambeth Council, 
since existing planning con- 
sents are for office and retail 
use. 

Mr Phillip Davies, managing 
director, sai d the island build- 
ing, built on a roundabout at 
the entrance to Waterloo 
Bridge, could be redeveloped as 
offices at a later date. 

Detailed plans had not been 
drawn up. be added. 

The original County Hall 
Development Group plans 
envisaged moving the round- 
about in order to combine tbe 
island building with vacant 
land next to Waterloo Station. 
This would make room for a 
new office building of up to 
500.000 sq ft 


Go-Ahead executives take pay-cuts 


By Peter Pearse 

In a move which appears to fly in the face 
of recent corporate trends, executive direc- 
tors of Go-Ahead Group - which floated in 
May - have taken a pay cut 

The reduction applies to the year to July 
2 when tbe Gateshead-based bus service 
operator lifted pre-tax profits from £315,000 
to EL87m, exceeding the prospectus fore- 
cast by 25 per cent 

The total remuneration for Mr Martin 
Ballinger, manag in g director highest 
paid director, declined from £131,000 to 
£101,000, with his salary falling to £90,000 
(£117,000). The emoluments (excluding 


pension contributions) of Mr Trevor 
Shears, finance director, and Mr Christo- 
pher Moyes, commercial director, foil from 
the £115J)00-£120,000 band into the £80,001- 
£85,000 band. 

Mr Shears said that directors sold some 
6.63m shares at 120p at the flotation, and 
said that previous pay bad included a 
“bonus ownership reward”. From next 
year this will replaced by dividends on the 
directors’ 34 per cent holding. 

Mr Shears said the executive salary lev- 
els were “what we believe to be right for a 
business of our size". He added that they 
were still tied to a public sector back- 
ground, from ftg management buy-out In 


1987. The fear of being seen as “nasty 
capitalists” and the recommendations of 
the Monk Survey on size of business and 
regional position also contributed. 

A recent survey of directors’ pay by 
actuaries Bacon & Woodrow showed that 
executive salaries have risen by 85 per 
cent this year. Mr Shears said he expected 
Go-Ahead directors' salaries to rise in line 
with inflation next time. 

Tbe annual results included some four 
months' contribution from Oxford Bus 
Company and six months from Brighton & 
Hove Bus Company. On Tuesday, the 
group completed the near-£24m acquisition 
of London Central Bus Company. 


SNC seeks to become 
full Tokyo member 


By Norma Cohen, 

Investments Correspondent 

Smith New Court, the 
UK-based securities company, 
said it is seeking to become a 
full member of the Tokyo stock 
exc h ange when a seat becomes 
available. 

The Japanese Ministry of 
Finance has indicated it is 
unwilling to increase the num- 
ber of seats from the current 
124 and SNC will be unable to 
fulfil its ambition unless an 
existing member decides to sell 
a seat. Currently, 24 of the 
Tokyo stock exchange's seats 
are owned by non-Japanese 

firms , including five bald by 

UK firms. 


Once purchase of a seat has 
been agreed, it would take six 
to 12 months before SNC could 
begin to take full advantage of 
its stock exchange member- 
ship. 

There has been growing 
pressure for deregulation of 
the securities industry in 
Japan, a move which could 
increase non-domestic partici- 
pation in the markets there. 

SNC has operated a represen- 
tative office in Tokyo since 
1987 and has recently expanded 
its Asian securities operations. 
It has seats on the Hong Kong, 
Singapore and Kuala Lumpur 
stock exchanges and has 
applied to operate a representa- 
tive office in Shenzhen. 


Losses increase at 
refocused Harrington 


By Richard Wotffe 

Harrington Kilbride, the 
magazine publisher, suffered 
an increased loss after closing 
two thirds of its titles to con- 
centrate on contract publish- 
ing and conferences. 

Pre-tax losses of £L3$m In 
the six months to June 30 com- 
pared with a deficit of £1.08m 
for the whole of 1993 and a 
profit of £621,000 at the i n te rim 
stage last year. 

There is no interim dividend 
a.7p) and the shares fell lOp to 
42p. 

Turnover in the period under 
review fell 10 per cent to 
£7-8&n (£8.7603), while the cost 
of sales rose 20 per cent to 
£6-12m (£5 Jim). The company 


blamed its reduced margins on 
the high cost of establishing its 
new conference activities. 

In August the company 
revoked Its proposal to pay a 
3.2p final dividend for 1993 
after bad debt provisions led it 
to publish re-audited accounts. 
The share price almost halved 
when late extra provisions of 
23m were made in June. 

The company, which claims 
to be the UK’s second largest 
contract publisher, expects to 
turn round its losses In the sec- 
ond half. Fifteen contracts, 
worth £4m of turnover this 
year, have been won, of which 
less than £lm was recognised 
in tiie first hall 

Losses per share stood at 
13.7p (earnings of 4.lp). 


Water glade’s new 
board concedes defeat 


By Christopher Price 

The new board of directors at 
Waterglade International 
Holdings, the p r op er t y devel- 
opment group which had its 
shares suspended on October 
10, yesterday conceded defeat 
and said it would not oppose 
liquidation moves next month. 

Following a boardroom coup 
in September, the existing 
management was ousted and 
the new board instituted an 
inquiry into the group’s 
finances with a view to 
restructuring the lossmaking 
business. However, the board 
reported yesterday that the 
group’s financial position 
made any proposed rescue 


plan impossible. 

Waterglade's liabilities are 
put at £29m. Of this, some 
£21.5m is owed to various 
hanks and secured on proper- 
ties worth not more than 
£9.5m. There is also £7.5m 
owed to unsecured creditors - 
this includes about £800,000 of 
VAT and the winding up order 
initiated by the Customs and 
Excise office is due to be heard 
on November 9. 

Mr Anthony Midgen, one of 
the new directors, said be 
expected the liquidator to ini- 
tiate his own enquiries into 
the running of the company's 
finances, and there could also 
be an inquiry from Customs 
and Excise . 


Glenchewton deficit reduced 


Glenchewton reduced pre-tax 
losses for the six months to 
June 30 from £463.000 to 
£293.000 having ended 1993 
with a pre-tax profit of 
£606,000. 

Turnover at the toys and 


housewares importer was 
down slightly at £8m (£82m). 

There were restructuring 
expenses of £21.000, while last 
year’s figures took into 
account the recovery of £35*000 
in property litigation costs. 


DIVIDENDS ANNOUNCED 


Derwent Valley . fait 

DFS Fumftur* fln 

EnaBst Nat Piet. fait 

Engffeh Nat Date fart 

Exmoor Dual Inc 
Exmoor Dual Old —Jin 

H a rrin gton K»bra _Jnt 

Havelock Europa int 

SWw High Yd int 

Smiths bids fir 

Wamtord km k it 


Current 

payment 

Date of 
payment 

Correa - 
poncing 
dividend 

Total 

for 

year 

Total 

last 

1-5&T 

Dec 1 

1.525* 


4J»5* 

4J} 

Dec 20 


72 


5.4 

Dec 2 

5 


16-2 

2.95 

Dec 2 

2.55 

_ 

11.3 

2.3 

Dec 7 

2.75 

9.05 

1055 

1-59 

Dec 7 

1.85 

use 

1.85 

nfl 

“ 

1 J 


2.7 

1 

Dec 22 

nil 

m 

2 

1-2? 

Dec 30 

1.1 


5.05 

8.4 

Jan 6 

7.55 

13 

11.85 

z. re 

Apr IQ 

2.75 


7.75 


DMdencte shown pence pa- ^1^ rirr _, rir . _ — — . ■ ■ 

increased caphaL ‘Adjusted for 


s 


I I 






ifHftA' 



*- v. % 


to notify 


financial times Thursday October 20 1994 

PEOPLE 


25 


V £1 Plumb to chair UK 
agricultural lender 


v 





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•pijjijf s 1U 
1 




The Agricultural Mortgage 
Corporation, the biggest 
long-term lender to Britain's 
farmers, has just acquired its 
third chairman in the last 18 
months. Lord Plumb. 69, leader 
of the Tory MEPs in Stras- 
bourg, has taken the haig i of 
Britain's only specialised agri- 
cultural lender. 

Lord Plumb, right, a former 
president of the National 
Fanners Union, takes over 
from Sir David Walker, follow- 
ing the latter's announcement 
that he is resigning as a deputy 
chairman of Lloyds Bank to 
become chairman of Morgan 
Stanley's European, operations. 
Sir David had replaced Henry 
Lambert as chairman, follow- 
ing last year's acquisition of 
the AMC by Lloyds Rank 

The AMC, set up in 1928, had 
been owned by the Bank of 
Rn eland and the big London 
clearing banks prior to its 
acquisition by Lloyds. The 
bank is intent on ex panding its 
new acquisition and has been 
strengthening Its ties with the 
fanning community. 

Lord Plumb, who had been a 
director of Lloyds for 15 years, 
went on the board following 
last year's acquisition, joining 
Sir Simon Gourlay, another ex- 
president of the NFU. and Lord 
Selborne, who farms 2,500 
acres in Hampshire and is the 
Government's chief adviser on 
nature conservation. 


Lord Selborne. 54, managing 
director of the Blackmoor 
Estate and a trustee of the 
Royal Agricultural society, 
joined the AMC board in 1990 
as the nominee of the Minister 
of Agriculture, Fisheries and 



Food and the Secretary of State 
for Wales. 

He was appointed a nan-ex- 
ecutive director of Lloyds Bank 
last July. 

In the wake of Sir David 
Walker's departure. Lord Sel- 
borne has bead appointed dep- 
uty chairman of AMC and 
Michael Thompson, a former 
deputy chief executive of 
Lloyds Bank, has also joined 
the board. 


Waterford 

Wedgwood 

Waterford Wedgwood, the 
Irish group formed in 1986 by 
the merger of the crystal and 
china companies has 
appointed Roger Little, 51, to 
the board, in a new position of 
chief operating officer of the 
Wedgwood group. 

Little joined from Unilever 
in 1987, as managing director 
of Waterford Wedgwood Aus- 
tralia, moving to the UK in 
1992 as Wedgwood group sales 
director. Finance director 
Edward Jenner who was also 
brought in from Unilever, is 
appointed to the board of 
Waterford Wedgwood, report- 
ing to little. 

la 1990 a consortium led by 
Tony O’Reilly, the Irish-born 
bead of Heinz, took a 30 per 
cent stake, with O’Reilly 
becoming mm executive chair- 
man. 


FINANCE MOVES 

■ David Cockborn, formerly 
with Lehman Brothers, joins 
SALOMON BROTHERS as 
London director of investment 
banking, responsible for the 
energy sector. There are more 
than 150 directors worldwide; 
Cockbum's is not a board 
appointment. 

■ Paul Loach, formerly md of 
Framlington Group, has been 
appoint ed m d of GT MANAGE- 
MENT EUROPE; he succeeds 
Peter Stevens, now corporate 
governance director of the B£L 
GT Group. 

■ Michael Barker, formerly 
director of County NatWest 
Australia Investment Manage- 
ment, becom es m arketing 
director of NATWEST Invest- 
ment Management 

■ Peter Sellars becomes chief 
executive of the BARCLAYS 
Metals Group, part of BZW. 

■ Sarah Bates has been pro- 
moted to md of INVESCO's 
investment trust division. 


Sikorski scores at 
Proteus International 


Jurek Sikorski, business 
development and marketing 
director at Proteus Interna- 
tional, has been promoted to 
chief executive just five 
months after joining the bio- 
technology company. 

The move follows the group's 
decision to accelerate the 
search for commercial applica- 
tions for some of its 30 prod- 
ucts under development. 

Sikorsky, 43, is expected to 
use experience gained at Smith 
and Nephew - the healt h care 
group where he was interna- 
tional marketing director - to 
form more collaborative ven- 
tures with pharmaceutical 
companies, offoeting the cost of 
bringing products to market 

Of those products, Proteus 
has high hopes for Adjuvant - 
its immune system booster for 
treating arthritis - and a new 
diagnostic test for Bovine 
Spongiform Encephalopathy, 
commonly known as maid cow 


disease, in live cattle. 

Proteus is discussing devel- 
opment programmes for Adju- 
vant with nine pharmaceutical 
companies, while an animal 
health company is said to be 
interested in manufacturing 
and marketing the BSE test 

Kevin Gilmore, executive 
chairman, said Sikorski - son 
of a Polish immigrant and one- 
time professional footballer 
with Swindon Town - was 
“ideally placed” to push the 
products forward. 

“Jurek will not only acceler- 
ate our development pro- 
grammes but help us repl 
our entrepreneurial style with 
the kind of structured line 
management we now need,” he 
added. 

John Pool Proteus's 50-year- 
old managing director, has 
been named deputy chairman 
but will continue to oversee 
the group's research and devel- 
opment arm. 


GEC Alsthom: Bray to 
manage largest division 


Kelvin Bray has been 
appointed manag in g director of 
GEC Alsthom’s power genera- 
tion division, created this 
month to allow the 
Anglo-French company to 
respond more effectively and 
rapidly to changes in the world 
market 

In his new role Bray, right 
cme of the best known names 
in Europe’s gas turbine indus- 
try, is running b; far the larg- 
est of GEC Alsthom’s divisions, 
which the reorganisation has 
reduced in number from seven 
to five. 

Consequential appointments 
remain to be marfp although 
GEC Alsthom did say that Wil- 
helm Heitmann would con- 
tinue running the boQers and 
environmental systems activi- 


ties. Bernard Dufonr, former 
head of the old electromechani- 


cal division, has left to join 
Snecma, the French state- 
owned aero-engtne manufac- 
turer. 



Bray. 59, has spent more 
than 30 years in the gas tur- 
bine Industry, and was 
appointed to the management 
board of GEC Alsthom in 1990. 


ACCOUNTING STANDARDS 
BOARD 

David Allvey, group finance 
director of BAT Industries, is 
to be the new tenth member of 
the Accounting Standards 
Board, which sets financial 
reporting standards. 

This appointment to the 
ASB increases the influence of 
industry and commerce on the 
board; other recent appoint- 
ments to the ASB have given a 


voice to preparers, anditors 
and institutional users of 
accounts. 

Allvey, 49, joined BAT in 
1980, and 1$ one of a three-per- 
son team responsible for the 
day-to-day running of the com- 
pany. Originally a civil engi- 
neer, be later became a char- 
tered accountant and a 
member of the Institute of 
Taxation. He worked with 
Price Waterhouse as a tax spe- 
cialist before joining BAT. 


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This announcement appears as a matter of record only 


New Issue 


October 1 994 


Land and Agricultural Bank 
of South Africa 



R300 000 000 

16% Local Registered Stock 
due 1996 

(Loan number 1 05) 
Open-ended issue 


Issuing and arranging bank 

Investec Bank Limited 

Registered Bank, South Africa 
Registration number 04/02833/U6 

INVESTED 


CONTRACTS & TENDERS 


ESTADO DO PARANA 

SECRET AFOA DA AGRICULTURA EDO ABASTECMENTO 
UBR hvtftutoAaronoffdcodo Parana 

LIGHTING DETECTION AND LOCATION SYSTEM 
SIMEPAR TENDER N 9 003/94 
CALL FOR BIDS 
The AGRONOMIC INSTITUTE OF PARANA - IAPAR will 
receive until 2:00 p.m. on the 25 November 1994, at the Parairi State 
Meteorological System - SIMEPAR at the Polytechnic Center of the 
Federal University of Paran&Jardim das Americas, Curitiba -Pararri 
- Brazil, the Documentation for Eligibility and Technical and 
Commercial Proposals to manufacture the equipment for the 
Lightning Detection and Location System, the complete description 
of which is contained in the Technical Specification, the opportunity 
for which will begin in public session by the opening of the envelopes 
containing the Documents of Eligibility. 

The bidding will be of a type, for Technical Quality and Price as 
Governed by the Brazilian Federal Statute 8.666/93 and the specific 
conditions contained in this edict 
It is projected that the system for tender shall be an integral pan of the 
Parana State Meteorological System - SIMEPAR and is to be a 
priority for the work in Scientific and Technological Research, and by 
complimentary to the operational activities. 

Interested parties may obtain more information, analyze, or receive a 
copy of the complete Edict at the address below: 

Sisfema Meteoroidgico do Parani - SIMEPAR 
Centro Politdcnico da Universjdadc Federal do Pamiri 
Jardim das Americas -Caixa Postal 3 18 
8000 1 -970, Curiti ba - Parent - Brazil 
Tel/Fax: +55<4l) 366-2122 
A complete copy of the document for bidding, in Portuguese and in 
English may be obtained by interested parties on payment of a non 
returnable fee of RS 300,00 (three hundred Reais) up until 10 (ten) 
days before the above established deadline for receiving proposals. 
The financial resources for payments, resulting from this current 
bidding, are available as part of the Parotid State budget 
At the time foe document for bidding is purchased, alt Bidders shall 
p re sen t a letter containing their complete mailing address (Bidder’s 
Name, Street, Number, Zip code. City. State, Country, Tel and Fax 
numbers). 

GONQALO SIGNORELLI DE FARIAS 
Director President 


GOVERNO DO ESTADO DO PARANA 


FINANCIAL TIMES 

FINANCIAL 

REGULATION 

REPORT 


Financial Regulation Report is a 

monthly service from the Financial Time?. It provides 
subscribers with up-to-date and thorough information 
on worldwide regulatory developments and their 
implications for the financial services industry. 

To receive a FREE sample copy contact: 

Simi Bonsai. Financial Time* Newlcnen. Marketing Department. 
Thinl Floor. Number One Southwark Bridge. London SRI 91 U„ England, 
Tel; 1+44 71)873 3795 Fua: (+44 711 873 3935 

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Additional Interest Statement 

The Walt Disney Company 

U.S. $400,000,000 

Senior Participating Notes Due 1999 

□ Qonerfy Sutanau Dated: October 20, 1994 

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FINANCIAL TIMES TKURSDAV OCYOM* 20 


COMMODITIES AND AGRICULTURE 


Metals surge as nickel 
touches two-year high 


By Kenneth Gooding, 

Mining Correspondent 

Prices on the London Metal 
Exchange rose sharply yester- 
day, helped by renewed inter- 
est from investment funds and 
a weakening dollar which 
made metals look cheaper in 
other currencies. 

Aluminium prices touched a 
fresh four-year high and nickel 
joined the party to go briefly to 
its highest level for two years 
before substantial profit-taking: 
stopped the upward momen- 
tum. At the close, aluminium 
was up another US$9.25 a 
tonne at $1,741.50, copper had 


advanced by S51 to S2.539.50 
while nickel was up $205 at 
$6,895 a tonne. 

Nickel, used mainly for pro- 
duction of stainless steel, 
reached $6350 at one stage, a 
42 per cent rise from the $4,000 
low point it touched last year. 
In spite of LME stocks stand- 
ing at a record 150,000 tonnes 
or an estimated U weeks of 
consumption. 

Analysts suggested that 
investment funds were antici- 
pating strong demand for met- 
als next year and helping to 
push up prices before 
increased consumption 
reduced stocks. 


Mr Heinz Pariser of Heinz H 
Paris er Alloy Metals & Steel 
Market Research, said at an 
LME seminar last week that 
nickel consumption this year 
was likely to grow by 7.7 per 
cent and reach a record 740.000 
tonnes. A ‘‘moderate" further 
increase of 2.7 per cent was 
forecast for 1995 Followed by 
rise between 4 and 5 per cent 
in 1996 and 1997. This would 
create a 33,000-tonnes supply 
shortage in 1994 and one of 

40,000 tonnes next year. Mr 
Pariser said nickel prices were 
likely to average S6.39Q a tonne 
this year and $7,053 and S7.714 
a tonne in 1995. 


Watch out for the garlic 

Alison Maitland on innovation in the UK food sector 

G arlic growers of at Tesco, the supermarket Pood buyers agree that Brit- 
F ranee, beware. Con- group which sponsored the ish farm produce is of a high 
sumption of the pun- food awards. “Not only is Colin quality but complain they can- 


G arlic growers of 
France, beware. Con- 
sumption of the pun- 
gent bulb in southern England 
has overtaken that of northern 
France, largely thanks to one 
enthusiastic grower on the Isle 
of Wight. 

Mr Colin Boswell has turned 
his Merslev Farms into one of 
the biggest garlic producers in 
northern Europe in the 15 
years since he diversified out 
of sweetcorn. Britain's first 
indigenous garlic grower, he is 
now the country’s leading sup- 
plier of fresh and prepared 
garlic products. 

His innovative approach - 
which includes his own brand 
of Smoked Garlic Butter - won 
him a national award for food 
marketing this week. British 
farmers are much criticised for 
failing to market their produce 
successfully, and the awards 
are designed to raise standards 
and help reduce the UK’s food 
and drink trade deficit of 
nearly £6bn ($8bn). 

“Mersley Farms is a clear 
example of a producer who has 
become simply the best in his 
field,” said Mr Colin Smith, 
fresh produce trading director 


at Tesco, the supermarket 
group which sponsored the 
food awards. “Not only is Colin 
Boswell wholly committed to 
his exceptional product, but he 
has shown clear marketing 
expertise In creating a range of 
added-value garlic products.” 

Beating the French at their 
own game proved a winner for 
two other British producers. 
Mr Julian Temperley, owner of 
a large area of cider orchards 
in Somerset, wanted to add 
value to his product because of 
increasing competition in cider 
production. So he created the 
first commercially produced 
cider brandy in Britain for 
three centuries. 

The Somerset Cider Brandy 
Company makes 15,000 bottles 
a year of Somerset Royal, 
which is similar to Normandy 
Calvados but has the distinc- 
tive flavour of Somerset 
apples. 

Tuddenham Hall Foods of 
Suffolk decided there was a 
market for tender English 
asparagus that could be eaten 
from tip to base and they man- 
aged to double turnover of 
their pre-packed delicacy in 
two years. 


Food buyers agree that Brit- 
ish farm produce is of a high 
quality but complain they can- 
not always obtain the quantity 
they need when they need it 

Mr Mike Bunney of Adas, the 
government’s agricultural 
advisory service which spon- 
sored the awards, said: “Mar- 
keting is not strong among 
quite a chunk of the industry, 
who foil to differentiate their 
product from their competi- 
tors/' But he added that more 
farmers and processors were 
tailoring their product to their 
customers’ needs. 

One Somerset meat pro- 
ducer, Peninsular Pigs, 
received an award for its suc- 
cessful collaboration with 
Marks & Spencer, supplying 
the retailer with all the fresh 
pork it sells. 

"Peninsular Pigs had clearly 
thought very hard about their 
market, and, by talking to the 
retailer, spotted an opportunity 
For meat of a superior eating 
quality, reared outdoors under 
a strictly controlled, welfare- 
friendly system," said Mr Jer- 
emy Finnis of the ministry of 
agriculture, which sponsored 
the award. 


India cuts 
import 
duty on 
aluminium 

by Kunal Bose in Calcutta 

India's federal government has 
cut the import duty on alumin- 
ium to 10 per cent ad valorem 
from 25 per cent because pri- 
mary aluminium consumption 
is rebounding strongly. 

Domestic producers, 
although operating at a high 
level of capacity, are not able 
to folly meet the demand for 
the metal from fabricators and 
extruders. 

According to industry offi- 
cials, the rising price of alu- 
minium on the London Metal 
Exchange was also behind the 
government’s decision to 
lower the customs duty. 

But even at the revised duty, 
the imported metal will cost 
more than locally produced 
aluminium. In recent months 
all domestic producers have 
raised their aluminium prices. 

Last year India imported 
about 45,000 tonnes of alumin- 
ium, while domestic produc- 
tion was less than 500,000 
tonnes. In the current year 
there has been a sharp rise in 
demand for aluminium from 
the automobile and electrical 
industry. 

• India's state-owned National 
Aluminium Company (Nalco) 
is to cut alumina output by 10 
per cent becanse of slack 
demand, Reuter reports from 
New Dehli. 

In 1993-94 Nalco produced 

753,000 tonnes of alumina and 
exported 372,000 tonnes. Nal- 
co 's annual alumina produc- 
tion capacity is 300,000 tonnes 
a year against world output of 
40m tonnes. 

An official said: “Nalco had 
targeted exports of 400,000 
tonnes of alumina in 1994-95 
but in the present scenaria the 
company might achieve 
exports of 370.000 tonnes. 
“Demand for alumina had 
fallen mainly because of 
moves by the world alumin- 
ium industry to deal with 
oversnpply,” he added. 


Booker’s salmon leap to the top 

James Buxton and Roderick Oram on the UK group s latest acquisit' 


T he decision by Booker, a 
UK food group, to buy 
the salmon farming 
operations of- Marine Harvest 
International of the US makes 
Booker the biggest single 
salmon producer in the world. 
It is also a vote of confidence 
in an Industry which has 
repeatedly fallen into crisis in 
the past few years. 

No one is saying that the cri- 
ses triggered by the sharply 
oscillating prices caused by the 
market dominance of Norway, 
the biggest salmon producing 
country in the world, will not 
recur. This year Norway’s 
expected output of 220,000 
tonnes will once again dwarf 
that of Scotland, the second 
biggest producer, which is 
expected to harvest 59,000 
tonnes. Chile comes third with 
about 50,000 tonnes. 

But the experience of the last 
few months gives some room 
for optimism. Only a year ago 
Scottish salmon farmers 
despaired as another unex- 
pected surge of output by Nor- 
way pushed prices to their low- 
est level for several years. Yet, 
against the predictions of 
many experts, prices have 
recovered since April and a 
leading Norwegian salmon pro- 
ducer told a conference in Scot- 
land this month that in 1994 
salmon fanners would have 
their most profitable year for 
many years, despite the fact 
that prices are stUl below 1992 
levels. 

One reason is that in the 
past few years new vaccines 
have led to a sharp drop in 
losses caused mainly by the 
disease furunculosis. Mortality 


rates at McConnell Salmon, 
Booker's salmon subsidiary, 
fell from 12 per cent in 1990-91 
to 5 per cent in 1993-94. Farm- 
ers have also invested in better 
production equipment and 
introduced more efficient 
methods of husbandry, produc- 
ing bigger and better fish. The 
result is that the breakeven 
point for mast salmon formers 
has dropped substantially as 
UK consumption has risen by 
22 per cent in the year ended 
June. 

“We’ve looked into the abyss 
on price and disease, and 
believe we can still make 
money in salmon forming,” Mr 
Charles Bowen, chief executive 
of Booker, said yesterday. “We 
project the average not the 
peaks of salmon prices and we 
assume salmon prices could 
taiL” On that basis. Booker, he 
suggests, thinks it can still 
make money. 

The takeover of Marine Har- 
vest brings to Booker the big- 
gest salmon producer in Scot- 
land, pushing its share of 
Scottish salmon production 
from about 9 per cent to just 
under 25 per cent. With output 
from Chile thrown in, Booker 
will have about 7 per cent of 
the world market, with produc- 
tion of 26,000 tonnes of salmon 
a year out of world output of 
about 365,000 tonnes. The nest 
largest producer is probably 
Hydro Seafood of Norway, part 
of Norsk Hydro. 

Operations will be more effi- 
cient after the takeover. 
Booker will dose Marine Har- 
vest's heaquarters in New Jer- 
sey, and merge the two compa- 
nies’ research and 


development departments, sav- 
ing about £3m a year- 
The acquisition of Marine 
Harvest's salmon fanning oper- 
ation in Chile brings it a set of 
forms in a country which has 
the lowest production costs in 
the world, thanks to excellent 
water and growing conditions. 


and low labour costs. These Lamp- t on outp „ t m 

benefits amount to a saving of W Nora lv itnd Ireland 
5p per pound off production bco 2L’ would form producer 
costs which in Scotland are Fart - production 

^tsipern,. 


The takeover also gives 
Booker access to the Japanese 
and US markets. But the cost 
advantage of producing in 
Chile is offset by the cost of 
transporting fish to the US 
market, making Chile overall 
only as competitive as US 
salmon producers. 

The resulting diversification 
of production and markets 
should mean that no more 
than 10 per cent of Booker’s 
output could suffer a disease 
problem at any one time. In 
any event, salmon turnover 


Scottish farmed salmon 

Whofssate prices at BflUngagsrta. London <£ per Kg) 

5.0 - - ' -- 



Source: T3B Scotland 


EU proposes higher banana import quota 


By Deborah Hargreaves 

The European Commission has 
proposed a 53.400-tonne 
increase in its quota lor 
banana imports from Latin 
America this year in order to 
assist the Windward Islands 
where agricultural areas were 
devastated by tropical storm 


Debbie in September. 

Governments from the Wind- 
ward Islands had asked if they 
could import bananas from 
other destinations while they 
are unable to fill their own 
import allocations. 

This will enable them to 
maintain their market share in 
the European Union while 


they rebuild their damaged 
plantations. 

The Commission has allo- 
cated additional tonnages of 

30,000 tonnes to Martinique. 
14.800 tonnes to St Lucia, 5.900 
to Guadeloupe and 2,700 to 
Dominica. 

Mr John Compton, prime 
minister of St Lucia, said 


recently that 68 per cent of the 
country's banana crop worth 
£45m had been wiped out by 
the tropical storm. He said it 
will take two years to repair 
the damage. 

The increase in quota takes 
EU banana imports from Latin 
America to 2.17lm tonnes 
this year. 



will still Ik* only 
compared vnth the groups 
total of S-5.51HI- 
However, th* ** 

future glut uf salmon an the 
European market remains as 

Norwav continues to push up 

output' faster than ttotkmd.ro 
prevent this. Booker has led a 


Quotas wnicn me? 

Stain price,. But for the 
scheme to work their govern- 
ments would have to permit 
the producer organisations to 
enforce controls on non-mem- 
bers. which the UK govern- 
ment rejects, saying it would 
harm the consumer. 

Whatever the outcome. 
Booker believes that creating a 
Scottish-based company with 
about 25 per cent of production 
will help strengthen the indus- 
try as it comes under attack 
from Norway. 


COMMODITIES PRICES 


BASE METALS 

LONDON METAL EXCHANGE 

(Prices horn Amalgamated Metal Tracing) 

m ALUMINIUM. 93.7 PURITY (5 per tonne) 


Precious Metals continued 

■ GOLD CQMEX (100 Tray OK.: Sffioy oz.) 


Close 1720-21 

Previous 1 713-14 

High/low 1730 

AM Official 1 729-30 

Kerb dose 

Open Int 252,220 

Total daily turnover 50.660 

■ ALUMINIUM ALLOY (S per loans) 

Close 1700-10 

Previous 1700-10 

Hflh/low 

AM Official 1710-17 

Kert) dose 

Open I rtf. 2.876 

Total daily turnover 321 

■ LEAD (5 per tonne) 

Ctose 646-47 

Previous 643.5-44.5 

WgMow 843/6*7,5 

AM Official 647.5-48.0 

Kerb doss 

Open i rtf. 41.943 

Total daily turnover 6.961 

■ NICKEL (S per tonne) 

Close 6785-95 

Previous 6580-90 

HrgMOw 6765 

AM Official 8765-66 

Kerb dose 

Open im 63.565 

Total duty turnover 57.832 


3 mtha 
1741-42 
1732-32J 
174071737 
5 748.5-48.0 
1741-2 


858-58.5 

655-56 

661/857 

658-59.5 

658-9 


6890-300 

8685-95 

6950/8730 

6870-76 

6895-905 



Sett 

Day's 


Opto 



pries 

ehsnga 


ha* M 

VOL 

0 a 

390.1 

+1.0 

. 

98 

55 

Hair 

39QL8 

♦ ID 

- 

- 

- 

0k 

392.3 

+1J) 

333.7 

3919 83.761 

18.451 

Feb 

385.7 

+1.0 

396.9 

3859 lftl49 

1940 

*W 

399a 

+18 

3999 

3999 7.481 

1.740 

Jim 

Trial 

4018 

+1J) 

4039 

4030 10991 1981 
196,161 23988 

■ PLATINUM NYMEX (50 Troy ax.; Srtnoy ozj 

Del 

4ZL6 

+2.9 

4230 

422.6 145 

1 

Jan 

42A6 

+29 

4259 

421.7 18977 

1.257 

tar 

4288 

+3.1 

4239 

4269 1468 

- 

-M 

433.0 

+29 

4305 

4309 744 

330 

Oet 

436.6 

+18 

. 

- 335 

. 

Jm 

Total 

439.6 

+3.6 

- 

2 

23972 

1988 

M PALLADIUM NYMEX (100 Trey oz.; SAray 02.) 

Dm 

issao 

+085 

15795 

155.75 4 969 

365 

Mar 

isejn 

+095 

15890 

157.00 19M 

6 

•tat 

Total 

la.is 

+1.00 

15990 

15890 152 

0249 

371 

■ SILVER COMEX (100 Trey oz.; OwtsArey Oil 

Oet 

537.1 

+2.4 

. 

41 

40 

Nov 

m4 

+29 


• 

. 

Dec 

5405 

+29 

5459 

5389 00.443 

11935 

Jan 

543.1 

+24 

5459 

5429 74 

1 

Mar 

S49J) 

+2.3 

5535 

5479 H675 

454 

May 

Total 

555.1 

+23 

5509 

5549 4925 22 

113,408 12916 


ENERGY 


Open mi 15.356 

Total daily turnover S-1-* 

■ ZINC, apodal Mflh grade (S per Kmne) 

CtOM 1063-63.5 1083-83.5 

Previous 1054.55 1074-75 

Hfgn/low 1068/1075 

AM Oltioai 1065-66 1085-68 

Kerb dose 1086-87 

Open mi. 103.262 

Total daWy turnover 32,510 

■ COPPER, grade A [5 par tonne) 

Close 2542-43 2633-40 

Previous 2-185.5-86.5 2488-69 

WflAflOMi 2517/2518 2558/2494 

AM Official 2516-17 2515-15.5 

Kero Close 2543-4 

Open Ini 207,918 

Total daily lumover 00.220 

■ LME AM Official C/S rale: 1.6200 

LME Closing E/S rate: 1.8175 

5pot 1.6179 3 ntfftsl 6163 6mBwt.6l34 9 nltl£1.6Q98 

■ HIGH GRADE COPPBt (COMEX) 




Day 1 * 


Open 



Close change High 

low 

felt 

Vri 

on 

12005 

+2.90 120.20 

118.40 

1.487 

239 

No* 

moo 

+380 11890 

117.25 

1.415 

126 

Dm 

m.w 

+490 I1&K 

11590 

38991 

5.024 

Jan 

11800 

+375 118.10 

116.10 

667 


FeD 

117.45 

+3 55 11770 

11170 

50) 

. 

Mar 

11690 

+3.45 II 7 JO 114.70 

3.112 

511 

Trial 




0412 

6912 


8 17 57 +0.15 17.57 17.43 28.539 4.994 

ir 1757 +0 14 1756 17.48 23.336 1.S33 

ir 17 58 +0.12 17.56 17.56 17.486 1.709 

« 418454 88^23 

CRUDE OB. IPE (S/bJrrai) 

DM nays Open 

price domge Wj/ft Low tor Vet 

* 1628 +O.I2 16.34 16.18 81,612 23.298 

n 18.23 +4110 16.29 16 18 27.401 6.754 

6 16.18 +0.12 1624 (6.14 11236 1.339 

k 16.19 +0.11 1619 16.16 6.073 848 

r 1606 - - - 1616 530 

>1 1807 - - . 2J73 139 

W 144,987 33,454 

HEATING OIL WYMBC (42,000 IB gaH; cm pUHl 

Uteit Day-i Open 

price starve Mflh low tot MSI 

n 48.25 +0.87 4800 47.45 23.989 8.134 

« 4850 +668 4900 48.30 44.833 6.813 

n «.7S +0.68 49.75 49.10 31.752 3,241 

b 50 25 +0.63 5025 50.00 18.037 1.184 

a 50.15 +0.68 50.10 49.91} u.494 1.025 

r 49.73 +0.73 - - S.814 439 

185,703 2257Q 


GAS OIL IPE Rrtomp) 


PRECIOUS METALS 

■ LONDON BULLION MARKET 

(Prices suppled py N M Romadvid) 

Geld (Troy as ) S pnee £ equn. 

Oose 390.30-39120 

Opcrcng 388.70-389.10 

Morning Ox 3 89.00 240.381 

Afternoon fw 391 10 241290 

Day's Higft 39f.M-39l.70 

Day's Low 389.00-389.40 

Previous Vase 389.30-389.70 
Loco Ldn Mean Gold Lending Rates (Vs l/SS) 

1 month 4 54 e months - .. .4.83 

2 months .„....4.6i 12 months 5.35 

3 months 4.?fi 


Sett a*y» Open 

pries songs Hgl Um hi Vbl 

HM 15040 +125 151.00 149.78 32.132 4.852 

Dec 15225 +0.75 153.00 152.00 25.525 3.825 

-tai 154 IX) +aw 16520 154.00 16.124 2,189 

Fob 155.35 +025 15825 1 55.00 7246 590 

ffisr 155.25 ■ 1S&00 155.00 8.753 378 

Apr 15150 -050 15440 15340 2277 125 

Total 100427 12289 

■ NATURAL GAS MMEX 11(1(100 mmttu; S/wnKu.) 


Latest Oafs 
price change Hftfc 
Kw 1.638 +0.003 1.640 1.6 

DSC 1.879 +0001 1885 14 

Jan 2029 +0.001 2.030 20 

Feb 1010 +0.009 2410 14 

Mar 1.670 +0.004 1.960 1.9 

Apr 1.635 +0402 1.340 14 

Total 

■ UNLEADED GASOLINE 
HYMEX f«0« US gflta; c/USff**.) 


LOW Int Vo! 
1.620 21,449 13.174 
1460 29.711 7.410 
2015 1B.D49 3,230 
1-995 1J.514 1.3Q2 
1.970 11,764 849 

1-933 7.141 5M 
147.807 30473 


SDvar Fix 

pAroy at 

US CK equiv. 

Nw 

Spot 

330.55 

933.50 

Dec 

3 months 

335.55 

543. OS 

JOn 

6 months 

34090 

55055 

Fen 

i year 

353.05 

567.45 

Mar 

Goto Coins 

S unco 

E equiv. 

tar 

Krugerrand 

381-394 

242-245 

Tefal 

Maple Leaf 

401.40-10330 



Net* Sovereign 

91-94 

58-69 



Latest Day’s Open 

price etanga Hgti low tat Vn) 

4845 +003 49S0 4875 17004 12954 

5620 -0.17 5705 5620 21,413 7.803 

5500 -A05 5533 S50O J2.3W 2429 

54.40 ■ 5400 5430 6,453 1259 

54.75 +008 5480 5480 24K 54 

58.40 +0.15 - - 4.668 76 

70065 24, 70S 


GRAINS AND OIL SEEDS 

■ WHEAT LCE (£ per tonne) 


SOFTS 

■ COCOA LCE (Wtonnel 


MEAT AND LIVESTOCK 


Sett Day's 
price tfnnge HJgta 
NOV 104.90 +020 104.90 

Jan 10650 *030 107M 

Hu 108.90 +020 110.75 

May 11095 +435 311.00 

Jul 112.65 +025 

Sap 96.40 -OlO 

Total 

■ WHEAT CBT (5,Q00bu nvn; 


Open 

Lew M vd 
104.80 1.456 2 

106.75 1.953 35 

10630 1,526 25 

11075 1.434 SO 

- 200 

to 

8,827 182 

centsriSOtti bushel} 


Sen Day's Open 

price dungs Higb . Lew lot Vo) 


Dec 337/4 +2/8 398/4 391/0 42530 22347 

Mar 408/4 +3» 4088) 402/0 21.843 6260 

Hay 385/4 ++3/2 38 6/0 380/4 3296 1.180 

Jul . 351/4 +2/0 352/0 348/4 3,112 1J79 

Sep 358/0 +3/0 356/0 352/4 226 3 

Dec 364/0 +2/0 3848) 361/4 139 13 

Total 77,552 32282 

H MAIZE CBT (5.000 bu min; cenla/56jb bushel) 

Osc 214/4 -0/4 21*6 214/0 123.306 20.604 

MV 225/4 -C/2 225/4 225/D 54.088 *153 

Hey 233/4 -02 233/4 2338) 24JJ97 1278 

Ad 23M) ■ 234*3 238/0 27.485 1,844 

Sep 243/8 -Of 2 241* 242/5 2000 84 

Dee 248* - 24381 2488) 11281 759 

Total 243,002 28.782 

■ BARLEY LCE (E per tonoa) 

Nov 101.70 -000 10190 101.70 385 9 

Jan 1IR45 -0.2S 10*A5 104.4S 413 20 

Mar 106.40 -030 130 

May 108.40 -030 48 

Sap 93J5 -1.75 2 

No* 93.50 +0.50 .... 

TcCal 975 29 

■ SOYABEANS CUT (S.OOCbu nw; c*nB/60t> tedM) 

No* 541/2 Sit 543/S 540/4 62656 22053 

Jae 5SM -2 It SS4/D 551/2 34.764 6039 

Mu 562/6 -2/2 56443 561/4 20.186 2.485 

May 570/2 -2/4 571/4 569/4 9.566 2.829 

Jul 677/0 -3/0 578/2 578/0 16,017 2JJ35 

Aug 58Q/0 -1/4 581/4 579/4 913 271 

Total 131,158 30488 

M SOYABEAN OfL C8T BO.OOOibs: wiMb) 

Oet 2672 -OW 2676 26 45 2021 1.329 

Dec 25.13 -0.13 2S20 24.96 31.909 74.028 

Jut 24.42 -0.10 24.48 24.29 12.315 2A48 

Mu 2339 -005 2408 23.85 13.208 1061 

May 23.70 -002 23.78 23J0 10.234 2052 

Jul 23.48 -006 2158 23.40 7.241 1014 

Total 83069 34,120 

■ SOYABEAN MEAL CBT /1 00 tens; SJlon) 


■ TIN (5 pet tonne) 



■ CflUOG OIL NYMEX (42900 US ^alls. SAwrel) 

Ne* 

•taa 

S41/2 

van 

Close 

5480-90 

5560-70 


Latest 

Day’s 


Open 

Mar 

562 IB 

Pnemaus 

5390-400 

5475-80 


Iriee 

diaoge 

won 

Lew Int Yel 

Hwt 

57Q/2 

H+jh/loiw 


5S90/548S 

HO* 

1798 

+0.16 

17.41 

1724 42901 25.465 

M 

577/0 

AM Official 

541 0-M 

5495-5500 

Dec 

1791 

+0.16 

1795 

17.37 98.929 38960 

Aug 

580.D 

Here dose 


5570-80 

Jan 

1756 

+0.14 

17.60 

17.45 57.424 109« 

Total 



Dec 941 *2 944 832 22.010 1.081 

MU 973 +2 975 962 41.762 1.535 

May 982 - 987 973 1 4.382 309 

Jul 995 -1 995 993 6.763 31 

Sep 1009 - 1014 1005 12.051 2S0 

Dec 1027 -1034 1025 8.334 128 

Total 109024 W74 

■ COCOA CSCE (10 tonnes; Stonnea} 

Dec 1304 +8 1306 1285 30.9 ! 6 £428 

Hu 1351 +6 1355 1332 Z1.405 608 

May 1379 +4 1383 1382 7.998 232 

Jd 1406 +2 3JE4 2 

Sep 1433 1.333 

Dec 1483 -3 4.966 3 

Total 73,737 £577 

M COCOA QCCO) (SOR's/ionne) 

Oct 18 Price Pie*, day 

Daily 971.18 972.17 

M COFFEE LCE (Vtonne) 


No* 

37K 

+72 

3780 

3540 

7.404 1 918 

Jan 

3743 

+60 

3730 

3517 

12682 2423 

Mar 

3663 

+67 

3663 

3460 

8.151 1901 

May 

3640 

•73 

3640 

3460 

2931 179 

Jol 

3580 

- 

- 

• 

1930 

Sep 

3540 

- 

- 


1.403 



Sett Day’s 

Open 



price clang* ffigb Low 

tat 

VbI 

Oet 

67.450 +9.675 67950 67.100 

1974 

2,345 

Oec 

69900 +0.900 ©3 50 68«0 30371 

0991 

Fee 

$8150 +0975 68250 67.650 

16.925 

1.489 

Apr 

582C0 +0525 68275 87725 

71.983 

1.152 

Jan 

64 900 +0375 65900 64.525 

3.196 

218 

Auq 

64 JX3 +0250 64.100 61900 

1971 

41 

Total 

65928 149*0 


■ LIVE KOGS CM£ flO.OOObs; cants/tos) 


Oct 

30.425 +0.175 31.000 30750 

571 

389 

Oac 

33.700 +0.275 34.150 33.600 

17.716 

3.064 

Feb 

38550 +0.450 38800 38JOO 

8917 

1.051 

Apr 

36ffi0 +0400 36900 36525 

3915 

558 

Jon 

42J75 +0975 42.400 41900 

1.633 

201 

Aog 

41.700 +0250 41750 41950 

317 

41 

Trial 

31970 

8400 


M PORK RFLUFS CME IJO.OOOftW centaribs) 

Feb 

39.775 +1925 4a 250 38350 

8000 

2.102 

Mar 

33-825 +1900 40200 30000 

1928 

249 

Uay 

40,600 +1.000 41 .150 40900 

293 

S3 

Jul 

41.700 +1900 41900 41 ISO 

277 

43 

Aitg 

40500 +1.000 40500 40-500 

61 

3 

Total 

10957 

2950 



Total 33,673 8, <19 

M COFFEE *C CSCE P7^00tas; oenWta) 

Dec 201.60 +6.70 2062S 190.10 14.499 5.068 

Mar 2M.Z0 +6-50 211.00 r84.» 11JB2B T.70B 

May 208,00 +8JX> 20800 197.00 4619 118 

Jtd 209.10 +400 19920 199.00 1.335 S3 

Sep 209 75 +6 00 209.75 209.75 B59 22 

Dee DO JO +400 21X100 20800 856 8 

Trial 34^97 8985 

■ COFFEE QCO) (US canta'paung) 

Oet 16 Price Pm. day 

Comp, da tf 186.38 185 25 

15 ttay average 188.43 190.66 

■ NoT premium RAW SUQlAR LCE Icemaribs) 


LONDON TRADED OPTIONS 

strike price S tonne — Caffs Puts — 


■ ALUMINIUM 

(99.7%) LME Dec 

1675 88 

1700 72 

1725 58 

■ COPPBt 

(Grade A) LME Dec 

2450 128 

2600 - 95 

2550 69 

M COFFEE LCE Nov 

3550 226 

3800 183 

3650 145 


Mar Dec Mar 
119 as 50 
105 34 80 

92 45 71 

Mar Dec Mar 
146 31 70 

118 48 92 

95 71 118 

Jen Nov Jen 
374 11 181 

348 18 203 

319 30 226 


11.82 



_ % 

. 

M COCOA LCE 

Dec 

Mar 

Dec 

Mar 

1295 

+007 

- 

90 


926 .. 

34 

84 

18 

38 

uoo 

+0.10 

_ 



950 

22 

70 

31 

47 

1295 

+098 

. 

- 450 


975. . 

13 

57 

47 

59 




540 

- 

■ GHENT CRUDE IPE 

Nov 

Dec 

Nov 

Dec 


Trial 540 

■ WHITE SUOAH LCE (5/tonne) 

Dee 347.00 +X00 34650 345.00 3,401 345 


Oct 

164.1 

-1.1 

184.9 

163.7 

1.038 

1.155 

Mar 

34050 

+200 

34150 

337.10 8.401 

552 

Dee 

1630 

-12 

163.9 

1629 

<3.950 

8.313 

May 

33920 

+1.50 34000 336.10 1,960 

143 

Jan 

164.4 

-1 2 

165.5 

164J 

10835 

1,596 

Aug 

337.10 

*1JK 

3380O 

334.00 2310 

323 

Mar 

167.4 

-l 1 

1685 

167.4 

13S79 

1.I6S 

Od 

3I6J0 

■030 31700 315.20 480 

no 

MW 

1703 

-13 

171.4 

1709 

7.700 

1.719 

Dec 

31840 

-020 

- 

4 


Jol 

174.1 

■0.9 

174$ 

174 0 

6.799 

970 

Trial 




10556 

1073 

Total 





9A439 10534 

■ SUGAR 11’ CSCE (liznooius: cents/lbs) 


■ POTATOES LCE (Erionrw) 




Mar 

1279 

+007 

1286 

1262 92561 

9.527 

Nov 

1500 

. 

. 



. 

May 

1280 

+010 

1285 

1265 21JQ9 

1.931 

Mr 

105.0 

. 

- 

. 

. 

. 

Jri 

1209 

+009 

tare 

1260 13292 

1.203 

Apr 

2IS-8 

-4,7 

mo 

21 5J 

1*335 

55 

Oct 

1240 

+006 

1244 

1230 11.240 

618 

May 

240.0 

. 


. 



Mv 

1202 

+006 

1207 

11.37 1.560 

37 

Jon 

107.5 




. 


May 

12JU 

+006 

- 

9 

- 

7*31 





tr33S 

fiS 

Tecat 




140576 13016 


1800 - 55 1 2 

1650 1 30 4 f 

1700 3 21 - S 

LONDON SPOT MARKETS 


FRBGHT (BIFFEX) LCE (SlWndex port) 


■ COTTON NYCE (SO.OOOfcs; cente/te) 


Oct 

1865 

•10 

1875 

1845 

510 

31 

Dee 

6828 

-104 

69.90 

6305 24,389 6005 

Nov 

1833 

-17 

1845 

1830 

371 

27 

Usr 

6503 

-1.35 

71.11 

8991 12449 841 

Dec 

1778 

-32 

1800 

1771) 

205 

59 


71.15 

-1.18 

7JJS 

71.10 6,873 177 

Jan 

1735 

+6 

1740 

1883 

LOW 

85 

M 

7105 

■1.20 

72.80 

7100 4.143 87 

am 

1674 

+3 

16TB 

16<0 

896 

id 

Oct 

68 as 

-0.90 

6030 

6030 523 7 

Jul 

1495 

+5 

. 

, 

749 


Dec 

68.35 

■104 

8928 

68.35 2177 138 

Trial 





3,147 

299 

Trial 




80,377 7,735 


Ohs 

Pm 





■ ORANGE MCE NYCfi (iS.OOOIbs; centAltH) 

BR 

1847 

1845 





Bov 

106.40 

+1.20 

10700 

U6.0S S.7T8 1A11 


Cotton 

Liverpool- No spot or shipment sates were 
recorded the week ended Ocuner 14 against 
165 formes in me previous wtafc Activity nos 
severely resoahied end business an nar- 
row torea Cost oftaw cotton deterred u*a« 
from Increasing mar purchases. 


11125 +1.45 110.75 10M0 9.523 M16 
11335 +1.35 113.75 HUBS 5.210 358 

116.40 +1.15 116.40 115 25 1.369 31 

11140 +0.95 11BJS 1182$ 788 13 

12125 +105 121 75 1Z1.5Q 360 12 

34,350 8^80 


VOLUME DATA 

Open interest and Volume data shown tor 
contracts oaded on COM EX NVMEX. COT, 
NYCE, CME. CSCE and IPE Crude Oil are one 
day m toreora. 


INDICES 

■ BEUTEftS (Base; 18^31=100} 

Oct 19 Oct 18 month ago year ago 
2073.1 2080.4 2122.2 1588.9 

M CRB Futures (Base - 1967^001 

Oct 10 Oct 17 month ago year age 
229.72 229.88 230.97 218.17 


m CRUDE OIL FOB (per berreVDec) 

+or- 

Dubai 

515.D0-6.Q52 

+0.050 

Brent Blend (dated) 

Si 028-0.32 

+0.120 

Brent Blend (Dec) 

S16.24-0.2ta 

+0060 

W.T.I. dritv «B) 

517.43-7.442 

+0020 

■ OfL PRODUCTS NWEprarnp: deOvary OF ftorvwj 

PremKjm Gasdne 

SI 76-1 70 

+1 

6aa Ol 

5151-152 

♦1 

Heavy Fuel OB 

592-04 

♦1 

Naphtha 

SI 72-1 73 

*1 

Jet Fuel 

5173-175 

+1 

Diesel 

5156-158 

+1.5 

Pmihuni toigus. Tel. Loneton fiTV 359 37V 


■ OTHER 



Gold (par trey OQ& 

$391.00 

+1.50 

Stiver (per miy az)A 

541.50c 

+3.00 

Platinum (per troy oz.) 

S418.70 

+0.46 

Paladlum (per tTOy oi) 

5164,75 


Copper (US prod.) 

121.0c 


Lead lUSpredJ 

39.15c 


Tin (Kuala Lumpur) 

13.70c 

+0.02 

T«i [Now York) 

258,5c 

+3.0 

Cattle nwe weighty 

1160Op 

+0.7T 

Sheep (hue waight) 

K.26p 

+261- 

Pi^s (fcrt wjigw) 

75.43p 

-0.51* 

ten. day sugar (raw) 

S316.0 

-2.8 

ten day sugar (v/ta) 

S3530 

+r).5 

Tae 8 Lyfe export 

om.o 

-2.0 

Barley (Eng. feed) 

Unq. 


Mane (US No3 Veto*) 

S132.0y 


Wheat (US Daik North) 

E165.0U 


Rustier (Nau)V 

9O05p 

-0.75 

Rubber (Deejf 

B9.75P 

-0.78 

Rteber (KL RSS Not jul) 

3S1.5 


Coconut 04 (PW}§ 

S517.Su 

- 60 

Palm OB (Malay.)§ 

562S.0I 

■6.Q 

Copra (Ph!« 

S4000V 


Soyabeans (USI 

£lS7.0v 

+1J) 

Cotlrii OuBoatoA- index 

74.15c 

+006 

Wootops (64s Super) 

438p 



2 pw lenna unton etruravo stagad. p pancwVg. c centau. 
r IWNIAO ^ MJtiyeun MnaA* y OctTOec. v Nov/Dsc. u 
Octtaov. r D«. t Nov. f London PhyahaA § OF »»*■ 
cam. A ffiAn marivst ctoM. * 8ta«p fljv* waight ravtod. * 
Chars? an wmu 8 Paces rvo tor previous day. 


CROSSWORD 

No. 8,589 Set by QUARK 


n n r 13 


4 6 6 |7 1 I* 




23 24 


The nncloed 4 (when old), 11, 12, 23 and 27/30 across and 2 down 
form a well-known group 


ACROSS 

1 Hustle around the detective 

m 

4 (8) 

10 Rude, we hear, and felt sorry 
0) 

11 1 5) 

12 (4) 

13 He arranges the sheets 
between the covers <10) 

15 One kept in - in winter, need- 
less to say (7) 

10 Agile doctor seen in river (6) 
19 Nom de plume for only man 
not left out (7) 

31 It could produce fir-cone (7) 

23 (10) 

25 Goes wild not getting runs for 
a long time (4) 

27. 30 (5,6) 

23 Lively Auberon next, not on. 
upset (9) 

29 Top man's space indicated for 
30? (3) 

30 See 27 

DOWN 

1 ft’s cynical and 'arsh in trav- 
elling at speed of sound (8) 

2 (9) 

3 River's mounds of sand? (4) 

5 Risked crude name for N. 
American Indian (7 ) 

6 Accomplished performance? 

( 10 ) 

7 Rowing boats are struck with 
fear, it's said (5) 


8 Abandon the uncultivated 
area (6) 

9 Seen in boat-race or cricket 
match (6) 

14 It’s kind of set but it’s move- 
able (10) 

17 One of the troops seen at the 
beach? (4,5) 

18 Rite gels confused for French 
working girl (8) 

19 Something attractive and 
round is the electric genera- 
tor (.7) 

31 The child is innocent; an Inex- 
perienced person takes her in 
(fi) 

22 Roofing material of church 
over there (6) 

24 Ring artist up (a lady) (5) 

26 River Don (4) 

Solution 8,588 


gaonraa HHDOQiaciQ 
a a □ n m □ n 
OQnHlDB QoaciBEinm 
a a 0 d 0 o 0 □ 
□□BOHB0H QnQIlDB 

a a □ □ a o e 

□□0B QQHDHClEinDD 

_ r,i a ei a b b 
□anaacioana ogee 
a .,^-,, 0,0 a □ a h 
HEIO0HQ GnQEBEE/C] 
a a q □ a q b □ 
□□Baoaaa 0000013 

130 a Q H Q Q 

qaanaiiHH 0000130 











FINANCIAL TIMES THURSDAY OCTOBER 20 1004 


FINANCIAL TIMES SURVEY 


27 



★ 


UK Gass the competitive era 

Thursday October 20 1994 








en months have passed 
since the government 
gave the go-ahead for 
the planned liberalisation of 
t he UK gas market, the fifth 
largest in the world and one of 
the fastest growing. But the 
subject has continued to spark 
off inte nse debate among 
industry executives, politicians 
and consumer groups. 

Last December, Michael 
Heseltine, trade and industry 
secretary, brushed aside warn- 
ings from the Monopolies and 
Mergers Commission and 
approved a fast-track timetable 
for the full opening of the 
domestic gas market in 1998. 

It was high time, he said, 
that the 18 m household con- 
sumers now served by British 
Gas had a choice of supplier. 

Officials from Of gas, the 
industry regulator, spoke of a 
future in which a multitude of 
suppliers would emerge. Super- 
market and department store 
chains, as well as credit card 
companies, might vie a gainst 
the gas subsidiaries of leading 
oil companies and regional 
electricity companies for a 
share in the market 
But by the summer, the 
brave new competitive gas 
world envisioned by the gov- 
ernment and Ofgas was fast 
falling apart The idea that mil- 
lions of consumers (and voters) 
would soon be counting the 
cash saved as a result of 
introducing competition gave 
way to front page scare stories. 
“Eight minion face gas price 
hikes,” screamed the head- 
lines. 

Ofgas fought a rearguard 
action to contain the damage 
ng that the end of uni- 
national prices would 
lead to only minor regional 
variations. It also gave assur- 
ances that the elderly and disa- 
bled would not suffer as a 
result of the introduction of 
competition. 

But the government’s refusal 
to make a commitment to 
include a new Gas Act in this 
rear’s legislative programme 
merely added to the uncer- 
ainty. 

. - _ To many in the industry it 
“ ’ ' ooked as if government minis- 

A ere had decided that gas com- 

petition was just too risky a 
■roject to embark upon so 
lose to an election. 


\ 


urn import uSS 



Support for liberalisation gathers pace 


Although political uncertainties continue to surround the planned 
opening of the UK gas market, Robert Corzine finds there is a 
growing belief that competition can be made to work 



Hesettfne: tfane to gto the household consumer a choice of atatphr 
market-based mechanisms to 


Many now believe those dark 
days of summer have p assed 
hi recent months support for 
liberalisation has gathered 
pace. 

British Gas now says it wel- 
comes c o mp etiti on, and wants 
to see a new gas bin passed 
this year so that it has maxi- 
mum freedom to restructure 
its businesses. 

Consumer associations say 
that they, too, want competi- 
tion. Even the opposition 
Labour Party has said that it 
does not want to defend British 
Gas’s monopoly. 

Although the government 
remains non-committal about 
whether gas will be included in 


the Queen’s Speech in mid-No- 
vember, there is growing confi- 
dence that mmg form Of gBS 
bill or government statement 
of support may be in the off- 
ing. 

But not all c i the uncertain- 
ties raised during the summer 
have been swept away with the 
rVwmg p ctf season. The concerns 
raised in recent months were 
enoug h to cause the Trade and 
Industry Select Committee of 
the House of Commons to 
focus its current round of hear- 
ings on gas liberalisation. 

Many of British Gas’s 
would-be competitors are confi- 
dent that the hearings will 
merely c onfirm that competi- 


tion with adequate safeguards 
is the best way forward. But 
there is no certainty that com- 
petition will deliver the sub- 
stantially lower prices and 
higher standards of service its 
proponents argue are attain- 
able. 

Clare Spottiswoode, director 
general of Ofgas, is optimistic 
that gas deregulation will not 
in«in higher prices, as same 
critics have con tended. “I don't 
see that anyone will lose as a 
result of competition,” she 
says. 

However, she admits that 
this is a leap of faith” on her 
part because there is no evi- 
dence from other countries to 


support her view. 

Tndawd, it is the fact that JJO 
other large western industria- 
lised country has embar ked on 
a srmflar path which worries 
some of those charged with 
implementing the complex 
structural and technical 
changes in the industry 
required to make competition 
work. 

British Gas, for rwrampifl , has 
a<sVpd for at least a six-month 
delay in the first phase of com- 
petition beginning in 1906. 
Executives at its TransCo pipe- 
line subsidiary describe the 
current timetable as a “high 
risk strategy”. They want more 
time to ensure that the new 


balance the inflow and con- 
sumption of gas actually work. 

But even though uncertain- 
ties persist, the timttprf compe- 
tition introduced so far and the 
prospect of a much more open 
market in the ftiture have trig- 


gered dramatic changes within 
the UK gas industry. 

British Gas Is undergoing a 
root-and-branch restructuring, 
one of the largest ever 
attempted in the UK. according 
to its executives. Within three 
years 25^000 jobs, a third of its 


workforce, will be gone and 
ffir ginawrin of regional a nd dis- 
trict offices and high street 
retail shops will be dosed. 

Senior management has also 
Launched a cultural revolution 
to turn what has been one of 
the UK's most bureaucratic 
and hierarchical companies 
into one which Richard Gior- 
dano, niwfrma p, says will be 
“more dynamic commer- 
cially astute". 

Change is also the order of 
the day for the independent 
gas marketing companies 
which have blossomed in 
recent years in response to reg- 
ulatory actions to promote lim- 
ited competition in the mainly 
commercial and industrial 
markets. 

The independents, with low 
overheads, have easily under- 
cut prices charged by British 
Gas, which until recently was 
barred by the regulator from 
offering discounts. They 
quickly captured 55 per cent of 
the mainly commercial market 
over 2^00 therms a year. 

But during the past year, 
intense competition has broken 
out among the independents, 
with the result that margins 
have narrowed dramatically. 
There are unlikely to be any 
early improvements, as Ofgas 
has recently lifted many of the 
temporary restraints it had 
imposed on British Gas to 
ensure that competition took 
hold. 

The harsh operating environ- 
ment is such that most inde- 
pendents predict tt will lead to 
a wave of rationalisation over 
the next two years. Many inde- 
pendents are subsidiaries of 
large mtomatinnal o§J ami gas 
companies, and thus should be 
able to ride out the hard times. 
Financially weaker companies 
may have to merge or seek 
market niches to s ur v iv e. 

But in spite of the problems 
and upheavals affecting the 
industry, there is a growing 
belief that competition can be 
made to work if the final politi- 
cal go-ahead is given. Ms Spot- 
tiswoode is among the opti- 
mists. 

“When we started work on 
this we thoag M there were a 
lot of contentious in yueq But 
there are not really that many. 
The real problem is the legisla- 
tive timetable.” 



Mobil Gas. From platform to 
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to you. We supply gas direct 
to thousands of businesses in 
Britain. If you or your business 
spend over £1,200 a year on 
gas call 0800 822 822 now and 
we will get a competitive quote 
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Annual Gas BO felca»K*j □£>.200-4,000 □ £<801 - 74.000 □ £24,001 + 

Mobil Gas 

The Natural Choice. 






28 


THURSDAY OCTOBER 20^ 


UK GAS MARKET 2 


L ast month British Gas 
topped off a turbulent 
year by unveiling a 
much-delayed presentation on 
its strategy to the end of the 
decade and beyond. 

Gone, according Richard 
Giordano, chairman, was the 
old British Gas. a public utility 
whose “mindset was driven 
first and foremost by the obli- 
gation to serve ... at any cost 
if necessary". 

In its place will come a new 
British Gas, a “dynamic and 
commercially astute" company 
which will dramatically 
restructure its domestic busi- 
nesses over the next few years. 
This should ensure sufficient 
cash flow to fund a big interna- 
tional expansion which will 
begin to pay off in the next 
century. 

Gone too, says Mr Giordano, 
will be a corporate culture 
determined to “fight dogged 
regulatory battles to defend a 
proud past". 

For British Gas's would-be 
competitors in the UK gas mar- 
ket, Mr Giordano's statement 
and similar comments from 
Cedric Brown, chief executive, 
offered a reassurance that 
Europe's 13th largest company 
would no longer stand in the 
way of the introduction of 
domestic competition. 

But the comments also con- 
tained an implied threat that 
British Gas would not idly 
stand by and see its domestic 
market share eroded, as has 
happened under regulatory 
pressure in the liberalised mar- 
ket for large commercial and 
industrial users. 

Last month's presentation 
also offered evidence that the 
“strategic paralysis" that 
gripped British Gas in recent 
years as senior management 
fought pitched battles with its 
regulator, has receded, along 
with what Mr Giordano 
described as the "regulatory 
fog". The result is that the 
company has been confident 
enough to map out a coherent 
way forward. 

What is less clear, however, 
is bow successful it will be in 


Robert Corzine finds British Gas in an aggressively confident mood 

Facing commercial reality 



Richard Giordano, chairman 



Redundant labour? British gas tecfcnictom at woric radical restructuring 
of the company means that 25,000 employees, a third of the workforce, 
wil be made redtaidant over the next three years 


Cedric Brown, chief executive 

implementing such a radical 
realignment 

There is little doubt that 
senior management is deter- 
mined to overturn the corpo- 
rate culture of a long-standing 
monopoly. A root-and-branch 
restructuring of the company 
means that 25,000 employees - 
a third of the workforce - will 
be made redundant over the 
next three years. 

Employee morale, aside from 


the handful of executives and 
managers who know they will 
have a job after the restructur- 
ing, is low. Some employees 
say management has been sur- 
prised by the large number of 
highly-skilled individ uals who 
intend to accept voluntary 
redundancy, rather than sub- 
ject themselves to further 
uncertainty. 

For most of those who do 
undergo and survive the cur- 
rent programme of having to 
re-apply for their jobs, there 
will no longer be the prospect 
of a job for life in the highly 
hierarchical, command and 
control environment of the old 
British Gas. In the coming 

rannths thnnsands of emp loy. 

ees. especially those in the 
public gas supply division that 
deals directly with the public, 
will undergo extensive training 
sessions to prepare them for a 
commercial environment 

In addition, the five domestic 
divisions will be recruiting 
people with marketing experi- 
ence outside the gas industry 
to help ensure that a commer- 


cial culture takes hold. 

Mr Brown was adamant at 
the strategy review that “there 
are no sacred cows at British 
Gas". The managing directors 
at each of the business units 
know they must “transform" 
their companies to suit the 
new commercial realities, or 
face a fate that senior execu- 
tives have not spelled out, but 
which industry observers say 
is the threat of divestment 

Speculation is most intense 
about the future of the public 
gas supply, the unit which pro- 
vides 18m households with gas 
and which will face the brunt 
of the competition once the 
domestic market is opened. 

Mike Alexander, PGS manag- 
ing director, says he is prepar- 
ing the division for an 
extended period of uncertainty. 
The intense competition his 
division is likely to encounter 
when the domestic market is 
fUlly opened in 1938 means 
PGS staff numbers, set to fall 
from 11300 currently to 9.600 
by 1996, may face even deeper 
cuts. 


The present Gas Act forbids 
British Gas from divesting the 
unit, but Mr Brown made it 
clear that month that if the 
company's competitors have 
the right to restructure their 
businesses, "then so should 
we". 

The outlook for other parts 
of the company is generally 
more upbeat. TransCo. the 
pipeline and storage division 
remains a regulated monopoly. 
It is the main repository of 
British Gas' technical skills 
and assets. It will also be the 
“main cash generator in the 
short to medium term", accord- 
ing to Mr Brown. 

The exploration and produc- 
tion arm of the company has a 
steeply rising UK production 
profile that will support the 
growth of corporate cash flow 
to the year 2000. The UK opera- 
tion will also help to under- 
write the company’s growing 
efforts to discover and develop 
mainly gas reserves In other 
countries. 

Many of the those upstream 
developments will be linked to 
downstream ventures in which 
British Gas intends to apply its 
UK skills and experience to gas 
distribution or gas-fired power 
generation schemes worldwide. 
Many of these will be in fast- 
growing developing economies, 
especially in Latin America 
and Asia, according to com- 
pany executives. 

The company expects such 
international activities to be 
the ma in engine of growth in 
the early years of the next cen- 
tury. 

But as the company's top 
executives acknowledged last 
month, the success of the 
long-term strategy is depen- 
dent on the company being 
competitive and profitable in 
its Cast-changing UK markets 
for the foreseeable future. 


Cheaper Gas 

the Truth 

“You can look forward to cheaper gas thanks to a new gas 
supply agreement from British Gas.” ihw/m/. g« .s Direct Mni! CamfHtignJune ' ( H) 


The Whole Truth 

“Most customers find that independent suppliers undercut 

Bl itisll Gas pi ices. t OFGAS fnjhrmalion Sheet August 'A/ j 


For Nothing but The Truth 


xtis on 


0500 001100 


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days. 




Name ..., 


Company Name* — 
Address — ~ 


Annual Gas Consumption 


....Position* . 


— Postcode. 


thernu/£. — — 


British Gas Customer Ref. No.*' — 

( — | Please send me a quotation and further details ot Amerada Hess Gas limited 
* If applicable ’ In the top right hand comer of your gas bill. 

Post to: Amerada Hess Gas Limited. FREEPOST 1 (WD 48061, London, WIE 4E2 

HESS I HMERHDH HESS GRS UMITEO 

FTS2010 



MMf AatttHKQ 


A gas showroom in north London: transportation costs account for about half of the total gas bffl 
rasktenttel consumers 

Robert Corzine on TransCo and the independents 

Fixing the cracks 


Engineers at British Gas’s 
national transmission system 
control centre at Hinkley in 
the Midlands can tell yon 
exactly what they were doing 
on February 14 1994. For on 
that day a cold snap triggered 
off a record surge in demand 
for natural gas. 

By the end of the day Tran- 
sCo, British Gas’s transporta- 
tion and storage division, had 
carried a record 355^6 m. cubic 
metres of gas, compared with 
a daily average of jost 
I68.imcm. 

The engineers say the fact 
that they were able to cope 
with such a strong surge in 
demand testifies to the wis- 
dom of years of heavy invest- 
ment in a transport and distri- 
bution system that Richard 
Giordano, British Gas chair- 
man, recently called the “big- 
gest and best in the world". 
Critics, however, say it is over- 
engineered and over-built. 

The creation of Solihull- 
based TransCo, whose assets 
are valued at £l7bn, stems 
from British Gas’s decision 
last March to split the UK 
business into five domestic 
divisions. It will retain its sta- 
tus as a national monopoly 
under the government’s liber- 
alisation plan, and is the clear 
core activity of British Gas’s 
UK operations. 

It will also play a central 
role in the introduction of 
competition in the domestic 
market All of the independent 
marketers as well as British 
Gas’s public gas supply divi- 
sion will use its pipelines to 
distribute gas to the 19m or so 
household customers. 

Transportation costs account 
for about half of the total bill 
paid by residential consumers. 
So the degree to which Tran- 
sCo cuts its cost base over the 
next few years will have a big 
effect on the extent to which 
domestic gas prices might foil 
with the onset of competition. 

Harry Monlson, TransCo’s 
managing director, and his 
staff of senior executives say 
they are determined to build 
an efficient, commercially- 


driven organisation winch is 
responsive to the needs of its 
growing list of customers. 

But relations between it and 
tiie independents operating in 
the commercial and industrial 
markets already opened to 
competition have not always 
been smooth. 

Last year a number of dis- 
putes arose over the slow pace 
at which TransCo provided 
billing information to the 
independents. Mr Monlson 
attributes the problems to the 
unexpected speed at which 
independents took market 

Some TransCo staff may 

eventually be stationed 
in the offices of the 
independents to ensure a 
speedier service 

share away from British Gas’s 
trading arm. 

“We believed there would be 
3,000-10,000 supply points [for 
the independents!," he said. 
“Now there are 120,000, and 
we've had to keep it together 
through fire-fighting." Short- 
comings in the current com- 
puter system added to the 
frustration felt by shippers. 

TransCo has since desig- 
nated senior account manag- 
ers to try to alleviate the ten- 
sions. Les Dawson, one of the 
managers, says: “Twelve to 15 
months ago most shippers said 
they had difficulties dealing 
with us. Now its just a hand- 
ful". 

Trust has developed slowly, 
but some companies are now 
providing TransCo with 
details of future business 
plans. There have even been 
instances when TransCo exec- 
utives accompanied the inde- 
pendents on sales presenta- 
tions to potential customers, a 
development which would 
have been unheard of only last 
year. In addition some Tran- 
sCo staff may eventually be 
stationed in the offices of the 
independents to ensure a 
speedier service. 

Mr Monlson says TransCo’s 


new commercial outlook 
means that it would even con- 
sider joint ventures on future 
pipeline projects. 

A document spelling out the 
piajn elements of the future 
relationship between TransCo 
and its customers is currently 
under consideration. The Net- 
work Code will define in detail 
the commercial and operating 
regime which will underpin a 
competitive market 

David Dewar, TransCo’s 
development director, admits 
that the atmosphere during 
early meetings on the code 
was “pretty dire". He believes 
there has been a “dramatic" 
improvement in recent 
months, although he worries 
that the present political 
impasse could undermine the 
commitment of some indepen- 
dents to taking part in what is 
Inevitably a time-consuming 
and highly technical process. 

There are still many issues, 
however, on which TransCo 
and the independents disagree. 
At present shippers do not 
have to supply to TransCo on a 
dally basis the gas their cus- 
tomers consume. But the pres- 
ent system of monthly balanc- 
ing means that TransCo is 
“physically and financially" 
subsidising them, according to 
Mr Dewar. 

The biggest disagreement, 
however, concerns the valua- 
tion of TransCo’s assets. 
Ofgas, the industry regulator, 
agreed to put off until 1997 a 
root-and-branch revaluation 
because of tbe pressing need to 
separate TransCo’s activities 
ITom British Gas’s trading 
arms, and to prepare the com- 
pany for competition. 

The independents say a 
lower valuation could pave the 
way for substantially lower 
transportation charges, and 
hence lower domestic prices. 

TransCo officials say such 
demands should be treated 
with caution, given the con- 
stant need to renew and rein- 
force the network to prepare 
for future growth, and for the 
cold winter days which could 
be just around the corner. 


Deborah Hargreaves on creating a UK spot marke 

Trading approaches 


The prospect of almost half of 
the UK’s daily gas supply 
requirements being turned 
over on a traded market or 
even the introduction of a gas 
futures contract is still some 
way from reality in Britain. 
But this is just what happened 
in the US where gas supply 
was deregulated Just over 10 
years ago. Now, shippers are 
confident they can turn to a 
well-established spot market 
for daily sales and purchases. 

Ofgas, the gas industry regu- 
lator, is keen to see the cre- 
ation of an efficient spot mar- 
ket in the UK to assist the 
development of competition 
when British Gas’s monopoly 
over household supply is abol- 
ished in 1996. 

Earlier this month , the regu- 
lator published a discussion 
document on a spot market, 
calling for views from the 
industry by early November on 
what steps should be taken to 
set it up. 

*Tn order to secure the suc- 
cessful introduction of sustain- 
able competition in gas supply, 
a daily market for gas has to 
evolve which is fully effective 
and efficient,” said Mark Hig- 
son, director of network 
operations at Ofgas. “We want 
participants to tell us the type 
of market that they would Hke 
to see evolve and what steps 
should be taken to develop a 
market" 

The need to establish a spot 
market arises from the daily 
balancing requirements of the 
gas supply network. Once Brit- 
ish Gas’s monopoly over house- 
hold supply is removed in 
April 1996, many of the inde- 
pendent shippers will be pump- 
ing gas I nt o homes through the 
company's pipelines network 
which is run by its TransCo 
division. 

These shippers will be 
required to balance their cus- 
tomer requirements on a daily 


basis - matching supply and 
demand which can fluctuate 
wildly, for example, when the 
weather turns suddenly colder. 

The debate over a spot mar- 
ket centres around how sophis- 
ticated this balancing system 
should be - whether it should 
be just that; a way to square 
up companies' needs on a daily 
basis or a folly-fledged market- 
place with posted bids and 
offers for gas. 

In its discussion document, 
Ofgas has laid out proposals by 
British Gas for a balancing sys- 
tem as well as a model for gas 
trading developed by the gas 

British Gas Is eager to 
see the development 
of some sort of 
marketplace in order to 
encourage competition 

supply arms of two regional 
electricity companies: Eastern 
Natural Gas and Manweb Gas 
with Morgan Stanley, the 
investment bank, amnng other 
suggestions. 

Tbe regulator wants to 
answer several questions sur- 
rounding spot sales and pur- 
chases. 

For example, it asks whether 
deliberate attempts should be 
made to create a “liquid and 
transparent on-the-day opera- 
tional gas market", or whether 
the market should be left to 
evolve without such interven- 
tion. 

The document also asks the 
industry: “Is it necessary or 
desirable to take a view now 
on whether or not to proceed 
with a deeper market or can 
that wait until later?" 

British Gas is eager to see 
tire development of some sort 
of marketplace in order to 
encourage competition. The 
company needs a flexibility 
me ch a n ism to balance the net- 


work - but this doesn’t have 
be a spot market “It's imp 
taut for us to have someth 
that moves us forward," c 
official said. 

But some independent Ind 
try players are sceptical ah 
the view that a marketpk 
can be imposed on gas tradi 
and many believe that s] 
sales and purchases should 
left to develop organically jj 
a larger market 

“There is a certain amor 
of trading that goes on now 
the gas terminals: more of t] 
is on. a daily basis in wlnta 
said Roger Turner, manag i 
director at UtiliCorp U 
“When the need for daily b 
ancing comes in, the comm 
cial and market pressures : 
daily trading will increase a 
spot markets will develop 
their own time." 

Mr Turner believes that si 
markets will develop at tbe g 
hubs where supply from t 
North Sea is brought on she 
rather than in a cent] 
marketplace. 

This means that daily bn 
ing will be closely linked to t 
physical market supply. Sea 
sort of clearing house or mi 
ket agent may need to be pi 
vided by a separate compai 
such as an investment bank. 

“I'm sure that after a year 
two, we'll all have screens < 
our desks with daily and mo 
long-term prices quoted ft® 
the terminals aro und the cou 
try,” he said. 

Since the government hi 
not yet produced legislation 
open up the household supp 
market, some Independei 
operators believe that it mi 
be too soon to be deciding ti 
details of how the market tm 
work. 

Alan Marshall, moaagli 
director at Agas, believes 
spot market will develop 
there is a real need for on 
Continued on page 




• 7 T-. 





FINANCIAL TIMES TH URSDAY OCTOBER 20 1994 


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UK GAS MARKET 3 


Tha Conoco-opsrated gas tenured, UncofcwMre: PowerGen fonrred a 
joint venture, Klnotica, wttti Conoco in 1990 

The regional electricity companies 

Operations to 
be combined 


All 14 electricity distribution 
companies on mainland Bri tain 
and PowerGen and National 
Power, the generation compa- 
nies, proudly boast their own 
gas supply arms. Some will 
undoubtedly make a success of 
them. 

But it is highly unlikely that 
all 16 companies will still be 
involved in what is certain to 
be a fiercely co m pet i tive mar- 
ket by the end of the decade. A 
few are expected to withdraw 
within the next year or so, par- 
ticularly if the government 
delays foil competition in gas 
beyond 1938. 

Few, if any, companies are 
likely to lose large stuns of 
money since setting up gas 
trading teams, often of half a 
dozen people or less, has not 
entailed significant invest- 
ment. But companies which 
withdraw will have to explain 
why a diversification that 
seemed too attractive to mi«s 
two years ago has foiled to 
deliver its 


promise. 

The initial 
attractions 
were plain 
enough. The 
recent regula- 
tory review of 
the regional ■■■■■■■■■ 
companies distribution busi- 
nesses underlined the per- 
ceived need from the (Sty and 
elsewhere for power companies 
to develop a range of busi- 
nesses which can make money 
in competitive and therefore 
unregulated’ markets. 

The companies certainly 
have the means to be able to 
diversify. All the regional dis- 
tributors and the generators 
either have surpluses or 
low borrowings. The problem 
for them is to do so without 
arousing doubts among inves- 
tors about whether they are 
capable of managing the non- 
power businesses they grow or 
acquire. 

The gas supply business has 
proved a lure because of its 
similarities and potential syn- 
ergies with electricity. 

The regional companies have 
long experience of operating in 
a low margin trading business 
and have developed energy 
trading expertise wbieb can be 
used in supplying gas. 

In many cases, the custom- 
ers to whom they sell gas will 
be the same as those who buy 
their power. Electricity compa- 
nies can make use of their 
brand name and the knowledge 
they have of the customers to 
improve their marketing. Some 
have merged their gas and 
electricity sales teams. Billing 
systems can be merged and, as 
technology develops, metering 
equipment can be shared. 

There are also synergies 
with companies’ generation 
arms. S.G. Warburg Securities 
regional electricity companies 
with gas-fired generation - 
that is all of them except Man- 
web - should be able to 
“swing" between gas genera- 
tion and gas supply. 

This, it says, should reduce 
the risk of over-contracting 
and potentially increase oper- 
ating margins as a result of 
seasonal demand. 

Klein wort Benson makes a 
similar point about National 
Power and PowerGen ina 
recent research document By 
developing a gas marketing 
business and a combined heat 
and power operations, which 
uses gas to drive operations, a 
generator has three alternative 
sources for any gas it buys 
including its own gas-fired 


The gas supply business 
has proved a hire 
because of its 
similarities and potential 
synergies with electricity 


power stations. This enables it 
selectively to target its sup- 
plies of gas, attaining the high- 
est margins possible.” 

PowerGen was one of the 
first electricity companies to 
enter the competitive gas mar- 
ket after setting up a joint ven- 
ture, Kmetica, with Conoco in 
1390. In 1993-4, Kmetica. con- 
tributed £8m to PowerGen’ a 
pre-tax profits on sales of 
£130m. 

Among the distribution ’com- 
panies. .Midlands Electricity 
was the first to move into gas 
marketing in August 199L It 
has a 7525 joint venture, Mid- 
lands Gas, with UtiliCorp 
is generally considered to be 
one of the strongest emerging 
players in the market 
DtiHcorp also has joint ven- 
tures with Norweb, Scottish 
Power, Seaboard, Sweb and 
Eastern. Northern Gas, the 
Norweb joint ve n ture, recently 
announced plans to set up a 
national gas nuBtoUng com- 

— pany. 

Total is 
among other 
overseas com- 
panies involved 
with regional 
electricity com- 
panies ; It has 
joint ventures 
with London and Yorkshire. 
Marathon. Oil & Gas has a joint 
venture with Hydro-Electric. 

The companies with most 
commitment to gas are those 
which have gone upstream. 
This summer Eastern Electric- 
ity bought a 6 per cant stake in 
fixe Johnson North Sea oil 
field, having previously agreed 
to buy its entire output 
Northern Electric, the last 
regional electricity company to 
move into gas simply, created 
an upstream gas venture with 
Neste of Finland and has a 
stake in the Victor field. York- 
shire has 7 per cent of the 
Armada gas field, which it 
bought for £27m from Amerada 
Hess. . 

Tbs aim of those companies 
moving upstream is to develop 
integrated gas businesses. 

Analysts believe that if the 
going gets tough these compa- 
nies will be the last to pull out 
of gas supply simply because 
they wm have to find other 
markets in which to sell the 
gas they are producing. 

Most believe that the going 
win get tough. Kevin Lapwood, 
analyst at Smith New Court, 
says the regional electricity 
companies’ gas businesses 
have not lived up to expecta- 
tions. 

“When the market first 
opened up it was money for old 
rope, because British Gas was 
under pressure to give up mar- 
ket share* says Mr Lapwood. 
“But as the market opened up 
further the competition got 
tougher. Nobody is losing 
much money yet but, with 
margins so thin, there are 
quite a few companies who axe 
unlikely to make much." 

S.G. Warburg believes that 
margins could be as low as 1 
per cent when the market is 
opened up fully. “This could 
threaten some regional electric 
companies' continued involve- 
ment in gas, given the long 
wait for deregulation, of the 
high margin domestic market,” 
says analyst Nick Pink. 

The two main risks, says 
Warburg , are bad debts and 
falling to sell all the gas 
bought from a supplier to an 
aid-user. That, in turn, could 
result in a distressed sale. 

Michael Smith 


Moving to screens 


Continued ftom page 2 

"There may well be a need for 
some sort of clearing bona 
arrangement which allows 
requirements to be balanced^ 
the day, but that depends on 
how many players there are in 
the market," he said. 

One of Ofgas's fears and a 

concern for some in the; gas 
business is that a s f ot 1 ? ia L 1 ^ 
which develops JJJJ 

not be as tnmsparent as a 

mal trading arena. If gas is 
bought and sold in 
roams when private deals are 
done ft will be hart to estab- 
Ush market prices applicable to 

^O^^-ument says: 


“Confidence that economic pri- 
cing si gnals are bring gener- 
ated transparently would be a 
key factor in encouraging reli- 
ance on the market and hence 
apahiinp the industry to add 
short term supplies to existing 
long term contract arrange- 
ments." 

This is why proposals by 
Morgan Stanley and the two 
regional electricity companies 
include the setting up of a 
commodity market with 
screen-based trading. Shippers 
hope that a mix of proposals 
will be adopted ftom the vary- 
ing suggestions in Ofgas's 
paper, but are not looking for 
opy ri gid market proacrfptioag- 


Q uadrant, Alliance and 
Kmetica. Just a few of 
the more than 4G com- 
panies which make up 
the UK’s independent gas sec- 
tor, may not be household 
names. But in many cases 
their shareholders are. A large 
number (ft the biggest oil and 
gas companies in the world 
have been drawn to the OK gas 
market, the fifth largest in the 
world and one of the fastest 
growing. 

For most oil and gas produc- 
ers, the appeal is simple: the 
opening of the domestic gas 
market is an opportunity to 
extract a higher value from 
North Sea gas reserves than 
was possible in the past by sell- 
tog to British Gas, for years 
the only buyer. Some also see 
the gas market as a logical 
downstream expansion. Natu- 
ral gas is a product which can 
be marketed alongside other 
energy sources such as petrol, 
electricity or home heating oiL 
The government's liberalisa- 
tion programme has also 
encouraged relative minnows 
to swim alongside the oil 
majors. John Astrop, commer- 
cial director of TTinaHra a joint 
venture between PowerGen of 
the UK and US oil company 
Conoco, says it is still possible 
for “someone sitting in a room 
with a telephone an d a far to 
run a gas supply business”. 

. Both minnows and majors, 
however, have been worried 
th»* the government will fan to 
put forward legislation to open 
the domestic market. The inde- 
pendents have mounted an 
intense lobbying campaign in 


Robert Corzine looks at the concerns of independent gas companies 

Uncertainty causes delays 


recent months to reassure poli- 
ticians that retail gas prices 
are likely to foil once competi- 
tion takes hold. 

The political uncertainty has 
caused many independents to 
delay making Hu» investments 
needed to operate in a competi- 
tive domestic market Compa- 
nies say it is also having an 
effect on decisions about 
whether to develop some North 
Sea gas fields and worry that 
prolonged delays could under- 
mine the continuing support 
‘ftom their parent companies 
needed to stay in the market 

The political uncertainty 
also coincides with growing 
competition and foiling mar- 
gins in those segments (ft the 
market open to competition. 

In recent years Ofgas, the 
industry regulator, has encour- 
aged competition by setting 
market share targets in the 
mainly commercial and Indus- 
trial segments above 2,500 
therms a year. It also required 
British Gas to ma l re available 
large quantities of gas to the 
independents as another 
mpanc of encouraging competi- 
tion. 

The low overheads of the 
independents mahimi them to 
undercut British Gas prices fay 
10-15 per cent, and they have 
quickly captured the mandated 
55 per cent of the firm contract 



Paying for more than just petrol; Total says its customer s wfl eventually 
be able to settle their gas bBts at petrol stations 


market above 2^00 therms a 

year. 

But the healthy margins the 
independents enjoyed in the 
early stages of competition 
have disappeared as the focus 
of competition has shifted 
away from taking market 
share from British Gas to 
intense competition between 
Hip independents. 


The intensity of the competi- 
tion is reflected in the feet that 
the independents submit 15,000 
nominations a week to Tran- 
sCo, the monopoly gas trans- 
porter, for quotes on the cost of 
transporting gas to potential 
customers. But only 1,500 
result in firm contracts, 
according to TransCo. 

Most independents believe 


the tough operating environ- 
ment will trigger a wave of 
rationalisation in the sector 
over the next two to three 
years. "The people who look 
most vulnerable are those 

without heavyweight financial 

backing," says one industry 
executive. 

Others say some of the “true 
independents” - those not con- 
nected with North Sea produc- 
ers and which do not have 
ready access to cheap supplies 
of gas - may be forced to 
retreat to niche markets or 
confine their activities to gas 
trading. 

The tough financial condi- 
tions likely to be required by 
the government to qualify for a 
public gas supply licence may 
also cause some companies to 
drop out, say industry ana- 
lysts. But the sheer size of the 
domestic market encourages a 
n umb er of companies. Just a 5 
per cent market share would 
still translate into nearly lm 
customers, spending on aver- 
age more than £250 a year. 

Details of the market strate- 
gies likely to be used by the 
independents will not be 
known until the conditions of 
the public gas simply licences 
are agreed. But several basic 
approaches are becoming 
apparent 

One is the total energy pack- 


age, with companies likely to 
offer electricity as well as gas. 
Some packages may also con- 
tain energy savings schemes to 
induce consumers to switch 
suppliers, although prices are 
likely to be the focus in the 
initial stages of competition. 

Some companies intend to 
link their gas business to exist- 
ing downstream activities. 
Total, for example, says its cus- 
tomers will be able to pay their 
gas bills at their petrol sta- 
tions. There is also the possi- 
bility that gas consumers will 
be included in the promotional 
schemes now run by oil compa- 
nies at their service stations. 

Ofgas officials say they 
would be pleased to see non-en- 
ergy companies enter the busi- 
ness. These could include 
credit card companies with 
existing large billing systems 
able to handle hundreds of 
thousands of accounts. 

But industry executives say 
it is more likely that oil and 
gas companies would form 
joint ventures with big retail- 
ers, such as supermarket or 
department store chains. “The 
marketplace could become a 
battleground for brand 
names,” says one. 

If it does, most independents 
concede that the strongest 
brand name is likely to remain 
British Gas. They worry that 
consumer inertia could prove 
the biggest barrier to their 
expansion into the market, and 
cite British Telecom as an 
example of how consumers 
stick to their existing supplier 
even though a cheaper .alterna- 
tive is available. 


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THc LCAOWG INTERNATIONAL GAS COMPANY. 




FINANCIAL TIMES 


THURSDAY OCTOBKR 20 IW 


UK GAS MARKET 4 


e l are Spottiswoode has a dual role to 
play as the UK prepares to deregu- 
late its domestic gas market As 
director general of Ofgas, the industry reg- 
ulator, she is working with the govern* 
ment to set out the rules for the new 
market. And once deregulation has 
occurred, she will oversee the market to 
ensure order and fair play. 

Ms Spottiswoode came to the job nearly 
a year ago after a career as a Treasury 
economist and more recently a business- 
woman in her own right Although she 
had limited experience of the gas industry, 
she had a strong personal belief in the 
virtue of free markets and competition - a 
belie! which she says has strengthened 
since she came to Ofgas. 

This view has shaped her approach to 
the regulatory issues. She would rather 
have a free market and use regulatory 
action to correct flaws, than intervene in 
every detail. "Well try and let markets do 
it; if not, we'll find a technical way 
through, H she says. 

Competition is also the best way to get 
British Gas to shed its huge “legacy 
costs”, as she calls them. "Regulation can 
only ever nibble away at the edges. Noth- 
ing can engender the culture shock that 
competition can,” she says. 

Ms Spottiswoode has advised the govern- 
ment to draw up a brief Gas Bill which 
provides the enabling legislation but 
leaves the detail to the terms of the operat- 



David Lascelles meets the head of Ofgas, the industry regulator 


‘Let markets lead the way’ 


Spottiswoode; ’a technical way through’ 


ing licences which she will issue to public 
gas suppliers (PGSj. Although this will put 
a lot of power in her hands, she says it 
will give the system the necessary flexibil- 
ity to evolve. 

PGS will have the right to seek judicial 
review if they disagree with her rulings. 


But Ms Spottiswoode also says she expects 
parliament to give her guidance about the 
line she should take. 

One of the first issues she will have to 
address is who to give licences to in order 
to ensure th at the market works. She will 
not insis t that applicants cover particular 
geographical segments of the market. 
Would-be PGS will be allowed to define 
their markets however they wish. Many, 
Ms Spottiswoode believes, will want to 
operate nationwide: no PGS need actually 
own any gas pipelines to provide a service 
so there should be no geographical con- 
straints. 

However some applicants may be organ- 
isations such as housing associations 
which d efine their markets by residential 
type rather than geographies! are a. 

If, once the licences have been issued, 
there are gaps in the market which leave 
same areas without a gas supply, she will 
use her powers to "stretch” existing 
licences to ensure that these areas are 
covered. Similarly, she will be able to com- 
mand companies to patch up holes in the 
market if a supplier goes out of business. 


The next problem is how to avuid cher- 
rypicking: new suppliers going for the 
choice markets and the easy profits. 

Ms Spottiswoode believes this problem 
has been exaggerated, and says it can be 
dealt with by identifying the people to be 
protected and including’ the necessary obli- 
gations in the licence. 

There are three issues. 

• One is energy efficiency . There will be 
a requirement on PGS to give advice on 
efficient use of gas. 

• Another is care for the elderly and disa- 
bled. The PGS will have to cater to their 
needs, although Ms Spottiswoode does not 
believe that these costs will be particu- 
larly heavy. She points out that the elderly 
tend to have good payment records. "The 
costs are so small that suppliers won't try 
to avoid them,” she says. It is even possi- 
ble that a PGS may choose to specialise in 
the market for people whose bills are paid 
by social security. 

• The third is debt and disconnections - 
or bad customers. Ms Spottiswoode says 
that many people fen into this category in 
the past because there was no incentive 


for British Gas to catch them before their 
debts became unmanag eable. In the new 
market, suppliers will keep a much closer 
eye on payments so that non-payers can be 
spotted early, she says. 

Although many expect the new suppli- 
ers to offer discounts to the better payers 
in older to lure them away from British 
Gas. Ms Spottiswoode says that it would 
make commercial sense for British Gas to 
cut prices first since these customers are 
cheaper to serve. That way. all prices will 
tend down to the discounted level, and 
cherrypicking will be much harder. 


M s Spottiswoode maintains that 
deregulation will not mean price 
increases - as some critics have 
argued. She expects most prices to JraD. “I 
don't see that anyone will lose as a result 
of competition,” she says. "Maybe just a 
few. but they will be caught by the social 
security net." However she admits that 
this is "a leap of faith” on her part because 
no other country has gone as for as the UK 
in deregulating its utilities. 

All these plans, however, depend on the 


goratMOTi giving tto eo-alioml for j <3* 

British Gas wants do the 

consumer associations. ****; h|n we 

ttoS n therewe r re a tot of contentious 
teues. But there are not ^ mW 
The real problem is the legislative time- 

Spottiswoode intends to deliver this 
message when she appears before the 
£5 £a and Industry Select Committee 
of thefaouse of Commons next week. 

But if the government decides not go 
aS withthegas bill in the next session 
of uarliament, what could she do to pre- 
servfthe head of steam that has built Up 

behind deregulation? 

It would be possible to lower the thresh- 
old at which competition can enter the 
market, but that would still require on 
order to be laid before parliament, u par- 
liament did nothing, the process of change 
“could fizzle out" creating instability, she 
says. But she would work hard behind toe 
scenes to ensure that that did not happen. 

ff gas is not in the Queen's Speech, she 
hopes that John Major, the prime minister, 
would at least make a statement promis- 
ing to deal with it next year. That would 
be sufficient to keep investors interested. 


D ecember could see the 
end Britain's isolation 
from the continental 
gas grid with the construction 
of a pipeline connecting 
England and Belgium. 

Such a link could open up 
trading to and from the vast 
European gas network, widen- 
ing horizons for gas companies 
that have already adapted well 
to new opportunities in the 
competitive UK market. But is 
a pipeline commercially viable 
and the best option for future 
UK gas trade? 

The proposed 300m intercon- 
nect or consists of a 250km high 
pressure gas pipeline from Bac- 
ton in eastern England to Zee- 
brugge in Belgium. Although 
capacity is not definite, the 
central case has a range of pos- 
sible flow rates from 9bn cubic 
metres (BcxrO/yr up to an antic- 
ipated maximum 15 Bcm/yr 
through a 35-inch diameter 
line. A larger option - a 40- 
inch line with capacity up to 20 
Bern - is also being considered. 

An interconnector study 
group, comprising seven proj- 
ect sponsors - British Gas, 
British Petroleum, Conoco, Dis- 
trigaz of Belgium, France's Elf 
and Norsk Hydro and Statoil of 
Norway - has been set up to 
examine the feasibility of the 
proposed pipeline link. 

The UK government, and in 
particular industry and energy 


A pipeline could link the UK to wider markets, says Rachael Ousiey 






An attractive proposal 


Thacfcfiatfcoijfe". 



minister Tim Eggar, see in the 
interconnector as an export 
route in the short term, provid- 
ing an outlet for valuable gas 
exports to the continent 

Detractors have suggested 
low gas prices on continental 
Europe make it difficult to 
imagine more expensive gas 
flowing from the UK to conti- 
nental buyers. But others sug- 
gest present-day prices are 
irrelevant as there will be a 
potential surplus of gas from 
UK continental shelf fields 
over the next 15 years or so 
which cannot be absorbed by 
the UK market alone, already 
at a high level of penetration. 

The inierconnector's viabil- 
ity would clearly be enhanced 
by a strong commitment from 
a leading producer to use this 
route. There are suggestions 
the UK government is putting 
pressure on Norwegian gas 
producer Statoil to put some of 
its volumes through the inter- 
connector. The apparent 
trade-off would be a sof tening 
of the UK government position 
on imports of gas from Norway 
to the UK. 


The current Frigg treaty 
allowing Norwegian Imports 
will expire when Frigg gas 
runs out in 1996-7, but discus- 
sions over a future treaty have 
reached impasse between the 
Norwegian and British govern- 
ments. This is in spite of sup- 
ply contracts negotiated 
between Statoil and British 
buyers such as National Power 


Funding options under 
consideration include 
shareholder loans, 
guaranteed bank and UK 
finance leasing 


and ScottishPower. 

Mr Eggar may be prepared to 
look more favourably on Nor- 
wegian imports in return for 
support by the Norwegians for 
the interconnector. Statoil 
already has four pipelines into 
continental Europe and is con- 
sidering a fifth to meet future 
commitments. While the inter- 
connector route carries addi- 
tional costs of transporting gas 
via the British Gas network 


from St Fergus in Scotland to 
Bacton, on the plus side It 
could offer Statoil further 
diversity of export options. 

The Initial interconnector 
project concept clearly sepa- 
rated ownership and capacity 
interests, but interconnector 
group commercial director 
Paul Reed said a consistent 
theme in discussions had been 
the perceived risk balance 
between owners and shippers. 
In May, the group changed its 
strategy to offer shippers 
equity in the line linked to the 
level of booked capacity, to 
increase the project's chances 
of success. 

Given the probable credit- 
worthiness of shareholders in 
the line and the transport 
terms, the group does not see 
financing as problematic. 
Funding options under consid- 
eration include shareholder 
loans, guaranteed bank loans 
(possibly including the Euro- 
pean Investment Bank) and UK 
finance leasing. Capital market 
funding post-completion will 
also be considered. 

Shippers expressing interest 


in using the interconnector 
must indicate their willingness 
to make long-term capacity 
bookings by letter to the 
steering group by the end of 
November. A signing meeting 
for final participants is sched- 
uled for December S, after 
which a company will be 
formed. 

Mr Reed said about 20 com- 
panies had expressed interest 
in booking capacity. Of these 
he expects 10-12 to make final 
commitments. Initial bids for 
capacity from shippers ranged 
from around 0.5 Bern to 3.0 
Ban, with an average around 
1.5 Bern, but some larger bids 
are expected. BP has already 
announced it expects to take 
up to a 20 per cent stake, 
according to BP managing 
director John Browne. 

Mr Reed is confident the 
interconnector will be built 
and suggests “it is not a case of 
if, but more a case of how big”. 

The Bacton-Zeebrugge proj- 
ect does not end with construc- 
tion of the pipeline. Transpor- 
tation of increased volumes of 
gas from landing points such 


S:- " 
j5: .. 


Bacton 


/ • s" • /vT.'A ^ i « 



UNITED 

KINGDOM 


. • #. .4.% V * V. '• ** '/ 

.v\ -i 

!»••• ••• • * •—* Ire * vv / * * 


a > : -*• METHEH^ANOS* , <* 

:7V... ’ 

L r rzJS . :[ eeLQnM_ „ 


Wa» SO 

Ken 80 


as St Fergus or Teesside will 
require British Gas to reinforce 
its network, unblocking bottle- 
necks in ffie system. Harry 
Moulson, managing director of 
BG TransCo, the transporta- 
tion and storage business unit 
has suggested this reinforce- 
ment could cost more than the 
interconnector Itself. 

A working group he estab- 
lished to look at the level of 
reinforcement required pro- 


duced three scenarios of differ- 
ent volumes arriving at differ- 
ent terminals. Shippers are 
being encouraged to give esti- 
mates of futiue demand. Simi- 
lar reinforcement issues face 
Belgian gas company Distrigaz 
which will be carrying gas 
from Zeebrugge to other Euro- 
pean destinations. 

The study group examined 
whether the interconnector 
would be the most economic 


means of either taking UKCS 
(UK Continental Shelf) gas Into 
the European market or bring- 
ing continental gas into 
Britain. On comparing the 
hypothetical cost of transport- 
ing gas from a field in the cen- 
tral North Sea to a customer in 
Germany via the mtercannec- 
tor with the cost of sending gns 
via a direct line from the field 
to a German landfall, it found 
the estimated pre-tax transpor- 
tation cost per therm of the 
interconnector route to be 
about 5.4 pence, 0.5 pence 
lower than the alternative. 

While the price advantage 
may seem insignificant, the 
group claims advantages in 
terms of capital efficiency and 
early cash flow of opting for 
tariff payments instead of up- 
front capital expenditure make 
the interconnector a more 
attractive option in terms of 
post-tax cash flow. 

This benefit is made more 
significant by the flexibility 
and grid-to-grid nature of the 
interconnector. In addition. 
The interconnector is not field- 
specific and can offer econo- 
mies of scale and new trading 
opportunities such as swaps, 
peak shaving, aggregation and 
pooling of capacity. 


Rachael Ousiey is editor of the 
Financial Times newsletter, UK 
Oas Market 





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FINANCIAL TIMES THURSDAY OCTOBER 20 1994 


31 


MARKET REPORT 


LONDON STOCK EXCHANGE 


Attempted rally reversed by bond weakness 


By Tony Byland, 

UK Stock Market Editor 

Uncertainty about the US dollar 
continued to gnaw away at confi- 
dence m a sluggish UK equity mar- 
ket yesterday. Further losses in gov- 
ernment bonds, following confirm- 
ation that domestic retail sales had 
strengthened in September, «i«r> 
bore down on share prices, and the 
FT-SE 100 Index lost a further 215 
points to dose at 3.0608. 

Early trading saw a brave 
attempt at a rally, largely inspired 
by a brief uptick in stock index 
futures. The Footsie to just 

above 3,092, but the flurry was 
quickly over and it was clear that 
there was no support for a chal- 
lenge to the 3,100 area. 

'Hie 0.5 per cent gain in UK retail 
sales last month was in line with 


some forecasts hurriedly reshaped 
by City analysts In the wake of 
Tuesday’s survey from the members 
of the Confederation of British 
Industry. Members of the CBI 
reported that retail sales were grow- 
ing at the fastest rate for nearly 
a year. 

On balance, equity market ana- 
lysts did not see the retail sales 
growth as being a threat for an 
early rise in base rates, but retail 
and consumer issues showed little 
enthusiasm for the indication that 
retail sales may at last be respond- 
ing to economic recovery. 

The market was restrained by the 
weakness in bonds, especially in 
Germany, and also by the la ck of 
vitality in the US dollar even before 
the annnnpoamont of the US trade 
deficit for August Disclosure that 
the US trade deficit with Japan bad 


risen to the highest level for a year 
sparked further weakness in the US 
currency, and the blue chip dollar- 
earning shares in London were 
quick to react 

There were sharp foils among the 
pharmaceuticals stocks, which had 
already been unsettled on Tuesday 
by SmithKline Beecham’s admis- 
sion that sales of its Tagamet drug 
had been badly hit by expiry of the 
US patent Other shares regarded as 
closely linked to the dollar’s for- 
tunes, including RT2 and HSBC, 
also turned lower. 

Bat the picture was little better 
among the domestically orientated 
issues. Most of the high street 
retailers continued to move lower, 
on the paucity of buying support 
rather than on any increased selling 
pressure. 

These stocks are now close to the 


pre-Christmas period which gener- 
ates the bulk of their annual profits, 
and confidence in near term pros- 
pects remains muted in spite of yes- 
terday’s evidence that retail sales 
may be picking up. 

Once again, the focus was on the 
big name stocks and the second lin- 
ers were somewhat overlooked. The 
FT-SE Mid 250 Index retreated 11.1 
to 3,521.2. Non-Footsie business 
made up about 60 per cent of the 
day’s total equity turnover. 

Seaq-reported volume moved 
higher again, horn 527.8m shares on 
Tuesday to 596m yesterday, but was 
still on the disappointing side of 
average levels. Traders continued 
to stress the sluggishness of the 
market that is believed to be mak- 
ing commercial life difficult for 
the pare brokerage houses, which 
depend on retail, or customer. 


FT-SE-A All-Share Index 


7.850 


business for their living. 

The London market is likely to 
turn its attention to domestic mat- 
ters for the rest of the week. This 
morning brings the latest statistics 
on domestic money supply and on 
building society lending, to be fol- 
lowed on Friday by provisional 
gross domestic product numbers for 
the third quarter of the year. 

However, the stock market will 
continue to watch the US dollar 
closely, with the blue chip issues 
unlikely to respond to purely 
domestic factors at present. But 
many analysts continue to predict 
an upswing in equities before 
the end of the year as recovery 
in the domestic economy shows 
through in terms of corporate prof- 
its and dividends, while subdued 
inflationary pressures prompt a 
rally in global bond markets. 



■ Kay Indicators 

Indices and ratios 

FT-SE 100 30608 -24.5 

FT-SE Mid 260 3521.2 -11.1 

FT-SE-A 350 1537.4 -10.5 

FT-SE-A AH -Share 1&24.3S -10.01 

FT-SE-A Al-Share ytdd 3.94 (331) 

Best perform in g sectors 

1 Water +1.3 

2 Merchant Banks +0.7 

3 Oil Exploration & Prod 4-0.6 

4 Breweries +U2 

5 FtotaHers, Food +0.1 


Equity Shares Traded 

Turnover by votume (mUor/). Exdudncr 
bHia-mniKat business and overseas turnover 
1.000 



FT OnSnay index 2357.0 -16.9 

FT-SE-A Non Fins p/e 18.74 (18.87) 

FT-SE 1 00 Fut Dec 3070.0 -30 

10 yr GOV yfeW 8.68 (863) 

Long gilt/equity yid ratio: 2.22 (821) 

Worst performing sectors 

1 Pharmaceuticab .-1.8 

2 Telecommunications -1.5 

3 Oft, Intorgrated .-1.5 

4 Tobacco -1.4 

5 Mineral Extraction ..-1.2 




import (in 


HOSSWOHD 



•SSX 

..-ii 

,««T 


Dividend 
hopes lift 
waters 

The utilities areas of the 
market, always viewed as safe 
havens when the wider market 
conies under pressure, gave a 
strong performance yesterday, 
led by the water stocks. 

These were driven sharply 
higher, helped by general opti- 
mism over the forthco ming 
interim reporting season that 
commences on November 1 
with results from Thames 


Water, which vies with North 
West as the sector leader. 

Dealers said the surge by the 
water issues was largely trig- 
gered by Smith New Court, 
whose analyst was said to have 
highlighted the potential for 
good increases in interim pay- 
ments. 

Most analysts are looking for 
interim- dividend rises in the 
region of 7 to 11 per cent for 
the individual companies. Spe- 
cialists also pointed out that 
the government's golden share 
in all 10 water companies will 
he abolished on December 31, 
opening the way for takeover 
moves. 

The best individual perfor- 
mance came from Welsh 


EQUITY FUTURES AND OPTIONS TRADING 


Stock index futures continued 
to decline, with premiums to 
the cash market narrowing 
through most of the session, 
writes Jeffrey Brown. 


The FT-SE 100 December 
contract was 3,070 at the 
official 4.10pm dose, down 40 
points for a two-day dedine of 
70. The cash market premium 


■ FT-SE 100 INDEX RJTURE3 (UFFE) C2S par tuft Index point 


(APT) 


Open Sett price Change Hgh Low Eat- vd Open mt 
Dec 3100-0 3070.0 -300 3114.0 3066.0 13894 55102 

Mac 3131.0 3083.0 -380 3131 it 31073 11 3700 

■ FT-SE MX) 250 INDEX FUTURES (UFFE) £10 per ftd Indent point 


Dec 


3537 n 3533.0 -17.Q 3537.0 3S37.0 


20 


4224 


» FT-SE MID 250 IMOEX FUTURES (OMLX) £10 pec tu» Index p oint 
Dec _ - 3533.0 ■ ~ I “ 

A1 open Harm Ague* m fdr prmtoii* day. f Exact votana Mac 


■ FT-SE lOQ INDEX OPTION (UFFE) f3057) CIO per 5# Index point 

2900 2950 3000 30» 3100 3150 3200 3250 

CPCPCPCPCPCPCPCP 
Od 161 I 111 1 61 2*2 28 12»j 2b « 1 95 1 145 1 195 

Nov inij 1S>2 1«P 2 23Ji 1043J 37b 73*1 57 47 62 28 1 14 16 ISW* 6 188% 

Ok 200*2 31>2 Iff 48 131*2 Of 102 83 74*2 <07*2 83*2 135*2 30% 170 23 208 
Jan 228 4fi 190 80*2 1S7 77*2128^88*2 «9 121*2 78b 150 58 181 44*2 219 

Jurt 288 83 228*2120*2 170*2 165 127 221>a 

Cali 4919 PKS 13JDB5 

■ EURO STYLE FT-SE 100 INOEX OPTION QJFFQ CIO per Ml Index point 

3878 2925 2979 3029 3078 3129 3178 3225 

OBI in 1 133 1*2 W*2 1*2 38 6 8*2 25*2 1 69 1 118*2 1 188*2 

NO* 203 12 181 19*2 123 31 88*2 47*2 81*2 89*2 88*2 87 23 138*2 12*2 168*2 

Dec 210*225*2 188 38*2 1« 51*2114*2 70 86*2 81*2 «J T|7*2 <0*2 W*2 27% 181 
Mar 234*270*2 171*2 106 IWj 150 77*2306*2 

Jiart 276*2 M 214*2 128 W*2 17D 1»*2 221 

Can 2770 Pm SlKD • UnowiH Ww rata*. ftnahm tom are tad on Mhmrt pikas, 
t limy fcfcd opirf mo** 

■ EURO STYLE FT-SE MP 250 INDEX OPTWM (OMJQ CIO par M Index poK 


3400 3460 8600 3580 3600 

Od 134* 71k W7% 93*2 «*» 1184* 

G*s 0 Puts 0 Sridenwl price* and ratoons m Wn to 4J0 psl 


8700 3790 


Water, up 13 at 657p, while 
Anglian, 549p, Northumbrian, 
687p, and Wessex, 631p, were 
all 12 ahead. 

GEC active 

Turnover of 13m shares in 
GEC kept attention firmly 
fixed on the VSEL takeover 
saga, where the cash-laden 
electronics giant is a declared 
potential counter-bidder to the 
agreed offer made by British 
Aerospace for the submarines 
group. 

But most of the activity in 
GEC turned out to be tax 
rather than bid related, and 
the shares dipped 3 to 284p. A 
bed and br eakfas t deal involv- 


at this level was 13 points, 
broadfy in fine with fair value 
premium. 

Although the premium to 
cash equities was dim, 
narrowing to around 8 points 
at times, traders said there 
was very little downward 
pressure on the cash market 

The quality business 
remained poor, with little 
Irquidity to be found In fattier 
the morning or afternoon 
session. Traders said It was 
hard to deal in sizes of more 
than 15 to 20 contracts. 

Institutional investors, after 
their brief reappearance on 
Tuesday, stayed on the 
sidelines. The atmosphere was 
gloomy, and most traders 
thought the contract would go 
lower before it recovered. 

Activity was again duD, with 
contract numbers easing to 
12,822, from 13,429 In the 
previous session. 

Stock options turnover 
totalled 39,813 lots, against 
26,685 on Tuesday. FT-SE and 
Euro FT-SE business 
accounted for 28,500 lots. 

Guinness was far and away 
the most active individual 
option, trading 2,060 lots. 
Glaxo, HSBC and British Steel 
were also busy options. 


| FT - SE Actuaries Share indices 



The UK Series j 


Day* 

Oct 19 PhaeK Od 18 Oat 17 Oct 14 

Y ear 
ago 

Ov. 

ytokm 

Earn. 

yteUK 

P/E Xd adL Total 
nllo ytri Return 

FT-S6 100 

30608 

-08 30803 31202 3106.7 

31582 

4.12 

7.10 

1865 110-35 118120 

FT-SE MM 250 

3521.2 

-03 35322 3648.0 3543.4 

3507.1 

3.55 

5.79 

2022 10820 131423 

FT-SE MM 250 ax kw Trusts 

S516.7 

-03 3526.1 3541.9 3537a 

35032 

3.72 

827 

1037 11079 1310.18 

FT-SE-A 360 

1537.4 

-07 1647^ 1583.0 1557^ 

1573.1 

3.99 

8.80 

1725 5158 1182.74 

FT-SE SmoKCap 

1792.87 

-02 179704 180015 179013 179096 

329 

423 

25.41 4809 1394.11 

FT-SE SmaOCap ex hw Trusts 

176248 

-02 178SL48 1787.88 178522 1780-72 

3.49 

5A8 

23.15 4923 1374.84 

FT-SE-A ALL-SHARE 

152409 

-07 1534.40 154045 1643.11 1557^9 

3-94 

828 

1725 5228 120228 

■ FT-SE Actuaries All-Share 








Oa/e 

Year 

ON. 

Earn 

P/E Xd v*. Total 


OP1 19 

chga% Oct 18 Od 17 Od 14 

ago 

ytokIH 

yMdN 

ratio ytri Ratum 


10 MINERAL EXTRACTION(ia) 
12 Extractive Industries*!) 

15 OH. MajpatWR) 

16 04 &cjaBjjg> 6 Proem D 


268329 

-12 271898 275328 274727 242870 

3.43 

810 

24.79 

81-48 

108020 

393887 

-09 907422 401327 3983.74 3095.10 

32B 

821 

23.74 

9802 

108885 

282873 

-12 266828 2707.47 270M3 240840 

329 

872 

21.78 8520 

108121 

189896 

+08 188843 190420 189722 200420 

2.19 

i_ 

i_ 

3GLQ3 

109T26 


SO GEN MANUFACTURERSC2B7) 187037 

21 Bidding & Conamjettonpa) 1052-94 

22 BuMhq Mato & Merchapaj 182090 

33 C*K«nrilcal5p3* 2342.11 

24 DKwmfted mdu»Wols(l6) 1774 SO 

25 Electronic & Bed EquW34) 1B78 -22 

26 Engtncortnapl) 18 ” ? 4 

27 Engmeomg, WsWdesflEJ aa *5 - ! 1 

28 Printing. Pape* 8> PckgtK& 276224 

29 To* mas * AnpareKTOI 1606.84 


-Q81884J55190a.74ia8e.11 191420 4.07 5.11 23.72 

-0.4 1057481071.57 107787 1158.40 9,75 587 2525 

-as 183828 185942 185180 185780 483 6.18 2328 

-0.7 2357.47 2367.05 2327.77 222080 3L96 4.41 2388 

-09 179074 181980 1824.41 188070 5.18 523 2097 

-OS 189423 1924.82 192075 2161 90 4.01 3-71 17.74 

-09 181048 183080 1823.11 168280 3.17 486 2387 

-08 227985 226072 227286 1889.60 4.42 1.46 90007 

-0.7 278124 2802.99 279987 245080 3.11 542 2188 

-18 182886 1831.77 163888 192180 4.1B 67a ima 


80 

8BJ9Q 

7988 

32.75 

8085 

48.78 

9284 

75-03 

4888 


956.16 

82980 

888.73 

103983 

91288 

92021 

103089 

110889 

108884 

910-35 


30 CONSUMER GOODSJ77J 2732.73 

31 Bmwario3(l7] 

32 Spirits. Wince & CfcfcrsflD) 2844.12 

33 Food MariutadureraPO) 2286-94 

J4 HtwsefuH Go«JS(l3) ****** 

36 H**h CareCI) *«*■“ 

37 ppamiacautlcalaflS) 

38 rotoapoot*) — S®*- 


-09 2758.72 279025 277283 2838.10 
♦02 2202.66 222028 221 483 2061 80 
-08 285280 287780 285281 289040 
-08 230049 231781 230042 236170 
-06242284241012 240080 266180 
-02 1624.94 163983 183073 170780 
-18 303008 308189 307031 328050 
-1.4 3T7Q09 3964.79 3817.03 402380 


428 

725 

1873 107.70 

944.74 

429 

7.78 

1US 81.10 

98820 

322 

883 

1885 10123 

95720 

424 

728 

1814 8429 

86420 

320 

725 

1886 8222 

86880 

811 

322 

4229 4824 

944.42 

4-41 

7.17 

1814 12818 

96844 

523 


1122 21727 

84898 


40 SERV1CESP20) 

41 OetnbutortSHI 

42 Letoire 4 HoiebpS) 

43 Modia{39) 

44 Rawoera, FoodpQ 

45 Rotators. Generals) 

48 Support Stocosf* 1 ) 

49 Transportlttil 

51 Other Sendees 8 B ualncMff) 

60 ummessw) 

M Ekctricttyiin 
64 Goa OtetriPuttonCT 

66 roVxxjrnn»inKatk5ns(4) 

68 Watw(l3) 


190789 

2S2189 

208289 

379148 

1712.07 

1653-42 

1497.60 

223888 

1244.05 


-OI 191015 191924 191320 190420 

819 

840 

1822 

51-50 

03827 

-02 253420 2S6Z20 255898 2721.40 

3.72 

728 

1025 

8229 

87725 

-0.1 208427 206228 2079-46 190320 

322 

4.70 

2424 5729 

102920 

-04 280222 282074 282722 257070 

2.49 

838 

21.68 

0042 

97128 

+Q.1 171013 171049 170128 1703.70 

3.78 

920 

1329 

5000 

100629 

165324 165846 16442* 1707.70 

219 

028 

1088 

4423 

885.46 

-04 1503.17 1H08B3 1508.47 1041.50 

281 

845 

1828 

3522 

91222 

-02 224025 227242 22782*232040 

322 

808 

2047 

5828 

878.10 

-04 124879 1252.78 125810 123800 

878 

3.78 

38-04 2522 

1088.73 


238583 -08 239024 242070 2411.19 250380 

242075 -0.1 242064 2459.46 2432.15 2171.70 

1894.49 -08 188989193487 196385 217030 

2031.50 -18 2061.99 208380 206013 2322.60 

100488 +18 188063 1B9083187586_1982.ig_ 


4-41 

728 

15.45 81-97 

92223 

3.78 

1018 

11.75 83.46 

1009.19 

822 

t 

311728 

88826 

4.07 

7.74 

16.72 S022 

68822 

5.10 

12-42 

8J7 8825 

9K28 


89 wOW-Fei*NClALStMg 

70 FWANCWLStttM) 

71 Banted 01 

73 tnsuroncdlT) 

74 Ufo AssurancoW 

75 Merchant Bonks*6) 

77 Otter FlnartcteP*) 

70 PfooortvWI 


215383 

290788 

1247.69 

235187 

274180 

1905^48 

1488.13 


-08 216S.9S 2182.13217981 233010 480 9.11 12.73 8884 85040 

-07 2827 JSC 28S18B 284058 2875.40 480 1015 1127 11889 844.15 

-1.1 126127 127028 126822 1487.10 5,42 9.43 12.12 5003 85922 

-062380782364802383.07 278920 5.44 723 1588 12722 91000 

♦0.7 272323 274884 2755.70 31 7420 3.79 1223 928 87.78 83722 

-02 182189 1834.70 183722 188120 422 826 1322 6381 98880 

1488X1 148085 1483.17 189880 4.13 482 29.13 4322 84029 


wV5£5g BiBi 8745198 ^270030277043 277422 271680 


89 FT-SE-A ALL-SHARE|8fl« 

■ Hotfriy movements 

Onon MO 


153489 -0.7 1634.40 154825 1543.11 1557.69 


1020 1120 1220 1320 


3-24 

324 


1820 


_L»_ 

068 


5189 S320 92428 
17.65 5288 120088 


1010 WghMg InnWy 


30704 

3S30.4 

1545.1 


30888 

3533.9 

15405 


30882 

35388 

15492 


30706 

35352 

15401 


30742 

35292 

1543.7 


FT-SE 100 
H SE Mid 250 
FT-SE-A 350 

1W . rr sc too o-F. Mto **■'««» «***• ^ ^ 1flM 

350 Industry baskets 


30688 

3527.4 

1541.4 


30628 3059.6 30578 30822 30578 

3S237 3S232 35212 3S37.4 35212 

15301 1537-1 15300 1G61A 15382 




ing 11.3m shares . passed 
through the market at 278p. 
VSEL itself moved down 15 to 
1,300 while BAe lost 6 to 47Sp. 

CU switch 

Commercial Union came 
under fire in a generally soggy 
composite insurance arena as 
Credit Lyonnais Laing high- 
lighted the impact on ClTs bal- 
ance sheet of the Group Vlc- 
toire acquisition and 
recommended a straight sell of 
CU shares or a switch into 
Royal Insurance -or Guardian. 

DLL's insurance team 
described the acquisition, as 
“well timed from a pure insur- 
ance viewpoint”, bnt ques- 


TRADING VOLUME 


■ Major Stocks Yesterday 

UaL Cbatng tort 
OOP* pHe» dmm 

at 

Asmaamt 
AbboyMtfaotft 

Abnmw 
MUDanteqt 
AngHan WMur 

izzz&Lrt 

AMK.Gk4.ftmi 
BAAt 

BATkxat 

BET 
acc 


8P 


bps kid*. 

BTt 

Blftf 

BankolSoaUrntt 

S3" 

BkmOnM 

Boohnr 

Bo«*t 
SowirT 
Brk. Amnfmcat 

Brftnti AUMranf 

arkWiGWt 
ftwahlsMl 
Bnttoti SMwrf 
BaU 

Bunran CtoTOlt 
Bonn 

Cksiwhr 
Cadxay SdMtppwt 

OMfcm t 

Carina canm.t 
Coni4»*»« 

Comcv unnaf 

Ox*jcn 

CoortaAosT 

ssu 

Dima 

Bream Baa-t 

Bra* Mkfaod Boa. 


Qan. Accdanrt 
OanreinocLT 


387 

310 

-1 

2200 

83 

-h 

SZB 

404 

-7 

2200 

47 


1.700 

502 

-1 

505 

548 

+12 

ISO 

332 

+2 

2200 

209 

+2 

1.400 

240 

-1 

202 

525 

-2 

91 

STS 

-a 

1,100 

507 

+4 

4,400 

444 

-a 

2200 

1(M*j 

-2 

358 

351 

-9 

208 

684 

-7 

8200 

407*2 

-6*2 

SOS 

314 


0300 

392 

-*h 

12.000 

309 

-2 

1200 

203 

-P 

3200 

667 

+3 

372 


+1 

-1 


413 

-7 

1200 

527 


1.400 

462 

-12 

i2oo 

47B 

-a 


374 

-4 

7.700 

285 

-1 

so 

390 

■a 

>8.003 

159 

-8*a 

8 

103 

73 

852 

+i 


1800 

1JS» 

708 

B.WO 

1200 

2800 


HrrtnaCnaW 


NDteVlMtVMMt 
Northern Sect 
NanhMFkoHt 


-4*f 


** iB74^2 1687.74 166621 321 6.41 1074 5582 1187.70 


27 1348 

259 GOB 
1800 325 

*800 353 

BXO lDO'j 
1,400 1M 


2.400 227 

1.700 400 

1800 143*2 

5300 414 


SwAMncwt 

TBN ^ 

nGmopt 






Cl— Pmriirea Chang* 



MmWst 3a 


maFT-socr 
nririm 
C 044*0X1 *>7 

O ItK WWUHMlS 

-rr«3C- and Tooum 
own am aufail 
t Snctor PT r«* 


iteatakKiisnofmior 




turned the long term strategy 
of purchasing a company 
which relies on third party dis- 
tribution when technological 
developments suggest more 
business will eventually go 
direct 

The broker estimated that 
ClTs net asset value had been 
diluted to a current level of 
450p and anticipated initial 
earnings dilution of 10 to 15 
per cent 

CU shares declined 9 to 535p 
on turnover of 2.2m, while 
Royal was only 2 off at 282p on 
2.3m traded and Guardian a 
penny easier at 192p. 

Barclays outshone other 
leading 1 hanW moving Up 3 to 
587p In response to positive 
noises from Hoare Govett, 
which was said to have 
lunched with senior officials 
from Barclays on Tuesday and 
reiterated its positive stance on 
the stock. 

Lloyds Bank, on the other 
hand, continued to suffer from 
Tuesday's news that Sir David 
Walker, the deputy chairman, 
is leaving the bank to join Mor- 
gan Stanley, the DS invest- 
ment bank. Lloyds dipped 10 
more to 554p. 

Lloyds also played a part in 
the decline of Standard Char- 
tered shares, which lost 6 at 
26Bp on relatively high volume 
of 3.8m as dealers picked up 
whispers that Lloyds may at 
last be ready to dispose of its 
4.7 per cent stake in Standard, 
some 45m shares. Lloyds 
acquired its holding in Stan- 
dard In the early 1980s when it 
unsuccessfully bid for the 
bank. 

Two big individual trades. 


NEW HIGHS AND 
LOWS FOR 1994 

MEW HUM tm. 

08JS fl) BUB2HQ « CN8TRN HI Howtocfc 
Euopo. owenam mou io — 
H2CTRNC 3 BLBCT EQUP (Q LPA MuMos, 

Mka—N, Nokia ftt. EXTRACTIVE INDS n 

Eos—!, Oanear, —Mm Aran, tNV9ST74SfT 
TRUSTS (3) MEDIA PQ Fterlach. Voita+lta Ty» 
-Taos TV, Do Wit*. OR. EXPtXHUTlOH 8 
PROD (1) QoHreanv HttfuncaniUU |1| 
BakMi BMbcH. PRTNQ, PAPBfl 3 PACKS ft) 
Baupi. TIMCRBORT 03 MO 9*4» M4- 
SM0KO4£t>, SOUTH AHKMN3 (I) 8A80U 
NEW LOWS M. 

Q4.TS (1) MMCS (!) Bonk of SeoriUd BMpc 
Fkt, Bank of ScoBsnd OMpe ftt, bum HATLS 
3 MCHTB H Hajrmxl VMms, Do ftL. 
CHEMCALS fl| Meteor IML USTMBUT0R8 
M BMfcNa/ Motor. QtonchMMn, Hndaai, Lax 
SanriM. DIVERSIFIED INDUS (0 Ptmn0 CUkyi, 
BECIRNC8 B8CTBQUP fC Data. Johnson, 
SoortNMic, SBremUm. BtCBOmam m 
Vtotea. Whman, EXTRACTIVE MOS M 
PasMe Me. SIm. Sl Mtn. ante. 
HOUSBKHjy QOOOS d FkM Omr, Vynsm. 
IHSURAMCE (1) Amariren Oan, INVESTHSKT 
TRUSTS HT) MVEBimiT COMPASSES « 
Hmgmton. Kw Chkia Supf Ffl. P u ti u ort RL 
ftt. Spsnrei Smtoar OoM, Do Vito, LB3URE 8 
HOTH2 U taps*. Stnek* (Wn4, UFE 
ABSURAIICC (t) Lknto MrikMl. MBM(2) 
88B Mgn. FariameuHi 8 AndatondL 
■ MERCHANT BANKS fQ Whtmot OH. 
EXPLORATION « PROD H Hot ScbUrtMrfRr, 
OTHBI nUKCML R knmadtea C*K S-te 
Pretta A. Tmy Lav. cm«R SBW3 A BU8NS 
a LaM* ha mn, WMa M a imown t M, 
PHMMNMUnCALS tO PKIHO. 

nu>Bi A packo |q Btmoaa. Brtnon. Croopor 
(4 Umn IMdoa Hy*u. SMow. PROPERTY 
W Camay ml. OabanMm Twnoo A CMreacka, 
RagNiSn. 3mtt> (J). RETMLERS, OBEHN. (2) 
On» Art Drea- W ou tn ^ iani. SUPPORT aglUS 
H Autoled Sat. UcOomal kiM, am-Ptun. 
TEXT1LE8 A APPAREL 0) Umar, Paridand, 
TRANSPORT p) BsOMlwU UUB. Vmt AS, 
AmKANB |B| Anwtan T A T. Befl «•*, 
CoHorita Bregy. MahyTaehnaiow. USMtaat. 

one of 1.4m shares at 352p and 
another of 800.000 at the same 
price, said to have been exe- 
cuted by Swiss Bank Corpora- 
tion. were the catalyst for the 
strong upward move by Scot- 
tish Power, which settled 5 
higher at 353p. Turnover In 
Power reached a hefty 4-8m. 
BTK was hit by a sell note 


squall, sliding to 305p at one 
stage before closing 2 off at 
309p in 12m turnover, Credit 
Lyonnais Laing, unbappy with 
tbe pressure on the company’s 
profits margins and concerned 
about earnings dilution 
through impending warrant 
conversions, is telling clients 
to sell 

Smiths Industries put on 7 at 
447p following strong results, 
although it was the 13p divi- 
dend - against market hopes 
for 12£p - that provided most 
of the underpinning for tbe 
shares. 

British Steel, the most 
heavily traded Footsie stock 
with 16 m shares changing 
hands, eased 3% to I59p as 
doubts about the shares’ abil- 
ity to outperform the market 
continued to trigger substan- 
tial position taking. The high 
turnover was mirrored by very 
active options business. 

Senior Engineering contin- 
ued to rally, moving up 4 to 
82p an the back of attempts by 
the company to reassure City 
institutions that this year's 
forecast profits upset is largely 
an isolated affair. 

NatWest Securities' latest 
property note was something 
of a mixed blessing for the sec- 
tor yesterday, with British 
Land receding 5 to 398p and 
Brtxton Estates 4 to 195p. The 
securities house expects share 
price discounts to asset values 
to widen by a third to 20 per 
cent on average over tbe next 
12 months and has moved its 
stance to neutral 

But the house was not uni- 
formly downbeat Its advice to 
switch from Brixtan Estates to 


Slough Estates helped to push 
the latter up 3 to 227p in turn- 
over of 2.3m. Equally, an 
upgrade of Hammerson’s net 
asset value to 396p following 
the company's big Australian 
disposal spurred the shares up 
2 to 337p. 

Price softness at Grand Met- 
ropolitan stood out in an oth- 
erwise resilient drinks sector - 
Guinness put on 2 at 463p and 
Scottish & Newcastle added 4 
at 5Q8p - with the weakness of 
the dollar helping to push the 
shares down 5 to 4l6p. More 
than half of GrandMet's turn- 
over arises in tbe US. 

Paper group Bowater fell 12 
to 452p after dealers said 
S.G. Warburg removed the 
stock from its buy list The 
house shaved profits forecasts 
but remained positive over 
long term prospects. 

Publisher Harrington Kil- 
bride dropped 10 to 42p after 
announcing a first-half loss 
and passing its interim divi- 
dend. 

Shop fitter Havelock Enropa 
jumped 18 to 188p as it restored 
the interim dividend for the 
first time in three years. 

Bullish comments from 
David Sainsbury, chairman of 
Britain's biggest supermarket 
group, propped up the food 
retailers yesterday. Argyll 
gained 2 at 2S9p and J. Sams- 
bury a penny at 399p, while 
Asda and Tesco were also firm. 

MARKET REPORTERS: 

Stove Thompson, 

Peter John, 

Jeffrey Brown. 

■ Other statistics. Page 22 


LONDON EQUITIES 


LIFFE EQUITY OPTIONS 


RISES AND FALLS YESTERDAY 





CMs 

__ 

_ r 

fata 

tore— • 

own 


Od 

Jen 

M 

Od 

ton 

Ad 

MM dgan 

589 

11 


_ 

6* 

_ 

_ 

ran ) 

838 

1 

to 

— 

48 

- 

- 

Am* 

260 

R 

21* 

28* 

2 

13 

17 

(-368) 

280 

3 

11* 

18* 

13* 

24 

26 

AEOA 

80 

4* 

7 

a* 

1 

3* 

5* 

nnj 

70 

1 

3 

5 

8 

9* 

11 

Brit Airways 

360 

17* 29* 40* 

2 

14* 

20* 

r®4) 

300 

2 

IS 

2BH 

1«* 

31 

36 

SriOBcMA 

300 

28* 

38 

45 

1 

10* 

16 

T41B) 

420 

5* 

21 

28* 

9 

23* 

30 

Boos 

BOO 

30 

40 

83 

1* 

10* 

17* 

rS26) 

550 

1* 

14 

27 

25* 

38 

43 

BP 

39Q 

21 

32 48* 

1* 

11 

16* 

r«7 1 

420 

4 

is: 

25* 

15 

26 

31* 

SriihSW 

140 

20* 

24 

28* 

1 

3 

5 

nsn 

160 

3* 

10* 

17 

4* 

10 

12* 

Bass 

500 

39* 

48* 

64 

1* 

15 

19 

■rS35) 

550 

4 

18 

27 

19 

42 

48 

Mtataa 

390 

22 

38 

47* 

2 

16 

23* 

r«oj 

420 

3 

21* 

33 

18* 

31* 

38 

CDertodds 

420 

SB: 

35* • 

46* 

1* 

13 

17* 

r**i > 

400 

1* 

18! 

28* 

21 

34 

38 

CoumlMw 

403 

45* 

57*1 

52* 

1 

6* 

16 

r»« ) 

543 

3* 

25 : 

33* 

13*26* 

40* 

o 

800 

28 

55* 

88 

3* 

222 

42* 

r*i9 j 

850 

3: 

29* 

44 

33 

49 

69 

HngOdKi 

460 

33 

40*1 

52* 

1 

11 

18* 

r«7i 

500 

5 

24 

41 

14*: 

27*: 

37* 

Lend Socur 

600 : 

26* 

38 

48 

2 

14* 

17 

r®t » 

650 

1 

12 

24 

30* 

43 

45 

Unrioi & S 

420 

7 

22 32* 

4* 

16* 

22 

r«s) 

460 

1 

8 

15 

38*43*46* 


460 

41*! 

54* 

83 

1 

0 

21 

r«7) 

500 

8 

29 

39 

n 

25 : 

39* 

Soiottawy 

390 

14 

2B 

48 

3* 

17* 

22 

(-398 ) 

420 

2 

16 

28: 

28*: 

34* 

38 

Six* Tram 

700 

16* 

38 

48 

4* 

17 

M 

mo 1 

7S0 

t 

M23H 

41 46* OB* 

Stanhoere 

200 

20 24* 

29 

1 

4* 

8* 

(21?) 

220 

3 

12 

17 

6 

13 

18 

TraMgar 

80 

a* 

8 

12 

1* 

5 

6* 

rwi 

90 

i 

3 

7* 

BH 10* 1 

12* 

Urtonr 

1100 

44 67* 

86 

2 22* 

37 

niaai 

1150 

7* 

38 86* 

17*45* 

62 

Ztoca 

600 : 

W* 02* 

73 

2* 20* 34* 

raao) 

850 

5 

34 

46 

29 

44 60* 

Opto 


He* 

Ml 1 

to 

Nor 

Mi May 

(toed l*a 

390 

35 42* 

49 

4 

14 16* 

T41«) 

420 13* 

25 

33 

15 

28 

31 

(jdnto 

140 

18 

24 28* 

2 

5* 

8* 

ns3) 

160 

S 12* 

18 

1 14* 

17 

ua fStato 

300 14* 

25 29* 

7* 12* 

22 

r*Q) 

330 

3*12* 

18 

29 

31 

41 

(Won 


DOC 1 

to . 

JM 

Dec 1 

Hot , 

Jua 

Rams 

110 10* 

IS 

18 

7* 

9* 

12 

PlU) 

120 

610*13* 

14 

18 17* 

Opto 


KM . 

unr 

Knr 1 

M) 1 



Rtoos 


FSOa 


Sums 


Opto 


■ Mi- 


■Pub- 


Ntot Hb M« Nd» ftt ia« 


220 1314 17 2BH 4 9 13 

240 3H n 1114 15 20M 23 

134 18% - - 2 _ - 

154 8 - - 9 - - 

180 18 24 27H 3 6K 10 

200 8 12 17 12 16 20 

600 30H 41 GBM T2H23M 38 
650 8 M 36 42 51M66M 

180 M 17 23 3H 8 11 

200 3» 8 13 15 19M22K 

300 15HSH 28 6M 12 10M 
330 M IIS MM 26 2914 38 


f-228 J 
lano 
n*i 

Lucas ends 
PM) . 
P&O 
f®*5 | 




65 




12 

74 

383 

100 

318 



80 

177 

60 

117 

14 







UtflHtos 







208 

66 

229 

20 

Others 

- 26 

Totals 

328 

923 

1335 


P87) 

ftuMU 
("307 ) 

mz 
0*73 ) 


On bread on thaw oampanlaa MM an riw London Shan Samos. 


f471 ) 

HcqM tasos 
ran 1 

Tosco 

C2M) 


1 * 200 ) 


POT) 

Opto 


850 42 84H 75 
900 WH J7Vi 48 
460 2314 41 48 
500 Oi 22 29% 
280 14 24 30 
300 5H 15 22 
220 20 28K 31 
240 7U 14K 28 
200 914 18 21 K 
217 3K 8H - 

3a am - - 

354 5 - - 


12 2414 4214 
37* 60 68 
9 16*32* 
WH 39 57* 
1(M 17 23H 
23H 29 36)1 
3 6H 1IJ4 
UK 16* 21 
8 14 17 
19 24 - 
4H - - 

1BH - - 


Expiry 

SeUtenont 


January 12 
January 26 


TRADITIONAL OPTIONS 

Rrat Dosings October 10 

Last Dosings October 21 

CsUc Andnox. Anglo Padfle, BTR WM, Canadton Pizza, Euro Dtansy, OiaanMi 
Res, Lon Ma foHsn^ MR, SnSh TuOow OA Puts: Arokies, Lon Merchant Puts & 
Cals: Division Grp, Eurotunnel, Nutrida. 

LONDON RECENT ISSUES: EQUITIES 


Oct Jan Apr Oct Jsn tv 


Mta 460 38 54% B3H 16 27 30 
f476 ) 500 MH3SH44H 37H 46K57H 

BAT tads 420 31 H 44 S2H 3H 12H23H 

1*443 ) 460 BM 21 38 24 32 45 

BTR 300 16H 28 31 8 11M 18H 

006) 330 314 12 17 25H 29 38 

Br* Tsbaxi 380 1318H28M M 19 23 
H91 ) 420 3 8 14 31 « 404 

CadbwySct 420 32 43 48H 3H 8H IBM 

(-443 I 4608»2l2Btt22U 27 37H 


BAA 500 12»28M 37 4 1BH 21H 

(*507 ) 525 2 14 21H22H3134K 

rants Wit 500 3Mt38U 92 1H IBM 19K 

(*526 ) 560 ZH IB JBH 2B 42 48H 

Opto Pea Msr Jtas Dec Mar Jm 

ttbsyiw 390 Wt 37% 41% 915 2DK 25% 

f 403 } 420 W 22 27 25 38H 42 

AmsBad 25 3* 4H • 2 3 5H 

TV V 30 1K2H3H687 

Barctqis 550 37 51 88 14 27H34M 

(*566 ) BOO 13 a 36 42 35» 83 

BM Gktie SO 21 22% 35 8W 13 7XA 

C287 ) 300 10% 18 23 10 Z3M 34 

Brito Gat 200 16H 24» 2* 8 13K 19 

C2M ) 3W 7 1BMtt18*23tt30K 

Oban 200 *4 T9M2SM 11 17 21 

reoi ) 220 6M 11H 17 24 29H 33 

1B0 17V5 2234 29 4 6* 10» 

180 8 11H KH 13H 18 22 

130 12H 18 18 6 10H 12 
140 7 71* 14 11 18 17* 

460 32* 43*65* 13 20* 30 

500 13*24*38* 35 41* SO* 

330 35* 43 51 8* 17 20* 
380 18 Z7H 36* 22 31 35 
100 13 IS 17 2 4 6 

110 B 9* 11* 5* 8* 11* 
220 22 28 32 4* 8* 13* 
240 8 W 21 14* 17 23* 

120 14* 18* 23 5* 8 12 

130 8* 13* 17* 10* 13* 17 
1000 43* 88 82* 25* 43* 52 


Issue Amt 
price peid 

P UP 

MKL 

MP 

pnj 

1084 

Hgh Low Stock 

Close 

price 

P 

+/■ 

Not 

<fa. 

OH. Grs 
cow. yfc! 

WE 

net 

_ 

FJ». 

061 

e»2 

4 APTA Wirts. 

4*2 -Ik 

wm 


_ 

_ 

- 

FP. 

9.48 

73 

63 Artesian Esta, 

70 

-1 

- 

- 

- 

_ 

§125 

FP. 

17.1 

130 

1(2 Compel 

112 


WN4J3 

2.T 

4.5 

10-8 


FP. 

1-30 

Ih. 

1 Conti Foods Witt 

IV 


- 

- 

- 

- 

63 

FP. 

123 

68 

65 Erinanlx 

67 


RNOJT 

5.3 

12 

&4 

115 

FP. 

39.1 

126 

116 Games Workshop 

126 


AN4.B 

22 

46 

US 

_ 

FP. 

2-49 

35 

30 Group Dv Cep Wts 

30 


- 

- 

- 

re 

— 

FP. 

30JQ 

62 

00 Hwnixos sm Asian 

60 

-1 

- 

- 

- 

- 

- 

FP. 

Z80 

30 

28 Do Warrants 

2a 

-1 

re 

_ 

re 

re 

180 

F.P. 

17 A 

105 

176 Mato lid 

181 


RNS-Q 

22 

4.1 

7j4 

180 

FP. 

434J 

161 

169 Man ED 5 F 

169 

-3 

RN8-0 

IJJ 

6.4 

82 

13S 

F.P. 

603 

140 

138 Sovtsak- 

140 

+2 

RN&a 

12 

3-4 

22.7 

- 

FP. 

114.1 

379 

360 Templeton E New 

389 

♦1 

- 

- 

_ 

_ 

- 

FP. 

IIP 

318 

180 Da Witt. 2004 

193 

+1 

- 

- 

- 

- 

- 

FP. 

28J 

360 

340 Wtaxham Writer 

340 


- 

re 

re 

re 

- 

FP. 

4.74 

330 

320 Da NV 

320 

-5 

- 

- 

- 

- 


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C233 ) 

Tame 

rw) 

Than OB 

n«« 

TS8 

rzia j 

TowWns 

rai3) 

Wdcms 

rw6> 

Opto 


RIGHTS OFFERS 


Issue 

price 

P 

Amount 

paw 

up 

Latest 

Renun. 

data 

1994 

hsgh Low 

Stack 

17 

M 

2/12 

2pm 

Vpm 

APTA Health 

118 

m 

28/11 

20pm 

9*7pm CatUes 

Mp 

Mi 

26/11 

Vpm 

*rpm 

Draoon OI 

500 

M 

18/10 

80pm 

24pm 

Recast 6 Cdman 

k330p 

M 

2fl/T1 

59pm 

48pm 

Smofit (J) 

76 

N> 

14/11 

5pm 

1*2Pm 

World of Leather 


Closing +qr- 
prloa 
P 


FINANCIAL TIMES EQUITY INDICES 

Od 19 Oct 18 Oct 17 Oct 14 Oct 13 Yr ago 


*»pm 

912 pm -ah 
6ft*n 

48pm -8 
1*2pm —7*2 


■Hgn "Low 


105018*36* 

» 

55 

72 7M 

Ordinary Sham 

2357 .0 

2373.9 

24004 

23812 

24122 

23782 

27132 

22402 

200 

26 am 32* 

3 

7* 10* 

OrtL dhi. yield 

4J0 

493 

429 

422 

428 

3.91 

4-51 

3.43 

220 

IS 1721*10* 

17 2DM 

Earn. ytaL % tUl 

8-22 

6.18 

612 

615 

610 

423 

621 

322 

200 21*28* 

32 

5 

BM 11* 

P/E ratio net 

1851 

1084 

1682 

18.71 

1826 

27.80 

3343 

1894 

220 

g is* 

22 13* 

18 21* 

P/E ratio nR 

184)4 

1617 

1635 

1824 

1829 

25.64 

3020 

17.09 


850 42 82* 74* a 42 54 
700 19* 38 02*67*50* 82 
M Jka Apr Oct Jan Apr 


rrai > 


r«i ) 

GEC 
r282 J 


700 47* 88* 83 12 28 37* 
750 18* 48* 57* 35 52 B 
480 14 27* 34 B* 17*28* 

500 2 ID* KH 41* 44 52 

280 11*17*23* 8 12* 15 

300 3* A 14 IS* 24 20 


GfeU 550 42 82 72* 1* 14* 28 

rS88) BOO 8* 32K 48* 17* 36 53 

EEOC 75|l*9 700 22* 85* 88* 8 30* 54* 

[714 ) 750 3 31* 48 30* 59 83* 

fcuttn 450 12* - - 5 - - 

T45B ) 462 8 - - 11* - - 

Opto Me* nbMo to to MV 


n«>i <1 uu> AliOWi W BH/WOO 

FT CMkuay Shna Max bw data 1/7/35. 

Ordinary Shore hourty changna 

Open GUO IOlOO 11J0 12J1Q la OO 14JD0 1SJ0 18J0 H>q* . Low 
2369a 23709 23701 2371 £ 2368.7 23622 23552 2354.7 2357.8 23805 23S1.7 
_ _pot 19 Oct 18 Oct 17 Oct 14 Od 13 Yr am 


MWtojei 

F174) 


18018*23* 28* 2* 5* 9 

180 6 12* 18 11 14* IB* 


security price. Pnmkans sh een m 
«i jos care iA2» 


booed an 
•«. 
Put* szsar 


BEAQ faaigakw 

Equity turnover (&n}f 

Eqdty bogakiet 

Share traded (mOt 

20.140 21.758 

10161 

- 24270 

- 4782 

23246 

10765 

26271 

4363 

24243 

1018.7 

28272 

548.0 

27253 

15827 

31234 

6342 

32288 

15012 

382&1 

705.1 









FT GOLD MINES INDEX 


Od ld| 
U re day 


Od 

T7 


Od 

14 


age yHM* «8 b tear 




to: (34) 
■ Baton* Mfcn 

AMeafiG) 

ArekaMs(7) 

Dntt America pi) 

Cop*j#W. The FkreicW 
FOOMbi brock** M 
ftadaoBreer QcM Ukaot 
UMret price* was 


wrn«K 

402 

284323 228600 191618 

121 

238740 178282 

368251 

+22 

357128 353313 263525 

178 

8823-28 230145 

288728 

-02 

208241 200421 226128 

129 

301389 £161.17 

17S826 

402 

175878 174494 158207 

076 

2033251488.11 


Tknoo Untad 1604. 

* mntar el Mnywla 9reh U9 Oolas. Bore VWuok IODDlOO 31/12/92. 
kuac oetio: 2SLB ; dajTs etanor -06 wM« Y«ra«ec 224.7 r PMOaL 
tar Bds BdUon. 




I idolity Options Tnuliug Service 
Save up to 


51 % 

on 

uMumissum 







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36 


FINANCIAL TIMES THURSDAY OCTOBER 30 IW * 



CURRENCIES AND MONEY 


MARKETS REPORT 


US trade figures keep dollar under pressure 


The dollar remained very weak 
on the currency markets yes- 
terday with the US August 
trade figures providing further 
ammunition for the bears, 
writes Philip Gaaitk. 

Analysts said the report was 
doubly bad in that the US's 
trade deficit with Japan had 
widened, re-focusing attention 
on the US-Japan trade dispute, 
while robust import growth 
had aggravated market fears 
about inflation, undermining 
US bonds and the dollar. 

Against the yen, the dollar 
closed in London at Y97.15, 
from Y97.685, after touching a 
low of Y96.70. It was virtually 
unchanged against the D-Mark 
at DML5009, from DML5003. 

Mr Wayne Angell, chief econ- 
omist at Bear Stearns, and a 
former Federal Reserve Board 
governor, said the dollar's 
weakness was “solely' attrib- 
utable to over-accommodative 
policy from the Fed. He said 
interest rates needed to rise by 
100-150 basis points to reach a 
neutral policy stance. 

Elsewhere the D-Mark was 


generally firmer in Europe. It 
closed at FFr3.433 against the 
French franc, from FFI3.431. 

Sterling finished slightly 
firmer against both the dollar 
and D-Mark, at $1.6188 and 
DM2.4296. The trade weighted 
index finished at 80.3 from 80. 


not overly robust D-Mark." 

Other political Issues in the 
market at the moment include 
the upcoming US congressional 
elections; and some evidence 
that political tensions In Rus- 
sia are causing weakness in 
the D-Mark. 


South Africa 


Against the dollar (rand per $ - 

2.0 


ConanaroW 


■ With the German elections 
out of the way. political volatil- 
ity In France has come into 
focus, fuelled by the resigna- 
tion of the industry minister 
over corruption allegations, 
and cabinet squabbles about 
the conservative candidate in 
the 1995 presidential elections. 

“Political issues are still a 
big factor in the market," said 
Mr Jeremy Hawkins, chief 
economist at the Bank of 
America in London Comment- 
ing on the franc, he noted: “It 
has again been weak against a 


■ Pound In Mow Yak 


Oct IS — Latest — — Pre*. cten- 

Cspot 1.8185 TJS125 

1 mO 1.8177 1.8116 

3 mfl 1.6170 1.6110 

1 yr 1.6063 1S004 


■ Speculation about the likely 
abolition of the financial rand, 
the Investment currency for 
foreigners, has recently 
renewed focus on South Afri- 
can currencies. This - and 
generalised dollar weakness - 
has helped the finrand to 
strengthen. The discount to the 
commercial rand has shrunk to 
11 per cent, a level last seen 
around the time of the success- 
ful reform referendum in Feb- 
ruary 1992. 

The finrand breached the 
psychologically important R4 
level to finish at R3.96 against 
the dollar. Th8 commercial 
rand finished at R3.5193. 

Finrand traders in London 
said activity had been brisk, 
but It had been mostly specula- 
tive, with no sign of large insti- 



1990 91 32 

Sourcw Odtatmam 


9a\ 94 


tutional orders. 

But Mr Emin Eyi, bead of 
South Africa sales at Baring 
Securities in London, said spec- 
ulators might have opened the 
door for other Investors. He 
said net foreign purchases of 
bonds and equities had risen hi 
recent weeks. Referring to the 
expected merger of the curren- 
cies, he “There are not 


many -currencies that have a 
sure fire rise of 5-10 per cent 
built in." 

Mr Eyi predicted that the 
financial rand would continue 
to appreciate, but said its aboli- 
tion could probably only be 
expected in the first half of 
1995, rather than imminently. 
The country’s foreign reserve 
levels are still too low, and 
there is little evidence as yet 
that it Is seen as a pressing 
political priority by the govern- 
ment 

Following the granting of an 
inves tmen t grade credit rating 
recently, the government is 
expected soon to announce its 
return to international capital 
markets with a bond issue. The 
prospectus for the issue is 
likely to contain more detail 
about a possible timetable for 
the abolition of the finrand. 


In the gilt repo today, the 
Bank will provide the market 
with £i.28bn assistance, matur- 
ing an November 10, at estab- 
lished rates. For the first time 
since the repo facility was 
introduced in March, only the 
shorter maturity date was 
taken up. There was no 
demand for the repo maturing 
on November 24. 

Analysts said this reflected 
the fact that market rates were 
fairly soft, malting investors 
reluctant to lock into a longer 
dated repo facility when 
cheaper funding was available. 
Today’s repo trill introduce & 
net injection of about £50Qm 
into the system. This should 
take some pressure off the size 
of the dally shortages, which 
have recently crept up to 
around £ibn. 


■ The Bank of England pro- 
vided £764m assistance to UK 
money markets, compared to a 
forecast shortage of £1.05bn. 
Overnight money traded 
between 5 and 7 per cent 


Oct 19 
*4*5*7 
ten 
Ksvnft 


UAL 


E S 

171.084 - 171.311 105.700 - 105800 
WOOO- 2E2280 174100 - 175000 
0.4307 - 04817 02570 • 02975 

371200 - 371810 229400- 229700 
488230 - 488554 301500 • 301500 
58362 - 59480 30715 - 30735 


POUND SPOT FORWARD AGAINST THE POUND 


DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


Oct IS 


Closing Change BhifatUr 
mid-point on day spread 


Day's Mid 
high tew 


One month Three months 
Rats MPA ROM MPA 


One year Bark of 
Rata MPA Eng. Index 


Oct 19 


Dosing Change 
mid-point on day 


BWoffer 

apread 


Day's mid 
Wtfi low 


One month Three month* »>• year JJ» Morgan 
Rata MPA Rata MPA Rasa MPA index 


(DKr) 

(FM) 

(FFr) 

(DM) 


0£) 


P) 


Europe 
Austria 
Belgium 
Denmark 
Finland 
France 
Germany 
Greece 
Ireland 
Italy 

Luxembourg 
Netherlands 
Norway 
Portugal 
Spain 
Sweden 
Switzerland 
UK 
Ecu 
SORT 
Americas 
Argentina 
Brazil 
Canada 

Mexico (New Peso) 

USA (S) 

Padflc/MkSdta EasVAMca 


fSFi) 


to 


(Peso) 

tH) 

(CS) 


Australia 
Hong Kang 
India 
Japan 
Malaysia 
New Zealand 


(AS) 


(MS) 

(NZS5 


Baud Arabia (SR) 

Singapore (SS) 

S Africa (Com} (R) 
S Africa (Fin.) (R) 

South Korea (Won) 
Tehran (TS) 

Thailand (Bt) 


17.1350 

+0.0763 

267 - 433 

17.1433 17.0527 

4S3918 

+0.0986 

713 - 122 

60.0810 48.6520 

251S3 

+0.0159 

105 - 201 

9,6319 

9.4941 

7.4883 

<4X0146 

798 - 988 

7.5090 

7.4450 

23381 

+0.0244 

348 - 413 

84508 

84066 

2.4296 

+0-0081 

284 - 307 

2.4377 

24223 

37Z810 

+4X977 

656 - 064 

373472 371.761 

1.0122 

+0.0005 

114 ■ 129 

1.0146 

1.0112 

2480.81 

+804 

936 - 223 

2485.17 247248 

49.9918 

+0-5985 

713 - 122 

50X610 49X520 

2.7223 

+0.0066 

212 - 233 

2.7263 

Z71S0 

10.5796 

+0.0241 

793 - 839 

10X037 104034 

242881 

+0.733 

748-033 

249.285 248X02 

202.480 

+1023 

365 - 694 

202.624 201.464 

11.6574 

+4X0209 

484 - 863 

11.7078 114830 

2.0138 

+00002 

125 - 151 

2.0209 

20103 

1^757 

+0.003 

748 - 765 

1X786 

14716 

0.920496 

- 

- 

- 

- 

1.6186 

+0-0034 

181 - 190 

1.6212 

1X125 

1.3809 

+0.0142 

789 • 828 

14826 

14658 

2.1903 

+ 0.0011 

889 - 916 

2.1962 

21824 

5^387 

+4X014 

333 - 441 

54444 

54212 

1.6188 

+0.0034 

1B4 - 192 

1X214 

1.6125 

Ifrtca 





£2011 

+ 0.01 

938 - 024 

2.2051 

21872 

12.5088 

+0.0259 

051 - 120 

124281 

124611 

50.7798 

*0.1007 

611 -384 

S0.7S84 50.7810 

167267 

-0.534 

179 - 354 

157.940 156X40 

4.1244 

-0.0041 

228 - 262 

4.1326 

4.1187 

2.6458 

+0.0043 

436 - 478 

2X517 

26384 

41.1176 

+0.3287 

837 - 515 

41.4516 40.7837 

6X1720 

+00127 

701 - 738 

6X815 

6.0488 

23783 

+ 0.0012 

769 - 797 

24807 

23744 

5.6970 

-0.003 

943 - 996 

6.7078 

S.6896 

6.4105 

-a 0431 

827 - 282 

64140 

6X827 

1294.64 

+4.67 

423 - 504 

1236X3 1287.30 

422677 

+0.0838 

524 - 830 

424307 421185 

402405 

+0.0788 

224 - 588 

40.3970 404000 


as 


116.4 

tirx 


Europe 

Austria 

Batgfuti 


94106 

OX 

94293 

-OX 

9X587 

- 0.6 

117+4 

- 

. 

■ 

- 

- 

- 

88.4 

84385 

- 0.1 

8433 

04 

84837 

0.7 

1104 

2+4284 

ax 

24262 

0.7 

24957 

1.4 

126.B 

1X12 

04 

1X116 

04 

1.0135 

- 0.1 

105.4 

2488X1 

-3.0 

2486.71 

-29 

2563.11 

-29 

74X 

49X818 

0.7 

48X088 

0.7 

494488 

OX 

117.3 

27208 

OX 

27175 

0.7 

26888 

14 

1214 

104791 

0.1 

104824 

- 0.1 

104B32 

OX 

86.7 

250X21 

-23 

253X01 

-7X 

- 

. 


20282 

-20 

207.716 

-104 

20647 

-IX 

88 X 

11.6784 

-22 

11.7264 

-24 

11X134 

-22 

76.9 

2X108 

IX 

2.0048 

IX 

1X676 

23 

1234 

. 

. 

- 

- 

- 

. 

804 

14758 

0.0 

14754 

0.1 

14716 

04 

- 

21894 

04 

21884 

04 

21871 

0.1 

86.6 

1X18 

OX 

1X172 

(U 

1.6082 

0.8 

61.0 

24011 

ox 

22024 

-04 

22205 

-OX 

_ 

125047 

OA 

124038 

04 

124107 

0.0 

- 

156X37 

34 

155X82 

3X 

150X47 

4.0 

1894 

2X497 

-IX 

28575 

-IX 

2X798 

-14 

- 


(Seri) 10.6850 
(BFr) 30.8820 

5.8780 -0.0025 765 


+4X025 825 - 875 10.6005 KXS340 
-41004 770 - 870 34X8400 30A120 


Hniand 


(DKr) 

(FM) 

(FFr) 

(CD 

P() 230-300 


795 


(L) 163260 
(LFf) 30.8820 

(H) 

(NKi) 

(Es) 163.7S0 
(PU} 125.080 


(SKr) 

(SFrJ 

to 


Germany 
Greece 
Ireland 
IWy 

Luxarnboug 
Netherlands 
Norway 
Portugal 
Spain 
Sweden 
Switzerland 

UK 
Ecu 
SORT 
Americas 
Argentina 
Brazil 

t^qnnrta 

Mexico (New Peso) 

USA (S) 

PadHc/Micfdie East/Africa 
Australa (AS) 

Hong Kong (HKS) 

India 
Japan 
Malaysia 
New Zealand 


4.8266 -0.0006 217 - 312 

5.1606 +OL0043 500 - 51S 

1.6009 +4X0008 005 - 012 


5.9068 58620 
4.6480 4.6947 
51825 51330 
15078 1AS60 


+0.12 200 - 400 23a 700 229.700 


OQ 15984 +0.0026 888 - 001 


+1.75 200 - 300 


1.8023 1-5896 
153030 1528.75 


-4X004 770 - 870 303400 308120 


1.6817 +00006 814 - 819 
05366 +00012 344 - 365 
+013 700 - 800 


1.6885 1.6776 
55645 54820 
153.930 153-3C0 


+037 040 - 120 125120 124.680 


7.2013 -0.0022 975 - 050 
1.2440 -00026 435-446 
1.8188 +00034 184 - 1S2 
12690 -00003 685 - 696 


72530 7.1663 
12495 12408 


1.6214 1.6125 
12725 12657 


10585 

30682 

5.8824 

4.6273 

5.1532 

15009 

230S95 

13993 

1537.05 

30882 

1.6818 

05393 

154.425 

120355 

72181 

12428 

1.618 

12863 


OO 100848 
0.0 30057 
-09 52915 

-02 48237 
-0.6 5.1623 

OO 1.4995 

-1.5 231.175 
OO 1.6895 
-06 1545 

0.0 30857 

OO 1-8802 
-07 6.557 

-6.3 155X5 

- 2.8 125.815 
-25 72488 


OO 1051 


03 30632 


-09 

02 

-Ol 

04 


6.948 

4234 

5.1648 

1.4908 


-12 233276 


OO 

-32 

02 


12884 

1589 

30832 


02 1.6719 
-12 6.8106 


-4.9 

-2.4 


160 

128.43 


12 12394 

0.6 1.6172 


-22 7.4138 

1.S 12243 


0.7 12676 


04 

02 


1.8082 

12837 


07 

02 

-12 

-02 

-Ol 

07 

-12 

02 

-3.7 

02 

06 

- 1.1 

-4.1 

-2.7 

-3.0 

1.8 

02 

04 


104.6 

1003 

1052 

82.9 

106.8 

1072 

682 


752 

1062 

108.1 

97.0 

95.1 
812 
61.3 

1062 

882 


- 1.48430 


(Peso) 

(RD 

(CS) 


- 998 - 999 
+0007 520 - 540 
1.3530 -0 0022 525 - 535 
3+4215 +02015 190 - 240 


09999 

08630 


09999 09978 
02540 02480 


12S57 12525 
3.4240 3.4190 


1253 OO 
3.4225 -0 4 


1.3532 -0.1 
3.4243 -03 


1.381 -06 
32317 -0.3 


83.4 


942 


7.7271 
(R 8 ) 312668 
M 97.1500 


IMS) 

(NZS) 

(Peso) 25/4000 


3.7510 


25193 

29600 


+0.0033 

592 - 602 

14815 

14557 

14S99 

-04 

14608 

-ax 

1.368 

-OX 

854 

- 0.0002 

268 - 273 

7.7272 

7.7270 

7.7268 

OX 

7.7277 

ax 

7.7426 

-04 

- 

. 

650 - 725 

314700 314875 

314638 

-44 

314988 

-29 

- 

- 

_ 

-0435 

200 - 800 

97.7500 96X000 

96.93 

27 

9646 

34 

92885 

24 

1427 

-0X079 

473 - 463 

2.5535 

25470 

24388 

44 

25273 

34 

26006 

-21 

- 

-0.0006 

335 - 353 

1.6389 

1.6335 

14353 

-0.7 

1.6372 

-0.7 

1.6425 

-OX 

- 

+0.15 

000 ■ 000 

25.0000 254000 

- 

- 

- 

- 

- 

• 

- 

- 

507 - 512 

3.7512 

27507 

27523 

-0.4 

27564 

- 0.6 

2775 

-04 

- 

-0X023 

687 - 697 

1.4719 

1.4675 

1.4679 

1.1 

1.466 

OX 

1.4592 

0.7 

- 

-a0092 

185 - 200 

34280 

34070 

34348 

-54 

34631 

-5.0 

3X396 

-24 

- 

-0.035 

500 - 700 

4X200 

29500 

3.9837 

-104 

4.0525 

-94 

- 

• 

- 

+1405 

700 - 800 

800.000 798400 

802.75 

-4.S 

6064S 

-34 

824,75 

-21 

- 

-0X1S5 

075 - 135 

26.1210 26.1075 

26.1305 

-0 9 

26.1705 

-OX 

- 

- 

- 

-0.005 

150- 250 

244250 24X150 

24.9925 

-34 

25.12 

-34 

254 

-27 

- 


tSOfl raw tor Oct IS. adfatter spraeds In die Pound taCIa show nrty the Wt fare* cfadnri paosa. Foreanl rates we nnrdrecdr quoted to the naiww 

Cut as knotted by cum knwwt rates, ttsta ndax c al ci W ad qy tea Barit of E ntered. Ben atanga 1986 - IOC BIX Otter and Mid - raw ki bate teb and 
tea Daiar Spot nrt*u darhad tram THE wu/HEUTHtS CLOSING SPOT RATES. Soma Wuaa aw rounded by tea F.T. 


PNRppkiM 
Saudi Arabia (SR) 

Singapore (SS) 

S Africa (Com J (R) 

S Africa (Fin.) (H) 

South Korea (Won) 799.750 

Taiwan (T^ 201105 

Thatand (Bt) 242200 

ISOR rate lor Oa IB. EDdfafler spreads in tee Ddter Spot aril* mow rety tee last dree tta crrta pieces. Forward m era nor droctfy quotad to tee nortec 
but are fcnpaed by current Meres Ms UK. Maid A ECU are quoted n US cunncy. IP. Morgan normal Wee Oct 18 . Base average T 990-100 


WORLD INTEREST RATES 


MONEY RATES 

October 19 Over 

nigra 


One 

month 


7J tree 

ruths 


8bt 

tilths 


One 

year 


Lento- 

Inter. 


CIS. 

rote 


Repo 

rai» 


Betoken 
week ago 


week ago 
Germany 
weak ago 


weak ago 
Maly 

weak ago 
N et her la nd s 


awtaeriand 

weak ago 

us 

weak ago 
Japan 
weak ago 


4M 

47k 

5tt 

Sft 
4 28 
420 

49 

4fi 

8 i 

854 

424 

424 

aa 

33 

41 

4M 

2 » 

2tt 


48 

43 

SI 

M 

4.85 

425 

54 

51 

84 

84 

423 

423 

33 

33 

■*3 

43 

2V4 

2 % 


54 

54 

SM 

SB 

6 . 1 s 

620 

64 

54 

3* 

83 

5.17 

521 

414 

44 

5 % 

54 

2 H 

£U 


sv> 

53 

5% 

5a 

5.25 

520 

6 * 

64 

9* 

9M 

6.30 

238 

44 

44 

5M 
53 
2 Mi 
24 


64 

64 

6 M 

84 

258 

270 

ri 

104 

10 M 

528 

S.61 

43 

43 

BN 

84 

33 

2% 


7.40 

7.40 

200 

5.00 

200 

200 


4.50 

4.60 


4.50 

4.50 


2625 

2825 


7.50 

7.50 

525 

525 

3-50 

250 

4.00 

4.00 

1.75 

1.75 


275 

6.75 

4.65 

4.65 

625 

225 

820 

8.20 


N $ UBOR FT London 

EiTBruanK rwng 

week ago 
US Hotter CDs 
weak ago 

son unksd Da 

ECU UHred Os mid ratara 1 naK 6»; 3 "***3t* g gtl uTi’am 

ottarad rates tor 910 m quoted to tee oww taftow 

2-?** Breton at Tctofa 


5 

5$ 

$8 

64 

“ 

- 

“ 


6 

5* 

5% 

641. 

“ 




4.79 

640 

643 

6.10 

- 




4.79 

541 

6.60 

8.16 




z- 

3K 

31 

3K 

4 

“ 



■ -y 

3tt 

35 

3K 

4 






day. The banks are Obi ike ■ That. Baric rt Tasya Barapv™ y-L-j Oapewta [Dal 

kM ress are Wren tar me durreetta Money Ratos. US S COa and SOT Unhed uwwa 


EURO CURRENCY INTEREST RATES 


Short 


7 days 
notice 


One 

month 


Three 

months 


Six 

months 


One 

year 


Belgian Rene 
Danish Krona 
D-Mark 
Dutch Quitter 
French Franc 
Portuguese Ena 
Spanish Pesata 
Sterling 
Swiss Frano 
Can. Dote 
US DOW 
Ratten Lira 
Van 

Aslan SSIng 


43 

-4H 

4H 

-Ml 

4ft 

• 4ft 

5A- 

SA 

8- 

6 % 

8 - 

s% 

6 ■ 

5% 

e%- 

6% 

4% 

4% 

-4% 

4% 

-4% 

4ft 

411 

SA - 

5A 

-4% 

4% 

-4% 

4ft 

411 

SA- 

sA 

5x1 

-5A 

sA 

-» 

5/+ 

SA 

5% - 

5*2 

9% 


9% 

1-8 

9% 

9% 

10% 

- 10 

7*2 

■7\ 

7% 

-7% 

7*3 

7% 

T7j - 

7% 

5% 

• 5*4 

BA 

-5A 

6% 

6*2 

&H- 

5U 

4 - 

3% 

4 • 

3% 

3% 

3% 

4% 

- 4 

4% 

-4ft 

4% 

-4ft 

4ft 

4ft 

SA - 

SA 

4% 

-4% 

4« 

•4ft 

5 • 

4* 

5ie - 

SA 

9 - 

7% 

B% 

-0% 

6A 

BA 

6% - 

8% 

2% 

-zA 

2A 

-2A 

2A 

2*4 

2)3- 

211 

1* 

-1\ 

1% 

■1% 

2% 

2% 

3,1 - 

3A 


5 % - 5 % 
84* - 6% 
54* - 5% 
5A - 5A 
5% -54* 
101b - 

oA - 8*1 

6>j - 0% 

4A - 4,1 
5(1 - SH 

5S • s{4 

8%-9«s 
2*2 - 2.1 
3% - 3*: 


8A - «A 

7*z-7% 
5% -5*2 
6 % - 5A 
8% - 84* 
10% -10% 
9-8% 
74* -7% 
4fl - 44 
6U - 0 ft 
6.1 * BA 
10 A - 10 A 
212 ■ 24. 
4-3% 


Short urn raw era caR far tea US Dolar and 


MONTH PfBQR FUTUMS 


(MKimWa Intarbank offered nrie 



Open 

Sett piles 

Change 

High 

Low 

Eat vol 

Open tm. 


94.17 

8420 

+0X2 

9421 

9416 

11.876 

59,158 

Mar 

9275 

8277 

. 

9278 

9274 

12.717 

36444 


9239 

8239 

-0.03 

93.41 

9236 

11,184 

25X92 

Sep 

9204 

8206 

-0X1 

9208 

83.03 

2,706 

19.670 

■ THMSB 

MOOni BfRODOUXR (L1FFQ* Sim points of 100 % 




Open 

See piles 

Chanoe 

wgh 

Low 

E*t. <rol 

Open tort. 

Dec 


9408 

-0X4 

. 

- 

0 

2564 

Mar 

. 

8287 

-0.05 

- 

- 

0 

1386 

Jun 

. 

9228 

-0X6 

- 

- 

0 

300 

Sep 

- 

8283 

-0X6 

■ 

- 

0 

52 

■ nm 

MONTH 

■UROSUUHt 

FUTUHSS 

(UFFET DM 1 m print* of 10094 



Open 

See piles 

Change 

High 

Low 

Eat vri 

Open tort. 

Doc 

9481 

9480 

•0X2 

9482 

9479 

13788 

157738 

Mer 

9443 

8450 

-0.05 

9453 

94.48 

30733 

137034 

Jot 

9417 

9413 

-207 

9418 

9410 

26199 

100297 

Sop 

9278 

8276 

- 0.00 

9279 

93.73 

12668 

76327 

■ Tina MONTH 

■UMURA «TJIATH nmiMS (LfFFE) LlOOOm prints oflOOK 


Open 

Sett pries 

Change 

High 

Low 

Eat vol 

Open tort. 

Doc 

90.72 

90.65 

-209 

9273 

90.83 

6174 

31306 

Mar 

90X2 

89X6 

•209 

90.04 

89.95 

3775 

20734 

Jun 

8942 

89.45 

-208 

8942 

89.44 

3837 

14808 

S«P 

89.10 

89.08 

-a 07 

89.13 

88.05 

1846 

18309 

■ IMM MONTH AMO SWISS FRANC niTUMS (UFFQ SFrlm paints of 100H 


Open 

Sett pries 

Change 

High 

LOW 

E*t vot 

Open InL 

DSC 

95.72 

9274 

. 

9274 

9270 

2 BOS 

20316 

M*r 

95+44 

9243 

-0.04 

95.44 

85.41 

1941 

18744 

Jui 

95 .07 

9205 

-202 

95.07 

9S.Q2 

1309 

8108 

Sep 

9472 

94.71 

-203 

94.72 

9468 

220 

1356 

■ THRU 

MONTH NCU FVTtHtSS (UFFE) Eculm points ol 100% 



Open 

Sett price 

Change 

High 

Low 

Esturi 

Open tort. 

Dec 

9286 

9284 

-202 

9288 

9200 

687 

7467 

MV 

9241 

9240 

-203 

9241 

93.38 

578 

8806 

Jun 

S2X2 

82X0 

-0.03 

92X2 

9287 

389 

3748 

Sep 

9247 

8244 

-205 

9247 

9242 

304 

1968 


* LffFE fabiee traded on APT 


CROSS RATES AND DERIVATIVES 


EXCHANGE CROSS RATES 

Oct 19 BFr DKr FFr 

DM 

E 

L 

FI 

HKr 

Ea 

Pla 

SKr 

SFr 

£ 

CS 

S 

Y 

Ecu 

Belgian 

(BFr) 

100 

19.03 

1268 

4.699 

2024 

4963 

3.446 

21.16 

4974 

405.1 

23X2 

4.029 

2X00 

4X81 

3X39 

314.7 

2453 

Danmark 

(DKr) 

6244 

10 

2763 

2563 

1.064 

2607 

2461 

11.12 

261.6 

2124 

1225 

2117 

1.051 

2X02 

1.702 

16SX 

1X41 

France 

(FFr) 

59.95 

11.41 

10 

2913 

1X14 

2976 

3X65 

1268 

2984 

2429 

1298 

2415 

1.199 

2427 

1X42 

188.7 

1430 

Germany 

(DM) 

20.58 

2917 

3.433 

1 

0417 

1021 

1.121 

4X56 

1025 

83X7 

4X00 

0429 

0412 

0902 

0467 

84.78 

0425 

Ireland 

(to 

43.40 

9.402 

6X39 

2400 

1 

2462 

2680 

1045 

246X 

2001 

1142 

1X90 

0X88 

2164 

1.800 

156+4 

1X61 

Italy 

W 

2015 

0384 

0X36 

0X98 

0041 

too 

0.110 

0.426 

1003 

8.182 

0470 

0081 

0040 

0088 

0.065 

6X40 

0051 

Ma*Hireslraiilra 

(FI) 

1237 

3.406 

2063 

0492 

0372 

9114 

1 

2887 

91.44 

74X9 

4X84 

0740 

0387 

0405 

0595 

57-79 

0488 

Norway 

(NKi) 

47.25 

8X93 

7481 

2X96 

0X57 

2345 

2473 

10 

236X 

191.4 

11.02 

1X04 

0X45 

2070 

1430 

14a 7 

1X06 

Portugal 

(Ei) 

20.08 

3X23 

2350 

0X76 

0407 

9964 

1.084 

4X51 

100 . 

81.36 

4.685 

0809 

0402 

0880 

0650 

83X0 

0413 

Spain 

(Pta) 

24X9 

4.699 

4.118 

1X00 

0500 

1225 

1X44 

5X25 

1229 

100 

5.758 

0495 

0494 

1.081 

0800 

77.68 

0630 

Sweden 

(SKr) 

4287 

2160 

7.151 

2083 

0868 

2128 

2X34 

9X74 

2134 

173.7 

10 

1.727 

0658 

1478 

1X89 

134X 

1.094 

Switzerland 

(SFO 

2442 

4.724 

4.140 

1X06 

0502 

1232 

1X52 

6X53 

1234 

1005 

5.789 

1 

0+487 

1X87 

0.604 

78.10 

0634 

UK 

to 

49X9 

9415 

8X38 

2429 

1.012 

2481 

2722 

1048 

2484 

2025 

11.66 

2014 

1 

2190 

1419 

157X 

1X76 

Canada 

(CS) 

22.83 

4.345 

3407 

1.109 

0462 

1133 

1X43 

4X31 

1727 

9247 

5X24 

0X20 

0457 

1 

0.738 

71.83 

0483 

US 

(Si 

30X9 

5.877 

6.160 

1400 

0.82S 

1532 

1481 

8436 

1527 

125.1 

7X02 

1X44 

0818 

1X53 

1 

97.18 

0.788 

Japan 

00 

31.78 

2049 

2301 

1444 

0843 

1677 

1.730 

8.728 

158X 

128.7 

7.413 

1X80 

0836 

1.392 

1X29 

100 

0411 

Ecu 


39.18 

7+457 

6434 

1.904 

07B3 

1944 

2133 

8.232 

195.1 

158.7 

0138 

1478 

0784 

1.718 

1X68 

123X 

1 


Eta*te Kroner, French Prana Nawestan Kroner, and 3notfah Kronor per lOf Belgian Prime, Yen, Escudo. Ura and Pesata , 
■ P-MABK FUTUBB3 (IMM) DM 125.000 per DM 


0 MM) Yen 12_5 par Yen 100 



Open 

Latest 

Change 


LOW 

Eat vri 

Open tort. 


Open 

Latest 

Change 


Low 

era. voi 

Open tort. 

Doe 

06656 

0.6658 

+ 0.0001 

06688 

04637 

30087 

81X11 

Dec 

1.0279 

1X343 

+00065 

1.0380 

1.0272 

14,177 

58.112 

Mar 

0.6686 

0.6887 

-006 

04695 

04866 

734 

4X35 

Mar 

1X405 

1.042S 

+0X066 

1.0475 

1X405 

287 

8X81 

Jun 

0.6698 

0.6698 

+0.0017 

04688 

06696 

51 

579 

Jun 

1.0500 

1.0535 

+00086 

1.0540 

1.0500 

126 

460 


■ SWISS mane wnuaasdUM) SFr 125.000 per SFr 


■ WMBW FWTOBBI (IMM) £82^00 par £ 


Dec 

0.8069 

0.8043 

+ 0.0010 

08074 

04016 

16X36 

41X69 

Dec 

14120 

1.6160 

+0X072 

1.8200 

14112 

Mar 

08103 

0.8070 

+0.0014 

08106 

0.8070 

15* 

1.101 

Mar 

1.8168 

14160 

+00068 

1.6180 

1.6150 

Jun 

0.8133 

04111 

+0X035 

04133 

06110 

89 

126 

Are 

- 

14110 

- 

14140 



7.894 42822 

119 489 

1 8 


LONDON MONEY RATES 


Oct 19 

Over- 

7 days 

Ora 

Three 

Six 

One 

Netherlands 

219672 

214459 

-0X0013 

-237 

545 

_ 


night 

nottco 

month 

months 

months 

yea 

Belgium 

40X123 

39X881 

+0X041 

-205 

5X0 

15 

Irnmfesta Staring 
Staring COa 

Trerany Stita 

7*j-5 

JP 

Hi 

W 

5A - 5/. 
SB -5H 

6 % - 6 A 

5J3 - 5% 

6 - 5% 

sn-5% 
5% -5,1 
6 % - 6 ft 

fiA - BA 

aft - 8 A 

7% -7% , 

7% -7 ■ 

Germany 

toe land 
Franca 

144964 

0.806628 

6X3883 

1.91411 

0.797486 

6X6712 

+0.00016 

-0X01146 

+0.0009 

-1.82 

-1X8 

0.43 

5X8 

4.70 

289 

9 

-4 



®ve - 5ft 

6 A-BA 


Deranrefc 

7.43879 

7.49561 

-0.00426 

0.79 

253 

-5 

Local authority (fops. 

Docounl Mateet <lej» 

5% - 5% 

1 - 5*4 

5% -5% 
5% - 5% 

SA - 5,1 

S% -5% 

r\ - aft 

Spain 

164X50 

196.089 

169401 

+0X31 

+0X48 

1.68 

3X4 

143 

0.00 

-11 

-23 

UK ctortng bank base tarring rale 5% per cent from Sepumbar 12 1994 

8-12 

NON BrtM MEMBERS 
Greece 284.513 

282777 

+0X14 

11X6 

-845 








Italy 

1793.19 

1955. ic 

+253 






month 


monflw 

months 

months 

UK 

0.786749 

0.787485 

-0X01655 

0.09 

3X4 



3% 


Certs of Tax dop (£ 100 , 000 ) 1% 4 34* 34* 

Cored Tan dap. inter ei 00.000 fa tljpc. Deodars wUlHtrnwn tar esrti 4tpa 

tender ram of ducoum &+Ci4pc. ECOD Ibcd rota SOp. Eapon Rrenoo. Mol* re <tay Sop 30, 
189*. noreod ran tar pvtad Oct 26. 199+ » No* 2S. IBM. Schemes l(B XOSpc. n efa r e nc e rate tar 
eertad Gep 1 . 1994 to San 30, 1994, Scrums IV S V S.735pc. Finance Horn, Base Rale Ope tram Oct 
T. 1994 

■ THREE MOHTH 9YRRUNO FUTURES (LIFFE) CSCXXOOO points of 100% 



Open 

Sett price 

Change 

Wgh 

Low 

EsL vri 

Open too. 

Dec 

93.52 

93.52 

- 0.02 

93X4 

9247 

25254 

145660 

War 

3S.7S 

92.71 

-0.04 

82.73 

8266 

26465 

73647 

Jun 

92.15 

92.13 

-0.05 

9215 

9209 

9522 

63517 

Sep 

91.71 

91.72 

-0X4 

91.74 

9147 

4308 

61014 


Trotted an APT. Al Otxan ntoraet flga. ore for pravtaus day. 


■ SHOffTSITHUNOOPTIOHaafFgaOQ.OOOpo^taof 100% 


Sinks 

Price 

9350 

8376 

9400 


Dec 

- CALLS - 

Mar 

Jun 

DOC 

PUTS - — 

Mar 

Jun 

0.20 


0.11 

0.18 

047 

1.48 

oxa 

0.04 

0.08 

0X1 

1.08 

Ewi'l 

0.02 


0.05 

0X0 

1.30 

1.92 

QOS 1 PiJU SB 18. Pmtaa <tr/i upon fa. Cods 

3410W Puts 163010 



EMS EUROPEAN 

Oct 19 Ecu can. 

raUa 


CURRENCY UNIT RATES 

Rate Change M +7- from M spread 
noanraEcu on day can, rata v weakest 


Dtv. 

Ind. 


Ecu centre* raree ser by «na Emcean Corrmtadcn. Cumnctes era In daaeendtag r 


Pwcantagecwnges are tar Sew a pmiSra tteange denow a eetei currency. Otverpenca aflcwn tee 

mao between me wmada: tee percantape refa ranue between ten MwIraWwl Ecu cereal raw 
ter a oerancy. and tee rmoknum pamHUd p ercentage daxaflon or tea aaiencye marfcat rata tom Ita 
GcucenHnta. 

p MVB3) StarSng and Saltan Ura wapanded Korn ERIA. Aduawn cafaWUd by tea fTnenoal Tknea. 


■ PMLMPELPHIASC C/SOPTlOieS C31.2SO ^enta per pount^ 


Strike 

Price 

Nov 

— CALLS - 
Dec 

Jan 

Nov 

— PUTS — 
OX 

Jan 

1X50 

6.81 

7X5 

7X6 

n ng 

0X2 

0X3 

1X75 

4.49 

5X0 

5X4 

0.13 

0.76 

1.18 

1 X 00 

263 

3X7 

3.72 

0.61 

1X0 

202 

1425 

1.11 

1X9 

248 

1.67 

2X9 

3.15 

1450 

0X7 

1.10 

1.54 

3X8 

4.18 

4X8 

1X75 

0X7 

0X4 

0.90 

557 

8.10 

6.51 


Prortnro days vcL. Cre* 127S4 Puts 14^61 . Pr«v. ifayra open Cdla 4i6^« Pun 361494 


■ THBCE MOftTH EWOPOLLAB (BI84) Sim pofnls of 100M 



Open 

Latest 

Change 

High 

Low 

Est vri 

Open tort. 

Dec 

94.09 

94.09 

-003 

94.11 

94.08 

59,608 

447X14 

Mar 

9270 

9287 

-a 06 

93.71 

93.68 

65X07 

402680 

Jun 

93X1 

93X8 

-0X6 

93X1 

9226 

37490 

300,828 


BASE LENDING RATES 


AdamfiCOmpwy 275 

ABed Trod Bank JL75 

AIBBanh 275 

•Henry Anabachty 275 

Barkcfl Baroda 275 

Banos BOao Vizcaya- 276 

SankolCypiw 275 

Bankoftratanf 275 

BanhoflncSa 275 

Barit rt Scotland 275 

Barclays Bonk 5.75 

BriBkoffMEaet..^ 275 
•Grown SHpteyS Co Ud 5.75 
CLBanfcNedadand ... 275 

CftbanfcNA _.5.75 

OydoadriaBank 275 

Tha Cooperrine Bank. 276 

Couts&Co 275 

OwSLyomafc 275 

Cypus Popular Bank -275 


it, 

Duncan Lawrio S.7S 

Exeter Bar* Larited^ 275 
Rnandd & Gon Bank _ OS 
•Robert Raring & Co _ 275 

Q rebar* S.7S 

•Gutanesa Mahan 276 

KahbBarkAGZkslch.275 

• Hj ii Ous Barit 275 

HeriteMe & Gen kw at 275 

•Hi Samuel 275 

tihoareACd 275 

Hon^ ton g S Shanghai. 275 

-Man Hodga Bate. 275 

•Leopold Joaoph & Sane 275 

Lloyds Bate _.275 

Mc^raj Bar* Ltd 276 

Mdand Baric 275 

* Mount BanAteg B 

NalWIasMnstor 275 

•Boa Brothers 275 


* Rotijurghe Guarantee 
Caparakm Lknted Is no 
longer autvrend as 
a banking Insttunn. 8 
fioyriBkofSco&nd- 275 
• 6 mW» 4 Wttnan Secs . 275 

TS 8 — 275 

•UritedBk of Knead - 275 
IWty Trost Barit Fte _ 275 

Wasran Trust _276 

WMeaway LMaw .... 275 
YortriAaBa* 276 


O Mombors or London 
Invasimenf Banking 
AasoaaOon 
* >ia a i 9 *ia*fl on 


■ US TBEASUHT BAJ. FlinWS (IMM) Sim per lOOM 


Dec 

94X6 

94.68 

- 0.01 

94.68 

9446 

ro 

18XM9 

Mar 

94X1 

9421 

- 0 . 0 « 

94X2 

91X1 

620 

9X22 

Jun 

93.79 

93.79 

-0.06 

93.79 

8279 

457 

3416 


AS Open taVMflgt. are far promts day 

■ gUROMARKOPTlOteSaJFFg) DMItnpointtOf 100K 


Stake 

rvj-- 

rnco 

Nov 

Dec 

CALLS - 
Jan 

Mar 

Nov 

Dec 

PUTS 

Jan 

Mar 

9475 

0.10 

0.14 

0.10 

0.13 

aos 

a.09 

0X5 

0X8 

9600 

0X2 

0X4 

0.05 

0.08 

0X2 

0X4 

0X5 

0X8 

9625 

* 0 

aoi 

0.02 

0.03 

0.45 

0.46 

0.77 

0.78 


Ea OBL total Cola 7703 Rita S77t Pmtoua oaft open im_ Cato 19150+ Puts 1/48+9 
■ EURO SWISS FRANC OPTWHS (UFFQ SFr 1m poWa of 100M 


Stria 

Price 

Dec 

- CALLS - 

Mar 

Jut 

Dec 

— PUIS - 

Mar 

Jun 

9550 

0X7 

0X0 

0.13 

0X3 

0X7 

0X8 

9575 

0.09 

0.10 

0.07 

0.10 

142 

0.77 

3800 

0.02 

0X6 

0.03 

0X8 

0.82 

0X8 

Est ml totaL Cm 20 Pl*3 a Prawoui day's open fa. Cota 

1870 Puts 845 



ECU 1^00,000,000 
Euro Medium Term Note 
end 

Euro Depositary Receipt Programme 

Lavoro Bank Overseas N.V. 

and 

Banca NazionaJe del Lavoro S.pJL 

Series No 3 

Banca Nazlonale del Lavoro S-p-A. 

- Hong Kong Branch - 

USS1 00,000,000 Subordinated Boating Rate 
Depositary Receipts due 1999 


In accordance with the terms of the Series No 3 
Depositary Receipts (the ’Receipts') described in the 
Pricing Supplement dated as of July 15, 1994, notice is 
hereby given that for the Interest Period from October 20, 
1994 to January 20, 1995 the Receipts will cany an 
Interest Rate of 5.9375% per annum. 

The Interest Amount payable on the relevant Interest 
Payment Date. January 20, 1995 will be US$ 15.17 per 
US$1,000 principal amount of Receipt, US$151.74 
per US$10,000 principal amount __ TheC&cvxmon 
of Receipt and US$1 ,51 7.36 
per US$ 100,000 principal i & ******** 

amount of Receipt 



1STITUTO PER IL CREDITO SPORTIVO 
Via Alessandro Famese, 1 - Roma - Italy. 


Notice is hereby given that on 16th - 19th September 1894 
Hie following bonds, Issued by the same ’Istituto per il Credit© 
Sportive" , were stolen: 


Obbligazioni 36" Emissione cod. ABI 15647 - 10.50% - 
January 1987/1997 for a nominal value of L. 
15,000,000,000 belonging to the series ranging from n.80 
to n.94 included (that is 15 complete series). 


Obbligazioni 37* Emissione cod. ABI 16852 - 12.50% - 
January 1999/1999 for a nominal value of L. 
30,000,000,000 belonging to the series ranging from n.22 
to n.31 included and from n.39 to n.58 inducted (that is 30 
complete series). 


As a consequence, a legal action is being undertaken. 


The above mentioned bonds and all coupons appertaining 
thereto are, therefore, uncollectable and non-negotiable. 


a a 


a s 3 D 


as 


BPS 

Residential Property 


Securities Nch4PLC 


taOjMWXM a 

CL** Al Notes Sj 

Mortgage Backed Floating 
Rate Nous due 2Q2! 


tetter b tn+vU- gun tee dwr will lr 

t pnrepJ uf U.+fi* per 

LKnjX» te«r puuim a, Clw> ,^bl 

nf ter NdlOT a, ter 4m* pMrtl Jje 

Jta Oiiebo- J9>+. Tie frtmpal anuar 

reutjwfa^ on to Mw-mbcr 1 W 
ihmkmrlw U^l.5 16 per \ow. 



NOTICE OF 

RES/GNATiONAND SUCCESSION 


To fte better* of any secttttiea for 
wttdxMORGANGUARANTYTRUST 
COMPANY OP NEW YORK, acted a* 
eidier trustee. New Yak paying agent. 
New York wertooioo agent, New Ye* 
registrar, New YartceuiBage agent. New 
.Yotk transfer agent, or in any other 
agency capacity in New York, NOTICE 
It hereby given that, effective as of Sep- 
(enter 2, 1994. MORGAN GUAR- 
ANTY TRUST COMPANY OP NEW 
YORK ha* resigned and iransfcncd its 
US. capons rent funaiew n. and his 
been succe e de d as Manure trustee or 
New Yorir ageat by, FIRST TRUST OP 
NEW YORK. NATIONAL ASSOCIA- 
TION, 100 Wall Street. Suite 1602 New 
Yak. New Yak 10065. 

FIRST TRUST OF NEW YORK. 4 
BKtceuJ basking ataocMoo whb opi- 
Wltadw of 31 02000,000, if a wholly- 
mned operating sobsttlary ofHiatBaak 
National Association, the primary bank- 
ing sutekKaty of First Bank System, lot 
Dated; October 22 1994 


NOTICE OF 

RESIGNATION AND SUCCESSION 
To the HMenof 



NOTICE it hereby ginai dm. effco- 
ihraBof November 5. 1994. MORGAN 
GUARANTY TRUST COMPANY OF 
NEW YORK wBI rerign and tnofer its 
US. ooponta tnre fuaetkos to. and 
wm basneoeeded m New Yote agwby, 
FIRST TRUST OF NEW YORK, NA- 
TIONAL ASSOCIATION. 100 Wall 
Strata, Solas 1600, New Yak, NcwYotk 
10005 an all of the above inocs except 
for the State Bonk of Now Sarah Wales 
10 Ycta-Estandade Ftoaoag Rate Now 
rSttic BWO red l kn d J ton Capital 
looenMoatlUaateiMniaOnlf Cam- 
•estible Goanateed Boods CHeodmon 
CqntaT). Tbccfiectracdateoftbchatn, 
ntrtn tap e d resiputioa and mccestaoo 
for the State Baric iawe will be Novtm- 
ber 20, 1994 red fa Hendeooo Opital 
wlQ be January 1, 1993 
Dwifc October 3t\ 1994 



' & Fioaodai 
Htatory on Compart 
Dbk 

' Decade* of hittoricsi tmairs prices 


iamtetShmlj ttygnr Bn gcrtlp rl By 

( eroydang you need in eos oay^o-l 

i nrees CRB lofbTtach helps you perform 

maljBt, bectaeutag. 


35 YEARS OF HISTORICAL PRICES BOR 
CASH. FUTURES, OPTIONS AND 
INDEX MARKETS. 

30 YEARS OF RJNQAMBrtALMORMAnON 
ON OVHtHDGDIAlCCnES. 

Simla, to w laterewtaa tbaed m tee CRB 
Coromwfiry Yew Book, tee Mrfe* of tee 
names fawny. laatefitiDa b> 
hinaricat den. CRB UtfTedt abo provide* dally 
pria update* via KRrOoote, Krisfal4UddciS 
aattwaranparifteallp des i gne d i> 
dowotoad and taeiarteateat^tay prices 
dhmly taoievdeitac. 
INFORMATION: Bfaaifa Vital 

HtHwe,78FkctSwi,OoadeBeOfY IHY 
TO: +44 (g) 71 842 400 


To the Holders of 

Sifchting Restructured 

Obligations Backed by 
Sonior Assets 2 (ROSAz) 
to the todenture dated os 
of January 10, 1952. between the 
Parent arid Stale Street Bank and 
Trust Company, as Trustee, notice 
fe hereby given lhat for the Interest 
Accrual F^enod October 17, 1994 
JK 9h J ,? ni if ry 1S - 1 S94, the 

arm rphlo in c— 


uauuoijr IQ, 1994 

rates arallcable to the Sec 
Senior Floating Rate Notes 
Secured Senior Subordin; 


Secured 
and 


Secured Senior Subordinated 

ssaasaS? 1 ®* 


LEGAL NOTICES 


Nctke of appoint— .a of 
Adaialsrativs Receiver 
Altaic &ta%o»n (I9K1 Limited. Regaieied 
RDjnbcr. 2X674131. Trad Loo ubm: Atlutto 
Bpdptaea (M9Z) UrniM. Naonr of buipen: 
Maastactuic of tatcraO eqnipauH awl mis— 
I ta* cbe ertkaltao! II. Dso of appontama of 
adtaiabtrathe raeaivets 31 Name 

-stem: 

dydrotele Bank. 

NJ Voogbl ATRHerdi 
Jetal it rfaiin ii tunl ra I t eeehr eu 
Office holder Nien b uta. 6339— d 2179 
Addraaa; HUIgate House. 26 Old Belle. 
Loadoo.BC4M 7fL '■ 







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nvPBMferUf 


ThretMteBt 

naNH 


Pool 

PW 

pool 


(MYtm 


e-ui 

MM 


D*» 

«*i 

CA«Ml 



0030 

9X1 

9X4 

9X4 

01 00 

9X1 

9X4 

9.94 

0130 

10tt3 

9X4 

0X4 

0200 

21X4 

11.07 

13X5 

0230 

21X4 

12X5 

14.54 

0300 

2134 

1234 

14X4 


21X4 

11X7 

13X5 

WOO 

21X4 

9X4 

994 

0430 

1851 

9X4 

9X4 

(BOO 

10X2 

9X4 

894 

0530 

iace 

9.68 

9X8 

0000 

9X1 

9X6 

9X5 


10X8 

1290 

1809 

0700 

19X3 

17X7 

20.15 

0730 

3847 

18X7 

1888 

0800 

38X0 

18.12 

20X3 

0830 

38X9 

1818 

20X8 

ran 

38X3 

iMr 

20.45 

0030 

3QX5 

1821 

20+13 

1000 

30X7 

18X2 

20+M 

1030 

30X7 

1821 

OT45 

1100 

30.13 

1821 

20+45 

1130 

27X8 

182S 

20X8 

1200 

34X8 

1829 

20X5 

1230 

34X6 

182B 

2851 

1300 

34X* 

1819 

30.42 

1330 

z-x.45 

18.02 

2023 

1400 

24.41 

17.44 


1-530 

24.40 

17+43 

19X3 

1500 

24X8 

17.43 

1882 

1530 

24-40 

17.42 

19X2 

1000 

24X0 

17+44 


1630 

24.73 

17.48 

19X7 

1700 

34.48 

2808 

3028 

1731 

31X8 

2804 


1800 

35X9 

2802 


1830 

46.10 

18X3 

2072 


54.14 

1860 

1879 

1600 

sax 

27X3 

3013 

2000 

37X3 

35.00 

37X1 


38X4 

34.09 

37X0 

2100 

21X1 

34X7 

37.18 


21+43 

19X7 

21.78 


19.48 

10X7 

21.78 

2230 

19/48 

1879 

1898 

SOTO 

19+48 

18X0 

1879 


19.48 



2400 

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M wa» Trtttfing FocSly 
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° C TOBER 20 1994 


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"NTERNAT/ONAl 

ssksees 


Name: 


Change your Future. 


The largest provider of dedicated financial 
paging worldwide, Hutchison Telecom, brings 
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information than anyone else, it really it. the Call 0S00 28 28 26 Ext. 135 today 


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Address: 


>|>ui s t : 


Hulcluson 
I clccom 


Postasde: 




FINANCIAL TIMES 


THURSDAY OCTOBER 20 1994 


4pmctossOaoOerl9 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


ISM YU. n Ste Ctese 

Mgb LoHStack Mr % E ISO* Hfcb lorn DbM 

17% 12% AAR 148 18-21 166 12% 12% 12% 

17% 12% Allan Ax 0.16 1.1 38 166 16% 16% 16% 


1« 22 27 2088 78% 77% _ 
941*570 54% 51% 53' 
12 85 3% 3% 

2.00 4X 33 1219 50% 49% 50 

0.76 2.4 1810782 31% 30% 31% 
050 3.7 10 II 13% 13% 13% 
0.52 26 13 20% 2D% 20% 

3215771117% 16% 17% 
0.44 1.9 29 120 23% 33% 23% 




79% 57% W 
72% 48% AW 
5 3% AW 
66% 38% ASA 
32 25% Aetna, x 
15% 11%AMMPr 
23% 17% ABM Mx 
16% 11%Aqsieate 
31 22% ACS IB 

12% 9% ACM (MU 1.09 11 X 
10% 7ACMCV0RP 190 115 

10% 7 ACM (M SO 036115 

12 B% ACM Git St 1iS 119 
11% 7% ACM Man 106111 
9% SUM Meragd 0.72 &7 
15% 6% AcncOv 144 13 19 
9% 6% tote Bed 8 

28% 23 Acmla 060 22 14 . _ . 

13% 5% Aeon 0.30 18 2 302 9% 9% 

17 11% Asm 129 351 19% 16% 16% 

18% 16% Adam EffT 0.40 ZB 0 76 17% 17 17% 

64 48% Ail men 100 la 90 52% 51% 51% 

100110 1010077 23% 23 23% 

018 11 8 559 5% 5% 5% 

0.10 08117 22 17% 17% 17% 

1 47 14 13 92 u52% 61 61 

2.76 5 8 7 1909 48% 473 

148 1.4 14 5S6 33% 32’ 

088 4.4 14 3799 

1 34 1 % U. 

096 11 25 2039 46% 4S% 

130 U IS 3503 26 24% 29 

50 23liC9% 20 29 

184 11.7 12 19 16 15% 15% 

9375 29% 28% 29% 

020 18 25 4739 17 15% 16% 

135 2.1 2B 547 16% 16% 16% 

120 18 760 15% 15% 15% 

128 15 IB 148 24% 23% 24 

120 18 T7 237 u23 22% 22% 

144 1.5 23 4441 29% 29% 29% 

080 1.1130 2636 U27% 27% 27% 
1.00 1.7 41 946 SS% 59 59 

170 17 4 646 26% 25% 26% 


31% 16% MM* 

0% SMwsS&p 

30 ISArhotae 
62 49% AtgonADR 
65% 44% tonal 
36% 25% A&k 
22% !6%AAmn9i 
4 1% Atom Ire 
90% 38% AkftC 
39% 22% Afctne Fn 
29% 16% Align he 
17 14% Aktaasa 
30% 21% A&Tdl 
18% 13 



... 13% Afeska A* 

21% 16% Atony im 
17% 13% Atone 
25% 19% At£t£ 

22% 17% ACUwA 
30% 25% Atom 
27% 19% AkaAl 
65% 49% AlceS 
30% 23% AtaBrowi 
22% UAtaAl 
24% 17Aiepllild 
28% 19% ABegP 
22% 13% Man CQQ 
28 20Afaoan 

4% H Am 
27% 17% Affree Cop 
10% 9/UknQ 
27% 21% AM Mi 
40% 33% AMSg 
11% 9%Atow 
29% 24AM&P 
7% 4% AOMStB 
35 21% Atom 
87% 64% Attoa 
30% 1B%«a(3pA 
11% TAmGovInc 
8% B%Ara Prods 
8% 8% Amafid 
25% ZOAratadlnd 
52% 44 AmdaHa 

9% 8% ArnAdJR 
31 20% Am Sent* 

37% 29% AnBmd 
25% 16% Am Bus PM 160 3.5 14 202 
6% Am Cap he * 165 9.1 142 


110 15124 1827 21 ‘i Z1U 

148 2.4 18 1648 19% 19% 19% 

184 78 71 860 21% 20% 21% 

11B 17 17 1776 21?# 21 21% 

144 1.7 16 560 26% 25% 25% 

1 dOO % % % 

1.64 78 22 »9 21% 20% 21 

118 18 30 9% 9% 9% 

190 3.7 15 CTCO 24% 24% 24% 

167 1.9 7 3366 35% 35% 35% 

084 12 Z100 8% 09% 9% 

168 13 192280 26% 26% 2P% 

26 809 7% 7% 7% 

16 4137 30% 29% 30% 


1 

21% +% 


uB9 86 BB% +1% 
18% 616% 18% 
a a ■■ 

7% 7^ 


180 18619 6501 
34 2291 
196138 494 

126 1328 5 

108 1.1 13 299 
152 £6 13 1341 
160 13 49 129B 48% 

124 2.7 47 

010 0.4 33 9216 _ 

2.00 58 10 1424 35% 35% 

23 22% 22 . 
7% 7 7% 



20% 16% An CaoBd 184 68 SO 65 17% 17% 17% 
23% 18% Am Cm CV i 188 5.7 0 S 19 19 19 


99% 42% AatCyan 
37% 27% AfflBPw 
33% 25% Amfiqv 
30% 24% AjnGrrt 
9% 6% Am Govt U 
27% 21% Am Mn n 
20% i6%AmMrfcge 
65% 55% AnHoma 

§ 2% An How 
91% Am no 
?l% 7AmOpp£x 
30 23% AmftMn 
34 lOAoiPtwn 
B% 7% Am Art E* 
27% 21 AmSto 


22% lBAmWaft-5% 1JS 6.9 
32% 26 Am War 
43% 36% Amt* 

43% 32 ArarcnJnc 

18% 11% AaaWt 
61% 50% Amoco 


18S 18 57 3850 99 98% 96% 

2.40 78 16 3S53 31% 31% 31% 
190 28 13 8184 
1.16 4.4 23 3449 
ITT 12.8 1078 

280108 7 363 
166 17 11 8 

2.82 4.7 13 3329 
175 216 9 20 
148 15 15 2967 
180 113 
088 16 
140 1.6 
144 5.7 
146 18 


30% 30% 
26% 26 26% 
6% 5% 6 

a a 55 
62% 81% 62% 
2 % 2 % 2 % 
91% 90% 91% 
aw 7% 7% ^ 


+% 


5 


212 24% _ _ . _ 

9 200 25% 24% 24% 

5 97 7% 7% 7% 

7 3483 27 26% 26% -% 

1 16 <H8 18 

1.08 19 11 309 Z7% 27% Z7% *% 

182 48 14 4839 40% 39% 40% +1% 

1-28 17 5 30 35% 34% 34% -% 

124 18181 518 018% 17% 16% 

280 17 16 4S30 60 59 59% 


9% 6% AnpcaPUx Ito 1.4 5 41 7% 7% 7% 

4% 3% Aim IK 0.12 £7112 33 4% 4% 4% 

34% 29%Amaau01 1.40 4.7 91144 30% 29% 29% 

4% 2% Anacomp 10 214 2% 2% 2% 

S8% 42%AlwtoW 130 17 B5 1383 45% 45 45% 

33% 23% Analog 31 23*4 32% 32 32% 

29% 24% Angaaca 084 38 24 65 27% 28% 27% 

55% 47% Anita 180 11 231707 52% 51% 52 

34 19% Anthem 21 620 31 30% 31 

16% 14% AMtXXIjrh 144 £5 17 £0 17% 17% 17% 

35% XAonCp U8 18 7 695 33% 33% 33% 

3% 22%ApadiaOp 128 1.1 36 1322 25% 25% 25% 

10% B%AnxMnFx 171 10 298 8% 8% 8% 

24 14% AM 40 263 23% 22% 23% 

7% Mafl 1 537 4% 4% 4% 

25% 16%ApplP*A 112 15 39 E7 24% 24% 24% 

28% 21%AKMhi 110 a4 19 5357 27% Z7% 27% 

51 43%An»Chenk £50 58 21 134 48% 48% *8% 

51% 45% Almca 48P 480 9.7 2 «% 46% 46% 

6% 4% Arqco 3 2093 6% 6% 6% 

29 23 Anna £19 2-10 00 2 23% 23% 23% 

57% 41% AraaNV 13 £9 32 3864 43% *3% 43% 

46% 33%AirowBee 14 934 36% 3 35% 

2 323 4% 4% 4% 

178 32 13 786 24% 23% 24 

140 13031419 33% 32% 33% 

0.40 18 12 4 30% 30% 30% 

1.00 £7 13 1205 3 37% 37% 

027 18 125 16% 18% 18% 

028117 6 88 2% Z% 2% 

0.12 13 25 42B U3T% 37% 37% 

1 82 25 U5S2 53?* 53% 53% 

280 1.1 15244% 244% 244% 

£08 68 13 S3 32 31% 31% 

128 42 7 10 8% 8% 6% 

1.54 11 9 388 17% 18% 18% 

580 54177 2126 102% 102% 102% 

3 40 4% 4% 4% 

8 23 17% 16% 17% 


7 % 4% Am Bp 
33% 23 tor tad 
34% 21% Amm 
31% 22% AcMdOaal 
44% 33%Am0fl 
25% 16% AstaPacF 
3% 1% Asset taw 
37% 28% Am M Gas 
57% *9% ATJT 
2B3%22fi%IMBch2 
38% 29% Attn Gas 
9% 5% Attain Sos 
21% 16 AUntc Egy 

112% 92% Amen 
10 4% Alta* 

20% 10% ABnra&w 188 51 




% 

I 


8% Altai ADR 134 38 101242 g 8 
116 08 24 1342 20% 19% 
HO 1.1 487 6% 8% 

0 .60 (8 39 2305057% 58% 
144 £9 11 87 15% 15% 

004 04 4 215 10% 10 

180 1.6 19 1481 
£00 38 17 1728 
9 27 

23 216 6% 6% 


12 . 

24% l7%Augat 
12% 8% Austria Fd 
57% 47% AAB 
20% 13% Amnco 
19 7% Aval 
45 30% Awwt 
52% 48% Mart 
14% 10% total Corn 
7% 5% Aztta 


fl 

20 

5% 

a 

a 

a 

6% 


38% 31% BCE 
8% 6% BET ADR 
5% 3 Banco 

17% 15% BakraFwk 
22% 17 Baton 

27% 21% BsUorQc 
30% 24% BaKp 
15% 5% BKMd 
9% SHOO, 

25% 20% BffiGE 
20% 13% Baf Mcp 
38 27% BncOna 
28% 20% BancafBV 
12% 9% BsneoCenta 
34% 27 BopHaonl 

1% 7 » Banderas 

63% 49% Ssdag 

50% 38% BankAn 
96 81% Bata Bast 
26% 22%BK8stn 
49% 44BkBO»lP 
33% 2SBan*XY* 
50% *3% BxtaArn A 
95 74Bai*AnB 
94% 62% BrfcT* 

38% 30 Belays 

30% Z2%B*dlCm 
39% 29% Sanies ftp 
«% 39% BarnB* 

13 8%BSM 
53% 33% Bauseft 
28% 21% Bam 
28% 23% BayS Gas 
22% 19% B0 Tf 1838 
23% IS Bear Sens 
50% 45%BBaSfftA 
37% 27% Bearinp 
32% 23Badaiianh 


- B- 

"68 7 8235 500 35% 35% 

02i ua » 8% o% 

9 20 50 6 5B3 4% 3% 

0*0 £4 IX 16% 16% 

146 £4 45 2962 19% 19 

140 1 6 24 53 25% 25 


QE0 £1 27 176 28% 28% 
iqJb 1()li 
11 262 7 6% 


105 as IS 293 


182 8 5 12 846 23% _ 

0.20 18 30 196jjH>% 20% 
1.24 4.4 915791 28% 27% 
094 36 9 71 15% 25% 
072 10 5 111 12% 11% 

1.04 15 7 220 25% 29% 

37 269 1% l 

170 1.2 20 272 59% 58% 
1.60 3 5 9 5991 45% 44% 
UE 08 5 81% 61% 

086 32 12 3810 27% 26% 

104 19 13 44% 44% 

12S 42 5 6268 30% 30% 
325 7 4 70 44 43% 

IX 81 16 75 d74 

m s.4 5 1754 67% 85% 
1.06 £9108 13 37% 36% 

0 B0 14 30 5*8 24% 14% 
1.40 37 53 40 X 37% 

164 39 101537 43 42% 

105 0.413? 1174 12% 12% 
198 £9 12 2434 34 % 33% 

1.05 £9 41 3205 27% 27% 

1.46 SHI SO 25 24% 
172 16 30 20% 20 

160 18 4 5354 15% 15% 

106 18 2 45% 1143% 

072 12 22 164 32% 31% 
040 18 25 183 30% 30 


TECHMuernur hums rm uk 


Samsung Laser Disc Player 




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Dual 1 Bit 4 Times Oversampling 
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a cm 


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46%34%BKta0 
7% SBatflPr* 
59% 48MU 
22% 14%Ba0ta 
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55 43%Bck>A 
25% 20% Banrt 
69 54% Band 4XP 
44 34% Burt 
36% 24% Banettn A 
1% %Bam*tB 
19% 13%BeRp 
1995D15100 BmMI 
10% 8 Bery Pad 

41% IS Bad Buy 
26% 2B%Be&l8t£ 
35% 51% Bdttm PI 
24% ie%Bamst 
53% *2% Betz L 
16% 11%Ba6it 
21% 11% Btocaflx 
32% Z3%BknSngmS 
33% 16% BDodr 
£2% laBtaeKKR. 
10% 7 7 s BtoffdMrx 
8% S%Bfc»CttEX 
10% 6% BMUeKTgtx 
46% 37% Bta<* 

6% 0%BkMCMpX 
15% 9% BMC tad 
50% 42% Baaing 
30h 19 Bo taC 

21% lOBotBSH 
26% 9% BORhCMn 
18% 11 Bonan 

24% 18% Basin Cat 
29% 20% Boortr 
36% ia% Bmz« Fna 
34% 297, BRE Plop 
90% 66% BrigS 
33% 19% BrtatoBflnt 
59% 50%BrMySi 
74% 54%BTAIr 
54% 39Brt6M 
81% 55% SP 
27 19% BPPrudhoax 
27% 18BSttaf 
71% 53% BT 

28% 22%9dynU 

»% 32% BtmiGD 
8 5% BnanSh 
30% 26% BnAnB 

S 2 <% BrflBT 
3>jBRT 
17% Brmnk 
18% 13% BrushUU 
41 35% Buckeye Pt 
28% 12% Bud Cool 

S 47% BuM 

36% Burin Rbsc 
19% 15% Bumton Pc 



TU. H 9s Ckm 

M » E lose MU Im* torts 

174 18 18 950 47% 47 47% 

136 14 2 18 5% 5% 5% 

£76 53 15 3109 52% 30% 52% 

140 £0 18 281 20% X 20% 

£76 ID 26 5223 55% 54% 55% 

160 U 22 2Z8 60 48% 49% 

154 £2 27 1159 24% 23% 24% 

480 79 12 54%dS4% 54% 

1.72 4£ 13 278 40% 39% 40% 

047 1.8 IS 57 25% 25% 25% 

104 4.6 17 287 % U % 

148 10 *1 46« >6 15% 16 

54 3U1BS60 19*00 1B9SQ 

140 4J 32 96 B% 9% 9% 

24 4657 38% 37% 38% 

£50 12 45 27% 27% 27% 

100 14 45 53% 53% 53% 

140 £1 8 3801 19% 19% 19% 

1.44 £0 23 121 48% 47% 48 

34122B3 15% J 
110 18 27 1114 18% 

140 1.5 59 S52 26% 

140 1.8 22 2623 22% 

192 6-6 12 56 20% 

173 89 247 8% 

0.75 110 544 5% 

170 14 804 B% 

US £7 27 2984 *8% _ 

112 J.7 34 7 6% 87 s 

100 IS 9 9181118% 15% 16% 

I JOB Z3 13S2S8 44% 43% 

160 £2 6 2117 27% 26% 

106 0-3 36 1356 17% 16% 

£06 89600 4735 
OX £2 17 1B23 13 
195 59 7 16 

090 £1 14 1292 
027 18 774 

£40 79 7 31 

194 £5 12 2301 72% 8B% 72% 

19 4498 23% 22% 23% 

£S2 59 15 6893 59% 5B% 58% 

1.77 £9 14 338 82 60% 62 

397 14183 2950 *7% 47% 47% 

U8 £2 26 4350 79% 78% 79 

1.74 14 6 213 21 3D% 20% 

IX U 25 4106 25% 2S% 25% 

3.77 59 18 2947 63% 83% 63% 

195 59 14 119 24% 24% 24% 

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084 6.7 16 56 14% 

.9 5707 29% 

48 17B9 

038 18 11 11» . 

190 46 14 00 3ft _ 

030104 0 15 3 2% 

1.10 ms 7 4S7 1ft 10% 

024 47 4 290 5% 5 

028 02 28 66 4% 4% 

040 1.0 13 1« 3ft 38% 

UO 23 ffi 103 51% 51% 

1.19129 12 8% 8% 

1970 2% 2 
198 29 13 802 
038 39 12 40 11 » 

018 06 19 880 2B% 28% 

OM 39 91082 25% 024% 

016 09 221381 18% 18% 

001 OO 44 2D% 2D% 

65 7448 838% 31 

020 2.7 8 22 J 
045 14 10 3ZD 
038 15 214048 


11 


33% 33% S% 
1ft 13% 13% 



ft 

3 


I 

I 

1 

-% 

ft 

ft 

i 





-T 


6% 5TtBrewr 
43% SftTEFfta* 


020 39 22 243 
190 16 12 £68 


S»1 


5% 

ft 8% TCWOwrS 084 9.8 361 8% <8% 8% 

48% 34% TW Corn A 043 09 47 51 46% 48 4ft 

2% 1%TlSWgn 008 49 2 129 2 1% 1% 

9% 15% TJX 058 13 10 2363 17018% 17 

080 5.8 13 181 145* 14% 14% 


29% 15% TJX 
18% i3%TM>Baarp 


7T% 61 TP* 


100 17 H 15 


79% 71% 


«te tamo 

9ft 22%TteonFd 
ft 3%-MBlW 
ift 10 Tate PI 
44% 34%TM*k 
ift 10% Tandem 

4ft M% lanflj — - 
12% 8% Tana Una am 79 

4 2% TO»« 

2ft l8%T«a6m 
40 23% nano 
2ft 14% To*))* 
46%34%TtetaSA 
76 50% Tam 
56% 48%TiqM 


10 H Sh (tea te 

Oh * E m te te tan (tea 

002 01 ns 28% 2ft 2ft ft 

042 4.7 13 173 6% 9 9 -% 

190 89 8 10 >5% 15% 

198 49 2D 1888 36% 39% 39% ft 

418505 ulB 17% 18% «% 
OBO 1.4 17 271B 44% 4ft 44 *1% 


79 8% 9 

14 2% 02% 
191 52 14 419 1ft 1ft 

OOO 1-5 28 1284 u40% 38 

090 59 64 771 16% IS 

199 4.1 B40CQ 41% 40 

191 2 A 1216430 62% 61 

1.00 19 43 Sn 53% 82 


30^ 1ft TanaOEahK 0.17 07 I5B 2S% 


. ftTateMEUk OSD 8.1 
8 ft TanteGHx 080 08 


88% 42% Terms 
30 25% TeppeoPa 
32 20% Tmtejno 
9% 4% Tame 
13% 6% Tana heta 
12% ft lam 
Tom 


190 39 17 2963 
140 02 11 47 

30 3811 
006 OS 1 979 
008 0 7 38 1109 12% 
18 184 ft 
3-20 5.1 14 5088 63% 



44% 44% 
29% 29% 
29% 30% 
7% 7% 
11% 12 
9% B% 
, S3 B3% 
020 06 39 121 32 81% 31% 

100 19 139794 TO 67% " 

040 10 24 20 19% 19% 

308 04 18 3251 33 3ft 

1.1038.7 1 IB 3 2% 

1.40 18 11 797 43% 43% 

212 2 4% 4% 

0-35 19 85 IS 

028 OB 102 


89% 61 

H% iftTtaatte 
43% 2ft 10*8 
4% 2% Tad tea 
Bft 47%Ttan 
4% 41haaten 
24% 14% TMCtp 

»% 24%1tefV*t 028 09 102 31% 

47% SSTtornoBac 012 03 2B 327 45% 
29 22% TMoM Om 18 7 259 24% 

70% 58% 1MM 294 12 23 414070% 

18% 13% Itann W 040 17 39 201 14% 
22% ISTboewatt 120 69 7 2S6 1ft 



24 15% USUCO 
1ft ftUSUCte 
1ft IftUSXU 
4ft 30% USX LB 
T7% 12% USX DaU 
31% 25%Ufflarp 


M. PI & 

Ota « E 

024 12 7 
090 04 0 
068 39448 1381 
1.00 25 0S2B 
020 19 5 242 
1.72 62 14 92 



53% 44%VFbi 
24% 15% V 





1ft 10%ToB{kK 
75 58%Taatan 
49% 38% retail 
30% 20% Tam Cup 
AZfttaCB 
18% BATet&Gte 
40% 32%1>8fUa 
26 21 Tomato 

f% 487Mm9 
1% 45%-nmtee 
1ft UThncs 
14% 12% Tim* 8 
17% iftTanna 
43 St Ttate 
ift 13% Trttegi* 
37% 32TOM25 

26% 12% litre 
84% 5ft Titan* 
24% 21% TOCOn 
47% aftTMters 
40 31% TOOK 
57 24% Triton 
4% 2%TtEaanS 
7% 4%1tataCrp 
14% 6% Twite in 
28% 8% TWO) CM 

24% 18% TMnOte 
S6%«%1teL 
10 6% TJ*oT 
6% 3%1)M 


1T% 9 J7% 

ft 2ft 28% 
11 1ft 10% 


25 T9%Tlte0 040 U 37 2019 __ 

3ft 29% Titer 028 119 58 615 34% 

44% 33% TMWn 096 19129 6171 3B% 

37% 28%TteHh 106 13 29 4755 33% 

30% 31% IWian 100 17614 632 37% 26% 3ft 

8 2% TtaeOp 7 1Z7 5% 5 5% 

13% iftltePr 100 82 10 1ft 10% 10% 

4% 4TateSfep 14 2B ft 4% «% 

15% 8%1taitanCta 096 6.1925 146 9% 9 9% 

27% 24%TotadE291 291 105 3 2ft " 

11 929 

094 07 18 11 83 63 63 

1.12 17 11 1271 42% 41% 41% J 2 

046 19 20280 29% 27% 28% +4% 
OM 22 12 683 28 % 2ft 2ft ' 

009 05 3 21 18% 18 18 

25 4515 3ft 37% 38% 

102 8.4 10 2 2ft 22% 22% 

200 4.1 8 898 48 048 48% 

038 07 12 89 48% 4ft 49% 

080 42 10 338 14% 14% 14% 

5 2 14% 14% 14% 

026 21 10 7 12% 12% 12% 

090 19 8 02(2 34 S3 33% 

034 12 18 257 1B% 17% 1ft 
150 7 3 HOD 32% 32% 32% 

8 554 11% 13 13 

104 20 30 2137 53% 52% 

080 39 145 22% 22% 

098 21 191882 33 31% 

068208320534% 34 34%+% 

010 03 29 1834 M% 33% 34% +1% 
1163544 3% 3% 

020 4.4225 212 ft 4% 

012 U 105 7 8% 7 

094 54 2 2484 12% 11% 11% 

070 10 21 22 23% 23 23 

090 oa asm 50% 48% 40% 

O10 19 91210 7% 7 7 

400 73 4 4 4 


5 

ft 

-% 


. 3 

33 


% 


- u 


51%45%USRC4.1x OO 07 12 47% O <7% 


29% 23% UJB F%1 

8 4% URS 


36 17% USB 
31% 2ft UST 
51% 48%USCW>I 
ISO 33%UN. 

10% 1%U)Clta 
M%17%UGI0te 
11% 5%lNCkc 
24 21% Untar 
27 20%IMBInc 


1JH 18 18 2288 26% 26% 

& ia 6 5% 


5 3360 20% 19% 19% ft 

1.12 40 16 3814 2ft 27% 2ft ft 

390 79 » 48% 49% 45% 

OB 1040 92 88% SD% +9% 

1.88640 2 378 ft 2% 2% 

198 09 21 242 2ft 19% aft 
2 407 6% 6ft 

190 79 80 3878 21% 21% 21% 

040 10 16 6301 2ft « 25% ft 
0.10 09 13 144 12 11% 12 

180 39 10 2 78% 73% 73% 

494 89 17 2081 119 117% lift 
TJB 12 88 870 48% 48% 4ft 
075 22 3310582 33% 32% 33% 
a S 13% 13% 19% 

2100 43% 643% <3% 
m 57 58% 58% 

144 80 12 370 35% 35% 3S% 

172 14 14 5081 51% 50% 50% 

082 19 9 198 23% 23% 23% 

020 10 5B 4568 »' 

0 192 
277259 7 8022 

a 138 3% _ _ 

104 19 a 571 3ft 37% 37% 

a 


s 3 

S ’S 'S A 


17% ii%umtet 

' 56% (Mir 

iaft uwv 

42%LUtap 

21% IKM 
... B% UtateQvp 
54% 43% UB 190 x 150 01 
67 SBUnB490 h 490 80 
39% 30% UBCJac 
87% 48%UaPic 
28% TftUnMtet 
22 18% UrionTm 
ft %U*R> 

15% ft Unite 
3% 2% IMClip 

41%29%UBtea .... 

15% 12% UkSknRqr* oa 8.1 63 811 
22% 17%Ud!teM 020 10 17 82 19% 1. 

5ft 3S£lMteea OU 01 a 3404 52% 51 
40 aUMta m 02 B 85 3ft a 
4%UMMM 028 S3 5 115 5% 

10% UkfCgDrefte 005 04 222 11% 1 

Uimfmoi nan 

4USAI 012 17 0 2884 4% 

020 19 14 1385 1ft ift 

a a 21 20% 2 

2 343 15% 15% ». 
124 19 7 427 « 31% 31 

032 10 a 4201 
008 03 91778 
114 5.7 33 4836 
100 11 172773 
082 89 12 46 
a 411 
086 11 13 1C 
198 99 11 41 

1 198 
090 13 18 15 
030 49 12 363 
On 18 22 3008 
088 11 11 1328 _ . _ 

in 44 15 2413 S% 33% 


% 

-% 

+% 

3 


ift ii% unfix 
23% iftusnur 
29% 14USHMM 
41% 3iusuq» 

24 11%USS6D« 
32% 15% UBSVB 
48% 37% USteetx 

n nuBfne 

12% Ukteter 

13% IMhPda 

2ftlUrRiadi 
18 iftltaWi 
% OHUnMML 
3% 8% liter Dp 
2ft 17% DM Dp 
30% 24% UPOca 
58 43UNUHCBP 
3ft25%1W* 



Sft BVsrty 
ift ift Waiter 
78% 60% 1KSPOOO 
47% 31%HstaH 
19% Vtata Res 
__ 2D%Mnmc 
34% 24%Wteoaa 
14 fttetaar 
10% 15% VtaCos 
37% Sftttnado 
56% HVUoll 


- V- 

128 29 13 1T18 51% 5D 5 

OS 1* 814 21% • 

008 1J1S0 13 6 

W* 094 13.7 334 7 

i 1901S9 155 8% _ 

r 064 89 ISO 10% 1ft 1ft 

31 1472 6% ft 

034 07 11 2570 33% ' 

a M2 3ft 

108 89 0 60 13% 

590 02 z2D 61 

a 484 46 

TO 16 a 

22 85 27 

044 19 10 SOB 33% 

11 21 7% . . 

20 365 1ft 18% 19 

100 60 » 89 33% 33% 33% 
HUB 9 55% 5ft 55% 


- w - 



I 

I 


36% 2ftvttteacs 

28% 22% Wtekt 


19% 14 IMfittgy 

42% 33%MOa. 
25% 20% Martel 
284221% Htan 
36% iftlttUn 
3% l%Kaaankd 
»% i3%wteaia* 

40 5 ! 34% nfcQHto 
11 6% HtetaSt 
St 24% 
ft 


StSt 


ft ft 8% 
27 a% 26% 


1ft Ift _ ... 
Z7% 21% Watt CD X 
ift I4%maca£ 
bO 39% «ASas 
ift 9% WdUn 

20% ftiwao 

35% IStattas 
25% 18% UMtiMng 
34%a%tanta 
15% IftMMgB 
6% 4% MDnCoel 
2ft Ifttantete 
2ft 14% taftte 
39 2ft Wsteo 
51% m%H*rtnr 
21% l3%Hbteat(tr 
73% 4ft HUM 
24% 10%lW|teB8 
18 14%«MKI 
20 13% HMttar 
32% 2S% Wear he 



a% IftHMSM 14 351 16% 16% ift 

32% 2ftHB.Hatti 1.92 69 13 \» 2B% » 2ft 

2ft ISHUante 84 525 18% 18% 1ft 

35% 30% HUM 190 39 12 2327 34% 33% 34% 
16% 12% ttetatut 09B 15483 C 14% 14% 14% 
33i«tan> 50 142 5 4% 5 

070 10 19 3817 39% »% 38% 
064 11 15 153 30% 30 30% 

- , 017 07 231O5E0 2*% 2ft 23% 

5% 2%MUnrtexOM 10 9 188 4 3% 3% 

n tertam 144 11 a 2215 7ft 76% 3ft 
100 70 a 185 14% 013% 14% 

122 80 13 m 37% a a 

198 49 B 64 21% 21% 21% 
*20 1.7 18 48 242% 240% 241% 
048 1.4 a ISA 34 31% 34 

008 49 5 84 1% 1% 1% 
on 19 16 83 16 16% 15% 

128 04 25 18 35% 35% 3ft 
004 OB 13 776 ‘ ' 

on 29 16 a _ 

023 12 14 7a 10% 

024 07 a 1818 33% 37% 

4.00 17 19 3052 14B% 147% 

024 10 19 2291 14% 14% 

048 17 19 48 27% 27% 27% 
098 59 11 300 18% 16 16 

37B 44% C% 44% 
19 404 17% 17% 17% 
MISS 16 16% 15% 
020 11 15 790 19% 19 19 

023 10143 31 23% 23% Zl% 
128 60 10 322 29% 28% 3% 
090 19 16 4296 13% 13% 13% 

aa 5.1 0 ns ub% 6% b% 
a sift 18 it 

15B 39 5 120 16% 16 

1.10 30 47 BOC 37% n% 

1-20 19 15 86a 41 40 

O10 07 17 55a 1ft 
1.22 29 16 HU 53% 

a 19 — 

034 10 16 511 1 . 

a 12 19% 

190 59 16 40 ‘ 

. 0.10 10 15 227 

0% 22% Ha 034 19 1310010 
7% 52SWM*V 006 09 14 5 

12 6% WMnara 020 1.9 17 a 1 
18% 42%HteO(i 198 10 16 257 51 . 

13% 7% WkMtaoo 16 1383 6% 

27%23%fteEn 101 59 14 1348 ' 

J% Z7H83cPBaS» 102 06 11 m 

1% 15 Mnro an 14153 a 17 
3i 26% WHmCDrp 1-12 19 61 374 2ft _ . 

aft 2ft vmct on io anorn a 29% 

27% 18% Watate 016 09 1520Z7 25% 26% 

26% 12% MtooMi 090 39 3 5736 18% ift 

18% ifttaWWtt 010 07 « 15 U% 

ft fttattarp 12 3989 ulO 6% 

9% 3ft Ulgltyx 048 1.1 211170 ift 41% 
&%l6%WtfeUtar 03 19 16 SM 17% 17% 

23% iftWynneU 044 10 14 137 23% 2ft 


-X- Y-Z- 




112% 87% tear 
53% 40XfeaCen> 

25 1 2 20TWaaEgy 
42% 33% wont M 
5% I2i*wa 
13% 7Znaa 
27% 20% Zmtfilal 
. ntafcci 
1ft 11% Zero 

29% 16%2UpM _.. _ 

13% 10% 2ymgFtxxlii.ee 99 
10% 6% Mg Tall QM100 


300 17 a 3221 11211 
056 1.1 a T7 50% 

1-22 59 12 23 22% 21 
0.16 0X19 7067 29% a. 

014 14 a 4% 4% 

6117a 13% 12% 

190 «4 a z sft 22% aij 

083 123 229 6% 

040 11 18 a 
Offl 49 16 168 
124 
644 



3 

13% a a 

18% 17% 1ft 
10% 010% ID'S 

ft 0% ft 


PIWMteMtatao 



H Oh 

tack te. E m *te Imp law 
ASM* 020 19 15 14% 14% 14% 

MX tap OlllS 783 16% 16 16% 

tatalE 2332991 ift 17% 18* +fi 
Acme ins 17 155 2D igJ 2 19% -% 

team cp 4i <23 ca a aft 

Maptal 1933064 21 1ft 2ft +2* 

AOCT* 38 1306 44% 42% 44% +2 

tefcBWi 151643 10% wift -% 
MUSenr 016 2 B 3ft 35% 38% ft 

Adapt Sts 020 30 7016 37% 35% 37% +1% 

AdateC 7 924 1ft 10% 10% ft 

Adi Logic 0 412 ft 4% 4% ft 

AdiPdim 6 ZO 4% 4% 4* -A 

AdiTeniab 12 20B5 ift 14% 15 

AftWfe 020 18 2277 33 % 31% 31% -1% 
10 108 15 14% 14% +% 

010154 1870 14 1ft 13% 

0 24 19 848u28% 27** »% ft 
Z94 11 3a 6ft 80% Sft ft 
098 17 3609 2ft 24% Z% ft 
A 519 11 10% 10% 

092 14 5 

4 484 
1X0 13 a 
090 12 62 
032 8 6 

008 16 1B1 


AOymai 

flimilrnrn 

MjJoCafca 

AKxpr 

AXzaADfi 

AUtf 

ABetfiMr 

Alep Org 

AUnPh 

Aides* 

Ala Cap 

AtatBC 

AttaGdd 

Alicia Co 

/Vn Bafat 

AmOttv 
AmQrBu 
Amlteag 
Am ted a 


a a a 

6% 0% 7% 

15 14% 14% 

14 13% 14 

3% 2% 2% 

IS 7% ft 

3612317 38% 3ft 36% +1% 
072 7 a 21% a% 20% ft 

016 34 17% 17 17 

15 a 16% 15% 16% 

24 3B2 25% 24% 25% 

10 409 7 6% 7 

Am Srftna 092 10 B7B 4% 4% 4% 
Appfrtlte 37 232 22 21% 22 

AmGrtA 056 16 1857 29% 28% 29% 
AmttP 11205 1% 1* 1* 

AmNBii 220 7 43 48 47% 48 

AmPcntaw 32231* 17% 16% 1T% ft 
AmTiw 13 588 17% 17% 17% 

Amgen he 2290585 use ^ 55 58 ft* 

Antal Cp 006 IB 1270 11% 11 11% ft 

AmvFta 4 441 6% 9* 9% 

AnatoQlc 17 10 18% 18 1B% 
Andyte 052 T7 142 20% 19% 19% 
AnaopalAa 100 13 21 15% 15% 15% 
Andrew Cp Zl 110 48 47% 48 

Andros An 9 429 18 17% 17% 

Apogee Eo 090 34 4287 ui7 ift 17 
MPBta 8 71 6% 6 6% 

ApptdUU 3217738 48% 45 48 +3% 
ApphC 048 3B314W 42% 41 41% 

Aftteeu OM 44 80 18% 17% 17% 
APtOrOr 034 48 3241121% 2121% 

019 14 1314 19% 18% 19% 

1.16 8 65 a 28% 26% 

064 23 111(23% 23 23 
040 19 ISO 22 21% 22 

322022 * 34% 0 

3a 53 26% 26 26% 

7 9770 12% 11% 12 
13 118 10% 9% 10% 

092 17 SIS 24% 23 2 ft 
048 a 803 67% 66% 67% 

9 145 2% 2% 2% 
09219 52 7% 7% 7% 


Pf 


Mtam 44147a 42% 4ft 42% ft 
OK*) 030 a 7226 32% 30% 32% +1% 

Dap Of 1.12 B 71 31% 31 31% ft 

Demo 020 4 47 7% 7% 7% ft 

tHTadi 17 55 22% 22 22 % 

0MB 000 a ia 21% 20% 21% 

OWM 16 ins 17% 1ft 16% ft 

O0Ufen> 92594 16% 15% 15% -il 

[Kg Sound 71 1416 3 2% 2% ft 

mgs** 24 387 7% 6% 7 +% 

annex Q) IB 2570837% 37 37% ft 

DfadeYm 020 45 301 6% 0% 6% +1* 

MAtaS 1 916 ft i 3% ft 

Ctdar Bn 020 0310 27 26% 2ft ft 

Derail Hh 0014 B1 13 12% 13 ft 

DmeoEODjP 9 97 « 8% B% ft 

•seam 11 01 1ft ift 10% ft 

OftySD 024 23 321 0 27% 27% 

Drug tape 00 42 284 4% 4% 4% 

DS Barer 10 16 10 27% 26% 27% +% 

Qirtor 042 12 818 16% 16% 16% ft 

Dimed 10 581 a% 28 2ft ft 


ID 


- K - 

K Stas 00 12 159 24% 23% »% ft 

oenCp 044 S a 9% ft 9% 

KtBufOO 3 439 ft 5% ft ft 

MTS* 072 23 289 a Z7% 27% +% 

Kanbcfcr 011 10 2ft « ft 

KtanbaB 004 13 42 Z 24% 24% ft 

ItecHaar 22 15 1ft 1ft ift 

HAW 06832 48 45% 47% +1% 

■dodge 2 397 4ft 4ft 

DMA 0 n j| A A -A 

KoatQhc 25® 885 28 27% 27% -A 

Kiddies 10 m Ift 16 1ft ft 


AlOCo 
Argonaut 
Armor AJ 
Arnold la 
AmacfTtf 


AST Bar* 

Afldocon 

M8CNr 


-% 

+% 

+% 

+% 

ft 

ft 

ft 

-J* 

ft 


ft 

-1 

ft 

ft 

ft 

ft 


ft 

ft 

ft 

ft 

ft 

ft 

ft 

ft 

ft 

ft 


EMU fid 2 10 3 2% 3ft 

ICp 2 602 3% 3% 3,i -A 

EedEfwu 5 a i <n i -A 

ED TeC 032 244510 19% T7% 19+1% 
EOtfnd 20 2flZ 8% 7% 8A -A 

StaaB l 453 1% diA IA 

Bac&sa 14 1130 15 14% 14% 

BacM 00 52 17 51% 51% 51% 
*990 21% 0 21% 

EmoonAsa 17 37 5% 5% 5% 

1966 Ult 10% U 
EBB/Vltn 47 5 13% 13% 13% 

EndrSW 0 2 1% 1% 1% 

Erasote 3 362 2% 2% 2,’« 

EgdUOi 010 0 705 5% 4% 5% +% 

Erte*n8 0481B7134S6u61% 58% 60% +1% 
tad 350 7% 7% 7% ft 

31 846 12% 12% 12% 

BaDyta 28 3770 22% 21% 22 

10 a 8% 8% 8% 

13 620 18 17 18 

Euent 010 » 1BB»% 21 21% 
EzeorpAm 18 1427 11 10% 10{2 -A 


ft 


-A 

■i 

ft 

ft 


ft 

-% 

ft 

ft 

ft 


ft 

ft 

ft 

+i 


ft 

ft 

ft 

ft 

ft 

+A 

ft 

-% 


Autohftj 


B El B 


Bateti MB 
Baler Jx 
EfehnLB 
BndK 
BMourn 


5% ft 
13 ft 
A 


BBSTFh 
BE Bare 

PMHIfirnT 

BanfiJeny 


i mud. Mm 




AMEX COMPOSITE PRICES 


4pmdosaOcUiarl9 


Ft Sic 

suck Wh. E 100* HUH lowOon Ctaaa 
Advlten S33 32 16 15% IB ft 

Wtatae 2 0 % Ji jl 

AlptoM 4 485 u7% ft 7% +% 

Am 1 st Pa 1.04 14 2 48% 4ft 48% 

AmMatnA <LWM» 75 23 22U 23 +% 

Amdatd flIB 3 3032 9% 

Am EM 2 „ 

AmpaMmA 44 190 

ash tom mat » 

Anretai 23 2 SO 

A» 8 341 

MteCMB 0 10 

Antes A 6 IBS 


BW Ocean 055 1 111 
SadpartRr 073 21 2 

BMHmiTA 004 a 220 
Bony* » 1*3 22 ! 
BATWr 071 
Bate fi 

BHa MW *0.40145 
Bto-HadA 73 
057 47 
30 



BHUPBA 


nil 


BnseanA 

Ddprap 

Cambrw 

taiMte 

CaramA 

piaetert 

Pamptan 

CteRi 

CntriFdA 

Canted 

CBmpune 


036 8 154 16% 
1.042*1 51 14% 


3% 

27 

A , 

113 14,5 1%** M* 
3 2 2 2 

18 43% 0% «% 
78 3,C .3 3 


16% 16% 
13% 14% 


020 15 67 25% 25% 

ojfl a Tin 11% ii% n% 
001 4 232 2% 2A 2% 
4 0 2a d2A 2% 
sb 4au4o% 9% a% 

OM 41 514 15% 15% 15% 
001 IB 5% 5% 5% 
0.300 ra UlB 16% IB 
1 10 1 11 1 


H SW 

Stock DM E 106* 
Coned RA 6 
DoraAIA 06404 
Down C A DAO 0 
CrmwCB 0014 
CoMe 0LB82 
C wtt o nwfti 15 


UiwOanCteg 

ft 


2 9% ft ft 
91 16% 16% 16% 
5 17% 17% 17% 
20 1ft 16% 16% 
19 19% IS 19 
13 3 2% 2% 


DM 12 350 1 

Dktek a 0 15% 1, 

Ducobbubi 0 *4 

00 8 a 






EadnCD 

EcMBm 

Eed&A 

EcWoRx 

an 

ae 


00 12 3 18 13 

0074a 3674 13% 12% 

033 B 178 10% 1ft 
4 94 8% d5% 

18 1541 Sft 3ft 
1671 14% 14% _ 

12 676 1ft 19% 19% 



FMitadB 064 11 
FkaA <00 16 
MCl^Bncxaa 16 
FWB(J) 056 74 
Fondld 

ruqum 


ssisasa 

2 » ir “ 

« a 

a 445 . .... . 

3 107 9% d3% ft 


12 % 12 % 


I 


taw OXB 5 40 18% 17% 18% 
BBdRIA 072 14 05 23% 23 23 

EhOHr* on 37 in ir% 171 

tadiitu i 0 

taateHl 14 26 

taTCd* 034 12 00 4 

(tanPr 20 PS 

PteW 028 14 3729 3 

HaaHhCD 4 16 



HBhcAta 

Hate 


MnaCp 

titan 


W 8h 

Or. E tflOt Hgft UwCtenCtaag 

1 so 1% 1% 1% -A 

015 0 « 10% 10 IQ .% 
8 224 ft 8% 6% 

0.12 29 12 11% 11% 11% ft 
32666 SA 2$ 3% 
re 126 15 14% 15 ft 

0X6 19 2705 19% 1ft 10 ft 


JtoM 

Warns 

ttwfcCp 

ISb 

laaftana 

Ltaoxhc 

LyndiCp 



Mata A 

unco 


10 2 
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4 62 

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II 410 13% 12% 

180 A rfi .. 

008 11 T7B0 19 16% 1ft 
024 3 Z100 15% 15% 15% ft 
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0X2 11 1009 17% 17% 17% ft 
BmtoeCp 00 7 20 16 14% 14% +A 

Banknote 060 14 12 2ft 23% 23% -% 
Bata Geo 052 151627 33 32 32% 

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BsyVharx OBO 12 100 23 22% 22% 
Barbate 1x0 131325 59% a a 
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21 185 8% 8% ft 
00 32 10 15 14% 14% 

13 91 14 13% 13% 

Bertteiwn 044 IS 244 36% 3S% 35% ft 
BHADp 012 18 306 13 11% 12% +1% 

Bine 110 306 5% 5% 5% 

SlgB 016 16 176 11% 11% 11% 
BUftyW 0X8 15 7a 13% 13% 13% 
6togn 0804 45% 44% 0 

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FoodlA 009143093 5% d5% 5% ft 

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- L - 

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to 22 239 4% 4% ft -% 

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9100 9% 9% 9% 
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Gain tf>e edge over your competitors by having the Financial Times delivered to your home or office every working rtey. 
Hand delivery services are available for subscribers throughout the Grand Duchy of Lu*emboui& 

Please call +32 2 513 28 16 far more Information. 

Financial Times. Europe's Business Newspaper. 




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40 


FINANCIAL TIMES 


Thursday October 20 1994 


AMERICA 


Dow in steady climb 
on earnings reports 


Wall Street 


US stocks were climbing 
sharply early yesterday after- 
noon as more strong earnings 
news started to overshadow 
fresh weakness in the bond 
market, writes Frank McGwty 
in New York. 

By 1 pm, the Dow Jones 
Industrial Average was 15.47 
higher at 3,933.01, after show- 
ing a modest decline during 
the morning. The more broadly 
based Standard & Poor's 500 
was 2.14 ahead at 409.80. 

On the New York SE, declin- 
ing issues outnumbered 
advances by 1,054 to 768 by 
early afternoon after moderate 
volume of 179m shares. 

The Nasdaq composite was 
also strong, gaining 5.82 at 
770.63, while the American SE 
composite was up a scant 0-71 
at 457.43. 

Early on, the market's atten- 
tion was focused on August 
trade data released by the 
Commerce Department and its 
effect on the bond and cur- 
rency markets. 

The report produced no big 
surprises. The US deficit in 
goods and services came in at 
S9.7bn, just about as econo- 
mists had forecast The figure 
represented a narrowing of the 
previous month's gap, revised 
up to $11.19bn. 

But a jump In Japanese 
imports was a disappointment 
With the US trade deficit with 
Japan at $5.8bn, against 
$5.26bn a year earlier, the dol- 
lar lost a little more ground 
against the yen. The decline in 
turn reinforced a sour mood in 
the Treasury market where a 
weaker greenback often dimin- 
ishes the appeal of bonds. 

Against this backdrop, most 


stocks failed to make much 
progress during the morning. 
Just before lpm, however, a 
broad range of issues began to 
rally, stirred by the fresh batch 
of encouraging quarterly 
results on offer. 

One of the big winners was 
Digital Equipment up SI 1 / to 
$30%. It narrowed its fiscal 
first-quarter loss to 98 cents a 
share, from $L14 a year earlier. 
The results were better than a 
$1.32 deficit forecast by ana- 
lysts. 

Compaq Computer was $1% 
ahead at $36% on brisk trading 
of 4m shares by early after- 
noon. The stock improved even 
though the company's third- 
quarter earnings were spot on 
expectations and its gross mar- 
gins receded. 

In ph arma ceutic als , Johnson 
& Johnson climbed $1'A to $54% 
an news that it had beaten the 
consensus -estimate by posting 
third-quarter profits of 82 cents 
a share. Schering-Plough 
appreciated $% to $71Y< on 
favourable results. 

McDonnell-Douglas, the aero- 
space concern, jumped $3% to 
$126% after posting earnings 
per share of $4.07. about 17 per 
cent better than the level pre- 
dicted by analysts. Its main US 
rival, Boeing, moved forward 
$% to $43%. 

A host of telecommunica- 
tions companies released their 
results, but none of their 
stocks moved very much as a 
result Bell Atlantic was up 8% 
at $51%, Pacific Telesls added 
$'/» at $30%. and MCI was 
marked down $7> to $24% in 
Nasdaq trading. 

In financial services, North 
American Mortgage plum- 
meted $7 to $19. Mabon Securi- 
ties lowered its rating on the 
stock after the company 


Canada 


Brazil 


Shares dropped 3.2 per cent in 
light midday trade on the Sfio 
Paulo bourse after a report 
that the government could 
soon adopt restrictions on for- 
eign fluids entering Brazil 

The Bovespa index was down 
1,569 at 47,527 by 1 pm in turn- 
over of R$13&n {$16l.2m). 

Analysts said that liquidity 
was short since most foreign 
Investors were absent from the 
market, awaiting a clear defini- 
tion on whether the govern- 
ment would restrict the inflow 
of money. 

Telebras preferred dropped 
3.7 per cent to R841.60 and Vale 
do Rio Doce preferred fell 2.1 
per cent to R51S6.50. 


S African golds overcome early losses 


Gold shares overcame early losses as bullion 
poshed higher, while industrials extended 
gains in steady trade in further response to 
recent good company results. 

Golds, which started weaker on bullion price 
weakness and firm financial and commercial 
rands, retraced losses by the close as the finan- 
cial rand slipped and the gold price recovered 
to $391 an ounce. 


The overall index rose 9 to 5,691 and industri- 
als added 37 at 6,505, while golds finished 3 
firmer at 2,325 after an early fall to 2^9L 
De Beers was 50 emits down at R99.50 and 
Anglos unchanged at R238, while Minorco 
slipped 50 cents to R10&35. All were off intra- 
day lows. 

Investec eased after a strong resnlts-inspired 
advance on Tuesday, retreating Rl to R64. 


EMERGING MARKETS: IFC WEEKLY INVESTABLE PRICE INDICES 


Market 

No. of 
stocks 

Oct. 14 
1994 

DoHar terms 
% Change 
over week 

% Change 
an Dec *93 

Local currency terms 

Oct 14 % Change % Change 
1994 over week an Dec *93 

Latin America 

{208) 

766.45 

+3.8 

+17.B 




Argentina 

(25) 

943.77 

+23 

-5.1 

578,07635 

+2.8 

-53 

Brazil 

(57) 

42334 

+2.7 

+81.9 

1.309325,639 

+0.7 

+1,1883 

Chile 

(25) 

831.32 

+6.4 

+50.7 

1.37257 

+5.9 

+44.0 

00 * 0 ™^’ 

(ID 

868.43 

+03 

+34.4 

138133 

+0.0 

+383 

Mexico 

(67) 

987.17 

+4.4 

-1.9 

1,45434 

+43 

+73 

Peru* 

(ID 

189.63 

+4.0 

+56.8 

258.81 

+3.3 

+02-7 

Venezuela 1 

(12) 

562.79 

+0.6 

-4.9 

2,194.70 

+0.4 

+54.4 

Asia 

(557) 

280.38 

+1.3 

-3.7 




Chins' 

(18) 

104.77 

+3J3 

-29.8 

112.93 

+33 

-31 3 

South Korea* 

(156) 

155.40 

+3.6 

+31.5 

163.13 

+35 

+30.0 

PhSppines 

(19) 

306.03 

+0.0 

-10.1 

377.73 

-03 

-153 

Taiwan, China* 

(90) 

151.06 

-0.9 

+11.7 

148.34 

-03 

+10.9 

IntSa 7 

(76) 

136.35 

-1.0 

+17.1 

151.96 

-13 

+18.0 

Indonesia* 

P7) 

110.75 

-13 

-113 

130.75 

-13 

-83 

Malaysia 

(104) 

312.03 

+1.7 

-6.0 

29435 

+13 

-135 

Pakistan 8 

05) 

42330 

-03 

+9.1 

586^6 

-03 

+11.4 

Sri Lanka* 

(5) 

192.92 

-5.0 

+8.8 

205.86 

-5.8 

+73 

Thailand 

(55) 

440.91 

+3 3 

-7.7 

437.32 

+30 

-93 

Eura/MM East 

(125) 

12037 

+0.3 

-29.0 




Greece 

(25) 

225.06 

-2.0 

-13 

355.52 

-2.9 

-73 

Hungary" 

(5) 

178J50 

-0.1 

+7.1 

22937 

-13 

+136 

Jordan 

(13) 

15331 

-03 

-7.5 

225.13 

-03 

-6.0 

Poland” 

(12) 

571.56 

-7.0 

■30.1 

83930 

-73 

•243 

Portugal 

(25) 

125.15 

+1.6 

+10-0 

133.94 

+0.6 

-30 

Turkey" 

(40) 

120.51 

+1.9 

-43.3 

1,980.84 

+36 

+383 

Zimbabwe** 

(5) 

263.42 

+0.0 

+303 

322.69 

-03 

+51.1 

Composite 

(890) 

36939 

+2.3 

+4.0 





*Kftcm mb odaMed at end- week, and mMf change an evcomoa ntonmnt torn the ptwvtoa FHdty. Boss date: Dec 1X8*100 a ow toss nend 
wftch an: flirt* I mi: ODec 31 1892; 0UJn 5 1990; t*Dec Jl 1992 (SUm 3 1992; * 1991; |7Mov 6 1090; ®S«p 20 1090! ft Wm I 1991; flCff 

Ok 31 r>»JO*c 31 1972. ( IZDoe 31 1992 f!3Mug 4 1389; ftA/tHtr 2 1993 


The listing this week in New York and locally of Indosat, the Indonesian telecom- 
munications company, has given a boost to the Jakarta market, which has been 
languishing so far this year a long way behind its regional competitors. 


The global offering of shares in the group, the largest in Asia, raised about $lbn. 

is should provide a much needed stimulus to the equity market and 


Brokers say this should proi 

encourage the return of foreign investors. Yesterday Indosat made' a successful 
debut on the local exchangi 
Rp7,000 before falling bad 

One difficulty facing the market's forward, progress 

foreign ownership of companies, currently at 49 per cent, which is not, at least 
in the short term, to be lifted. 



FT -ACTUARIES WORLD INDICES 



EUROPE 


Frankfurt modifies its sector strategy 


revealed a loss of 27 cents a 
share, against net income of 83 
cents a year ago. 

Elsewhere on the Nasdaq, 
Amgen led technology stocks 
In a solid advance. The bio- 
technology concern rose $4 to 
$58 on its forecast of 
double-digit growth in sales 
and income next year. 


Toronto was foundering at cau- 
tious midday dealings as indus- 
trial products and conglomer- 
ates came under pressure. 

The TSE 300 composite index 
fell 14J3B to 4^01.07 at noon in 
volume of 23.63m shares. 

Conglomerates dropped 1.2 
per cent as Canadian Pacific 
dipped C$% to C$21% in fairly 
busy trading. 

The base metals sector rose 
as metals prices bounded to 
higher levels. Aluminium is at 
a new four-year hi g h, while 
nickel is at its highest level for 
two years. 


The dollar, the main 
depressant for bourses this 
week, traded below DMi.50 
again, early in New York. The 
mood on the Continent was not 
improved by ambiguities per- 
ceived in the US August trade 
figures, and their effect on 
bond markets, writes Our Mor- 
kets St aff. 

FRANKFURT rotated its sec- 
tor strategy by half a notch, 
and engineers took more pun- 
ishment as the Dax index, 33.60 
lower at 2,051.16 on the session, 
ended 11.45 down at an Ibis- 
indicated 2,058.13 after steady- 
ing in the post-bourse. 

MAN, which builds trucks as 
part of its range, dropped DM9 
to DM405; Mannesman)!, which 
brings in steel and mobile tele- 
phone prospects, fell another 
DM11 to DM378; and Linde, a 
leader in lift trucks, shed DM20 
to DM858. 

All three, reflecting the 
switch to cyclicals, had been 
above-average performers as 
blue chips fell by 11.2 per cent 
in the first m'w» months erf this 
year. But brokers said that the 
lower dollar would affect 
export marg ins, and that there 
was a large sell order in Man- 
nesmann. 

Turnover rose from DMR3bn 
to DM6.6bn. Among second-lin- 
ers the window frame manu- 
facturer Weru plummeted by 
DM225 or nearly 20 per cent to 
DM905: Bank Julius Bar and 


Barclays de Zoete Wedd cut 
their earnings forecasts after 
Weru scaled down its sales 
growth expectations mid said 
that 1994 profits would not 
match those of the previous 
year. 

PARIS fell back during the 
afternoon under pressure from 
futures, and the CAC40 index, 
having seen a high of 1.901, 
ended off 99.3Q or L2 per cant 
at 1,876-31. 

There was plenty of corpo- 
rate news to interest investors. 

Bouygues, the construction 
group, lost a further 3 per cent 
to FFr532 following a 4 per cent 
foil on Tuesday, after making a 
forecast of virtually unchanged 
1994 sales figures and announc- 
ing an 18 per cent rise in first- 
half net profits. 

The company also suffered 
from selling after it said that it 
would not sign a pledge by 
members of the country's 
building industry against using 
illegal payments to win con- 
tracts or orders. A spokes- 
person for Bouygues said that 
it had not signed the ethics 
declaration since there were 
already laws governing busi- 
ness practice. 

Elf Aquitaine dipped FFr9 to 
FFr367 amid reports that it 
would make a loss on the sale 
of its US fertilisers division. 

Thomson-CSF shed FFr4.40 
to FFr144 JW after detailing a 
foil in first-half net profits to 


FT-SE Actuaries Share Indices 


OCt 19 
Hwfr Chang#* 


Opan 11.00 11-30 I2JO 13L0Q 


THE EUROPEAN SERIES 
HA P iSjOO Pom 


FT-SE Eumck 100 
FT-SE EinDack 200 


132976 

138UH 


133003 

13883a 


1329.13 

138833 


13376 132V67 
138307 1378,69 


1320*1 

137023 


132098 

1379.05 


13JJL21 

137960 


Oct 19 


Oct 17 


OH 14 


on 13 


00 12 


FT-SE Eararat* 100 1333.52 134330 1350.17 1351.18 

FT-SE Eunmck 200 1389L1* 1400X7 1404.65 141275 

ha raoo rotmq; hwav in ■ itne no ■ lauo iw«*r wo - mos ■ iitsn t wn* 


1399-83 

139270 


FFr3 lm, from FFr455m last 
year. Analysts said the figures 
w ere in line with expectations. 

ZURICH was depressed by 
the weak dollar and losses in 
UBS and Roche certificates, the 
SMI index declining 12-7 to 
2329.8 in what was also seen 
as a continuing consolidation 
after last week's rally. 

Roche certificates fell SFrtO 
to SFr5,650, extending the 
week’s losses, which followed 
downgraded earnings forecasts 
from a number of analysts 
after Monday's nine-month 
sales figures. However, James 
Capel, which did not alter its 
forecasts, commented that 
while sales growth was slow- 
ing, Roche had plenty of scope 
to reduce costs, most notably 
in pharma research and devel- 
opment, and this was increas- 
ingly being emphasised as a 
component of profits growth. 

UBS bearers declined SFrl9 
to SFr 1.256 and the registered 
shares were SFr2 lower at 
SFr306. Comments by the 


board ■chairman that UBS 
would not abandon its plan to 
create a single bearer class, 
even if the motion were 
defeated at the November 22 
g g m , prompted concerns about 
a long legal battle ahead with 
BE Vision, which retreated 
SFr30 to SFr 1,405. 

Among dollar earners, Nestle 
foil to a low of SFrl.167 before 
erasing some of the loss to fin- 
ish SFr5 easier at SFrl,l79. 

BULAN continued lower, 
with investors still waiting for 
the political situation to 
become clearer, and for confir- 
mation that the 1995 budget 
would be passed, largely intact. 

The Comit Index shed 5.06 to 
621.60, a level last seen in late 
January, and 23.9 per cent 
below April's peak during the 
euphoria which followed Mr 
Silvio Berlusconi's general 
election success. 

Blue chips were broadly 
lower, Fiat dipping L149 to 
L6.051, Olivetti L45 to L1.813 
and Telecom Italia L87 to 


L3 985 Pirelli contained its loss 
to L6 at L2,210 after its sharp 
falls of the previous two ses- 
sions: Seaq International in 
London said yesterday that 
Monday’s exceptionally large 
volume of 57m shares was the 
result of technical trading 
involving repurchase transac- 
tions. Against the trend. Gaic 
continued to rise, adding L30 
at L$0l following Monday's 
comments by Ferruzzi's chair- 
man about the future treat- 
ment of its Gaic stake. Ferruzzi 
gave up L33 at LI 570. 

AMSTERDAM was broadly 
neutral ahead of tomorrow's 
options expiry, and the AEX 
index finished 1.49 off at 404.01. 

Weakness in bonds followed 
through into the financial sec- 
tor during the afternoon, with 
ING, for example, down FI 1.00 
at FI 78.00. 

MADRID produced an intra- 
day bounce of about IV* per 
cent from its day’s lows, the 
general index closing only 0.16 
down at 296.53 after early falls 
on debt market weakness. 

ISTANBUL, beset by infla- 
tion and a severe under- 
performer in dollar terms this 
year, saw its domestic index 
drop 92437 or 3.6 per cent to 
24,894.23 as liquid funds stayed 
away from the equity market 


; rflu 




Written and edited by WTlIiam 
Cochrane, John Pitt and Michael 
Morgan 




ASIA PACIFIC 


Nikkei weakens on currency considerations 


Tokyo 


Worries about the yen's contin- 
ued strength depressed activ- 
ity, and share prices were hit 
by arbitrage selling and small- 
lot, corporate profit-taking. 
writes Emiko Terazono in 
Tokyo. 

The Nikkei 225 average 
ended 123.53 down at 19.86R87, 
after a morning high of 
20,023.40, and a low of 19.863.27 
in the last half-hour of trading 
as dealers adjusted positions 
and corporate investors took 
profits. 

Most domestic investors 
remained inactive due to cur- 
rency fluctuations, while for- 
eigners, who had been buying 
commodity and basic material 
related stocks, also held the 
sidelines. Volume totalled 
230m shares, against 255m. 

The Topix index of all first 
section stocks receded 6.18 to 
1,580.47 and the Nikkei 300 
dipped L15 to 28834. Losers led 
gamers by 677 to 297, with 194 
issues unchanged. In London 
the ISE/Nikkei 50 index eased 
3.19 to L292.7L 

The yen fluctuated around 
the Y97 level against the dol- 
lar, in spite of heavy buying of 
the latter by the Bank of 
Japan. However, some analysts 
think the yen will ease follow- 
ing the US elections in Novem- 
ber. Credit Suisse Japan 
expects the dollar to rise after 
a rate increase by the US Fed- 
eral Reserve, and expects dol- 
lar selling by Japanese export- 
ers to ease in the near term. 

Export-oriented high-technol- 
ogy stocks lost ground, while 
speculative favourites were 
traded actively. Hitachi dipped 
Y16 to Y994 and Sony lost Y10 
at Y5.870. Steels were also hurt 
by profit-taking. Nippon Steel 
slipped Y3 to Y387 and Kawa- 
saki Steel Y4 to Y443. 

Sega Enterprises, the video 
game maker, fell a further Y50 
to Y4.900. Traders said the 
company’s price cut for an 
electronic game last week dis- 
couraged investors, prompting 
them to sell short 

Nippon Kayaku plunged Y67 
to Y710 on reports of problems 
with its cancer drug. Chemical 
companies, supported by over- 
seas investors last week, were 


lower on profit- taking , Kureha 
Chemical shed Y20 to Y540. 

Speculators supported Mitsu- 
bishi Oil on hopes for its oil 
development project in Viet- 
nam. The stock rose Y20 to 
Y1.100, while Ensuiko Sugar 
R efining surged Y180 to Y2iS70 
on rumours concerning the 
company's development of a 
cancer remedy. 

In Osaka, the OSE average 
declined 90.92 to 22,235.39 in 
volume of 26m shar es. 


Roundup 


The region was still tentative, 
and mixed. The Pakistan stock 
market closed without trading 
in a marie of respect for Mr 
Aman Manai, general secretary 
of the Karachi Stock Exchange 


agents’ union, who died in a 
car crash in Saudi Arabia. 

SEOUL took profits on fears 
of a technical correction and 
the composite index fell 1&53 
or L7 per cent to L094.76. Only 
a few construction shares and 
asset-play counters remained 
popular. Sambu Construction 
and Hyundai Engineering and 
Construction each rose 
Wonl.300 to Won39,500 and 
Won47,500 respectively. 

HONG KONG fell on the 
weakness of the US dollar and 
on fears that the Chinese econ- 
omy might be out of control. 
The Hang Seng index closed 
9&51 down at 9,320.06 in provi- 
sional turnover of HK$2]88bn. 
Brokers said that investors 
were waiting for yesterday’s 
US trade figures and today's 


government land auction. 

Meanwhile, the China wor- 
ries coincided oddly with a rise 
of 8.32 to 1.325.76 in the 
H-share index of Chinese 
stocks listed in Hong Kong, 
and a SHANGHAI A share gain 
of 30.40 or 4.8 per cent to 666.62. 
But brokers said the Shanghai 
rebound was strictly technical, 
with turnover thin at Ynl.46bn 
and market sentiment still 
weak. 

TAIPEI declined L3 per cent 
on profit-taking, the weighted 
index losing 86.43 at 6,669.10, 
off a 6,817.46 hi g h Turnover 
was heavy at T$89.49bn. In 
SINGAPORE, light profit-tak- 
ing left the Straits Times 
Industrial index 19.87 points 
lower at 2^64.11. 

SYDNEY rose on firmer 


futures and late buying inter- 
est, the All Ordinaries index 
finishing 10.0 stronger at 
2,013.4 in turnover of A$388m. 
Brokers said comments by Mr 
Beraie Fraser, the Reserve 
Bank governor, on interest 
rates and inflation had no 
effect on trading. 

Oils were firm on recent 
exploration news, with Wood- 
side up 29 cents at A$5.14 and 
Santos 8 cents better at AS&94. 

WELLINGTON was lifted by 
a 9-cent advance in Telecom, to 
NZ$5.38, and the NZSE-40 index 
closed 9.25 higher at 2,061.66 
in below-average turnover of 
NZ$26m. 

MANILA looked for third- 
quarter earnings prospects and 
the composite index finished 
639 ahead at 3,09934. 








l . 





Joint* compiled by The Financial Times Ltd.. Gotdmon. Sachs & Co. and NaMVest Securtttea Ud. in conjunction <Ntth the kwtttiAa of Actuaries and the Faculty at Actuates 

NATIONAL AND 

REGIONAL MARKETS TUESDAY OCTOBER 18 1994 MONDAY OCTOBER 17 1094 DOLLAR INDEX 

Figures In parentheses US Day’s Pound Local Local Gross US Pound Locd Year 

stow number of Into Dollar Change Staffing Yen DM Currency % ehg Dtv. Dolar Sterling Yen DM Currency 52 week 52 week ago 
°* a” 8 * Index * Index Index Index Index on day Yield Index Index index Index Index mji Low (approx) 






Belgium (37) 


Canada (103) 


OttnUifc (33) 

261.51 

Franca (101) 

195.88 

-17036 

Hong Kong (56)- 

Ireland (14) 

148.73 
38231 

Holy (53). 




Malaysia (97) 

- _555.0fl 

Mexico (IB). 


Motherland (19). . 







38533 







Switzerland (47) 

18735 

Untied Kingdom (204). 

USA 1515} 

202.87 

191.01 

EUROPE (703) _ 


Nottk; (fia_ 




Euro-Pacrfc (1456). 




Europe Ex. UK (505) 

— 156.19 

IttxttE*. 1*5(1638) 

World Ex. UK (1947)- . 

177.00 

World Ex. So. Al. (2092).. 
world Ex. Japan (1683) .. 

——17836 
. — 190.14 

The World Index (2151 1.... 

— 17936 


-03 

0.0 

0.5 

-0.3 

05 

-0.7 

- 0.1 

-02 

-0.4 

- 1.0 

- 0.8 

02 

- 1.1 

-0.8 

-0.5 

-o.r 
-0.0 
-0.3 
Z2 
-13 
0.0 
- 0.8 
-0.6 
-0 2 


15456 

171.39 

158.77 

125.34 
239 .99 
179.74 
158-30 
134.66 
350.88 
194.12 
72.40 

149.31 

51024 


104.01 

115.72 

108.82 

84.33 

181.48 

120.94 

105.67 

90.60 

236.07 

13061 

48.71 

100.46 

34031 


131.33 

146.17 

134.94 

106.53 
20338 
152.77 
13035 
114.44 
29831 
164.99 

61.53 
12090 
433.88 


151.94 

146.13 

131.77 

134.02 
203.16 

19019 

138.02 
114.44 
37028 
186.67 

90.19 

10046 

547.24 


2034.59 1409.32 178023 8534.42 
200.63 134.99 170.52 167.74 


07.40 

191.45 

363.27 

306.01 

131.34 

218.95 

153.77 

18539 

175.30 


45.35 

129.62 

23AM 

ZOOM 

08.37 

147.32 

103.48 

126.14 

117.95 


57.29 

182.72 

308.75 

200.08 

111.63 

186.09 

13069 

158.08 

14859 


63.77 

185.02 

26842 

291.16 

13S21 

254.42 

129.48 

185.99 

191.01 


-0.5 

-02 

03 

-0,3 

03 

-08 

-O.* 

-0.4 

-04 

- 1.6 

- 1.2 

00 

- 1.1 

-08 

-0.7 

- 0.8 

- 1.0 

-04 

05 

-1.5 

-0.4 

-1.3 

- 1.1 

-02 


3.65 

1.10 

4.18 

231 

1-12 

0.74 

3.15 

1.81 

026 

039 

1.74 

0.76 

153 

120 

3.44 

3.B1 

1.79 

137 

220 

4.10 

1.57 

1.88 

•UB 

085 


168.99 

187.45 

172.12 
137.01 
280.14 

197.13 
171.20 
147.CS 
38334 
213.65 

7050 

16237 

562.09 


155.68 
172 as 

158.75 
12037 
23993 
181.82 
157.90 
13S.62 
354.03 
197.06 

7032 

143.76 
518.43 


104,53 

115.94 

106.46 

84.75 

18090 

12153 

10589 

9095 

337.41 

132.15 

49.17 

10043 

347.07 


132.10 
146.53 
134J55 

107.10 
203.35 

154.10 
133.83 
11445 
30005 
167.02 

62.15 

126.93 

439.40 


182.77 

146.48 
13131 

134.48 
20062 
191.72 

138.63 
11435 

38050 

189.64 
91,31 
100 A3 
553.16 


189.15 

1B8.S9 

177414 

14531 

275.79 

197.13 

18537 

150.40 

50056 

216.60 

97.78 

17010 

621.63 


14036 

167.46 

149.33 

12054 

23027 

116.86 

18934 

128.37 

341.29 

171.66 

S7-88 

124.54 

43071 


166.21 

184.47 

162.91 

12087 
235 96 
122.49 
16&55 

135.79 

357.09 

17224 

7209 

15280 

44704 


230243 2123.19 14233S 1799.49 800030 2547.08 169028 1779.90 


21075 

73.94 

21024 

39032 

32035 

144.99 

23056 

16095 

203.79 

191.39 


20066 

8020 

133.90 

366.09 

30099 

133.73 

220.03 

155.83 

187.96 

178.52 


135.92 

45.73 

130.04 

245.51 

201.88 


147.56 

104.50 

12005 

11838 


1M.78 

57.30 

164.34 
31028 
355.10 

113.34 
18049 
132.07 
159,31 
149.61 


169. 00 

6426 
186,85 
269.43 
289.74 
137.33 
25535 
131 JO 
107.96 
1B139 


219.75 

7739 

211.74 

39632 

333.45 

155.79 

23858 

17856 

214,96 

19004 


18751 

5022 

165.62 

29456 

202.72 

i2a.m 

175.83 

143.64 

181.11 

17095 


185.17 

6433 

184.86 

33234 

214.TB 

144,44 

20091 

14018 

10055 

191.05 


-05 

-01 

Ol 

- 0.1 

-02 

-04 

-OS 

-01 

-01 

-02 

-03 


16048 

212.85 

1S7.71 

15077 

172.10 

1*334 

230.68 

16056 

162.43 

16180 

174.49 


107 as 

14328 

106.11 

10082 

HOBS 

9046 

161.27 

108.05 

109.29 

110.07 

117.41 


136.40 

180.99 

134.04 
13434 
14035 
12133 
203.71 
13048 

138.05 
139.04 
14831 


150.34 

211.03 

111.20 

12091 

187.08 

129.47 

232.17 

130.75 

14082 

14025 

17797 


- 0.8 

-09 

- 0.1 

-0.4 

- 0.2 

-0.7 

-03 

-0.4 

-02 

-03 

-05 


109 

1.40 

109 

194 
293 
2.49 

292 

195 
2.07 
026 
2.89 


175.67 

232.16 
171.70 
17395 
188.01 
15081 
282.55 
175.18 

177.17 
17057 
190.88 


162.02 

214.13 

15838 

159.79 

17141 

144,83 

242.18 

18197 

16141 

164.70 

175.87 


10088 

14160 

10020 

107.16 

11029 

9899 

162.40 

10835 

10058 

110.45 

17794 


137.32 

181.48 
13492 

135.43 

14697 

12298 

20534 

13094 

138.49 
13999 
14996 


151.60 

211.78 

11197 

127.42 

187.46 

13039 

23166 

13196 

14596 

14078 

17890 


17898 

23116 

17086 

175.14 

19173 

16012 

29621 

17065 

17069 

18003 

19620 


154.79 

17119 

134,70 

14188 

175.67 

13594 

230.10 

14598 

16596 

16894 

17894 


16126 

13493 

16018 

10091 

18727 

143.77 

23191 

181-46 

16895 

170.12 

181.49 


-01 164.51 110.89 13992 14990 -03 2.26 179.62 16597 11193 14093 149.77 180.80 16895 17031 


Copytijnt. Ttw FUianeel liiv» Untod. GcUmit, Sadia ml Co. and Names SeoaUtos Unwed. 1887 
LdMst prises nn unmoikcts lor Ha odiuon. 


■- .;r: r.>-“ t. .7 ^ ^«sjwk 

;> ..iV 'jm '2i x’ .--j ‘‘hi ia 


The Commerzbank report 
on German business and finance 10/94 


Do the wider margins hold the 

key to EMU? 


Since the fluctuation margins were 
widened within the European Monetary 
System, the exchange rates of the core 
currencies have remained fairly stable. 
Can stability of the kind prescribed by the 
Maastricht treaty in the run-up to full 
monetary union be ensured in the future 
as well without the discipline of a true 
exchange-rale mechanism? Or were the 
narrow fluctuation bands, in fact, the 
cause of volatility? 

Fixing exchange rates within narrow 
bands used to be advocated as a strategy 
for making monetary policy more rig- 
orous in countries whose central banks 
lacked full anti-inflationary credibility. 
However, even within the group of hard- 
core currencies, long-term yield spreads 
did not necessarily decrease while 
exchange rates were regarded as fixed, 
Le. up to September 1992. Funds went to 
countries offering high premia, such as 
Italy, Spain, the UK and at times also 
France. This “convergence play” began 
around 1987 and was strongest in 1991. 
The fact that countries were willing to 
defend their exchange rates vis-a-vis the 
D-mark kept interest rates high and made 
the old parities seem more durable, until 
the deepening recession in Western 
Europe rendered this strategy too costly. 


"In the end, the feasibility 
of EMU will be decided 
in the markets.” 


Flexible exchange rates - 
the only alternative 


The EMU debate now focuses on 
the question whether a single currency 
is the only viable alternative to flexible 
exchange rates. 

Two things need to be borne in mind 
here. The ERM crises were the product 
of exceptional circumstances, while the 


current stability of exchange rates is 
attributable to monetary easing. 

The “convergence play” began at a 
time when a growing number of market 
participants were expecting a steady 
convergence path to 
EMU. In a sense, then- 
stance was surely irra- 
tional, as it presupposed 
that persistent interest- 
rate differentials exagge- 
rated the true devaluation 
risks. During the period 
leading up to the first crisis 
in September 1992, it was 
dear that fiscal policies 
continued to diverge and 
the effects of German 
unification were evident. 

Once the “EMU illusion” 
evaporated, the pressure 
within the system was so 
great thar credibility could 
not be re-established without in effect 
freeing exchange rates, as happened in 
August 1993. 

Since then, however, growth has been 
picking up and inflation is subdued or 
on the decline in most Western Euro- 
pean countries, and the Bundesbank 
has lowered its key lending rate by more 
than two points. This has given the 
remaining ERM members sufficient 
leeway to hold their exchange rates stable 
vis-4-vis the D-mark within fairly narrow 
bands. 


Two factors are crucial for continued 
exchange-rate stability: first, growth has 
to remain Don-inflationary; and, second, 
fiscal consolidation has to be achieved, 
even in the face of record unemployment 
Neither of these conditions will be easily 
met Over the medium term, consumer 
prices might not prove as stable as they 
are now. Moreover, it is unlikely that all 
Western European countries win be able 
to cut their deficits sufficiently. 



- 




I . 


Yield spreads of long-dated government bonds 

vtB-*-vb D-mark 





K.. 


'.yv/rj, 


• -'-rasWa 


!'v 


: r. V 1 


" in ”: 






1NJ 


1987 1888 

— Frauen franc ..... 
Sower Oouttcha Bundesbank, 


1980 1991 

Italian Hra ■ 


1992 1993 199 * 

m Spantah (Mata 


Accordingly, the prospect of a leap 
from flexible rates into monetary union 
could throw the foreign-exchange mar- 
kets into turmoiL On the other hand, 
policy-makers will continue to need a 
good deal of luck if Western Europe is 
to move closer to EMU by the end of 
the decade. All in all, it is highly unlikely 
that the “EMU illusion" of the late 1980s 
will be revived: financial markets react 
quite sensitively to policy inconsistencies 
and, in the end, the feasibility of EMU 
wfl] be decided in the markets. 




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