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A US success is . , 
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Brazilian finance 
minister quits 
over broadcast 

Brazilian fina^y 
minister Rubens Ricu- 
pero (left) resigned after 
confessing in a private 
conversation migtainmiy 
broadcast by satellite 
television that when it 
came to inflation indices: 
“I don’t have any scru- 
ples. What is good, we 
exaggerate - what is had. 
we hide”. IBs resignation 
--- conies at an awkward 

time few the Real Until now, Ur Ricupero has 
earned the nickname of “the monk” because of his 
calm and reassuring public statements on Brazil's 
new currency. Page 16 

Majo r Insists on IRA guarantee: British 
prime minister John Major insisted he needed a 
“copper bottomed” guarantee from the Irish Repub- 
lican Army that its ceasefire was permanent before 
Sinn F6in, its political wing, could join talks on the 
ftitnre of Northern Ireland. Page 16 

Nomura chief seeks end to securities tax: 

Hideo Sakamaki, president of Japanese securities 
company Nomura, railed on the finance ministry to 
scrap Japan’s 0.3 per cent tax on securities sales to 
make the country’s equity markets more competi- 
tive. Page 4 

Bermudan link tai new fund at Lloyd’s: 

Indemnity Insurance Services, a London-based 
insurance broker, is combining forces with a Ber- 
mudan reinsurance company in an attempt to form 
a Lloyd’s investment company. Page 17 

US 'rigid* over Cdban refugees: Cuba's chief 
negotiator with the US, Ricardo Alarcdn, said 
Washington had taken a rigid stance over possible 
moves to stop the flight of Cuban refugees to Flo- 
rida. Page 3 

First Financial seeks transfer business: 

First Financial Management, an Atlanta-based 
information services company, has offered 1800m in 
cash for Western Union Financial Services, the US . 
money-transfer business. Page 19 

Russia and China In trade pact: Russia and 
China signed trade and co-operation agreements 
promising partnership between them after 40 years 
of volatile relations. Page 2 

Japan's Socialists abandon d og ma : Japan’s 
two-month-old ruling coalition of left and right was 
strengthened when Socialist members voted to 
scrap their most extreme policies. Page A 

Venezuela seeks e co no mi c stabffity: 

Venezuela approved a programme designed to stabi- 
lise the economy and pull the nation out of reces- 
sion. Page 3 

European Monetary Sys te ms The spread 
between strongest and weakest currencies in the 
EMS grid narrowed during the week, although the 
order of currencies was unchanged. The Bundes- 
bank council met and left German rates untouched. 
Earlier to the week four French commercial banks 
had raised interest rates by 25 basis points. Curren- 
cies, Page 29 


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The chart shows the member currencies of the 
exchange vote mechanism measured against the 
weakest currency in the system. Most of the curren- 
cies are permitted to fluctuate within 15 per cent of 
agreed central rates against the other members of the 
mechanism. The exceptions are the D-Mark and the 
guilder which move in a 2.25 per cent band. 

Store Darby 7.5% ahead: Malaysian conglom- 
erate Sime Darby reported a 7.5 per cent improve- 
ment to MS904m (US$354xn) in annual pre-tax prof- 
its. The result, although viewed as satisfactory, was 
below most analysts' expectations. Page 19 

Offer tor Texaco Canada rejected: US ofl 

group Texaco rejected an offer worth C$200m 
(DS$l46m) for its Canadian subsidiary, Texaco Can- 
ada Petroleum, saying the company was an impor- 
tant part of group strategy for North America. 

Page 19 

Qovett expands In US: Go veil & Company, UK 
fond management and insurance group, has signed 
a distribution agreement with American Capital 
Marketing, a US mutual fund group, which it esti- 
mates will more than treble its US sales to $ibn. 
Page 18 

Hambvos to hw 1 ****** A si an trash Hambros 
Bank of the UK is to launch an investment trust 

spe cialising in smaller Asian companies, which it 
believes should benefit disproportionately from fast 
economic growth. Page 18 
Nigerian oil waters’ strike callodeff: 
Nigeria’s two oil workers' unions called off their 
two-month-old strike aimed at forcing an end to 
military rule. Page 4 

Bumper rice harvest for Japan: 

in Japan has brought the best nee harvest m eight 
years, with the crop expected to produce an excess 
of L4m tonnes. Page 4 


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EU offers initiative to head off abortion row 


By Bronwan Maddox and 
Mark Nicholson In Cairo 

European Union delegates yesterday 
launched a late effort to prevent bitter 
differences about abortion from over- 
shadowing the International Conference 
on Population and Development, which 
opens today in Cairo. 

The EU delegates want to soften the 
language on abortion used in the draft 
statement, which has become the focus 
of angry opposition from religious con- 
servatives. 

The dispute over abortion has threat- 
ened to open up a new divide in interna- 
tional politics with Catholic and Tnlamir 
states joining forces to oppose more lib- 


eral proposals primarily from the US 

and some north European states. 

The talks to avert an open dispute 
came as more than 15,000 national dele- 
gates, representatives of hundreds of 
non-governmental organisations and 
around 2.000 journalists, arrived in Cairo 
for the week-long gathering. 

The European initiative follows an EU 
agreement yesterday to a compromise 
on abortion which could form the basis 
for a consensus among the 170 countries 
at the conference. 

The EU agreement bridged the conser- 
vative stance on abortion taken by 
Ireland with more liberal proposals 
favoured by Denmark and the Nether- 
lands. Amendments to the draft docu- 


Page 5 

■ Cobbling together a conference 

■ Brazil’s problems of old age 

■ Bhutto defies Islamic protests 


ment were being circulated last night by 
EU delegates. The central proposal was 
to state in the document that “in no case 
should abortion be promoted as a 
method of famil y planning”. 

However, the concerns of the more 
liberal Western states are addressed by 
the proposal to urge in the document 
that governments “deal with abortion as 


a major health concern”. The United 
Nations population fond estimates that 
50m -60m abortions are performed world- 
wide each year and that as many as 
250,000 women die each year from poorly* 
performed operations. 

The compromise appeared to have 
won the backing of the powerful US del- 
egation. which has been the primary 
focus of criticism from tbe Vatican and 
Islamic conservatives, who have charged 
Washington with endorsing abortion. 

Mr Timothy Wirth. US undersecretary 
for global affairs said: “Tbe European 
Union has come up with a draft lan- 
guage which we think is very promising 
as a compromise." 

Mr Wirth yesterday stressed that the 


participants in the conference had 
reached agreement on "92 per cent" of 
the proposed text during three years of 
preparatory discussion. However, sev- 
eral delegations said that the degree of 
agreement might be under threat during 
the formal talks on the proposed text 
which open in closed session tomorrow. 

Tbe conference aims to thjash out a 
consensus by the end of the week on 
ways of tackling worldwide population 
growth and family planning. However, 
the draft text's accent on human rights 
and the empowerment of women has 
provoked strong criticism from religious 
conservatives. They accuse it of endors- 
ing abortion ;is a means ol contraception 
and undermining family values. 


Chirac appeals to Balladur 

Gaullist 
split in race 
for French 
presidency 


By David Buchan In Paris 

Tension among Gaullist rivals for 
the French presidency burst into 
the open this weekend as Mr Jac- 
ques Chirac, the party leader, 
declared his “passion” for the 
presidential contest due next 
year and appealed for loyalty 
from his former prot£g£, Mr 
Edouard Balladur, the prime min- 
ister, who now leads him in opin- 
ion polls. • 

At the annual “summer univer- 
sity” of young members of the 
RFR Gaullist party, at Bordeaux, 
Mr Chirac’s hold on the party 
machine he has led for 20 years 
was amply demonstrated by the 
chants of “Chi rac pr£-stdenf\ 
and by the open endorsement be 
received from Mr Alain Juppg, 
the foreign minister, who is also 
RPR secretary-general. 

But, for the first time, a senior 
RPR member suggested the party 
should endorse neither Mr Chirac 
nor fellow-Gaullist Mr Balladur, 
in order to avoid being tom apart 
by their rivalry. Mr Philippe 
Sfeguin, the National Assembly 
president, who prefers Mr Chirac 
to the prime minister, was 
reported to have said that such 
neutrality “would not take a sin- 
gle vote away from Chirac”. 

In fact, Mr Chirac migh t gain 
from being less tightly wrapped 
in the RPR flag than in his past 
presidential bids, when he failed 
to win centrist support 

The more obvious beneficiary 
of RPR neutrality, though, would 


be Mr Balladur, who already has 
wide appeal for the RPR’s coali- 
tion partner, the UDF centre- 
right federation. This grouping is 
nominally led by Mr Valery dis- 
card d'Estaing, but its biggest 
component the Republican party 
(PR), now for prefers the emol- 
lient Mr Balladur to the ex-presi- 

A»nt_ 

Two PR ministers redoubled 
their calls for a “unity” candidate 
within the majority, by which 
they mean Mr Balladur. Mr 
Gdrard Longuet trade and indus- 
try minister, said: “In contrast to 
the spirit of the Olympic Games, 
the important thing [in the presi- 
dential election] is to win, not to 
participate”. Mr Francois Lyo- 
tard, defence minister, com- 
plained of “snipers within the 
[government] majority”. 

Mr Juppd told young GauDists 
t ha t Mr Chirac “should lead the 
way - and he knows that you 
will be there, and me with you, to 
follow him”. He has thus broken 
tbe silence that ministers have 
Tnatntatnpri for most of this year 
on revealing their presidential 
preferences. His action is no sur- 
prise, given his RPR post and his 
feeling of being marginalised 
sometimes by Mr Bahadur on for- 
eign policy issues. 

Even so, it may bode Ol for 
discipline this autumn in the gov- 
ernment and In parliament, 
where the RPR leader, Mr Bern- 
ard Pons, is urging Mr Chirac to 

Continued on Page 16 



Appealing to the electorate: German SPD leader Rudolf Scharping (second left) joins In the Mexican wave at a rally in Dortmund to mark the 
start of Ids party's general election campaign Report, Pagg. 16. .... . ... 


Tory alarm over EU reform plans 


By Jamas Blitz In London 

Mr John Major, the UK prime 
minister, is under mhimt»ig pres- 
sure from Conservative back- 
benchers to reject French and 
German proposals for a sweeping 
reform of the European Union 
that would exclude the UK from 
an inner core of EU states. 

Tory MPs on both the pro- 
European and Euro-sceptic wings 
this weekend urged the prime 
minister to use a keynote speech 
in the Netherlands on Wednes- 
day to criticise the proposals, 
which they fear would relegate 
the UK to the “slow lane" of 
Europe. 

Euro-sceptic Tory MPs claimed 
the proposals would mean that 
Britain paid the full cost of EU 
membership without getting the 
benefits. The proposed changes, 


versions of which emerged in 
interview given by Mr Edouard 
Balladur, French prime minister, 
and in a document last week by 
tbe French government and Ger- 
many’s Christian Democratic 
Union (CDU), envisaged the cre- 
ation of an inner core of five EU 
states - France, Germany, Bel- 
gium, the Netherlands and Lux- 
embourg. 

Britain, Spain and Italy would 


be in a second tier, which would 
□ot be obliged to meet all the 
criteria of European monetary 
union. Other European states 
with weaker economies would be 
in a third tier. Mr Jim Cran, a 
rightwing Tory MP and leading 
Euro-sceptic, said: “The concep- 
tion laid out in these discussion 
papers is unacceptable. They will 
end up consolidating FrancoGer- 
man domination of tbe EU.” 


Pro-European Tories were also 
dismayed by the proposals, claim- 
ing that they were the inevitable 
consequence of Britain's uncer- 
tain policy on Europe. 

It will be virtually impossible 
for Mr Major to ignore the Fran- 
co-German proposals, which 
threaten to open a period of 

Continued on Page 16 
Editorial Comment, Page 15 


BAe challenges Fokker on 
FI lbn refinancing package 


By Paul Betts, Aerospace 
Correspondent, In London 

British Aerospace is challenging 
a FI lbn (SS65m) refinancing for 
Fokker, the loss-making Dutch 
regional aircraft manufacturer 
controlled by Deutsche Aero- 
space (Dasa). 

Tke UK company, which like 
Fokker is a 1 Barfing manufacturer 

of regional turboprop and jet air- 
craft, is expected to ask the Euro- 
pean Commission to block the 
refinancing on the ground that it 
constitutes an unfair subsidy. 

The move is likely to compli- 
cate the long drawn-out efforts of 
BAe and Dasa to merge their 
respective regional aircraft 
operations as part of a broad 
restructuring of the European 
sector. 

Mr Dick Evans, BAe's chief 
executive, said on Friday ahead 
of this week's Famborough Air 
Show that the European regional 
aircraft industry needed to be 
consolidated around one group of 


.2-6 

_ 8 

. 18 


mamrfflf ± r rrprK similar to the suc- 
cessful European Airbus consor- 
tium in the large airliner market 
To that end, BAe has held exten- 
sive talks with Dasa and Aeros- 
patiale of France. 

Although BAe remains in con- 
tact with Taiwan Aerospace, with 
which it foiled last year to forge a 
joint venture, the UK company 
has made clear that it now 
favours a European solution to 
its regional aircraft prob lems. 

Mr Edzard Reuter, chairman of 
Daimler-Benz, which owns Dasa, 
also said last week that he hoped 
to reach an agreement with BAe 
on combining tbe two companies’ 
regional jet activities. 

But the FI lbn refinancing 
package for Fokker, announced 
in July, is now seen as a signifi- 
cant obstacle to progress towards 
an eventual merger of BAe’s 
and Fokker’s regional jet activi- 
ties. 

BAe argues that the refinanc- 
ing constitutes an u n fa ir subsidy 
that shores up Fokker’s position 


CONTENTS 


in any eventual merger negotia- 
tion and further distorts competi- 
tion in a market already plagued 
by manufacturing overcapacity 
and too many competing prod- 
ucts. 

The refinancing of Fokker 
includes a FI 600m capital injec- 
tion from Dasa, which bought a 
51 per cent stake in the Dutch 
company last year, and an addi- 
tional FI 400m of indirect support 
from the Dutch government, a 
minority shareholder. 

Under the package, the Dutch 
government has approved a sale- 
and-leaseback arrangement 
involving the sale of Fokker’s air- 
craft building technology to 
Rabobank, the big Dutch cooper- 
ative bank. 

The deal required government 
approval because the purchase 
and subsequent leaseback of the 
Fokker technology patents by 
Rabobank is designed to reduce 
the bank's tax bill, depriving the 
government of around FI 400m in 
revenues. 


MaroUonal News. 

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_ 29 
3031 


e\ Tin? irrMANriAL TIMES UMITEP 1994 No 32.463 Week No 36 LONDON - PARIS - FRANKFURT ■ NEW YORK - TOKYO 



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financial times Monday September 5 1994 

NEWS: INTERNATIONAL 


Kohl, Gorbachev clash over eastern land 



Mikhail Gorbachev: Heading 
tor a meeting in Bonn 


By Judy Dempsey n Berlin 

Mr Helmut Kohl, the German 
Chancellor, and Mr Mikhail 
Gorbachev, former Soviet pres- 
ident. were yesterday locked in 
a public dispute, the outcome 
of which could, affect thou- 
sands of former property own- 
ers in east Germany. 

Mr Kohl, who will meet Mr 
Gorbachev in Bonn on Wednes- 
day, said on German radio that 
the Soviet Union had linked its 
agreement on the German uni- 
fication negotiations to Bonn's 
acceptance as legal the Soviet 
administration of what was 
occupied eastern Germany 
between 1945 and 1949. 

During that time, the Soviet 
administration expropriated 
8.2m acres of land and hun- 
dreds of enterprises. The land 
was subsequently divided and 
distributed to ethnic Germans 
□eeing eastern Europe. 

Last week, however, Mr Gor- 
bachev challenged Mr Kohl, 
claiming that Moscow had 


never link ed the expropriation 
issue with the Soviet Union's 
acceptance of the unification 
talks. Yesterday. Mr Gorba- 
chev was supported in this by 
Mr Eduard Shevardnadze, his 
former Soviet foreign minister. 

Their reluctance to support 
Mr Kohl, who is seeking re- 
election in October, coincides 
with claims by former land- 
owners who argue that it was 
west and east German politi- 
cians, not Mr Gorbachev, who 
agreed among themselves not 
to give back land to. or com- 
pensate. Prussian aristocrats. 

The former land-owners 
believe that Bonn used the 
so-called Moscow veto for dif- 
ferent reasons. Bonn, for exam- 
ple, could not finanically sup- 
port full compensation, while 
the first east German non- 
communist government 
believed the former land own- 
ers were either former Nazi 
sympathisers or would return 
and expel the small land-hold- 
ers who had been established 


by the communist regime. 

After German unification, 
former property-owners, 
including Daimler-Benz, tried 
to reclaim their property in the 
east but were over-ruled by 
Germany's Constitutional 
Court, which cited the exis- 
tence of the Moscow veto. 
These former property-owners 
are se eking the same rights to 
restitution and compensation 
enjoyed by those whose prop- 
erty in Germany was confis- 
cated by the Nazis between 
1933 and 1945, and by the East 
German co mmunis t regime 
between 1949 and 1990. 

The meeting or Mr Kohl and 
Mr Gorbachev follows a crucial 
compromise agreement by a 
special joint committee oF Ger- 
many's lower and upper 
houses of parliament about 
how the government should 
compensate former property- 
owners whose land was confis- 
cated by the Nazis or the com- 
munists. 

This accord, expected to be 


passed by both houses this 
month, would end four years of 
wran gling among politicians, ft 
could also help acelerate 
investment decisions in the 
eastern German states, dogged 
by property rights disputes. 

Its recommendations 
include: 

• A DM4,000 (S2564) payment 
to those east Germans never 
compensed for confiscated 
property under the former 
co mmunis ts. 

• The level of compensation, 
to be calculated on the 1935 
valuation of land and financed 
from a DM12.6bn fSS.lbnl fund. 
Depending on the status of the 
property, the value of land will 
be multiplied several times. 
Former owners will be issued 
with bonds in 2004, redeemable 
five years later. 

• Former property owners of 
the 1945-1949 period will be 
allowed to buy back a limited 
amount of their property at a 
price below the current market 
value. 



making new difficulties 


Moscow denies military 

in Chechnya 


Italian 
unions 
warn on 
pensions 

By Andrew HHI in Milan 

The Italian government will 
this week step up discussion of 
budget measures for 1995 in 
the face of growing threats 
from unions to create trouble if 
their wishes on pensions 
reform are not respected. 

The full cabinet will hold its 
first formal debate on budget 
proposals tomorrow, although 
the Treasury stressed at the 
end of last week that no deci- 
sions would be taken on the 
detail of the budget 

Mr Silvio Berlusconi's gov- 
ernment has to find an esti- 
mated L45.000bn ($23.4bn) from 
cuts or additional revenue in 
1995, in an attempt to bring the 
budget deficit down to 
Ll3S,600bn. Plans must be 
agreed and presented to parlia- 
ment before the end of the 
month. 

The Treasury has refused to 
confirm growing speculation 
that savings worth an addi- 
tional L3,000bn or more will be 
needed to cover the additional 
cost of servicing Italy's large 
public debt following the half 
point rise in interest rates last 
month. Figures released last 
week by the Bank of Italy indi- 
cated that the overall debt had 
grown to nearly U,900,000bn 
by May. 

The Berlusconi government 
will come under attack inter- 
nally if it reneges on election 
campaign promises not to 
increase taxes. But Treasury’ 
experts believe they still have 
some room to raise indirect 
taxes next year without 
increasing the overal fiscal 
burden, because tax measures 
introduced by the previous 
government expire in 1995. 

Mr Innocenz Cipolletta. 
director general of Confindus- 
tria. the Italian employers' fed- 
eration. said at the weekend 
that even a budget which 
raised L-JSilOObn next year 
would not ho enough. 

But trade unions are resist- 
ing the drastic action recom- 
mended by the Treasury to 
reform Italy's overloaded pen- 
sion system. Two of Italy's 
three main trade union federa- 
tions - CIGL and UTL - have 
expressed serious doubts about 
the government's plans. Only 
CISL. the Catholic federation, 
is taking a softer line. 


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Ukraine 
and Russia 
patch up 
relations 

By Matthew Kaminski in Kiev 

Ukraine and Russia are 
moving towards normalising 
their often strained and frac- 
tions relationship. A weekend 
ministerial summit yielded a 
series of agreements to be 
signed when President Boris 
Yeltsin visits Kiev in early 
October. Also signalling a 
thaw in military relations was 
a compromise splitting land 
facilities in the Crimea that 
had held up a final agreement 
an the division of the Black 
Sea fleet 

Many treaties have been 
signed and broken, bat the 
installation of a new president 
in Kiev and the changed politi- 
cal atmosphere in Ukraine 
hold oat prospects for a last- 
ing reconciliation. 

Ukraine and Russia in prin- 
ciple have agreed to avoid doa- 
ble taxation, ease custom regu- 
lations and start work on a 
customs anion and a free trade 
treaty. “The agreements win 
not resolve ail problems exist- 
ing between Ukraine and Rus- 
sia, but it should establish a 
basis for developing rela- 
tions,” said Mr Hennady Udov- 
enko, Ukraine's new acting 
foreign minister. 

A shift in attitude toward 
Moscow follows the election in 
July of Mr Leonid Knchma. 
who promised closer links 
between the former Soviet 
Union’s two largest states. His 
predecessor, Mr Leonid Krav- 
chuk. a communist turned 
nationalist, often squabbled 
with Moscow over various 
issues including control of the 
country's nuclear weapons and 
the Black Sea fleet, based in 
the Crimea. 

Mr Valery Shmarov, the 
defence minister, said on Fri- 
day that Ukraine would agree 
to split the on-shore facilities 
of the fleet, breaking with pre- 
vious refusals to even consider 
the issue. Tbe two this April 
had agreed to diride the ships, 
with a bulk going to Russia, 
but details on lease terms and 
compensation have yet to be 
finalised. 

Over two years, at least four 
attempts to diride the 300 ves- 
sel fleet's assets and on-sbore 
installations have failed. An 
agreement is likely to be 
linked to forgiving part of 
Ukraine's large oil and gas 
debt. 

In the dispute over seces- 
sionist moves by Crimea, a 
mostly ethnically- Russian pen- 
insula given to Ukraine in 
1954, Russia recently has dealt 
directly with Kiev, orten 
bypassing Crimean President 
Yuri Meshkov and most 
recently rejecting Sevastopol's 
bid to join the Russian Federa- 
tion. 


THF. FINANCIAL TIMES 
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ketine GmbH. Admin l-Roscndjhl- 
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HITl-T-h). Re.pm.%ible Editor Ridunl 
Lambert, do The l-nuneul Times Lim- 
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presence 

By John Thomhffl 

The Russian government 
yesterday denied it had inter- 
evened militarily to destabilise 
tbe Caucasian republic of 
Chechnya despite an outbreak 
of fierce fighting over the 
weekend. 

Mr Victor Yerin, Russia's 
interior minister, told the 
Interfax news agency yester- 
day: “All that is happening 
with Chechnya is the business 
of the Chechen people alone. 

No interior troops are involved 
in the events in that republic." 

Russian news agencies 
reported that fighting had 
erupted on Friday between 
supporters of Mr Dzhokhar 


By Steve LeVine In Tashkent 

The outbreak of fighting in 
Chechnya appears to mark tbe 
start of a new. violent phase in 
a Moscow-backed effort to 
install a non-separatist govern- 
ment, and to help keep Russia 
from splintering. 

The turbulence comes in 
Russia's most volatile region, a 
strip of well-armed Moslem 
republics in its south-west Cau- 
casus mountain region, it origi- 
nated three years ago, when 
Mr Dzhokar Dudayev returned 
to lead Chechnya after serving 
as a general in tbe Soviet stra- 
tegic bombing division, and 
declared independence from 
Moscow. He went on to humili- 
ate Mr Yeltsin, who sent in 
about 500 Russian troops to put 
down the separatism but 
quickly bad to withdraw when 
Mr Dudayev declared war. 

The attempt to unseat -Mr 
Dudayev, however, risks heavy 
bloodshed in a republic known 
for blood feuds and belligerent 
clans. In oil-rich Chechnya, 
high fashion involves variants 
of I930s-style gangland pin- 
stripes and fedoras, and gov- 
ernment ministers keep loaded 


Germany's editorial writers 
were given a wonderful oppor- 
tunity to proffer advice to the 
British and Irish governments 
following the IRA's decision to 
bring in a ceasefire. After all. 
Germany actually went 
through the experience or uni- 
fication five years ago. But the 
commentators opted for cau- 
tion. 

Perhaps they were reluctant 
to explain to Dublin how, 
despite a common language, 
German unification has cre- 
ated internal economic, psy- 
chological and social divisions. 
There was little editorial dis- 
sension across the political 
spectrum’ 

The leaders agreed that the 
response by the British govern- 
ment to the ceasefire was cru- 
cial for determining the future 
development oF the peace pro- 
cess. "The peace prospects now 
depend on the Unionists and 
the British government,” wrote 
the left-wing Frankfurter 
Rundschau. 

The conservative Frankfurter 
Allgemeim Zeitung went fur- 
ther. In its editorial, the paper 
blamed the British government 
for failing to cope with the 
IRA. but added that the IRA 
had failed in its attempts to get 
London to stop protecting 
Northern Ireland. The FAZ 


Dudayev’s regime and opposi- 
tion forces at Dolinskaya, 30km 
outside the republican capital 
of Grozny. The fighting 
involved artillery and 
armoured vehicles, raising sus- 
picions that Russian forces 
were involved. 

Mr Movladi Uganov, the 
Chechen information minister, 
told Reuters on Friday that 
two Russian helicopters had 
fired on the outskirts of 
Grozny inflicting casualties. 

The Russian defence minis- 
try vigorously denied the 
charge. 

Reports of the fighting have 
been confused and there have 
been no details of casualties. 
The situation was reported to 


pistols and rifles on their desks 
and in concealed holsters. 

Mr Yeltsin's open support for 
Mr Dudayev's opponents is 
partly a strategy to preempt 
his own nationalist critics by 
appearing tough against inde- 
pendence drives in Russia's 
restive regions, such as Tatar- 
stan and Bashkiria. He is also 
sending a signal that he will no 
longer tolerate such flagrant 
defiance. 

Moscow's plans also appear 
to stand a good chance of back- 
firing. One of Mr Yeltsin's 
greatest political foes. Mr Rus- 
lan Khasbulatov, has become 
Chechnya's most conspicuous 
opposition leader and may 
himself take power there. Mr 
Khasbulatov was Russia's par- 
liamentary speaker until Mr 
Yeltsin ousted him last year in 
a bloody shootout, and was 
released from prison in Febru- 
ary. While denying he wants to 
be Chechnya’s president, Mr 
Khasbulatov has allied with 
two of three warlords who 
have emerged against Mr 
Dudayev, and yesterday said 
he was forming a paramilitary 
unit to oppose the republic's 
president. 


returned to the subject a day 
later, arguing that “the IRA 
has manoeuvred the British 
government into a situation of 
imponderables. London cannot 
allow the impression to be cre- 
ated that violence has led to 
the goal [for peace]." 

The liberal SQddeutsche Zei- 
tung settled for scepticism. 
"The prospects for a perma- 
nent peace settlement could be 
illusory," the paper warned. It 
was left up to the small Nard- 
bayerischer Kurier, based in 
Bayreuth, to use the ceasefire 
to reflect on other ethnic and 
political conflicts throughout 
the world. 

It speculated that if a solu- 
tion in Northern Ireland was 
possible, would it be too much 
to expect that one day "the 
Kurds and the Turks would sit 
at the same table, the Chinese 
would grant independence to 
Tibet, and North and South 
Korea might be reunited. Noth- 
ing is impossible." 

But, in South Korea, the cov- 
erage of the breakthrough was 
particularly low-key In con- 
trast to the copious coverage 
that the South Korean media 
gave to the civil war in the 
recently united Yemen earlier 
this year. This event was con- 
sidered a warning about prob- 
lems that Korea could confront 
if unification is achieved 
between North and South 
Korea. 


be calm yesterday. 

Moscow has repeatedly made 
plain that it wants order rees- 
tablished in the break-away 
republic and has called upon 
Mr Dudayev to step down, 
warning that Chechnya faces 
the risk Of “self- annihila tion in 
the bloody flames of civil war". 
The Russian government has 
openly supported a Chechen 
opposition grouping, led by Mr 
Umar Avturkhanov, which has 
been fighting to remove Mr 
Dudayev. 

On Friday. Chechnya 
ordered the expulsion of all 
Russian journalists within 24 
hours. The telephone lines 
between Moscow and Grozny 
have been cut 


The anti-government groups 
possess enough armour to lend 
some credibility to assertions 
that Moscow has armed the 
rebels. 

Last month Mr Yeltsin sent 
cash to one of the rebel prov- 
inces, Nadterechni, to make up 
three years of back pay to pen- 
sioners and government 
employees that had been with- 
held by a blockade from 
Moscow. The windfall signifi- 
cantly boosted the image of the 
region's warlord. Mr Umar 
Avdorkhanov, leader of the 
rebels’ Provisional Council 

This has made Mr Avdork- 
hanov appear to be Moscow’s 
favourite to succeed Mr 
Dudayev. But another regional 
strongman, a 31-year-old for- 
mer Grozny mayor named Mr 
Beslan Gantemirov, is said to 
control the biggest rebel force, 
about 1,000 men in Chechnya's 
Unismartanovsky region. Then 
there is the third warlord, Mr 
Ruslan Labazanov, 26, a mar- 
tial arts specialist who says he 
supports Mr Khasbulatov. 

Mr Labazanov's political 
plans are simple: "If Dudayev 
does not resign, we will elimi- 
nate him. " 


The South Korean media's 
routine coverage of the Irish 
story may be explained by the 
fact that its attention was 
focused on the diplomatic 
moves Last week that could 
determine the fate oF the Kor- 
ean peninsula. The US had 
agreed to a meeting in the 
North Korean capital of Pyong- 
yang to discuss the establish- 
ment of diplomatic relations 
and China gave its support to a 
North Korean proposal for a 
peace treaty with the US that 
could eventually lead to the 
removal of US troops from 
South Korea. 

Irish-Americans divided 
between those who foresaw the 
almost immediate unification 
of northern and southern 
Ireland - in five or perhaps ten 
years - and those who believed 

the British government would 
merely seek to exploit the IRA 
ceasefire for tactical advan- 
tage. Many third and fourth 
generation Irish-Americans are 
shaky on the details of the 
Irish conflict A good propor- 
tion believe that Catholics 
make up the majority in the 
north, but they are unwaver- 
ing in their determination that 
the British must go. 

But one general assumption, 
expressed by commentators on 
radio and television shows last 
week, is that the British people 
are tired enough of haemor- 
rhaging cash and casualties in 


China and 
Russia 
sign trade 
accords 

By John Thornhill in Moscow 

Russian and Chinese leaders 
signed a series of trade and 
co-operation agreements over 
the weekend, promising a new 
era of partnership after 40 
years of volatile and often bit- 
ter relations. 

In the first visit to Moscow 
by a Chinese head of state 
since 1957, Mr Jiang Zemin 
signalled his determination to 
extend the recent rapproche- 
ment with Russia. “Autumn is 
the season of harvest. In 
Moscow I have gathered a 
good harvest," he said yester- 
day. 

The two presidents signed a 
political declaration promising 
neither country would target 
nuclear weapons at tbe other. 
Both sides pledged not to 
allow ideology to obstruct 
their bilateral relations nor 
join an international grouping 
that would endanger each oth- 
er's security interests. An 
agreement was reached demar- 
cating the western section of 
Russia's border with China, 
which has been in dispute for 
decades. Russian involvement 
in five big Chinese industrial 
projects was also confirmed in 
a trade protocol, which could 
bring $200m (£129m) of orders 
to Russian companies. 

“Both parties reached an 
understanding of the necessity 
to build a new type of con- 
structive partnership, which 
means neither confrontation 
nor political alliance," Mr 
Qian Qicben, China’s foreign 
minister, said yesterday. 

Mr Boris Yeltsin, Russia’s 
president said that as a force 
both in the west and the east 
Russia had no alternative but 
to develop its national inter- 
ests “through partnership and 
normal co-operation with tbe 
outside world” 

China remains one of Rus- 
sia's most Important trading 
partners despite a sharp con- 
traction in trade between the 
two countries this year 
because of the upheavals in 
Russia's economy. 


Northern Ireland that they are 
only too eager to withdraw. 

And leaders of one Irish- 
American lobby group after 
another hurried to give the 
credit to President Bill Clinton 
for encouraging the peace pro- 
cess along by his decision to 
grant a visa earlier this year to 
Mr Gerry Adams, the Sinn 
Fein leader. 

Newspaper editorialists were 
more enthusiastic in their 
response to the news of the 
IRA ceasefire, though careful 
to warn that it was only a first 
step. The New York Times. 
under the headline "Hope 
Reborn in Northern Ireland", 
hailed the move as “a break- 
through - anri thing s ought to 

go very badly for any faction 
that shatters this yeamed-for 
ceasefire". The paper con- 
cluded: “In short, the perma- 
frost seems finally to be heav- 
ing." 

The Washington Post, while 
sharing the view that Mr Clin- 
ton deserved much of the 
credit, was more cautious on 
the future prospects. “The 
ceasefire, a culmination of 
years of effort, is only a begin- 
ning. But if it holds it will be 
seen as the breakthrough con- 
cession that made real peace 
possible," tbe Post said. 

By Judy Dempsey in Berlin. 
John Burton in Seoul and 
George Graham in Washington 


Yeltsin seeks to outsmart 
his nationalist critics 


INTERNATIONAL PRESS REVIEW 1 

,^< 1 ^ i 

Caution on bridging the divide 


N IRELAND 


INTERNATIONAL NEWSDjGEgT 

Swedish poll 
doubts grow 

Support for Sweden's opposition Social Democratic Party, 
favourite to win the September 18 general election, fell signifi- 
cantly last week according to an opinion poll published y es ter- 
day. But the swing was strongly to the left and not towards 
the struggling right-centre government of Prime Minister Carl 
Bildt The poll showed support for the Social Democrats slip- 
ping 3^2 percentage points to 47.4 per cent, the first time the 
party has fallen below 50 per cent since June. This suggested 
the Social Democrats will not win an overall majority. 

The shift is likely to unsettle finan cial markets, which have 
driven up long-term interest rates and weakened the Swedish 
krona because of uncertainty over how the incoming govern- 
ment will deal with the country's budget deficit and Cast 
growing public debt. Uncertainty over the outcome of referen- 
dums Later in the autumn in Finland and Sweden on their 
applications to join the European Union has also unsettled 
markets. The left in Sweden is strongly anti-EU and a poll in 
Finlan d on Saturday showed a strong swing there to the 
anti-EU camp for the first time in several months. Hugh 
Camsgy, Stockholm 

Bougainville peace agreement 

The six-year guerrilla war on the Pacific island of Bougain- 
ville, controlled by Papua New Guinea, moved towards peace 
at the weekend after talks between Sir Julius Chan. Papua 
New Guinea’s newly elected prime minister, and Commander 
General Sam Kauona, leader of the Bougainville Revolution- 
ary Army. A formal declaration said PNG troops and BRA 
rebels would “ maintain static positions" until a ceasefire was 
announced this week, when a South Pacific peacekeeping force 
would be sent to the island to ensure the truce was honoured. 

The two leaders also announced that a “peace conference” 
would be convened no later than October 10. This is a 
positive beginning on a path to peace," said Sir Julius. The 
Bougainville dispute centres on islanders' demands for 
self-rule. Tensions were inflamed in the 1970s and 1980s with 
the building of the Panguna copper mine, operated by Austra- 
lia's CRA. Local landowners claimed that they did not get 
enough compensation and that income from the mine was 
siphoned back to CRA or the PNG government at the expense 
of the island’s community. Nikki Tail and Agencies. Sydney 

Malaysia detains sect leader 

The leader of a banned Moslem sect in Malaysia has been 
detained under the country's tough internal security laws to 
prevent him “acting in any manner prejudicial to the security 
of Malaysia”. Mr Ashaari M uhamma d, head of the A1 Arqam 
sect was arrested at tbe border between Malaysia and Thai- 
land at the weekend after bang deported by Thai authorities. 
Mr Ashaari, with his wife, six-month-old daughter and four 
followers, is being held at an undisclosed destination under 
the terms of Malaysia’s Internal security act, which allows 
detention without trial for up to two years. A1 Arqam. which 
claims 100,000 followers in Malaysia, was banned by the 
Malaysian authorities last month. Tbe government said the 
sect was guilty of deviationist Islamic teachings and described 
it as Uie greatest danger to the country since the communist 
insurgency- A1 Arqam says it is being victimised because of its 
growing influence in Malaysia, which is about 55 per cent 
Moslem. Kieran Cooke. Kuala Lumpur 

Ukraine min ers die in blast 

An explosion at a Ukrainian coal mine at the weekend killed 
24 miners and left 15 injured. The mine blast In SIavyavo£erb- 
skaya, at the heart of Ukraine's eastern coal belt and just 
outside the regional capital of Lugansk, underlined tbe poor 
state of the country’s coal industry, saddled with ageing pits 
and outdated equipment. Investigators have yet to find the 
cause, but methane gas was suspected. Accidents are frequent; 
some four miners die for every Ira tonnes of coal produced. 
Last year 212 miners perished in mine accidents; in 1992, an 
explosion in the Lugansk region killed 57 people. Ukraine’s 
mining sector, now propped ap by subsidies from Kiev, needs 
capital investment and layoffs to prosper in a market econ- 
omy. But tbe Kiev government balks at such moves for fear of 
upsetting a fragile stability in trhe country’s mostly Russian- 
speaking, over-industrialised and impoverished eastern region. 
Matthew Kaminski. Kiev 

Russia curbs MMM adverts 

The Russian government has reinforced recent attempts to 
bring some order to the country’s chaotic advertising market 
by banning the MMM investment fund from advertising in 
state-run media. MMM, a pyramid investment s cheme which 
sucked in millions of shareholders, has continued to run 
extensive television advertising campaigns despite the col- 
lapse of its share price, the arrest of its founder and govern- 
ment claims that MMM investment certificates are little more 
than “pretty postcards”. Mr Victor Chernomyrdin. Russia’s 
prime minister, has also instructed state-run mwHa not to run 
advertisements by “organisations attracting investments from 
individuals and legal entities in violation of priori r>g laws". 
Last week, the Russian government approved a draft law 
proposing stiff regulation of Russia’s nascent advertising mar- 
ket It is not clear whether MMM mil be able to evade 
government restrictions by limiting its advertising to private 
television stations. John Thornhill, Moscow 

VW to set up plant in India 

Volkswagen plans to set up a car factory in India, one of tbi 
world's fastest growing vehicle markets. Volkswagen 
Europe's biggest and the world’s fourth leading car maker, has 
selected Indian tractor manufacturing group Eicher Motors as 
its partner in conducting a six-month feasibility study, news 
papers reported. The study will help VW deride which models 
to launch in India, according to the reports, which quoted VW 
Asia-Pacific c ha i rman Martin Posth. Volkswagen’s foray into 
India comes 12 years after it set up its first Asian joint venture 
in China. Volkswagen is the latest in a string of foreign 
companies to target the Indian car market since the govern 
ment relaxed restrictions on foreign investment last sear. 
Reuter. New Delhi y 

Japanese in Hungary car deal 

Suzuki Motors of Japan is to add four-wheel-drive care to the 
range produced at its plant in Hungary, under an agreemenl 
with the rival Fuji Heavy Industries, which will sell tiww fa 
Europe badged as Subarus. Up to 12,000 a year wifi be supplied 
to FHJ from next year under an original equipment n. a nnf«s 
tore deal. The versions or the Suzuki Cultus, currently pro 
a . form * ^ replace a Subaru Justy 

Fm Previously shipped from Japan. Sales oi 
^ already been discontinued in the domestic 

market The two companies agreed in June to co-operate in 
developing automatic transmissions, and yesterday's disclo- 
sure prompted specufation that they could mow to joint 

Cramb ] ^ cost ‘ cuttin « efforts. Gordon 

Mazda in Chinese venture 

SiS SLR? 5? ve ^ to manufacture commercial 
from is*- The Japanese vehicle 
/ Uzh P u SoM “otore, a focal company, 
of H ldon . esia 2011 Tomen, the Japanese trading 

aorat Yiotra fsioim) and to have an annual outuut of 10000 
pick-up trucks rising to 30.000 in 1997. This is inline with ’the 

2 S 3 SrSJ 53 iESf 5 - V * tha ; smaU 5 WS 5 S 

^Tnian^li 00 ' 000 a ***■ Loc ^ 1 parts procurement is 
fofo t P v^ “ a ! ease to 50 per cent Mazdaal^ySs a 


v 










Caracas plan 


Colourful recovery in the nation’s capital 


aims to pull in 
foreign funds 


By Joseph Mam 
In Caracas 

The Venezuelan government 
moved closer at the weekend 
to implementing a new pro- 
gramme designed to stabilise 
the economy and pah the 
nation out of its second year of 
recession. 

President Rafael Caldera and 
his cabinet approved the pro- 
gramme at a special cabinet 
session on Saturday. 

However, officials said that 
details would not be made pub- 
lic until after a series of meet- 
ings to be held with represen- 
tatives of political parties, 
business, organised labour, the 
Catholic Church and other 
groups. 

The Caldera adminis tration's 
main goals are to fight infla- 
tion by reducing the fiscal 
deficit. 

A plank of the policy is to 
attract new foreign investment 
especially in petroleum ana 
heavy industry, and to revive 
the “strategic role” of the gov- 
ernment, in the economy. The 
government aims to increase 
workers' real purchasing 
power, and provide social wel- 
fare benefits to the nation's 
poor. 

The programme is expected 
to include the following ele- 
ments: 

• Fiscal action, such as 
increasing some direct and 
indirect taxes, improving reve- 
nue collection at all levels, and 
reducing allowable deductions 
for income taxes. 

• Staggered increases in retail 
prices of petrol, which now 
sells at about the equivalent of 
13 US cents (8pj per US gallon. 
These price increases will be 
accompanied by some type of 
wage bonus or subsidy to pri- 
vate sector and government 
workers. 

• Replacing zero-conpon 
bonds, denominated in Ven- 
ezuelan currency and Issued by 
the central bank, with US dol- 
lar-denomlnated or doUar- 
finknri instruments backed by 
Venezuelan oil. The new 
instruments, to be purchased 
only with Venezuelan cur- 


rency, wiH be used to absorb 
excess liquidity and should 
cost the government considera- 
bly less than the zero-coupon 
bonds. 

• Government financial assis- 
tance for small b usiness es, 
agriculture and tourism. 

• The reorganisation of sev- 
eral ministries. 

It was not clear whether the 
government was planning to 
include one key reform, involv- 
ing changes in the current sys- 
tem of accumulated severance 
benefits, in its programme. For 
years, business In Venezuela 
has been seeking nhangps tn 
the system, which creates 
heavy liabilities for employers. 

Also, it was not apparent 
whether the government 
planned to make any changes 
in existing controls on prices 
and foreign exchange transac- 
tions, or whether it would 
restore six constitutional 
rights suspended on June 27. 

Under the economic p lan, the 
government hopes to lower 
inflation from a projected GO 
per cent this year to 25 to 30 
per cent in 1995. inflation last 
year was 48 per cent 

For 1995, the administration 
also hopes to achieve a zero 
fiscal deficit and to raise non- 
oil gross domestic product to a 
positive 3J) per cent compared 
to a projected negative 43 per 
cent this year. 

President Caldera, who 
began a five-year term in Feb- 
ruary, inherited a weak econ- 
omy and a finantriflT crisis that 
forced his government to take 
over 11 commercial hanks and 
provide ftnanntoi aid to several 
others. 

The president has repeatedly 
said that he rejects the free- 
market economic policies i 
applied during the previous 
administration. He has tamed 
to heavy government interven- 
tion to tackle Venezuela's eco- 
nomic and financial problems. 

Despite tins position, he is 
opening the country’s oil explo- 
ration and production sectors 
to major international invest 
ment, for the first time si nce 
the petroleum industry was 
nationalised in 1976. 


George Graham finds Marion Barry running hard to win back the Washington mayoralty 


T he orange damp on the 
rear wheel of Mr Marlon 
Barry’s Chrysler Hew 
Yorker car, as he parked out- 
side the offices of the Washing- 
ton Post last week, seemed 
almost the last, desperate 
effort of the city establishment 
to stop his resurrection than 
drug addiction and prison to 
become, once a gnm. mayor of 
Washington, DC- 
With only a week to go 
before the Democratic party's 
primary ballot that - in all 
likelihood, in thfa solidly Dem- 
ocratic city - will determine 
the winner of the elution in 
November, it wiD take more 
than a clamp to stop Mr Barry. 

He was last seen by the 
world outside Washington In 
1990, smoking crack cocaine on 
a videotape made by the Fed- 
eral Bureau of Investigation. 
He served six months in prison 
for cocaine possession, but 
returned to win a seat on the 
Washington city council and 
now holds a wafer-thin lead in 
the r unning for the mayoral 
primary, 

A Washington Post poll last 
week showed him on 34 per 
cent, against 33 per cent for Mr 
John Ray. a dull safe council 
member, and only 14 per cent 
for the Incumbent mayor, Mrs 
Sharon Pratt Kelly, who won 
the office in 1990. just after Mr 
Barry’s arrest, with a promise 
to “dean house”. 

Even six months ago, Mr 
Barry’s comeback seemed 
nnthiniwHe. But his devoted 
supporters have led an unprec- 
edented drive to register new 
voters in the city's poorest dis- 
tricts, where the reservoir of 
sympathy for him jg deepest 
During the last four months, 
more than 19,000 new voters 



have registered for the Demo- 
cratic primary, half of them 
east of the Anacostia River in 
the most depressed area of 
Washington. 

The national Democratic 
party is bracing itself for a 
Barry victory that seems cer- 
tain to cause embarrassment 

Six months ago, Mr Tony 
Coelho, a former congressman 
who has been drafted as the 
party's top strategist, said that, 
if Mr Bazry were to win, “the 
implications are that the 
comics go wild and the press 
goes wild." 

Today, Mr Coelho calls the 
candidate a good role model 
because of what seems to be 
his successful recovery from 
dependence on drugs and 
alcohol. 

For Mr Barry, a consummate 


politician, his straggle with 
addiction Is one more element 
to be turned to account in bis 
election campaign. His 
speeches even echo the 12 -step 
recovery programme of Alco- 
holics Anonymous. 

Tm in recovery and so is my 
city," he said when he 
announced his candidacy. 

Throughout his long political 
career. Mr Barry has been 
adaptable. Tim son of a share- 
cropper in the Mississippi 
Delta of the far south, he 
became, in the 1960s, chai rman 
of the Student Non-violent 
Coordinating Committee, one 
of the most potent organisa- 
tions of the civil rights move- 
ment, over the head of more 
messianic leaders such as Mr 
Bob Moses. 

In Washington, Mir Barry put 


on a suit to win a seat on the 
city school hoard. In 1978, he 
won his first term as mayor 
with a lot of white votes from 
the US capital’s opulent 
north-west 

But, on his return from 
prison, running in an almost 


kente cloth and kun caps 
which have become, for many 

hlack Americans, an wnfihtom 

of their African heritage. 

Now that he needs votes 
citywide in his quest for a 
fourth term as mayor, the busi- 
ness suits have returned, 
though flashes of kente still 
appear. Tm a situationist. I do 
what is necessary for the situa- 
tion,” he once said. 

Support for Mr Barry in 
many of the poorer black areas 


of Washington is fervent and 
unquestioning. Many saw his 
pursuit and eventual arrest by 
the FBI as a conspiracy by the 
white power structure against 
a powerful black man. 

Many others appear to 


recreate the boom years of the 
1980s when he helped to recy- 
cle some of the benefits of a 
thriving local economy 
through government jobs and 
summer work programmes. 

Conspiracy theories are not 
strange in Washington, a 70 
per cent black city which, until 
it won a limited degree of 
self-rule 20 years ago. was run 
by a congressional committee 
chaired by such luminaries as 
Senator Theodore Bilbo, also 


from Mississippi but he was a 
Ku Klux Hangman. 

Besides, in a city where, on 
any given day. sociologists 
have estimated, four out of 
every 10 black men are in 
prison, on parole, on probation 
or wanted by the police. Mr 
Barry’s cocaine conviction may 
not seem much of a blemish. 

Even so, white voters and 
many of the wealthier blacks 
in north-west Washington are 
less forgiving. They remember 
not only the FBI videotape, but 
also a Barry administration in 
which a dozen or more senior 
officials, including two of Mr 
Barry's deputy mayors, were 
convicted of various degrees of 
corruption. 

They remember, too. a city 
government which became an 
all-purpose jobs programme, 
and which, even today, after 
substantial cuts by Mrs Kelly, 
has more people on its payroll 
than Chicago, a city four times 
its size. 

Whether Mr Barry con win 
the primary on September 13 
depends to a great extent on 
the size of the anyone-but- 
Barry vote. 

Mrs Kelly is unlikely to bene- 
fit greatly. She spent most of 
her first two years as mayor 
running for some higher 
national office and started run- 
ning the city too late to make 
much difference. With the city 
facing a budget crisis and the 
corruption-plagued housing 
department now in the hands 
of the courts. anyone-but-Kellv 
outpolls even anyone-but- 
Bairy. 

That leaves Mr Ray - and 58 
per cent of his supporters, in 
the Washington Post poll, 
wishing somebody else were 
running. 


entirely black ward, Mr Barry 
adopted the brightly coloured 


accept his message of personal 
redemption, and to be willing 
to give him a second chance to 


US accused of inflexibility in Cuban refugee talks 


Cuba’s chief negotiator in the current 
talks frith the US said yesterday that 
Washington has taken a rigid stance 
over possible moves to stop the flight 
of Cuban refugees to Florida. 

Mr Ricardo Aianrdm predicted little 
progress until the discussions tackle 
the US economic embargo of the 
Caribbean island, agencies report 
from New York. 

The Cuban former foreign minister 
insisted that thousands of his fellow- 
citizens have recently risked crossing 


the Florida Straits in flimsy rafts 
because of the 30-year embargo by 
the US against Culm. 

He said on CNN television that 
Cuba was “flexible enough” to dis- 
cuss attempts to mid the exodus when 
talks resume in New York, which was 
doe to happen late yesterday. 

“But we have to make it very 
dear,” he went on, “that, if yon want 
to find a real resolution to this prob- 
lem, yon cannot Ignore the sources” - 
namely the economic embargo. 


The US negotiators were “not pre- 
pared even to talk about that," Mr 
Alarcdn said. “If s very unfortunate. 
That means that a real solution can- 
not be found.” 

The latest flood of Cubans leaving 
the Island began when President 
Fidel Castro responded to riots in 
Havana on August 5 by suggesting 
that his government would no longer 
stop citizens trying to leave. 

Since then, more than 28,000 
-Cubans are believed to have tried to 


reach Florida an home-made craft 

The tide of refugees was slowed on 
Saturday, when 850 people were 
picked up by the US Coast Guard. 
This was down from nearly 1,300 cm 
Friday. 

During two days of talks in New 
York last week, US officials said 
Washington had proposed putting in 
place an “expanded, predictable, 
dependable and legal” migration pro- 
gramme, provided that Havana took 
steps to prevent an illegal, dis- 


organised exodus from the island. 

Mr Alarcdn was not optimistic 
about the chances of reaching an 
agreement during the talks yester- 
day, or any time soon. “I think that 
there is still a pretty long road to go 
before we can finalise a specific 
agreement That’s my impression. 
But ifs possible to find one.” 

The US state department stated 
that the US delegation at the talks 
would have nothing to say until after 
the meeting last night 



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★ 

NEWS: INTERNATIONAL 


Bumper harvest adds to Japan’s rice troubles 


By Emiko Terazono in Tokyo 

This summer's hot weather in Japan 
ha s brought the best harvest in eight 
years. Unlike Last year, when the rioe 
harvest index fell to 74 after heavy 
su mm er rains and typhoons, this 
year's crop is expected to produce an 
excess of 1 .4m tonnes above projected 
consumption. 

However, this is not entirely good 
news: the agriculture ministry is 
struggling to rid itself of foreign 
grains left over from this year's emer- 
gency imports. Last year's poor har- 


vest caused a shortage of Japanese 
rice in February, triggering panic 
buying among consumers. 

More than lm tonnes of Thai and 
Chinese long grain rice, which is 
unpopular with consumers, are said 
to be held in the warehouses of whole- 
salers and the government. Some 
retailers, unable to sell the foreign 
rice, have been dumping it in bagfuls 
in unused fields, and one Buddhist 
temple in central Japan has become 
famous for the many people who 
come there to feed the pigeons with 
long grain rice. 


The surplus is expected to remain 
for several years. In the wake of last 
year’s poor harvest, the government 
eased the rice-reduction policy estab- 
lished in 1971 to prevent an oversup- 
ply. As a result, farmers who were 
forced to turn their paddies into vege- 
table and fruit Gelds have resumed 
growing rice. 

Another headache for the ministry 
is the partial opening of the domestic 
rice market next year under the Uru- 
guay Round of multilateral trade 
negotiations. The government will 
allow imports of up to 4 per cent, or 


400.000 tonnes, of the market; this will 
be raised gradually to 8 per cent over 
six years. Moreover, fanners in rice- 
exporting countries, including the US 
and Australia, which supplied the 
2.6m tonnes of emergency imports, 
are demanding that Japan import the 
same amount from this year's har- 
vest 

To add to the confusion, the govern- 
ment is trying to revamp the regu- 
lated distribution system by relying 
more on market forces. Earlier this 
month, an advisory council to the 
ministry proposed that the Staple 


Food Control Act be reviewed for the 
first time in 52 years. While this is 
expected to provide consumers with 
cheaper rice, it could also mean that 
inefficient rice fanners and wholesal- 
ers will be forced out of business. 

The good news for the government 
ste mming from the rice saga may be 
the Yl55.2bn in profits made by Its 
food agency from selling foreign rice 
to distributors at three times the 
import price. The government says 
the profits will be given in subsidies 
to farmers suffering from last year’s 
poor harvest. 


Conference move brings SDP into line with rightwing coalition partner 

Socialists 


jettison 
party dogma 



Tomiichi Morayama: won party backing for U-turn 


Nomura chief 
calls for more 
open markets 


Nigerian regime 
defeats oil 
workers’ strike 


By William Dawkins in Tokyo 

Japan's two- month-old ruling 
coalition of left and right was 
strengthened at the weekend 
when Socialist members voted 
to follow their leader and scrap 
their most extreme policies. 

The move, agreed at an 
extraordinary convention of 
the formerly pacifist Social 
Democratic Party on Saturday, 
is the biggest policy change in 
the SDP's history. It bolsters 
the authority- of Mr Tomiichi 
Muraynmn. the pragmatic 
Socialist prime minister, and 
removes the biggest risk to the 

survival of the originally unst- 
able coalition: a policy split 
between the SDP and the con- 
servative Liberal Democratic 
Party, the largest partner. 

The decision angered the 
SDP’s extreme-left minority, 
which staged drum-beating 
demonstrations outside the 
convention centre and begged 
Mr Murnyama not to sell out to 
the LDP. One senior member of 
the left resigned and others 
might follow. 

A nearly two-thirds majority 
of the national convention 
voted in favour of a draft pol- 
icy. accepting the existence of 
the country's self-defence force 
- Japan's military - so long as 
it was the minimum needed. 
While a relief to the govern- 


ment, this is a sign that 
defence spending could face a 
further squeeze in next year's 
budget 

The party agreed that the 
US-Japan treaty, under which 
24.000 US troops are based in 
Japan, must be "firmly main- 
tained", rather than turned 
into a mere friendship treaty, 
as in its previous policy. 

On taking office. Mr Muray- 
ama quickly dropped the SDP's 
traditional opposition to the 
US-Japan security treaty and 
to the existence of Japan's mil- 
itary. But until Saturday's crit- 
ical test of his control it was 
unclear whether SDP members 
would support him or rebel. 

Other changes to Socialist 
dogma included acceptance, for 
the first time, of the national 
flag and national anthem, for- 
merly seen as militarist sym- 
bols. In an important move for 
energy policy, the SDP dropped 
its traditional demand to ban 
nuclear power and said Japan 
should continue to use those 
nuclear reactors now in opera- 
tion until new energy sources 
could be found. 

The weekend U-turn means 
the SDP's official policies are 
now nearly the same as those 
of the LDP. the Socialists' tra- 
ditional foe for nearly four 
decades until last year. 

The policy switch is likely to 


reduce, but not erase, any anxi- 
ety in Washington that the 
new government will be 
tempted to downgrade Japan's 
strategic links with the US. An 
element of uncertainty over 
just how far the SDP had 
embraced the US security tie 


was raised yesterday when Mr 
Wataru Kubo, party secretary 
general, said Japan should 
reduce and eventually drop the 
military aspect of its relations 
with the US and shift the affi- 
ance to a more internationally- 
oriented linkage. 


By wnnam Dawkins In Tokyo 

Japan's equity markets must 
be made more open and com- 
petitive if the economy is to 
recover, Mr Hideo Sakamaki, 
president of Nomura, Japan's 
leading securities company, 
said at the weekend. 

He called on the finance min- 
istry to scrap Japan’s 0.3 per 
cent tax on securities sales, to 
admit more h anks to the secu- 
rities business, and recom- 
mended the dismantling of the 
cross-shareholdings that bind 
together Japan’s keiretsu, or 
corporate familie s. "The fewer 
cross-shareholdings the bet- 
ter,” he said. 

"The Tokyo market must 
become fully functional as the 
heart which pumps blood into 
the economy.” said Mr Saka- 
maki 

Japan's equity markets were 
“at the development stage” 
compared to the US and Lon- 
don, but needed to catch up 
East to cope with Japan’s tran- 
sition from a mixed economy 
to a free market economy, he 
argued. "The Japanese system 
is distorted and strained, both 
in politics and the economy,” 
said Mr Sakamaki 

Japan's securities industry 
has been calling for an end to 
securities sales tax for years. 
Demands have intensified 
recently because of a doubling 
in the past year in the value of 
Japanese shares traded in Lon- 
don, where there is no such 
tax. 


The finance ministry is 
unwilling to abolish this 
source or government revenue, 
on the grounds that Japanese 
share trades are already lightly 
taxed Individual investors, for 
example, pay no capital gains 
levy. 

Nomura's call for a more 
open equity market reflects its 
own confidence in being able 
to face increased competition, 
after a partial recovery from 
its dive in profits in the early 
1990s. 

S mall er brokers do not share 
this confidence because of 
their over-reliance on commis- 
sion income at a time when the 
share turnover is low. 

The economy was still “in a 
tunnel" with no sign of the 
exit, said Mr Sakamaki pessi- 
mistic by contrast with the 
comments on Friday by the 
government's Economic Plan- 
ning Agency that bright signs 
were gradually spreading. 

Pre-tax profits of Japan's top 
400 companies last year were 
barely above the level of a 
decade ago and their return on 
equity was poor, 2.7 per cent, 
by comparison with their US 
counterparts' 13 per cent Mr 
S akamaki pointed out 

High wage costs were a big 
factor in this. Japanese costs 
were so high that not even a 
YlOO.OOObn (£653bn) increase 
over their Y19l.000bn sales 
last year would bring 
an increase in profits, he 
predicted 


By Paul Adams in Lagos 

The leaders of Nigeria's two oil 
workers' unions yesterday 
called oft their two-month-old 
strike aimed at forcing an end 
to military rule. 

A spokesman for the leaders 
of the unions Nupeng and Pen- 
gs gsan. who last month were 
barred from their posts by mili- 
tary decrees, said they had 
only decided to "suspend” their 
action “in the interest of the 
suffering masses. ..the economy 
and the oil industry”. How- 
ever, an attempt to resume the 
strike action Is almost cer- 
tainly to fail in the wake of the 
waning support among their 
members, some of whom had 
already returned to work. 

“We have asked all our mem- 
bers to resume work immedi- 
ately. and from tomorrow they 
should all be back to work.” 
said the spokesman, Mr Arthur 
Onoviran. 

The unions said that they 
still stood by their demands for 
the military government to 
uphold the undeclared victory 
of Mr Mosbood Abiola in last 
year’s presidential poll release 
him from jail and restore the 
democratic institutions that 
were swept aside in November. 

The unions are also demand- 
ing reforms in the state's man- 
agement of the oil industry, 
where under-investment has 
led to heavy job losses. 

During August, the strike 
cut more than a quarter from 
Nigeria's 2m-barrels~a-day out- 
put of crude oil the country’s 
only major export, and 
severely disrupted national 
fuel distribution. Most of the 
lost production was at Shell's 
onshore operations, while off- 
shore producers were largely 
unaffected, with Chevron rais- 
ing output 12 per cent, accord- 
ing to industry sources. 

The companies said last 
week that production staff 
were returning to the oil fields 
and that tanker drivers in 
Lagos and the country's 
south-west had resumed work. 
Nigeria’s main oil refinery at 
Port Harcourt was again prod- 
ucing, and the fuel depots were 
open. 

The oil workers became iso- 


lated in their struggle against 
General Sani Abachn's regime, 
which has rejected demands to 
hand over to civilian rule and 
release Mr Abiola. Strikes in 
other sectors of the economy 
were shortlived or haphazard, 
and the movement to end mili- 
tary rule lacked political lead- 
ership, despite strong popular 
support especially in Mr Abi- 
ola 's native south-west 

The end of the strike leaves 
the government in its strongest 
position in several months Mr 
Abiola and several of his out- 
spoken supporters are in jail, a 
strike in the most important 
industry has been broken, the 
national executive of the oil 
unions has been replaced by 
government nominees and the 
government has carried the 
army in the clampdown 
against pro-democracy forces. 

Without a government In 
waiting - a cohesive political 
movement to take control if 
the government were to fail to 
rally the strikers during a long 
haul - the oil workers could 
not achieve their alms . The 
strike has proved that an oQ 
industry stoppage is a powerful 
weapon in a long campaign 
against a government in 
Nigeria hut alone cannot bring 
down a determined regime. 

The multinational oil compa- 
nies successfully replaced 
strikers at the oil fields with 
senior management or expatri- 
ates usually employed in other 
jobs, and the government was 
prepared to accept a 25 per 
cent drop in exports for the 
foreseeable future, despite the 
effect on Nigeria's balance of 
payments and the long-term 
damage to the oil industiy's 
investment and production 
capacity caused by the stop- 
page. 

Mr Abiola's future obviously 
remains in doubt. He has been 
in detention since his arrest in 
June for declaring himself 
president on the anniversary of 
his unofficial victory in the 
1993 presidential election. He 
faces charges of treason. Fears 
about Mr Abiola's health led to 
repeated demands at the week- 
end that he be allowed hospital 
treatment 


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The Financial .Tm|esV :\iVv:;-.';||:l^ 

plans to publish 

" " ' /'s' . \ . I” 

vr. ‘ *i v 


The Philip|iiii|i§ 

" . . * ■ * •* 

on Monday, September 12. 


Islamic leader offers Algerian truce 


By Francis Gtries 

Contacts between Algeria's 
military leaders and the out- 
lawed Islamic Salvation Front 
appear to have been stepped up 
following the offer of a truce 
by one of the two paramount 
FIS leaders. Mr Abassi Madam, 
in a letter to the head of state. 
General Liamine ZerouaL 
This is the first time an FIS 
leader has suggested a truce 
could help create a climate in 
which FIS conditions for peace 
talks could be discussed. Gen- 


eral Zeroual has said he is 
keen on creating a dialogue 
among all Algerian parties 
which “reject violence”. 

FIS conditions include the 
release of all members of the 
its ruling council held in 
Algeria and permission for 
those in exile to return, and 
the guarantee that they can 
meet freely in Algeria with the 
Islamic Salvation Army, the 
FIS armed wing. 

According to the Algerian 
daily newspapers Liberty and 
El Watan. General Mohamed 


Betchine - secretary general of 
the presidency, former head of 
military security and one of 
General Zeroual's most trusted 
advisers - visited Mr Madani 
in Blida prison a few days ago. 
There are also persistent 
rumours that Mr Jamel Ould 
Abbas, president of the foreign 
affairs commission of the 
National Transision Council, 
an body appointed by General 
Zeroual earlier this summer, 
has held meetings with FIS 
representatives in Lausanne, 
Switzerland. 


The spokesman for the FIS 
in exile, Mr Rabah Kebir, 
recently acknowledged that a 
number of their armed sup- 
porters in Algeria are moving 
over to the much more radical 
Islamic Armed Group (CIA), 
which has claimed responsibil- 
ity for the killing of most of 
the 60 foreigners murdered in 
the past 12 months. He has 
warned that the violence in 
Algeria, which is claiming an 
estimated 300 lives every week, 
is bound, in the absence of a 
dialogue, to get worse. 


China’s leaders struggle to keep 
rampant inflation under control 


Philippine Series 

Companies who advertised in the Philippines survey 

P 

will also feature in the above series which will be 
published during week commencing September 12. 
This is in conjunction with President Ramos' visit to 
Europe. 

The series includes a question and answer session 
on investment, the economy and liberalisation. 


FT Surveys 


Inflation: the forecast remains upwards 

35 principal cities 

35% Forecast 



By Tony Walker in Beijing 

China feces a formidable task 
bringing inflation down to 
manageable levels this year 
and has no chance of achieving 
its revised target of 13 per cent 
for the year, according to west- 
ern economists in Beijing. 

Economists are forecasting 
retail price rises of 19-20 per 
cent for the year, and urban 
cost of living increases of 22-24 
per cent, compared with a 
national retail price index rise 
of IS per cent in 1993 and cost 
of living rise of 19.8 per cent in 
the major cities. 

China's leaders announced 
last week that fighting infla- 
tion would be the govern- 
ment's main priority for the 
rest of the year. They also fore- 
shadowed a slowing of eco- 
nomic reforms such as 
attempts to rationalise state- 
owned enterprises, many of 
which are virtually bankrupt 

Premier Li Peng, in bis work 
report in March to the 
National People's Congress, 
the Chinese parliament, set 9 
per cent as a target for retail 
price rises this year, but that 
figure has since been revised to 
13 per cent. 

The government also has lit- 
tle chance of keeping to its eco- 
nomic growth target of 9 per 
cent for the year. Economists 
expect real GDP growth to 
average 11-5 per cent this year. 

Fean of social unrest fuelled 
by rising prices and lay-offs 
from state factories prompted a 
high-level review of economic 
strategy. Thousands of workers 
have either lost their jobs or 
are living on subsistence 
wages following the imposition 
of a credit squeeze last year. 

Chinese leaders have been 
walking a tightrope in their 


efforts to maintain high rates 
of economic growth to absorb 
the unemployed, while at the 
same time seeking to keep 
inflation in check by 
restraining growth in money 
supply and tightening credit 

Resurgent inflation in Jtrae 
and July pushed the leadership 
into more decisive measures, 
including a freeze on price 
increases on services such as 
transport and electricity for 
the rest of the year. Local lead- 
erships were put on notice that 
they would be held responsible 
for discouraging price rises. 

“The ability of local govern- 
ments to control the retail 
price index and consumer price 
index will be used to assess 
their achievements and will be 
made public every month,” 
said a circular by the State 
Council the cabinet published 
by People's Dally, the commu- 
nist party newspaper. 

According to a survey of 
price movements this year con- 
ducted by a western embassy 
in Beijing, the monthly infla- 
tion rate in June and July 
picked up to more than 3 per 
cent compared with a slowing 


in the rate of increase in previ- 
ous months to l per cent. 

In July, the national retail 
price index was 21.4 per cent 
higher than a year earlier, 
while the urban cost of living 
was 24 per cent higher Ann. 
ualised retail prices in the first 
seven months of this year rose 
by 20 per cent. In major cities 
the rate of inflation exceeded 
25 per cent 

Western economists attri- 
buted the reversal of inflation 
trends in June and July to an 
easing of credit in the second 
quarter in response to a clam- 
our for assistance from failing 
state enterprises. 

Credit and deposit balances 
of the banks Increased in May- 
June and the money supply 
expanded. At the end of June 
the amount of money in circu- 
lation was 19 per cent higher 
than at the beginning of the 
year. 

Capital spending leapt in 
July. It was 73 per cent higher 
than In the same mo^h last 
year, and surged by 29 percent- 
age points over June. A binge 
in investment in fixed assets 
last year was one of the main 


cause of inflationary pressure 
that built up through 1993. 

Economists doubt that price 
constraints will be effective 
over the longer term. Food 
price subsidies are regarded as 
"short-term palliatives” and 
ones that will bring their own 
problems as they will add to 
the budget deficit 

Falling producer prices - 
prices of steel and other raw 
materials were down sharply 
this year - suggest there may 
be an easing of cost pressures 
in the latter part of this year. 
However, promised wage rises 
in the second half of the year 
will counteract this trend. 

Pressures on food prices - 
the food price index rose by 
31.9 in the 12 months to July - 
are likely to continue. Severe 
flooding in China’s southern 
provinces and drought in the 
north have resulted in major 
crop losses. 

Possible further increases 
this year in grain prices 
to improve returns to a 
restless peasantry would 
jeopardise anti-inflation mea- 
sures. 

The government raised the 
price of grain by more than 50 
per cent to consumers this 
year, and this was a major 
cause of the jump in the food 
price index. 

_ China’s leaders face a testing 
six months. There are no easy 
choices as they seek to balance 
a commitment to reform with a 
perceived political need to 
check inflation. 

Western officials have no 
doubt that if measures 
announced this week to 
restrain price increases fail, 
the authorities wifi resort to 
more draconian measures such 
as a return to rigid price con- 
trols on staple commodities. 


FINANCIAL TIMES 


Monday September 5 1994 


NEWS: INTERNATIONAL 


Mark Ni cholson finds the United Nations population and development gathering confused, chaotic and costly 

Cairo cobbles together a conference - at a price 


Diplomats gnashed 
their teeth, United 
Nations officials wore 
a tired air of resigna- 
“on. Journalists 
famed and sweltering 
delegates inched their 
w »y painstakingly 

through a glacially 
slow registration, pro- 
cedure - but the big- 
gest international conference to be 
hosted by the Egyptian capital was 
up and running. Just 
It has proved, according to United 
Nations conference organisers, one 
of the most nerve-jangling exercises 
in just-in-time onf in their 

experience. “In 20 years of attending 
and organ i sing international confer- 
ences," said one senior official, “I 
have never seen such chaos." 


UN organisers began arriving a 
week ago to find empty offices where 
they expected to find desks, chairs, 
telephones, faxes and photocopiers. 
Hundreds of local staff had not been 
hired. Telephone lines out of the 
press centre were hooked up only 
two days ago. 

But by yesterday, for all the gripes 
of organisers and some major out- 
standing difficulties, some UN offi- 
cials were privately voicing a 
stunned awe at the conference hosts’ 
ability to throw it all together, more 
or less, at the last moment. 

Same glitches remained. Like the 
fact that there were no telephone 
lines into the press centre to serve a 
world of anxious news editors. 
Reporters from Associated Press 
were none too impressed to find that 
the office they had rented for <7,000 


had been locked up and declared out 
of bounds for security reasons. 

Late-arriving NGO representa- 
tives, meanwhile, were grinding 
through a registration procedure 
averaging five delegates an hour a 
combination of there being too few 
computers, just two photo-ID 
machines to process around 4,500 
delegates and some fairly grave 
problems with the spelling of names 

But inside the palatial Chinese- 
built conference centre 15,000 dele- 
gates and representatives ebbed and 
flowed in purposeful confusion firm 
makeshift offices and halls which 
will host 100 meetings daily. 

In what appeared an attempt to 
lend the affair a guhiimfnai tone of 
calm and majesty, dozens of com- 
puter terminals ranged around the 
conference centre blared out an end- 


less loop of the March of the Slaves 
from Verdi's Aida. 

In what, at the same time, 
appeared an attempt to give the dele- 
gates some sense of urgency, a digi- 
tal Population Clock in the centre's 
foyer relentlessly ticked up the 
growth in the world's population, 
which at noon yesterday was 
5.657.178326 and rising faster than a 
person a second. 

Outside, Cairo has been trans- 
formed. Security precautions are 
extraordinary. White-coated police 
ring the conference centre at 10 -me- 
tre intervals and virtually line the 
main routes to and feom hotels. Any- 
one carrying a bag of any sort down 
the 2 kms of the Nile corniche in 
central Cairo is searched. There is at 
least one security officer on duty lor 
every delegate. 


This vast and filthy city has also 
been given an unprecedented face- 
lift Statues have been dusted, every 
single kerbstone along the main 
routes has been painted black or 
white, flyovers have been repainted, 
roundabouts grassed, a whole popu- 
lation of men with brooms has 
emerged from nowhere to populate 
the roadsides. 

Quite bow much this is costing the 
Egyptian government is a matter for 
conjecture. How they might be fin- 
ancing it, however, is perhaps less 
so. (tee of the chief complaints of 
UN organisers, diplomats and others 
at the conference is that the govern- 
ment appears to have taken every 
opportunity to raise as much money 
from the event as possible. 

They cite as examples rite fact that 
hotel rates have been fixed at S145 a 


night at all the main hotels, well 
above the standard Cairo hotel cor- 
porate discount rate of $80 the 
organisers had hoped for. Hoteliers 
suggest at least 25 per cent of this 
goes straight into government cof- 
fers . Organisations renting office 
space have been charged $10 a day to 
rent such things as bookshelves and 
wastepaper bins. Only an outcry 
forced the caterers to abandon 
charges of S8 for a sandwich. 

A state department booklet offer- 
ing orientation and security advice 
to visiting Americans stated that US 
delegates should watch out for 
“scams and rip-off schemes’, saying 
these “often consist of overcharging 
for merchandise purchased or ser- 
vices rendered" - did this apply to 
the conference itself, asked one 
uncharitable US visitor. 



Youthful Brazil faces problems of old age 

Life expectancy is rising while the birth rate is continuing to fall, writes Angus Foster 


Brazil looks set to enter the 
next century with 40m people 
“missing * 1 . According to projec- 
tions made in the 1970s. its 
population would reach 2 Tgm 
by the year 2000. But according 
to latest predictions, the total 
win be far less, probably 172m. 

The reasons for the sharp 
slowdown in population 
growth are also seen in other 
Latin American countries. 
They include a drastic fell in 
female fertility rates, mainly 
due to increased use of contra- 
ceptives and rapid urbanisa- 
tion. The consequences, which 
include an ageing society and 
serious strains on social and 
employment seeds, have not 
yet been addressed. 

“It is the population above 65 
which will grow the most in 
the next decades. Brazil will 
have to live with this phenom- 
enon. which is well known in 
developed countries, without 
having overcome typical prob- 
lems related to under-develop- 
ment,” says demographics pro- 
fessor Josfe de Carvalho. 

Brazil's population change 
started in the 1940s. Improved 
medical and basic services led 
to falling mortality rates. Fer- 
tility rates remained high until 
the end of the 1960s, leading to 
rapid population growth and a 
society with more than half its 


members under 20 years old. 

It also encouraged a belief, 
still held by many today, that 
Brazil was blessed with an 
eternally young and last grow- 
ing population. At the first 
international population con- 
ference in Bucharest in 1974. 
Brazil's population was 100m 
and expected to double rapidly. 

But the female fertility rate 
- the average number of births 
per child-bearing woman - 
began a startling fell from 5.8 
in 1970 to 43 in 1975 and 3.6 by 
1964. In a recent study of Sao 
Paulo state, Brazil's richest, 
the fertility rate was 2 J. in line 
with some developed countries. 

The fall was partly due to 
rising education and urbanisa- 
tion, as femitips moved from 
agricultural to industrial job6. 
But the main reason was 
increased access to, and 
demand for, contraception. By 
1966. 66 per cent of women of 
child-bearing age said they 
were using some form of con- 
traceptive. Of these, about 40 
per cent had been sterilised 
and a further 40 per cent used 
the pilL By 1990. contraception 
use had risen to 69 per cent 

These rates are high, consid- 
ering Brazil is the world's larg- 
est Catholic country with a 
still conservative church hiera- 
chy. Abortion is Illegal unless 


the woman has been raped or 
is in Tnwiiffal danger. 

Officially, the church promotes 
the Billings method, which 
teaches couples to avoid sex 
during ovulation. But very few 
couples obey, suggesting the 
church is, unofficially, more 
liberal than it appears or los- 
ing its sway. 

Padre Antonio Carlos Frizzo, 
whose parish is in the poor 
suburbs of Sdo Paulo, says ecu- 

The over-65s 
are set to grow 
the fastest 


pies must choose. “If a couple 
asked advice on sterilisation, 
which is rare. 1 would take into 
account their economic situa- 
tion number of children, 
the love between them and 
whether another method is 
possible. 

“But the couple must decide, 
and that's something we 
should not and canno t try to 
stop. And their derision has to 
be supported, too. This might 
be criticised in the Vatican, 
but we are dealing with people 
in real situations," he says. 

The increasing demand Cor 


sterilisation has a startling 

side-effect - it has helped make 

Brazil the world leader for cae- 
sarian births. These account 
for roughly one in three deliv- 
eries, about twice the rate for 
Un gland and Wales. 

The reasons are complex. 
Some women think caesarian 
section a “modern" way to give 
birth. a view hospitals encour- 
age, while others fear the pain 
involved in vaginal deliveries. 
Another reason is that when 
giving birth by caesarian, a 
woman can request to be steril- 
ised at the Mntf Hwp and the 
government pays. Outside 
pregnancy, women have to pay 
to be sterilised, usually at 

semi - leg al clmics. 

The declining birth rate will 
transform Brazil over the com- 
ing decades. Population 
growth, which in the 1970s was 
2.4 per cent, has fallen to 1.9 
per cent and is still declining . 

Today, 35 per cent of the 
country's 157m population is 
under 15 years old. By 2020, the 
percentage will have fallen to 
24 per cent. By about 2040, 
with a rapidly a g in g society, 
the population will reach about 
220m and stabilise or even fall 

This prompts the church and 
other anti-abortion groups to 
argue that population control 
is now obsolete in Brazil, espe- 


cially given the country's 
undeveloped agricultural land. 
A more stable population will 
also allow better government 
planning. In the past, rapid 
population growth in cities, for 
example, has prevented gov- 
ernments developing long-term 
urban plans. 

But the changes will also 
provide some sobering chal- 
lenges. The n umb er of people 
of working age is set to grow 
2.4 per cent a year for the next 
decade, adding to pressures on 
the economy to create jobs. 

The social security system, 
established when the average 
age at death was 45. must be 
reformed to cope with life 
expectancies of 64 and 69 for 
men and women respectively. 

The country's under-funded 
public health system must 
emphasise preventative medi- 
cine if it is to cope with the 
increasing demands of an age- 
ing population. Finally, the 
growing number of elderly 
from smaller families will need 
extra services. 

Unfortunately, Brazil does 
not seem greatly aware of 
these challenges. Because of 
the government's economic 
problems, the 1990 census was 
postponed to 199L After fur- 
ther spending cuts, only basic 
findings are available. 



Bhutto 

defies 

Islamic 

protests 

By Fartian Bokhari 
in Islamabad 

Ms Benazir Bhutto, the 
Pakistani prime minis ter- left 
for Cairo yesterday to attend 
the UN population conference, 
defying intense lobbying by 
Moslem activists wanting her 
to stay at home. 

The Pakistani government 
said Ms Bhutto would play an 
important role in presenting 
Islamic countries' views: “She 
will make a very strong state- 
ment in which she will reject 
proposals that arc against 
Islam and will present the 
point of view of the Moslem 
countries.” 

For the past week. Pakistan's 
well organised Islamic activists 
have been worried that inter- 
national efforts such as the UN 
conference would impose an 
“un-lslamic" agenda around 
the world. Last week, legisla- 
tors belonging to Islamic par- 
ties rose in protest during a 
session of parliament and 
demanded that the government 
boycott the conference. 

The protesters believe such 
issues as sex education, homo- 
sexuality, abortion on demand 
and pre- marital sex will gain 
global legitimacy through rec- 
ognition in a final conference 
document. 

Some government officials 
were worried that Islamic 
groups - many of whom also 
oppose Ms Bhutto in the belief 
that a woman cannot lead an 
Islamic country - may try to 
use the issue to stir opposition 
against her government Last 
week, a prominent religious 
scholar was quoted as saying 
that if Ms Bhutto went to 
Cairo, religious parties may 
support an anti-government 
campaign by opposition groups 
next week. 

The debate over Ms Bhutto's 
Cairo visit has drawn attention 
to one of the country's most 
controversial problems. Many 
officials believe the 3 per cent 
a year population growth has 
hampered economic growth. 
High population growth is also 
blamed for the government's 
poor performance in improving 
literacy, health and welfare. 







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6 


FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


NEWS: UK 


MoD faces £500m gap in budget 


By David Owen and 
John Wffbnan 

The Ministry of Defence faces a 
£500m gap in its budget next 
year if it cannot resolve prob- 
lems which are dogging a 
scheme to transfer service- 
men's quarters to the private 
sector. 

The ministry win be forced 
to look for savings elsewhere 
in its budget, including scaling 
back its procurement plans if 
the scheme fails to take off. 
The Department of Trade and 
Industry is monitoring devel- 
opments because it is con- 
cerned that UK defence compa- 
nies could suffer if there are 
further cuts in the MoD pro- 


curement budget 

Mr David Hart, a wealthy 
businessman who is a close 
friend of Mr Michael Portillo, 
the employment secretary, has 
been brought in to advise on 
raising the money needed to 
finance the transfer and mod- 
ernise the housing stock. 

The scheme - unveiled in 
March and described by Vis- 
count Cranbome, then defence 
minister, as “a sort of finance 
lease" - involves creating a 
non-profitmaking bousing 
trust to own and manage the 
homes. 

For the housing project to 
deliver the savings projected 
for the defiance budget in 1995 
and 1996. it would have to be in 


operation within the next 12 
months. However, it Is thought 
that the ministry has not 
received any firm commit- 
ments from bousing associa- 
tions or the private sector to 
get the scheme started. 

Under the plan, 68,000 armed 
services married quarters per- 
sonnel would be transferred to 
the housing trust under 30-year 
leases. The trust would be 
independent of the Ministry of 
Defence, but would contract 
with it to provide accommoda- 
tion for married service per- 
sonnel to improve its qual- 
ity. Capital for the deal would 
be raised in the City of Lon- 
don, secured against the future 
stream of rental income. 


■ Although there has been a 
good deal of interest In princi- 
ple among po tential lenders, 
aspects of the proposals have 
provoked concerns which the 
ministry is yet to overoome. 

Much of the properly is in 
poor condition and located 
near military bases, rather 
than in towns and cities where 
it could be more easily sold or 
rented if it is cot needed. Some 
of it is inside secure areas, 
which restricts its use to 
defence personnel. 

Doubts have also been raised 
in the housing association 
movement over the capacity of 
file markets to raise an addi- 
tional £500m a year. Associa- 
tions currently raise around 


£lbn a year to top up govern- 
ment grants for building low- 
cost homes. With concern over 
the supply of funds in the 
future, the Housing Corpora- 
tion, which distributes the 
grant has been trying to 
attract foreign investors. 

Potential investors are 
thoug ht to have been to 
accept a 30-year estimate of the 
likely cost of upgrading the 
accommodation - a proposition, 
which some are sai d to have 
regarded as taking on an unac- 
ceptable degree of risk. 

Mr Hart a political adviser 
tn Mr Malcolm Riflrinri, riafenpa 
secretary, is helping to devise a 
plan that meets the govern- 
ment’s objectives. 


Survey finds wider gap 
between rich and poor 


By John WHbnan, 

Public Policy Editor 

Poverty in Britain’s cities has 
become increasingly concen- 
trated in small pockets of 
deprivation, two reports pub- 
lished today by the Joseph 
Rowntree Foundation say. 

The social research organisa- 
tion says that the gap between 
the richest and poorest neigh- 
bourhoods in cities widened 
between 1981 and 199L 

Most cities have areas where 
low incomes, unemployment 
and low levels of car and home 
ownership are becoming the 
norm. These are often close to 


more prosperous areas where 
people own their own homes 
and many households have 
two incomes and two cars. 

The areas of intense poverty 
are mostly in the northern 
cities and inner London, 
according to an analysis of 
data in the 1991 census. But 
less localised poverty is spread 
over most old industrial areas 
such as the south Wales 
valleys, northern En gland and 
central Scotland. 

Pockets of wealth are found 
throughout Britain, with the 
greatest concentration of pros- 
perous neighbourhoods in the 
south-east 


A second report, comparing 
Oxford in central England and 
Ol dham in the north-west, says 
that even prosperous cities like 
Oxford have council estates 
with marked levels of poverty. 

A quarter of the population 
of both towns receive means- 
tested benefits to top up their 
income. The number of low- 
income families grew rapidly 
between 1991 and 1993. 

The Geography of Poverty 
and Wealth 1981-1991. Increas- 
ing Polarisation Between Bet- 
ter-Off and Poorer Neighbour- 
hoods in Oldham and Oxford. 
Joseph Rowntree Foundation, 
40 Water End, York Y03 6LP. 


Support for rail workers 


By Robert Taylor, 

Labour Correspondent 

Britain's striking signal 
workers will receive massive 
support this week from the 
Trades Union Congress, whose 
annual conference opens in 
Blackpool today. Union leaders 
were rallying around the RMT 
transport union's cause last 
night. 

“This is a thoroughly mod- 
ern strike,? said Mr John 
Monks, the TUC’s general sec- 
retary. “It Is fully balloted, 
fully legal, overwhelmingly 
supported by signal workers 


and strongly supported by the 
public.” 

“There are people who are 
trying to divide congress by 
saying the KMT’s strike is a 
throwback to old-fashioned 
trade unionism and at odds 
with what the new TUC alms 
to do. They are wrong.” 

He added: “People who say 
that strikes like this should be 
a thing of the past are right. 
But that’s a message for the 
government and Railtrack. It is 
only a bad employer - in this 
case backed by a hostile gov- 
ernment - who can't settle dif- 
ferences with their employees 


by negotiating fairly and 
openly. 

Mr Jimmy Knap p, RMT gen- 
eral secretary, told the rally 
tha t Rail track chairman Mr 

Robert Horton should stop his 

threats to dismiss st riking sig- 
nal workers. 

Aslef, the train drivers' union, 
is to move a motion calling for 
an immediate public inquiry 
by the Health and Safety Com- 
mission into the safety aspects 
of the dispute. The c onflic t will 
be debated by delegates on 
Thursday when the next 24- 
hour strike by signal workers 
is to take place. 


Directors sound 
warning on rates 


By Alan Pike 

A warning that higher interest 
rates would damage economic 
growth was sounded by the 
Institute erf Directors yesterday 
ahead of Wednesday’s monthly 
economic meeting between Mr 
Kenneth Clarke, chancellor of 
the exchequer, and Mr Eddfa 
George, governor of the Bank 

Of En gland 

Mr Urn Melvffle-Ross, direc- 
tor-general, announcing the 
results of the Institute's 
bimonthly business opinion 
survey, «dd that although the 
economy was growing quite 
strongly uncertainty continued 
among his members. “With 
inflation at such low levels, 
there is no case at present for a 
damaging increase in interest 
rates,” he said. 

Summer speculation about 
an early interest rate rise 
abated after announcement of 
a (Sail In the underlying rate of 
inflation from 2.4 per cent in 
Jane to 22 per cent in July. 
Although the Bank of England 
has warned that the govern- 
ment’s targets for reducing 
underlying inflation would be 
at risk without a base rate 
increase in the next few 
months, analysts do not expect 
this week's mpering to spark 
an immediate change 

Mr Melville-Ross said there 
were few signs of higher infla- 
tion in the pipeline and if 
exports rather than consumer 


spending continued to provide 
the impetus for economic 
growth “it could be next year 
before the situation warrants a 
base rate rise." 

The institute’s survey found 
76 per cent of directors feeling 
that their companies were 
doing well or very well, 
although this was down 
slightly from 79 per cent In the 
June survey. There was a fell 
in the proportion reporting 
improved volume and profit 
The fells were from 70 per cent 
in June to 63 per cent In 
August for volume, and from 
62 per cent to 54 per cent for 
profit 

The proportion, of respon- 
dents feeling more optimistic 
about thp economy nudged up 
from 44 to 46 per cent Signs of 
economic growth were given as 
the main cause of optimism, 
while political unce rta inty was 
the biggest inhibiting factor. 

• The Finance & Leasing 
Association says heavy dis- 
counting in the summer sales 
produced a slackenin g of con- 
sumer credit in July. 

The association says in its 
monthly consumer credit and 
busi n ess finance report that 
although consumers used 
credit in the sales, it was to 
buy heavily discounted bar- 
gains. 

As a result consumer credit 
of £L276bn in July was 7 per 
cent down from June. 


Britain in brief 



Computer 
spending 
grows 15% 

UK companies have increased, 
their spending on oompnter 
systems fer beyond corporate 
projections of a year ago, 
a c co rdin g to the animal Price 
Waterhouse information 
technology review, in a 
farther reflection of rising 
business investment 
confidence. 

The review, based on a 
survey of 1,000 information 
technology executives, 
indicates that IT spending rose 
by 15 per cent last year across 
the corpora t e sector, a sharp 
increase given the low 
inflation rate. At the start of 
1993 exec uti v es were 
predicting a rise of only H2 
percent 

Executives projected that 
their IT spending would fell 
2.6 pa* cent this year, 
however. This raises doubts 
about the snstainahfllty of the 
I n vestme nt recovery, although 
Price Waterhouse notes that in 
recent yean “the panel has 
consistently (maerecfumaieu 
the coming year’s growth”. 

The survey reflects the 
marked trend away from 
mainframe-based systems to 
new designs based on 
networks of personal 
computers and mid-range 
marhhw called 'servers’, with 
58 per cent of organisations 
claiming to have some form of 
client-server network. 


Support for 
unions grows 

As many as 89 per cent of 
people surveyed in a poll 
commissioned by the Trades 


Union Congress believe trade 
unions “are necessary to 
protect people’s interests at 
work”. 

The figure represents a 
subs tantial increase on the 79 
per cent who agreed with that 
s tatement last year. 

Fifty eight per cent opposed 
any further g o vernment laws 
“to restrict the powers of the 
trade unions” with 35 per cent 


hacking that suggestion. The 
survey was based on 1,004 
interviews by telephone 
between August IS and 2L 

In a second survey cf 500 
trade unionists, also 
commissioned by the TUC, 58 
per cent said their job had 
grown less secure in the last 
two years and 42 per cent said 

they were being treated worse 

by their employer than two 
years ago. 

Smaller loads 
for Transrail 

The biggest of three British 
Ban freight companies being 
prepared for privatisation 
launches its operations today 
with a fresh livery and a new 
service to attract smaller loads 
off the roads. 

Transrail, which specialises 
in the distribution of bulk 
freight such a coal, steel and 
building materials. is creating 
two “motorways" to take loads 
overnight between London and 
Scotland and between the 
north-east of England and the 
south-west 

The service, dubbed 
Enterprise, is ejected to be 
competitive with road haulage 
for as little as 50 tonnes. At 
present the mirdmum viable 
load is about 1,000 tonnes. 

Transrail, which Is expected 
to be sold late next year or 
early in 1996, expects 
Enterprise to absorb more 
than 100,000 lorry journeys in 
its first year. 

The service will be available 
between Kent and Aberdeen, 
guaranteeing the arrival of 
overnight loads in Aberdeen 
by 9am. The second route will 

run between Cornwall and 
Teesside. 


Trade union 
near collapse 

Efforts to rescue Ucatt, 
Britain's biggest construction 
union, from the brink of 
financial collapse are being 
stepped up amid fears that the 
onion’s troubles could 
precipitate a wider crisis of 
confidence in the trade union 
movement's finances. 

Unity Trust Bank, the trade 
rmirm bank, is working closely 
with ELW. Fisher, Dcattis 
accountants, in the hope that 
agreement can be reached by 
the end of the month on a 
drastic cost-cutting package 
that would tnclnrie staff 
redundancies and the sale of 

lrnlnn nffrwg 


Ucatt's perilous finances are 
causing deep concern 
throughout the trade union 
movement and Mr John 
■ Monks, general secretary of the 
Trades Union Congress, is 
keeping in dose touch with 
events. 


Writ names 
Saunders 

Mr Ernest Saunders, the 
former Guinness chief 
executive, who was released 
on parole for his part In the ‘ 
Guinness affair three years 
ago, has been named on a writ 
as marketing adviser to a 
troubled publishing venture. 
Mr Saunders was released 
from jail tire Court of Appeal 
was told that that he was 
suffering from pre-senile ; 
dementia, a condition - 
resembling Alzheimer’s 
disease. 

Mr Saunders is being sued in 
a legal battle between the two 
partners in ajoint venture 
called Retail Revolution, 
which planned to launch 30 . 
magazines to be sold 
exclusively through petrol 
stations. 


Revenue to 
increase access 

The Inland Revenue plans to 
merge Its five computer 
systems and allow more of its 
staff to gain access to 
taxpayers’ personal records, 
moves which have sparked 
concern in the main civil 
liberties pressure group. 

It will also provide additional 
details to the Departmental 
Social Security about 
employers who are potentially 
liable for national insurance 
contributions. 

The changes to computer 
systems crane as part of the 
Revenue’s "change 
management" programme, 
which i ncludes ambit ious 
modernisation of its computer 
systems and greater 
responsiveness to taxpayer 
demands. 

Staff at Revenue tax inquiry 
offices around the country - 
and others who answer 
taxpayer telephone inquiries — 
will for the first time be able to 
gain access to all personal tax 
information. 

Mr John Wadham, legal 
director of liberty, formerly 
the National Council for Civil 
Liberties, said yesterday that 
he was concerned about the 
moves. 


Today, Caz dc France imports, transports, stores 


and distributes natural gas all over France. 


To do this. Caz tie France calls on the four 


major auppiiers to 


Europe: Ituseia, Algeria. Norway 


and rhe Netherlands, which provide %% 


of the French market 



and pipelines. Within France, the natural 


::us iruusminsinn and distribution network 


cu%er» more lltun 150.000 km. supplying 


over 5.000 municipalities 


and 25 million consumers. 


With 26.000 employees oil 


(Jo rim ice 
a company of 

many talents. 



the job and one 


of the world’s 


largest research centres. 


Cur ilr France is commit led to providing each 


u-ser with a clean, economical 


ami modern energy source. 





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FINANCIAL TIMES MONDAY SEPTEMBER 


5 1994 




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In rite past 
year, we’ve 


seen our storage 
business grow 
30%, our PC 

business grow 100%, and our 


Alpha AXP sales increase 164%. 




our PATH WORKS™ application, 
which lets you connect with 
anybody on virtually any network 
operating system, no matter 
what client you’re on. And our 
Link Works™ software lets you 
share and edit work regardless of 
application, on most any network 
operating system. 

OUR STRATEGY: 

YOU CALL THE SHOTS 

This multiple platform/multiple 
operating system strategy means 
we never have to force a migration 
on you. You choose what’s best 
now and we support it. You decide 
when, where, or if you want to 
migrate and we provide what you 
need. Simple. 







Some people think those figures 
already represent a comeback. 

To us, it’s just a beginning. Digital 
is changing from a company famous 
for complicated decision-making, 
to one famous for decisiveness. 

At our new Computer Systems 
Division, we’re applying the 
lessons learned in our PC opera- 
tion to our core business. The 
result: a division with its own 
manufacturing, engineering, sales 
and marketing- one that lets us 
pay more attention to your needs, 
with systems unequaled in their 
openness and range of choice. 

THE BEST Of CISC, 

THE BEST OF RISC 

That choice begins with two 
equally supported platforms— Intel” 1 
CISC for very high volume and 
high performance PC clients and 
servers, and our 64-bit Alpha AXP 
RISC for absolutely blinding 
performance in workstations and 
servers. And we offer the only 
products you can convert from 
CISC to RISC. 

Now the industry is finally 
beginning work on 64-bit RISC, 
and we’re happy to see this 
endorsement of Alpha AXP. But 
HP and Intel say it’ll take a few 
years. We have 64-bit RISC now. 
With 6,000 applications. 


OUR SYSTEM: MANY SYSTEMS 

Fact is, Digital is a multiple 
operating system company because 
that’s what most of you are. 

In DEC OSF/lf we have the most 
standaxds-compliant, highest quality 
UNIX* in the industry. It gives 
you outstanding high availability 
features through clustering and the 
fastest recoverability of any UNIX 
on the market. And ours is the only 
commercial 64-bit UNIX system, 
which experts say will keep us the 
price/performance leader for years. 

We offer Open VMS™ because 
millions need it, as it provides 
the best clustering capabilities on 


the market for high-security, 
high-throughput, business-critical 
work. We plan to support it, 
invest in it, keep customers folly 
operational with it, and introduce 
it to new customers as well. 

What’s more. Digital has part- 
nered with Microsoft* to bring you 
the Windows™ operating environ- 
ment, Windows NT™ Workstation 
and Server. 

All these system options give 
you one very important thing. 
Choice without compromise. 

OUR SOFTWARE: TRULY OPEN 

Our openness even extends to 
software. One excellent example is 



But don’t worry, 
we re planning a 
comeback. 


f 




THE MOST ADVANCED 
TECHNOLOGY 

Nothing proves this better than 

our pioneering 64-bit RISC 

architecture. Where else in this 

industry are so many competitors 

so far behind a single leader? 

Right now, our Alpha AXP clients 

and servers offer the highest 

performance and the best price/ 

performance you can buy. 

THE EASIEST 
TO DO BUSINESS WITH 

One thing chat definitely isn’t 
changing is our world-class service 
and support. To be even more 
responsive, we’re dramatically 
expanding our relationships with 
resellers, VARs and System 
Integrators. Of course, if you need 
a direct relationship, we’re here, 
with our partners, delivering 
the products. Our goal is to be the 
easiest company to do business with. 
With the products and support 
that will keep you competitive into 
the 21st century. 

Just like us. 



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FINANCIAL TIMES 


MONDAY SEPTEMBER 5 1994 






MANAGEMENT 


Teleworking, although popular in the US, has been slow to catch on in Europe, writes Vanessa Houlder 

When the office is the dining room 


A s the UK rail strike moves 

into its 13th week, it is tak- 
ing an increasingly heavy 
toll on British businesses. 
Like January's Californian earth- 
quake and past bomb explosions In 
the City of London, the strike is 
encouraging companies to consider 
promoting telework in order to 
reduce their dependence on com- 
muters. 

Teleworking, the practice of using 
computers and telephone links to 
work away from the office, inspires 
grand claims from its advocates. In 
a recent newspaper advertisement 
exhorting companies to introduce 
teleworking to overcome the rail 
strike, one British consultancy 
claimed that the practice “not only 
overcomes the immediate transport 
problem ... it will increase pro- 
ductivity by around 45 per cent”. 

The supposed ability of telework- 
ing to increase productivity, along 
with other benefits such as reduc- 
ing road traffic and creating a more 
flexible workforce, has won it influ- 
ential support. The European Com- 
mission, which is promoting it as 
part of its measures on growth, 
competitiveness and employment, 
believes that Europe could poten- 
tially have 10m teleworkers. 

Optimistic forecasts about tele- 
working's potential have been made 
for 20 years, since before the tech- 
nology actually existed to make it 
possible reliably and economically. 

Yet, even now, the uptake of tele- 
working is patchy. Although the 
technological obstacles have been 
overcome, it is seen by employers 
as being difficult to manage, while 
employees worry that their career 
prospects will suffer if they are not 
seen in the office. 

In the US, where the Clean Air 
Act has forced employers to reduce 
commuters' car emissions, an 
increasing number of employees are 
being encouraged to spend some or 
all of their week working at home. 
The Institute for the Study of Dis- 
tributed Work, based in California, 
estimates that between 4m-5m peo- 
ple, or 3-5 per cent of the US work- 
force. ore teleworkers. 

In Europe, however, the introduc- 
tion of teleworking has been rela- 
tively slow. In the UK, a recent 
Department of Employment report 
cast doubt on the notion that it was 
“slowly but inexorably growing”. 
Although one in 20 organisations 
employs at least one teleworker, 
fewer than one employee in 200 is a 
genuine teleworker, it said. 

This figure excludes self-em- 
ployed homeworkers and people 
who spend less than half their time 
working from home. Nor does it 
include staff who spend most of 
their time with clients while using 
telecommunications to keep in 
touch with the office. This 
approach, used by companies such 
as IBM and Arthur Andersen, 
allows employees to use a limited 
pool of desks when in the office - a 
practice known as "hot-desking”. 

A Department or Trade and Indus- 
try study published early this year 
argued that the slow speed at which 
teleworking has been adopted 
meant that “the UK and the rest of 


Europe as a whole are net losers of 
jobs and trade both to the USA and 
to developing countries”. 

The uneven take-up of telework- 
ing can partly be ascribed to the 
recession. Interest in teleworking 
increased in the late 1980s. when it 
was viewed as a way of retaining 
scarce skilled workers. This became 
less of a factor during the recession, 
leaving much of the expansion of 
home working to the ranks of the 
self-employed and those who work 
from home on an informal, occa- 
sional basis. 

Indeed, many companies that pio- 
neered teleworking have stopped 
their schemes completely. The 


Department of Employment’s report 
said that “we were surprised by 
how many {organisations that used 
teleworking in the past] had since 
given up the practice”. The reasons 
given by these companies included 
job cuts, the departure of the man- 
ager who initiated the scheme, the 
lack of success of the scheme and 
changes in the circumstances of 
employees or the company. 

For example, FI Group, the com- 
puter services company which pio- 
neered British home-working in the 
1960s. has stopped the practice com- 
pletely. 

This change was precipitated by 
FI taking on larger projects, which 
required greater teamwork. 
"Because of the complexity or the 
projects we are working on, we 
need large, closely knit teams 


which can work around the clock.” 
says Rosie Symons, one of FTs man- 
agers. 

Rank Xerox also once associated 
itself closely with teleworking - to 
much public relations acclaim - but 
has now dropped the practice. Its 
“networking” experiment in the 
early 1980s involved employees leav- 
ing the staff and working on a 
self-employed basis, with guaran- 
teed work from the company for a 
period of time . The networkers kept 
in touch with Rank Xerox via com- 
puters and a telecommunications 
link. But although the experiment 
suited the company's particular 
needs at the time, it was not 


extended to its regular staff. 

The fear that teleworking is a 
back-door route to redundancy has 
slowed its take-up during the reces- 
sion. But over the past year, the 
subject has been re-established on 
the agenda of large companies, 
according to Noel Hodson, director 
of SW2000, a teleworking consul- 
tancy. 

He attributes this resurgence in 
interest to the growing burden of 
commuting, the sharp drop in the 
cost of equipment, and the eco- 
nomic benefits of teleworking that 
stem from the retention of trained 
workers, increased productivity and 
reduced office overheads. 

In Britain, Digital Equipment, the 
US computer company, saves £20m 
a year in office costs as a result of 
introducing flexible working prac- 


tices for 2J500 of its 4,000 employees 
over the last eight years. 

This summer it opened a tele- 
centre in Newmarket, the headquar- 
ters of its East An glian operation, 
which occupies a tenth as much 
space as its former offices in the 
town. The telecentre will house just 
nine staff, working in secretarial or 
administrative roles. The sales, con- 
sulting and customer service staff 
work from home, their cars, or occa- 
sionally from other Digital offices. 

But Digital believes that the weak 
state of the property market may 
prevent it from disposing of 
unwanted buildings and so fully 
realising its planned cost savings. 


After property savings, productiv- 
ity gains are usually dted as the 
most powerful benefit from tele- 
working. As well as taking less time 
travelling and gossiping, staff who 
work at home are usually found to 
take less sick leave. When the City 
of Los Angeles set up a teleworking 
project after January’s earthquake, 
it found that the staff involved were 
12L5 per cent more productive than 
they had been previously. 

But productivity claims should be 
treated with caution. Ursula Huws, 
the author of the Department of 
Employment's report on telework- 
ing, points out that teleworkers are 
selected because they are trained, 
responsible and productive. "Hav- 
ing selected those people, it is not 
surprising they are more produc- 
tive,” she says. 


The financial and productivity 
gains from teleworking are tem- 
pered by obstacles such as the risk 
of dilating the company’s corporate 
identity in the eyes of employees 
and customers, senior managers' 
mistrust or technology, and concern 
about the security risks arising 
from the transmission of confiden- 
tial files. 

But perhaps the greatest problem 
concerns the management of tele- 
workers. This difficulty is most 
acute for managers who are accus- 
tomed to monitoring their staff 
closely, rather than setting targets 
and monitoring results. 

This issue was highlighted In a 


recent report by the Conference 
Board, a New York-based business 
membership organisation, which 
found that teleworking had been 
adopted by only l per cent of the 
employees working for companies 
that offered schemes involving it 
Same 75 per cent af the companies 
surveyed said the greatest hurdle in 
a teleworking programme was con- 
vincing managers that employees 
can be productive and properly 
supervised when they work from 
home. 

The low take-up of teleworking in 
companies with teleworking 
schemes also points to some ambiv- 
alence on the part of staff 

In some instances, teleworking 
has brought employees considerable 
benefits. One case in point is John 
Ruscoe, a 42-year-old programmer 


working for ICL, who now lives on 
a farm on Orkney, off the north 
coast of Scotland. The teleworking 
option, which has been embraced 
by 300 of ICL's staff, allowed him to 
abandon his 90-minute-long com- 
mute from his previous home to 
Manchester each day. “I seem to 
have the best of both worids." he 
says. “I earn a Manchester salary 
and live in a nice, rural environ- 
ment” 

Many individuals with young 
children are also grateful for the 
opportunity to work from home, 
although they are tmanimnns that 
it is not a substitute for child care. 

Yet teleworking does not always 
work out well for the employees. A 
report by the Science Policy 
Research Unit into teleworking last 
year chronicled numerous prob- 
lems, including isolation, family 
strife and the feeling that home is 
no longer a refoge from the office. 
“Unless you are physically out of 
the house, you haven’t left work," 
said one interviewee. 

The experience of teleworkers 
depends largely on the way they are 
treated by their employers, accord- 
ing to Huws. She believes that mid- 
dle managers or professionals who 
are hi ghly valued by their employ- 
ers often enjoy teleworking because 
they continue to feel integrated into 
the corporate culture. Less privi- 
leged workers doing relatively low- 
grade jobs often suffer from isola- 
tion. 

Even those employees who 
embark on teleworking often find it 
is not for them. Hodson has found 
that after a few months of a tele 
working experiment, more than half 
of those who volunteer for the 
scheme are likely to want to return 
to the office. 

A teleworker’s potential problems 
are numerous, including loneliness, 
distractions from neighbours and 
family, fear of missing out on pro- 
motion opportunities and lack of 
self-discipline. 

These difficulties suggest that 
companies wishing to make tele* 
working compulsory will meet resis- 
tance from their workforce. Even 
enthusiasts often find they want to 
return to the office at some stage, 
for instance when their children 
have grown up. “There are stages in 
peoples' lives when it suits people 
to work from home but very few 
people want to do it all their lives,” 
says Huws. 

The problems experienced by tele- 
workers can often be overcome by 
encouraging them to come into the 
office regularly to keep in touch 
with other staff; this was one of FTs 
early discoveries. “It is a vital part 
of flexible working to have a social 
centre”, says Stephen Jupp, a con- 
sultant at Digital. 

Teleworking schemes that require 
staff to work in isolation need 
sophisticated management if they 
are to retain employees and 
increase the employer's competi- 
tiveness. 

“There are virtually no technolog- 
ical barriers, no legal barriers, no 
cost barriers to having people work- 
ing from home," says Huws. “The 
barriers are human ones.” 



Tired of the sweet smell of success 



W hy is it. asked the great 
and ibe good of the green 
movement in a letter to 
the FT last week, that the media 
spends more time attacking Body 
Shop than it does ail those thou- 
sands of companies that could not 
can? less about the environment? 

The question makes me feel a lit- 
tle uncomfortable. Over the past 
two weeks I have been reading the 
knocking copy about the company 
that brought us peppermint foot 
lotion. I have to admit it; I long for 
holier-th.'m thou Anita Roddick and 
her touchy husband Gordon to be 
taken down a peg or two. 

1 ran neither fully justify my 
aversion, nor can I lay it to rest. 
Many or the tilings Body Shop does 
- giving employees time off to do 
voluntary work, offering civilised 
childcare, buying products from the 
third world - are admirable. 

What gets up ray nose is not the 
sickly smell of the perfumes but the 
sanctimoniousness of the compa- 
ny's style. Doubtless. I am suffering 
from the British disease of hating 


success, yet there is more to it than 
that. The Body Shop has put itself 
on a pedestal so high (it is even 
thinking of establishing a business 
school, of all seif-regarding things) 
that it is only natural to want to 
topple it 

In the last 10 years many other 
companies have taken big leaps 
environmentally, but their bosses 
do not tell us about how well 
they've done as they stride though 
the jungle waving American 
Express cards. Neither would they 
have the brass neck to claim simul- 
taneously that their company never 
does anything as filthy as advertise. 

As for the specific allegations 
made during the last few weeks. I 
would not be surprised to discover 
that they do not amount to much. 
Body Shop may be a little stingy in 
the information it provides about 
its do-gooding. but it is still way 
ahead of the pack. 

The Roddicks ore suffering as a 
result of their own PR. Anyone who 
shouts so loud about being perfect 
is bound to be attacked when the 


slightest thing goes wrong. And 
when Body Shop comes in for a bit 
of stick, it would be better advised 
to be more relaxed in its response. 
By publishing 32-page rebuttals of 
allegations before the latter have 
even been made, and decrying the 
“zealots of cynicism” that dare to be 
critical the company is asking for 
it. And when it gets it, can we 
really be blamed for laughing up 
our sleeves? 


Last week was the traditional time 
for telling colleagues how well they 
look after their holidays, and for 


sifting though overflowing in-trays. 
In mine there seemed to be fewer 
than usual of the glossy invitations 
to business conferences. The big 
organisers gloomily explain that 
they went into recession a year 
after everyone else, and it will be at 
least another year before they start 
emerging from it. 

I wonder if they are being opti- 
mistic. It has always been a mys- 
tery why companies are prepared to 
spend £1,000 or so for the privilege 
or having their managers out of the 
office for two days. It was all very 
well in the times when every com- 
pany had several extra layers of 
managers that it did not need. But 


now that everyone is overstretched 
and under pressure to produce con- 
crete results it is particularly hard 
to justify two days sitting at a green 
baize table in the ballroom of a big 
hotel listening to things about your 
industry yon should have known 
already. 

Most conferences are an ineffi- 
cient way of disseminating informa- 
tion - the chances of picking up 
any secrets are nil with the compe- 
tition sitting listening, too. Regular 
attendees say that the value is in 
the networking - but in that case 
conferences for the mid-1990s 
should be organised differently, 
with the formal sessions cut out, 
and the whole thing abbreviated to 
a few hours of hobnobbing time. 
Whether anyone would pay £1,000 
for that is another matter. 


The same disfllusiomnent does not 
seem to extend to training confer- 
ences and seminars, where there is 
no limit to the sorts of things people 


feel the need to learn. The London 
Personal Development Centre is due 
to open later this month offering 
“inspiration, holistic healing and 
down-to-earth practical skills for 
individuals and businesses alike". 
There is a course on Astral Sex and 
Zen Tea Bags, and another on how 
to make a drum and use it to get in 
touch with yourself and your tribe 
or company. A third. The Power of 
Dynamic Womanhood, shows 
women how to win, and invites men 
along at half price. 

The peppermint foot lotion bri- 
gade may enjoy some of those semi- 
nars; the one that interests me is 
called “I Love My Job!” It includes a 
“laughter clinic” and teaches you 
haw to treat work as aldn to play. 
Satisfied customers from this semi- 
nar apparently include British Tele- 
com and the BBC - two organisa- 
tions where morale is so low as to 
be off the map. Next time your tele- 
phone engineer starts hamming 
cheerfully under his breath, or you 
meet someone from the BBC who is 
not moaning, you 11 know why. 



DESERT ISLAND 
MANAGER 


Sir Richard; 
Sykes 

Yarkshireman Sir Richard Sykes 
prefers to relax on mountain - 
walking holidays rather than by 
the beach. Nevertheless, the; - 
r-hief executive of Glaxo, the' . 
world's second bluest drugs 
company, relishes the prospect . 
of being marooned on a desert 

island. He is one of the few 
scientists who have fought their 
way to the very top of the drugs • 
industry. 

Could you carry on yoar . 
business from . the island? 

1 might even hare a c fearer idea 
of Che business than from here in 
Berkeley Square. I would need : 
telephones, fax and a notebook - _ 
computer, then could comment 
on and make decisions from, the- 
island. With the extra time! had, 
it could add up to even better 
decisionmaking. 

Who would you take with you? 

An astronomer. I’ve always-been '' 
fascinated by the stars. With 
those long evenings and clear 
skies, what a perfect opportunity r 
to study the stars. ' .V 


What would you take for 

sustenance? 

As a variation from the plentiful 
fish, I would like to take dried ’■* 
pasta and pordnL They are 
preserved and should last a ' 
while. And to drink, a few crates ' 
of Brunello. It would be too 
difficult to cool any white whies. . 


Any entertainment to ■. 
accompany the food and wine? 1 
For music, r would like to taka' •• 
Brahms’ four symphonies 
ponihirfpd hyTtwranini. He Is - 

incomparable. There was a 
wonderful television series 

caBtul Search for the Nile 
narrated by James Mason. That 
series would help me associate 
with explorers and ploneers. And 
for a book! would take Scoffs' 
tost Expedition.. 


Would you become a beach " 

' bum?'. • .* 

Tm not the sort (ff person who 
would fie around on th& beadL l 
need discipline and would ‘ .. 
exercise for at least mi boUra ... 
day. I need fo keep in top 
condition both ^ysksdyand •" 
menially. I*d need- to build that . 
astronomical observatory after; , 

*SL 


How would yon keepmentofiy *; 

m . 


. programa.fbr computers; 

Woold you try to escape? ' ” ^ ; 

on the UudUtet 
come when r would have to . 

consider altemalav e s^Ra quite & 
practical and Tax sure f comd'C r- *. 
bnfld what was-necessaiytor = 

have. . • 

What would yon most fitoabm#. 
the Island? , . ' \ X 

Solitude. Fd miss my _ 
i don't have a problem 
my own. And ! would notfoassC -V 


. . v. 

What would yon dlelifee ■£&$$$ 
being there? 

After a time; it would be Otegfrc 


there is no access to cultures 
to my family. . • • •: .‘;7V : 

■ . ... *. A-.tf; :" 

Are there any conditions youVv ; • 
want to impose on ywe bdsinpfo 5 . 
None, it should be aitaitflfsS ' 
island, unspoiled. • 


Daniel Gffeeaj 


The Financial Times plans to publish 
a Survey on 





on Wednesday, October 12. 


Cities across Britain are striving to put In placet new economic, employment and soda! structures which w3 create the jobs and the 
balanced c ommu n iti es necesaey tor prosperity far afl in the next century. The survey wB examine those efforts, and the role c e ntre! and 
local government, local Industry- economic development borflgs and commiaittyhased goups are pfefltag. ftt the same time It wB took at 
the experience of other countries being sJmBar problems are! examine what lessons they may have to oBdr. 
fiw a faB criteria! synopsis and detaBs of waflable advertisement positions, please contact 

PatLookeror Brian Heron on Tel: +44 81 834 9383. Fax: +44 RL 832 9248 
Alexandra BuBcflngs. Queen Street. Manchester M2 5LF 


FT Surveys 


*Mum 

BHACiaa BBBIMS BS 1992 


FINANCIAL TIMES 

FINANCIAL 

REGULATION 

REPORT 


Financial Regulation Report is a 

monthly service from ihe Financial Times. It provides 
subscribers with up-to-date and thorough information 
on worldwide regulatory developments and their 
implications for the financial services industry. 

Tv receive a FREE sample copy contact: 

Simi BjsmI. Financial Trows Newskstlcrt. Marketing Department. 
Third Floor. Number One Sc-uttiwart Bridge. London SEI 9HL. England. 
Tel: 1+44 7 1 » Sri .1? 15 Fax: 1+44 7 1 1 873 3*335 

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FINANCIAL TIMES 


Monday September 5 1994 


MEDIA FUTURES 





launches five new titles 


Big batch of CD 

Sorting Kindersley. the UK 
publisher which has assembled 

one of the largest multimedia 

teams in the world, is about to 
introduce its first big batch of 
GD-Rom titles. 

The company which won 
awards for its first title. 

Musical Instruments, is 
publishing five titles on 
September 29. These include 
The Ul timate Homan Body, 

The Eyewitness Encyclopedia 
of Science and My First 
Incredible, Amazing 
Dictionary. 

The launch of so ninny 
ambitious “edutainment** titles 
simultaneously, mmhinjn p 
words, pictures, sound, 
animation and video on a 
compact disc, represents the 
fruit of a several million pound 
investment by DK. 

The company, which has 
built up a 130-strong 
multimedia team plans to 
launch another six CD-Rom 


Roms represents a several milli on pound investment. Raymond Snoddy reports 


Touting begins today in the shares of Advanced 
Media Group, interactive multimedia 
specialists. They will be dealt on the 42 
tearket, London’s newly revamped market for 
young companies. 

The company has placed 400.000 ordinary 
shares at llflp, valuing the group at £L3m, 
AMG is interested in CD-Rom applications 
in areas as diverse as Tnpdirai and 
pharmaceuticals, defence, travel and 
education. 


The company says it has developed software 
called Visual Data Systems which enables the 
creation of “virtual travel” around cities, 

bufldjngs and terrain. 

It has also acquired the CD rights to 
Gormenghast, a cult novel trilogy by Mervyn 
Peake. 

AMG is ran by George Macaulay, who has 20 
years experience in the computer industry, and 
the non-executive chairman is Anthony Brook, 
also chairman of SelecTV. 


titles in the spring and a 
further six next autumn. 

“We are certainly the largest 
[of this type cf company] in 
Europe." says Alan 

Buckingham, managing 

director of DK Multimedia, set 
up in 1991 to address the 
emerging market. 

Buckingham concedes 
this was, to same extent, an act 
of faith. But he says he never 
had any doubt about the 
importance of multimedia - 
only the timing of its 


commercial success. 

Hie Musical Instru ments 
CD-Rom has already sold 
between 60,000 and 70,000 
copies, with special editions 
being created for the French 
and German marke ** 

One of the new titles takes 
David Macaulay’s best-selling 
book. The Way Tilings Work, 
which has sold more than JL5m 
copies, and crams an a single 
disc more than 1,000 
fflnstratkms and 300 
animations to explain mare 


th?n ISO inventions. 

At tbe click of a mouse, 
Everything from ligbtbulbs to 
lasers came alive an screen. 
The program has a suggested 
retail price of £79, although 
CD-Roms are often discounted. 
A user simply has to click on 
any words in the text in red to 
open more than 1,500 screens 
and pop-ups, and move 
instantly from an explanation 

of a machine to a biography of 
its inventor. CD-Roms can 
actually show the inside of a 


four-stroke engine working. 

Tbe Encyclopedia of Science 
(recommended retail price £99) 

more than 170 irurfn 

subjects organised into four 
major categories - chemistry, 
mathematics, physics and life 
sciences - with a Who’s Who 
of science and how they made 
their discoveries. 

Forthcoming titles will tteal 
with topics ranging from 
nature and world history to 
electronic atlases and travel 
guides. Buckingham, who used 
to be a DK book editor, set out 
in 1991 with a team of five “to 
teach ourselves bow to make 
this stuff. 

He believes books have to be 
“reconceived” for multimedia, 
rather than simply turned into 
electronic form. Hie big 
question for DK, a quoted 
co mpany capi talised at around 
rooni n and in which US 
software giant Microsoft has a 
20 per cent stake, is how 


quickly the consumer market 
for CD-Roms will grow. 

The company estimates 

there are about 80,000 to 
100,000 CD-Rom marhippc jjj 
domestic use in tbe UK but 
that number could quickly 
double or even triple. 

The market i$ much larger in 
the US. and Buckin gham 
believes that, by the end of this 
year, 10m homes could have a 
personal computer which can 
play CD-Roms. 

There are even strong signs 
that from next year most 
personal computers in the US 
may be shipped with CD-Rom 
capacity as standard. 

If so that could provide a 
growing market for titles such 
as The Way Things Work. 
Encyclopedia of Science or 
Stephen Biesty*s Incredible 
Cress Sections Stowaway - “an 
amazing quest through an 
authentic 18th century 
warship!” 








National security tap dance 

Motoko Rich reports on the battle over Internet-based encryption codes 


European push for 
caller-pays pagers 


O fficials in most 
countries would 
agree that tiie 
recent spate of 
plutonium smuggling poses a 
serious threat to international 
weapons security, and want to 
prevent the build-up of nuclear 
material in the storage banks 
of would-be nuclear states or 
international terrorist groups. 

In some countries, 
governments are not Just 
worried about nuclear 
weapons. They fear that 
encryption codes - programs 
for scrambling private 
messages - can be deadly in 
the hands of potential enemies. 

During World War H the 
Enigma code, the German 
encrypting machine, which the 
Allies cracked and used to 
eavesdrop on Nazi 
communications, was a vital 
key in the Allied victory. 

But today, just as plutonium 
is frighteningly simple to 
transport in a suitcase, 
encryption codes are easily 
transmitted via ftp Internet, 
the global computer network. 


where there are no national 
borders and no customs agents 
to stop smugglers. 

These codes consist 
p rimar ily of complicated 
computer software which 
scrambles electronic messages 
and requires “keys” - extended 
versions of the familiar ATM 
pin number - to decode them. 
With the explosive use of tbe 
Internet for both personal and 
commercial reasons, security 
has became a major issue and 
such codes offer comfort to 
users worried about their 
privacy. 

Businesses want such codes 
to protect their sensitive data. 
Civil rights advocates argue 
that encryption codes are 
essential to guard against 
unwanted surveillance. Human 
rights organisations in the 
former Soviet Union, South 
America and Burma are said to 
be using computer 
cryptography to protect their 
Internet messages from the 
eyes of the police. 

On tbe other hand, some 
governments argue that if 


encryption codes are widely 
available on the Internet, any 
individual or group - fndndtng 
potential terrorists or enemy 
states - will also be able to 
protect their messages from 
national security 
organisations. 

In the US, the government 

demons trated this ar gnrnpnt in 

its proposals for tbe Clipper 
Chip, an encryption code 
developed by the National 
Security Agency which would 
have allowed computer users 
to scramble their messages but 
would also have allowed law 
enforcement or intelligence 
agencies to tap in. 

But many software authors 
have developed sophisticated 
programs winch incorporate 
encryption technology that is 
virtually Tmrrflcloihlp It js this 
technology that governments 
fear. 

In the US, it is a gainst 
federal law to export strong 
encryption codes. Far the past 
18 months, a US federal grand 
jury in San Jose, California has 
been investigating whether 


Phili p T nmmW Tnflnn au thor Of 
the computer software PGP - 
for Pretty Good Privacy - had 
a role in puffing his 
cry pto g rap hic software on the 
Tntemurt and thus allowed ft to 

be exported. 

zhnTnprniflTm denies having 
loaded PGP on the Internet, 
thoug h he js piaage d that the 
software has circnmnavigated 
the globe and claimed he 
invented the code in part for 
political reasons. 

“If we allow the government 
to have the technological 
power to monitor every 
movement of the political 
opposition, thpn the normal 
mechanisms we have to 
chang e OUT gove rn wiant may 
be neutralised,” he said 

PGP is available 
commercially in the US from 
Vlacrypt, an Arizona-based 
software company, for $100. 
Leonard MBcus, president of 
Via crypt, believes the 
government’s efforts to ban the 
export of PGP, or any similar 
technology, is futile because 
anyone could have put it on 


the Internet “The infor mation 
is now available and there is 
no way to bottle it up,” he said. 
“Anything you do to try to 
stop it is artificial. ” He said the 
US's export ban merely 
stymied multinational 
companies which wanted to 
use US technology to protect 
their data Other US fi i m « 
complain the US law just 
creates unfair competition 
because other countries, 
incl uding the UK, are not as 
strict in enforcing export laws 
on cryptography. 

Phil Dubois, ZUmnermann's 
lawyer, said he could face a 
prison sentence of up to four 
years if he were convicted by 
the grand jury. But he said he 
wasn’t sure why the 
gnvpmmant was ain g tin g out 
his chant. “The fact is that this 
sort of software is out on the 
street in every country,” he 
said. “And it’s not just because 
someone here has broke the 
law but because everyone else 
Is as smart as us and they have 
created their own 
cryptography.” 


By Andtew Adonis 

In the US and Asia-Pacific, 
pagers are an integral part of 
tile mobile 

sector. The US has 21m paging 
subscribers, Asia-Pacific 19m, 
and in some Asian cities 
pagers are as much a teenage 
fashion accessories as means 
of communication. 

Western Europe, by 
contrast, has only Jk2m paging 
subscribers. Beyond Sweden, 
few attempts have been made 
to fate the pager into the high 
street It r emains largely the 
presave of the business sector 
- generally used by companies 
or organisations that do not 
want to equip their employees 
with mobile phones but need 
them to have some form of 
mobile comnmiii cator. 

Almost all European paging 
operators earn their revalue 
on the bams of fixed rental 
charges, often finked to 
restricted geographical zones. 
The package is unattractive to 


personal consumers, who 
wants low up-front prices and 
a simple usage package. 

That may be about to 
change. Sweden is pioneering 
calling-party pays paging. 
Pagers are available on the 
high street for less than $150. 
with immediate connection. 

In tiw UK, several initiatives 
are under way. One of the 
most adventurous is a pilot 
scheme to make alphanumeric 
paging available on a straight 
calling-party-pays basis. 
Alphanumeric pagers are the 
most advanced of the range, 
all owing callers to leave long 
text and numerical messages 
displayed on a large screen on 
the pager. 

Student Pager, the private 
company undertaking the 
pilot, is launching the service 
with 8JMX) students at the two 
universities in Nottin gham at 
tiie start of the coming 
academic year. The students 
can hire the pager for a flat 
Fee of £99 to cover their course 


duration. They can then tap 
into four channels of 
information about lectures 
and student or local events. 

They can also receive 
messages, which callers leave 
by pboning a Mercury Paging 
bureau at premium rate. The 
premium rates are 39p 
off-peak and 49p daytime, so 
messages will cost between 
about 20p and SOp each to 
leave. The total charge is a 
fraction of the cost of running 
a mobile phone. 

Student Pager plans to go 
nationwide next year. Paging 
operators will monitor its 
progress carefully: 
conventional wisdom holds 
that an alpha-numeric service 
is too expensive to provide on 
a calling-party-pays basis 
unless the charge is higher 
than standard premium-rate. 
The problem is bureau costs, 
which are high - and cannot 
be avoided given the current 
state of voice-recognition 
technology. 



:crvi; 


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Where in the USA is Carmen Sandiego; The popular geography program encourages children to locate places in detective-like fashion 

Interactive child’s play 

Victoria Griffith assesses the boom in learning programs 


T he advent of CD-Rom 
and sharply falling 
prices for powerful 
multimedia computers 
have triggered a boom in chil- 
dren's learning programs- 
Parents are investor in soft- 
ware and CD-Rom programs 
that teach their children read- 
ing, mathematics , geography, 
foreign languages and other 
skills. The programs often 
include d azzling animation, 
sound, and motion picture 
clips to capture the attention 
of their young users. 

The US market for children’s 
educational software and CD- 
Roms grew an estimated 25 to 
30 per cent last year, according 
to the consumer research 
group Packaged Facts, and has 
now reached about $lbn in 
annu al sales. 

The number of companies in 
the market is also increasing 
strongly, with start-ups like 
San Francisco-based Big Top 
Productions now putting out 
titles and giants like IBM and 
Microsoft moving in. Microsoft 
launched a new line of home 
educational software last year, 
and IBM, already active in the 
schools market, hopes to 
launch products for the home 
shortly. 


Better and cheaper technolo- 
gies have paved the way for 
this boom in business. Multi- 
media computers, powerful 
enough to store the large 
amounts of information neces- 
sary for capabilities like ani- 
mation and digitised speech, 
can now be bought for as little 
as $1,200. 

CD-Rom may be even more 
important to growth. “CD-Rom 
is a vital enabling technology,” 
says Harry WUker, senior vice 
president of Broderbund, a 
major learning program pro- 
ducer. “It allows us to deliver 
inexpensively a lot of stuff - 
video, sound, and so on - to 
the consumer.” 

CD-Rom is prompting espe- 
cially rapid growth in the pre- 
school market “Very young 
children don’t have the text 
and motor skills required to 
use the older, less sophisti- 
cated programs,” says Robert 
Davidson, president of David- 
son & Associates, which excels 
at mathematics programs. 

Frustration over increasingly 
violent video and computer 
games has also fueled the edu- 
cational program surge. "There 
is a backlash against violent 
games and parents are search- 
ing for alternatives,” says 


Hope Neiman, vice president of 
marketing for Knowledge 
Adventure, an educational pro- 
gram maker. “The philosophy 
is that if children are going to 
play with games anyway, they 
might as well play with some- 
thing they can learn from.” 

The most successful learning 
programs are convincingly dis- 
guised as games. In Reader 
Rabbit I by the Learning Com- 
pany, for instance, the ani- 
mated Reader Rabbit pro- 
nounces three-letter words 
children choose with their 
mouse on the screen. The pop- 
ular geography program Where 
in the USA is Carmen San- 
diego, by Broderbund, encour- 
ages children to locate places 
In detective-Uke fashion. 

With technologies improving 
rapidly, the market is set for 
change over the next few 
years. 

The next step will probably 
be programs that allow users 
to connect to other players or 
databases. Davidson, for exam- 
ple, plans to launch an adult 
program. War Craft, this 
autumn which can connect two 
players via a modem. Although 
the game’s title sounds violent, 
the company says it resembles 
a game of chess. The company 


hopes to launch similar prod- 
ucts for the children's market 
soon. 

“There is a deeply felt need 
to socialise through these pro- 
grams,” says Wilker of Broder- 
bund. “The expansion of this to 
more than one computer - so 
children in two different 
households can play with each 
other - is inevitable.” Manu- 
facturers also foresee an 
onslaught of educational pro- 
grams that allow users to 
access databases through 
on-line services. 

Digitised voice and voice rec- 
ognition technology will play a 
role in the industry's develop- 
ment. “Voice recognition tech- 
nology is import ant for our 
language programs,” says Wil- 
liam Dinsmore, president and 
chief executive of the Learning 
Company. “In one or two 
years, we believe it will be a 
big part of our mix.” 

While growth has been 
strong, most people in the 
industry believe it has a long 
way to go before it reaches 
maturity. 

With technology improving 
rapidly, the children's educa- 
tional sector will probably ride 
the boom for some time to 
come. 


I 




10 


FINANCIAL TIMES MONDAY SEPTEMBER S .IM 


PEOPLE 


Business heart 
of west Belfast 


Mackie International is to be floated in London. 
Owner Pat Dougan talks to William Lewis about 
his hopes for a post-ceasefire Northern Ireland 


P at Dougan sees him- 
self as a man on a 
mission - to bring his 
children home to 
Ulster. As owner and chief 
executive of Mackie Interna- 
tional, the precision engineer- 
ing firm, the head office of 
which lies between the Catho- 
de Falls Road and Protestant 
Shankill Road, Dongan 
believes he and his company 
are living proof that Belfast's 
religious divide can be beaten. 

By overcoming sectarianism 
at Mackie - where 380 Catho- 
lics and Protestants are work- 
ing side by side to build a pros- 
pering business - Dougan 
believes it may help tempt 
home his, and other children, 
to bufld a new peaceful Ulster. 

“My children all left this 
country and that is a sad situa- 
tion,” he says. “They were all 
educated here and then cleared 
off." 

“I have a son in California, a 
son in the south of England, I 
have a daughter living in 
South Africa, a daughter living 
in the Republic of Ireland and 
one at university in Dublin," 
he says. “And mine is probably 
a good example of families in 
Northern Ireland.” 

Dougan was persuaded by 
Richard Needham, bis friend 
and the then Northern Ireland 
minister, to come out of retire- 
ment and take over MaHnp 
Last Friday Mackie 
announced that it is to be 
quoted on the UK's Unlisted 
Securities Market via a plac- 
ing, a move which will be fol- 
lowed by a full listing for the 
company on the London Stock 
Exchange. The company, 
which specialises in the design, 
manufacture and indallatinn 
of textile machinery for a 
worldwide market, will be capi- 
talised at around Kflm Dou- 
gan last week spoke of his 
excitement at the company’s 
flotation plans and his per- 
sonal commitineni to thp peace 
process in Northern Ireland. 

The share placing follows a 
sharp recovery in the compa- 
ny’s fortunes. In 1991 sales 


dipped to just £6.1m and Dou- 
gan says bluntly that the com- 
pany was “dying". However, 
this year the company is expec- 
ted to make pre-tax profits of 
about gam on turnover of 
around £19m. 

Flotation will enable Mackie 
to eliminate debts of £Mu3m 
and help finance a capital 

spending programme. 

The significance of the flota- 
tion announcement is clear 
from the private reaction of 
many of Ulster’s business lead- 
ms. One said that he “would 
pray for Mackie's success and 
anything which shows the 
world” that after the IRA 
ceasefire the region has once 
again become investment 
friendly. 

Dougan agrees that the com- 
pany’s health is crucial to the 
well being and future of west 
Belfast: “This company could 
become the flagship of west 
Belfast if we can demonstrate 
to US and overseas investors 
that there is a work ethic here, 
this will allow us to develop 
the «kins of the community.” 
Tm pwwmients in. training facil- 
ities for local people are 
already under way with the 
bunding of a new university 
site and training centre close 
to the Mackie factory. 


F or Dougan, success at 
Marine is ins way of 
“doing his bit". 
Because of its location 
in west Belfast the company 
has a si gnificance quite out of 
proportion to the size of its 
business activities. 

“The excitement is of this 
whole thing going forward. If 
we can create lots more indus- 
try, then the opportunity will 
be for other families , just the 
same as my family, to return 
to Northern I reland, " Ik says. 
“I feel I have a contribution to 
make and I am trying to make 
it through this.” 

It is certainly not money 
which keeps the 61-year-old 
Catholic happily running a 
company which, has a predomi- 
nantly Protestant workforce 


and is situated in one of the 
most volatile regions of west- 
ern Europe. Due to the success 
of Powerscreen International, 
another Northern Ireland com- 
pany which was floated and 
which Dongan Chaired iinHI 
1990, he now owns about £2m- 
worth of property and 140 
acres of farmland, ffis current 
66 par cent share balding in 
Mackie win fall to just under 
21 per cent after flotation. 

Dougan insists he wjQl stay 
on to “finish the job" at 
Marine. “I am very excited by 
the whole prospect I do not 
want to miss the success, and I 
do not mean in a monetary 
sense. 1 want to be here when 
this thing is a total success.” 

His declared motives are con- 
firmed by a former colleague. 
“This man is one of the 
old-fashioned good guys,” he 
says. “By keeping that com- 
pany alive, he ha« dniw more 

than any pnlttiriim tO help end 

the problems in west Belfast " 

An adviser to Dougan says 
he is a “truly dynamic individ- 
ual who WOUld think nothing 
of getting on an aeroplane to 
Africa to Hiwrih a deal I find 
him exhausting, he never 
stops”. 

Dougan says that “the World 
has always been the place I 
have sold my wares in”. He 
sleeps four hours <»Hi night 
and works a 12-boor day, arriv- 
ing at the office each morning 
in time for a 7am start. Such 
high energy levels will 
undoubtedly be needed to per- 
suade City investors to put 
money into a company situated 
in an area which many of them 
would not even dare visit And 
not without good reason. On 
Wednesday ni g ht, less than a 
mile from Marine’s fact or y in 
Springfield Road, Republicans 
welcomed in the IRA’s cease- 
fire by virtually laying siege to 
the local RUC police station. 
Eventually the crowd dis- 
persed but it was a clear 
reminder of how tense and vol- 
atile the mood of the local com- 
munity still is. 

Fortunately for Mackie, Dou- 



w 


1 


(23 




IN THU NEWS 


The aphoristic 

Norman 

Augustine 


Martin: both jobs are going to 
Daniel Tellep, 62-yaarold 
rhoirman and chief of the 
larger Lockheed group, while 
Augustine will have to make 
do with the lesser title of 
president 

Stiff Teilep insists that the 

two of them will work together 

as a tenm. And if this looks 
suspiciously Kke 

superimposing ah extra 

management layer, it has been 
agreed that when Teilep retires 
- in. say, a couple of years’ 

time - Augustine will become 

airman and chief executive. 


•w 


■will take on' Alberto 
Giovannini’sroleas : _ 

coordinator of the council m i 

experts. Giovannini hlmseff 
now Jerome Chazen Professor 
of international Business at . 
Columbia, will continue to 
advise the Treasury on the 
privatisation oUtaly*s state 
electricity company. End, 
likely to take place late this 
year ot in early 199ff 



Dynastic moves 
at Danone 


Treasury moves 
in Italy 


gar’ s enthusiasm extends to all 

parts of Northern Ireland. He 
makes great play of the “work 
ethic” in Ulster, especially 
among Protestants, and shrugs 
off the idea that violence and 

tnHwririaHnw Tmto ever sf farted 

Mm or his business. He Haims 
never to have been threatened, 
and says that “industry has 
not been really been affected 
by the troubles". However, “it 
has to be In the best i n t e rests 
of Northern Ireland to have a 
nassaHnm of violence”. 

Thirty per cent of Mackie’s 
workforce is Catholic but he 
says there have been only a 
small number of sectarian Inci- 
dents at tha finmpary in r pnait 
years. For this be smg fes out 
thp trade imi<m mo ve ment for 
praise. : “It helped keep things 


ralm The trade unions have 
worked tirelessly to keep the 
peace on the shop floor,” he 
says. 

And if pnthnsiasm does not 
do the trick Dougan raises the 
issue of duty. He describes 
Mackie's flo tation as “the first 
opportunity the City of London 
has had, post the cessation of 
violence, to show its confi- 
dence in Ulster”. 

As for the politicians in 
Ulster, he believes they are 
“generally an honest lot but 
community leader s should be 

busy budding bridges”. 

And what if the peace in 
Ulster does hold? For Dougan 
the sky is then the limit. “We 
have the potential to do sales 
three times what we do now,” 
he says.. 


Few captains o£ industry, it 
is safe to say. go dog-sledding 
in the Arctic or travel the 
Oregon Trail in a covered 
wagon, mid still *fad the time 
to pen a book of business 
aphorisms. 

But then Norman Augustine, 
the 59-yearold Chairman and 
chief executive of Martin 
Marietta, the US defence 
group, has never been 
altogether the average boss, 
writes Richard Tomkins. 

Last week he was in the 
news when Martin Marietta 
and Lockheed, two of the three 
biggest US defence contractors, 
announced that they were 
merging. Characteristically, 
where other industry 
executives would have rambled 
on about the synergistic 
benefits flowing from a merger 
of complementary corporate 
cultures, Augustine chose a 
dffferpnt approach “The 
arithmetic is simple,” he «>m 
T hree foil factories are better 
than six half-fan factories.” 

A Princeton graduate who 
joined Martin Marietta in 1977 
after two years at' the 
Pentagon, Augustine signalled 
his loathing of cant — and 
simultaneously gained wider 
public consciousness - by 
publishing a Murphy’s Law 
type of book, called Augustine’s 
Laos, in 1983. One example: “If 
a sufficient number of 
management layers are 
superimposed on top of each 
other, it can be assumed that 
disaster is not left to chance.” 

More recently, he has been 
credited with leading the 
badly-needed consolidation of 
the US defence industry 
through takeovers of General 
Electric’s aerospace operations 
and General Dynamics’ space 
systems business. 

Yet he will be neither 
chairman nor Hrirf executive 
of the newly-formed Lockheed 


l%e Italian Treasury has 
completed the reshuffle erf its 
council of expert advisers, 
naming successors to 
Francesco Giavazzf and 
Alberto Giovanni ni, 
well-known in the world of 
inteinjiKnnai fimmi* for their 
work on privatisation and debt 
policy over the last two years, 
writes Andrew HHL 

The council of experts was 
set up in 1992 by then treasury 
minister Guido Carh to advise 
on economic policy. Members 
were drawn from top 
internati onal financial and 
economic positions. 

Professors Giavazzi and 
Giov annini - nicknamed the 
G2 in flcademie circles for 
their join* pnWtratimw - are 
both returning to acad em i c 
positions, at Milan's Bocconi 
University and Columbia 
Unive r s i t y In New York 
respectively. Their successors 
are from the same high-flying 
economic background. 

Vittorio Grilff a member of 
the Treasury's council of 
experts since last year, 
succeeded Giavazzi last week. 
Grim, 37, was educated first at 
Bocconi and then gained a 
Masters and a PhD in 
economics from the University 
of Rochester in the US. He is 
cnrrently deputy director of 
the Program for International 
Economic Studies at 
Geo r ge to wn University in 
Washington DC, and the 
Woolwich Professor of 
Financial Economics at the 
University of London's . 
Birkbeck College. 

Vincenzo La Via has joined 
the council of experts from 
Akros, the Italian investment 
group, where he was partner 
<md senior fond manager. La 
Via, who has also held 
positions at the World Bank, 
has a doctorate from UCLA. 

It has yet to be derided who 


Heads of French companies are 
often criticised for bring too . 
monarchic - and perhaps too 
dynastic, in the case of 
Antoine Riboud, the 75-year-old 
head of the Danone food group, 
whose son, Franck. 38, has 
been just made his number 
two, writes David Buchan.. 

Antoine Riboud, whose 
management style is described 
by one Paris analyst as 
increasingly authoritarian and 
peremptory, has never made • 
any secret of bis desire to see 
bis son rise to the top of 
Danone, which he has built up 
imrier the name of BSN, 
recently dropped In favour of 
the more identifiable 
best-selling brand of Danone 
yoghurt. 

But the announcement of 
Franck Riboud’s elevation to 
“vice chairman and president" 
under his father who is 
“chairman and chief 
executive” was careful to. 
mention that the move was 
made at the initiative of Michri 
David-Wriff the board's 
non-executive vice chairman 
and head of Lazarda, which 
awns 55 per cent of the group. 

Franck Riboud, who replaces 
the retiring Georges Lecafiier, 
lias worked at Danone since he 
graduated from the Tjumanne - 
Poly technique in 198L He has 
had a taste of responribflty at 
most brandies of the group's 
multifarious food businesses 
and since 1992 he has been . 
reponsible for corporate 
development 

Danone fiffiriala Halm that 
any idea of Franck being 
groomed to take over from his 
father is prana ture; the fetter 
can go on until be is 80, 
according to the group’s 
statutes. 

At the board meeting which 
elevated Franck, it was also 
nnnramflflfl that Jacques 

Vincent and Christian Laubie 
would join Philippe Lenain in 
the inner circle as senior 
vice-presidents. 












SeiWv:-.-' *-»■ — • 


-• 


CONTRACTS & TENDERS 


BRUSSELS-CAPITAL Region 
Town of Schaerbeek 


CONSULTATION for the 
SALE and the RENOVATION 
of the uialu building 
in "place DADLLY" 


site owner and consultant: 

Sodete du Logement de la Region 
Bruxellolse (S.L.R.B.) 
rue Jourdan, 45-55. 1060 Brussels 
telephone: 32/2 533.19.11 
fax: 32/2.533.19.00 


site: 


In the town of Schaerbeek, at "place 
DalHy". with a surface area of = 8.500 sq. 
mtr. on 4 levels 


purposes of the consultation: 
the competitors should propose: 

- a list of the potential activities, 

- the characteristics of a renovation. 

- the requirements of acquisition. 

- the construction schedule. 


prospectuses are available In French and 
Dutch from 12/9/1994. at the S.L.R.B. 
at a cost of 10.000 BEF. 


bidding deadline: 

Thursday 15 December, by 4 pm {at the 
S.R.L.B.) 


COMPANY 

NOTICES 


General Motors Corporation 


NOTICE IS HEREBY GIVEN tku 

In tcnpinMrtMMnofiMM 

of SOI (gmM pH rime of Ac nan mi 

of ike COfponlioa payable OB I he Hkfe 

Scptonbcr 1944 tore wiU become du it 

Ktpect ef ilw boRT deporimy KcrVB * 0 Ui 

iteoiarim of I JJO CCS pec int. Tte depress? 

wilgnt tanker auiioe of *c ante* eqatadrai 

of dir id dtMibaUaa per oak payable «n aid 

■Btf to IS* Sntnter IW AS chore an 

he mna npaoh il by a oo ralKd date fana and 

USA l*i declaration qmubiMc from to 

dqxatoy. CUM «htr Are UK tad* aad 

mantra of to Stock Eadreqr sret lodprlfadr 

beam depreftaty mxip a Bar muUao. final 

data* oaaot be aoaqreL 11c cmpaadnA Zui 

qmlcr 1*4 report will ha mihHo apua 

re a te afc a late repoateiy areal beta*. 
Bjfdan BnfcPLC 

BGSS LONDON COWl£R SERVICES 
8 Arad Com. Inks. EOft 7HT 


AlMntool 
ndveruTonar] 

whcfiaranteHefry 

The A Jwj i fcuum H o d m an 


raffeaat 


Ike HmUThn 
OoeSotoBBfcMto. Laataam fitt, 
■ut **i1 1 m mofac *44 71 873 3064 


YOU CAN ADVERTISE YOUR 

S1Q11S IN THE RNAMOAL 
77MES RECRUITMENT PAGES 
FROM AS LITTLE AS 
£90+ VAT 


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Fob rbthbi ktmu puue khhwI 
Phiup Wrioey OH 
Ta; +44 71873 3351 
Fax: +44 71 873 4331 or 

BY IRtlie m U AT 

Fwmcuu. Times, 
Recrwtwbct Aovomsun, 
Number One Southwark 
Bridge, 

London SE1 9HL 


FT CONFERENCES 


THE NUCLEAR INDUSTRY- INTO THE 21ST CENTURY? 

14 & IS September 1994, London 
Thta Mgh-Jevd mooting wH sxsndno the outlook for nuclear power In North 
America and western Europe and review growth potential In the Aaia-PacfBc 
region. The chaDonges of Improving effidency and safety at nuclear plants In 
•astern Europe and Issues related to managing the fuel cydo wH ateo be 
adtfressad. Speakers indude: Janies Hann C8E, Scottish Nuclear; Mmy 
Cade, EdF; Michael Kkwan. Nuclear D earie; Or Yh-Yun Hsu, Atomic Energy 
CoundL Taiwan; Michael Foiger, linked Kingdo m Nrax Limited; Professor 
Jugis VRemas, Lithuanian Energy Institute; Thierry Beudon; EBRD-, .John 
Guinness CB; British Nuclear Fuels and Jean-Paul Lannegrace, 
FRAMATOME. 


RETAIUNG TOWARDS 2000 - 
COMBINING VISION AND EFHGBICY 
London, 21 & 22 September 1994 
This year's meetin g wfl focus on the need for the rate! industry to exptokfuOy 
the opportunities that new ma r ke t s and new technolog ie s offe r. wttfe detatog 
with the fundamental business dwlengos - nwkiUng protitab&ty; controlling 
costs, managing the property portfolio and 'crime busting’. Winning rslafl 
formats wfll be those that successfully combine vision wtih efficiency. 
Speakers at the conf e rence, arranged Jointy with Ooopero & Lybrend, indude: 
Teh Ban Lian, Emporiun Hokfngs (Singapore) Lid; George Seaton, Edgars 
Stores Limited; Zottan Koazegt, Azur Unto; Mark LBy, The Disney Store 
Limited; kflehaei Ruddd, The Boots Company; Robert IMer, Galleria 21 (UK) 
Ltd; David Carman, Quantum International and Ian Smith, Mstaian. 


INTERNATIONAL BANKING 
Madrid, 29 & 30 September 1994 

This major forum, bnmecRately prior to the annud meettogs of the IMF and toe 
Worid Bar*, wffl debate the outlook for banking in the mid-1990s and adless 
a wide range of issues of current concern to the International financial 
community. Speakers taking part indude: Emflto Bot&l in Rios. Banco 
Santendec Lord Alexander at Weedon QC, Ntetonal Westminster Bank pic; Or 
H Ormo Rudtog, Cftfcorp; Richard J Boyle, Chase Manhattan Bank NA; Dr 
Josef Ackarmann. Credit Subae; Egktto Giuseppe Bruno, Cradito Ra fan o and 
Eugene J Ludwig, Comptroier of toe Currency. USA. 


INTERNATIONAL INFRASTRUCTURE FINANCE 
BUHLD-OPERATE-TRANSFER [BOT] 

London/} & 5 October 1994 

This maior Financial Times conference wffl focus on bukFopemtwttangfer 
[BOT] opporturibes to key growth ma rk ets , to include Eastern Europe, South 
Africa and the Mddle East. The cha ken ga of ■nandng and managing BOT 
contracts vrifl be highlighted to recent caee studies of major projects In the 
power, telecommunications and environmental Infrastructure sectors. 
Speakers include: Mr Trevor ManueL Minister of Trade and Industry, South 
Africa, Sir Alistair Morton. Eurotunnel, Thierry Beudon, EBRO, Dr Jacques 
RogctenaM. Banobras, Inder Sud, The Worid Bank. John HoBtan 01. Morgwi 
Stanley & Co Limited, Michael Heath, Nynex Network Systems Company. 
George Kappaz, KMR Power Corporation, Mr Christopher Nash, Northwest 
Water Intemattonai Ud. Mr Malcoim Stephens CB, The Beme Union. 


INDIA'S ECONOMC RENAISSANCE 
Delhi, 26 & 27 October 1944 

Given the breadth and pace of economic reform in India since 1981, Ns high- 
level FT tarum wffl provide a unique opportundy to review toe governments 
BberaBsation p ro gr am m e and assess business and kwestment pctapecte. The 
meeting vril also consider IndteTs oo mp el M vsnBaB In worid markets and look at 
the chsSenges of toipraring the country's totrasOuture. 


DOING BUSINESS WITH HUNGARY 
Budapest, 14 & 15 November 1994 

WMi a new Gover nm e n t recently Mooted to ottioa jWa major FT con f er an u a wa 
provide a timely opportimity tea re-appratoaitf Hungary's atiracifvness as a 
location tor foreign direct, and increasingly . p ortt o Bo investment Speakers 
include; Mr Peter Bod. PreskfenL National Bank of Hungary. Mr Ferencs 
Bantia. State Property Agency, Professor Janos Martonyi, Former State 

Secretary. Ministry of Foreign Affairs. Mr Lajos Bakras^udapest Bank Rt and 
Budapest sack E x cha nge Cornel, Mr Lajoe CsepLState Ho Mto gs Company 
AV RL Mr Gyorgy Suryani, Ma n agi ng Director. Centre! European In ta matimd 
Bank. Dr Mark von Ulilenskiold. MATAV. Mr Isfvan Orban.EGlS 

Pharmaceuticals Ltd 


DOING BUSINESS WITH SPAIN 
Madriff 23 & 24 November 1994 

The FI's *94 conference, to be arranged with Expansion and Actual idad 
Econ&nca, wS Wo as Its theme ‘Spain Competing In Empe”, focusing on 
economic recovery, eompetffl v fly and flberailstag markets. Speakers toduda: 
D. Jos6 Artorto Grtoftn Martinez. Minister of Labour & Social Security, Spam; 
D. Atoerto Recarte, Vice President & Managing Director, Cent u nton; D. Carlos 
Espinosa de Jos Montsras, Chairman & Chief Executive, Mercedes Benz 
Espena. SA; D. Oscar Fanjul Martin, Chairman, flo p so l SA; D. Lub Atisnza 
Serna. Minister of Agrictttia, Fisheries & Food, Spain; Mr Bernard Duron, 
Chairman. Saint-Louis Group SA: O. JosO Miguel Zaklo, Chairman & 
President, Grope Tav»t 


AS en^tiries should be addressed to: F ina n eitf Times Cortiereneea, P 0 Bax 
3851. London SW12 8PH, UK. Tolepbone: 081-873 8000, Foe 081-873 
1335. 


THE WEEK AHEAD 


T-a?!’ Cl-y 


DIVIDEND & INTEREST PAYMENTS 






■ TODAY 

American Express &edft Corp. 
896 Dual Cur. Snr. Bd. 1995 
Y80000.0 

British Petroleum 8% Dual Cur. 
Yen/% Bd. 1995 Y80000.0 
Clayhithe 1.875p 
Dewtuirst 0.75p 
Da A N/Vtg. 0.75p 
Electrocomponents 7p 
Gen. Motors Acceptance Corp 
of Canada796% Nts. Sop. 1997 
C$77.50 
GSetto $0^5 

Hafifax Bldg. Scty. FRN 1999 
£134.67 

Fsetan B296 Nts. 1999 
Y620000.0 

Royal Hotel 6.196 Bd. 1997 
Y6TOOOO.O 

Scottish & Newcastle 11^6p 
Sweden (Kingdom of) 6%96 
Nts. 2003 $32.50- 
Symonds Eng. 0-25p 


Cardiff Property 0^5p 
Countryside Props 1.41p 
Creditanstalt-Bankverein 
Bed Rate Nts. 2002 $2319.27 
Dares Estates 896 Un. Lru 
1992/97 £4.0 
Enserch $0.05 
Ftqi Bank Int Und. Sb. Gtd. 
Var. Rate Nts. $1457.99 
Joseph (Leopold) 91696 Un. Ln. 
1997/2002 £4.625 
Lockheed $0.57 
Moorgate Inv. TsL 255p 
Rockwell InL $0^7 
Vega 2.075p 


■ WED NESDAY 
SEPTEMER 7 

Blick 35p 
Safoiand 0.79p 
Woolwich Bldg. Scty. FRN 
1996 £134.53 


■ TOMORROW 
Bank of Greece 109696 Lru 
2010 £5.375 
Banner Homes Ip 


■ THUR SDAY 
SEPTEMBER 8 
Abbey National Treestay 
Services Gtd. FRN 1999 
$11.50 
Anglian &2p 


Treasury 79696 2006 £3.875 
Treasury 1096 2003 £5.00 
Cardiff AutomobDe Receivables 
No5 Class A FRN 1997 
£142.10 

Da Mezzanine FRN 1997 
£16*L56 

Court Cavendish Z65p 
Cowie 2.725p 

Fleming Int High Ina Inv. Tst 
2-5675p 

Kaltenazoo 2.45p 

Nat Ausbafla Bank Sb. Var. 

Rate Nts. 2000 £145.88 

Nat West Bank Var. Rate Cap. 

Nts. 2009 £140.21 

Nationwide Bldg. Scty. FRN 

1995 2133^7 

Partridge Fine Arts 1.4p 

Prism Leisure 3.03p 

Renold 79696 2nd Db. 1992/97 

£3.8125 

Wood (John D.) 1.25p 


Carcfo Eng. 7^p 
European Assets Tst FL0.08 
Funding for Homes 10V696 Db. 
2018 £5.0625 
Greenfriar Inv. 2^> ' 

Holders Technology 2p 

Investors Capital Tst 1.3p 

JLI Grp. 3J?p 

Lex Service 5.6p 

Malvern UK Index Tst 1.7p 

Manweb17.35p - 

Motor World 2. 5p 

Oriel 3p 

PeTtcan 1 _25p 

Savllls 1.5p 

Scott Pfckford O^p 

Texaco $0.80 ' 

Warner-Lambert $0.61 

Woolwich Bldg. Scty. 796 Nts. 

1998 £700.0 



... ' ~ ~ - . 


■ FRIDAY 
SEPTEMBER 9 
Anheuser-Busch $0.40 
Treasury Fftg. Rate 1999 
£1^406 


■ SATURDAY 
SEPTEMBER 10 
Treasury 51696 2008A2 
£ 2.75 

General Motors $0.20 
Grace (WR) $0-35 . 

Joseph (Leopold) 14.25p 


UK COMPANIES 


AMBC 

Albwqr tov. Ttt. 


■ TODAY 

COMPANY NESTINGS: 

DriipWc Food*. Marehant Taylors HA 
MdowtoYoik. 12A0 
RawBore, Ragsnt House, Rnmore Way. 
Uvwpeol, 12.00 

M»i Domhastar Hotel, IWc Lsna, W, 
12X10 

Voga, 2-8, Masora Avmvn, EO, 430 
BOARD MEETMQS: 


Haynss PitolMng 

ti Stims : 


n ta teM iar Motor on*. 



BBA 

Bain) (Wm) 
BtuahfrdToys 


reiiaiHi bit 
Oartmore Value toiva. 

HatiBig. 

Lloyds Smatiar Cote hiv. 


Navmwn Tonka 
OGCtaL 


Csfwbraad Robar 
O wte PM. Cw inv. Tat. 


HBadwon Mtiga. 

Home CouifiM Nowapapere 

fetrure JmUtia 
Nurdte A P ea cock 


TLS Range . 
Yortotahv Food 


RTZ 
RaOtac 
RusaaC (Alomcfer) 
SaverMd R 
SfetwnEnp 


Copyraore 

Energy Capital tav. Co. 
ML 


Tbocnpaon On to*. 
Wknpoy {GO 


Wlson (CorawOy) 



inv. 

WatseCity of London 


■ TOMORROW 
COMPANY MEETINGS: 

Bfrw tep. Forte ftwhouta, Fwriby Ugh 
Road, Norm Farfey, 1-kXL 12.00 
Soott PteMoid, 26S, Hgti Straot, 
Croydon, swrey, 11J» 

SaiacTV, Ltewboreugfi Hotel. . 
LanasberouSh Raca, S.W., 11 JO 
Stvmln, Tha Connaught Rooms, Sraal 
Ouaan 8fraet,wJX,iun 
fl kito a PuMahteg, Mbit Houaa. 77. 
Manael Baate, KLOO 
Wood {John D), 26. Cumn Street w„ 

xzm 

board MeenNoa 
HntfB 

HMbwy Undanwtifeg 
Ma cr o 4 

Hirer 4 ItuioanBla Smatiar Cate Tat. 


IYSBnilffiER7 
COMPANY MSTtNQSc 
Baapafe Bargar Way, North Lynn Ind. 
Ml, Ktoga lym. 11J0 
DM idalB girp^ K-64, Broatoviek Street 
W, 11JI0 

Dabannara Tawaon k CMunocks, 30, 
Throj^nortan SMI, &C. 1 UXJ 
nemfrig frit. Mgh bic. bnr. TbL, 25, 
Copthte ArenuB, EC., 3JI0 
Goods Durrwit, 30, finM Street. ECl 
iieo 

JLI Qn», SL Janies Coat how. 
aucMn o ham Qxte. SlWL IOlOO 
Jo a ap ta (Laopofcti. M a rcf w nt Taytora HaB. 
3a Threarewads Street EG. izeo 
K atanumi o, C»y Oontorenc a GBrtlra. 7B, 
Marts Lana. EC. 11 JO 
ML MdgL, Sheraton Scytoa HoM. Bath 
Road, Hayas. ixoo 
MS int, Doncaster Moat Houaa, 
Wannsararth. Doncaatar. 12JM 
S ai ga , as. ftwfawy Oreua, EXX. 12J0 
Sytten a, Prom Eng. On. CTOae Lane. 
Bmdfiad, 1E30 

Hide/ Robor, GO, Wetnia Embankment 
SacWars, ECL. 1030 . 

BOARD MEETINGS: 


■ THURSDAY SEPIBKBER 8 
COMPANY MEETINGS: 

Begod tep, 108-113, ChartBtiouaa 
Street EjO, 1Z00 

Boanagrewa kata. National Motorcyde 
Mjaawn, Covanby Read, GtdnM, West 
Utitands,1E0Q 

Bufraargfp), The Oder MBs. Rough 
Xane. Harated, 230 
Dboon^ Graovenor Houaa Hotel. Pm* 
Lane. W, 11^0 

Prraitatr . BccaBxr House, Park Law. 
Btonto ghan. igoo 

fenkfa Sfevkt Q. SL Jamea Cowt HOW, 

ajeMnghwn Gaa. S.W^ 1030 

Triplax Lkwd, Boanfcal Gartara, 

WC a B xa a n a Hoad. Cd QtM atou . 
Btortnoham, i jjq 
BOARD IffiSTINGS: 

FMc - 
Batiwlnch 


M FRIDAY SB>TEMBER» 

COMPANY MEETMQS; 

Croat Packaf^ro, Coiatanay Road. . 

Oatogham. Kant 1000 

kwaatment C&, Fakfax House, Fuhood 
Ptocn. Grays ton. WXL, 12.00 
lister & Co, Nownel teadted. Manydda 
Road, Bradford, 12J» 

Oeaoritea, Chanarad Inauranoa toatinie, 
2a Akfennanbuy, EG, 1030 ... 

ratr, Butctms Hat 87, B artoo to wn* 
CkM.EG.iaOO . 

Ratianca Sacufiy. Gtedora Hafl, 9. 

Montague CfrM- &£., 1 E 00 


Sttwceach. Leaser Otehal. Souto SL 


Johns Ptaea, Path. 12. 6u 
®»ntey Laiain, Atoton Caakio, Oromwa* 

Roml. Caatio InaaB, Safltad, 11J0 
Water, Anamfaly Rooms. • 
Swtoe# Street Bafh. 11JX3 
BOARO MS71NGS; 

RnafcK 

AnaourTat 

Qmatt Qlabal SmattarCas. tow. 


Stavartzeomtfa 
Iraarima:- 
Baattiapoma^ . 

Oanadten Ptzza 
Coatata 

Oaranan Shared Etadt/TM.. .. 

Qmraa Aston SmaktrCo’a tab 



Ji : . ■—.! 




* As,.; 1 7 

■ * ... * " ■ . 


HTR Japawaa SmaBar Go's Tat 

SmABanoa 
TortwViiin Hotspur 
hterime 

Ar)0 Wlpgtos Appiaton 


Peny 

Taylor Nafeon 
Water TV 


Vtaua«y 


BTR 

BteaCtoete 

Bo a tro m 


Company maatingadre amwafgaoaiaf 
moatlnga wilasa oihenrii 


wtoBtep- 


CSuretiaCo 

Cookaon 

Entecp rta oQ* 


* note: Rapona a nd a coo u ntaaro - - 
n« nwmatiy a wf labladatf «ppim*i?AdX 
sbe weeks after too bo«d mastiag » 
spprero lha prdk rfr wy maute. 



\ 


J 









* V . - 


CONFERENCES & EXHIBITIONS 



SEPTEMBER 6-8 — " 

INFRARAIL 94 SffTBIBER22 

TWiUy iMOTatwui trade exfobib * « ^"American Flnaicial and 

products and services Tor ni|w By Bushl0 » s Briefing 

i nftwnuanro n be held m O-MEX Came. EconoBt »«. academics and bus hi ess 

Matches ter, England. Over I5S te * daa &Q » *1* Latin American countries 

organisations from 13 connlries arc raw*. aniline the □nancial and business 

part m this very timely event. eshUUm “PPonuoiUes in ihc region, including 

fa supported by associated one-day ^”*1 Argentina. Mancn, Ran, cuu, and 

ftauinn organised by the Institution of Vewanda. Sponsra iEA/AUn*. 


H. Neumann International 

C&TTRAL& EaSTESN EUROPE 
Management Consultants GmbH 


Qvfl Fngiiwwy 


Cam £200 1 VAT 


Adspen - Mack-Brooks Co«« : Melanin Jones ax Couferau, 


TO (0707) 275 641 


MANCHESTER 


Profit 

Tbfc 071 236 4938 toe 071 236 1889 

LONDON 

SEPTEMBER 22 


CBI Owfarem*, includes presentation, **** ** 

and workshops on a wide range of trade 

and raves! me (It Opportunities. Czech ^ Mrofae ng. B Op fe mentina and designing • 
delegation includes Vladimir Dio airy * nccc3,fcl profit-related scheme. Topics 
Minfata for Industry nod Ttade. ' “ lclu d c a review of whether HiP in rigbl for b 

Oouaa Nicbob Marta comp any, the design process, employment 

CBi CooferaBics In' asm and a pnofcti saMs by Sevan 

Tet 073 379 7400 Fax; 071 497 3646 TtasPLC 

- LONDON Qmmot Bvfc Kmrae, CBC Log* Stndtasad 

^ * 1 Servian United. 

SSSssi- .. 



GOVERNMENT of the 
RUSSIAN FEDERATION 


Manaflaneni Qgme Europe 


UNITED NATIONS 
INDUSTRIAL DEVELOPMENT 
ORGANIZATION 


Allgemeine 

Bau ten- V ertriebsgese I Isc haft 

oubJi 


Finance: LawOngthoWbrid to the — -■ LONPO> 

MonnsSon Superhighway SEPTEMBER 22 

An la -depth conference on the c^i. . 

coov ci g e nce, cooperation and crxnpetitfcm SU ***" yIna 010 DerKSsjd. Knoping 


i the UK cable & telephony industry. 


your cuatonar In a changing world 


Cornua-. Patricia Baymon. Kagan World 0ne Strategic Planning Society ft 

Media Limited. ESKC Co nf erence 

Tbb 071 371 8880 Fax: 071 371 8715 We live in a wcrM of consmner choice. Tto 

LONDON ®W marketing concept of supply and 

SromiRi^iT demairfneotk updating. Martatingsiiat^y 

oct'lnUtH T3 most actaowkdgp socio-ceocoonc chan ges 

COMPETENCY & COMPETITIVE and demographic trends in order to 
ADVANTAGE immUm 

Practical working conference with Contact: Jo Matoee. 

representative speakers from top UK Din Strategic Planning Society 

organisations demonstrating how the Td: 071-636 7737 

effective use of cranpetenries within their rnunnN 

operations has played a significant role in ■■ — -■ 

helping them to achieve their business Rpp ru unen oen 7 

goals. Also choice of workshops: F „ g M ,_ 

Organisational Development and Pay . r °P 8an Bqul«8 


A CONFERENCE WITH OVER 100 SPECIFIC RUSSIAN INVESTMENT PROJECTS 
DETAILED ENTERPRISE INFORMATION IS AVAILABLE AND MEETINGS 
AND VISITS WILL BE ARRANGED 

INVESTMENT PROMOTION FORUM 
ST PETERSBURG/NOVGOROD 
26 - 29 SEPTEMBER 1994 

Gain access to industrial investment projects with high local market potential and/or 
involving declassified Russian technology. Meet the managers and local sponsors behind 
these project proposals for private discussions. 

To register please contact UNIDO in Vienna, 

k phone 43 (1)211 31 3999 or fax 43 (1)230 82 60. S 


LONDON 


European Equities 
Investment Management 


SEPTEMBER 29 
South Africa 


OCTOBER 4^ 
Software Quality 


Contact: Conference Manager. Human 
Rename Ratnenbip 
Teh 071-409 0699 Far: 071-4994285 
LONDON 


Conference Cant, tendon. 

Major international conference cm pan 
European investment strategy featuring 
analysis of On growth of the tnaHnaonal and 
investor base in Europe and mdndfag 16 
etmmjtoctor workshops. 


A Ci tyfmum conference featuring Chris ' Guest or Folly? 

Sob, Sir Evelyn de Rothschild, The seminar for people who want to 


OCTOBER 13 & 14 
The Management of 
Product Safety & Quality 
Product Safety and Quality are the 


Bndiey, Robert Guy, Basil Hemov, Gary quality but need to balance its responsariBy of everyone concerned m the the running of a bairns through the use 

Monde. M J Levwt. Lnda van der Post. ret t toe ? " production of goods. The seminar will of technology. This two thy seminar will 


SEPTEMBER 14 investor base in Swope and mcfcnflng 16 

Sao Paulo commyfocw workshops. 

'The Brazilian Embassy and the Crama AEaonlOgBcDowJmnTttenaB 
Government of Ihc State of Sao Pardo ere TO 071 832 9532 Fhx: 071 353 2791 
agamzmg ■ Seminar on "Sao toiler. Trade LONDON 

and favestmeafs Oppmtnnities in the Bean L ™! ■■ ll — L, 1 . 1 ... . 1 

Of the South American Market* to be iKid RFP mi HFq fff ~ 

ng 

For further information, please contact F“ Conference, m aaociatx» with BT. 
the Brazilian Embassy. bria *» iamdug exponents to 

Tel: 071 499 0fT77 esL 234 ' rctanrinc devetopaerts in l irthrmari o n and 

LQjyjjQjy commnnication systems and their 
55231555 important role in company strategic 
planning. 

minars Contact GemgnmlQagaby 


«■*». W w *-"*-** W*n ucr tom. . ™. r f .-,-' ww> . r — j”-- 5“ ■ — — « uaannmi yj. 1U0 two umy h omm u wiu 

Sponsors: Sooth Africa Foundation, provide oppomnidcs to hear dear and show yon how to get the best out of 

ss2ssrr b, '“ a,s “ p ™- ^ “• 


practical c j t phmatkma by leaefing experts. 
Further detnib from 
Ituanatmasl Frafesaioad CbefbenOEs 
Ltd. Tet 061 455 8623 

LONDON 

OCTOBER 17 & IB 
FT 

World Mobile Communicationa 


SEPTEMBER 14ft5 planning 

Hnandal Astrology Seminars Contact Ocxxgma fOngaby 

Two fell evening scssknu with Robert CBI Ctinfetatces 

Hand (from USA) world renown 1U: 071 379 7400 Fhc 071 497 3646 

Astrologer and writer of PC Software LONDON 

’Astro Analyst 1 and Roy Gillcti. City of 

London Anno Analyst, who has SEPTEMBER 27 

successfully predicted Bond markets l)mr prei**!*, In System 

ihtMigh 1994L 

At FtaningsCanftienco Centre, EC2R. f rOCI " W| * 8,, \ , 


I=ZrP=mmdC 

mmmmnon xxtxn utyiorooir pnalCAl steps fo improve cpinmy witnovt > j. ^r- .g-c cana 

1bL-Q22S 466744 Rue 0225 442903 toss ot time or budget lee ooi bozi 

I/wnnN Contact Unicom Seminars - ... 

- ' Tel: 0895 256 484 ftz: 0895 813 095 ^L, pcr , ^ 

SEPTEMBER 29/30 LONOOS OCTOBER 17 A 18 

Tetecommunicattorm Baling OCTOBER 4-5 World Mobile Comm 

Systems '94 Software This two-day conferenc 

feferawtfan far Ctwyetltivn Advantage Testing Methods and Tools together key apeakm to sh 

Royal Lancaster Hotel. Laodou, W2 Packed with mfernntioo and practical tip*, on the growth of mobile cc 

29dt/300t September 1994 pnawued by cmertaimng and bfiamattw the various tedtnologpea I 

Worldwide Fora® for Billing Systems world-class experts, this seminar provides “4 new operator strategic*, 

professionals the nuorinm benefit in the shortest ante for Enquiries Hnandal Times 

Last year attended by over 200 people u,to CTilical “P*? of Tel: 081-673 9000 F« 081 

===== 

_ LONDON user* of software tea tins methods and tvmncn is 


cooferteca will bring ^ |op|M tactade . Update OD 


together key speaker* to shnr their views 
on the growth of mobile coenmnncadona. 


presented by mugtiining and informative the varioua technologpca being adopted muactlve locatioo; Impact of the 


SEPTEMBER 30 
Technotogy Transfer - 
Creating Gompeffifve Advantage 
Through Ota Transfer of Technology. 
Share dte experience of a Mgh profit# 


the mmwm Iviwfii m rtw ■iin rtwM w hr Enqutrira Hnandal Times 

this critical aspect of software Tet 081-673 9000 Fax: 081-673 1335 

management. A special feature is the LONDON 

presentation of case studies ho® <nAwitri»I ■-'! 

users of software tearing methods and OCTOBER 18 

Teh 0895 256 484 Pax: 0895 813 095 ™ J0 ™ VentUTBS 

LONDON 7,10 mbiace « one of the Cbqmrate 


OCTOBER 4-6 
Frelghtconnectfon 94 


speaker faculty reprossnting industries Conference & Exhibition 


Full details - Roy GiUett Coasnltanls A TO * d *7 brie& « N ^ c ’‘ Le « al 


PhoneOwn 0276 683896 Gronp on rights and reaponnibilltfes in 

software procure menu Practical and 

11 - - 1 rfirectiy relevant to L^al Advaora and 

SEPTEMBER 18-20 Gnmpany and IT Management. JE250JP * 

The N a t iona l Education & VAT. Fax for further information or 

Jobs Fair proviaiotial bo oti n g to Mnric Dwyer. NOC 


The UK's most definitive careers and on 061 236 8049 ocTU: 061 2286333 
cdocatton show h dadi n g a conqnehenshit LONDON 

seminars programme. Over 140 

univetsilics and higher education caDcgcs SEPTEMBER Z7 
will be exhibiting and promoting a hngr Women nwan business 
range of coanes at an levels. Dm ooeriiy conference Iks been designed 

FREE ENTRY „ , ■_ ? . 


which ere oil now benefiting from 
Increased efficiency of plant, 
processes and people, phis enhanced 
levels of safety end environmental 
can 

Contact Ctairo Meeting, 

Xbo nnriTMTfnfrf 

TbL 071-8301078 Bar. 071 -409 3296 

LONDON 

OCTOBER 

Invest in your evenings 


The thind — —nui extdxtioo nd «i nfrv F n rr 

for logistics professional*. Keynote , , - - ■ 

weaker Secretary of State for Tkaaspafl. OTt #at Wta 

phis Sir Atastur Moitau, Enttttmnd and 637 4383 Fta: 071 631 3H4 

15 other leatfing industry speakera and fanr ^ — mmm — 
debates. Accepted wisdom will be 'A r v Ty%n ro"<o " 

challenged and controversial ideas OCT OBtfi 1B-1B 
advanced. Introduction to Foreign 

to fcnbex details, rfc^iooe: exchange and Money Mario 

OS43 419600. Far 0543 419299 Highly jrartkipative txiinlng c 

LONDON co venae traditional FX and I 


OCTOffiniS ^MM^ar 

Strategic Affiances 

and Joint Ventures i — 

This conference is one of the Cotporatc OCTOBER 26-27 
S trateg y Se ries mp mised by IBC LEgsi BPR 94: Ro-enghieerlng, 

Sufies and Services landed Key mess of — r. 

•fisemrioo ioctaie: Wby Joira VE®nre?;Frev- ^ ro p ess Managemen t and 
Allwnce Stages sad; Law. Tax and POTfOtmence hi^rovernent 

Hmopo^ leading txmfetence and cahflittion 


Contact: Jidia Dopbtade, IBC Legal Sbxto devoted to exploring how to apply 
aud Service* Linked. business re-engineering strategies to 

TfeLOTT 6374383 Fhx:0716313Z14 sefaieve quantum leaps in corporate 


LONDON IKdbrmance. Designed id meet the needs 
“ES2E2J of your whole it-en gincrrlng team, from 
executive sponsor to those involved in 
. planning and implementing project*. 

Contact BcnmcasLsteB«eoce 
Tet 081 544 1830 Fhx: 081 5449020 
SSS LONDON 


OCTOBER 5/6 
Auditing the Dealing room 


range woonwes it au Thb ooo-diy conference has been doigiied 

„ , . „ _ to inspire btuinesswomcn seeking to 

Enquiries: ton Faster - Centre ExHHnons ^ nnrl m " . . 

■TVFtrt 7ti734n ndysnenihrircsMeo and to provide nscfel 

HPMTNPH4M sdvfce n women in the organisation and 

- , WKC r BIRMINGHAM toMMgFml ^ jjffqtm Mpeg, of thrir 

SEPTEMBER 19-20 penmtil fives. 

BUSINESS PROCESS 

RE-ENGINEERING (BPR) TnL (071)7300022 Iftwnnv 

rmflmiino cFrlre o/semman for imm utB lA/NllUn 


SEPTE M BER 19-20 posmai no. 

BUSINESS PROCESS 

RE-ENGINEERING (BPR) TnL (071)7300022 mNnnv 

Continuing series of seminan far mnsgen — LONDON 

chained with designing and im pl rmn Xing " - , ,, T? 

BPR iniiialjve*. Presented by leading US SEPTEMBER 27-28 
practitioner and BPR author. Proven trow- World Port Privatisation 
to-do-if implements lion guide illustrated This seminar wtD offer a unique view of 
with case studies and workshops. Course pan privatisation worldwide to sD involved 
book also available- Over 50 otg an is atin M pxrtica. It will cover the valuation process - 
in the private £ pnNk seems have already accessing private capita] - competitive 


London Business SchooTs long-established (UndcistiradinglheTieaswy ruwaions) 
finance evening programmes for Tn ^ n * fl S <fajg«*l specifically far in ternal 
experienced managers and finance ■ na °“ .“ d ^ "5?““ cta *P Ml ***> 
prohssiooala start in early October. The ST^tS^SSo^" 
Corporate Finance and investment casb uuntets and deltv^c^Ktaat^O 
ManagemnnL programmes require + VAT. 
att e ndance on one cvemng per week and lywood David Intxrnatksnl Ltd. 
the Masters Dcgreo lu Finance requires Tel: 0959 565820/0956 323184 
two years of port time study. Fta: 0959 566821 

For detail* caD Valerie Morgan on LONDON 

071 262 5050, orftx 071 723 1788 w 724 7S75 

LONDON OCTOBI =R 8-7 


OCTOBER 18-19 executive spomc 

Introduction to Fbralgn pfenning rod impi . 

exchange and Money Markets 

Highly psrtlcipative training course 
covering traditional FX and Money — 

madeets (Staling ft Eurocurrencies). For QCTOBER77 
Corporate treasnry peraonneL trainee _ lu . ** 

dealers, treasury marketing executives. International 1 
financial controllers, systems and other Managing Gkl 
support personnel Conference on i 

£480 + VAT multinational* u 

Lywood David tatenutionnl Ltd. 

Tet 0959 S65820/0956 323184 Price: £20000 phn 

Fare 0959 565821 Contact: VGchrilT 


International Tax Conference - 
Managing Global Expansion 
Conference on the tax issues facing 
maltinalionala in the changing global 


Price: £20000 ptos VAT 

Contact: MichcUe Beard, Erast ft Young 


LONDON Td: 071 931 2297 Fax: 071 242 5862 


LONDON 


Repeated November 21-22. 


itntegic* in leUnde Mriw^t > 


OCTOBER 3-5 
Lafterty*a 

1st fn tei natio nal Wealth with inside rs 1 up-to-ibc-mmurc views of 

M a nagement Convention the business and economic Climate In 

Fonr distinct bat related conferences - a Somh Africa^ givteg yoa the tnfcnnjTOoo to 

an area which offers enormous profit ^ ^ of EegJand, Derek Keys the 
opportunity fix providers of finsneni and South Afttean Minister of Finance and Dr 
professional services:Globml Wealth Onto Stats Governor of the Sooth African 
Briefing, Private Banking, Investment Resene Bank 
Management ft Dealing, Personal Con t a ct: Crarine O'Shea. Enurfbnim 


OCTOBER 18/19 

Practical Documentary Credits OCTOBER 30- NOVEMBER 1 

Trade finance training for financial Living with Technology 
in stitu ti on s and expoitfimpon company Transport & Road 

Transport EngSnoortng 

handling ducrcpeneies and the UCPSOO A" opportnntty for all 

£4flQiVAT 11110 »»iinriii D Oo o* can, mms no rw# 

Lywood David totemxtiood Ltd. to assesa exjsting challe nges and 

Tt± 0959 56582010956 323184 OevetopmenM. Tins twin track conference 

Fta: 0959 565821 with 30 naemstionsl speakers win provide 

I/1NTVTN “* bnportant stimnitu for strategic and 
.. practical Oca dedskm araking. 




Contact: Richard Parris. Vntkal Systems 00^ arf experienen - die 


Intercede Lid 

Tel 444-455-250266 (24 bouts) 

Pax: 444-455-890821 

LONDON AREA 


rhMfgmg mfa wf prat mltsn itiea. 

Bnramossy Ml - Jean TbeaHer 
Td: 444 71 779 8609 Roc 444 71 779 8795 
LONDON 


OCTOBER 6-7 in stitu tio n s and axport/repoit company 

Dobra Business In the personnel. Presentations, practical 

New South Africa exercises and tfiscasskm on Doc Credits. 

This importam conference wm provide ytw “.J*™ 1 “ ia *®* al0ta11 

with insiders' np-to-tbc-mmnte views of . ,, 

the business and economic climate In t-ywuod iJsvtd mtenwiamil Ltd. 

Somh Afiica, giving yoa the mtamatian to Tet 0959 565820(0956 323184 
make Inlcliiaent business decisions. Tax: 0959 565821 


LONDON 


SEPTay^ S 

The national conference ft exhibition for PPMA SHOW 

the whole fitc protection profession, The UKs premcr Stow far procuring and 
featuring a wide range of the blest fire packaging machinery. Over 200 


TO: 444 00)71793 1230 
Pxc 444 (0)71 793 1250 


LONDON 


safety equipment and sendees. scmdbold e ni r epres e nting 500 hte na t tonai 

Contact: lane MalcoWn-Coc machine tn a t ra fa ctnrers. Bquipmcni to 

FMJ Intonatiim] Pubticaiksu Lid. p ro cess and psek good, pharmnccnticals, 

Td: (0737) 7686U- Fuc (0737) 761685 cosmetics, chemicals, beverages. 

BO URNEMOD Id oonfectianay^tc. Free daily eexninar on 

"'"' r " i " ' CE Mark icgubtions- 

SEPTEMBER20 __ to IUigIs contact MefiubSedes 

How to succeed with mergers m ^ hcumbi imi 
and acquisitions vrc, BIRMINGHAM 

Over 50 pet cent of mergers and ■■ 1 — LT!^L!1 

foil ^ SEPTEMBER 28 


fa 'people' issues which eanae the feihns n._ j,r rtnf^Inl 

rather than any strategic, financial or The Third Age of Financial 
matted ng dements of the deal. This one- Services _ 

day conference tvill identify and address Urn opportunities fat thn 504 markets, 
the critical factors in the mergers and A joint conference organised by Age 
acuuisitioas process which manor most to Concern England and The Hedcy Centre, 
~m ] f . designed to help those companies 

Director Conferences interested m mattering goods and soviets 

Tet 071 730 0022 to the SOf age group. 


Financial Pfenning Conference 
Contact: Ebine 

LAFFHKTY CONFERENCES, Dublin 
Tel: (+353-1) 671 8022 
Fhx: (4353-1) 671 3594 


OCTOBER 6-7 

International Cash Management 

Successful and ProfitoHe Sohaioas 

XMCmOC KUURUacuutub. oi)iiipiJKiu u> ^ v _ 0 _ 1 __ _ SmAelWh 

cosmeriw, cherolmds, beverages. ^ ^ mpmviife fa designed tpStaUy tor the bnyera and 

confectionery £ie. Brae dsuy seannsr on sellers of caxb management services . 

CE Mark regulations- UaSTof d» City of Lomfcm. paying Fc »™ ri “8 pie nary sessions, real life 

ES— 2U I i— is* zszxxszzr. sr= 

TO: 081-681 8226 Hraron-otniMi seemities marfccn. delegates of dm laest and most successful 

NEC, BIRMINGHAM Eaoniriet Financial Tones ™Ji manaeenienr n -«*iBtni«wi 

" - — - - - Tbt OBI-673 MOD Fix: 081-673 1335 Contaec Caroline Bond. Boroforom 

SEPTEMBER 28 LONDON Teh 444(0)71 793 1230 

The Third Ag® of Financial = te ^ 71 TO »» I/wmAN 

Senicm OCTOBER 3W5 

Use oppratnmlies in the 56+ marfceo. City UltBnsfva San drtar OCTOBER 11 

A joint conference organised by Age A programme t or new recrui ts to the C5ty. Measuring the value tit I.T. 
Coocern Engbmd and The Kessksy Centre, corporate finance, aeaswets and fin a nc ial Investments 

designed to help those companies exocnilves covering structure, markets. This nr^ f w r . ^y how to ms the 

hrn-MBi in m«tr«rj fag goods and aendoa ns»Mto ™W1 posfakm of dm Oty. nine of LT. projects and prioritise LT. 
to the SOf a» grant. Speakers inefnde Michael Cassidy. Scott investment snecessfelly. (1 presents 

335 + VAT Dobble, Sir Michael Palliser and Colin guidance from leading academics and 


OCTOBER 19 Qxaact Peter Etfanoods. 

Instimte of Road Transport Bagbmets. 

^SSSexammesttoprinclplca ^ (071) 630 1 .H ftx:(tm)^ 6677 

hnmlwad in making pmn-w ftil ^ J 

Tbpics indade: Why acquire?; Pro-tVml unucuReni 
sta^COnductiretoelfeadiBfendageace; 

Anti-trnst iamea; PubDcbidg Ftivato sales; ThelStAnmjal 

rnfnpl rln^ watertight k p l Review of IT Law 

Minimising tax liability and; New This pres ti gious one day confe ren ce will 


Accounting Sandank. 


have the leading speakera. cover the 


Contact: JuEa Dopbeide, IBC Legti Studies critical remex, the essential devudopmeoB, 
and Servkts Limbed. tow. litigation, regulation and policy. It 

Tel: 071 637 4383 Rnc 071 631 3214 will have a practical approach for 

LONDON Practition er s. 

SSSSSSSSS8SSSSSSSS Farther details from 
OCTOBER 19 International Profemk m al Conferences 

Practical BPR - Ltd. TO; 0614558623 

Inualemantatlan Issues LONDON 


designed to help those companies 


OCTOBER 19 I nte rn a tio nal Professio n al Cocfereacg 

Practical BPR - Ltd. TO; 0614558623 

Implementation issues LONDON, 

2nd Annual Conference of the BPR Study 5555*5 “ 

Gronp (20CM- membcist NOVEMBER &-8 

New (never disclosed before), recently CBI 

mccessfai Case studies presented with National Conference 

interactive sessions from senior Sessions indade - Europe, Manufacturing. 

m anagement and practitioners. Lively Exporting. UK Rmnmn y, TRaining, Equal 

d faraisiotts and demonstrations indntflng Opponmtities. Speakers <««*«<» - Kenneth 

speakers from Citibank International. Clarke, Jacques Banter, Kamleah Wahl , 

Nationwide Building Society. Affiance and Paddy Asfadown. Michael Hereltine. 

LeiccMor. Capital Home Loans, Piekfords Ccmaa CBI Spcxfal Evens Department 


NOVEMBER 8-9 

Quantitative and Computattoral 

Finance 

US Embassy. London. 

Two day seminar hoslrd by the US 
Embassy. US and UK experts and 
practitioners review a range of novel 
quantitative models applied to the finance 
and securities industries. Derivatives; 
options; yield curves: vnee e s ses, failures 
and experiences will be discussed. 

Contact Union 

Tet 0895 256 484 Fax: 089$ 8(3 (NS 
LONDON 


INTERNATIONAL 


OCTOBER 28 & 27 

How to Grow your Suisness 

using Market Research 

Information fa t-v-nming fundamental in 


re scuidi and the real reasons far using it. 
Cbutact - Imeannonal Professional 
C onferen ce s Lid. Tet 061 455 8623 
LONDON 

OCTOBER 26 
Essential Intamatlonal Tax 
Techniques after the 
Finance Act 1994 


international tax techniques; Foreign 
income dividend; Why the UK in in 


rales; Latest developments in transfer 
pricing and; Integrating the new tax 
regime into yocr hnutntional strategy. 
Contact Kate Roberts, IBC Legal Sadies 
and Services Limited. 

TeL 071 637 4383 toe 071 631 3214 
LONDON 


to [be SOf age group. 

LONDON Crist 335 + VAT 
35SSE rringri- Anna Harman at The ikofay Centre 
TO: 071 353 9961 

LONDON 


SEPTEMBER 22 TO:071 3539961 

pm LONDON 

Annual Pensions Conference " ~ 

in association wife Wiliam M SEPTEMBER 29 
Mercer Ltd. Considers company pension Ernst & Young 
policies and Goveratncni urntegiea « Hgl* Transfer Pricing Conference 
of keialotjvc Cfttangu- Keynote speaker, far m Dill national* of 1994 

William Hague, Mintaer of State for cec£) Rcp(It ^jp^US Regnbtnm. 

!° dalS r ,r ! ty . 1 ,., Price: nOaOOptes VAT 

Contact SrodmA htrcd CtotactTta Deromxm.ema& Ytxmg 

LONDON TA>«POh 


Shawn— KPMG y pm«o r- ooMttltmta. as well as insights from fee 

Information from CStyformn: trapetianee of major organisa ti ons, m both 

Tok 0225 466744 toe 0225442903 aSrvEtEMSEZ* 
t nunrui * rtn l « »J B w m t lM intelligence 
- — TO: 081 543 6565 toe 081 544 9020 

=S=T 1 LONDON 

OCTOBER 4 — 

Pensions Now OCTOBB) 11/12 

Aooo-dxy conference covering Pensions Practical Dealing COWSC 
Equality; SERFS - breaking the link; - Foreign e x change 
proposal mmrmnm solvency requirements; lYaming tn spa and forward ftnex dcaHng 
the proposed new regulatory regime mid tar tmmec/jnmor dealers and Corporate 


and more. 

Conta ct : Stove Towers, Hanson Associates 
Tel: 444 (0> SMI 120118 
toe +44 (Ifl 60S 663829 


Teh 071 379 7400 Pac 071 497 3646 

BIRMINGHAM 


OCTOBER 20 
Pre-Budget Economic 
Prospects and Pol ley 

Sixth Annual tntcnatxmal State of the 
Economy Conference with speakers 


NOVEMBER 7 

IXWDOM GlobM Convention on Retail 

Financial Sendees 

Day 1: 13th International Ratal 
Banking Conference 
Sale of lira Theme 'Strafed* far 2001'. 
hMMkm Subjects: Bonking, msnruce, inves tm ent 


mchvW Sb Alan Wsltas. Ton Omgdon. “ B “8 e “ e "‘ «iummer fiaoncial 

Aiutmu . n « , y. , ■ services. Morning session i Global, 

R ^ Lonal or N ^nol Markets}' 
-K/SaSESt Alte-ta-re-bro-B-nkPro/rfimfng 


fee' proposed new regulatory regime and toroee/jimor dealers and Corporate “ d Noil MlckJnn0D - Strategies la 

compensation scheme; fee extra burdens CbmaccMra 

these will add; being a pension scheme wi- , f p rrrmcr. C° n ^ ata,ces 


Strategies Jbr 2001’ 

Contact: Moans La&rty 



Conta ct : The Conference Manager, Gee 
Fnbfishiig Ltd. 

Tel: (071) 538 5386 Bar (071)5388623 

LONDON 

OCTOBER4&5 
FT fntematkmal 
Infrastructure Finance 
BaflACperat^Tfanfer (BOT) prajeas are 


£480 4 VAT. 

L^wnod David lnurastioaal Ltd. 

TO: 0959 565820/0956 323184 
toe 0959 565821 OCTOBER 24 

Structmlng Tax Efficient 

OCTOBER 19-14 Joint Ventures 

TiraiSSi5oiw*«^ SSlSllSHSS 

This coafarncewil] tie a dclibmau sup S2EHta£?2Sfifl3?2 
hack from theory. Ddemnea will be takas P«nmag pofeH ox property jona 

tiwmn* ■ iSmfaq iLnuriiiunf ventwes; Joint vaUmTUg ICTOSS BXtroaal 

fflro^ a stnKtored IMg m bordra . what are fee tax imniiratiosx?: 


Profile 

Tdk 071 236 4938 Fhc 071 236 1889 

LONDON 


6718022 Fam +353 1 


NOVEMBER 9 

Global Convention on Retail 

Financial Services 

Day 3: 6 Parallel Conferences 

- Delivery Systetro 

- Marketing 

• Non-Bank Banks 

- Retail Financial Services in the Middle 
Eaa 

- Cross-Border Opponuniaits. in Iberia 
Com ac e Monoa Cad Lari cm Conference* 
Tet 4353 1 671JC22 Fax: 4153 1 6713501 

LONDON 

NOVEMBER 9-30 
Integrating CHent/Servar 
and Legacy Systems 
Advice on architectural alternatives, 
products/toois, middleware, and which 
standards are important for the tutors. 
Draws on a wealth of experience from 
real-life user sites where important 
lessons have been learned for 
achieving more-effective solutions in 
the future. 

Contact: Unicom Seminars 
Tel: 0895 256 Fax: 0895 813 095 

LONDON 

NOVEMBER 10 

Global Convention on Retail 

Financial Services 

Day 4: 6 Parallel Conferences 

- Idamfr ; Rra h nji 

- Direct Financial Services 

- UK Financial Services 

- p erso na l Pmuciel Planning 

- Croet- Border Opportnatioi in France 

- Retail Financial Services in Emerging 
Markets 

Contact: Moons Owni Lafferiy Co ufct c uu e i 
TO 4353 1 6718022 Far +353 1 6713594 
LONDON 

NOVEMBER 11 
Global Convention on Ratal 
Hnandal Services 
DayS: 7 Parallel Conferences 

- Cross-Border Opportunities m 
European Financial Services 

- Central ft Eastern Europe 

- Germany 

- Nordic Europe 

- Benelux 

- Italy 

- Retail Rnencial Services in hifia 

- Hmnn Rohqtocs 

Contact Mouna Cord. Laflcny Conferences 
Tet 4353 1 6718022 toe +353 1 6713594 
LONDON 

NOVEMBER 15-16 
Business Perform an ce 
Measurement: 

Transforming corporate performance by 
Dfivnn^od yiLtn^yng die dfivtxs of fimizr 
profitability. This two-day conference 
captures fee relevance and practibitity of 
developing new 'corporate dashboards", 
which ■"«*«*■ wraw fi—nrhl mrfjpiimv, stKh 
as customer satisfaction, quality and 
hcnrinwfcjng 

Contact: BurimialincWpacc 
TO CBI -543 6565 toe 081-5449000 

LONDON 

NOVEMBER 16 
Mvketing and the 
Competitive ChaHenge 
Will show how competition can 
generate Invaluable opportunities (a 
Improve quality, responsiveness and 
cost effectiveness of public services, 
using the marketing approach. 
Relevant to Chief Office rs/Directors 
developing services in the context of 
marital testing and CCT. 

Keynote Speaker: Professor Kicron Walsh, 
Chain Henry Tam Fee: £195 + VAT 
Cbutact Elaine Whiteman. 

Longman Conferences - 0279 442601 
LONDON 

NOVEMBER 16-18 
The Wachovia 
Personal Banker Program 

InternatioaaOy-Bcctalmcd role model far 
effective banking practice which 
differentiates ibe bank from its 
competitors. Prcsenraiions from senior 
Wachovia executives share the bank's 
world-famous strategy of relationship 
b an kin g 27, day seminar, Atlanta. ISA. 
Owner Amu Pearson. 

Lafferiy Training . London 

TO (+44-70 7820590 Far (+44-71) 782 Q5« 


Data Warehousing: 

Practical Experience and 

Lessons for tiro Future 

Building the smart corporation, driving 

effective business process reengineering 

projects, unlocking fee most valuable of 

corporate assets. Learn bow many of the 

world's most competitive corporate players 

have used (he dau warehouse concept to 

achieve a s t rat e gic corporate advantage. 

Contact Unicom Seaman 

TO 0895 256 484 Bar 0895 813095 

LONDON 


EXHIBITIONS 


SEPTEMBER 12-18 
GCC & Britain 'Sd Exhibition 

Over 350 of the Gulf States moat 
nemsfal business will all be under one 
roof, all ready to talk badness u Olympia 
2. HUN am - ADO pm. Daily. 

For tickets fafomati on eontict: Arab- British 
Chsmbei of Commerce. 6 Belgrave Square. 
London SW1X6FH 
TO071 2354363 Fxc 071 2456688 

LONDON 


SEPTEMBER 26, 27, 29 & 30 
EC White Paper end the 
e Bangeman & Christo phenson 
Group Reports 

These duenments have given decisive 
political impel its to the development and 
e energy networks in Europe. The Club dC 
+ Bruxelles is orpojnnc three conferences 
s on thne key -nbjccfc. with the European 
Comm town. 

For th'luils see three ads beknv or 
Contact: Club de Dftudlcs 
, TeL- (3221 771 -OfUHJ Fas: f 3231 77u-6o.?i 

■ BRUSSELS 

SEPTEMBER 14 & 15 
1st EU/EEA Intellectual 
Property and Competition 

Law Symposium 
This major event will review recent 
developments in intellectual property 
right*, and update on competition taw. A 
high quality panel uf speakers with 
cnmiulerahlc expenise in their fidd of law 
have been brought together fur (his 

'Vrapcrjum. 

Hurt (vrr details from 

Imcnuiiruut hulromal Conferences 

Ltd. Tel: U6I 455 6623 

I STOCKHOLM 

: SEPTEMBER 26 & 27 

The European Challenge for a 
Global Information Society 
Eight delta icn on the market and public 
, rcgulatiiMis, new nctwoilu and services, 

I initiatives from the Bongerannn Group. 
Financial implicatitiiis. and uppi in unities 
from LU. Pirigrarmnes. Expert panellfatn 
> from the European Cummissiun I D. C 111 
l A Xltlt and from the private sectM. 

Conuci. nub de Bnudlcs 

Tel: f322t 771 -98.00 Fax: 1.122) 77IMift.71 

1 BRUSSELS 

SEPTEMBER 29 
The Future of Trana-European 
I Transport Networks 
I The rote of transport networks in the 
politics of frer move me at throughout 
Europe. Examination of exixting and 
proposed projects, selection criteria and 
financial aspects. Four important debates 
with experts draws from ihc European 
Contmuoino (□ G. VIII). asrociatitms and 
private sectors concerned. 

Contact: Chib lie BnucDes 
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SEPTEMBER 30 

The Future of Transr European 

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Why should the European Union create 

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FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


BUSINESS TRAVEL 




Ffightban 

On Friday, tho Federal Aviation 
A ti irt na teatto n saw &ibm ft - 
nine taxi world countries ■ 
fated to meet international 
safety standards and have 
been banned from flying to the 
US. tt afso gave coraSttond . 
approval for continued fSgfrts 

from four otter countries aid 

said their safety standards 
would be kept underdose 
scrutiny. 

The nine countries which did 
not m eet min imum standards 
were: Do mini can Republic, 
Befize, Honduras, Nicaragua, . 
Paraguay, Uruguay, Gambia, 
Ghana and Zaire. The four put 
under continued dose review 

were: Botivfa, Nether la nds 
AntBes, 0 Salvador and 


Beirut strike; 

htorethan^OOOtrayeierE 
towd for Eixope, North ' 

• Africa and Quff states we m ... 
strsdadat Beirut international 
airport on Friday when tight 
crews of MhUeeast AMnes^- 
Lebanon’s national canter, 
wsrrf on strike Friday • 


The open-ended states by 
300 ptote and flight engineers 
{pounded at feast 10 MEft 
aircraft 

. The strive woe bunched at . 
Iha t w f g ht of Lebanon** -• 
annual summer travel season. 

Aviation officials said' 
ne goti ations were underway 
between tha strikers and. •* 
msiagement of the 
stat^owned airine. 


' ScaxShayfcap Afrfines arid a" \ 
US-based invested- firm ■ 

. presenter* plate on Friday far a 
new tetemationaloterter' based . 
totSafcfe." - " ' '■ ■■ •" ■ • ’ 

' TTto-ptar^ which was'" '*'• 

- requested by Latvia and seems 
aseotiS. of approver cafe foF 
reptaciqgfWD current tafmari 
j&Rnes With one system'based 
fa Riga Tbs hew carter, which 
lias not yet bead given a name, 

■ would use -tie Latvian capital as 
a bub-andlntfiaSy would fly ■ 
within the’Balticsand 


Ufaainef^ght ; ■ j. 

After moinft Bunk lvHr*£eara' 
ef BBaceawM i ri te^ : 

Ukraine's 

troub led naHonai Airtfoe ' 
began a sawfoui foom:K^ 
toHwigaiYiastTbursd^, 
Air Iftrabw Has 


since 1992 that it ien*£. 


to Budapest but 
to do no doe to 1 
and financial or 


uti*fe 


: Strike Uum&' ■: r 

! L^C-Thursdsv, EWteh Airways 
cabin crews'at Manchester and; 
• B fai foabaro bactad sM» f ■ • 
l action In a baSot by iha * 
Transport and Genera} Workers’ 
■ Union.'.- 

Meetings are now to beheld 

tovyforesbive the tSsputev" 

- which is ‘over ho&Jays and 
aiowahcee affix#® m 
hostesses aid stewards. ■„•.*: 

: Thre^qrarters crftho565 ' 
cabin craw union merrfoers at - 
theakports returned their 
papas h'the&aiot' '■ 

A total of 88 per cent backed 
a strike, write an even bigger 
praporttoffc 33 per cent, *- 
. supported other forms of 
industrial action abort of a 
walkout, sadfoeunton. ‘ 


‘Stunning’ Kansai 
opens its doors 


By MicHyo Nakamoto in Tokyo 


K ansai International 
Airport opened yes- 
terday. “Take-offs 
and landings went 
very smoothly." said Tsune- 
haru Hattori, airport president 
But 19 flights were delayed for 
up to 65 minutes - owing to 
the malfunc tion of an air traf- 
fic-control computer - and he 
acknowledged that the open- 
ing. after seven and a half 
years of construction, did not 
give cause for “unalloyed joy”. 

“We are still learning from 
problems, and if two more run- 
ways are to be built soon we 
will need more support from 
the Kansai region." he said. 

Kansai, is built on a 
man-made island off Osaka and 
is Japan's first major airport to 
operate round the clock. It has 
a daily capacity of 454 arrivals 
and departures. But, partly 
because of high landing fees 


and passenger service charges, 
only 339 international and 469 
domestic weekly flights were 
scheduled by the time of the 
opening. 

For harried business travel- 
lers who do use the airport, 
Kans ai is likely to offer plenty 
of visual appeal with a stun- 
ning terminal building 
designed by Italian architect 
Renzo Piano. 

Transit passengers to other 
cities in Japan will also find 
the airport designed to meet 
their needs, with flights taking 
off to 24 domestic destinations 
from the same terminal build- 
ing. Passengers are only 
required to move either up or 
down a floor by escalator or 
elevator. 

A shuttle that runs along the 
length of the ter minal building 
at frequent intervals ensures 
that moving from one end of 
the long building is a smooth 
and easy process. 


For passengers travelling on 
to one of the nutfor cities 
around Kansai International, 
such as Osaka, Kobe or Kyoto, 
or to other parts of Japan by 
train, the airport offers the 
convenience of direct access to 
the railway station through the 
terminal building. 

If taxis or personal cars are 
the preferred method of trans- 
port, the airport is linked to 
two major expressways that 
ran to major cities, with an 
estimated driving time of one 
hour to Osaka and 70-minutes 
to Kobe. 

Kansai also offers a boat ser- 
vice into Osaka. This takes 
about half an hour. But what- 
ever route is taken, the high 
costs of public transport from 
the airport are guaranteed to 
shock the first-time visitor. 
The 3.75-km bridge tinlrtng the 
airport to the main island costs 
cars Y 1,700 ($17) to cross, the 
JR train ride to Shin-0 saka 



. .... 




Kansai: designed by Italian architect Renzo Piano. 


station is nearly Y3.000, and 
the 35-minute boat ride to 
Kobe, to which there is not 
direct train link, is Y2.490. 

At around 6am yesterday, 
The Crystal Wing was the first 
ferry to make the 30-minute 
journey from Kobe air terminal 
to the airport island. But, due 
to engine trouble, another 


FT 


29 & 30 September 1994 - Madrid 

Timed to precede the annual meetings of the International Monetary Fond and the 
World Bank, the conference will provide a high-level forum to debate key issues 
facing the international banking community. 

SUBJECTS INCLUDE: 

• Future for international banking 

• Banking in Europe - strategies for expansion 
■ European banking privatisation 

• Implications of a single European currency 

• Current concerns in supervising the banking industry 

• Do derivatives pose a major risk to the international banking system? 

SPEAKERS INCLUDE: 

Mr Emilio Botin Rios Dr H Onno Ruding 

Chairman of the Board Vice Chairman 

Banco Santander Citicorp and Citibank, NA 

Dr Josef Ackennann Mr Egldio Giuseppe Bruno 

President of the Executive Board Deputy Chairman 

Credit Suisse Credito ItaUano SpA 

Mr Richard J Boyle Lord Alexander of Weedon QC 

Vice Chairman Chairman 

The Chase Manhattan Bank, NA National Westminster Bank pic 

FINANCIAL TIMES CON FERE NCES 
in association with FT Magazine THE BANKER 

and 


For more information about marketing opportunities, please contact Lynette Northey on 071 814 9770 
FT INTERNATIONAL BANKING Please complete and return to: Financial Times Conferences 


Please tick relevant boxes: 

0 Please send me details about the conference 
0 Please send me details about business opportunities 
0 Please send me details about ‘Hie Banker’ 

Tbc information you provide will be hdd by ua and may be used to keep yon 
informed of FT producer and rued by other selected quality companies for 

mailing purposes. 


Please complete and return to: Financial Times Conferences, 
PO BOX 3651, London SW12 8PH. 

Tel: 081 673 9000 Fax: 081 673 1335. 


Name Mr/Mis/Miss/Ms/Other . 


Job Title Dept 

Company Name - 

Address - 


.PostCode .. 


HN 


(M^d.Btarisaifs V&gtoABantfc ' 
Is to start services' to AustmffafrT 
partnership wriitt Aus&Aan . 
firtheAnsett „ . 

The two carriers tawe famed ■; 

. a mattering ftefooste*' whfchi . ... 

means ‘Vfrglrrwffl-bar offering./- - 
£859 Iflodort-^ciieyr^um: •- 


-.■■■■ Mon;"' \:1Ub 


Thur FH 


■" Passengers v *3 ■fly.VrgixfrorTr- 
■London to Hong Kong sod then 
lake an An&etr flight to. Sydney. 

with connections to Brisbane .; J 
and Mefoouma. 7 here wff be V 
three ifigfea ai week from 
September 10 , Increasing to five 
in foe New Year. 


^28 $ » & 31 ^b 29 


mm 


-O Iti-i-V. *.. 


. ■ r? 


tho NawftnW 


Airlines keep their 
guard up 


C arlos the Jackal may 
be behind bars, Israel 
may be entering into 
peace agreements 
with its neighbours and the 
IRA may have declared a 
ceasefire; bat there is to be no 

qlnrirgnhig of airline security 

procedures. 

As a spokeswoman for 
United Airlines pats it “Secu- 
rity won’t change. We’ll keep 
operations absolutely 100 per 
cent as they are.” This is a 
theme echoed by El Al, which 
delares itself “probably more 
on our guard than before. 
We're certainly not relaxing, 
with peace in the air. Indeed, 
there may be more splinter 
groups forming as a result of 
the peace process, so we have 
to redouble our efforts." 

The big dates in the world of 
airline security, are September 
12 1970 - when Palestinian ter- 
rorists blew up three airliners 
in Jordan, and simultaneously 
attempted to hijack an El Al 
jet at Heathrow; and December 
21 1988 - the date of the 
Lockerbie bombing. The first 
prompted the worldwide intro- 
duction of X-ray scanners and 
metal detectors; while the sec- 
ond led to the present mish- 
mash of regulations, concern- 
ing into: alia the carrying of 
electrical items and the prob- 
lem of identifying which pas- 
sengers are responsible for 
which pieces of luggage. 

Events like these also 
imprinted the notion of. airline 
security on travellers’ minds. 
Other aspects of aviation 
safety (such as airworthiness) 
are easier to forget about; bat 
airlines now work on the basis 
that security must not rally be 


boat the Pearl Wing, had to 
return to Kobe at around 7am. 
The 173 passengers were trans- 
ferred to another boat 
In a related development, an 
accident involving a hydrofoil 
carrying passengers from the 
port of Kobe to the airport 
forced more than 100 passen- 
gers to miss their flights 


Charles Jennings 
looks at the 
security 
implications of 
declining terrorism 

done, it must be seen to be 
done. That it is, in feet, a mat- 
ter of customer comfort to 
make them go through the 
security checks involved in an 
international flight. El Al’s 
famous lengthy cross-question- 
ing of passengers before they 
get on a flight, for instance, 
manages to be both Irksome (it 
hiiBK ages) and at the same 
time profoundly comforting (at 
least a Leila Khaled is less 
likely to be on board). 

Some airlines are so uneasy 
at the prospect of even discuss- 
ing security - in conditions of 
reduced global tension or oth- 
erwise - that they can barely 
allow the word to cross their 
lips. As Air France (which has 
recently re-introduced sched- 
uled flights into Beirut) says: 
“There’s one subject that air- 
lines won’t talk about, and that 
is security." 

A British Airways spokes- 
man did break ranks, and 
promptly tied himself in knots 
trying to say something with- 
out actually revealing any- 
thing: The only answer I can 
give is that a huge part is intel- 
ligence. We liaise with all the 
intelligence authorities around 
the world and adjust our mea- 
sures to suit." Meaning? 
“You’ve got a very high level 
of security measures at all 
times anyway and we can go 
up two or three notches from 
that and then go down a notch 


or two. But it remains at a 
very high level. " 

For the airport authorities, 
as well as the airlines, the feet 
Is that to talk about security is 
to some extent, to breach secu- 
rity. And no (me in their right 
mind is going to advertise, say, 
a slimming-down of baggage 
checks, even if such a thing 
were on the cards. According 
the British Airport Authority: 
The thing about security is 
that we review it constantly 
and we certainly wouldn't be 
making any reductions. The 
process of review never stops, 
it’s an ongoing situation. " 

In feet, much of Britain's air- 
line and airport security is 
mandated directly by the 
Department of Transport. 
There is a bottom line imposed 
by the DoT, below which carri- 
ers may not go; although they 
can add farther procedures as 
they choose. Some of the more 
recent DoT regulations include 
checks on baggage going into 
the holds of aircraft (in addi- 
tion to the hand luggage 
searches introduced some 
years ago); tougher security 
arrangements for airport staff; 
and making tt an offence to 
give false information about 
the contents of one’s baggage. 

Having raised the stakes to 
their current height, there is 
clearly no easy way to lower 
them again. In Japan and the 
US, where the IRA, the Red 
Brigade and the PFLP have not 
been so active, flight security 
can sometimes seem extremely 
relaxed. But elsewhere air trav- 
ellers will continue to face the 
same hours of tedium that they 
have come to know so well 
over the last two decades. 


ARCHITECTURE 


View of Wardour’s 
hidden treasures 

Colin Ameiy on the castle's restoration appeal 


W ardour Castle, in 
Wiltshire, feels 
like the setting 
for Brideshead 
Revisited. It is one of the great 
18th century houses of 
En gland. It was built for Lord 
Arun dell in the 1770s, with 
both a house and chapel 
designed by James Paine. Out- 
side they are severe and 
uncompromising. Inside, they 
both contain brilliant sur- 
prises. In the house, there is a 
staircase that is an architec- 
tural tour de force and the 
whole interior of the chapel is 
a decorative triumph. 

The recent history of War- 
dour has not been entirely 
happy. In 1960 the great house 
became Cranborne Chase 
School. Inevitably new build- 
ings were added, and alter- 
ations were made that changed 
the character of the place. The 
school dosed a few years ago 
and the bouse has been sold to 
he divided into apartments. 

The chapel had an indepen- 
dent existence ran by the Jesu- 
its who have cared for its trea- 
sures. and in 1992 a 
programme of structural repair 
was undertaken. An appeal 
was launched and funds are 
needed to complete the work. 

As part of this appeal an 
exhibition and sale of paint- 
ings has been mounted at 
Christie’s in London. One hun- 
dred artists were commis- 
sioned to paint their impres- 
sions of Wardour and the 
results are on view at Chris- 
tie's in Ryder Street, 
SUames’s, London, SWi, until 
September 9. 

During this week it is not 
just the paintings that are on 
view but also a display of some 
of Wardour's hidden treasures. 
There are historic vestments of 
extraordinary quality as well 
as silver and gold - a reflection 
of the panoply cf worship from 
the 18th centnry. 

Short of visiting the chapel 
itself (Wardour is near Tis- 
bury, in Wiltshire) it would be 
difficult to think of a more 
imaginative evocation of a 








I sWtl 



Wardour chapel: interior is a decorative triumph 

great building than this exhfbi- in the arcane world of the 
Uc ?r.. . ... orphrey and dalmatic, the cope 

Although technically a pn- and the chasuble - theatrical 
vale chapel, it is the size of a yet sacred garments that are a 
major parish church. James Ear cry from the howdL-in cross 
^ in 1778 and stitch garments that pass as 
th ® a 3T J ° hn So ? n ? a* 13 * 1 to vestments in the modem cath- 
m 1790. its visual climax is the olic and Anglican church, 
sumptuous alter which was There are several paintings 
commissioned from that mas- that evoke the chapel well - 
ter of the Roman Baroque, Gia- work by Alan Dodd, Edmund 
comoQnarenghL Fairfax-Lucy, Jane Dowling 

Sl endld ? tuals 313(1 Ricardo Cinalli is some of 
SR. ^ conducted the best. There is enormous 
around tins altor and they variety and work in all media 
by the , veflt ‘ ~ even a set of painted porce- 
tea*** cups and bowl - 
th? to ins P ired by Wardour and made 

the vestmmfs which are some by Melinda Patton. 

^ Of socle- The Idea of encouraging con- 

to temporary artists to contribute 

» tbeir work to help save an 
three^lmensioii^ quality of older work of art is an inspired 

one. Wardour CtopelTS 
Sa531i& 38 celebrated by this 
, ««S°? culllsas ' exhibition and shown to be one 
Pomegran- of the great 18th century 
^ churches of Europe that 

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FINANCIAL TIMES 


MONDAY SEPTEMBER 


5 1994 



MEW YORK 

•MS* «yop*a- 

masts Its autumn ■ 
vsnta.0ftThuR5(jw 

; 

the opening waekfe' 

first night on-. ■ 
s ' ftur *yor»tww:. 
PtodGcfion ijf . . • .. 
'Borodin^ -Prtnce 
Igor, not seen h • 
New Yert since Cay 
Opertobst 
pwxfcjcsttdointaQe. ' 

Recast is traded ■ 

by raverstf Russia] 
Pi*tdpate»and ■ •• 
BMarVyqetaaitrt. \ 
Cfiy BaRetwH ■ -. •• 
c fo eoWigw 
p ‘ Jtav tSaiOareax 
"Hw season raraai * 

November 20.' •'"■• 




MANTUA 

'ttattetwrtbaion .. 

.to be devoted id . 
the RenatesanoB * 
^BTHisijeon.BapJsta-- 
' Aflserti opens attbe" 
PateBO»Te(}d§on 

Safrjnfeqc He no t only 

teftategaeyof ... 

orarw&oqS-DiScflngs ' 

■ ^twoin Mantua), but hfe 
.'iwrtionpBtolng,:.-. • 

ecufptuwtrid ' ' ■; 
arcWtndum put those 
'arisen a par w&i 
; Bteraturaand philosophy 
:;ln the 1$tft century. The 
shew IriciaiMiedmpulep- 
cqrWfW^.sc*® model* 

drawjnf/s, mhksiurets.ancf 
ftSadfiionSvteTlby • 

. Aroerij^imtiaatjpdarv. »-* •■•= 
-musiauar^rancl private oo Be cti on g. 


LONDON 

King Sunny Ademd- 
the Africa Bests bring 
their 1 ji±fri muse to 
Europe this wtett wSh . 

conc er ts at * 
A mste nd artf a 
bkSsq on ■ 
Wednesday, the 
New Maning in ' 
Paris on Thursday ■■ 

and Londcm’sRciyai 

Festival Ha* on - 
Friday- Fusing' " 
traditions Yomba ■ 
fotic tunes wtft 
Ghanaian WgWfe,-- 
the twenty 
voices, aJectrfc. 

■ guBare and 
taBdng drums 
make 

. ■ iTtodra^daic»mu5k^..W»tt» - '. 

RFH usftera beaMe tocope? 


GLASGOW 

Scottish Battel Mats K autumn toirtig 
vyflh a reveal of Peter DameTs 
“CaxfeKaSa". with a fetching Ros»ni 
'score. The company cetebrttfes it 
StorJubBea this season, and the 
production is a memorial to DameC, 


the company. 





LOS ANGELES 

Tha city of angels hosts the largest multi-d&dptinary festival of British arts in North 
America. Hi#*ghts of the festival’s mom than 70 events rdude a back-to-back 
showing of works by the RSC (Shakespeare's Henry VI The Battle for the Throne, 
dractad by Katie fcffichefl) and the National Theatre (David Hare's Racing Demon); 
the premiere of Kenneth Branagh’s frtm Mary Shettey-s Demon); solo performances 
t V Lynn Redgrave, Mariam Margolyes and Steven Berkoff; and an offing] royal visit 
from Prince Charles. The festival opens on Wednesday with a Hollywood Bowl 
concert by the HaBe Orchestra of Manchester, conducted by Kent Nagano. 


Barricades up at the Bastille 

A time-bomb has exploded at the Paris Opera with the sacking of its music director. Andrew Clark reports 


W hen the Paris 
Op6ra Orchestra 
meets today for the 
first time since the 
summer holidays, 
it is unlikely to main* music. The 
players are almost certain to vote 
for a strike in support of their 
sacked music director, Mynng- 
Whun Chung. Without an orches- 
tra, the Op6ra will be unable to 
open its season in two weeks' time. 

A strike at the Op6ra is nothing 
new. It has been a financial admin- 
istrative and artistic mess for the 
past 15 years. Its huge, high-tech 
Bastille headquarters - inaugurated 
in 1989 as one of President Francois 
Mitterrand's grands tranaux - has 
only made matters worse, lurching 
from one catastrophe to the next 
But this dispute is different. It is 
the first major upset to the French 
government's plan to restructure 
the Op&ra, restore its artistic credi- 
bility and reduce its deficit That 
plan places complete executive 
power in the hands of one man - 
Hugues Gall, an internationally-re- 
spected opera administrator who 
currently runs Geneva's Grand 
Theatre. He is due to take up his 
post in Paris next summer. 

Gall, assisted by the Opera's 
interim management opened talks 
with Chung in March, aimed at 
renegotiating the Korean conduc- 
tor’s lucrative long-term contract 
As it stood, the ctm tract invested 
Chimg with artistic powers which 
Gall himself expected to assume. 
Gall wanted to reduce Chung's 
responsibilities, to shorten the con- 
tract and limit his pay. At the end - 
of June, Chung received an ultima- 
tum saying that unless be accepted 
the terms offered, the contract 
would be annulled. On August 12, 
he was dismissed. 

Since then, the conflict has 
descended into a legal tussle, with 
Chung waging a vociferous public 
campaign to portray himself as the 
wronged party. He appeared to win 
an important victory last week 
when a Paris court ordered his rein- 
statement - at least until the 
grounds for his dismissal were clari- 
fied (which might take months). 
But the ruling could not be 
enforced: by a quirk of French law, 
no-one can forcibly enter a public 
establishment against the wishes of 
its manag ement. On arriving at the 
Bastille, Chung and his lawyer 
found their way to the rehearsal 
room barred by the interim direc- 
tor, Jean-Paul Cluzel. and a posse of 
security men. The locks to his office 
had been changed. His furniture 
was Impounded. 

Until now, Chung has had the big- 
gest voice in the Optra’s artistic 
decision-making- He had a free 
hand In choosing repertoire, guest 
conductors, production te ams and 
singers. His contract guaranteed 
him a mmimmn 30 performances a 
year, rising to 50 over an eight-year 


International 


m BERLIN 

CONCERTS 

PhRharmonie Tonight and 
tomorrow: Claudio Abbado conducts 
Berlin Philharmonic Orchestra in 
woks by Prokofiev, Tchaikovsky 
end Stravinsky, with cello soloist 

Natalia Gutman. Tonight 
(Kammermusiksaal): Alfred Brendel 
and Mends play chamber music by 
Mozart and Schubert Thurs: 
Esa-Pekka Salonen conducts Los 
Angeles Philharmonic Orchestra in 
EHiott Carter's Fmat Symphony ana 
Bruckner’s Third- Fri arK * Sat Daniel 
Barenboim conducts Berlin 
Philharmonic Orchestra In works by 
Goldmann and Bruckner. Sun 
momtog: Rafael FrOhbrakde Burgos 
conducts Orchestra and Chorus of 
the Deutsche Oper in an ^ 
aU-Mendelssohn programme, with 
vioNn soloist Vadim Repin- Sun 

morning (KammermusJ^- 

Abbado conducts members or the 
BPO in Bach and Hindemith. Sun 
evening, next Mon: 

Ashkenazy conducts Berlin Radio 
SympW Orchestra In Goldschmidt 
and Mahler. Next Mon 


period. His foe for each performance 
would have increased from 
FFr80.000 (£10,000) in 1992 to 
FFr177.000 (£20,000) by 2000. He was 
also paid a salary as music director. 
The package was worth FFrSJm a 
year at the time of his friami—rii — 
or FFrSm ( flm) by the end of the 
decade. It was a time-bomb fHimlid 
by Pierre Bergfe. Chung’s patron 
and friend of President Mitterrand, 
in the dying months of the last 
Socialist government Barge knew it 
would blow up 'in the face of an 
incoming centre-right administra- 
tion with its own ideas about how 
to run the Opdra. 

Chung’s pay made good head- 
lines, but the crux of his conflict 
with Gall was artistic power. “Gall 
made it dear he had to take all the 
decisions ” says Chung. “Of course 
yon need a strong man at the top. 


but not a dictator. I have never 
taken decisions alone cm casts and 
production teams. In any normal 
situation, the management dis- 
cusses these with the conductor, 
and a decision is taken by mutual 
agreement. Under the terms 1 was 
offered, they could have told me to 
conduct 40 ballet performances and 
1 would have had no choice." 

Chung was appointed shortly 
before the Bastille opened in 1989, a 
Utile-known 36-year old who did not 
even speak French. The Opfira 
orchestra had been decimated by 
months of inactivity. In the five 
intervening years, Chung has been 
the only stable element in the 
Optra's administration. While a 
string of managers came and went, 
Chiing filled the vacuum and accu- 
mulated power. He made the 
orchestra his priority - defending 


its rights, improving standards and 
bringing in lucrative recording 
work. He enjoyed his job at the Bas- 
tille, and wanted to continue. 

Chung’s dedication and skill 
earned him the respect of a notori- 
ously fractious group of musicians. 
“It was anarchy when he came”, 
recalls the cellist Marc LatarjeL “He 
did a good job, he raised our profile. 
We had concerts, recordings and 
tours, so we weren’t always stuck 
in the pit Nobody will do this for us 
in future. We need a music director 
to keep discipline and resolve our 
problems. Now someone wants to 
destroy the only thing that was 
good in this troubled house." 

Gall had always made clear that 
Chung would not figure strongly in 
his plans. He did not need a music 
director; at most, he wanted some- 
one to keep the orchestra in shape. 


While acknowledging Chung’s 
achievements, Gall says the conduc- 
tor’s advisers exaggerated his expe- 
rience and ability. “Chung makes 
himself out to be on the level of the 
top ten conductors In the world. 
The gap between his performance 
and theirs is important If you look 
at Haitink at Covent Garden, he has 
none of the powers in Chung's con- 
tract and not half the money." 

Gall’s brief is to put the Opera in 
order. TO do that he must run it the 
way Rudolf Bing ran the Met for 22 
years, the way Gall’s mentor Rolf 
Iiebermann ran the Opera in the 
1970s - with absolute power gath- 
ered in his hands alone. Those were 
the conditions on which he accepted 
the job. He had no Intention of shar- 
ing responsibilities with Chung. 

Gall set out his plans in a report 
last autumn. He would stick to 


agreed spending limits. He would 
close both theatres (the Palais Gar- 
nier and the Bastille) at different 
times, to carry out the repairs and 
investment necessary to their effi- 
cient running. He would transfer 
the grand niarainai ballets to the 
Bastille, and return a select slab or 
the opera repertory to the Gamier. 
He would provide a quick Ejection 
of what the Opera has been missing 
- mainstream repertory in non- 
weird productions, capable of being 
frequently revived. On the basis of 
these reforms, he hoped to lure 
back the top-rank conductors who 
have shunned the Opfira since the 
Liebermann era. 

Gall is viewed by most observers 
as the one person capable of sorting 
out the Opera's problems. His only 
mistake so for Is to have expected 
Chung to go quietly. 


Pop concert 

Jeff 

Buckley 
moves out 
of the 
shadows 



Mynng-Whnn Chung: way to the rehearsal room was barred by the interim director, Jean-Paul Cluzel, and a posse of security 


I t is Jeff Buckley's misfortune 
that this, his first major 
European tour, will be the one 
in which his work Is 
repeatedly compared with that of 
his late father, Tim. He had better 
just get used to it and move on. As 
his debut album, Grace, shows, he 
has the talent and confidence to 
move out of the shadow of one of 
the brightest stars in the fragile 
firmament of 1960s 
singer-songwriters. 

Where Buckley p&re tended 
towards jazz-tinged melancholy and 
introspection, Jeff prefers a more 
muscular approach, happy to blast 
away at his guitar when the 
occasion demands, bat using his 
similarly soaring voice to ride over 
the crashing chords as he 
demonstrated on Friday night in 
the (fork, dingy atmosphere of The 
Garage in Highbury. 

More successful are the songs 
which portray a keen intelligence 
and willingness to exper i ment of 
which his father would have been 
proud: “Mojo Pin", all angles, 
floating vocals and unexpected key 
changes; the rhythmically buoyant 
and exuberant “Grace”; the 
rodder, slide guitar-led “Last 
Goodbye”. The trouble with both 
album and live performance is that 
these stand-out tracks come rather 
too early; they establish a standard 
of excellence which proves difficult 
to maintain. 

While one can understand 
Buckley’s desire to slow things 
right down and show off the range 
and rich tone of his voice, his cover 
versions of “Lilac Wine” and 
Leonard Cohen's “Hallelujah" are a 
wasted self-indulgence, especially 
when his own material is so strong. 

It took the Jim Morrison-like 
“Dream Brother” and the heavy 
metal “Eternal Life” to zap some 
energy bade into the proceedings, 
although by this time the level of 
chatter among the audience was 
getting disturbingly load. 

What remains unequivocally true 
is that Buckley is a star in the 
making, from his self-deprecating 
way with his good looks (pointing 
out to the audience a “pimple 
which Sony couldn't pop”) and his 
hip put-downs to the startling 
ambition of his song-writing. By 
the end of this tour, Tim will begin 
to be respectfully forgotten, and 
Jeff will pick np a privileged 
mantle indeed. 

Peter Aspden 

Jeff Buckley’s European tour ends 
in Paris on September 22. 


(Kammerrnusfcsaal): Radu Lupu 
piano recital (2548 8132} 
Schauspteftaus Thurs, Fri and Sat 
Michael Schoenwandt conducts 
Berlin Symphony Orchestra in works 
by Webern, Kuhlau, Mozart and 
Schubert, with soprano Nathalie 
□essay. Sun afternoon: Hartmut 
Haenchen conducts CPE Bach 
Orchestra in a Bach programme 
(2090 2156) 

Jasus-Chfistns-Kirche Sun: Lothar 
Zagrosek conducts Berlin Radio 
Orchestra In a programme of music 
by Barthold Goldschmidt, including 
Ns ceAo and clarinet concertos 
(2548 925Q) 

OPERA/DANCE 
Stnatsoper untar don Linden 
Tonight final guest performance by 
Roland Petit’s Ballet National de 
MareeJHeL Sep 17, 22, 23, 27, 29: 
Rudolf Nureyev’s production of 
Raymonds (200 4762/2035 4494) 
Deutsche Oper Tomorrow, Thurs: 
Die ZauberflAta Wed: Katya 
Kabanova with cast headed by 
Karan Armstrong. Fri, Sun: ballets by 
three young American 
choreographers. Sat Aribert 
Reimann’s 1992 Kafka opera Das 
Schloss, starring Wolfgang Schfine. 
Next Tubs: Christa Ludwig song 
recital (341 0249) 

Hebbal-Theater fit Ren6 Jacobs 
conducts first night of Jean- Louts 
Martinoty’s Sehweteingen 
production of Florlan Leopold 
Gassmann's L'opera seria, with cast 
headed by Rensrto Capecchi, Robert 
Gambill, Jeffrey Francis aid Janet 
WHflama Reprated Sep 11, 13, 15 
and 18 (200 4702/2035 4494) 
Komlsehe Oper Fri: Cosi fan tutte. 
Sat Cav and Pag. Sun: Giulio 
Cesare. Sep 16: new production of 


Berthold Goldschmidt’s Der 
gewaltige Hahnrei (229 2555) 

THEATRE 

A new stage adaptation of Pushkin's 
Boris Godunov, directed by Gero 
Troika, opens on Sat at VolksbOhne 
am Rosa Luxemburg Plate (292 
3394). A musical based on the tale 
of Cyrano de Bergerac opera on 
Sun at Theater des Westens, with 
previews from Wed (882 2388) 

■ NEW YORK 

THEATRE 

• PhtedeJphla, Here I Ckxneh at 
last, a new show on Broadway - and 
a play, no less. Milo O'Shea, Robert 
Semi Leonard and PauSne Flanagan 
star in Brian Friers drama about the 
rocky relationship between father 
and son In rural Ireland. Directed by 
Joe Dowling, final previews 
tomorrow and Wed, opens on Thurs 
(Roundabout 1530 Broadway at 
45th St, 869 8400) 

• Three Tall Women: a moving, 
poetic play by Edward Albee, 
dominated by the huge, heroic 
performance of Myra Carter. She, 
Jordan B^cer and the drofi and 
delightful Marian Seities represent 
three generations of women trying to 
sort out their prats (Promenade, 
Broadway at 76th St, 239 6200) 

• Angels in America' Tony 
Kush ref's two-part epic conjures a 
vision of America at the edge of 
disaster. Part one is Millenium 
Approaches, part two Perestroika, 
played on separate evenings {^Valter 
Kerr, 219 West 48th St, 239 6200) 

• Blood Brothers: Willy Russell's 
musical about twins who, separated 
at birth, eventually meet rad faO in 
love with the same gbi. The show 


has been running on Broadway for 
18 months, but the recent addition 
of singer Carole King has provided a 
lithe heat to the box office (Music 
Box, 239 West 45th St, 239 6200) 

• Caroused: Nicholas Hytneris 
bold, beautiful National Theatre 
production from London launches 
Rodgers and Hammerstein towards 
the 21st century (VMan Beaumont, 
Lincoln Center, 239 6200) 

• Crazy for You: the musical 
based on Gershwin's Girl Crazy is 
now in its third year on Broadway. A 
highlight of this gfitzy entertainment 
is Susan Stroman’s choreography 
(Shubert. 225 West 44th St 239 
6200) 

• Guys and Dolls: a top-notch 
revival of the 1950 musical about 
the gangsters, gamblers and 
good-time girls around Times 
Square (Martin Beck, 302 West 45th 
St 239 6200 

• Kiss of foe Spider Woman: pop 
star and ex-Miss America Vanessa 
Williams has confidently assumed 
the starring role in the long-running 
Kander and Ebb musical directed by 
Harold Prince (Broarfouret 235 West 
44th St 239 6200) 

OPERA/DANCE 
State Theater New York City 
Opera's autumn season begins on 
Thurs with Madama Butterfly. 
Borodin's Prince Igor, opening on 
Sat is foe company’s first new 
production of foe season: Guido 
Ajmone Marsan conducts a cast 
headed by Valery Alexeyev, Vladimir 
Grfshko and Oksana Krovytska, wtfo 
choreography by Damian Woetzel of 
New York City Ballet The season 
runs tin Nov 20. Repertory in the 
opening month Includes Carmen, 
Tosca, Delibes' Lakm6 and Die 


Zauberfldte (870 5570) 

Metropolitan Opera The opening 
night gala on Sep 26 features 
Placido Domingo in Puccini’s fl 
Tabarro and Luciano Pavarotti in 
Leoncavallo's 1 Pagfiacd, conducted 
by James Levine. Teresa Stratas 
and Juan Pons sing in both operas. 
The first new production Is 
Shostakovich’s Lady Macbeth of 
Mtsensk, opening Nov 10 (362 6000) 
CONCBTTS 

Avery Fisher Hall The New York 
Philharmonic begins its new season 
on Sep 21. The orchestra's music 
director, Kurt Masur, conducts the 
first three weeks of concerts (875 
5030) 

Carnegie Hail The Academy of St 
Martin in the Fields, with mezzo 
Cecilia Bartoii, opens foe season on 
Sep 29 (247 7800) 

■ PARIS 

OPERA 

• The Opdra Bastille is due to 
open the season on Sep 19 with a 
new production of Simon 
Boccanegra, but the management is 
in the throes of a legal tussle with Its 
sacked music director Myung-Whun 
Chung - a battle which may affect 
the opening data. The season also 
includes Madama Butterfly, Le nozze 
di Figaro, Lucia di Lammermoor, La 
Damnation de Faust, Un balk) in 
maschera, Iphigfrile en Tauride, Die 
Zauberflflte and I Capuleti a I 
MonteccN (4473 1300) 

• The new Ring production at the 
Ch&telst continues with Siegfried on 
Oct 14 and Gotterriammerung on 
Oct 16. There will be two complete 
Ring cycles between Oct 31 and 
Nov 13 (4028 2840) 

DANCE 


• One of France's leading young 
choreographers, Philippe Decouffo, 
brings his troupe to Theatre de la 
VUle for two weeks of performances 
starting on Fri (4274 2277) 

• The Paris Opera Ballet’s 1994-5 
season takes place mainly at the 
Opera Bastille. It opens on Oct 25 
with the traditional Grand 
followed by Balanchine's Le Palais 

de crista] (Symphony In Q to Bizet, 
The Four Temperaments to 
Hindemith, and Jerome Robbins' 
Glass Pieces to Glass (12 
performances till Nov 17). The 
season also includes a young 
dancers programme, Nureyev's 
production of Swan Lake, a triple bffi 
including works by Balanchine and 
Martha Graham, John Neumeier's 
Magnificat and a Nijinska-Nijinsky 
programme (4742 5371) 

CONCERTS 

Semyon Bychkov conducts the 
Orchestra de Paris in foe opening 
concerts of the new season at Salle 
Pleyel on Sep 14 and 15, with piano 
soloist Radu Lupu. The orchestra 
spends foe rest of foe month on 
tour in Austria (4561 0630) 

FESTIVAL D’AUTOMNE 
This year’s festival runs from Sep 20 
to Dec 30. Highlights include Peter 
Stein's Moscow staging of foe 
Orestes, a Robert Lepage 
production, a Bob Wilson adaptation 
of Dostoyevsky, and The Merchant 
of Venice directed by Peter Sellars. 
The dance programme is headed by 
Trisha Brown Dance Company, and 
there is a special focus on the music 
of Gyorgy Kurtag (Festival 
d'Automne d Paris, 156 rue de 
Rhrofl, 75001 Paris. Tei 4296 1227 
Fax 4015 9288) 


ARTS GUIDE 

Monday: Botin, New York and 
Paris. 

Tuesday: Austria, Belgium, 
Netherlands, Switzerland, Chi- 
cago, Washington. 
Wednesday: France, Ger- 
many. Scandinavia. 

Thursday: Italy. Spain. Athens. 
London, Prague. 

Friday: Exhibitions Guide. 

European Cable and 
Satellite Business TV 

(Central European Time) 
MONDAY TO FRIDAY 
NBC/Super Channel: FT Busi- 
ness Today 1330; FT Business 
Tonight 1730. 2230 

MONDAY 

NBC/Super Channel: FT 
Reports 1230. 

TUESDAY 

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

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports 1230 

Sky Nows: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430, 
1730: 







14 


FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


Samuel Brittan 


Aim at the climate, 
not the weather 



A book which 

r - PtW made a lasting 
impression on 

- me ^ m y last 

year at high 
school was 
Peter Drueker's 
The End of Eco- 
nomic Man, 
published in 1939. Although 
the author had already long 
been resident in the US, it was 
in the best tradition of central 
European speculative thought 
His thesis (speaking from 
memory) was that Nazism was 
neither a form of capitalism 
nor of socialism, but a revolt 
against the whole utilitarian, 
nicely calculated “lore of less 
or more", in favour of more 
primitive collective urges. 

In subsequent years Drucker 
has become best known as an 
American management guru; 
and, as someone who would 
not be allowed to manage the 
proverbial whelk-stall, I lost 
track of him. But J could not 
believe that he had lost his 
wider interests; and sure 
enough, his list of public works 
shows that he has continued to 
reflect on society, ideas and 
politics. His latest venture, 
published last year when he 
was 84, is a kind of summa. 

Although entitled Post-Capi- 
talist Society (published by 
Butterworth-Heinemann), it is 
free both of Spenglerian gloom 
and of the posturings of futu- 
rologists. Instead, he focuses 
on trends already visible. He is 
now sure that market values 
are here to stay and regards 
lon g in g for an imaginar y medi- 
eval past as mainly a reflection 
of ignorance of what the Mid- 
dle Ages were really like. 

The emerging society is post- 
capitalist in the sense that the 
Marxist vision of a few private 
owners versus an army of pro- 
pertyless workers Is dead. 
Indeed, workers own the enter- 
prises through their pension 
funds. Moreover, physical capi- 
tal is no longer do minant and 
is now subordinate to what 
mainstream economists call 
human capital and Drucker 
prefers to call “knowledge". 
Mainstream economists may 
say that he is unduly preoccu- 
pied with Marxism and the 
reaction to it and they no lon- 
ger think of variables such as 


Land, Labour and Capital In 
upper-case letters, but of innu- 
merable products and factors 
of production designated by 
algebraic letter. For this very 
reason, much of their work is 
cold and uninformative. 

As it is based on current 
realities, Drueker’s vision of 
the knowledge society cannot 
be entirely surprising. But the 
all-important d trails are more 
perceptively highlighted than 
elsewhere. For Instance, the 
emerging society is individual- 
istic - it is toll of specialists 
who cannot be bossed about by 
their superiors who lack the 
knowledge to do so - but it is 
still highly dependent on 
organisations. 

Drucker has spotted that 
“contracting out" is the Big 
Idea common to advanced cor- 
porate practice, privatisation 
schemes and voucher propos- 

Drucker has 
spotted that 
'contracting out* is 
the Big Idea in all 
sectors 

als for schools and universi- 
ties. The key is that people 
should concentrate on what 
they are trained to do and do 
best When cleaning is done by 
directly-employed Mrs Mops, it 
will usually be a low-grade 
activity hardly worth the 
attention of the deputy chief 
executive. Contracted out to a 
specialist company, it becomes 
a principal activity in which 
employees can take a pride - 
as I have seen when staying 
late at the office. 

On the larger question of the 
nation state, Drucker points 
out that it has lost its domi- 
nance, but it is stQl the only 
tolly developed political insti- 
tution. Indeed, the effect of 
money and info rmatio n becom- 
ing transnational is that states 
can be of almost any size. 
When his native Austria was 
forcibly separated from the 
Hapsburg empire after the first 
world war, it was universally 
condemned (even by its own 
inhabitants) as too small to 
survive. Yet it has recently 
prospered, along with even. 


smaller states like Slov enia. 

One of Drueker’s most elo- 
quent asides is on the futility 
of military aid to friendly 
regimes. “To the threat if you 
do not give us these arms well 
get them elsewhere, the proper 
answer is: go ahead." In no 
instance has such aid stabi- 
lised a region; too often the 
recipients became “interna- 
tional terrori st s who use the 
military aid they receive to 
turn their country into a land- 
based pirate ship to terrorise 
the international community”, 
as Saddam Hussein did. 

Drucker Is also always inter- 
esting on Japan, which he 
treats as a traditional nation- 
state. Like many European 
countries before the first world 
war, Japanese governments 
have been certainly prepared 
to give their local industries a 
helping hand, but stayed clear 

Of wngincartrig or maa - 

sive expenditure prog rammes . 

In the end, the reason why I 
decided to write about Post- 
Capitalist Society is that, in a 
couple of paragraphs, he 

mu fare mnn> cancc of marm . 

economic policy than most life- 
time specialists. “Every gov- 
ernment promises to cure 
recessions. But this is pure 
quackery. No government has 
been able to deliver.” Political 
leaders, he argues, should 
instead try to re gain ftp ability 
to avert major depressions. 

This means balancing bud- 
gets. not only in normal times 
but even in modest recessions, 
so that g ov er nments rsm afford 
to borrow to invest In the 
infrastructure, which is always 
in bad repair, when a real 
slump threatens. How to do so 
without encouraging the mega- 
state on which Drucker is as 
scathing as anyone is, of 
course, a problem. But he has a 
good point when he argues 
that recent Japanese attempts 
to encourage consumption 
instead sparked off a property 
boom from whose residue the 
country is still recovering. 

Drueker's central economic 
point, however, is that govern- 
ments should concentrate on 
inflnimc in g the rfimate Instead 
of on futile attempts to change 
the weather - a fruitful anal- 
ogy, which it is astonishing 
has not been used more often. 


F or much of this year 
US-registered explora- 
tion rigs have -been 
flocking to the Gulf of 
Mexico to take part in what 
promises to be one of the most 
remarkable chang es in the for- 
tunes of an ofi-producing area. 

After nearly 45 years of pro- 
duction, (me of the world’s 
most extensively drilled pieces 

of oil and gas-bearing seabed is 
attracting renewed interest 
from oil companies - in spite 
of relatively low world oil 
prices. 

The reason is that new tech- 
nology has given oil companies 
the ability to explore large, 
geologically-complex areas, 
which were previously not 
thought to contain oil, or 
which defied conventional 
exploration methods, Industry 
observers say the. new reserves 
in the Gulf of Mexico that can 
now be tapped could be large 
enough to slow the steady 
decline in overall US domestic 
production. 

The new techniques could 
also extend the productive life 
of other mature areas, includ- 
ing the UK and Norway’s 
reserves in the North Sea. 

The resurgence of interest in 
the Golf of Mexico results from 
two innovations. One is the 
growing technical ability .to 
operate oil production plat- 
forms in deep water. The other 
is the extensive use of a new 
seismic technique which, com- 
bined with advances in com- 
puting power, is pinpointing 
oil and gas reserves where pre- 
viously they, could not be seen. 

The first of these innova- 
tions is the most visually dra- 
matic. Until recently, most of 
the world’s offshore oil plat- 
forms sat above a lattice work 
of steel, firmly fixed to the 
ocean floor. But the volume of 
steel needed to fix a deep- water 
platform to the seabed would 

main* them tTTMwmmqir!. 

To overcome this problem, 
oil companies working, in the 
Gulf of Mexico are using the 
first of a new generation of 
floating structures known as 
“tension leg platforms”. These 
are held in place by 12 steel 
pfces, each more than half a 
mile long, that run from the 
floating hull to the ocean floor. 
The design eliminates -most 
unwanted vertical movement 
while allowing the struct u res 
to move with the waves. . 

The first of these new struc- 
tures came into operation in 
April when production com- 
menced at Shell Oil’s Auger 
platform in the Gulf of Mexico. 
It lies in 2360 feet of water, a 
US record and one of the deep- 
est ail platforms in the world. 
Anew US depth ream! will be 
set in 1996 when Shell and its 


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Truly, deeply 
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Oil companies are successfully tapping previously 
inaccessible reservoirs, says Robert Corzine 


partner, British Petroleum, 
install a $L2bn (£77Qm) plat- 
form in 2333 feet of water over 
the Mars field, found in 1989 
and the largest discovered in 
the gulf in 20 years. 

Lessons learnt In the Gulf of 
Mexico are being applied else- 
where. Shell and BP are part- 
ners in two UK deep-water pro- 
jects west of the Shetland 
Islands that are currently 
being assessed for production. 

Mr Bob Howard, vice-presi- 
dent of domestic opaatkms for 
Shell OH, says the new drilling 
technology could help exploit 
an additional 8bn-l5bn barrels 
of oil in the Gulf of Mexico. In 
contrast to the small reservoirs 
common in the shallow water 
of the gulf, the new deep-water 
fields have much larger 
reserves. In the early 1980s, 
most geologists thought that 
these off-shore deep-water 
firidg contained few 0 0-bearing 
sands, says Mr Howard. 

If these estimates are con- 
firmed, it would place the Gulf 
of Mexico deep-water reser- 
voirs in the same league as 
Alaska’s Prudhoe Bay, big- 
gest single off field in the US, 
which accounts for a quarter of 
the country’s daily output of 
63m barrels. 

The change in exploration, 
outlook was largely brought 
about by the second innovation 

that is «i pnnwng up mnr p of Hip 

world’s oil reserves - the use 
of a three-dimensional seismic 
technique. This has allowed 
geologists to “petit around cor- 
ners”, says Mr Howard. 

The new technique uses the 
same principle as conventional 
two-dimensional seismic sur- 
veys. Air guns towed by boats 
generate sound waves. The 
reflections from rocks under 
the seabed are picked up by 
lines of underwater sound 
receivers, known as hydro- 
phones, towed by the boats. 

But three-dimensional sur- 
veys use many more air guns 
and hydrophone lines placed In 
parallel That allows seismic 
“ snapshots" to be faifcnn every 
25 metres, compared with typi- 
cally every 2km-3km in the 
past. The large amount of data 
generated would be useless, 
however, without rapid 


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advances in computer process- 
ing. Mr David Work, group 
vice-president for exploration 
at US oil company Amoco in 
Houston, says increased com- 
puter power has cut the cost 
and the time It takes to inter- 
pret the data. “It now costs 
(50,000 to process the same 
information that five years ago 
cost $250,000,” he says. 

BP officials say such techni- 
cal advances have cut the time 
between tha first mamie shot 
being fired and an exploration 


well being drilled to as little as 
six months. A couple of years 
ago the process would have 
taken two years. 

The (lbn or more that it 
to build a new genera- 
tion deep-water platform has 
restricted interest to big oil 
companies. But ones 

are »wnng those leading the 
way in using three dimen- 
sional seismic surveys to 
explore beneath the seabed, 
where sheets of salt until 
recently formed a impenetrable 
blanket over as much as 60 per 
nwit of the Gulf of Mexico. 

“Five years ago if you hit 
salt you would stop drilling," 
says Mr Clive Fowler, 
vic&president of Amoco’s off- 
shore business uni t in New 
Orleans. The two-dimensional 
qw'gmtr technique then in use 
gave geologists insufficient 
detail to determine where the 
salt ended and any oil-bearing 
rocks began. But three- 
dimensional seismic combined 
with computer power have 
helped geologists to “see” 
below the salt sheets, which 
can be about 5,000ft thick. 

The race to discover new 
fields in the Gulf of Mexico 
began last year when a consor- 
tium comprising Philips Petro- 
leum, Amoco and Anadarko, a 
US independent explorer, 
announced a big commercial 
sub-salt discovery in the gulf. 
That set off competition to 
secure new government leases 
in areas covered by the salt 

Experts are divided over 
whether the sub-salt reserves 
will rival those in deeper 
water. But “if the sub-salt play 
is for real, it could be like 
raffing the dock back 30 years 
in the Gulf of Mexico”, says 
Howard, Weil, Labouisse, 
Friedrichs, the New Orleans 
broker specialising in the 
energy industry. 

Unlike the deep-water finds, 
many of the most interesting 
sub-salt areas are in shallow 
water close to pricting plat- 
forms and pipelines. That 
should keep development costs 
low. But even with the advan- 
tage of existing infrastructure 
and new seismic feobu riq ues, 
Mr Work does not expect the 
commercial success rate in 


developing sub-salt fields' to 
lead to Mg improveinsnta frcxni 
the 10-32 par cent success rate 
in traditional areas. 

There are many technical 
problems, including the diffi- 
culty of drilling through the 
plastic-like salt without cans* 
tog the well walls to collapse. 
Some industry observers pre- 
dict that there will be “many 
disappointments". 

Earlier this summer, Phili p* 
and Anadarko announced the 
abandonment of a sub-salt 
exploration wen due to prob- 
lems with the well, even 
though it had hit large 
amounts of oil and gas. 

Some ail executives believe 
the full potential of the gulf 
will not be realised without 
government help. They say the 
high risk associated with deep- 
water development means that - 
as much as half of the poten- 
tial reserves might not be 
exploited unless the govern- 
ment provides royalty relief or . 
a production tax credit — 
Both proposals are being 
considered to Washington. -But 
Ms Hazel O'Leary, energy sec- 
retary, says any relief would 
have to be “revenue neutral”, . 
and sot add to the federal bud- 
get deficit The industry says 
any financial aid would pay for 
itself with up to 100,000 jobs 
created by full-scale, deep-wa- 
ter development 

B ut even if the full 
potential iff the Gulf 
' of Mexico is realised, ~ 
it is unlikely to be 
enough to reverse the decline 
in US domestic production, 
caused mainly by the deple tion . 
of mature onshore fields. 

The government says large 
reservoirs of oil remain to be 
discovered in US coastal 
waters apart from the Gulf of 
Mexico. But most of these 
areas are covered by Congres- 
sionally-imposed environmen- 
tal bans an drilling. - 
The impact of the technical 
innovations on the reserve 
base and cost structure on. the 
US oil industry will be substan- 
tial, however, even if their 
application is mainly confined 
to tiie Gulf of Mexico and other 
existing oil regions. 

to addition to pinpointing 
.now reserves, three- 
dimensional seismic surveys of 
existing Adds have uncovered 
nearby deposits mtasad in ear- 
lier studies. The technique has 
also given companies a better 
idea of how more oil and gas 
can be extracted from an exist- 
ing reservoir, while the 
increase in information avail- 
able to geologists has reduced 
the number of expensive, 
exploratory weQs that need to 
be drilled in prospective fields. 



LETTERS TO THE EDITOR 


Number One Southwark Brii 

Fax 071 873 5938. Letters transmitted should be dearly typed 


London SE1 9HL 

not hand written. Please set fax for finest resolution 


Better mechanism 
needed so legal aid 
system not abused 


From Mr Drydm GHUng-Smith. 

Sir, John Mason (“Cheap ride 
on trial”, August 30) rightly 
draws attention to the scandal 
of legal aid payments to 
tycoons facing criminal 
charges, while help for the gen- 
uinely poor Is being more 
tightly rationed. In many cases 
the apparently easy availabil- 
ity of legal aid to the astute 
fraudster has resulted in an 
unwelcome burden an indus- 
try- 

The burden is borne by 
employers (and faUn dispropor- 
tionately on smaller employ- 
ers) who take ex-employees to 
court following their discovery 
of in-house fraud, usually at 
senior level. The cost of mak- 
ing an example of such persons 
can be prohibitive if the offend- 
ers can fight a long war of 
attrition funded by state legal 
aid. 

The state should be encour- 
aging and not discouraging 
public-spirited employers from 
bringing fraudsters to book. 
Without this deterrent indus- 
try would risk even larger 
losses through fraudulent mis- 
appropriation of funds. It is 
also a fact of life that the 
fraudster, who has been able to 
outw i t his company’s security 
checks, is best equipped to out- 


smart the legal aid system. 

Frustration knows no 
bounds for a company spend- 
ing vast s ums in legal fees in 
the task of bringing a crooked 
former director to book, not 
only when he miraculously 
“divests” himself of substantial 
assets in order to qualify for 
legal aid, but when he also 
qualifies for income support so 
that the state pays his mort- 
gage interest and annual tax 
on the grounds that his own 
company is only paying him a 
pittance for working eight 
hours a week, because he 
needs the rest of his time to 
prepare his defence. 

Sadly, this pattern of experi- 
ence has been the lot of too 
many- UK companies. A more 
effective mechanism for pre- 
venting such abuse of the legal . 
aid system would not only ben- 
efit the tax paya 1 but also the 
large number of UK companies 
for whom the costs of their 
continuing war against fraud 
has been grossly inflated by 
the apparent ease with which 
wealthy fraudsters have been 
able to quality for legal aid. 
Dryden r»ni trig - Smith . 
managing director, 

EBS Management, 

30 Finsbury Square, 

London EC2A 1SB 


Legislation has clearly 
proved to be solution to 
cutting credit periods 


From Mr Bo GOranstm. 

Sir, You contend that coun- 
tries with extensive legislation 
on late payment typically have 
longer credit' periods than in 
the UK (“Venturing capital", 
August 25). You are right in 
one case - France has credit 
periods averaging around 56 
days compared with 81 in the 
UK. However, France has only 
recently introduced statutory 
interest and other measures 
and long credit times are mare 
a factor of French culture than 
anything else, to all other 
cases, you are wrong. Ger- 
many, The Netherlands, Swe- 
den, Norway and Finland, all 
of which, have had extensive 
legislation against late pay- 
ment for some years, have 
shorter credit periods ftm in 
the UK, with the lowest bring 
20 days in Germany. This has 
been confirmed by research 
from the Cammisaon itself and 
many other organisations, 
including Intruzn Justitia. 

You say payment periods in 
these countries have length- 
ened recently. True, they 
lengthened by a few days doe 
to the European recession, but 
in several countries they are 
now improving again. Also, 
these few days one way or 
another do not chang a the fact 
that aZL these countries have 
much lower late payment peri- 


ods than in UK, in some cases 
one third the length - pay- 
ments to Sweden are on aver 
age seven days late compared 
with 23 days late in UK 

Voluntary measures encour- 
aging companies to pay on 
time are what you suggest to 
deal with the serious problem 
of late payment. You neglect to 
mention, however, that such 
voluntary measures have been 
tried in several different forms 
by the Confederation of British 
fcxtasfry and the government 
for the last seven or eight 
years with absolutely zero 
effect 

It appears very clear to me 
and obviously the European 


every other western European 
government, that legislation is 
the only solution. All the facts 
prove that where legislation 
has been implemented it has 
improved the situation over 
the medium to long tom. ft. is 
therefore beyond me and many 
others why the British govern- 
ment should insist an continu- 
ing with purely voluntary 
schemes. It seems strange'that 
the Financial Times should 
take the same view. 

Bo Gdranson, 
chairman, Intram Justitia, 
Straiomskglaxm 1013k 
NL-1077 XX Amsterdam, 
Netherlands 


Mitigating cost of contract termination 


From Mr Martin Winter. 

Sir, Those concerned about 
large payments to directors on 
termination (“Insurers join 
outcry against large pay-offs", 
August 20) of contract should 
always refer company boards 
to the Companies Act 1985, sec- 
tions 312 and 316(3). Any pay- 
ment will require shareholder 
approval unless it is a bona 
fide payment by way of dam- 
ages for breach of contract or 
pension for past service. 

English contract law 
requires that any party suing 
for breach of contract must 
mitigate his loss. To the extent 
lpijft is mitigated the damag re: 
claim is reduced. The claim 
will similarly be reduced if the 
party could, but failed, to miti- 
gate his lose. 

If the terminated director is 
able to obtain another job at 


the same salary on the day 
after leaving (and be is obliged 
to nmiw efforts to find fresh 
employment as soon as possi- 
ble) his entitlement to damages 
will be extinguished. While 
there will always be a judg- 
ment on the extent to which 
mitigation is possible, it may 
be a relatively rare case where 
none is possible over, say, an 
tmexpfred three-year period of 
a contract - it requires the 
judgment that the person con- 
cerned will not work at afl dur- 
ing that period. If the view can 
so readily be takm that the 
services of the terminated 
director are so little in 
demand, perhaps shareholders 
are gnritlrf to wonder whether 
the executive should have been 
taken on in the first place. 

While welcoming the focus 
on length of existing service 


agreements, shareholders may 
lightly want to assure them- 
selves that mitigation princi- 
ples are properly applied on 
any termination. After all. any 
payment made by boards with- 
out appropriate consideration 
of what mitigation -is possible, 
without proper reference to 
shareholders, will, in the 
words of section 312, “be 
unlawful . . 

Perhaps a board might even 
consider continuing to pay the 
director concerned over the 
unexpired period of his con- 
tract or until he find? a new 
job - whichever is the sooner. 
This threat can inject realism 
into negotiations with a 
departing executive. 

MSrtin Winter, 

Biddle & Co, solicitors, 

1 Gresham Street, 

London EC27 7BU 


Ringing out 
the old 


From Mr Alan BtorkodO. 

Sir, Mrs Florence Gflkes did 
indeed see a button A and B 
payphone on the inland of Soay 
an August 1 (Letters, Septem- 
ber 1 ). However, BTs large 
Investment programme caught 
up with the kiosk on August 
22, when the old mechanism 
was replaced by a modem unit 
Papa Stour 224 to the Shetland 
Isles was similarly updated on 
August 25, thus assuring it of 
its place to telecommunica- 
tions history as the UK's last 
working public button A and B 
payphone. 

Alan QjorkvoIL, 

BT payphone manager 
Scotland, 











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FINANCIAL TIMES 


MONDAY SEPTEMBER 


5 1994 


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FINANCIAL TIMES 

Krssasssi 

Monday September 5 1994 


The chahce for 
a Euro-debate 


Last week’s proposals from France 
and Germany for building a "hard 
care” of states at the centre of 
Europe launch an essential debate 
on the fhtnre of the European 
Union. They mark an end to the 
uneasy truce over the pace and 
scope of integration that had pre- 
vailed since ratification of the 
Maastricht treaty. 

The suggestions from Mr 
Edouard Balladur, the French 
prime minister, and Germany’s 
governing Christian Democrats 
address the question at the heart 
of the Ell's Intergover nmenta l 
conference in 1996: how can the 
Union remain an integrated struc- 
ture while embracing an ever-in- 
creasing number of member 
states? 

The challenge is to build a 
Union that will be more numerous 
in its membership, more effective 
in its derirfon -maWtig more open 
in its relations with the rest of the 
world, more competitive in its eco- 
nomic structures, and more capa- 
ble of winning loyalty from its cit- 
izens. 

These are goals -to which not 
just France and Germany but 
Britain too must pledge support 
Since an expanded Europe will be 
more diverse, it win have to be 
flexible enough to embrace vary- 
ing patterns of integration. Unpal- 
atable though it may be far some 
countries, Europe must .accept the 
inevitability of a multi-speed 
future without in the process 
allowing its decision-making 
machiner y to become hopelessly 
cumbersome. 

The desire to open the EU to the 
east is a top priori t y for several 
member states tnritiriing Ge rmany 

and Britain, and rightly so. Bein- 
forcing . parijamentary democracy 
and market capitalism in central 
and eastern Europe is vital to the 
entire continent’s stability. But 
unless EU governments find the . 
right formula for enlargement, the 
process could well aggravate the 

gristing wtrafnfl in file Union. Wid- 
ening and deepening - enlarge- 
ment and integration - will not 
prove easily compatible. 

Huge strains . 

For a start, enlargement will 
impose huge strains cm the EU 
budget, both in agriculture and in 
relation to the structural funds. 
The German document says a 
fresh round of refrains in the Com- 
mon Agricultural Policy will be 
needed to enable the central and 
eastern European states to join 
the Union around the year 2000. 
This is a welcome shift in think- 
ing since, up to now, Bonn has - 
shrunk from publicly accepting 
the need for such, painftil adjust- 
ments. The message needs' .to' be- 
brought home with brutal clarity, 
not only In France but also in the 
Medit e rranean states that remain" ' 


major net beneficiaries from agri- 
cultural and structural funds. 

Still more potential for discord 
lies in the Goman admission 
Italy, Britain and Spain are 
unlikely to be in the group foa* 
first accomplishes economic and 
monetary union. This assertion, 
although controversial, is little 
more than a statement of the obvi- 
ous. In monetary affairs, as well 
as in immigration and justice mat- 
ters and foreign and ttefan eg pol- 
icy, different EU groupings are 
already cooperating with varying 
degrees of intensity, as Mr John 
Major pointed out three months 
ago in espousing a “multi-speed, 
multi-track Europe”. 

Hard core 

However, the existence of a 
"hard core” for the third stage of 
Emu does not Inevitably mean the 
same group constituting the core 
for all other forms of co-operation. 
And it does not mean that coun- 
tries outside Emu should not play 
a leading part in other fields. 
Italy, Spain and indeed Britain are 
strongly committed to develop- 
ment of a common foreign and 
security policy. Other constella- 
tions would be keener, say, on a 
joint immigration policy. 

The key to malting such “vari- 
able geometry" work is twofold. 
First, cooperation between groups 
of states should be inclusive and 
open to extension, rather than 
exclusive. Second, to avoid under- 
mining the mriwtiwg level of inte- 
gration, it is important that wom- 
bers and fixture members of the 
EU agree on certain minimum 
essential requirements. 

Above all, economic hberahsa- 
turn, through the single market, 
must remain the central compo- 
nent of efforts to improve the 
Union’s productive capacity and 
its citizens’ prosperity. Enforce- 
ment of the roles of the single 
market, and its extension to areas 
like energy and telecommunica- 
tions, are essential goals from 
which there can be no opt-outs. 

By la unching debate an these 
issues now, die Frenchand Ger- 
man leaderships have taken a cal- 
culated risk. Their prescriptions 
will certainly offend public opin- 
ion - not only in existing “periph- 
eral” member states but also quite 
possibly in the Nordic countries 
which face more or less finely-bal- 
anced referendums oh member- 
ship in the autumn. 

But tha truth is that nTI imwWhar 

states, present and fixture, have 
some extremely difficult questions 
to answer if they are to make the 
expanding Union work. It is vital 
that these issues are aired thor- 
oughly and pubhdy over the -next 
two years. Only then can the 
Union's tasks of widening and 
deepening be successfully recon- 
ciled . 


Outsiders in 
Whitehall 


The, UK government is rightly 
proud of its record in bringing 
business executives and other out- 
siders into top jobs in White hal l. 
The newcomers have brought 
fresh insights to the business of 
government and helped shake up 
civil service management; They 
have also contributed to improve- 
ments in the efficiency and effec- 


debate over "the wisdom of bring- 
ing outsiders into top W h i t ehall 
jobs has been rekindled by events 
at two high-profile agencies. 

Chi Friday, Ms Bos Hepplewhite 
resigned as rihiaf executive of the 
Child S u pp o rt Agency amid con- 
tinuing criticism of tbe agency’s 
role in pursuing absent fathers to 
pay maintenance for their chil- 
dren. Ms Hepplewhite was previ- 
ously director of Mind,- the mental 
health charity, and had spent 
most of her working life as a 
health service manager. During its 
first year of operation, the agency 
felled to hit almost an its perfor- 
mance targets - in stand cases by 
a wide- margin. Ms Hepplewhite 
aign seemed to lack the po l i t ic al - 
•Mite needed to deal with critics, 
p articular ly on appearances before 
parliamentar y select c ommi ttees. 
She has been, replaced by a career 
civil servant who is regarded as a 
pair of hands. 


'ears stirred 

Mr Derek Lewis, chief executive 
of the Prison Service agency, also 
found himself In tbe news last 
week, over tbe transfer of four 
convicted terrorists from Britain 
to prisons in Northern Ireland. Mr 
Lewis, former chief executive of 
Granada, the leisure group, was 
accused of insensitivity and 


tire moves within days of the ISA 
ceasefire. The transfers stirred 
fears among unionists of secret 
rnncftfcdttna to tbe IRA in return 


bedrid-, and 
demanded a speedy inquiry. 


Mr Lewis apologised, and seems 
likely to remain in post He weath- 
ered previous storms such as tbe 
loss erf seven, prisoners by Group 4, 
the private security group, during 
the first two weeks of operating a 
privatised prison escort service. 
And he has successfully imple- 
mented the government’s contro- 
versial prison privatisation pro- 
gramme, despite criticism of 
conditions at the first privatised 
prison. But last week’s furore over 
the transfer of prisoners is the 
sort of political problem that a 
career civil servant would have 
spotted Instantly. It demonstrates 
the need to ensure that those com- 
ing from outside the civil service 
get the advice they need for work- 
ing in what Mr Lewis has himself 
described as “a goldfish bowl*’. 

More accountable 

However, these events clearly 
demo nstrate one strength of the 
government's civil service 
reforms. The creation of agencies 
headed by a pubhcly-identifiable 
ffhfaf executive was intended to 
make public services more 
accountable. Ms Hepplewhite and 
Mir Lewis have both experienced 
the consequences of that account- 
ability in their separate ways. 

Indeed, it can be argued that Ms 
Hepplewhite has taken the rap for 
others who should share response 
bility for the problems of the Child 
Support Agency. These include 
the Treasury officials who 
imposed unrealistically high tar- 
gets for savings that forced the 
agency to pursue fathers already 
paying some maintenance. The 
policymakers who ignored advice 
that would have made tbe mainte- 
nance formula more acceptable 
aian have a case to answer. Anon* 

ynious civil servants inside White- 

hall departments are much less 
accountable than agency chief 
executives, as the events sur- 
rounding the arms to Iraq scandal 
and tbe. debacle over the pft clo- 
sures illustrated. 





T he Famborough air 
show opens today with 
all the glitz that an 
international aerospace 
bazaar can muster. Cen- 
trepiece of the show will be the 
four-nation, £32bn Eurofighter 2000, 
with a stand which includes a simu- 
lator demonstrating the riirma com- 
bat pilots can expect Unfortunately 
for the assembled boyars, sellers, 
observers and enthusiasts, the real 
Eurofighter will not fly. Preparing 
an aircraft to perform at Fambor- 
ough would take too much time out 
of a development schedule already 
two years adrift. 

Another of the problems which 
have dogged the project will surface 
tomorrow when Mr Volker Rflhe, 
the German defence minister, gives 
evidence to a parliamentary defence 
committee in Bonn. Up fin discus- 
sion is a report from the German 
national audit office which heavily 
criticises the cost of Eurofighter, 
and suggests buying Russian Mig-29 
fi ghter s instead. 

These are just two examples of 
the turbulent ride the Eurofighter is 

likely to get in the next few months 
as several of the conflicts surround- 
ing Europe's largest Industrial proj- 
ect reign it e. Those taking part are 
the UK (primarily British Aerospace 
and GEC), Germany ©ASA), Italy 
(Alenia) and Spain (Casa). 

Tbe German report on Eurofigh- 
ter’s costs, widely dismissed as inac- 
curate, is bound to produce rhetoric 
from the project's opponents who 
object that the Eurofighter is over- 
engineered and over-priced. While a 
change of government in Germany 
is not expected, the run-up to next 
month’s faiw al pifi ftiiww fang cre- 
ated some uncertainly and could 
conceivably produce a new adminis- 
tration which is not as committed 
to the project as Chancellor Helmut 
Kohl's UhrteHww Democrats. 

The opposition Social Democrats 
are opposed in principle, though the 
party is split with one faction sup- 
porting the project because it wffi 
secure a large number of engineer- 
ing jobs. An alliance gover n ment of 
the Greens and the SPD, while 
unlikely, might pull Germany out of 
the production phase of the aircraft. 

Then there is the thorny issue of 
how many aircraft each country is 
going to buy. That numb er, to be 

decided next year, determines the 
amount of work each country gets 
in the Eurofighter manufacturing 
run. Germany has suggested that it 
may reduce its order from 250 to 
140. Britain, meanwhile, is thinking 
of increasing its order from 250 to 
more than 300 Euroflghiers in artier 
to replace some of its Tornado 
strike aircraft With disparity aris- 
ing between the British and Ger- 
man orders, arguments are Kkely to 
become more intense over which 
work should go where. 

Assuming, as most observers do, 
that Germany remains with the 


Eurofighter hits 
bad weather 

Bernard Gray examines the conflicts surrounding 
Europe’s biggest industrial project 





Eurofighter, strong political and 
industrial turf wars will be fought 
over the £20bn of production work. 
Resentment of what some German 
opponents call “the English aero- 
plane” is likely to be exacerbated if 
the change in size of both countries’ 
orders mean that Britain’s manufec- 
turers take work from Germany. 

Of the problems, the cost over- 
runs discussed in the German audi- 
tors’ report have attracted the most 
publicity. One UK expert estimates 
Britain's share of development costs 
has now overshot by £lbn since 
1988. The total development bill is 
Hkdy to be around EUJtan, up from 
the £6fibn estimate when the proj- 
ect first started. 

hi part, that reflects the uncer- 
tainty inherent in such leading-edge 
technology. Many of the dements 
needed for Eurofigh ter had to be 
developed from scratch and then- 
cost could only be guesstimated. 


But as one insider said: “These 
open-ended remits have ai«> meant 
cosy risk-free development deals to 
fimd them. With regular cheques 
arriving every month, companies 
have had little incentive to keep 
costs down." 

Never theless, the main reason for 
collaboration is to spread the one- 
off development costs among sev- 
eral partners. But as the pro- 
gramme is analysed it is becoming 
increasingly dear that much of the 
potential gains have been lost 
because of duplicated overheads 
and poor co-or dina tion. Officials 
will not say how much of the £L0bn 
development cost has been frittered 
away, but one Bxpert says “esti- 
mates are very difficult, but I would 
think between 30 and 50 per cent of 
the money has been wasted”. 

That money has probably gone 
for good, but some of the errors are 
steadily being corrected. More of 


the development risks win be car- 
ried by the manufacturers rather 
than defence minis tries- ami work 

is being put cm to a fixed-price foot- 
ing. Confused management struc- 
tures are being rationalised. 

The cost arguments, however 
embarrassing, are tmKiraTy to kill 
the project unless another serious 
hiccup occurs, and that is getting 
less likely as the project becomes 
better defined Nor would a German 
exit from the programme ground 
the Eurofighter. Indeed, in some 
ways a German exit would suit the 
other partners, since Germany may, 
in any case, he obliged to pay its 
share of development costs, and the 
other countries would then be able 
to put the aircraft into production 
themselves. 

With much of the development 
money spent, and strong British 
backing for the Eurofighter, out- 
right cancellation of the project is 


hard to envisage. 

Besides, the military case for 
replacing European fighter fleets 
remains strong. The last generation 
of aircraft developed in Europe, the 
Tornado, was manufactured during 
the 1980s. It is essentially a bomber 
and air-to-ground strike aircraft, not 
a fighter. In the Gulf war, Britain's 
Tornados often had to be escorted 
by US aircraft because the UK had 
no fighters equal to the task. There 
is little desire in the Royal Air 
Force to repeat the humiliating 
experience. 

Even the sceptical Germans 
recognise the need for new aircraft, 
and the view that Germany only 
needs a light fighter to defend its 
own airspace may lose ground fol- 
lowing Germany's decision to lift its 
ban on military deployment outside 
the Ns to area. 

While they are primarily Inter- 
ested in the high-technology skills 

and jobs which will flow from Euro- 
fighter, Italy and Spain will aiop 
need new fighters in the next 
decade, and are not overly con- 
cerned with the exact specification 
of the project, provided costs are 

Mmfe^jnnd. 

The need for new fighters could 
be easily met by buying off-the-shelf 
US F/A-18S of F-15s, but these would 
not guarantee air superiority into 
the next century. In more advanced 
designs the alternatives to Euro- 
fighter are thin on the ground. Rus- 
sian Mig-29 or SU-27 planes are the- 
oretically a cheap possibility. 
However, becoming dependent on 
Russia for spares would raise eye- 
brows in west European defence 
ministries. 

Since tbe ructions look unlikely 
to kill Eurofighter. and other alter- 
natives are unattractive, the chal- 
lenge now is for companies and gov- 
ernments to organise the 
production phase of the Eurofighter 
to keep costs at a bare minimum 

If the workshare arguments pro- 
duce a shake-up of what manufac- 
turing goes where, production may 
be put on a more rational basis. 
Though Spain and Italy will want to 
keep their full quota of work, there 
is no economic need for the two 
countries to have final assembly 
lines, as currently planned. Com- 
pleting the last stages of the air- 
craft's construction at the two 
established lines at Wart on in Lan- 
cashire and Manehiug in Bavaria 
would cut costs. Greater specialisa- 
tion would also help. Currently one 
wing is being made in Italy, with 
the other split between the UK and 
Spain. 

“The companies probably now 
have a firm enough grip on the proj- 
ect that provided they tender sensi- 
ble prices the Eurofighter’s future is 
secure,” said one aerospace expert, 
“and those governments moaning 
about prices could do a lot to help 
cut costs themselves if they weren’t 
so nationalistic about workshares.” 


Alison Smith on institutions that have outgrown their ownership structure 


I t seems cruel to propose that 
the principle of “mutual own- 
ership", where ordinary cus- 
tomers can own the organisa- 
tion, should go. The term suggests a 
degree of cosiness in an otherwise 
cut-throat world where individuals 
have to deal with large, faceless 
financial institutions. 

Take building societies, the 
mutual organisations which domi- 
nate the UK mortgage market My 
savings help to fund your mortgage. 
My mortgage is funded by other 
people's savings. By becoming bor- 
rowers - or opening investment 
accounts - we become part-owners 
of the organisation and, so, are enti- 
tled to good treatment Or take 
mutual life insurance companies, 
which account for a significant 
share of the sector. As policyholders 
and part-owners, we do not have to 
hand out a separate portion of prof- 
its to shareholders. 

The reality, however, is some- 
what different If customers are 
treated well by a society or life com- 
pany it is generally because of 
fierce competition in retail fin anc i fll . 
services for new customers, not 
because they have a one-in-a-miDion 
say in the organisation’s strategy. 
Mutual organisations have come 


Mutual destruction 


a long way - and diversified sub- 
stantially - since their origins in 
the 18th century. Many are now 
financial conglomerates controlling 
billions of pounds in assets and 
funds. Control of these organisa- 
tions by those who own them is so 
fragmented that it- scarcely exists. 
In short, most of than have out- 
grown their ownership structure. 

Mutu als counter that their sy s tem 
of one-member-one-vote is fairer 
than companies where tbe size of a 
shareholder’s vote is decided by the 
fflTe of the sharehnlrifng . But their 
argument is weak: the scattered 
nature of mutual ownership means 
that no one fem cnnng h of a stake to 
challenge how the board behaves. 

Excep t hi extrema circumstances, 
most members do not bother to play 
an active part i n over seeing the 
nmnagHmunt of a i w-j-ua? organisa- 
tion. Meanwhile, the increasing 
complexity of financial services, 
and the obscure accounting prac- 
tices of life compan ies, discourage 
m emb ers from questioning board 
riArisfang , even if they do vote. 

For example, the Walifay, the 



whi d* never 
: woold be missed 


UK’s largest building society, has 
5.5m members. But fewer than 
150,000 took part either in person or 
by proxy, in decisions at this year’s 
a nnual general meeting. Similarly, 
at Standard T.ifa, the UK's largest 
mutual life insurer with more than 
2J2m policyholders who are mem- 
bers, only 53 attended its annual 
general meeting in April. 

In response to this, the mutuals 


would argue that their managers’ 
strategies are held to account in 
other ways: they must attract new 
customers and satisfy credit ratings 
agencies. Even the media are not 
afraid to criticise. 

Their argument, however, misses 
two points. First, none of these 
checks necessarily replicates the 
interests of those who own the busi- 
ness. Second, public limited compa- 
nies are subject to similar disci- 
plines - and attract more attention 
and provide more information 
because their share prices are 
quoted on the stock exchange. 

The mutuals’ argument fells 
apart completely, however, when 
they try to defend tbe protection 
they have against hostile takeovers. 
Under UK legislation, neither build- 
ing society nor mutual life company 
boards are obliged to consult their 
members about takeover offers they 
oppose. 

While the position of shareholders 
in PLCs is not a financial equiva- 
lent of the golden age of Athenian 
democracy, the model does offer fea- 
tures lacking in mutuals. First, the 


concentration of votes held by pow- 
erful shareholders increases pres- 
sure on the board to take account of 
the interests of the owners, particu- 
larly in areas such as efficiency and 
cost-effectiveness. 

Second, PLC status frees individu- 
als to decide whether to retain or 
sen their stake in the organisation. 
Those who disagree with a PLCs 
strategy can simply sell and cease 
to be owners. They do not have to 
rh angp their life Insurance or mort- 
gage in order to do so. 

Later this month, the government 
is due to publish a consultation 
paper on the future of building soci- 
eties, which will Include sugges- 
tions on how to make them more 
accountable to members. 

Generally, members are not seek- 
ing greater accountability - most 
would be happy if their savings or 
mortgage organisation were 
answerable to experts at big institu- 
tions. Their primary relationship is 
as customers, not owners. 

The Treasury should widen dis- 
cussion by proposing the conver- 
sion of mutual financial organisa- 
tions to PLCs, except, perhaps, for 
the smallest. Making members of 
mutuals effective owners is a lost 
cause. 


Observer 


Passing the 
OECD parcel 

■ Still no word on who is going to 
get the top job at the Organis ati on 
for Economic Cooperation and 
Development Jean-ClaudePaye,the 
current incumbent, has to step 
down at the end of the month and 
the 25 rich countries who own the 

Paris-based wwinnrin Hrinfc famlt 
gffll gpgm nn nea rer tn finding a 

successor. 

The delay is starting to be 
embarrassing. It is normal for a 
new OECD secretary-general to be 
chosen several months before the 
handn ypr and with thw annual IMF " 
meeting little more than a month 
away It is far from clear who will be 
holding the OECD torch. 

Don Johnstone, ftirmar head of 
Canada's liberal party, is still the 
frontrunner and the feet that last 
week Canada finally appointed a 
new High Commissioner in London 
ends speculation that the job was 
being held open for him in case he 
didn’t get the OECD job. 

However, an informal poll of 


Johnstone’s lead is narrowing 
despite being supported by the US. 
Payie is running a dose second with 
the UK’s Lord Lawson and 
Germany's Lorenz Schomerus 
traflmg a long way behind. 

Pays, like Ms predecessor Emile 
Van Lamep, could stay cm for 
another tern because OECD 
members cannot agree on a 


successor. But if this was going to 
happen Faye should have had the 
nod long before now. 

One intriguing rumour is that if 
tha Anwirains drop their snpptirt 
for Johnstone, tbe French would 
back the US choice for the Nato 
secretary-general's job. 

Tnrtcod DoUglaS Hufd’S mama jg 
even being mentioned although it is 
hard to believe that John Major 
could afford to lose his; foreign 
secretary at the moment. 


Lumbered 

■ They will soon be humming Tm 
a lumberjack and Fm OK” in the 
forests of Arkhangelsk to northern 
Russia. 


company have found an unorthodox 
way round paying their 
hardworking lumberjacks. After a 
year without salaries, the Itar-Tass 
news agency reports that brawny 
Yarensky loggers will be paid in 
what is, for Russians, a rare 
commodity - tampons. 

ft makes a welcome change from 
washing powder and car spares and 
should keep the wife happy. 


Sickening 

■ Ben Cohen, 43, the ex-hippy 
co-founder of the Ben & Jerry’s ice 
cream eham. Is getting a reputation 
for quitting. 

First, he announces that he wants 
to step down as chief executive of 



*If it wasn’t for the world 
population summit we might 
never have mef 

his socially responsible US 
business, which gives free back 
massages to its employees and 7.5 
per cent of its profits to charity, 
now he has resigned from tbe 
advisory board of Business Ethics, 
the US magazine just because it has 
been criticismgAnitaRoddick’s 
Body Shop. 

Although Ben & Jerry's 
environmental credentials have not 
come in for the same sort of flak as 
Body Shop’s, Cohen’s wacky image 
la storting to look a bit suspect 
Since the firm launched its “Yo! Pm 
your GEO” essay contest to find 
Cohen’s successor it has been 
flooded with applicants explaining 


in 100 words or less why they 
wanted to head tbe ice cream 
maker. 

Over 200 anhnala — including 
monkeys, horses, dogs and cats - 
sent in an application as well as 
hundreds of children , the youngest 
just 11 weds’ old, who thought 
their parents would make great 
CEOs. Most applicants said their 
first decision would be to give 

everyone a pay rise. 

No wonder the firm has quietly 
hired Russell Reynolds, one of the 
world's biggest head-hunters, to 
find the right person. 


Caught Knapping 

■ Tins week's TUC conference 
should be good news for Jimmy 
Knapp, the signal workers boss. Not 
only is he president of the shindig 
but his troops are supposed to be on 
strike next Thursday, when most 
delegates like to slope off home 
early. 

If the Preston-to-Blackpool branch 
line is shut ft should boost 
attendance on Friday, the last day 
of hiS wmfer ftnry Even if the line 
remains open the brothers are not 
going to cross the signal workers 
picket line to catch the Preston 
train, are they? 

The only sligfrt worry is the 
possible strain on mnim finances if 
ripte gntgq jntric t fairing fends 
home. Standard fare from Blackpool 
to Birmingham is £100 and double 
that for Blackpool to London. 

Of course, there is always the 


bus, lads. 


Hearing aid 

■ Meanwhile, a special telephone 
hot-line has been fitted up in the 
TUC conference office just so that 
Knapp can keep in contact with the 
signal workers' frontline. But 
Knapp may have trouble in using 
the phone unless he talks in a 
whisper since it rings within 
hearing range of the press tables. 

Expect some usually well 
informed reporting of the signal 
workers position over the next few 
days. 


Lamb in the dock 

■ An old lady in New Mexico wins 
$3-frn damages after she spilt a cup 
of McDonald's coffee over herself, 
and a secretary in New York gets 
97.1m for being sexually harassed 
by her boss. Now an Australian 
woman has been awarded A$2J2m 
after being shot by a lamb. 

Anne Moulding, 29, was paralysed 
after she tried to lift the lamh into a 
truck and its foot kicked a loaded 
rifle and sent a bullet into her 
waist. A Sydney Supreme Court 
judge has ruled the property owner 
was negligent in faffing to take 
basic precautions in the control of 
firearms. 

Heaven knows the size of the 
damages, if it had been proved that 
the shot was triggered by a ram 
rather than a ewe. 







16 



CONTRACT H IRE 

SELL AND LEASE BACK 

CONTRACT PURCHASE 


NORTH 0191 510 043-1 
CENTRAL 0345 5S5S4Q 
SCOTLAND OJ.73S <525 031 


FINANCIAL TIMES 

Monday September 5 1994 


Brossette JB7/ 

Soniiaire ■ Chauffage ■ Canalisation 









CPU exploits talk of ex-communist links 

German socialists focus 
election attack on Kohl 


By Christopher Partes 
m Frankfurt 

Germany's Social Democratic 
party opposition leaders 
launched a direct assault yester- 
day on the central pillar of the 
ruling coalition's election cam- 
paign - Chancellor Helmut Kohl 
himself. 

Mr Rudolf Scharping. the SPD 
leader, and Mr Helmut Schmidt, 
the party's elder statesman, 
denounced Mr Kohi as the chan- 
cellor of missed opportunities 
and a destroyer of jobs. 

Mr Scharping characterised 
him as an insecure autocrat who 
listened neither to the electorate 
□or to his own party. As a result, 
there was nothing behind Mr 
Kohl but “a giant black hole", he 
told an SPD campaign gathering. 

“You can see the insecurity in 
his eyes," he said. Mr Kohl's 
Christian Democratic Union was 
“burnt out" and he was trying in 
vain to conceal the fact 

In the four years since unifica- 
tion he had frittered away the 
opportunities for economic, social 


and cultural unity in Germany, 
Mr Scharping added. 

Mr Schmidt, who was displaced 
as chancellor by Mr Kohl in 1982. 
blamed him directly for the 
“unconsidered actions" that had 
led to the loss of almost half the 
jobs in the former East Germany. 

The SPD, which currently lags 
behind the CDU and its Bavarian 
sister party, the Christian Social 
Union, in the opinion polls, last 
week started its campaign to 
undermine Mr Kohl's personal 
s tandin g with the announcement 
of a three-man electioneering 
vanguard. 

Tbe tactic of persuading voters 
to weigh the alleged failing s of 
one man - Mr Kohl is still seen 
as an unsatisfactory chancellor 
by half the population - against 
the leadership strength of the 
SPD emerged clearly yesterday in 
Mr Scharping's unusually vigor- 
ous and confident presentation. 

He brushed aside charges, cen- 
tral to the CDlTs opening attack, 
that the SPD was prepared to 
govern in an unwritten allian ce 
with the party of Social Democ- 


racy (PDS) and so allow the for- 
mer East German communists a 
say in r unnin g the country. 

However, comments at the 
weekend by Mr Jens Reich, one 
of Mr Scharping's advisers on 
eastern Germany, to the effect 
that he could imagine a minority 
coalition of SPD and Greens rul- 
ing with alternating support from 
the CDU and the PDS, seem to 
ensure Further exploitation of the 
issue by Mr Kohl and his allies. 

With promises of economic and 
social justice and warnings that 
the electorate should not be 
intimidated by the “German Ber- 
lusconis" among television and 
newspaper proprietors support- 
ing Mr Kohl, Mr Scharping's 
speech concluded the rituals pre- 
ceding the campaign proper lead- 
ing to the election, on October 16. 

All the main parties have now 
set up their stalls. As the 
so-called “hot phase" of the cam- 
paign gets under way, personal 
attacks and a sharp focus on 
almost exclusively internal issues 
seem certain to dominate the 
early stages. 


Major demands guarantees 
of lasting ceasefire from IRA 


By James Bfltz In London 

Mr John Major, the British prime 
minister, yesterday insisted he 
needed a “copper bottomed" 
guarantee from the IRA that its 
ceasefire was permanent before 
its political wing Sinn Fdin could 
join talks on the future of North- 
ern Ireland. 

Mr Major emphasised the gov- 
ernment's cautious approach to 
the ceasefire declared last week 
by announcing that Mr Gerry 
Adams, the Sinn Fein leader, 
would continue to be barred from 
visiting Britain. 

The prime minister, speaking 
on BBC television, said the Sinn 
F£in leader would remain subject 
to a three-year exclusion order 
barring him from visiting the UK 
mainland, and that he did not 
expect this to be revoked “in the 
next few months”. 

Mr Major's caution was in 
sharp contrast to that of his Irish 
counterpart Mr Albert Reynolds, 
who is expected to meet Mr 
Adams this week to discuss Sinn 


Fein’s participation in the Dub- 
lin-based Forum for Peace and 
Reconciliation, which would 
bring the Irish nationalist move- 
ment into talks with political par- 
ties in the Republic. 

Mr Reynolds said last week 
that the Irish government 
accepted Sinn Fein’s statement 
as a clear signal that “the war 
was over". 

Mr Dick Spring, the Irish for- 
eign minister, will today meet Sir 
Patrick Mayhew, the Northern 
Ireland secretary to try to resolve 
the differences between the gov- 
ernments' judgments of how to 
respond to the ceasefire. 

An Irish foreign ministry 
spokesman said yesterday: “We 
understand the caution of the 
British government, but we hope 
that it is going to be cleared up 
shortly and that the meeting 
hopefully will contribute to that" 

Sir Patrick said Irish national- 
ists had not yet made it clear 
that the violence had been per- 
manently ended. He said: “It 
would be quite enough if we 


could hear them say, for exam- 
ple. this is over for good’." 

Unionist politicians in North- 
ern Ireland yesterday maintained 
their pressure on London to 
respond cautiously to the IRA's 
declaration. 

Mr Chris McGimpsey, the hon- 
orary secretary of the Ulster 
Unionist Party said a cessation of 
IRA military operations was sim- 
ply a logistical statement, 
whereas a permanent end to vio- 
lence was a political statement 

Mr Peter Robinson, the deputy- 
leader of the Democratic Unionist 
Party said the terms of the IRA 
ceasefire provided “a get-out 
clause to renew the violence if 
they do not get concessions they 
are looking for from the British 
government". 

At the weekend the DUP sent 
out invitations to other Unionist 
parties and organisations in the 
province to create a new forum 
as a counterweight to the one 
being set up by Mr Reynolds. 


Gaullists I Tory alarm at EU reform 


Continued from Page I 

make his candidacy formal as 
soon as possible. 

Mr Chirac is said not to want 
to do so be tore January- knowing 
that Mr RaJIndur will make no 
official move before then. On the 
other hand. Mr Chirac clearly 
wants to use the autumn to let 
Mr Baliadur know there will be a 
fight with his party lender. 


Continued from Page 1 

debate over Europe's constitu- 
tional future that may prove as 
divisive at the wrangling over 
the Maastricht Treaty. The Ital- 
ian and Spanish governments 
l:tst week attacked the proposals, 
which many believe are the open- 
ing positions in the argument 
leading to the EU intergovern- 
mental conference in 1996. 


British officials made clear that 
the government is unhappy with 
some aspects of the proposals. 
The French and German reports 
call for a single core of five 
states. The UK has argued that 
there should be inner cores tai- 
lored to particular areas of policy 
in which the UK would, be In the 
core group on defence and single 
market legislation, but not on 
social chapter discussions. 


Brazilian 
finance 
minister 
quits over 
broadcast 

By Angus Foster in Sao Paulo 


Mr Rubens Ricupero, Brazil's 
finance minister, resigned yes- 
terday after confessing in a pri- 
vate conversation mistakenly 
broadcast by satellite television 
that, when it comes to inflation 
indices: “1 don't have any scru- 
ples. What Is good, we use - 
what is bad, we hide." 

His resignation comes at an 
awkward time for Brazil’s two- 
month-old new currency, the 
Real, and for Mr Fernando Hen- 
rique Cardoso, the government’s 
candidate in next month’s presi- 
dential elections. 

Mr Ricupero was talking pri- 
vately to a journalist from TV 
Globo, Brazil's main broad- 
caster, in between taping inter- 
views. However, about 10 min- 
utes of the conversation was 
transmitted live and received by 
homes with satellite dishes 
throughout BrazO. 

During the conversation, Mr 
Ricupero suggested that the suc- 
cess of the Real and bis personal 
popularity were winning votes 
for Mr Cardoso and taking sup- 
port from his main rival, Mr 
Luiz Indcio Lola da Silva of the 
Workers party (PT). "The great- 
est vote-getter today for [Mr Car- 
doso] is me." he said. 

In a prepared statement yester- 
day, Mr Ricupero said he was the 
victim of “an electronic failure" 
and that he was exhausted at the 
time of the conversation. 

“This is not how ( normally 
behave," he said. “But the Real 
plan is more important and that 
is why I handed In my resigna- 
tion." 

Last weds, the PT complained 
about government support for 
Mr Cardoso which, although not 
surprising in Brazil, is techni- 
cally Illegal. To comply with 
Brazilian law, Mr Cardoso 
resigned as finance minister in 
April to run for president But 
he is still closely linked with the 
new currency. 

Mr Ricupero said during the 
interview that television stations 
such as Globo were using favour- 
able comments about tbe Real to 
support Mr Cardoso's campaign, 
instead of giving him more open 
support 

Among other revealing com- 
ments, he said he was preparing 
widespread tariff reductions on 
imports. 

Mr Ricupero's resignation, 
although extremely embarrass- 
ing for the government, will 
probably not threaten tbe Real. 
While currency markets are 
expected to open nervously 
today, the team of economists 
who designed the new currency 
and other anti-inflation mea- 
sures remains in place. 

The incident has unsettled Mr 
Cardoso's election campaign. 
Although he led Mr da Silva by 
45 per cent to 23 per cent in tbe 
latest opinion polls, Mr Cardoso 
wants to win the presidency tn 
the first round on October 3. 


THE LEX COLUMN 




Europe today 

A deep tow pressure system, just south-west 
of Iceland, will bring an unsettled westerly air 
flow to much oi northern and western Europe. 
An active frontal zone will cause a lot of cloud 
and ram over I he Low Countries, northern 
Germany, Denmark and southern ports of 
Sweden and Norway. Further south, the 
influence of a ndge of high pressure from the 
Atlantic towards southern France will bring 
settled conditions. Central Spain, Italy and 
southern Greece will be sunny and warm. 
Central Greece and the Balkans will have 
isolated thunder storms. North-west Russia 
will have plenty of sun under a large area of 
high pressure. 

Five-day forecast 

The Icelandic low will move very slowly 
towards the south-east to a position north- 
west of Scotland. The circulation around this 
low will push frontal systems into western 
Europe causing changeable conditions. It will 
become rather windy, especially around the 
British Istos. High pressure over sou l hem 
Europe will provide mainly settled conditions. 
A disturbance over northern Africa will 
promote thunder storms over Morocco during 
the next couple of days. 


TODAY'S TEMPERATURES 


FT^WEATHER GUIDE 



Oiow 


LOWJSk 


27 LOW 





28 ✓ 




‘TV/ 


35 

. Cold front 


33 

Wind speed In KPH 



Maximum 

Bering 

sun 

31 

Caracas 

fluid 


Celsius 

Belfast 

talr 

15 

Cardiff 

far 

Atxi DfviW 

sun 

39 

Belgrade 

sun 

27 

Casablanca 

far 

Accra 

shower 

30 

Berlin 

ran 

19 

Chicago 

shower 

Algiers 

thund 

32 

Bermuda 

shower 

33 

Cologne 

fair 

Amsterdam 

shower 

17 

Bogota 

cloudy 

19 

Dakar 

sun 

Athens 

sun 

30 

Bombay 

drad 

30 

Dallas 

thund 

Alfante 

fair 

30 

Brussels 

shower 

19 

Delhi 

cloudy 

B. Aims 

sun 

27 

Budjpost 

sun 

27 

Dubai 

sun 

B.fiam 

ter 

17 

C hagan 

rain 

19 

Dublin 

shower 

Bangkok 

ihund 

33 

Cairo 

sun 

34 

Dubrovnik 

fair 

Barcelona 

show or 

HT 

Cape Town 

ter 

. 20 

Ertn&ursfr 

fair 


We wish you a pleasant flight. 


Lufthansa 


Situation at IS GMT. Temperature marmxjm for day. forecasts by Mtrttta Consult of the fttefrtartands 

Cameo* tlwid 32 Faro tar 29 Madrid mm 33 Rangoon 

U ar ®f fan- 16 Frankfurt shower 24 Majorca shower 29 Reykjavik 

Casablanca far 26 Geneva fair 25 Malta (air 29 Rio 

Ovcago shower 23 Gibraltar sun 26 Manchester fair tS (tome 

Cotogne fair 20 Glasgow shower 16 Mania thund 31 S. Frisco 

Dakar sun 30 Hamburg rain 17 Melbourne drzd 16 Seoti 

Daflas thund 33 HeWnta shower IS Mexico Gry thund 17 Singapore 

Delhi cloudy 35 Hong Kong thund 31 Mend fair 33 StDcWxXm 

sun 43 Honolulu Shower 33 Milan fair 27 Stneboug 

DuWin shower Ifl Istanbul sun 26 Montreal fair 19 Sydney 

Dubrovnik fair 27 Jakarta ter 31 Moscow Cloudy 19 Tangier 

lair 16 Jersey fair 18 Munich fair 22 Td Aviv 

Karachi drzd 31 Nairobi fair 23 Tokyo 

Kuwait son 44 Naples fair 29 Taranto 

L Angeles fair 28 Nassau thund 33 Vancouver 

Us Palmas sun 27 New York cloudy 19 Vwlce 

Lana cloudy 20 Nk*> fair 25 Vienna 

Usbon fair 32 Nicosia sun 37 Warsaw 

London fair 19 Oslo shower 14 Washington 

Lujuboung shower 20 Parte fair 22 Wellington 

Lyon tar 25 Path lair 22 Winnipeg 

Madeira lair 27 Prague doudv 20 Zurich 


The Giordano dividend 


Mr Richard Giordano may not be 
popular with Sid if, as feared, he 
freezes or even cuts British Gas's divi- 
dend this week. But shareholders 
should take comfort from the fact that 
their new chairman is engineering a 
change in strategy which should, In 
time, more than compensate for any 
disappointment on dividends. 

The biggest change is that Mr Gior- 
dano is determined to embrace compe- 
tition and make it work to Gas's 
advantage rather than fight it at every 
turn. Gas’s previous tactic was to run 
scare stories about how millions of 
consumers would see their gas bills 
double if competition was Introduced 
for domestic customers. That won it 
Tew friends. 

Mr Giordano appreciates that com- 
petition can be used to change the 
group's bureaucratic culture. The com- 
pany has also come to the view that 
the real added value in its UK busi- 
ness is transporting gas, which will 
remain a monopoly, not trading it. 
Since its trading monopoly carries a 
host of social obligations. Gas believes 
it may be in its interest to demerge 
the business completely. It remains to 
be seen whether Gas can persuade the 
government to move ahead with its 
planned legislation. Gas’s earlier scare 
tactics have given ministers cold feet 
about dismantling the monopoly. But 
Gas's more constructive approach is 
certainly in shareholders' interests. 

Mr Giordano is also refocusing Gas's 
overseas strategy. In the past. Gas 
spent hundreds of millions of pounds 
on foreign acquisitions without a clear 
idea of where it could add value. 
Again, the new strategy has yet to be 
fully articulated, let alone produce 
tangible benefits. But the shares, 
which have underperformed the mar- 
ket by 15 per cent this year, look due 
for a turn. 

Emerging markets 

Sceptics must be disappointed by 
the recent performance of emerging 
equity markets. After a strong rally in 
July and August the IFC emerging 
markets index now stands 7 per cent 
above the level at the start of the year. 
As the chart shows, emerging markets 
have again been outpacing their coun- 
terparts in the developed world. For 
true believers this wQl not come as a 
surprise. The sharp correction of the 
first quarter was caused by the with- 
drawal of footloose international funds 
rather th an setbacks in the emerging 
economies themselves. The attractive 
combination of high growth rates 


notatfv a tp developed mar k ata 

110 : — 






1993 1994 

Source; Baring SaasWas 

and economic liberalisation remains. 

Besides, falling share prices and rap- 
idly rising earnings quickly trans- 
formed the valuation of many mar- 
kets. The Asian markets which 
suffered most during the correction - 
Thailand and Malaysia fell by 25 per 
cent in the first three months of the 
year - have started to attract inves- 
tors in search of value. But there are 
signs that tbe rally of tbe last two 
months has been more tHsrrhnfnating 
than the liquidity-fuelled bull run of 
1993. 

While last year it was unusual for 
neighbouring emerging markets to 
move in opposite directions, this year 
performance has been wider spread. 
For example, Brazil has gained more 
than TO per cent tins year on hopes 
that the latest attempt to curb infla- 
tion will prove successful Yet Argen- 
tina is still lower than at the start of 
the year. If long-term investors rather 
than high-rollers are now driving 
emerging markets, so much the better. 

UK car market 

After all the hype, the August car 
sales figures have been disappointing, 
and puzzling. Thanks to massaging by 
the trade (he foil month's numbers 
due out tomorrow may well be better 
than the flat out-turn earlier figures 
suggested. Even so, underlying sales 
appear to have gone off the boil They 
could hardly have continued for ever 
at the pace set in the first half. But 
given the encouraging signs elsewhere 
in the economy, including a pick-up in 
new house sales In August, a sharp 
slowdown is hard to ex plain. 

One possibility is that the problem 
lies not with demand but supply. 
Anecdotal evidence suggests supply 
shortages of certain models, in some 
cases caused by a lack of key compo- 


nents. There are long waiting lists for 
some German cars due to the unex- 
pectedly strong recovery in the domes- 
tic market earlier in the year. 

But supply shortages do not explain 
why dealers are complaining about 
the disappearance of the private 
buyer. This is especially odd since pri- 
vate new car buyers tend to sell-on 
after five years and 1989 was the peak 
of the last cycle. Perhaps car buyers 
are showing the same bargain-hunting 
mentality evident in other consumer 
markets and holding out for better 
daais at tbe end of tbe month. Or 
maybe they have finally tired of the 
August registration scramble. What- 
ever the explanation, the odds must 
favour poor August figures being a 
temporary blip rather than a change 
In the trend, in winch case the sharp 1 
fell In car dealer share prices over the ; 
last few weeks could soon be reversed, j 

Metals | 

After a summer luff, base metals 
prices have continued their upward 
pgfh Al uminium has already broken 1 
through its early summer peak to , 
reach its highest level for three years. 
Copper is not Car behind, which is 
good news for RTZ ahead of its 
interim results on Thursday. Summer 
weakness in base metals is usual, 
since the holiday season takes the 
edge off industrial demand. The rally 
may simply reflect the end of the dol- 
drums. 

If it is to develop into another leg of 
the base metals bull market, though, 
the overhang of stocks will have to be 
reduced. While al uminium stocks have 
fallen modestly during the summer - 
thanks to production cuts agreed in 
January - copper stocks have risen 
over the past few weeks. The question 
is whether the seasonal increase in 
industrial demand during the aut umn 
is enough to make inroads into stocks. 
Prices will fell back if there is no 
appreciable reduction in the overhang. 

Doubts about metal prices may 
explain the relatively poor perfor- 
mance of mining shares during the 
first half of the year. RTZ has outper- 
formed a falling equity market by 13 
per cent this year, for example, while 
the copper price has risen by a third. 
Since the average copper price in the 
first half of this year was not much 
different from last, the company's 
interim figures will not show much 
benefit But if falling copper stocks 
underpin another rise in the metals 
price this autumn, the shares will 
have room to rise. 





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i .ns# 1 3 


Without us, they couldn’t 
hit the ground running. 


Absorbing forces of 250 tonnes when an airliner touches down at 140 mph is a critical test for landing gear - and it's a test 
that Mcssier-Dowty systems pass successfully 20,000 rimes every day. 

Merging Dowty’s landing gear interests wiih those of SNECMA's Messier in Messier-Dowty has created a new Q50 million 
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manufacturing and test facilities on both sides of the Atlantic. With its landing gear already fined on 14,000 aircraft of 
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Dowry is one of TI Group's three specialised engineering businesses, the others being Bundy and John Crane. 

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"A 



FINANCIAL TIMES 

COMPANIES & MARKETS 


©THE FINANCIAL TIMES LIMITED 1994 


17 


Fletcher King 

CHARTERED SURVEYORS 
COMMERCIAL PROPERTY 
CONSULTANTS 
London 
071-493 8400 

EIRlv'lMGriAM MANCHESTER NORWICH 
NORTHAMPTON 


Monday September 5 1994 




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MARKETS 


THIS WEEK 


JOHN PLCNOEIfc 

Aff p jf% GLOBAL INVESTOR 
MU/mrf As analysts speculate over the 
outcome of Wednesday’s chat 
beitween the UK chancellor and the 
lliSlfBr povemor of the Bank of England It 
* worth casting an eye over the 
IbII recent behaviour of starting futures. 

In effect the market has been 
antWpaing an increase in shod term rates of more 
man a fufl percentage point by December. Page 20 

STEPHANIE FLANDERS: 

ECONOMICS NOTEBOOK 
UK employment trends over the 
past 20 years have favoured 
women; but an article published 
today argues that economists’ 
research has gone the other way. 
The author claims that In describing 

the decGne of full-time work for 

men, and the accompanying growth of the female , 
labour force, researchers may be encouraging a 
backlash against women. Page 20 

BONDS: 

The Impact of higher European economic growth 
on inflation and interest rates will be crucial to the 
performance of European government bond 
markets this autumn. Page 22 

EQUITIES: 

In Wafl Street, data revealing much weaker jobs 
growth than expected, should bring a more positive 
tone to the market when investors return to work 
tomorrow, while the UK stock market has turned 
highly volatile as the summer holidays draw to a 
dose. Page 23 

EMERGING MARKETS: 

“If making money is a sin . . . welcome to heU,” 
reads a sign in Bombay proclaiming the virtues of 
stock market investment Page 21 

CURRENCIES: 

The trade dispute between the US and Japan has 
been a key factor in the dollar's weakness this year 
but high-level trade talks this week between US 
and Japanese officials could provide it with fresh 
direction. Page 21 

COMMODITIES: 

Cocoa producers and consumers will on Thursday 
try again to agree rules covering a production 
management deal that was implemented in 
February. Page 20 

INTERNATIONAL COMPANIES: 

First Financial Management an Atlanta-based 
infonnatfon 'services company, has afforscf $800m 
in cash to acquire Western Union Financial 
Services, the brig US money-transfer business. 

Page 19 

UK COMPANIES: 

Celsls International, the UK biotechnology 
company, has ended six months of management 
uncertainty by appointing a new chief executive. 
Page 18 


STATISTICS 


Bess landing rotas 29 

Company meetings .10 

Dividend payments 10 

FT-A World tncfces £0 

FT Guide to currencies 21 
Foreign exchanges -29 


London recant issues — 29 
London share service . 29-31 

Managed funds 25-29 

Money markets 29 

New tot bond issues 22 

WOrid stock mkt Indices _ 24 


Patrick Harverson finds potential buyers eyeing once-lumbering US TV networks 

Clambering ssm-iw*: ■■ 

for rides on 
the dinosaurs 


A few years ago the three 
national OS broadcast 
television networks - 
ABC, CBS and NBC - seemed 
like Inmherfng riinrwa^i rg fanfaiy a 

slow decEna 

Under pressure from nimbler, 
more innovative competitors 
such as cable TV companies, 
independent programme-makers 
and newcomers such as Fox Tele- 
vision, the networks’ share of the 
national television audience was 
falling - from 98 per cent In the 
1970s to about GO per cent by the 
start of the 1990s - and their 
advertising revenues and profits 
were sliding. 

Yet today the dinosaurs have 
roared back to life and powerful 
entertainment companies soch as 


Wait Disney, Turner Broadcast- 
ing, Time Warner, .Paramount 
and Tefe-Ctammunlrations (TCI), 
the country’s largest cable televi- 
sion operator, now appear eager 
to own a network. 

Time Warner and Paramount 
are even p lanning - to launch their 
own networks next year. Time 
Warner is also said to have been 
nego tiating to buy NBC from 
General Electric; Disney is 
rumoured to be interested In 
CBS; while the chairmen of 
Turner and TCI have stated they 
would like to own one of the big 
three networks. Only ABC, 
deemed too large to swallow 
whole, is im tramp from bid specu- 
lation. 

The sudden burst of interest in 
the networks is driven by several 
factors. For a start, the econom- 
ics of tile business are improving. 
The long decline in networks’ 
share of national ratings has 


been lmitpH, advertising Bales are 
forecast to grow and profits are 
recovering. There is also a grow- 
ing realisation that as the num- 
ber of available television chan- 
nels increases, so does the value 
ctf the network. 

Mr Scott Siegler, former bead 
of Columbia Pictures Television 
and an ex-network executive, 
says; ‘T Brink that the advertis- 
ing community has become 
aware of the fact that the mare 
fragmented tfw market becomes, 
the more important the big three 
networks become. They are the 
only people who, an any given 
night, can guarantee you GO per 
cent of millions of households.” 

Yet there is another reason 
why networks have become 
a ttract i v e to potential buyers: a 
changing regulatory environ- 
ment 

Since 1971, financial interest- 
syndication regulations, or “fln- 
syn H , have barred networks from 
producing much of their own pro- 
gramming wiH from participating 
in the lucrative syndication busi- 
ness - selling re-runs of shows to 
local stations. 

The fin-syn rules, however, are 
due to be eliminated in Novem- 
ber 1995, after which networks 
wOl be allowed to produce their 
own shows and reap the profits 
of syndication. “With those 
restrictions lifted, suddenly a net- 
work becomes a far more profit- 
able business than it was a few 
years ago,” says Mr Michael 
Theodore, media specialist at 
managinrognt consultants Ar thur 
D Little. 

Programme makers such as 
Time Warner and Disney want a 



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network because it would help 
tharn realise profitable synergies 
not previously allowed under fin- 
syn and protect revenues from 
their existing programming busi- 
nesses. 

If the big programme makers 
do not move into networks soon, 
they could find themselves when 
fin-eyn expires owning a product 
for which they cannot find a 
national outlet. 

P rogramme suppliers could 
try to build a network from 
scratch. This is what Time 
Warner is attempting, primarily 
by persuading independent local 
television stations to sign up as 
affniatog for its new WB network, 
due to start early next year. 

Time Warner’s repented inter- 
est in NBC may be motivated by 
the uncertain future that cable 
tele vision faces. Earlier thfg year 
the government imposed price 
controls on cable operators and 
the industry fears further regula- 


tion. A bid for NBC would be a 
good defensive move for Time 
Warner, whose cable operations 
include the successful Home Box 
Office channe l 

Mr John Reidy, media analyst 
with securities house Smith Bar- 
ney Shearson, says Time Warn- 
er's interest in NBC “shows you 
that Time Warner is very ner- 
vous about what's going to hap- 
pen to its TV production busi- 
ness. It also raises the question of 
whether they have some doubts 
about the rapidity of the growth 
of the cable business.” 

There are many analysts who 
doubt whether Time Warner will 
be able to buy NBC outright, at 
least not just yet Until limits on 
cross-ownership of cable and tele- 
vision s tations are eased. Time 
Warner's options are limited. 

Mr Richard Grand-Jean, head 
of the entertainment industry 
investment banking boutique 
Global FOm Equity, adds: “They 
[Time Warner] already have a 


ton of debt. The world is not 
really ready to see them take on 
another $4hn to $5bn of it” 

Even Disney may not be in the 
best shape to do a deal with CBS 
after the accidental death in 
April of its president Mr Frank 
Wells, and the immine nt depar- 
ture of its studio chief, Mr Jeffrey 
Katzenberg. Analysts estimate 
Disney would need to offer at 
least $5bn for CBS. 

Ultimately, Wall Street believes 
that CBS or NBC (and possibly 
both) win change hands within 
the next year, mainly because 
they have the wrong owners 
who, moreover, appear to want to 
get out of the business. 

As Mr Theodore puts it: “Peo- 
ple always felt that GE and NBC 
was a poor match. As for CBS, 
Larry Tlsch is not a broadcaster, 
and he does not have much of an 
idea about the direction the 
industry is heading. At this 
point, I think he wants to take 
the money and run.” 


Savoy Group censures director over leak 


By Christopher Price In London 

The controversy over the control of Savoy 
Group took another twist yesterday when 
the UK luxury hotel company publicly 
censured one of its directors over a leak of 
confidential info rmatio n. 

Savoy was angered by weekend press 
reports citing a study by Mr Giles She- 
pard, its managing director, which had 
been circulated to certain directors, restat- 
ing the company's need to fight off the 
attentions of Forte, its rival and largest 


shareholder, and to remain independent. 

A Savoy statement yesterday said: “The 
board of the Savoy Group is dismayed that 


one non-executive director, for his own 
reasons, has decided to discuss confiden- 
tial papers with the press. This is unsettl- 
ing for employees and does nobody any 
good." A company source said the story 
had been leaked by Sir Michael Richard- 
son, who announced on Friday his plan to 
retire as chairman of Smith New Court, 
the securities house. “There will he pres- 
sure on him to resign [from Savoy] after 
this," said the source. 

Sir Michael yesterday admitted the story 
emerged from his office, but denied it was 
a deliberate leak. “I did not show the 
report to anyone, it did not happen like 
that at afl." He said the report had been 


spotted an his desk by a journalist who 
was interviewing him about his retire- 
ment When questioned, he had given a 
brief outline of its contents. “That is not a 
leak,” he said. He described the question 
of his resignation as “ridiculous”. 

Mr Shepard said yesterday. “Nothing 
has been discussed by the other directors 
in relation to anyone resigning." 

The policy document at the centre of the 
row, written by Mr Shepard, was circu- 
lated to Sir Michael and three other non- 
executive directors. It outlined Savoy’s 
trading and corporate strategy after the 
company's interim results due on Septem- 
ber 13. It also restated the company’s 


intention to remain independent and ques- 
tioned Forte’s performance and strategy. 

Sir Michael and Mr Shepard admitted 
the row reflected tensions on the board 
over Savoy's future. Forte, which has 
fought a 13-year battle for control, holds 42 
per cent of voting shares. It has discussed 
with other shareholders the creation of a 
joint venture which would pool the two 
groups’ luxury hotels. Savoy also owns 
Garidge’s and the Connaught in London. 

Forte agreed in November 1989 not to 
increase its stake in Savoy for five years 
and to give 12 months’ notice if it wanted 
to do so.. The latter requirement remains 
even after the five-year standstill ends. 


Bermuda 
link for 
new fund 
at Lloyd’s 

By Richard Lapper In London 


Indemnity Insurance Services, a 
London-based insurance broker, 
is combining forces with one of 
Bermuda's largest reinsurance 
companies In an effort to form a 
new Lloyd's investment com- 
pany. Indemnity wants to raise 
some £20m ($31 m) through a 
stock market flotation of the 
new vehicle - Euclidean Invest- 
ment Company - later this year. 

Centre Re, now owned by Swit- 
zerland's Zorich Insurance, will 
underwrite an innovative 
long-term reinsurance contract 
for the company, which should 
allow Euclidean to accept up to 
£80m in premium income, twice 
as much as it would otherwise be 
able to underwrite, increasing 
potential profitability. 

Corporate Names can accept 
annual premiums equal to twice 
tbe amount of their funds held at 
Lloyd’s, according to rules intro- 
duced last year by the market 

Euclidean will spend several 
million pounds annually on a 
multi-year reinsurance policy 
from Centre Re. The Bermuda 
company will make available a 
letter of credit for some £28m, 
which it is thought Lloyd's regu- 
lators will regard as an accept- 
able asset for solvency purposes. 

In this way Euclidean will 
increase its deposits with Lloyd's 
to some £40m. The reinsurance 
policy will also cushion investors 
against large tosses. 

Indemnity specialises in stop- 
loss insurance - a kind of per- 
sonal reinsurance for Lloyd's 
Names, the individuals whose 
assets have traditionally backed 
the market This activity has 
allowed it to obtain unusually 
comprehensive information 
about the market By backing no 
more than 86 of the most profit- 
able syndicates and by closely 
monitoring future activity it 
hopes to be able to obtain above- 
average underwriting results. 

Mr James Stuart, Indemnity’s 
joint managing director, says he 
expects the increased gearing 
will allow Euclidean to make a 
return on capital of some 25 per 
cent Net dividends are to be lim- 
ited to 20 per cent of capital. 

Lloyd's raised some £800m in 
corporate capital last year and 
expects to raise between £L25m 
and £25 Qm in extra funds for 
1995. Most is expected to come 
from private sources. Venton, 
another Lloyd’s agency, has 
linked up with Butterfield Secu- 
rities of Bermuda to raise money 
for a corporate capital vehicle. 


This weeks Company news 


JAPAN TELECOM 

Investors worry 
over high price 
of issue 

Japan’s third largest 
telecommunicat ions operator will be 
listed tomorrow cm the second sections 
of the Tokyo and Osaka stock 
exchanges. , _ . 

The issue's high public offering price 
of Y4.7m ($47,000) per share is cansing 
g nrap anxiety among investors. Along 
with the other telecom operators, the 
company's earnings have been squeezed 
by rising price competition. 

Aggressive price-cutting in. long 
distance. rates has hurt JTs ear nin g s as 
well as its competitor s. PP L listed last 
year, and Nippon Telegraph and 
Telephone, the former monopoly. 
Although sales were up last business 

year, pre-tax profits fell 18 P®r 
from a year earlier to Yi(L2bn. Earnings 
before touvs for the current year are 
projected at Yl6bn. 

DDFs listing last September attracted 
a large number of investors, boosting 
the stock price, but some analysts fear 
that may not be the case for JT. 

Unlike DDI, tbe company lacks 
money-making subsidiaries, and Tokyo 
Digital Phone, its affiliated c dlula r 
phone company, only began operations 
earlier this year. 

Stronger competition Ui thBS ^_^TL. 
businesses is likely to squeeze further 
JTs profit margins. .. 

Japan Telecom was ongmaBythe 

telecommunications arm of Japan 

Railways, and JR still has a big 

shareholding. , 

i The troubled Swiss telecoms 
. a imaoi jinnefl! 


profitability after two yaara of heft? 

set out tbe group s prospects on 

E^y-j^er this year. Ascomreporti^ a 
product areas- 


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StKKdk FT Gn*l**»; . ■' 

CADBURY SCHWEPPES 

Soft drink sales set 
to give sweet results 

Cadbury Schweppes is expected to 
report on Thursday some erf the best 
interim results among UK food 
man ufac turers with pre-tax profits up 
by about £40m to £200m (5310m). Soft 
drinks will show the biggest 
Improvement at home and abroad while 
confectionery win be patchier. The 
results will also lay to rest fears that 
the aggressive own-label cola strategy 
by J. Sainsbury, Britain’s largest 
supermarket chain, has hurt Coca-Cola 
St Schweppes Beverages, Cadbury’s 61 
per cent owned joint venture. 

After Samsbmy launched Its Classic 
(Vila line earlier this year in packaging 
resembling Coca-Cola's, Coke fought 
back with heavy promotions. In 
Samsbury stares, Coke is now 
outselling Hlasgit* Cola in cans but not 
large bottles. But the cans carry a 
higher profit margin and Samsbury 
accounts for less than 5 per cent of 
CCSB's sales. Overall, CCSB’s operating 
profits should be up by about fifim to 
mare than £5Qm. 

In the UK, chocolate volumes are 
virtually static and Cadbury is trying to 
recoup rising cocoa costs. Sugar sweets, 
via the group’s Trebor Bassett brand, 
look more promising. 

Shareholders ean expect a dividend 
increase of at teast-OAp to &3p but the 
group may act on a bint at its AGM 
about weighting the dividend more in 

Hug wrtfh flfllim ditrfog fha yun* TWe 
would require a rise to more than 5p, 


OTHER COMPANIES 

Flat profits expected 
at Camaud Metalbox 

■ Carnaud Metalbox: The 
Franco-British packag in g group is due 
on Thursday to report first-half profits 
which are expected to be substantially 
unchanged from the FFr509m (f9Sm) 
net profit it recorded in the first six 
months of 1993. 

ram has alnflfldy annnnn rafl that 
turnover rose 3.6 per cent in the first 
half to FFTl2Abn. Last month it 
admitted that it i w na iwwi under 
continued pressure on prices from its 

CQStomerB and fmin si ^hinpint 

increases in some raw material costs. 

■ Total: The French oil group is due to 
report on Wednesday first-half profits 
that it has said wOl be broadly in line 
with those in the first half of 1993, when 
it made an operating profit of FFr3.49tm 
and net group profit of FFrlAGbn. Total 
has seen its crude prices and refining 

marghiR enme nridar tha cama 

downward pressure as other oil 
companies. 

These were among the factors that 
led Elf-Aqnitaina, the other French oil 
major, to repo! a 10 pea: cent drop in 
first-half net profit last week. 

But Total is significant^ better 
placed financially than Elf. With debt 
amounting to 23 per cent of equity at 
the end of last year, it has far fewer 
financial charges to carry. 

■ RTZ: The minerals group is expected 
to report on Wednesday a steep rise in 
profits for the first half of 1394 from 


Carftaud Metatoox 

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9aurcKFTenph)te - - . 

£L86m ($288m) to about £2K&n-£215m on 
the back of higher base metals prices. 

■ BTR: The industrial conglomerate 
will provide an important indicator of 
tbe capital goods sector when it reports 
interim results on Thursday. Analysts 
expect a double-digit increase in pre-tax 
profits to about £660m- £670m ($L04hn), 
excl u di n g gains on disposals, a n d a 10 
per cent rise in the dividend. 

■ Glaxo Holdings: Europe's largest 
pharmaceuticals group is expected to 
report interim profits up from £L67bn 
to between £L88bn and £L9bn ($5L9bn) 
on Thursday following increased 
volume sales of Zantac, its best-selling 
anti-ulcer drug. 

N British Gas: Second-quarto - results 
usually show a loss because of a 
seasonal downturn in demand, and 
analysts are expecting a net toss of 
Elfim- £47m ($73m) in the half-year 
results on Thursday. 


CompanlM In this Issue 


ABC 

Aeronwndco 

Bojaya 

BrtUah Aerospace 
CBS 

Canaden 88 Bwrgy 

CetoJs International 
Chettanham & Gioucs 
Oautartia A erospace 
Fbat Financial Man 
Fokker 


17 Forte 

19- Games Workshop 

18 Gouatt&GO 

1 Hambros Bank 

17 133 W sav Systems 

19 Indemnity Ins Sana 

18 htah Permanent 

18 Land Lasse 
1 Mandats 

19 Mexicans 
1 NBC 


17 

Paramount 

17 

18 

SW Electricity 

18 

18 

Savoy Group 

17 

18 

Stow Darby 

19 

IB 

TO CHy of London 

18 


Taiga Forest Prods 

19 

18 

Texaco 

19 

Texaco Canada 

19 

19 

Tima Warner 

17 

18 

Watt Disney 

17 

19 

Western Union Fin 

19 

17 

Zeneca 

18 


This announcement appears as a matter of record only 

Management Buy In 



GHESS 1 H 6 T 0 H TYRES 


Tyre retailer and wholesaler 
Transaction initiated and arranged by 

Coopers & Lybrand Corporate Finance 
Equity arranged by 

CINVen 

Equity finance provided by funds managed by CINVen 
Debt facilities supplied by Lloyds Bank Pic 
The management team were advised by Hammond Suddards 
The investors were advised by Macfarlanes 


Having the capital to back a big idea is only half the secret. 
Having the vision to spot one is the other half. 



CINVen 


CINVen Lid b a member of IMRO 


t 









V 



is 


FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


COMPANIES AND FINANCE 


is names chief executive 


Sy Tint Surt 


Celsis International, the 

biotechnology company. b3s 
ended six months of manage- 
ment uncertainty by appoint- 
ing a new chief executive to 
replace Mr Tony Martin, who 
was dismissed in April on the 
grounds that he was “ineffec- 
tual". 

The Cambridge-based com- 
pany. which specialises in con- 
tamination detection equip- 
ment. has recruited Mr Arthur 
Holden from Baxter Interna- 
tional. the US medical supplies 
group, where he was global 
marketing vice-president in the 
renal dins ion. 

Mr Holden signed a two-year 
rolling contract on Friday, 
some four months after he was 
first approached by Celsis. 

The company, however, 
declined to disclose the value 
of his package or whether his 
annual salary would exceed 
the £85.rtio paid to Mr Martin. 

It has yet to reach a settle- 
ment with its former chief 


executive, who still holds 
shares worth more than £l-53m 
after leaving with almost two 
and a half years of his three- 
year contract to run. 

Mr Mark Clements, finance 
director, said Mr Holden would 
help to build shareholder value 
in the company, which earlier 
this year announced increased 
pre-tax losses of £1.58m 
(£460.000) following a sharp 
rise in research and develop- 
ment spending from £156.000 to 
£934,000 in the year to March 
31. 

That spending — n rin g funds 
from last year’s £ 12.4m flota- 
tion and income from collabo- 
rative ventures with compa- 
nies such as Wellcome and 
Merck - has been used to 
develop a range of hygiene 
monitoring products. 

Mr Holden, who joins the 
company on October 10. said 
he was determined to exploit 
commercial applications of 
Celsis' technology. 

“1 will be conducting a 
review of the overall strategy 



Arthur Holden: plans to develop commercial applications side 


and will see if this side of the 
business can be developed 
more rapidly,” he added. 

In the latest commercial 
agreement, Celsis said it 
had signed a deal with 
Colgate-Palmolive to use 
its bioluminescence kits to 


monitor personal care products 
such as shampoos and body 
lotions. 

The company declined to 
reveal how much the deal was 
worth, but predicted that simi- 
lar manufacturers would fol- 
low Colgate's lead. 


S Western 
Electricity 
buys back 
2.5m shares 


By Robert Corzine 


expands US 


By Christopher Price 


Govett & Company, the fond 
management and insurance 
group, has announced a signif- 
icant expansion of its US 
operations. 

it has signed a distribution 
agreement with American 
Capital Marketing, a US 
mutual fund group, which it 
estimates will more than tre- 
ble its US sales to 51 bn 
(£600m). 

Mr Ian Whitehead, chief 
financial officer, added that 
the move woold save Govett 
some S3m a year in costs. 
“These are obviously welcome, 
but the most exciting aspect of 
the deal is the growth poten- 
tial for our US mutual funds,** 
he said. Govett currently man- 
ages seven such funds. 

Govett will continue to act 
as investment manager of the 
funds, while American Capital 
will take control of distribu- 
tion. which Govett says will 
substantially increase the 
number of wholesalers selling 
the products. 

The US mutual fund market 
has S -MOO bn of assets under 
management. International 
funds, which have been one of 
the fastest growing segments, 
represent 8.5 per cent of the 
assets. American Capital cur- 
rently manages more than 
Slobn-worth of assets through 
44 mutual funds. 


Hambros to launch Asian trust 


By Be than Hutton 


Hambros Bank is to launch an 
investment trust specialising 
in Asian companies with a 
market capitalisation of less 
than S500m (£322.5m). 

The Hambros Smaller Asian 
Companies Trust is based on 
the manager’s belief that 
smaller Asian companies are 
under-researched, and should 
benefit disproportionately from 
fast economic growth in the 
region. 

It will be managed by Hong 
Kong-based Hambro Pacific 


Fund Management, which 
already runs the Hambros 
EQUUS South East Asia fund, 
covering a similar geographic 
area, and ranked 13th of 32 off- 
shore funds in the same sector 
over three years. 

The new trust’s initial port- 
folio will be concentrated in 
the markets of Hong Kong. 
Malaysia. Singapore and Thai- 
land. but the managers will 
also be free to invest through- 
out the rest of Asia, from 
South Korea to India. 

The fund will be dollar 
denominated, but London- 


listed, and Will have an initial 
life of about seven years. 
Shares will be Issued at 51, and 
warrants will be attached on a 
one-for-five basis. Capital will 
be raised by means of an insti- 
tutional placing by NatWest 
Securities, with a minimum 
subscription of 530.000. 

A s imilar trust. Edinburgh 
Hew Tiger, was launched in 
March this year to invest in 
Asian smaller companies, but 
its shares are still trading at 
below the issue price after the 
corrections in world stock mar- 
kets earlier this year. 


TR City of 
London net 
assets advance 


TR City of London Trust 
reported net assets up from 
133.64p to 135.33p over the year 
to the end of June. 

Net revenue for the year 
improved from £9. 02m to 
£10.7m for earnings per share 
of 5.25p <4.59p). 

A fourth interim dividend of 
1.3lp has already been paid for 
a total or 5p (4.&p). For the cur- 
rent year the board is forecast- 
ing a total dividend of 5-24p. 

The result was helped by a 
decision to charge half man- 
agement expenses to reserves. 
If the same allocation had 
applied in the previous year 
revenue would have been 
£9.3m for earnings per share of 
4.81p. 


C&G first-half profits 
likely to exceed £100m 


By Alison Smith 


Cheltenham & Gloucester 
Building Society, the UK’s 
sixth-largest. is on Thursday 
likely to announce pre-tax prof- 
its exceeding £100m for the 
first half of this year, after a 
sharp drop in provisions for 
bad and doubtful debts. 

It recorded pre-tax profits of 
£75.3m for the first six months 
of last year. An increase of 
more than one third would be 
broadly in line with some other 
large mortgage lenders, and a 
significant difference could re- 
open the debate about the 
£1.8bn cash bid for the society 
by Lloyds Bank. 

One of the questions raised 
by some members of the C&G 


Alternatives Group is whether 
C&G could have attracted - or 
could still attract - a higher 
bid. At the time of the 
announcement in April, one 
analyst suggested that a third 
party could afford to offer up 
to £2.5bn- 

Originally the deal was due 
to be concluded in the second 
quarter of next year. In June, 
however, the scheme suffered a 
setback in the High Court 
which said that the society’s 
plans for distributing the 
£1.8bn among its members and 
others was unlawful. 

Revised proposals, issued in 
mid-August, envisaged that 
completion of the deal would 
be delayed by about three 
months. 


South Western Electricity has 
become the third of the cash- 
rich regional electricity com- 
panies to buy back some of its 
shares. 

The Bristol-based company 
on Friday purchased 2.5m of 
its ordinary shares in the mar- 
ket at 820.5p per share, repre- 
senting 2 per cent of the issued 
ordinary shares. 

Mr John Sellers, finance 
director, said the company 
had taken advantage of a 
downturn in its share price 
on Thursday to enter the 
market 

In common with most other 
regional companies, Sontb 
Western has powers to bny 
back up to 10 per cent of its 
equity. 

Mr Sellers said the company 
wants to assess the market’s 
reaction to Friday’s purchase 
before deciding whether to 
bny back more shares. 

Analysts expect other elec- 
tricity companies will soon 
join South Western, Seeboard 
and Eastern in baying back 
shares. 

Each either has the cash in 
hand or low borrowings. Bny- 
ing back shares boosts earn- 
ings per share and enhances 
the potential to raise dividend 
payments, even if the current 
upsurge in the sector's share 
prices continues. 

Brokers Hoare Govett esti- 
mate that share prices in the 
sector have risen between 40 
and 45 per cent on average in 
the two months to the end of 
August 


Irish Permanent 
pays £6.7m for 
banking arm 


By Alison Smith 


Irish Permanent Building 
Society is buying Guinness & 
Mahon, the Dublin-based pri- 
vate banking arm of Guinness 
Mahon, for £6.7m. 

The purchase by IPBS, 
Ireland’s largest building soci- 
ety with assets of I£2.7bn, fol- 
lows its acquisition of Pruden- 
tial Life of Ireland, and comes 
In the run-up to the publica- 
tion of the prospectus it 
will issue as part of its flota- 
tion. 

IPBS is the first Irish 
society to convert to pic sta- 
tus, and is to be floated on the 
London and Dublin Stock 
Exchanges. 


Fantasy war games maker 
for market with £40m tag 


By Christopher Price 


Renegade goblins, space orks 
and blood angels will be fight- 
ing for investors’ attention 
next month when Games 
Workshop, a fantasy war 
games manufacturer, comes to 
the market in a flotation expec- 
ted to value it at over £48m. 

“We are not a toy maker, or 
satisfying some fad,” says chief 
executive Mr Tom Kirby. “This 
is a business which has been 
serving a hobby enjoyed by 
thousands of young people for 
16 years. I think our record 
speaks for itself.” 

The Nottingham-based group 
was the subject of a £l0m 
management buy-out three 
years ago, and in that time 
has doubled turnover to 
524.5m. Operating profits have 
increased nearly threefold in 


the same period to £4. Km. 

Games Workshop designs, 
manufactures and markets all 
its own products. The custom- 
ers are predominantly male 
and between the ages of 10 and 
17. 

The company invents futur- 
istic war games complete with 
figures and rules, which it then 
controls and supplements with 
developments. Customers are 
encouraged to keep up with 
the latest changes through the 
company’s own magazine, 
“White Dwarf”, which sells 
some 60,000 copies a month. 

About 10 per cent of the UK 
business is done through mail 
order, the rest through the 
company's network of 75 out- 
lets. Like the magazine, the 
shops sell only Games Work- 
shop material and staff advise 
on the hobby. Games Work- 


Zeneca drug strengthens 
place in cancer market 


By Daniel Green 


Zeneca has submitted for 
approval a new drug that is 
likely to affect profits growth 
within two or three years. 

Casodex is a treatment for 
prostate cancer that is esti- 
mated by Lehman Brothers, 
the stockbrokers, to have 
potential sales of between 
5250m and $5Q0m (£323m) a 
year. That woold make it Zene- 
ca's third-biggest seller. 

The drug is an oral anti-an- 
drogen. About 300,000 new 
prostate cancer cases are 
reported each year worldwide, 
making it the second most 
common cancer in men. 


Approval for the drug Is 
being sought first in the UK. 
Submissions to regulatory 
authorities in the rest of the 
European Union and in the US 
will follow by the end of the 
year, and It is likely to reach 
the market in 1995. 

Other companies making or 
developing anti-androgens 
include Scfaering Plough 
and Johnson & Johnson of 
the US. 

Casodex's approval would 
place Zeneca more firmly in 
the cancer market. It already 
has Nolvadex and Zoladex In 
the area, but both are outsold 
by heart treatments Zestril and 
Tenormin. 


Manders in 

NZS35.5m 

acquisition 


To create a truly world 
class insurance broker, 
which names would you 
bring together? 


CROSS BORDER M&A DEALS 

BIDDER/INVESTOR 

TARGET 

SECTOR 

VALUE 

COMHBfT 

SnwthKSne Beecham 
(UK/US) 

Sterflng VWnthrop (US) 

Pharmaceuticals 

£ 1 . 88 bn 

Largest OTC 
acquisition 

Swiss Bank Corp 
(Switzerland) 

Brinson Partners (US) 

Financial 

services 

£487m 

SBC continues 
global growth 

Stan home (US) 

U IHput (UK) 

Consumer 

products 

£37.2m 

Recommended 
cash offer 

Jefferson Smurftt 
(Ireland) 

Nettmgsdorfer (Austria) 

Paper 

£20. 2m 

Strengthening 
corrugated side 

Bowater (UK) 

Van Gelder (Netherlands) 

Specialist 

paper 

Ct5.4m 

Release liner 
expansion 

General Bectric (US) 

Lindner Licht (Germany) 

Lighting 

rVa 

Strategic buy 

British Steel (UK)/ 

SSAB (Sweden) 

Norsk Staf (Norway) 

Steel 

n/a 

Taking full 
control 

Volvo (Sweden) 

Dro^nfiDer (Germany) 

Commercial 

vehicles 

rVa 

Continues bus 
consoBdatkxi 

Fyffes (Ireland) 

Sofiprim (France) 

Food 

n/a 

Another conti- 
nental stake 

Service Corp 

International (US) 

Plamsbnsok (UK) 

Fiaieral 

services 

Cl 93m 

Second major 

UK buy 



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shop also has branches in 
France. Germany, Australia, 
Spain and the US. Last year, 45 
per cent of sales came from 

abroad. 

Mr Kirby is dismissive of 
changing tastes affecting the 
company's future. “We have 
created several generations of 
customers already and are 
addin g new ones all the time. 
War games have been played 
for centuries, nothing's going 
to change that.” 

The flotation will seek to 
raise some £ 20 m through a pla- 
cing of half the shares, with 
management share sales 
accounting for about 10 per 
cent of this. The remaining 50 
per cent of the shares will be 
subject to a free float Credit 
Lyonnais Laing is acting as 
stockbroker, and Samual Mont- 
agu as financial adviser. 


Manders, the coatings and ink 
manufacturer, is expanding in 
New Zealand through a 
NZ$35 ,5m (£i4m) deal. 

It is buying Morrison-PIM 
Holdings, which makes print- 
ing inks, for NZ$27. 5m and the 
assumption of NZ$8m of bor- 
rowings. 

In the year to June 30 1994 
Morrison made an operating 
profit of NZS3Jhn (NZ$3 -2ml on 
unchanged turnover of 
NZ545.&EL 

Manders said that the pur- 
chase would complement its 
existing New Zealand business, 
whic h was acqu i red from 
Croda in January this year. 


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FINANCIAL TIMES 


MONDAY SEPTEMBER 5 1994 


COMPANIES AND FINANCE 


Atlanta group tops 
Western Union bids 


By Patrick Hatverson 1 
in New York 

First Fi n ancial Management, 
an A tlanta-based information 
services company, has offered 
Y8Q%si in cash to acquire West* 
«n Union financial Services, 
the big DS money- transfer 

hndruwo 


N ' 

;1 " ijuisifioj, 


First Financial has also 
offere d to a ssume about 
of Western Union unfrnanred 
pension Uahilities. This lifts 
the total value of the bid to 
above SXhn. 

The offer tops two previous 
bids for Western Union: $970m 
offered last week by Fbrstman 
Little, the New York buyout 
firm, and $660m offered by 
First Data Corporation. First 
Data, however, bag also agreed 
to assume the $265m In pen- 
sion Uflhilitips 

Western Union is currently 
owned by New Valley, a New 
Jersey-based financial services 


company which has been oper- 
ating under bankruptcy court 
protection for the past year 
and a halt New Valley hopes 
eventually to sail the unit for 
enough to pay off its creditors. 

The deadline tor the auction 
ends on September IS, but ana- 
lysts believe that it is unlikely 
First Financial's bid will be 
topped. 

Founded in 1851, Western 
Union controls 90 per cent of 
the US domestic money trans- 
fer market Last year it com- 
pleted 40m transfers of funds 
worth more than $7 Jbn. Reve- 
nues this year are expected to 
top $55Qm. 

Western Union last rfmngprt 
hands In 1987 in a junk bond* 
nanced leveraged buy-out. 
However, the company, subse- 
quently renamed New Valley, 
struggled to meet the high, 
interest oh its debt; and even- 
tually filed for bankruptcy in 
March 1993. 


Danish group to issue 
3m shares in New York 


By KHory Barnes 
In Copenhagen 

ISS International Service 
Systems, the Danish industrial 
cleaning group, is to issue 3m 
B shares on the New York 
Stock. Exchange this autumn. 

Flans to seek a New York 
listing were initially 
announced last year, when ISS 
paid $93 Jim for National 
Cleaning Group of the US to 
become the largest cleaning 
business in North America 
with sales of about 1950m. 

The share Issue was post- 
poned this spring when the ISS 
share price, which peaked at 
DKr276 early in the year, 
began to weaken. The shares 
took a further beating in 
August following the group 
half-year results, failing same 
20 per cent to DKrl77. 

But Mr Potd Andreassen, 
chief executive, said the 
group's investment bankers 
had advised it to go ahead with 
the issue, which will raise 
about DBzSSQm ($86m> at file 
current market price. 

“The issue will strengthen 
our equity capital and enable 
us to go ahead with our strat- 
egy of -expanding our core 




Mr Pool Andreassen: Beady 
to expand core badness 

rimming hiwmoM, rnphtrirng hy 

new acquisitions,” he said. 

Group equity capital at the 
end of June was about 
DKrl.47bn and assets about 
DKriU5bn, an equity ratio of 
23L9 per cent 

ISS is the world leader in 
industrial cleaning with a 
labour force in excess of 
120.000. For the first half of 
1994 sales rose 22 per cent to 
DKr7.24bn and pre-tax profits 
climbed 33 per cent to 
DKrtBSm. 


Mexican 

airlines’ 

chairman 

resigns 

By Ted Bandacfce 
In Mexico City 

The chairman of Mexico’s two 
largest airlines, Mexicans and 
Aeromexico, has stepped down 
under pressure from creditor 
banks seeking a $200m injec- 
tion of new capital from share- 
holders. 

The resignation of Mr Ger- 
ardo de Prevoisin, who in Feb- 
ruary 1993 brought the two 
forms' co m petitors together, 
threatens to unravel the affi- 
ance that controls more Bur 
70 per cent of Mexico's domes- 
tic airline market 
Both airlines are in financial 
trouble. Aeromexico lost 
$136m in the first half of 1994, 
While Mericana followed 1993 
losses of $l00m with a first- 
half 1994 loss of $115m. 
Together they have total debts 
of more than gibn. 

Creditor banka gave Mr de 
Prevoisin unto September l to 
find $l5Qm of fresh capital for 
Mexicans and about $50m for 
Aeromexico. Advisers to Hr de 
Prevoisin say Us first priori t y 
has been to find new money 
for Aeromexico, which has 
been the stronger of the two 
companies, both of which were 
privatised by the Mexican gov- 
ernment in the 1980s. 

Mr de Prevoisin 's plan of 
rationalising routes and unit- 
ing workforces among the two 
carriers has yet to prove its 
worth. Only baggage handling 
and other ground services 
have been successfully com- 
bined. 

Management has faced com- 
petition from a plethora of 
new, small airlines which have 
fafrnn advantage of the Mexi- 
can government's open skies 
policy and flooded the most 
popular routes with cut-price 
flights. 

Average revenue for the air- 
lines is between 15 and 20 
cents per km travelled. The 
company believes it needs to 
increase that figure to about 
30 cent per km in order to 
break even. 

Mr Jose in i * rjamomu was 
n amed pew chairman of Aero- 
mexico, while Claudio Terrain 
will take over the poet at 
Mexicans. Both were already 
board members of both air- 
lines. 


Sime Darby lifts profits by 7.5% 


By Kievan Cooke 
to Kuala Lumpur 

Sime Darby, the Malaysian 
conglomerate that boasts of 
being southeast Asia's biggest 
multinational, has reported a 
7.5 per cent improvement to 
M$904m (DS$354m) in pretax 
profits for the year to June. 

The result was below most 
analysts’ expectations but was 
viewed as satisfactory for one 
of tlie region’s most conserva- 
tively run and cash-rich com- 


A final dividend of 17.5 
Malaysian cents was recom- 


mended, compared wtth 1&5 
Malaysian cents in Ihe previ- 
ous year. Group turnover rose 
to M$8J21bn from M$7Mm. 

Sime Darby, once largely 
plantation-based, has diversi- 
fied into a wide range of activi- 
ties including the oft and gas 
industry, property, motor 
heavy equipment franchises 
and the manufacture of vari- 
ous rubber products. 

The main money-earning 
base was once a gain Hong 
Kong. Pretax prefits in Sine's 
division in Hong Kong, where 
it acts as the automotive 
and heavy equipment distribu- 


tor, were M$227m compared 
with USissm last year. 

Analysts say Shoe benefited 
from buoyant demand in its 
motor distribution in Hong 
Kang, particularly for Europe- 
an-sourced cars, but its overall 
performance in the territory 
was not as impressive as in 
previous years. 

Shoe's operations in Malay- 
sia, the Philippines and Aus- 
tralia reported lower profits 
while Singapore registered 

improved results. Profit from 
the plantations division fell by 
nearly M$20m due to lower 
average prices for palm oil 


products. Depressed rubber 
prices also hurt profit margins. 

However, with palm oil 
prices now recording id-year 
highs and rubber prices 
strengthening, It is likely that 
plantations will have a for bet- 
ter year. 

Stine should also benefit 
from its involvement in vari- 
ous infrastructure projects, 
including its share in an inde- 
pendent power producer 

scheme in Malaysia. 

“The board believes the 
group will have another year 
of record profitability in 
1994-1995.” it said. 


Morgan Stanley bullish on Ireland 


By Antonia Sharpe 

Morgan Stanley, the US 
investment h ^nir l baa stolen, a 
march on its competitors with 
the publication of a bullish 
report on the Irish economy 
and stock market only days 
after the IRA announced its 
ceasefire. 

With toe exception of Lux- 
embourg, the Irish economy Is 
the smallest in the European 
Union and Is only equivalent 
to one-thirtieth of the rise of 
the west German economy and 
one-twentieth of the size of the 
UK’s. 

Nevertheless, its dynamism 
has prompted Morgan Stanley 
to nickname it the “Celtic 
Tiger”, a variation of the label 
given to the fast-growing econ- 
omies in south-east Asia. 

It that I reland hag the 


most rapidly-growing economy 
in the European Union, with 
Gross Domestic Product 
growth averaging 5 per cent 
over the five years to 1993. 

This growth rate may be 
exceeded in both 1994 and 1995, 
the broker forecasts. At the 
same time, inflation rides are 
muted by strong productivity - 
trends, a large balance of pay- 
ments surplus and a firm 
exchange rate. 

Mr Richard Davidson, Mor- 
gan Stanley’s European equity 
strategist, said that the IRA’s 
ceasefire further improved the 
country's prospects because of 
the likely easin g of border 
restrictions and the freer 
movement of goods. “There 
will be more investment in 
either part of Ireland which 
have positive benefits for both 
economies," he said. 


Trading in futures and 
options up in Sydney 


The Sydney Futures Exchange 
said that fixtures and options 
trading rose by 51 per rent in 
the first eight months of 1994, 
compared with, the same period 
a year ago, thanks partly to a 
surge in interest from over- 
seas, Renter reports from Syd- 
ney. 

The chief executive of the 
exchange, Mr Les Hosking, 
said that a total of 21 -3m con- 
tracts were traded in the 
period to August 31. Of the 
total, 8 per cent was sourced 
from overnight trading on 
SFE's after-hours screen-based 
market. 


Mr Hosking said that SFE 
equity derivatives have been 
the fastest growing products. 
Interest rate contracts also saw 
solid growth, with, volumes ris- 
ing by 38 per cent for the three- 
year bmid contract, by 45 per 
rent Cor the 90-day bank bsB 
contract and by 40 per cent Cor 
the 10-year band contract 
• The Chicago Mercantile 
Exchange is to consolidate its 
two largest divisions into a sin- 
gle membership class. The 
exchange proposes payouts to 
agricultural sector traders of 
$60,000 to $$70,000 in a deal 
totalling $45m. 


Ireland’s entry into the wide- 
ly-used MSCI Europe index has 
prompted institutional inves- 
tors to include Irish stocks in 
their portfolios. The country 
has a benchmark weighting of 
06 per cent in the index but 
Morgan Stanley recommends a 
portfolio allocation of L3 per 
cent 

“We expect that the market 
can rise by L5 per cent over the 
next 12 months,” said Mr 
Davidson. He noted that while 
international investor interest 
has increased over the last 
decade, the market remains 
undervalued, particularly the 
banking sector. 

However, bke the economy, 
the Irish stock market is also 
one of the smallest in Europe 
with a total market «*pHaiiwa. 
tion of $17bn. Average daily 
volume in Dublin in July was 


Lend Lease 
sees further 

By Nldkf Taft In Sydney 

Lend Lease, the Sydney-based 
financial services group, has 
announced an. operating profit 
before tax of A$264.7m 
(US$19fhn) for the year to and- 
June, up from A$248m in the 
previous 12 months. The after- 
tax figure increased by 12.6 per- 
cent to A$232.1m, and fully-di- 
luted pgmfngn per share rose 
125 per emit, to 109.7 cents. 

The company said there were 
in aU its main divisions, 
which comprise property, cor- 
porate services and retail 
financial services, including 


I£26m ($17m), of which the top 
10 stocks made up 63 per cent 

The low level of liquidity 
outside the top 10 stocks poses 
considerable problems for 
institutions wanting to deal in 
large amounts. “Investors atm 
view the market as illiquid and 
dominated by locals but there 
is good profit growth and valu- 
ations are cheap,” said Mr 
Davidson. 

The Irish government’s 
intention to sell off its remain- 
ing 15 per iwit stake in Irish 
Life and the potential privati- 
sations of Telecom Eireann 
and the Aer Lingus group 
should greatly improve market 
liquidity. 

In addition, the flotation 
next month of the building 
society Irish Permanent should 
raise between l£30m and 

TPHftn 


ahead and 
advances 

the MLC and Australian Eagle 
life businesses. 

Funds under management, 
which take in those of the 
recently-acquired Yarmouth 
group in the US, now total 
A$292bn. an increase of 57 per 
cent 

The company said that it is 
budgeting for further improve- 
ments in profit and earnings 
per share in the current year. 

It noted that its 12 per cent 
stake in Westpac, the large 
Australian hanking group, was 
held at cost, or A$619an, while 
the market value of the invest- 
ment was now ASTSSm. 


Offer for 
Texaco 
Canada 
rejected 

By Robert GHibens In Montreal 

Texaco, the big US oil group, 
has rejected an offer worth 
C$2Q0m (US$146 m) for its Cana- 
dian subsidiary, Texaco Can- 
ada Petroleum. 

The US company says Tex- 
aco Canada is an important 
part of group strategy for 
North America. Texaco holds 
78 per cent of Texaco Canada, 
an Alberta oil and gas pro- 
ducer and developer. 

The bid is from Canadian 88 
Energy, a small western Can- 
ada oil and gas company, 
which is offering C$1.60 a 
share for Texaco Canada's 
I24m shares after Texaco itself 
offered to buy the minority- 
held shares at C$1.40 a share. 

Dissident Texaco Canada 
shareholders had complained 
that Texaco's offer grossly 
undervalued Texaco Canada's 
assets. Canadian 88 insisted its 
bid was “very serious" and not 
aimed at forcing Texaco to 
raise Its offer for the minority 
shares. It owns almost 10 per 
cent of Texaco Canada. 


Malaysian 
group expands 
in Canada 

By Kferan Cooke 

Berjaya, one of Malaysia’s 
fastest growing conglomerates, 
plans to buy a 60 per cent 
stake to Taiga Forest Products, 
a Canadian rnrapany listed an 

tiie Toronto Stock Exchange. 

Berjaya is offering C$30 Am 
(US$225m) for the stake - or 
C$1250 a share. It described 
Taiga as the largest indepen- 
dent Canadian building prod- 
ucts distributor specialising in 
the wholesale of lrnnhar and 
panel products. Taiga made 
pre-tax profits last year of 
C$8.4m cm sales of C$37im. 

Berjaya, controlled by Malay- 
sian Chinese entrepreneur Mr 
Vincent Tan, has interests 
ranging from manufacturing to 
food distribution and hotels 
and leisure centres. Recently it 
has been expanding into tim- 
ber businesses in Malaysia and 
the South Pacific. 



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MARKETS 


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THIS WEEK 


ING-iilBANK 


ftL: 44.JI.JMCMT MX: 44 71 '748104 



As analysts 
speculate fever- 
ishly over the 
outcome of 
Wednesday’s 
chat between 
the UK chan- 
cellor and the 
Governor of 
the Bank of 'En gland it is 
worth casting an eye over the 
recent behaviour of sterling 
futures. In effect the market 
has been anticipating an 
increase in short-term rates of 
more than a fall percentage 
point by December - In other 
words, at least two separate 
half point increases. 

Notwithstanding the strong 
probability of some pre-emp- 
tive tightening before Christ 
mag, the implicitly draconian 
forecast looks manic in the 
light of recent economic data. 

Xt certainly appears a back- 
handed compliment to the 
credibility of UK monetary pol- 
icy, as, incidentally, does the 
behaviour of long-term rates 
(see chart), where the yield dif- 
ferential in the UK has moved 
very unfavourably this year 
against German bunds. The 
question is whether the mar- 
kets are overdoing the caution, 
leaving a tog arbitrage oppor- 
tunity for cooler heads. 

Some, such as CS First Bos- 
ton in its September fixed 
income research bulletin, have 
unhesitatingly recommended 
buying the December short 


sterling fixtures contract out- 
right. My inclination Is on 
their side of the argument But 
it is still worth playing devil’s 
advocate to see what could jus- 
tify the market’s pess imism 

The prize candidate for this 
role is a sterling crisis. The 
obvious scenario would prota- 
bly involve market worries 
about high rates of growth 
leading to a rapid disappear- 
ance of the gap between actual 
and potential output, quickly 
followed by Inflationary bottle- 
necks. Against a background of 
no early increase in base rates 
and a November budget which 
Is perceived to be excessively 
political and over-generous, 
this could easily do the trick. 

The snag with the argument 
is that we have already seen 
some pre-emptive tightening 
by the bond markets, which 
have imposed constraints on 
wn wa i m ptitm via thp. rise in the 
cost of fixed-rate mortgages. 
This has coincided with the 
chancellor's tougher fiscal pol- 
icy starting to make its mark. 

The worry about capacity 
utilisation thus looks prema- 
ture in relation to a December 
futures contract As for the 
concern about Kenneth 
Clarke’s fiscal and monetary 
intentions, it presupposes that 
the man is wholly devoid of 
judgment 

A more interesting case far 
pessimism is that advanced by 
Mr Brian Beading of Lombard 


Global Investor / John Plender 


Overdoing the caution 


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Street Research. This hinges 
mi Britain’s rale as a global 
financial intermediary in a 
world where the pattern of cap- 
ital SOWS lOOkS IwCTftflfiingty 
perverse. If life were rational, 
countries with ageing popula- 
tions in the developed world 
mi g ht Ik expected to run cur- 
rent account surpluses on their 
balance of payments and to 
export capital to developing 
countries where the risk-ad- 


COMMODITIES 


Richard Mooney 


Cocoa pact talks to resume 


Cocoa Producers and 
consumers will on Thursday 
begin a fresh attempt to agree 
rules covering a production 
management deal that was 
implemented In February. 

Members of the International 
Cocoa Organisation (ICCO) 
failed to reach agreement in 
June, when consumers com- 
plained that their views were 
not adequately represented an 
the organisation’s production 
committee. 

The International Cocoa 
Agreement, which is operated 
by the ICCO, has adopted pro- 


duction management and con- 
sumption promotion in place of 
its buffer stock price stabilisa- 
tion scheme, which has been 
moribund for some years. 

This month’s session, which 
is to continue until September 
20, will mmp riflfl meetings of 
the fUIl ICCO council, as well 
as the production, consump- 
tion and executive committees. 

Some of the urgency was 
taken out of the revival of the 
cocoa pact by last autumn’s 
price rally, with expectations 
of more to come as reduced 
production in West Africa and 


other areas (a legacy of his- 
toric low prices) promised a 
drawdown from world stocks. 

Prices have become stuck in 
something of a rut this sum- 
mer, but remain some 35 per 
cent above the level of the 
summer of 1993. 

Nevertheless, producing 
members of the ICCO are keen 
to have some working machin- 
ery in place to counter any 
later market setbacks. Some 
have suggested that if some 
satisfactory^ arrangement can- 
not he readied under the aus- 
pices of the ICCO, then prodnc- 


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SOME OF OUR FIGURES AS OF MARCH 31, 1994 


Toml assets 
Net profit 

Paid-up capital (April 1994) 
Flee capteT-v 

1 nWna r yft iktfr n.'Ti n pgq vpfo qpf 

OrpfraJ 

" unts 1 ' .. 


USD 2,088 million 
USD 35 million 
USD 119 rnfllkm 
US) 52 million 
USD 1,943 million 



Retain 
XHqjkwaR 
Ditejfep 

• '/ Total 

- .1.- p r-r -v-7 - -JsS 


12.82% 
NLA. % 
8.44% 
£-£3.04% 

£&fc25.% 



. :<?i 


ivlGARANTI BANK 


&3 Bdyttutare CatfoL Maafak 60670 Isaobol / TURKEY Td. Fax.- (90-212) 285 40 40 
Contact person.- Me. Adas Acar. Cxmntve vice FreskieoL 


27635 sw-o 



; -- ’■•ft-*" 

} Kssfeii fSjSii 


justed returns are much 
hitter. Yet within the Group 
of Seven industrialised coun- 
tries, only Japan comes dose . 
to matching that description. 

Even then, the Japanese last 
year recycled only half their 
current account surplus in the 
form of long-term direct and 
portfolio outflows. But the 
most remarkable statistic In 
the accompanying table is the 
one that shows Britain, despite 


being in substantial current 
account deficit, becoming the 
biggest net exporter of 
long-term portfolio capital in 
the G7 in 1993. 

The US, too, has recently 
turned generous with its out- 
flows, especially if direct out- 
ward investment of a farther 
net $37bn is induded. Mean- 
while, Germany and Italy both 
received huge portfolio inflows. 

Part of the reason why the 


English-speaking economies 
have been exporting capital 
despite running current 
account Awfaftfo is that their 
financial systems are so highly 
developed. Traditionally, age- 
ing Britons are big savers. But 
murfi of their saving has been 
recycled to younger Britons 
who borrow more than their 
co u n terpar ts elsewhere. Whan 
tim Inter-generational transfer 
is netted out, the savings rate 


proves unduly low and contrib- 
utes to a large current account 
deficit 

Yet the deployment of the 
gross savings- of the ageing 
populations of the US and 
Britain is conducted mainly by 
fond managers without regard 
to macro-economic consider- 
ations such as tiie overall level 
of p pHnnai savings. This leads 
to a big financing requirement. 
Both countries have, in affect, 
ende d up borrowing short and 
lending long cm a huge scale. 

This leads to an unstable sit- 
uation, which is more worry- 
ing for Britain than the US 
where external factors are less 
Important far the conduct of 
monetary policy. Given that 
the UK economic recovery is 
more advanced than continen- 
tal Europe’s, Britain will need 
to cut interest rates again 
before Germany. That could 
cut off the short-term inflows, 
causing sterling, to crash. 

Mr Reading concludes from 
this that the way to deal with 
the new wtnnmi constraint cm 


NET CAPITAL FLOWS 

Ibn 

1969 

1690 

1991 

1992 

1992 

1994Q1 






annual rate 

USA 

46 

-30 

9 

22 

-15 

10 

Japan 

-as 

4 

70 

-26 

-63 

152 

Owmany 

-3 

. -4 

22 

36 

120 

-57 

Britaki . 

-34 

-15 

-18 

-21 

-63 

271 

France 

22 

35 

14 

34 

3 

-75 

Italy 

3 

-t 

•6 

-13 

57 

38 

Total 

-4 

-11 

91 

32 

19 

339 


era might do worse than to 
emulate tim coffee producers’ 
successful export retention 
scheme, which had helped to 
lift prices even before June/ 
July frosts in Brazil drove 
them to 8%-year highs. 

Other events this week 
include a three-day Indian 
planters’ meeting in Coonoor 
to assess crop prospects for 
tea, coffee, rubber and spices, 
and a four-day international 
oils and fats conference in 
Kuala Lumpur. On Wednesday 
Statistics Canada is due to 
release its grain stories report 



If a rise in the 
sale of apples 
relative to 
oranges had 
negative wider 
consequences, 
observers 
might call for 
market 
reform. Few, however, would 
accnse apples of harbouring 
anti-social ambitions. The 
trouble with the labour mar- 
ket is that people are not HkB 
fruit Discern a trend, and you 
could find your politics bring 
examined more vigorously 
than the finding itself. 

Analysing developments to 
the UK over tim past 20 years 
is especially hazardous. Over- 
all, employment trends have 
favoured woman; but an 
article pubHshed today in the 
centre-left journal. New Econ- 
omy*, argues that economists' 
research has gone the other 
way. 

The author, Rosemary Qui- 

ney, rfafang that in describing 
the decline of fob-time work 
for men, and the accompany- 
ing growth of the female, 
largely part-time, labour force, 
researchers may be encourag- 
ing . a backlash against 
women. 

Female employment far the 
UK has risen by 23 per emit 
since 1971, while the number 
of employed men has fallen by 
almost the same amount Mbet 
researchers trying to under- 
stand th is change dahn to 
welcome the fact that female 
job op port un ities have grown. 
Women have dearly benefited 
from the shifting character at 
jobs created, a rising propor- 
tion of which are part-time, 
and concentrated In the ser- 
vice sector. 

The same authors have 
understandably - i£ acco r ding 
to MS Gainey, incautiously - 
drawn attention to the down- 
side of recent developments, 
both for male employment 
prospects and the distribution 
of income across households. 

Male unemployment, cur- 
rently 12.6 per cent, is more 
than double the 5J per cent 
rate suffered by women. 

In addition, since more than 

three-quarters of female 
part-time work is taken by 


Economics Notebook 


Sex and the 
labour market 



jJi.-;::. i'J- ».-v& 







married, women . with 
employed husbands, there 
might be a damaging side-ef- 
fect for the overall distribu- 
tion of income. •‘Work-rich” 
.households, in which both 
partners have jobs, boost their 
relative standing, while the 
homes of the unemployed slip 
even farther down. 

Too often, Ms Quiney 
argues, these facts are fanptto- 
itly drawn together into an 
accusation against women. 
Not only are women suffering 
less unemployment than mm , 
but since they are already 
"comfortably off ”, ffemaia part- 
timers are effectively branded 
as "stealing jobs from needy 
men because of a selfish 
desire to buy pins”. 

This is not merely politi- 
cally incorrect; it is factually 
questionable as wefl. For one 
filing , hwwiHnp unemployment 
rates are notorious for under- 
stating the number of jobless 
women. Statistics calculated 
by the OECD tend to put UK 
female unemployment a good 

<W»1 M gtomr than the offWttl 

rate. 

Even the adjusted figures 


miss out those women who 
drop out of the labour force to 
work at home , when their job 
prospects are low. In fact, a 
smaller proportion of single 
mothers are finding work: 22 
per cent were employed in 
1990-2, compared to 26 per cent 
in 1977-9. 

It is equally misleading to 
characterise married women’s 
employment as a bid for extra 
pocket money. As Ms Quiney 
notes, most working women 
contribute more than a third 
of their household’s earned 
i n come. 

Research by Mr Stephen 
Marfiin and Ms Jane Waldfo- 
gel, at the London School of 
Economics, has found that a 
disproportionate number of 
the women going out to work 
were from poorer households. 
This means that, tar from 
adding to the recent trend 
towards greater income 
inequality among working 
households, the "emancipa- 
tion" of such women counter- 
acted it Many famfltai might 
he In poverty, were it not for 
the woman’s efforts. 

The distributive effects of 


the rise in the number of dual- 
earner households could be 
l ess favourable if one includes 
families tn which no-one has'a 
job. Bat the chart (left) shows 
that this is where women 
have not avoided their part 
urns' fate. 

The top line of the graph 
confirms the steady rise in the 
nnrnhar of working wives. The 
percentage of married couples 
of working age in which the 
woman is “non-employed” 
(either on the dole or out of 
the labour force altogether) 
has fallen from 45 per cent, in 
1973. to 35 per cent in 1991. 

However, this disguises the 
fact that only the wives of 
working husbands have been 

finding jobs. The middle line 
charts their progress: a mere 
25 per cent of them are now 
mmemployed, compared to 42 
per cant 20 years ago. This is 
steeper than the line above, 
because a growing proportion 
of women in the same type trf 
household have been "shar- 
ing” non-employment with 
their husbands: nearly a 
tenth, in L991,. compared to 3 
per cent in 1973. 

If one combines these 
Teaulte for married couples 
with the relative labour mar- 
ket failure of single mothers, 
it is dear that the problem Is 
not rising sexual equality, per 
se. In a growing number of 
"work-poor” homes, neither 
men nor women are being 
offered the fall-time, perma- 
nent jobs which were the 
norm when the benefit system 
was created. Instead, firms are 
opting to employ workers on 
rather different terms. Accept- 
ing them, can leave these fami- 
lies worse off and less eco- 
nomically secure, than 
remaining on the dole. 

Finding a “correct” way to 
describe these disturbing 
labour market trends ought 
not to distract from deciding 
how they might be reversed. 
Rather than "shoot the mes- 
senger”, find ways to reform 
the system which produced 
the 


' Stephanie Flanders 

* “Women need the work*. 
Institute of Public PoUcy 
Research. 


FT- ACTUARIES WORLD INDICES 


Jointly oompfad by Tin Financial Tlnm Ltd, Goldman, Sacha* Co. aid NaONaat Socurftfes Lid. in conjunction w3h tha 

NATIONAL AND 

REGIONAL MARKETS — WOPAY B iP T U M POn 1 1B84 ■ . - . THURSDW 

figuraa fci pararMhaan US Wchg Rouxf Local Local K Oeaa US Powd 

ohow numbar e# but Qatar rinoo Startag Yen DM 
of Mock Max 31/12/93 Index 


InriButa of Actuates and tha Faculty of Actuates 


Local Local K Gross 

Cwsncychg flora Oh. 
Indax 31/12/93 YMd 


Yan 


— — -DOLLAR HOC- 

Local . . Vmt 

DM Cumncy 52 weak 52 week mo 
Indtn Index High Low {appro) 


AuabaSa | 
Austria (17) 


-178.68 

.186*6 


Belgium (37). 
Canada (1 04). 
Danmark {33) . 


-177.04 

-133.00 


FHand {24) 


-ZS7J07 


Franos 07) 


Qarmmvpfl}. 


Hoop Kong (56) 
Mend (14) 

lta*|M). 


-17930 

-17&57 

.14X54 


-214*0 


-8138 


Jeprnm 


-164*8 


Mexico (IQ 


-56X86 


NMhorf&nd R7) . 


-2281.68 


New Zealand (14) , 
Norway (23) . 


-217*7 


Shgapo»{44) , 
South AMea (BE 
Spam ( 


-207*6 


-367*3 


-306.12 


Sweden PG 


SmtQflriend (4?) 


-14047 

-228*0 


-109.46 


LMMd modern (204) 203-16 

USA (517) 192*1 


7.1 

178*8 

178*6 

176*6 

16003 

-2-1 

049 

178.73 

17025 

179*1 

5* 

187*0 

iPPJg 

15622 

18B.12 

-4* 

1*0 

194*1 

157*9 

122.79 

a* 

168*0 

111*3 

143*0 

140*6 

-a* 

094 

174*8 

168*2 


-0.1 

130.13 

88.18 

108*8 

134*1 

8.1 

2*0 

135.72 

130*3 

85*1 

4.0 

248.71 

161*2 

206*2 

215*8 

-8* 

1*8 

26348 

243*6 

158*8 

45* 

172*7 

112*6 

146*4 

189*4 

208 

074 

174*5 

167*2 

109*6 

-02 

168*9 

110*1 

142*1 

147*4 

-a* 

goo 

175*1 

168*4 

110*5 

6* 

148*4 

148*4 

121*0 

121*0 

-4* 

1-7U 

147*1 

147*4 


-1 7 A 

40439 

404*9 

404*6 

401.18 

-17.4 

3*5 

403*9 

404.78 

404*9 

16.1 

214*9 

214*8 

214*9 

197.79 

6* 

020 

210*2 

211*4 

211.48 

Z\S 

83*3 

83*8 

83*8 

86*1 

11* 

1*8 

83*8 

83*0 

83*8 

28.7 

164*8 

103*0 

184*9 

mm. 

12* 

0.74 

l&MO 

164*9 

103*7 

-4* 

-S6S*S 

566*5 

565*5' 

556*4 

-04 

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584*0 

60066 

585*4 

-6.7 

2160*7 

1414.70 

182IL30 

8302.16 

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225037 

2173*6 

142278 

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217*7 

217*7 

217*7 

174*7 

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3*0 

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215.11 

215*6 

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75*3 

75*3 

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3* 

080 

74*7 

74.79 

74.77 

15* 

109*6 

130*6 

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1,71 

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129.18 

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292*1 

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247*9 

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gna 

902.77 

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6826 

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-06. 

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140*5 

135*7 

88,73 

13* 

236*0 

226*0 

gg w«n 

23092 

6* 

1*6 

22030 

221*6 

223*0 

4* 

180-75 

104*8 

135*2 

136*5 

-8* 

1.79 

162*3 

150*3 

10X43 

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194*7 

203.16 

203.16. 

184*7 

-5.1 

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184.70 

202*4 

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12078 

165*0 

19221 

1* 

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193.11 

165*7 

121*8 


160*6 

160*0 

143*8 

111*7 

207*2 

142.70 
14048 
120*3 

407*4 

213.18 

84*6 

188.18 
570*6 

1851*8 

218.70 
73*7 

168.12 

371*2 

248*3 

115.48 

228*0 

133*4 

204*7 

158*3 


159*7 

188.75 

199*8 

134.42 

214*6 

188*4 

148.16 
120*3 
40042 
19038 

98.44 

103*7 

565*1 

6308*5 

173.16 
■ 6S.87 
102*3 
253*2 
208*8 
139.4s 
23441 

133*0 

184.70 

183.11 


168.16 

195.41 

177*4 

146*1 

275.79 

178*0 

185*7 

148*4 

806*6 

214*8 

97.78 

170.10 

621*3 

2647*6 

217*7. 

77*8 

211.74 

376*2 

305*4 

1HL7B 

231*6 

178*Q 

214*8 

196*4. 


139*4 

1B4*4 

143.82 

120*4 

223*4 

104*8 

150*4 

124*8 

282*6 

161*4 

57*8 

124*4 

392*3 

1616.11 

16025 


165*2 


175*3 

128*8 

176*3 

165.70 

161.11 

.179*6 


147*1 

175.47 

147*4 

127*0 

227*3 

104.73 

16044 

126*7 

■28067 

1fiB*S 

77*6 

156*7 

404.17 

174063 

185.40 

62*1 

17038 

287.19 

101.42 

137,70 

180*1 

136*6 

187.79 

188*4 



—.178*1 

' 4 * 

160*1 110*8 

142.78 

137*0 

-4* 

2*4 

174*0 

167*6 

100*3 

143*7 


NORBsfllQ 

— 221*4 

18* 

212*1 138.18 

179*2 

214.10 

. 8* 

1*8 

217*9 

209*3 

137.08 

178*8 


Padflo Baaki (74SJ — ; 

— 174.72 

204 

174J2 174.72 

174.72 

114.72 

8* 

1*5 

174*4 

174*5 

174.71 

‘ 17X11 


Euro-FacHto (148^ 

—175.14 

Ig.fl 

18007 .110*4 

142*6 

16TJM 

2J. 

IK 

' 174*2 

167*9 

.108.78 

142*4 


Nortfj AroricH (S21) 

—168*9 

- 1* 

181 M 118*6 

168*5 

186*1 

. 1* 

2*0 

169*5 

18X44 

' .118142 

15641 


Europe Sx. UK (514) 

—167*6 

ft* 

151*2 99*1 

127*2 

136*5 

-A7 

233 

166*3 

.149*9 

98,17 

127.76 


Pwdfc Ex. Japan CCS) . — _*70*5 ' 

-5* 

270*5 270*5 

270*6 

24Q.10 

-10.1 

2.70 

28X54 

270*3 


37244 


World &.US (1847) 

— 178*6 

12* 

169*2 11006 

14X28 

136*9 

3* 

1*7 

176*6 

13017 

11X73 



WOUEk.UK (19009 

—178*8 

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144*6 

149.17 

XI 

2*2 

178*5 

171*6 

1.12*8 

14X22 


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— 178*8 

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gon 

179*0 

172*6 

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World Be. Jap« (1686) _ 

—191*2 

1* 

183*0 120*0 

165.18 


-HA 

2*2 

191.12 

18X85 

12040 

15X60 

182*5 


WTT7* 

8* 

173*7 113*7 

148*2 

183*7 

2* 

2*0 

18047 

17X70 

11X68 

147*6 

15342 


178*8 
222*3 
178*6 
ITS. 14 
1S2J3 
163.12 
29*21 
17065 
178*0 
180*3 
195 an 


15086 

173.18 

13479 

143*8. 

175*7.' 

134*7 

200.13 

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165*6 

156*4 

174*4 


167.18 
174*8 
16018 
160*0 
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137.72 
204*1 
100.78 
16720 
168*0 
170.41 


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monetary policy is to allow 
currencies to take the strain, 
while the consequences of 
easier money are offset by 
tighter fiscal policy. 

An equally striking feature 
of the table is the reversal of 
the biggest net flows, those of 
Britain and Japan, in tbs first 
quarter of this year. Yet in 
practise they do not represent 
conventional repatriation since 
they were largely offset by a 
return to repayments of bor- 
rowing. Because of the historic 
losses sustained through the 
appreciation of the yen, Japa- 
nese institutions much 
of their international capital 
excursions in the euromarkets. 
Loudon, meanwhile, plays host 
to many leveraged investors in 
its capacity as an international 
finnTwiai centre. 

-The big swings In the table 
hdp explain the extent of the 
bond market fall-out earlier 
this year. And, indeed, why 
burnt Investors are leaving 
such large arbitrage opportuni- 
ties in the futures markets. 







US- Jap: 




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FINANCIAL Tl MF-S 


Monday September 5 1994 



EMERGING 


: This Week 


The Emerging Investor / Stefan Wagstyl in Bombay 

Bulls ride roughshod oyer doubters 


"If making money is a 
an. ..welcome to hell," reads 
an advertising sign In Bombay 
proclaiming the virtues of 
stock market investment 

AH over the city there are 
people taking the to 

heart - from the crowds mill- 
mg in the narrow streets 
around the Bombay Stock 
Exchange, to the foreign 
investment bankers who have 
taken up residence in the lux- 
ury hotels. 

Bombay is in the midst of its 
biggest stock market invest- 
ment boom in over two years 
The Bombay Stock Exchange’s 
index of leading shares has 
risen by about 35 per cent 
since early May to reach a new 

all-time high last Wednesday of 
4288.18. 

The previous record of 4246 
was set to April 1992, at the 
peak of a rally which collapsed 
when it emerged that the mar- 
ket was being fuelled by sus- 
pected illegal share-financing 
operations organised by Mr 
Qarshad Mehta, a leading 
stockbroker. The ensuing 
Rs40hn ($i2.75bn) scandal 
a cloud over Bombay's finan- 
cial markets that is only now 
beginning to lift. 

The most b ullish stockbro- 
kers are certain that the tartar 
is now in sight of 5,000. The 
more cautious point out that 
the market has already risen 
by more than 70 per cent since 
its lOW Of 2,633 in the mirtrfte of 
last year, and is riding for a 
falL But those who think a cor- 


CURRENCIES 


rectum is overdue are in the 
minority. 

The bulls' case is built on a 
strong revival in the economy. 

Three years after the start of 

economic reform in 1991 
plunged much of Tr jjfy n indus- 
try into a- prolonged recession, 
there are signs that many com- 
panies are recovering. In the 
year to March 1994, exports 
grew 22 per cent. The first few 
months of 199495 have seen a 
pick-up to domestic demand, 
particularly for consumer 
goods, and this should be sus- 
tained, given that the monsoon 
seems to have distributed 
ample rains. 

Moreover, the bulls expect 
interest rates to fell by about 1 
percentage point when the 
Reserve Bank of India sets 
monetary policy later this 
month for the Octobar-March 
half-year. This would bring 
minimum commer cial lending 
rates to 14 per cent, compared 
with a high of 19 per cent in 
1991-92, 

All this, say the bulls, is 
feeding growth in corporate 
profits, which rose 75 per cent 
at the net level in 1993-94 and 
are forecast by stockbrokers to 
increase a further 40 to 50 per 
cent in the current year. 
According to the hulls, these 
increases justify current price/ 
earnings multiples for 
shares, which trade at about 53 
times their net earnings for 
1993-94, and 36 times likely 
earnings for 139495. 

The bears do not deny that 


Ten best performing stocks 

Stock 

CtBolqr 

ftfctey V 
2AA4 

teak sa toSte 
* 

t etianga 
% 

tnt Indorayon Utama 

Indonesia 

2.7112 

05046 

22-87 

Rt Exploration & Production 

Thatend 

9^781 

V6630 

21 S3 

Tefecomasri 

Thailand 

35792 

05951 

17.59 

Comerdal 6 d P tafa 

Argentina 

3.7556 

0-5353 

16.62 

Brat Bangkok City Bar* 

Thaiand 

OS^8 

01288 

15J1 

OA Sudanericana de Vaoprea 

Chits 

0.7571 

0-0888 

1358 

Pebrobraa (pH) 

BrazS 

0.1898 

00218 

13.01 

Krung Thai Bank 

Thafland 

3U1784 

03361 

12-25 

Krfsda Mahanakoran 

Thaiand 

33133 

0.3558 

1Z01 

Cia De Acaros del PreaSco 

CMe 

6.4886 

06604 

11^8 




Sure: Btotof 

l aacurtto* 


the economic outlook is better 
than at any thn* in the past 
three years. But they believe 
that in their rush to buy, inves- 
tors have pushed share prices 
far beyond levels justified by 
economic logic. “Prices are 
simply outrageous,” says Mr 
Pradip Shah, managing direc- 
tor of Crisil, a credit rating 
agency. “The economy is good 
but ifa not that good." 

Mr R RalakrwrtmaTi senior 
vice president at DSP Financial 
Consultants, a securities com- 
pany, argues that the rate of 
profits growth has been exag- 
gerated by one-off technical 
changes, including th** liberal- 
isation of foreign exchange 
rules and to accountancy regu- 
lations covering depredation. 
“Underlying profits growth is 
moderate ” he 6ays. 

He and other bears warn 
that shares are being driven up 
mainly by the flood of money 
entering a market w hich Is too 
small to cope. Domestic inves- 


tors' appetites have been whet- 
ted by the sight of foreign fond 
managers, who were allowed 
into India only in late 1992, 

Waging Indian stocks. 

Even although the total mar- 
ket capitalisation of the Bom- 
bay market is now nearly 
$150bn, daily turnover is quite 
low - below 3100 m - because 
so little stock is freely traded. 
The families that control most 
listed companies typically hold 
25 to 75 per cent of the issued 
capital other lorng^enn hold- 
ers such as development banks 
are also infrequent sellers. 
Very ltttle is left for foreign 
fund managers and other new 
inv e s to r s to buy. 

The - fHfflciiHiws in acquiring 
shares are acce n tu a ted by the 
cumbersome trading, settle- 
Tnprrt and tr ansfer procedures, 
which mean it can take six 
weeks for sellers to receive 
payment and three months for 
buyers to secure full owner- 
ship of their stock. Although 


stockbrokers and bankers are 
trying to improve the process, 
they only expect dramatic 
cha n ges after the Bombay 
Stock Exchange and the newly- 
formed National Stock 
Erfthang w ( pnnnh computerised 
on-screen trading, and a com- 
puterised share depositary is 
es tablished to handle share 
transfers smoothly. On-screen 
trading on the NSE could start 
this year for top stocks and on 
the BSE next summer, but a 
fully-fledged depositary is two 
or three years away. 

These difficulties have 
already persuaded some for- 
eign fund managers to slow 
their purchases of Indian stock 
or to switch to the Euroequity 
Issues of Indian companies. 
After averaging $25lm a month 
to the first half of 1994, net 
foreign buying of Indian equity 
fen to $89m in July and JBQm 
in August. Given that many 
investment funds dedicated to 
India have yet to invest, this 
slowdown is likely to be tempo- 
rary, but it shows that fund 
managers are paying he ed to 
price levels. 

They are also diversifying 
their purchases from the large 
capitalisation stocks, which 
tend to trade an the highest 
multiples, to s malle r issues, 
where price/earnings ratios are 
as low as 10. Mr Shah believes 
that this is where the best 
vaipe is now to be found in the 
market - hut it is also where 
the problems of acquiring 
stock are the greatest 


Philip Gawith 


US-Japan talks move to centre stage 


A series of high-level trade talks this 
week between US and Japanese officials 
could provide fresh direction for the 
dollar. 

The trade dispute between the two 
countries has been a key factor to the 
dollar's weakness this year. There are 
widely differing views, though, as to 
what progress can be expected, and 
hence what the likely outlook for the 
dollar is. 

Elsewhere, starling win be a focus of 
attention as markets watch the 
monthly monetary meeting in the UK 
for any signs of a decision to raise inter- 
est rates. 

In general, currenqr market activity 


is likely to be subdued by the labour 
day holiday in the IIS today, and the 
Jewish new year later in the week. 

Mr Mickey Kantor, the US trade rep- 
resentative, is scheduled to hold talks 
with Mr Ryutaro Hashhnoto, the Japa- 
nese international trade and industry 
ministry, and Mr Yohei Kono. the for- 
eign minister. 

Mr Paul Chertkow, haad of global cur- 
rency research at UBS in London, 
argues that a breakthrough in the talks 
is increasingly likely. On this hama he 
predicts that the dollar could 'rise to 
Y1D7 to YllDby the end of the year. 

Economists, at Swiss Bank take a dff-. 
ferent view. “We expect that the market ' 


wQl become <fl«M»nohantpd with the per- 
sistent trade talks between the US and 
Japan,” they say, predicting that the 
dollar win test new lows against the 
yen. 

Over the next three months , however, 
they see the dollar rising to YI05 
through central bask intervention, and 
dollar buying on the back of hopes that 
the Japanese trade flT| d current account 
surpluses win shrink. 

Tomorrow's release of (he Bank of 
Japan’s quarterly survey of business 
activity should provide some firm evi- 
dence of the strength - or not - of 
economic recovery. 

Opinion In the UK is mixed about 


whether any upward move in Interest 
rates can he expected. Good inflation 
figures, however, coupled with indica- 
tions of a slowd ow n in consumer spend- 
ing, appear to have shifted the odds in 
favour of rates staying nnchang ad, pos- 
sibly for the rest of the year. 

This may cause sterling to weaken, 
but tise dollar probably remains a more 
important dete rminant of its fide than 
the level of UK interest rates. 

Market concerns about Italy’s fiscal 
position have recently contributed to 
lira volatility. For thia reason tomor- 
row’s meeting of the Italian cabinet, to 
discuss the 1996 budget, will be closely 
watched 


FT GUIDE TO WORLD CURRENCIES 


The table Mow {firm tho latest wmftiWo rates of mohenge (rwmdacO against tour kay ourrenctea an ftfdqy. September 2. 1994 . In some cssss the rate k nominal. Market rates are the average of buying and sstenQ rates iw capt 
wham they am shown to ba otherwise, to some cases mertaot mtes ham boon cototetoad from those of foreign euisndes to uteJi they are Usd. 


US* MMK 


YBt 
PC Ml 


tSIQ 


US* 04MMC 



<014.40 

164.400 


18 
840887 
24JU71 


W8S7T-5 

4.108 

1-6424 

3.TCO 

20804 

17,0897 

847.191 


848840 


80818 

1.7287 


1.789 

1JW 

11-0471 

100015 


741808 

102JHB 


200200 
01 in 77 
3.1054 


18448 
404380 
7-2740 
4J 

U 


20102 

32140 

18888 

5340B2 

1 

31.3888 


02418 

88887 

203174 

1.288* 


271S1 
14J04S 
1JS 
1.3348 
11.1148 
16 


10061 

turn 


807406 

20223 


1.2812 

342-007 

06408 

201086 


20112 

S302S7 

unto 
»i -«n 


27322 


PnlUS 

Ugwk M4 

baton Fare «?#»*) 
Bums 

BuntodRJ 


87.5218 

(00440 


08197 

347.67 






Csaayk (tol 
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CerLAk. Rep ICTAFrt 
am jCTArt 

CMe (CNtean 
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t*bouan«p nbn) 

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tSuertf 


620440 

21116 

20CL200 

130337 

1J081 

820440 

826.440 

042883 

102788 


643774 

08186 

B34JM2 


1.7572 

08879 

08012 

38-3145 

342807 

07303 

160748 

234223 

340801 

08761 

80087 

548794 


*7488 

08814 

18088 

378024 

330267 

58554 

248.188 

39188 

898257 

12762 



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24101 
180040 

i m 


18601 

874405 

08413 


4.19 
029 
18MB 


01883 


08878 

1.7287 

81428 


150001 
It 

217J 


07304 

87*186 


107418 

11-8364 

105.786 

106.131 

48L4386 

338181 


140727 

108801 


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BSS.7D4 

787064 

802018 

1*17*1 

37016 


217008 

173047 

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*0194 

167486 


607872 

43821 

201065 

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18786 


21.4813 

837973 


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Korea North 
Korea Sou* (Wo* 

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3*2807 

342907 


188210 

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812837 


410838 

06687 

910672 

07904 

2216 

38071 


830367 

410883 


04488 

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254778 


07047 

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1138 


342778 

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07400 

406830 

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4.1688 

202882 


167.158 


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0.7500 

0478 

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177038 


100734 

342807 

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13.1332- 

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0307. 

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113-854 

1.7287 

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1337.65 


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106100 

826440 

104780 

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7.7933 

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820440 

&aw* 

140666 

820440 


150121 

5302*7 

S0481 

07816 

04818 

234605 

02091 

170716 

27151 

132136 

208088 

227386 

34077 

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128074 

64871 


09*73 

6.1653 


04149 

80*18 


01X48 

604OJ 

6340^1 

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601718 

634082 


»MMI 

3429 


128848 

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02031 


80757 

03835 


3429 

81443 

342907 


680267 



03198 

123098 

04807 

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544017 

1J467 

21*88 

801729 


12773 

61324 

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472883 

12448 

14212 

28*6.18 


08169 

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4070*3 

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25627 


847.181 

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82381 


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14488 
10888 
04148 
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147832 
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1*1018 

22707 

205106 

08612 

14626 

23136 


02844 

281800 

21620CQ 

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120 

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150042 

130263 


4.18 


108002 

27005 


167425 

650166 

3J503 


22318 

3429 

100643 

807868 

1.7297 

04149 

12297 

3428 

1.7297 

100043 


1-0081 

28004 


170078 

14081 

27151 

08512 

271S1 


27151 


7.6737 


23168 

405255 


12448 

04717 


710877 


1870*5 

26771 


030S3 

12114 


05818 

107071 


724233 


08408 

01957 


1X061 

03072 

12195 


ftwk 

SpanWt Potato 
N Africa (SpPhMta} 

W 

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322458 


247.181 

124717 

28416 

172104 


067*1 

02844 

180047 

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861018 

180015 

8X1733 

25514 

110039 

534092 

00708 

62*88 

122278 

170157 



70056* 

280000 

200-200 

780712 

480184- 


314121 

120877 


161084 

25771 


21839 

374.773 

00312 

201343 

772428 


27732 

40879 


187247 


10088 

310014 

121018 


50080 

110205 


3X771 

70317 

12114 


408312 


202371 

52*078 


12133 

103172 


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184.145 


10185 


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02377 


228*4 


71419 

2.168 


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Tongak ftoel 

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Usto&Criwe (UB® 


(08.192 

26.1672 


20804 

80078 


10448 


700420 

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JAL MILEAGE BANK 6UT0p€ 


Hong Kong 


Sun Hung Eai plans to set up a 
joint venture fund with 
Shanghai Shenyin Securities to 
invest in China’s A share 
markets, non confined to 
domestic investors. 

The size of the fund has yet 
to be finalised, but it is 
expected to range from S5Qm to 
hundreds of millions of dollars. 
The plan is subject to approval 
from Beijing. 

■ Lebanon 

Beirut’s defunct stock 
exchange will reopen within 
two months, the president of 

the newly -appointed stock 
exchange committee said in a 
newspaper interview. 

The exchange, which 
operated last in 1984 at the 
height of Lebanon's 1975-90 
civil war, would trade in 
shares of those companies 
listed on the exchange before it 
closed, he said. These are 
currently bang dealt in the 
unofficial grey market 

■ Poland 

Investors oversubscribed the 
public offering of the Polish 
treasury’s 48 per cent stake in 
tyre maker Debica. the 
privatisation ministry said. 

The initial results of the 
offer did not reveal the extent 
of the oversubscription, or the 
final issue price for the shares 
which were offered at a 
minimum 160,000 zlotys apiece. 

■ Pakistan 

A Karachi Stock Exchange 
committee has rejected an 
ap plicatio n by Mineral 
G rinding Mfllc to malro a 



i 

News round-up 



3-for-l rights issue to pay for 
the conversion of its grinding 
mills to cement-making. The 
committee said the company 
had not planned the project 
properly. Another KSE 
committee last month blocked 
a 20 -for-i rights issue planned 
by Tri-Star Power. 

■ Mexico 

Grupc Continental, the 
bottling company, is to raise 
some 2m pesos via a global 
issue of 20m L shares with 
restricted voting rights. The 
proportion of shares to be 
issued in Mexico and in other 
markets has not yet been set. 

■ Jordan 

The Amman share market was 
depressed last week by plans 
for a capital gains tat on 
the share dealing of finan- 
cial institutions. On Tuesday, 
most shares plunged to the 5 
per cent daily price limit 
imposed to stabilise 
fluctuations. On Wednesday, 
however, the general price 
index ended weekly trading 
only 0.55 down on the day at 
147.12. 

A feared steep fall in volume 
and prices was averted after 
investors decided the proposals 


were unenforceable at any 
tune in the near future, and 

that they still had to be 
debated before becoming law. 

■ Ivory Coast 

Hie Ivorian state is to sell its 
35 per cent stake in the cable 
company. Sociefe Ivoirienne de 
Cables, which is 51 per cent 
owned by Italy's Pirelli group. 

Applications for shares are 
expected to be taken by local 
banks from next week and the 
company should be listed on 
the Abidjan Stock Exchange 
before the end of thin year. 

■ Bangladesh 

Mr Sh ams ul Islam Khan, the 
Bangladesh Commerce 
Minister, asked parliament this 
week to approve a new 
companies act seeking to 
safeguard the interests of 
shareholders and Investors. 

The bill seeks to make all 
company information and 
statistics transparent, remove 
disparity between public and 
private sector companies, and 
relax government control on 
management of companies. 

• Emerging markets coverage 
appears daily on the World 
Stock Markets page 


Baring Securities emerging markets indices 


todOK 

2/SA4 

Woek on week movement 
ACbol Percent 

Month on month movement 
Actual Percent 

Year to dele movement 
Actual Percent 

World (288) 

187^0 

+2.11 

+1.14 

+20.05 

+1157 

+19.09 

+11.34 

Lathi America 
Argentina (29) 

117.00 

+3.09 

+2.71 

+934 

+7.67 

+1.62 

+1.40 

Brazil (22) 

246.60 

+4.60 

+1.90 

+62^7 

+3422 

+106.95 

+7628 

ChBe (12) 

198.60 

+1.90 

+097 

+17.75 

+9.81 

+51.06 

+34.61 

Mexico (28) 

153.07 

-6Pfl 

-394 

+8.96 

+622 

-8.19 

-5.08 

Perufl^ 

752.77 

+31.78 

+4.41 

+63.37 

+9.19 

+176.68 

+30.67 

Lathi America (96) 

178.07 

-0.72 

-0.40 

+24.02 

+15.59 

+28.83 

+1922 

Europe 

Greece (13) 

85.17 

+0.65 

+0.77 


-1.05 

42.08 

+2.50 

Portugal (16) 

123.02 

+1At 

+1.10 

+5.21 

+4.42 

+1020 

+9.72 

Turkey (20) 

83J)4 

-5-73 

-6.46 

+1.47 

+1.81 

-78.67 

-48.65 

Europe (49) — 

-.101.59 

-0.30 

-0^0 

+2J4 

+225 

-10.65 

-9.49 

Asia 

Indonesia (22) 

158S4 

+6.16 

+4.03 

+18.75 

+11.78 

-12.10 

-7.07 

Korea (23) 

141.71 

+3^6 

+2.43 

+14.42 

+11.33 

+32.01 

+29.18 

Malaysia (23) 

247.97 

+10-30 

+4.33 

+19.01 

+8.59 

-507 

-2.01 

Pakistan (10) 

110.80 

-1-07 

-0.96 

-0.77 

-0.69 

-0.89 

-0.80 

Phniippnes (1 1) 

300.79 

-1.79 

-0-59 

+15^2 

+5.44 

-21.69 

-6.72 

Thaftand (24) 

275^49 

+17^0 

+6.60 

+31.49 

+1220 

+1123 

+4.53 

Taiwan (30) 

176J7 

+3-52 

+2.04 

+1.63 

+023 

+22.66 

+14.74 

Asia (143) 


+826 

+3.75 

+17.22 

+8.12 

+797 

+326 


« Meta to 8 torn. January m 1BB2-1D0. Bouts: Bang Saconuas 


This announcement appears as a matter of record only 


NEW ISSUE 


August, 1994 


Eridania Beghin-Say 

Montedison Group 

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22 


FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


WORLD BOND MARKETS: This Week 


NEW YORK 


US markets are dosed today 
for the Labor Day holiday, but 
when investors return to woife 
tomorrow they are likely to 
still be digesting the 
implications of last Friday’s 
August employment news. 

Althpsx gh handling n rnnhpre 

ware reassuring, the 30-year 
Treasury bond yield rose to 
almost 7 J5 per cent as investors 
were worried that the rise in 
the manufacturing working 
week last month indicated a 
strengthening in the indnafarifli 
sector erf the economy. 

Friday's movement, 
however, seems overreaction 
to the data, and some rebound 
in the market is likely 
tomorrow morning; 
particularly as there wdl be no 
significant new statistics for 
several days. 

The calendar is relatively 
quiet until Friday, with data 
on July wholesale trade and 
consumer credit, 
second-quarter productivity 
and weekly money supply 
growth unlikely to have any 
impact on prices. 


Patrick Harversof 


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4-25.1 


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Trading will be dominated 
by manoeuvring ahead of 
Friday's publication of the 
August producer prices index. 
Broking bouse Donaldson, 
Lufkin & Jenrette forecasts a 
0.4 per cent increase in the 
August PPL following July’s 
05 per cent rise, and a 02 per 
cent increase in the ‘'core" PPL 
which excludes food and 
energy, if the forecasts prove- 
correct, the annual rate of 
producer price inflation will be 
steady at 12 per cent 


LONDON 


Despite a busy week for 

<wwirtT TV> statistics, foe gilts 
market is likely to focus on 
Wednesday's monthly meeting 
between Mr Kenneth Clarke, 
chancellor of the exchequer 
and Mr Eddie George, governor 
nf thq ’ Rank nf Rn gfand. 

After hints that the Bank 
wants to see an interest rate 
rise over the next few mnrrths. 
speculation will arise over 
whether the two men will 
immediately move to push up 
rates foam their c u rre n t level 

of 5.25 percent 

Ms Katy Peters, senior 
economist at Daiwa Europe, 
says most indicators have 
shown little sign of 
inflationary pressure the 
two lastmet. The rate of 
narrow money growth is 
expected to slow, when 
announced on Monday; bouse 
prices are weak; and annual 
growth of average earnings has 
stayed at 3.75 per cent. Ms 
Peters thinks rates will be left 
unchang ed. 

To help th em decide on the 

strength of the recovery, 


Phitio Coe can 


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industrial production and 
manufacturing output figures 
for July will be released on 
Tuesday. Analysts expect each 
of these to rise by 0.4 per cent 
mn n tfo-^n- TTiftn Hi 

W hate ver the ffflwnmte and 
Interest rate news, gil t s may 
find n diffic ult to ma kp 
progress without the help of 
the international market The 
yield spread to lb-year German 
bunds fell below 140 basis 
points on Friday, having been 
1£G points a few weeks ago. 


FRANKFURT 


Since last week’s Bundesbank 

meeting provided no new dues 
as to future German rates 
developments - the repo rate 
was again fixed at 4J95 per cent 
for the next two securities 

nttpiTr f t inso n ffo i m g g — the 

mood in the d gmesHn bond 
Tngrirete depends as usual ftis 
week on external influences. 
For domestic investors, the 

DAX stock market index, 

driven entirely by hopes of 
profits improvements, remains 
the focus of attention. 
Thursday's release of first-half 
west German gross domestic 
product data has already been 
widely forecast and discounted. 

According to some dealers, 
the bond market is at present 
characterised by an underlying 


exacerbated by post-holiday 
sloth a Tnfmff dealers. 

Last week’s surprise rises in 
French banks' base rates 
prompted a flurry of selling, 
sharpened, by Germany’s 
higher than expected 
industrial production figures. 

US labour market data for 


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August, released cm Friday, 
stirred a brief bout of buying 
on the grounds that unchanged 
imwnp ln ymgnt figures and 

lower than expected new job 

sf gwih-ig w (dgnnUod teas hnnynnt 

economic activity. But bund 
futures suffered later when US 
analysts claimed to have 
detected new grounds for 
fearing iwffaHnn in a slight 
increase in hourly wages. 
Today's US holiday will give 

G erman a chanc e tn 

Tr^q^w ^ own minds. 


TOKYO 


While the government's view 

cm the domestic economy will 
te released later this week by 
the Economic Planning 
Agency’s monthly report, bond 
prices seem to have discounted 
a large part of the recovery. 

The No 164 10-year 
benchmark bond dosed up 5 
basis points at 4.735 per cent 
last week in spite of positive 
news over the gover nmen t's 
financing. Requests from 
ministries for the next 


increases of 4A per cent, while 
the ministry of finance 
indicated only a UK per cent 
increase. 

Moreover, the three-party 
coalition government 
annwriwri that tharewill no 
supplementary budget 

The steepening of the yield 
curve only seems to confirm 
that many market participants 
expect a sharp jump in the 
economy, and a rise in 
inflatio n rather Hum a modest 
recovery and subdued inflation 
figures predicted by most 
analysts. 



Emiko Terazono 


s/u&f — Wen* <== 





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“The market is discounting 
recovery pretty for in - 
advance,” says Mr Dick 


Capel in Tokyo. 

Meanwhile, news from the 
bilateral framework talks on . 
trade with the US this week 
may affect movements of tire 
yen, which usually has a 
short-term impact on bond 
yields. A stronger yen will ' 
support bands, which are 
likely to face profit-taking by 
institutional investors. 


Capital & Credit / Graham Bowley 


Waiting for a rise in European rates 


The impact of higher European 
economic growth on inflation 
and interest rates will be cru- 
cial to the performance of 
European government bond 
markets autumn. 

So for this year, the markets 
have had a terrible time. Ger- 
man government braid yields 
have risen by L7 percentage 
points to more than 7 per cent 
from a low point of 5A per cent 
at the beginning of the year. In 
the UK, the increase has been 
even greater, with yields rising 
by 2.5 percentage points to 
more than &5 per cent 

This tumround from last 
year’s bull market was sparked 
by the US Federal Reserve’s 
decision in February to raise 
short-term interest rates, 
which many investors took as 
the turning point in world 
interest rates. Seven months 
later, however, investors are 
still waiting for European rates 
to turn upwards. Europe has 
left recession far behind, yet 
strong economic growth is 
showing few signs of feeding 
through into higher inflation. 

The economic data is Impres- 
sive. German industrial pro- 
duction grew at an annual rate 


of 22 per cent in July, while 
inflation remains around 3 per 
cent. “Against that back- 
ground, the Bundesbank is 
Kkflly to trim interest rates far- 
ther,” said Mr Ken Wattret, 
international economist at 
Midland Global Markets. 

In the UK, gross domestic 
product grew at an annual rate 
of 3.7 per cent in the second 
quarter but underlying infla- 
tion, at 22 per emit, Is at its 
lowest level for 27 years. 

Despite the continued good 
economic news, fiwgnffai mar- 
kets remain unconvinced that 
European governments will be 
able, or w illin g, to stop infla- 
tion from rising again as 
growth continues. 

“The current high bond 
yields show that Investors’ 
inflation expectations are still 
high and that they expect 
interest rates to rise soon,” 
said Mr Ceris Williams, direc- 
tor of fixed interest at Roths- 
child Asset Management 

However, many analysts are 
confident that yields wifi fall 
back as investors become con- 
vinced by continued good eco- 
nomic data that inflation will 
be subdued for a while yet 


“We may well see a recovery 
in bond prices once markets 
are reassured, but it is a grad- 
ual process and market senti- 
ment is fragile,’’ said Mr Wat 
tret 

It is in Europe’s “peripheral" 
bond markets, such as Sweden, 
where Ihe scope for a reduc- 
tion in yields is perhaps the 
greatest, in the medium-term 
at least Sweden, plagued by 
concern over its ballooning 
public debt has seen band 
yields rise this year from 
around 7 per cent to as high as 
12.5 per cent last month. 

“Despite the volatility, Swed- 
ish bonds offer good value with 
yields this high," said Mr Wi- 
liams. In fact current high 
yields make most European 
government bond markets 
attractive. 

“Investors are being paid a 
substantial premium for hold- 
ing bonds as opposed, for 
example, to cash,” he added. 

German 12-month cash 
deposits c urr ently provide 
returns of about 52 per cent 
whereas 10-year bands yield 72 
per cent In the UK, 12-month 
cash deposits yield €2 per cent 
and 10 -year bonds 82 per cent 


However, it is not just wor- 
ries about Inflation that are 
weighing on investors’ minds. 
Many European countries axe 
r mmfrnp largo gover nment defi- 
cits, and tiie fear of a greater 
supply of bonds to fund those 
deficits has been a drag on 
European bond markets 
throughout 1994. As the end of 
the year comes closer, with 
many countries’ borrowing 
programmes for from complete, 
those fears are intensifying. 

“There are still a lot of defi- 
cits out there which need to be 
funded, and concern about sup- 
ply is beginning to rear its 
bred more and mare,” said Mr 
Wattret 

Daiwa, the Japanese invest- 
ment bank, estimates that Ger- 
many has raised slightly less 
than half of its tending needs 
for the year, with only four 
months remaining. 

The UK, on the other hand, 
is more advanced. Just five 
Trwmthfl intn its fiscal year, it 
has raised Elflbn oat of a total 
requirement of £30bn. 

Germany is la g gin g mainly 
because it has been reluctant 
to borrow at the prevailing 
yields, preferring to wait fin 


Extraordinary General Meeting : 

participate in the 
Group's worldwide expansion ! 


L'OR£AL, world leader in the 
cosmetics industry with mana- 
ged cosmetics sales of FF 432 
billion in 1993 and net consolida- 
ted profit of FF 2Z585 million, 
before capital gains and losses and after minority 
interests, is offering its shareholders the opportunity 



to take pert in a new stage in its 
expansion. 

If they support the transformation 
of agents in the United States. 
Canada, Switzerland and (he majo- 
rity of Spanish agents into Group subsidiaries, die 
Group will grow further internationally. 


Extraordinary General Meeting 

‘ 194 at IX i 


Thursday, 22 September 1994 1 

at tbe Group's bead office, 41 rue Martre, CDchy, Hants de Seine, France. 

Hohfca of he at e r jin s should ad vise chdr haA. gmc fc tnofcer or other approv e d iia ennrdk ty cf inteakw to vote «nJ/w to attend 

die meeting before Friday 16 September. 

- There aneadictlfac meeting thooid a»9 their buck. BockbrnAer or other epy rowed uncnn c &ary tor their aO nri a mvai end srtitch 
most be Aown on the day at Ibo Meeting. 

-Thtnc who cannot mead die Meeting out concise them voting bight* bv Mtonmo a neoxv on eunw a rami 
von. Drams *m available at your bam. noacnoKat o* other Amoves nrmaoMAK. Postil rates mm be 
received by Monday 19 September at the latest. 

■ Report of the Board of Director* end the Appraisal Auditors 

- Approval of die capital coonibutkro by GESfARAL. tbe vmltaukro of the a cquire d riauct and the ictoted payment 

■ Acknowledgement of (he L'ORdAL rights tsxuo related u die contrib u t io n 

■ Cooespond in g amendment of the artfctea of asaoctaihm 

In a ptess tdeeae dated 13 lone 1994, L'QR&AL inaounccd die Rmndnl mm and cotaflrinm lint die projector capial oaatftottan 
or a o qn i ri ri oo of abates in COSMAIR. Inc. USA. COSMAER Canada Inc_ LOftSA-PAGEL (Switzerland) and PROCASA (Spain). 
The company invites its sbareholden to approve the Hauler by GESRARAL to L'OR^AL of COSMAQt, Inc. USA shares, rejro- 
tenting 51.16 % of its capital and of COSMAIR CANADA lnc_ re pre s enting 29.83 96 of its capital. There capital coatiibntiasi 
will be paid for by tbe allotment of new L'OltfAL aharea to CE&RARAt. 

This capital contribmkm would increase GESPAAALM interest in L'OfUcAL bom 51.04 * to 53-65 «. 


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fht»tn to fall- ffimOarly, Spam 
has been forced by high 
long-term yields to shift its 

fTmrirng from the long and <rf 

the market to relatively 
cheaper shorter-dated debt 

Concern about increased 
supply, with the possibility of a 
more expansionist president 
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probably be cine of the main 
negative influences on the 
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ket for the rest of this year. 

In August, both Sweden and 
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International / Richard Lapper 

Emerging markets regain lost ground 


Investors are slowly returning 
to the secondary market for 
emerging country debt - one erf 
the most volatile of all fixed 
Income markets. 

Earlier tins year, amid tur- 
moil in international bond 
markets, investors dumped 
so-called “Brady bonds" -paper 
issued to restructure medium- 
term public sector debt to for- 
eign commercial banks — and 
other emerging market debt 
instruments. 

The market remained in tbe 
doldrums for much of the 
spring and summer but last 
m onth, following, the staMUsa- 
tion of US long bond rates and 
positive political news In both 
Mexico and Brazil, prices 
began to recover. Analysts and 
traders say the market could 
now regain more lost ground. 

“The worst appears to be 
over. One trig proviso is that 
US long-term interest rates 
remain stable,” says Peter 
West, economic adviser to 
West Merchant Bank in Lon- 
don. 

West Merchant’s secondary 
debt market index - based an 
the prices of 13 emerging coun- 
tries’ debt - shows a decline of 
some 25 per cent between the 
end of last year and late ApriL 
More recently though, the 
index has recovered, rising by 
nearly 9 per cent between July 
25 and August 22. 

Two factors in particular 
have helped. First, US Trea- 
sury bonds have stabilised. 
Investors measure the yields of 


Brady and other traded debt 
against that of the US long 
bond and the sharp d«nTtn« in 
prices following the rise in US 
short-term interest rates trig- 
gered this year’s decline. 

The more recent fiat trend in 
long-term US rates - with 
yields around 1. 5 per cent for 
some weeks - has helped confi- 
dence and has allowed inves- 
tors to focus more on a number 
of positive political develop- 
ments in Tatin AmpricM 

Second, the apparently 
“dean" victory last month of 
Ernesto Zedillo, the candidate 
of the ruling Institutional Rev- 
olutionary Party in Mexico's 
presidential election, has reas- 
sured foreign investors in a 
country which has Issued a 
quarter of all Latin Brady 
bands. 

At the miwb time improving 
prospects for Brazil - which 
accounts for 37 per cent of all 
Latin American Brady bonds 
issued — fa* tmri a big impact. 
The fell in inflation following 
flw I ntr od u ction in July of tfe* 
“real" jrian, has helped Fern- 
ando Henrique Cardoso, the 
plan’s architect and former 
fhwMwi minister, surge nhwiri 
in the opinion polls, ahead of 
October's elections. 

Mr West is particularly 
impressed by the commfommit 
of Mr Cardoso to thoroughgo- 
ing fiscal reform, which he 
believes could help consolidate 
the country’s recovery. 

The rise in Brazilian 
"Bradys" has led the rally. 


with the price of par bonds ris- 
ing by 10.9 per cent and C 
Bands up by 222 per cent in 
the month between. July 25 and 
August 22. 

There are some indic a tions 
that the rally in prices has 
eased in the last two weeks. In. 
particular, Venezuelan debt 
prices have fallen sharply In 
the last few days. Some ana- 
lysts suggest that the good 
news on. the Brazilian and Mex- 
ican political scene has now 
been fOUy discounted in prices. 

“We think that in the near 
term Mexican. and Brazilian 
Brady bonds are technically 
unlikely to rally from here,” 
says Mr Paul Luke, head of 
emerging markets research at 
Morgan GrercfelL However in 
general there are grounds for 
optimism about future pros- 
pects, Mr Luke and others 
point out. 

Following tbfa year's fall in 
prices, there is now a much 
greater difference between tbe 
yields of different Brady bands. 
The gap in “spreads” between 
the cheapest bonds, those 
issued by Nigeria, and the 
most expensive papa, from 
Mexico, is now more than 
three times greater than it was 

Bi ght months ago. 

“You don’t have the spread 
compression,” says Mr Luke. 
‘Tnvestors are being paid more 
for taking the big risks." An d 
despite the fall in prices, 
liquidity has unproved follow- 
ing growth in trading volume. 

Trading volume tn emerging 


market debt readied almost 
$2JM0bn in 1993, more than 
twice the volume recorded in 
the previous year, according to 
a survey by the Emerging Mar- 
kets Traders Association. 

The completion this year of 
Brady deals for both Brazil and 
Bulgaria and the imminent 
prospect of an agreemeit far 
Poland has increased the sup- 
ply of paper. “The market is 
basically broadening,” says Mr 
Rodzianko of Chemical Bank 
in New York, who is chairman 
of Ihe association. 

Buyers have been coming 
bads to the market, with some 
recovery of interest among US 
institutional investors and 
mutual funds. 

Mr Rodzianko says there has 
been growth in local interest, 
especially in Brazil, where 
investment banks and other 
fi nan cial institutions have 
been particularly active in 
recent weeks. “Brazil is going 
to be unstoppable. There is a 
high upside potential. There to 
too m uch capital d omestically 
and the first place they look 
beyond the borders of Brazil to 
the Brady bond," he says. 

Mr Luke is optimistic on 
prospects for Bulgaria and 
Poland and also says Peru and 
Panama could be dose to 
Brady deals. “You need good 
f un dam e ntals or low prices or 
a combination of both. In many 
cases here you have good fun- 
damental stories where assets 
are cheap. You cant keep a 
good market down." 


NEW INTERNATIONAL BOND ISSUES 


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FINANCIAL TIMES 


NEW YORK 


MONDAY SEPTEMBER 5 1994 


EQUITY MARKETS: This Week 


***** 


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V»-“ 




c... 


I « round 


-Hi 

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•• A 

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Wall St likely 
to take a more 
positive line 

WaB usually Bates known ifa 
assessment of the government’s 
monthly employment report within 

h ours ofl ts release. This time, mariset 
obsenrere must wait four days to eet a 
true reading on investor sen timent 

1 th ^L noD ' £arm Payrolls had risen 
by oply 179,000 last month was mostly a 
reflection of the thin trading c ondition s 
prevailing that day, with the approach 
of the long Labor Day weekend. The 
data, which revealed much weaker Jobs 

growth than expected, should bring a 

more positive tone to the market when 
investors return to work tomorrow. 
Surely, the dispirited bond market 
• played some role in Friday's lacklustre 
response in equities. Fixed-income fund 
managers, ever wary of inflation, 
focused on details of the jobs report 
that su ggest ed growing constraints in 
manufacturing capacity, which could 
translate into hi ghAr prices. 

Economists expect evidence of such 
upward pressure In August producer 
price data due at the end of this week. 
Excluding the volatile food and energy 
sector, a rise of 0.3 per cent is forecast, 
after a OJL per cent increase in July. 

Still, cautious optimism prevails in • 
stocks. Mr John Moore, director of asset 
management at Value Line, the Mew 
York research firm, predicts the broad 
market will cKmh slowly and steadily. 

As he points out, there is a growing 
belief on Wall Street that earning s, not 
interest rates, are gradually taking over 
as the controlling force in the stock 
market Consequently, he says, "equity 
investors can afford to be forgiving 
right now, as long as they can assume 


Dw JoBMtefaa aM 



rates are going to level off". 

. The jobs data did nothing- to 
undermine such an assumption, 
according to most economists. “This at 
least buys [the Federal Reserve] 
tune,” says Mr Ray Stone, managing 
director of Stone & McCarthy Research 
in Princeton, New Jersey. At the 
earliest, he says, the Fed win wait until 
November before lifting rates again. 

In the meantime, the autumn may 
bring new vigour to growth stocks - 
especially larger capitalisation Nasdaq 
issues such as Microsoft and Cabletron 
- which have mostly languished over 
the past two years. 

That may seem surprising in view of 
the broad pullback in computer stocks 
last week. The selling came on the 
heels of a profits warning Issued by 
AST Research. An extra push down 
came from bellwether Compaq, which 
was thought to be trimming its supply 


However, Mr Moore attributes last 
week's setback to profit-taking and a 
fleeting bout of the jitters. Technology 
concerns have turned in impressive 
performances for the most part, he . 
points out “These stocks tend to have 
two, three or four good quarters, then 
they stumble. That makes everyone 
nervous for a day or two.” 


LONDON 


Share prices 
focused on 
higher ground 

Thfi Stock Tnarlret has tumgri highly 
volatile as the summer holidays - 
extended perhaps by the prolonged 
British Rail dispute - draw to a dose. 
Although proSSt-taking in the wake Of 
the latest upstage has been modest and 
underlying retail business strong, there 
are signs this week could see a more 
penetrating review of market prospects. 

The interest rate outlook has 
hardened in Europe as the latest 
indications of strength in the G^xoan 
economy have suggested the trough of 
Mw rate cycle has been reached. In the 
UK. Wednesday’s monthly meeting 
between Mr Kenneth Clarke, chancellor 
of the exchequer, and Mr Eddie George, 
governor of the R»»|if of England, has 
already triggered alarm bells among 
market analysts. 

Some believe there is already a party 
in the City prepared to urge that base 
rates should be raised now, as a 
pre-emptive strike against an 
accelerating economy and hints of 
infla tion. It was them concerns that 
kept the stock market hopping hum 
one foot to another last week. 

Mr Richard Jeffrey at Charteriiouse 
TTIney Securities points out that, while 
the chancellor will be politically wary 
of raising base rates, he has committed 
himself to having inflation below 2% 
per cent at the and of thin parliament. 

, “If be falls, it will be seized 
upon ... as a broken commitment," 
says Mr Jeffrey. Since the City still 
believes that interest rate policy has 
been, the key to keeping domestic 
inflation subdued, it is not surprising 
that market antennaw are an the alert 

However, there is stiU the question of 


International offerings 


FT-CC-A AiMtMWe tndrex 



whether a modest and controlled rise in 

base rates would stop a market now 
focused on the recovery in company 
profits and dividends. It seems deer 
that the equity market wants to go 
higher. 

Recent support has come from 
wholesale upgradings of hank and 

companies, and. also ^ 12 
cBvidend reviews among electricity 
companies prompted by the favourable 
pricing review. NatWest Securities 
points out that, with the impetus from 
gilts now missing, maintained 
corporate earnings momentum is even 
more important for equities. 

Kteanwort Benson's Edmond Warner, 
agreeing that the interim reporting 
season has started in good form and is 
"unlikely to shake prospects fen: this 
year”, warns that 1995 expectations 
appear overblown. 

He says the strong list of profits 
upgrades to August, a reversal of the 
July trend, does not change his view 
that earnings will grow by only 10 per 
cent next year, which would be a 

disappointment for a consensus forecast 
of ULfl per cent, according to a review 
by Legal & General, but these medium 
term views will be swept aside if the 
conviction that some large takeover 
moves are in the offing prove true. 


Israel takes a global 
approach to privatisation 


After decades of being 
overlooked by international 
Investors, Israel Is preparing to 
emerge from obscurity with a 
series of international equity 


Progress towards peace in 
the region and the easing of 
the Arab boycott have greatly 
reduced the political risks 
which have been associated 
with the country for so long. 
At the same time, the favour- 
able economic outlook has 
w»yte Israeli stocks an attrac- 
tive alternative to other fast- 
growing economies in southern 
Europe, Asia and Latin Amer- 
ica. 

However, apart from a dedi- 
cated following in New York, 
where some 50 mainly bi-tech 
Israeli companies are listed, 
foreign holdings of Israeli equi- 
ties are low. 

At present only 2 pm* cent of 
the Israeli stock market is esti- 
mated to be owned by foreign- 
ers, a significant proportion of 
which is made up of BZW 
Investment Management's 
Tgm<>> Fund. 

to the past, the Israeli gov- 
ernment has not sought inter- 
national capital when it sold 
off stakes in state-owned com- 
panies because of the strong 
demand from domestic inves- 
tors. 

However, the poor perfor- 
mance of ti-ift stock market this 
year and a diversion of savings 


OTHER MARKETS 


FRANKFURT 

Another firm week is in store. 
UBS said that while polls are 
suggesting that are-election of 
the CDU/CSU-FDP coalition 
might have helped sentiment, 
its key reason for being 
positive was the likely 
surprises In earnings due to 
hi gher volumes and prices. 

KHD is expected to report 
interim results early in the 
week. UBS forecast a loss of 
DMIOOm after a of DMS&Sm 
deficit last time. 

However, he said the 
full-year result should be 
somewhere around break-even 
as the industrial plant division 
is likely to book most of its 
profits in the second half. 


ZURICH 

After the excitement generated 
last week hy TJBS*s news 
improved trading income in 
July and August, and the 
better than expected -•rir- mnnth 
figures from Roche, the health 
products group, on Friday, the 
Swiss market starts the week 
In confident mood. 

AH three of the big Swiss 
banks were out of favour to the 
aftermath of their first-half 
results, althoug h there have 
been signs of renewed interest 
in recent sessions. 

Mr Bryan Crossley at Hoare 
Govett said that while it may 
not be realistic to expect the 
Swiss banks to recover the 
relative standing in the market 
that they enjoyed back in the 


mid-1980s, it is much mare 
debatable whether they really 
deserve to be as much as 30 per 
cent below their early- 1987 
peak relative rating. 

"to the short term, 
continuing doubts about 
trading prospects are likely to 
remain a drag on share prices,” 
he said. 

“However, we are more 
optimistic about the earnings 
outlook for 1995 and it should 
be home in mind that 1994 
profits will probably end up 
not too for short of the record 
levels of 1993, which were 
widely considered as quite 
exceptional" 

There was stffi some scope 
for Anther easing of loan 
provisioning requirements as 
the economic upturn 


continued, he said, which 
would have the effect of 
encouraging a renewed growth 
of business volumes. 

Mr Crossley also argued that 
in a longer-term prospective, 
the growth in the relative 
importance of trading income, 
because of the link with 
interest rates, has actually 
reduced the overall volatility 
of earning s. 

In the meantime, Ascoxn, the 

tmnhleri telPrrwTrmr minatirms 

equipment maker, is due to 
outline the group’s new 
strategy and prospects at a 
press conference on its 
first-half results on Thursday. 

Results for the first quarter 
gave rise to some 
encouragement when foe 
company announced that it 


had avoided an operating loss 
in the first quarter and that it 
continued to expect to hreak 
even in 1994 and expected to 
return to profit in 1995. 

AMSTERDAM 

The busy first-half repcarting 
season continues this week. 
The market was in good form 
in the early part of last week 
before news of an unexpected 
downturn at Bds Wessanen, 
the drinks group, on 
Wednesday, led prices lower. 
That news put a check cm a 
rise in shares to Hemefcen. 
which reports its own first -half 
results on Friday. Elsewhere to 
the browing sector, Grolsch 
unveils interim figures an 
Wednesday.. 


Ahold is due to report 
tomorrow and Fortis Amev 
first-half figures come on 
Thursday. 

TOKYO 

Stock sales by corporate 
investors realising profits to 
boost eaming fi ahead of the 
September book dosing are 
expected to peak this week, 
writes fonUco Torazono. 

While public pension and 
insurance funds are likely to 
support {Rices around 20,000, 
large capital stocks and banks 
will face selling pressure. 

Investors are expected to 
focus on releases by 
think-tanks an corporate 
earnings for the current 
business year to next March 


into a buoyant property mar- 
ket have encouraged it to pur- 
sue a more global Strategy- 

Last week, the Government 
Companies Authority, the offi- 
cial body charged with selling 
stat&owned companies, said it 
had chosen Wertheim Schro- 
der, part of the UK merchant 

bank and fund mana gement 
group Scbroders, to act as 
financial adviser to the sale of 
shares in Israel Chemicals 
(ICL). the country's leading 
chemical and fertiliser com- 
pany. 

The government plans to sell 
32 per cent of ICL, which is 
currently valued at around 
$850m, through an interna- 
tional public offering and 15 
per cent to a single or a group 
of private investors. 

Bankers believe that the 
offering, which would leave the 
government with a 28 per cent 
stake, will take place during 
the first quarter of next year. 

In the meantime, Morgan 
Stanley has been selected to 
advise on the international 
offering of shares in Bezek, the 
telecommunications company. 

The government wishes to 
sen 25 per cent of the company, 
which would lower its stake to 
51 per cent The sale, which is 
likely to go ahead by May next 
year, cou ld ra ise between 
$6Q0m and $70fen. 

Observers say that at pres- 
ent, Bezek is less prepared for 


but Friday's futures and 
options settlements will 
introduce a note of caution. 

HONG KONG 

Investors wifi be keeping a 
close watch on whether the 
benchmark Hang Seng index 
can remain above the 10,000 
level, twites Louise Lucas. 

The psychological barrier 
was briefly pierced last 
Thursday in Spite of China 
passing into law its decision to 
scrap foe colony's democratic 
reforms on resuming control. 

However, there are few focal 
points to stimulate a renewed 
attack on the 10,000 level: 
corporate reporting this week 
comes mainly from second and 
third Uners, although Hopewell 


privatisation than ICL. largely 
due to the uncertainty about 
the government’s intention to 
break Bezek 's monopoly on 
international phone calls. 

Another candidate for priva- 
tisation is El Al. foe state- 
owned airline. The govern- 
ment, which intends to sell 51 
per cent of the company 
through the Tel Aviv stock 
exchange and through an 
international offering, has 
appointed BZW to conduct a 
valuation of the airline. 

Three problems obstruct El 
Al's privatisation. First, the 
government wants to keep a 
golden stake to protect state 
interests and the exact scope of 
this has yet to be defined. 

Second, it must also deter- 
mine what to do about the air- 
line's S55m annual security 
costs, 80 per cent of which are 
currently met by the govern- 
ment 

Third, the government must 
decide whether to remove leg- 
islation which bans El Al from 
Sabbath flights. The ban cm fly- 
ing between dusk on Friday 
and dusk on Saturday cost the 
company an estimated $30m to 
$40m in profit last year. Offi- 
cials say these issues should be 
resolved in time for El Al to be 
floated by mid-1995. 

Julian Ozanne and 
Antonia Sharpe 


Holdings, foe property and 
infrastructure company, posts 
Its finals today. 

Investors will start to focus 
on the Jardine companies, 
whose interim results kick off 
next week. It is expected that 
an announcement will be maria 
then on the fate of the 
remaining companies in foe 
group following the delisting of 
parent Jardine Mafoesan and 
Jardine Strategic Holdings. 

Many analysts expect 
directors will announce that 
Dairy Farm, Hongkong Land, 
Mandarin Oriental and Jardine 
International Motor will follow 
suit, leaving a substantial hole 
m the 3Scompany Hang Seng 
mriML 

Compiled by Michael Morgan 


This announcement appears as a matter of record only 


ALCATEL 


has restructured the balance sheet 
of its subsidiary, 

Alcatel Teieta§, in Turkey 


Citibank has provided 


its advisory services in this transaction 
Istanbul, July 1994 


CITIBANKS 



SGASOCfETE 
GENERALE 
ACCEPTANCE NAA 
FRF 500,000.000 

REVERSE MATING 

rate notes due , 

SEPTEMBER 2003 
For the period 
September 01, 199* 
to December 01# 1994 
the new ratafias ;been 
fixed at 7,259775 % PA 

Next payment daw - 
December 01, 1994 . 
Coupon nr: 2 
Amount : 

FRF 1835.1 V for the- 

denomination of 
FRF 100 000 
FRF 18351,10 fOr foe 
denomination or 
FRF 1 000 000 

THE PRINCIPAL PAYING 
AGENT SOGENAL 
SOC1ETE GENERALE 
GROUP m 

16, Avenue Emile Reuter 

LUXEMBOURG 


SGASOOETE 
GENERALE 
accb*tance N.V. 

FRF 600,000,000 
REVERSE FLOATING 
RATE NOTES DUE 

JUNE 2003 

For foe period 
September 01, 1994 
to December 01, 1994 
the new rate has been 
fixed at 8,509775 % P.A. 


Next payment! 
smberOI, 


date: 

December 01, 1994 
Coupon nr: 3 
Amount : 

FRF 2151,08 for foe 
denomination of 
FRF 100 000 
FRF 21510,82 for the 
denomination of. 

FRF 1000000 

THE PRINCIPAL PAYING 
AGENT SOGENAL 
SOOETE GENERALE 
GROUP 

15, Avenue Emile Reuter 
LUXEMBOURG 


SGASOCfETE 
GENERALE 
ACCEPTANCE N.V. 

FRF 800.000.000 
REVERSE FLOATING 
RATE NOTES DUE 

DECEMBER 2003 
For foe period 
September 01, 1994 
to December 01, 1994 
foe new rate has 
been fixed at 
5,5947375 % P-A. 
Next payment date : 
December 01, 1994 
Coupon nr: 2 
Amount: 

FRF 1414^3 for foe 
denomination of 
FRF 100000 
FRF 141423 for foe 
denomination of 
FRF 1 000 000 

THE PRINCIPAL PAYING 
AGENT SOGENAL 
SOCIETE GENERALE 
GROUP 

15, Avenue Entile Rauter 
LUXEMBOURG 


ChflHartamftGtoucasiter 

BtMtfSocMy 

£125,000,000 

Platting Rate Notes due 1995 

la accordance with [be pnmsaoo* of ihe 
Notes, notice it hereby given dun the 
Rue o i Interest far me three month 
period coding 30lh November, 1994 hat 
been fated at 5.7125% per anmon. The 
interest among far sadi three month 
period vriH be fMZ-41 per £»J«» Bearer 
Note, and 0.434.21 per 000,000 Bearer 
Note, on 3fah November. 1994 against 
presentation of Coupon No. 14. 

Usltm Bank *T Switzerland 

Loedaa Breach Agcm Bank W 

31st August. »*4 



Ffetocc East Europe 
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East Earopean 
Borinas Law 
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bnmer Report 


Energy Report 
For a Fret sample copy 
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Class A 

Mortgage Backed Rosilng Rate 
Notes due September 2030 
Notice is hereby gtwm that there 
«U be a principal paymart of 
£ 3 , 070.00 per Note on the Interest 
payment date September 19 . 1994 . 

Tne sititipal amount outstandng 

per Note wibe £ 90370 . 00 . 

By; Gban HanUlmBnfe.MJL 
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Lt 



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Saudi International Bank is pleased to announce 
that with effect from 30 August 1994 its new address 
and registered office will be: 

One Knightsbridge 
London SW1X7XS 

Telephone: 0171 259 3456 

Fax: 0171 259 6060 


Telex: 8812261/2 


Cables: Saudibank London SW1 


Shareholders 

Saudi Arabian Monetary Agency, National Commercial Bank, Riyad Bank, 

Morgan Guaranty Trust Company of New York, The Bank of Tokyo, Ltd., Banque National^ de Paris, 
Deutsche Bank AG, National Westminster Bank PLC, Union Bank of Switzerland 


London 


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MM 

5EQ OrtUI-SB 1532.70 101550 IB152& 2082.1 B 201 

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Banc* Comm Kd (1972) 68503 68051 69053 017.17 105 

WS CflneB |A1«41 11075 IIiMlO 11100 13HUB 105 


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MRMIM 

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HMZUtand 

cap. 40 n/7/aa 2178.75 210752 zi4a« zoom 3/2 

toOfflMCyUBS 112359 111819 113132 1711.19 28*2 

Marfa Como [2/1*89 30B&28 301839 311253 930837 VI 

MOM 

BTA 119771 2960.4 2957.1 29586 322850 18/2 

5E5 M-SPOTCW75J 575.70 57527 57847 6(151 4/1 

SOM Africa 

JSE GOU (38*781 24025V 2331.0 22805 2*0250 99 

JSE M. (28/9*73) ffi375f 65455 B5385 675750 15* 

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UM*d*J3aiB*6r 701053 097415 700811 7B40S 299 


40830 21 /B 
23790 21iS 


174850 14/2 
544850 19*1 


US INDICES 


IMtt 388558 3901.44 381142 3B78M 3KQ3S 397838 4152 

(31 /I) (4/4) (Jl/US* p/7/32) 

Horn Bank 9811 0804 B8T7 18651 9843 10877 5459 

pm) (i3*5) (la/ia/H) runvsi) 

Tmpal 112756 1633.46 164252 180229 154052 186229 1832 

PS) (20/4) (2/2/84) (5/7/32) 

UBta 16455 18557 16810 2750 17871 2084B 1850 

0*1) CVB) (31®93) (6/4/32) 

OJ tad. Ocy’* nl0h 3028B4 (102759 ) Low 307158 (SS715B ) (nwaradcWf) 

Dmn Ntfi 391802 (301142 ) Low 3880.72 (388754 ) (AOUd^ 


47056 47117 4755B 46250 43892 48250 4.40 

PQ (4/4) P/2/B4) (1*6/32) 

55358 55553 55819 58869 51805 56059 352 

Pa (21/4) P tsm (2WB9 

4818 4658 4860 4854 41JB 4840 854 

(14/y (4/o gwg p/10/74) 

25851 2B058 28159 2B7J1 24114 287.7! 448 

Pa m »*«» P5MMJ 

48554 46452 46434 48758 42207 48759 2831 

09 PSffl POW (9/12/72) 

75823 73895 70552 88953 69179 8BU3 5457 

(IBa (24/8) (16/3/94) plfflVTS) 


Is this your own 
copy of the 
Financial Times? 


Or do you rely on seeing someone else^? Every 
day the FT reports on the topics that matter to people 
doing business every day, in and from Europe. 

We cover the latest European, U.S. and inter- 
national news, and analyse the implications from a 
European perspective. In fact you’ll find far more than 
finance in the FT. 

No surprise then, that the Financial Times is 
read by more top business executives in Europe than any 
other publication.* 

Make sure you’re one of them by getting your 
own copy of the newspaper delivered daily to your office. 


■Sowse EB83 1993 


FT 


nsw iot 

MO 13 77 


Dow Jones hut Oy. YMd 

S a P bid. DM. yWd 
SIP bid. FVE ratio 


Aug 28 Aug 19 Aug 12 Year ago 

254 2.73 2.70 2^0 

Aug 31 Aug 24 Aug 17 Year ego 

253 257 243 2-46 

21.11 20.73 2351 2750 


BangtaA SET (3V4/75) 163956 152864 1SM53 178373 4/1 119890 4M 

Mft4 Ono4J« 1668) 25*572 S7XJ 25924 2888360 13/1 1298870 24/3 


S8B56 10/1 
94400 10*1 


US Caofu M fl/l/rqs 8*13- 6425 6437 64350 279 

OB8MOBOOI 

Einasdt IBOpartOW) 140156 139652 148552 154819 31/1 
Bn Top-100 G&ttffl 12Z7J1 12283) 123838 131151 Hi 
JCMQgra (31/1 (u) 341.77 34157 30819 Sn 
BartKP 6nasJ771/BB 187JS0 18114 18557 18760 2*9 

■ cac-40 stock a»ax nmjiwft (mattf) 


taOUB 21* 

114106 m 

man an 

14155 21/4 


■ srumatm aw wow 5»» bmx wnm «oo nm— w** 

Open Sett price Change HBgh Low EslvoL Open tat 
Sop 473.80 47155 -2J2S 47550 47020 88^484 181,780 

Dec 477.55 47456 -250 47755 47250 15.750 62541 

Mar 480.40 477.15 -2.40 481.00 47SJ9S 107 4/418 

aptn noma Igura* « In pnwkwd dqr- 


■ MW YOHK ACTIVE gTOCKS ■ TRAPWO ACTT0TTY 
MM SbxJa doe* Cft&W • Wm (B«a9 


SUBSCRIBE NOW AND GET THE FIRST 12 ISSUES FREE. 

T« Gillian Hart, financial Tune* (Europe) GmbH. Nibelungenplaii 3. 60318 Fmnirun/Main. Gennuy 
TeL + 49 69 136 830. Tlx. 416193, Pax. + 49 09 596 4483. 

YES. I wonU like ro satocribe to the finmeial Times, and enjoy my find 12 issues free. [ will allow up to 21 days 
beftwe delivery of my fiiw copy. Please enter my sahsertpdon for 1 2 mondn u die following me*. 

AiBBU 0ES35M France TO 1040 Netherlands DR. 815 Sweden SEK 3^20 

Bd^iian BFR (3500 Germany DM750 Norway NOK 3.220 SwiBeriand SFR7I0 

Denmark DKK 3^00 Italy LIT 600500 Ponugal ESC 00. 'XX) 

Fmbnd PMK2UM0 Liuemtnig LFR 13J00 Spam FTS63J00 

F« mtariprions in Turkey, Cypiu*. Greece, Malu. pteaae contact +32 2 513 28 16. 

□ Bin | — ] Charge my American Expreu/Dinere Clofei/ 

me I — 1 Euwcard/Via Account. Ejp,r> Date 


MW SbxJa Dm Gunge • «ne 

nriM pm an t»y Sap 2 Sap I Aug 31 

WH R3NK4 a w nsffl) n IM York SE 211683 288443 357592 

United 3574000 21% +1 „ 13*7 lAMS 16526 


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Open SeriPrice Change High Low Eel voL Open W. J* §9*^ StHUDO 29 +» W) fit*,!? 

to ^2 SH 2 "« 1 S wSS S t km Tndsd 2029 2573 2073 

9” 2WS.0 -28.0 2083-0 207a(J 54 8.^5 Caapaq 8278000 35 . (tee 040 044 1015 

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Op*n rvwerf Hgum* far <mn*» day- Mag MUnak 2,169,090 13H Uactaqed 021 731 711 

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(Mr T 4 T 2029000 29H -H Non Lorn 20 29 IB 


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Ah order tH'iNpnti wiitaax a jrjewntrp. 


Financial Times. Europe’s Business Newspaper. 





















































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financial times Monday 


SEPTEMBER 5 195*4 


N 


CURRENCIES AND MONEY 


MONEY MARKET FUNDS 


POUND SPOT FOR'*"’ 


AGAfKsf THE POi 'v 


'"'Vni *>" 


Bortpe 

Austria 

Belgium 

Dsmiurtc 

Finland 

Franca 

Gammy 

Greece 

Inland 

**f 

Liaantxiurg 

Nemwtanda 

Nanny 

Portugal 

Spam 

Sumfcn 

Swtantond 

UK 

Ecu 

amt 


owmg 

(Start 17J6S7 
(Bffl «Q.ee38 

<dko &iz43 
(FM) 7.7933 
{FFi) 8X944 
PM) Z4101 
8>) 388.865 
K) 1.006Q 
W 2432LB3 
(LFf) -19.6638 
Ifi) 2.7041 
(NKi) 106718 
(E*» 247.191 

CPtaJ 2001200 

(BK>) 11.8205 
(SFr) 2JB60 
03 

- 1-2689 

- 0.943130 


Qvan 0e BWbfrer 
00 <** icrearf 


DOLLAR SPOT FORWARD AGAINST THE DOLLA? 


Day's Ud 

Mgh low 


Cue month imamoosn Orw y*ar Barfs of 
Rata KPft Rata %PA Rata WPA Eng. Mac 


Closing Change 
rrjd-prfrtt on day 


BkiMtm Day's mid One monlh Three month# One year J.P Morgan 
spaadMgh low Rate HPA Roe MPA Roe MPA index 


-0XQ09 579 - 
-013344 2ie . 
-00529 206 - 
-00478 838 - 
-00488 810- 
-0.0189 086 . 

-017 339- 
-0.0041 07g - 
-2.77 135- 
-03344 218 - 
-00209 027- 
-0.0564 679 ■ 
-012 0GB • 
-1.184 077- 
-0.0342 120 - 
-0.0135 247- 

-0.0084 623- 


734 17.17S6 
059 50X050 

280 fixi27 

028 7X850 

678 83434 

117 Z4434 

970 370268! 
093 1.0184 

431 2449X0 ! 
°6a 50X050 . 
056 2.7370 

757 10X902 
324 248X21 1 
322 202X77 ! 
290 11X167 ■ 
272 Z062* 


ox 

17X485 

04 

- 

. 

11&3 

Austria 

(Sch) 

11.0476 

-0.052 450 - GOO 

11.1425 11.0450 

11.0475 

DO 

ox 

49X788 

-X.1 

404588 

04 

116.8 

Belghim 

(BFt) 

32.1560 

-0X1 300 - 700 

22X800 32.1300 

32.176 

-as 

-ox 

05911 

-1.1 

9X664 

-OX 

110X 

Dotvnartt 

(DKD 

8.1056 

-0X521 646-000 

82437 

8.1001 

6.1721 

-IX 

- 

- 

- 

- 

- 

S4X 

Rrfand 

(FM) 

5X450 

-0X465 400 - 500 

5.1153 

5X400 

5.0475 

-ox 

-ox 

8X686 

-09 

E2318 

04 

110X 

Franw 

(FFi) 

5X500 

-0X47 490 - 510 

5.4110 

5X430 

5X53 

-0.7 

ox 

04074 

04 

2X79S 

IX 

1202 

Gamary 

(P) 

1X602 

-0X108 535 - 609 

1X840 

1X595 

1X604 

-02 


-05 1X104 

_a*i 2452X3 

DUB 49X788 

-0.1 2-701 a 

OX 10X783 
-8 X 252.101 
-2X 201X85 
-02 11X825 
OlS 2X202 


-07 1X1 61 -0.7 

-32 2513X3 -S3 
-0.1 49.4588 0 A 

0.4 ■ 2X895 IX 
-0L3 105853 0.1 

-7X 

-&S 20*22 -2.0 
-2 A 12.113 -25 
1.1 1X879 IX 


Austria (Sdrt 11.047S -0.052 450 - GOO 11.1425 11.0450 11.0*75 OX 11X473 OO 10X725 07 

Belgium (BFr) 32.1500 -031 300 - 700 32X800 32.1300 32.176 -0.9 32.19 -05 32X1 -05 

Denmart (DKi ) 8.1858 -0X521 646 - 666 02437 6.1601 6.1721 -IX 01931 -IX 02706 -1.7 

Hnlond (FM) 5X450 -0X4« 400 - 500 5.1133 5X«00 00475 -OX 0059 -1.1 013 -1.7 

France (FFi) 5X500 -0047 490 - 510 5.4185 5X430 5X59 -07 5X50 -07 OX 

Germany (DJ 1X602 -0X168 585 * 609 1X840 1X505 1X604 -OX 1X604 -0.1 1X552 OX 

Qroece (Dr) 238.650 -OX 500 - 800 240400 233X00 238X5 -IX 230625 -IX 242.425 -IX 

tnetaid (IQ 1X316 *00105 308 - 323 1X369 1X151 1X305 OX 1X268 IX 1X051 1.7 

Italy (l) 1574X0 -035 430 - S50 1587X5 15730X3 167045 -05 1569. 8 -07 16409 -4.4 

Luxembourg (LA) 32.1500 -0X1 300 - 700 32X900 32.1300 32.170 -09 32.19 -05 32X1 -05 

Nettertanda (H) 1.7605 -00186 500- 610 1.7784 1.7600 1.7606 -0.1 1.7508 -0.1 1.7448 03 

Norway (NKt) 6X437 -00629 427 - 447 6X371 8X427 6X482 -04 6X587 -09 6.7757 IX 

Portugal OSb) 160020 -054 970 - 070 161.400 159X70 180X7 -7.1 162X4S - 6X 170X2 -02 

Spam pug 129X00 -1.13 550 - 650 131X50 129X50 129X25 -OO 130X65 -OO 13345 -3X 


Money Market 
Trust Funds 


ha m am MU 
CAFHoMyMmmartCoUd 

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£ 5 *“ “^S VSW MSS, .. 

Ceiswla rrS +Q.0Q55 688 - 705 1.3705 tjSOQQ _ ... m _ 

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PecMartllHddto EeittAftfe^ 448 +a004fi 444 ’ 451 1.5470 1,5377 1X446 OX 1X428 OX 1X303 OX S2X 

ttaSKng ffiS 11X384 S? ' SS **" 5X07,3 2^»Q3 OLO 2.0817 -02 2X999 -09 

5 * w «*« SS £:5 11 “ °- 4 - 1tm4 . “ M 

E&md ^ «£SSi£? ISS’SS ,5 “ 81 - “ ,5i346 *■! 147jan . “ 18 ^ 

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™ bimI y-S ZM *0.0805 023-507 38X900 304730 . . . 

MHhpM 1 PUme. Famed iMoa am not efreety <yjc*Bd » Ihn martial 

EXCHANGE CROSS RATES 

» «fr m DM B L H NKr Ea Pta 8Kr 8Br 

I*™ 4 - 853 a03 ° 4897 185 »XB 497X 403.1 23X0 4X90 

SSS* S-lf B£77 Zjao 1 058 2554 2X30 11.10 2506 21 OX 12X1 1127 

2JS-. ET2 “■* - 1 ®, 2^5 1X20 2943 3X72 12X9 2801 242X 14X0 1452 

ESS* I*® 3j4afl 1 OXtB 1009 1-122 4X88 10BX 83X7 4X06 0X41 

9,4 j? B - 188 Z3al 1 2413 2.683 1QA9 245X 198X 11.73 2.010 

S 7 uiu ^ 5X340 0.099 0041 100. 0-111 0435 10.16 8X32 0488 0083 

J®? tLB81 0373 aB0A 1 1808 91 74.04 4X71 0749 

4888 “JO 7X18 2X80 0954 2301 2X68 10 233X 189.* 11.18 1X17 

2^2? ^22 3:343 5X876 1X408 B83X 1X84 4X78 WO 80X9 4.782 0X2 0 

SgSan f-lS 1JRW 5X503 1218 MW 5X80 123X 100. 6X04 1X12 

T? 6 *'. , P*?» 4201 5D58 6.902 1039 0X53 2058 2X88 8X42 208.1 1604 10 1.714 

“H™** 1 ™ 2 4 - 51 *-701 4X79 1.190 0408 1200 1X35 5X17 122X 98X2 SX34 1 

y , B 4 ®-6« 0524 8X84 1410 1X08 2432 1704 10X7 247X 2002 11X2 2X26 

Ganeda (CS) 23X1 4X09 3.913 1.141 0477 1152 1X80 5X06 117X 94.78 6X87 0988 

W 3 2 - 14 5-154 5X49 1X80 0X52 1574 1.750 6X41 1600 129X 7X60 1X11 

*pan (Y) 323X 82X5 S3X4 15.70 8X87 16844 17X2 68X6 1610 1304 77.00 13X0 

Ecu 39X2 7X41 6X43 1X08 0798 1920 1141 HMQ 185.7 158X 9X59 1X04 

Ym par IXOOl DmWi Kronw. French Fine. Ntfimyan Momr. and SwaOrti Kronor par 10c Bargho Banc. Eacodo. Ura and PWBta par m 


Swodan 

PW 

7.5521 

-0X442 

483 - 558 

7.7229 

7X417 

7X998 

-2.7 

7.7101 

-80 

S*ritzertand 

(SR) 

1X115 

-0.0128 

110 - 120 

1X320 

1X110 

1X108 

a7 

1X085 

OX 

UK 

n 

1X448 

*0X045 

444 - 451 

1X470 

1X377 

1X448 

OX 

1X428 

05 

Ecu 

re 

13233 

*0.0118 

230 - 235 

1X235 

1X069 

1X224 

OX 

1X205 

OX 

SDftf 

re 

1.44012 

- 

- 

- 

- 

_ 




Art km lea# 











Argentina 

(Paso) 

0X885 

-0X014 

904-905 

0X005 

09964 

_ 

. 



Bred 


03860 

*0X01 

850 - 870 

0X870 

0X850 

* 

. 



Canada 

PS) 

1X860 

-0.0008 660 - 671 

1X673 

1X646 

1X877 

-0.7 

1X68 

-as 

Mexico (New Peso) 

3X845 

-1 004 

620 -870 

3X870 

3X820 

3X855 

—0.4 

3X873 

-ox 

USA 


- 

- 

- 

- 

w 


• 



n, .yt, (jw. D bbO/AAXm 

rnECIDC/lmnf cnvAaica 









Australia 

(AS) 

1X458 

40X009 

483 - 472 

1X477 

1X443 

1X471 

-OX 

1X478 

-03 

Hong Kong 

(HK» 

7.7271 

-0.0006 

207 - 274 

7.7274 

7.7287 

7.7268 

ox 

7.7277 

ao 

IndEa 

(FIs) 

31X700 

-0X013 

075 - 725 

31X750 31X075 

31X55 

-3-3 

SIX 

-2.9 

Man 

«Y> 

99X950 

-027 

600 - 300 

100X00 90X500 

99-196 

2.4 

88.745 

26 

Mateyote 

(MS) 

2X515 

-0.0059 

510-520 

2X575 

2X510 

2X423 

4X 

2X31 

3-2 

Nm Zeeland 

(NXS) 

1.6525 

-0X06 

51 B - 532 

1X570 

1X504 

1X534 

-a7 

1XS5S 

-0.7 

KniHppines 

(Peso) 

28X500 

-0X75 

600-500 

208000 201500 

w 

re 

• 

_ 

SeudAntato 

(SR) 

3.7504 

- 

502 - 606 

3.7600 

3.7503 

3.7317 

-04 

8.7558 

-0.8 

Stngaporo 

(SSI 

1.4998 

-0X005 

993 - 003 

1X003 

1.4993 

1.4885 

1.1 

149B6 

0.9 

S Atriae (ComJ 

W 

3X773 

-OXOBS 

785 - 780 

3X8S0 

3X765 

a»a»n 

-5X 

86211 

-4-9 

S AMca|pn4 

(FI 

4X350 

+0.005 

260-450 

4J54SO 

*5100 

4X687 

-8X 

4X275 

-82 

South Knee 

(Won) 

800750 

+0X5 

700-800 

601.000 800X00 

803.75 

~4X 

B07XS 

-82 

Tehran 

(TS1 

202380 

-0X02 

300 - 480 

26X460 26X300 

20X58 

-OX 

26X96 

-ox 

TheOand 

(UO 

25X050 

-a 02 

850 - 150 

25.0200 24X850 

25.0775 

-3X 

25X05 

-82 


1X799 -IX 63.4 
3X847 -03 

97.0 

1^1 -XX 88.0 

7.7428 -02 

9048 19 1409 

2X045 -11 
1.6806 -XX 

3.7744 -OS 
1.4888 07 

3X878 -3.4 


tson me lor Sap 1. BdiMhr aw ait In Aa I 
but am Mipllad by currant (mans ntte. UK. In 


2 Fora tea. LaamECnMa on-amine 

Broom 1 4.73 -I 4MI3-MI 

0«. Bd. at HR. ot Chart g( Eaglaatft 

2 [oa Start. Lmoa ECTT SM on-M® IBIS 

Dreora I *jbs -1 4MIs-mb 


Money Market 
Bank Accounts 

baa aa CW MCr 

Mled Trust Baak Ltd 

Si DnpK Its. Lmkll. FC4H TXT nvaMOan 

H*e*»IT7.IW1»l Oil 4BD 6 jM 1BB1| 

THaciAEiun.) sos *m bjis inr 

tdmmbzjodi*) set *2 tu v— * 

oanKonH ui us SJJ vrenr 

MC*B2J»l4t *00 3 DO *07 MS 

WIIlQiei* UO 305 ui ur 

PnnMIEES* U7 it# 0*7 trony 


OJS too MO 

UI 1M MB 

3Jb 2BI 3K MS 

9JH *07 Mb 

Its *33 Hn 

SH *» Ml 


AiMhaatUBrenSCoUd 
x Oy ikaa. (wibb Ed r »r. 


Qao Kettg (loartoaj PIC Pramkr Acx 
lOrtod can. Im»aa31 nff on-n IC1S 

120000* 900 3.73 I 308 1 Or 

mum-cauHO 1 *j» 3.ib| *js| oa 

cuaFcnuno its zn lio re 

aatutwrt I 27b — 2DS I 2 Til re 

DaiogBan TW Pte- OnOnw 500 to 
bSueaSLitaadartviaasn tei-api 
na.KO.SMra 1 740 SJS2& ] 1M1 

now* i for 1 tun ares un i 

cuootiMireuml ilb nan I zmI 


keam Sam IML Otreroea Hroa. 

iBferoesuui.KOgBe 

lore 0373 ore] re 

me uo us us re 

»m I *05 UD *001 re 

»me [*4o 3379 uni re 

1 *73 3529 *78 1 Or 


TnarMreMMl ! 


439 US 
*13 SOI 

Ut 125 
US 4.U 



ir Spot taMe rtnw only me me Am tSrefctM plreaa rravred ware an 
1 4 ECU era quored It UE currency- JJ*- Uorpon norWirt kxScaa S**i 1. 


MONEY RATES 


Portugal 

Spam 

Svetlan 

Swfeai t and 

UK 


1030 4897 

1.058 2554 

1X20 2943 

041 B 1Q09 
1 2413 

0X41 100. 

0X73 880,4 

0XS4 2301 
0408 B83X 
0X03 1215 

0X53 2058 

0.488 1200 

1X08 2432 

0477 1152 

0X52 1574 

6X07 15844 

0796 1923 

ftaartrti Kroner par ' 


H NKr Eo Pta Wr 

8446 

21X8 

497X 

4081 

m iw 

2X39 

11.10 

259.6 

21 OX 

12X1 

8272 

12X9 

299.1 

242X 

14X0 

1.122 

4X88 

1080 

8807 

4X06 

2X83 

1049 

245X 

1986 

11.73 

0111 

0435 

1016 

8232 

0488 

1 

8009 

91X2 

74.04 

4X71 

2X88 

10 

2389 

1804 

11.18 

1X94 

4X76 

100 

8089 

4.782 

1X51 

5X80 

1285 

100 

6X04 

itua 

8X42 

2001 

1004 

10 

1X35 

5X17 

122X 

9082 

5X34 

2.704 

1057 

2472 

2002 

11X2 

1X80 

5X05 

117X 

94,79 

8587 

i.reo 

0841 

1600 

1208 

7X50 

17X2 

6880 

1610 

1304 

77.00 

2.141 

6^60 

185.7 

158X 

9X59 


Over Ona Three su One LortTO. Os. Repo 

rfght month mtha mffra rear kttsr. rate rale 


weak ago 
Qanmny 
week ego 
Mand 
Made ago 


week aflo 


week ago 


5K 54 
5H 5fl 
5K, 5H 
5M Stk 
4X5 4X5 

4X5 4XS 
SU 0| 
5M 64 
84 8M 

&& sa 

4X3 4X9 

493 498 

44 44 

44 44 

4* 4* 

4% 4fl 
2H 2* 
2% 2H 


■ O-MAHK WITTNUS (HUM] DM 125X00 Pif DM 


UK fNTEREST RATES 


Sep 

Open 

06354 

Sett price 
08426 

Change 

+00080 

Hgh 

05434 

Low 

06310 

Eat. rot 

31X80 

Open ktt. 
90400 

LONDON MONEY RATES 



Doc 

08345 

0X427 

+0.0080 

0X435 

06312 

5X66 

17,459 

Sop 2 

Oven- 

7 days 

One 

Three 

Mar 

- 

0X434 

+0X079 

06436 

06424 

80 

2X99 


right 


month 

months 









Mortar* Staling 

ft - 4 

4%-ft 

5-4% 

ft-ft 

■ SM 

M nMNC MJTUMtt (MM) SFr 125,000 per SFIr 



Staring CDs 

Traatary BSs 

- 

* 

4B-4B 

A.ii) 

W-ft 

5.1.5A 

8ep 

0.7558 

078S2 

*00094 

07555 

07503 

18X46 

80109 

Berft BBs 

. 

. 

■0*5 ■ 

ft-4a 

wix ■ aft 

04 - 5& 

Doc 

0.7571 

07865 

+00094 

0768S 

07518 

887 

5X64 

Locri ndhariy dope. 

44-4A 

43-4% 

4iJ-4% 

5U-5U 

Mar 

- 

07668 

+00092 

07870 


1 

59 

Dtecourt Market dope 

5% - 4% 

4%-4% 

- 



weak ago 2» 2ft 28 

■ $ LIBOR FT London 
mmrtMn k nong -4 A 5 

week ago - <14 5 

US Dolor CDs - 405 4X0 

week ago - 4X5 4X0 

6DR Linked Da 3* 34 

week ago 3» 34 

ECU Ltakad Da laid ndaa: 1 attMkitnMQI 
■ana are eftarad mm far Sion tpuM to the raaria 
day: nw.bartw amt Broken Hurt. Bn* o( Tdtyo. I 
Md ndaa ara ahoun Or Hie dmaadc Monty RTOeo. 


54 7X0 

8K 7X0 
m 8X0 
6% 5X0 

5X3 8X0 

5X3 8X0 

714 
714 
104 
1(M 
5X2 
5X2 

44 0025 

44 BX2S 
5V 
514 
2 « 

2« 


4X0 

4X0 

- B.75 

- 0.75 

4X0 4X5 

4X0 4X5 

- 6X5 

- 6X5 

7X0 8.45 

7X0 8X5 

5X5 

825 

3X0 

3X0 

4X0 

400 

1.75 

1.75 


Bank of Intend Hgh Uaml Cbeqaa Acc 

3e-40Mgaa.soBga5ri ia usaeiuie 

fidlood * lure mesIxsmI re 

szoaOMwxm I ua ion I £ju*l re 


BMkolSeattad 

reiwaa roi— iBncapaot en-etneue 

moatairwaun- sjb ms ixel mb 
£!U ao-C24USa__l 37# 2X1 UK Mil 
rzsnjxo. I sxo xts I #izr un 


XXre UoUge Bank Ltd 

tamure hScarenifcn an 

ireMitnuroreax I uo *m I 

IrtlMlaMfeE l *75 *21 

ureMhuDatretEcI *7# tail 

HambacMt Ftaaace Groap 
5 Ena* way. Wo* MangaaM 
csodoo* I 5J# are I 

Unpaid Joseph & Sore Urotted 
aa roa HMaaaatcaiitii 


KMoarait Benson Ud 

isairea** loan M,Lrerea was 20t ori-wr inaa 
lUCAtdSOOO 1*0 Ul *07 1 PoB| 

nekwort Boomb Pltam Bank 
uawart M u re ea— awaa roHM u ga M WlM) 

I5B Karto lore tad. IMra MS »f arr-U7lse« 

H1CAE-HO*) 1*0 20 I *07 1 bay 

IMM-tattHlMtHI 

n Canoanl u. Immatcar jfo 0272*33*72 

noaxooawrtm* _ [ ire ire S29| Taair 

anno* (bis sae n; tray 

cnm. *cb in I «m yw>ty 

r loxod* l*n 158 I *7# I vaafy 


MMaod Bank pic 

s POBtaa ETWrref 


roan Waalwaoa 01 F* Creamy fleWrtmoe 

tajm-tajm I un ire *oo v«a e 

00X00-0*809 1 *75 3J0 *75 IWatr 

t23X0D-c*exm I uo its oxo nwt 

ruum-tsoxn us 39* #x» vree 

£100X00*. I S50 *13 550 Yretly 


SlSO *13 I 350 1 


54 51- -- 

54 54 - - - 

5.07 5X8 --- 

5X8 5X0--- 

»4--- 
3H 4 

6 mire fiM; 1 year OK. S UBOR HartreW flidna 
■ bylourniaronobroOrtro iironearti aortdng 
»*»■• via nimn wMiMimmur. 

. US S COb red 80R lUrod Oapmta 0ML 


■ AAPA W —S TH fftmiMB (IMM) Yon 12X per Yon 100 



Open 

Sett price 

Change 

High 

• Low 

EsLtfOi 

Open krt. 

Sep 

1.0044 

1X101 

+00056 

1X102 

09988 

10108 

50048 

Dee 

.’1X093 

1.0168 

+00056 

1X170 

1X06O 

943 

11X24 

Mar 

1X195 

1X241 

+00057 

1.0235 

1X195 

IB 

1.751 

■ SlTOLttlQ RTTURES flMM) £62X00 per 2 




Sep 

1X452 

1X468 

+00010 

1X500 

1X362 

10979 

34.183 

Deo 

1.5390 

1X438 

+0X010 

1X480 

1X340 

1X34' 

2X23 

Mar 

- 

1X408 

+0X010 

1X450 

1X350 

21 

184 


UK derolng bonk bene tending rate 5^ par cent from Februwy & 1994 

Up » 1 1-8 3-8 90 9-12 

montfi morth months months morttha 

Cano of T« dap: (£100,000) l^j 4 34* 3* 3» 2 

Orow ol T« dop. undw Cl 00X00 It 1 *2pc. DepiroB# wfindrem tor caiii 4p* 

Aro. troeter iTOb cl tlaeoirt fiXSOOpc. GOOD Md Me 90p. Emm Pram. Make up day Aug 31. 
IBS* Affeed re tar period Sap 24 IBM to Oet 2S. IBM. Sehronre ■ 8 ■ OOree. RateroKa rota re 
ported .My 30. 1904 to Aup 31. 1004.1IciirotiaBlVAVaLS74ia.nirotoeMciBaBaMltBiaS^pc4an 
Sap 1, IBM 

BANK OF ENGLAND TREASURY BOLL TENDER 

Sop 2 An 28 Sgp2 A* 26 


■ PMLAPUMAWI C/9QPIKMM S3! .250 (cento per pc*flnrt 


Stria 

Price 

Sap 

- GALLS ~ 
Od 

Nov 

Sep 

- PUTS 

Oct 

New 

1450 

944 

9X2 

0X2 


- 

000 

1475 

6X2 

8X6 

7XB 

- 

0.06 

025 

1X00 

446 

4.71 

5X0 

021 

028 

088 

1X25 

224 

2.77 

3X4 

1X9 

083 

1X8 

1X00 

0.65 

1.41 

1X5 

2X5 

1X0 

2X1 

1-87B 

010 

0X9 

1.05 

5X1 

3X2 

4.04 


Bfc on on* 

Total it mMw 
Tom dbcoM 

HbL ire 

Motmoni rf aria, hmi 


ESOOn ESOOro 

OOOIa czoasro 

ESOOn. £500m 

eBBJBO £98X69 

40% 00% 


FT QUIDE In WORLD CURRBKEB 

Hie FT GuMo lo World Cwrandss 
table can be found on the Entering 
Martota page in today's edHaa 


Top accepted rob 53747* 53547% 

Am. rate of imeoan 93588% 53537% 

Rougo yWd 5X314% 5X281%. 

OROr it dm tender ESOOn £S00n 

Ha. xcol Ud 182 dors 


■ Paamd hi Urea York 


EURO CURRENCY INTEREST RATES 

Sep 2 Shot 7 day* Om Three Sbt One 

term notice morrfi montio months y ear 

Beigian Franc *U - 4{J 6 - 4% 6»# -5 5* - 5£ 5%-5% 8% - 6 

Danish Krona 5>#-44| 5\ - 5>* 0 - 5>2 8^ - «* 7^-7 7% - 7 

D-Mafc 4g - 4j| 4(J ■ 4fl 43-4(1 5-4% 5>#-5 V. - 5 

Dutch GteQdnr 5 - 4g 5-4JJ 5 - 4$ 5^-43 6>a - 5, 1 * 5B - 5 

Frwch Franc 5 ^ - ft 5,1-5* 6% - 5»a 5J1 - 6ft ft - 8 

Portuguese Eat 12% - 11% 1ft - 10 11% - 11 '11% - 11% 11% - 11% IlH - 1 
Spanish Peseta 7£ - 7ft 7jh - 7ft 7% - 7,1 8-7% ft - ft 9 - 8T 

Startng 4fl-4H 4%-4% 5A-4» ft - 6i 8-5% B% - 8 

Swire Franc 4-3% 4%-3% 4A-4& 4d-4ft 4«z-4% 4H-4 

Cart- Dotar SA - 5 64-5 54-54 5% - ft 64-58 63-6 

USDoiar 4H-4S 4H-4B 4% - 4% 5-4% 54 - 54 6H • & 

ttafienUra B - ft ft -8 84-84 ft- ft 94 - 94 504 - H 

Yen 24-2% 24-2% 24-2% 2% -24 2% -24 2% - 2 

AdenSSbig 3%-3% 3% - 3% 44-44 4% - 4% 54 - 54 53-5 

Short trom rates are art far Ota US Dolar and Yen, oOMm: two dqirt node* 


54 - 54 5% - 5% 

ft-8% 7% - 7 

5 -4% 5% - 5 

54-43 6% -54 
ft • 5% 53-63 

11 % - 11 % 11 % - 11 % 
8-7% ft - ft 
ft - 54 8-5% 

44 - 44 4% -4% 

ft-5% 64-53 
5-4% 54-54 

ft-ft 94-94 

2% -2ft ft -24 

4% - 4% 54-54 

: two dayrt nodes. 


ft-8% 

7% - 7% 
54-54 
53-ft 

ft-8% 
11H - it4 

9-8% 
8% -ft 
43.43 
63-93 
63-53 
104 - 104 
2% - 24 
63-53 


BarctHsPifcao Accent HIM. 

I*— * lire amireprta osi- 2 S*dzm 

njDoo-c2^re 1 2xo irel 2x2 re 

nMMUM 2X5 1X1 [ Z27\ Of 

ttoxnw*en zn 2x0 1 27#| re 

csxoo- I are axil axel re 

Brown SMptoyA Co Ud 
rtartdwiDwureemUiMDaEia D71-tnn» 
I ami «m| re 
FiTODnanriM 1*00 100 I *01 1 Mr 

CdnlmknBrePIc 

8 9reWm&yraB,BMtiuroiEH2 2PP B*l6SBI2re 
MCA 1*75 3Xe2S I -Itaariy 


20Bkrt#aijmiroronffiwrei on-trazora 

mgr I am am I are mb 

flndonm* 1**3 - *52 MO 

OwnwreesaDOo* 1 375 -I axil ua 

Chartertreisa Bank UnAed 
tnoatwrenomBcwTOH. #71-2*8*000 

emo-eiiian a.7# am am mb 

CTm- f *na aiai are MS 

moKHzaun us an *at m 

£100X00* *50 *11 457 un 

sBmo-came- in 21a z» w 

OTiiwuaaLOM aa I** uo ire 

snoreo-oieamo_ am am am un 

CHUMP * .. . — 8JS 241 a42 MB 

^^ ' ,,al, " —,, "*(*roBBa^!5P TI * TI, 
Chdretbda Bank FtadUa Sokdkei Are 

manwiewa Hat* sne» ai a* d*i-mb707d 

mreo-caure — _| a?o 27# I i7S re 

esome-CMarea am an aos re 

osvDiMwidoMr u _l *m am I *ml re 


Tha C B opo m KaBank 
Ml Brareo, matamei. Laaca 

1B« ,1 us 

fMMBMr-BBd BraTO DaraTO An 

AT Mini T *90 

■-■Bro 


RO Bra 2 EMOHkt 071 70S #430 

EwuHAccnm* an aai an M> 

noma. am aa? *50 m* 

BSJOUt* 5m *7# 3 DO <fem 

rmoou* am *12 sso nan 

ira5»__- ua - are Mrtf 

JtaOnwklo Btdg Soc - tafejoariareMor 

nm my. smwoL rare raw cannan 

E3rtM*m I are 2*0 ax*| re 

oxoD-taeM am zn utsl re 

C1Q.00MMJB9 4X0 123 *J7| Qs 

CMna-CMJMB 1*40 *00 44#| DP 

ooxoo* lore am a«il re 

Fortmaa Bkta Sac RraaSgo Choqao Aocaret 
aonMrtfeninxs.ibBa 1 ooooeejea 

oamo* 550 *13 UO Marti 

rau.oac-c m . a aB uo an om mw* 

taumMaam9 — *50 are *re man* 

muuMi&au 150 2m uo trom 

DMKt-afiiiZ uo 14 zu irom 

Rea Bratton United, Mm 
«M mmniWW l .lsndaaEC2Maai OTVOaiieO 

TirurtMT' -—I -T I - r 155 I 445 1 MB 

nrowdtnauro [ *50 are *s9 are 

DUS S»«*nsOlU- I 022 110 I *321 Mr 

Royal Book ol Scoflred tdc Praadoo Ace 
caMmsaEronauwiEienE. rei^sreoare 

ctuao* 17# 24t I am re 

C25XD0-C4MH 130 2d in OB 

£10X00—124X00 275 2XB I US QO 

Esxoo-isxee 2m im| 2x2 re 

£2X00 — £*990 150 1.131 141 Qs 

San & Pitrapwfltobert Hentog 

lit —#iiiamiTTr rm^nirnni tut 0000202101 

EOMAOMM 1 175 201 I 342] DMy 

TEEMFlndlYMt— 5X0 - 5.73 Ml 

rasSAWNMa 1 4X1 -I *50 i Mh 


Rsvtaa dayw w* Cata 0.130 Pua IL300 . Pro*, tkyto open tot. CsHa 905^1 57 Poto 427X50 


5*2 

~ — C3dso 

-Prw. due 

Capot 

1X475 

1X453 

iR*h 

1X473 

1X451 

3ndh 

1X4SG 

1X433 

1* 

1X329 

1X306 


■ -nwaa noonH guwopoiuui (im -t tim porta of itti* 

Open Soa price Change Hgh Low E9L wol Open W. 
Sep 94X5 84X8 *0X1 94X8 94X4 50X49 385,199 

DOC 94X1 94X1 - 9440 94X1 72,005 491X65 

Mar 94X4 64X3 -0X1 9413 94X2 52X48 381X59 

■ 09 TWEAgUWY BOLL RJIUWE8 pMM) Sim per 10096 



ami 5x1 1 mw 

| 532|0-*m 
455 e-NP 
*X4 e-are 
axzlo-Mi 

I ara|o-«m 
are e-row 
22BiB-am 

I *I0|B-Mk 
IBMO 
£77 1 MM 
arelo-Mo 
MCMsnara 


SHimroswinaiMi oznirom 

MHISnhMBailta 1500 2025 1540 tt 

OaarortHtM £10000* 3X2& 2710 1675 Or 

MMCSOOOO* 1750 2X13 1X03 OB 

HMACItnno* 1X75 2000 1931 Or 

IYbM TESSA— 4375 - 4X47 Or 

Dotted DomUoaa TTOet Ltd 

room 92. rtMN. SMOOT OBI -447 KM 

EVH PVa Ctam ACCOM 

CIXOO*— _l *75 ISO ( 4X4l re 

IMM mat Soak Ud (tonaorfy inn 

1 lindis W1HT*. 071-2580094 

£10X0040 Ml MMj 875 6X6 I 102 3-Ma 

Cioxoo-iaodsraroa- 750 1X3 7A4ls-aae 

£25X00-1 TTOr 1 755 5X4 I -I iron* 

X Hmy Schrader UtoggS CD Ud 
HOOrorwii* iiroMBcwma .on-aBeooo 

SpocMAlE.— [3573 253 141 ( MB 

CUUBO a s l aasra 1 1X25 272 1 1671 MB 

Westuni Tract Ogb Merest Chegoo Ace 

HsMwa|CMB*npiajdinj TIE 0732224141 

£noro* *75 are | *m| re 

£3Xe0-E14XS0— — 456 13B ] *36 Or 

C1XOO-C4599 1 423 118 I 452 1 re 


TCXitfc y-ti 


rt mat pawns , pro 
I rode not tan w. 
a*M4D0 *» Ihdactta « 


UK GILTS PRICES 


Sep 

95X8 

95X7 

- 

8542 

95X7 

1.407 

12X53 

Dad 

94X8 

94X7 

+001 

94X0 

94X8 

923 

10,149 

Mar 

84X3 

94X6 

- 

94X3 

94X4 

469 

4,112 


Vk% Amt kdnrt Uot og 

Notes nteC +*- era due at Ona 


m% Aom hawrat Dot On 

Notn Price E w- do dro id Bn 


VKtt Mm Uorart trot dp 

Note* Prim £ */- Era On xd tae 


™ A« Open (marosl Ops. am tor prantaue (My 


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12pc 1885.. - 102i* -.1 2X50 XC3 Jjr23 20B12M YmOVxc2fX>4±t 87fi 

EntiSpc 6ml 990-05 _ 90* _ 214 HR HI 2431271 SEEws 

itB»peifl85 imA zxoo Jroruiei 1*01254 p ”*^ pca * & — — ■ 

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B#tl3pc6BS 1090-05 — 98A — ™ HrtWI 2531271 0 _. 9 u BBalB IK > 

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8kB 19k 1997 118i <L2 830 ApZ70BZ7 2151209 

B%pcl9SS 1MI3 0.1 3X50 JaiDJylB 13X1273 


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-IX 4550 H27SaZ7 
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hell 07.83 IBBVel 150D MnOSiie 10X1313 

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2%pc'01 PBJMfiBud -.1 1X0D Ur34Sa» 1381316 

2*sta-®S (785) 161Q -.1 1X50 IMOIW20 13X1317 

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2%pe*11 (748) W. -2 1X50 Fc23Ab23 1171319 

I%peia (BIT) 13 OH -2 2X00 FtlBMie 11.7 1320 

2%pc7B (BIX) 138* -5 2X50 JBBJflB 20X1321 

2%pCa0 PS-Bl 133* -5 2400 ApIBOClB 1051322 

2%pc'2*tt P7.7) 111% -X 2,100 JU7M7 1061323 

4%pc*30tt- — (133.1) 110* -4 1X00 J116M2 UJS - 
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months prior k> Issue) end haw been adkorod to redact rabrofag 
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December 1993; 1«1X end far My 1904: 14*0. 


reSX»%ii«r: 7am _ im 13 * 3 


TranggRttelM.-: t»fiW — Mg*"®" ^ " 

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■ 118* -.1 aiTl M14M4 7XIM8 OOteM 

iSeSn 10S -2 *«» F«a*a2S 2071280 ConsTOkK 45U 

tSiU.-— Ift -* !LK« SSSM 383 - «»Laro3%l*tt 41« 

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STOCK INDICES -wo- n r 

Sq, 2 Sen 1 An 31 Aug 3P Aug 28 HgO Low "M __ _%»» 


356 RrlAul 
1509 Jte Dal 
118 AfrtOd 
56 ApSOrf 
275 SMpJjfe 
475 Apl Od 
laro era shown In 


Other Fixed Interest 

A&fcaaowimana — us& -x 
Astao Onr I0%pc 2D0B_ 11 113 -1 

Btaai11l9PC2012 11B% IX 

Maori Cap 10 SB 05 

9pc Cap 1896 100% — 

1360 W-Z 108% -1 

l%drt Oaten 15pc 2011. 1423 -2 

imdnsfapczooo izr% ix 

UmpBdftpcirad 37 — 

LCC3pC20Aft 32% -IX 

Maiclsrtar ll%pc 2007- 114% -1.1 

Hrt.1Ht.4cV 68% 17 

Brirtrit AIM# 3%PP BBI. 133% OX 

4%JJctZB24_ 128% IX 

OH Ut Bites 16%PC200B 137 IX 


27X1239 umpMSbpcffBO — 3 uafaUBOc tn 

SX1S2 LCC3pc "20 Aft 32% -IX 28 UefcSeOe 81 

HMCtartsril%pe2007. 1M% -1.1 B Ap230c25 31 

Tit™ ••*.*.**'* 68% 17 25 Ml Sal 81 

151321 mm tnfo 3%pc 2021. 133% OX BO MOMS 11 

1X123B 4%pcl2024— 128% IX SO 71 

26X1315 OHHK8hreit%6C20ai 137 IX SO t*1 Eel 61 

pound* W art# / pronswsps changn era ceteufarad on > Fridn aRUv 


50 MJy4 1.12 - 

100 19248624 393 - 

45 Hy15Hr15 4D31837 
303 AplOci -1465 
725 JeaOMO - - 

315 API Od 5*93 1426 
40 HfSI H*30 27.10 - 

40 Apises 3933146 
3 UeApJeOc 893 - 

28 UaJeSeOe 893 - 

B Ap2S(ka 3*83 3275 
25 msel 8933381 
60 MO MO 1933435 
50 7« - 

50 msel BTO - 


BANK RETURN 

bankwg pepAffTwarr 

LtaMHoa 

Capital 

PtfaBc deposits 
Bankas deposits 
Reserve end other accounts 


Government eecuWw 
Advance and other aecounte 
P re mi ss, equipment end other i 


ISSUE DEPARTMENT 


Notes h dmdaHon 
Notes In Bertdhg Department 


Other Oowronm er d eecurldee 
Other SecuUea 


AugaW 31, 1994 dooeaw tor waek 

c e 

14*59X00 

113X03.191 -700X13X83 

1X05,180877 -85X38X62 

7.133X84.441 <8X88.177X49 

8526X27X09 *1X84X25X34 


1,011,103,708 

7X71X88X70 

488X63,^9 

8X93X87 

177X05 

8X26X27X09 


18X01X06X33 

8X89X67 

18X10X00X00 

8X99X43X84 

9X10X58.716 

18X10X00X00 


*1X45X00 

4-1X79,681X52 

-113X11 

*0X11X84 

400X09 

*1X84X26534 


*130X88X18 

*3.311,484 

+140X00X00 

-658X54X88 

*798X54X88 


LONDON RECENT ISSUESs EQUITIES 

taue Am mm. Cfoso 


ptjx w»l 52106 3251 X 32408 32851 3033 2P0X M2 9009 

IW 230 ^x 379*3 38165 38118 3B07X fltt8 MH.4 «»J 1OT4 

Sin Mrt MB « rts 37814 36012 38208 38178 38107 «6kT 3362.4 41807 13703 

5St S W07 16307 1046.1 177M 145IA 17713 0U5 
FtSUSsto JESS* 180650 100551 190U8 2884X0 1777X1 28MM 186378 

FM* m lit SfiJR 1M 167032 1067X9 1880X1 W6072 175288 26^ WfiTB 

SJJ22L S 1812X7 15*04 162057 1630X3 1784.11 144&8S 176411 01X2 


base lending rates 


Adam 0 Company. — S2S 

Alad Dust Bank 526 

ASBack- - $25 

■Henry Ansbodw — o» 

BrairfBarada- &2& 

Benco Bttron Mocaya. S2B 

BorkdCypui — 5» 

Banket Monti 52S 

Bank or moo 52® 

BtekrfSooiand S2S 

Borckgo Bank 5» 

BaBhriMBEast..- 525 

•Brown ST4«V& CD UdX28 

aeorfiNteWml.-MS 

CtetakrfiNA 526 

CfctaoddaBork 

The Cocpetrfh® BortL 5» 

(Vrat lRa - &2S 

Cret*Lycm4S 525 

Cypiwpopier Bank -.5X5 


OnoanLarote 1>25 

Enter Bank Linked— 596 

FVtsncielAGteiBer*-. 8 

•ftOertRemteoaCo. S2S 

Gteteark 

OQiWMlMVn S2S 

Hrf*Ba*A©Zldch.S25 
•HranbrooBarft 
Hrotarfek Gan kw Bk. S2S 

•HBSanuei &S 

CHbareOCQ 

rta^harq&Siflnghat OZ 

JJtanHodgoBte*— - S2B 

•Laretkl Joooph aSW86a 

UoydsBro* 

Mbq 1»( Bank 151 

MMandSte* 5XS 

•MMlBtrkng 6 

NmWeeShnsw 

•RsaBkctiera 528 


• RrariaagharewonBO 

ootportefan LMted tone 

bngertMhortsedas 
afaerfdngntiiiian. B 
nHd0krf8QHtend.S2S 
■Sntti&VHbitenSacE.SXS 

TS8 025 

•UnaadSkoTKiinak 5X8 

Unky Treat Ba* Pic... 028 

Weetein That — 5X5 

WMoawwLaktor._&36 

YBriortraBro* S25 

• Members of London 
Iny m tman l Banking 
Asaxjadon 

* kiadnhUidbn 


Sep 2 Sop 1 31 Aug 30 Aug 28 Will tar HD Uw 

FT-SE Einkrtk 100 1401X0 139852 140L52 1401X0 138SX9 1540181383481540.19 90045 

Ft-SE Brtrtrack 200 140L57 USOXB 146058 M5B43 144858 107.111 13425G 1S87.10 93052 

FT Ontroiy 25002 £094 2S3SX 2S385 2S625 27135 22S05 27135 484 

FT Bmt SOcoMn 21.71 82.10 91X6 9174 92X3 WIN 9089 12740 49.19 

ft read tetaart 11083 loaao 10959 ms* idoss uw I0753 iss57 5053 

FTGDUMtate »39X52O9BXB2D023r 205054 1BB&54 29674 1782X2 236740 922.1B 

PredecanaraoUllBBO 2B1X 2S4X 254.1 2506 2*7X 2775 185X 73*7 435 


FT GOLD MINES INDEX 



%ckg 
Sap An 

2 31/B« 

ap 

1 ttn 

%ol 

Bold 

Hmb 

tan die 
mate % 

52 weak 
ogb Loro 

fieMIttree tadro pS) 

IflUB -42 

20BK2B sura 

19000 

209 

2307491022X8 

■ bgtmte tattca 

ttfcadfl 

330373 00 

322224 16X9 

3019 

4.13 

3440X0 1902-23 

MrtMien 

2717X2 +19 

286590 7X9 

13X0 

1X3 

3013X0 mis 

Hm Anarta (tq 

171006 -01 

1B702O 2051 

54X2 

073 

2039X5 1383X0 


prise paid 


1904 

price 

+A 

re 

FJ». 

25X 

.100 

92 gftonactet 

90 

+1 

-1 

ts>. 

204 

89 

81 BaBaQShn Wits 

81 


100 

FP. 

104 

102 

100 Beacon tev Tat 

102 


- 

KP. 

1.79 

48 

43 Do. ISawai 

47 

-1 

185 

F J>. 

74.1 

173 

105 Chamtortato Ph. 

188 


re 

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1X8 

1% 

ft Corfl Foods Wrta 

1% 


120 

FJ>. 

12X 

133 

11B CopyrMrt Prom. 

125 


re 

FP. 

302 

94 

91 BWiSCO Jpn Dtso 

S3 


- 

FJ*. 

038 

GO 

42 Da Wamnto 

48 


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re 

77 

83 JF R Japan Wta 

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31 

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000 

17 

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40 

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108 

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30 




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9X7 

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960 

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US 

960 

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9.30 

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960 

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BX5 

960 

9-50 

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9X5 

1LS0 

960 

0630 

#64 

067 

9X7 

0800 

964 

968 

9X8 

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BXS 

968 

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tmw 

965 

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11.03 

1269 

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1131 

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1648 

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1*32 

1B.14 

2 a ID 

1030 

1£L75 

19 0* 

21.60 

1100 

18.75 

1R04 

2160 

1130 

20J3B 

18.74 

21.70 

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zaxo 

206* 

2260 

1230 

20J50 

2064 

22X0 

1300 

2&00 

206* 

22.50 

>330 

1764 

2064 

2260 

1400 

1764 

186* 

2160 

1*30 

1*1 B 

1808 

2004 

1500 

12.75 

1460 

1568 

1630 

1060 

1460 

1568 


1060 

1*00 

I860 

1830 

12.75 

1*00 

1568 

17D0 

12.75 

1460 

1566 

1730 

1368 

1*00 

1568 

1800 

1*07 

1460 

1560 

1830 

>467 

1460 

1568 

7000 

1360 

1*00 

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1B30 

1368 

1460 

1568 

£000 

2168 

1*00 

1560 

Z030 

2368 

1*00 

1560 

2100 

2363 

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2*03 

200 

21.40 

3160 

3268 

2200 

2166 

3100 

3268 

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21.1 B 

2200 

2402 

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1464 

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RIGHTS OFFERS 




Oapitid* The RrwndU Tknm United 199* 

nguru M fa eflel m oboe tsrote c< GOnurfM. Bert# US Octets. Bern VMmk 1000X0 31/12M2. 
nroteeroror OM Mheo kidae Sep. 9 ■ 2815 ; wm*% rtrangee v-145 ports; Yero egn 1703. 


taaue 

Amount 

Latent 

prlca 

prid 

Renua 

P 

UP 

tteta 

32 

M 

SflO 


F0flh LOW 
1%pm %pm 


I ^NA WCIAL TIMES | 
MANAGEMENT REPORTS 

AUTHORITATIVE 

MARKET 

REPORTS 


NBEATABLE 

INTEREST. 














































































FINANCIAL TIMES 


Monday September 5 1994 




























































nVrfrlE 


on no 

09 

05 

on 

LI 

052 25 

on 

19 

024 27 

OW 

04 

290 

57 

on 

87 

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08 

191 

54 

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240 

77 

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1.16 

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19102 

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075 208 

048 

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1190117 

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040 

19 

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198 

19 

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47 

19 25 

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270 

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98 13% <03% 13% 

171 19% 15% 15% ft 
BBS 72% 71% 71% -J» 
3S» 60% 68% SB% -% 
SM 4% 8% 4 

mo 50% 49% 50% ft 

am aft 29% 29% -% 
4101114% Tft 14% 4% 
lie 22% 22% 21% ft 

34018% 16 18% 

634 23% 22% 22% ft 
312 9% 8% 1% 

38 7% 47% 7§ 4% 

223 7% 7% 7% -ft 

548 9 8% 9«% 

82 8% 8% 8% 

61 8% 89 8% ft 

108 2§0 2§5 ^ 

456 12% 11% 11% ft 
1789 14% 14 14 

140 17% 17% 17% 

448 87% 87 57% 4% 

4871 28% 27% 28% 4% 
Z1CQ 5% 5% 5% 

80 18%. 18% 18% -V 

40 57 58% 57+1% 

sssaa i 
812 22% 22 22% 

77 1% 1% 1% 

9S 40% 48% 48% -% 
1117 80% 30% 20% -% 
488 29% 24% 29% +% 
17 18% 18% 18% 4% 
12504 2B% 28% 28% +% 
151 17% 17% 17% -% 
IM8 18% 18 18% 

830 15 M% V4% -% 

118 24% 23% 23% -f 
170 22% 22 22% 

2204 28% 28% 28% -% 
2821 25% 8% 28% 

340 88% 84% ^ 

70S 21% 21% Z1% -% 
482 2% 21% 21% -% 

1744X20% W% 20 -% 
790 27 28% 27 4% 

21 1% 1% 1% 

92 21% 21% 21% 4% 
10% 81% 10% 4% 
23% 22% 23 -% 

Sjlif 

jl 4 } , 

7% 8% 7% 4% 

21% 21% 21% 

48% 4ft 40jg ft 

23% Zft 23% ♦% 

36% 35% 35% -% 
22% 21% 21% . 
7% 7% 7% ft 
18% 17% »« +1« 

31% 21 31 -% 

im x>% 2S 2ft ft 
22s 22% 2S 2z*« ft 

29 18% 15% 18% 

2430 BM9A % 

1813 9§ B% 02% -% 
218 8 7% 7% 

42 28% 25% 28% 

180 20% 28% 28% ft 
127 8% 8 « ft 

4003 25 24% 24% •% 

1 20 20 20 4% 

282 27% Vh 27% , 

048 41% 40% 41% -% 
13 J7 y 37 
118 15% 10% 1ft -% 
3284 SB 57% 87$ -% 

39 7% 7% 7% 

92 4% 4% 4% ft 
333 33% 31 33% 4ft 

S ra 5 «% -% 

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2731 53% 52% 63 -% 

24M 25% 24% H ft 

120 9% 9% 0% 

340 021% 20% 20% ft 

m 4% 4% 4% ft 
811 2% »% A 

1003 29% 25% 25% ft 
275 49 48% 40 *% 

1000 1£ 4% 

Z100 23% 25% 23% 

438 48% 47% 47% -1 

M7 3ft -J* 

827 5% 8% 5% +% 

287 24% 24% 24% 4% 
747 30% 29% 28% +% 
1» 30% » 3^4 4% 

388 37% 37% 37% -% 


2 % 

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.S S A 3 

7723 54% 54% 54% 
2 818201% 251% 

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828 17% 17% 17% 
2908 100 104% 104% 


452 II W% 10% ft 

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878 SB 98% 56% ft 
83 10% 10% 1D% 

888 7 8% 8% -% 



18% 19 

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27% 27% 
10% 10% 

AS 


2ft 23% 4% 
9% W +% 


I 

88% 47 
90 80 

a** 


BE 

OUR 

GUEST. 


FOUR 

S5 


When you stay with us 

in UMASSOL (Cyprus) 

stay in touch - 

with your complimentary copy of the 




7% SBratPr 
99% 40 MM 

10% 14% MIB 
93% SHU 
EG 43% 0(toA 

25% 20%Bnii 

89 88%BaM(4L3Px 
43% 34% BraMx 
36% 27%0MflMnA 
1% iaaqma 
18% 13%B«tfr 
nmnuMH 
10% 8 Ban? Pat 

37% ^»BM0a^ 

06% n%BaBaanpr 
24% 18%BaBft 
83% 42% Bed L 

18% 11%Bl*Ent 
21% 1i%BoenB 

32%23%BtakwaS 

§ 16% ODBC* 

18 Bach H PL 
10% B%BkfecMfV 
8% 5% State 

10% 8%BUatfV 
48% 37% Bbdc 
31% 23% BkxM) 

4% 6%BbaCNp 
28% 19%8HCM • 
50% 42% Batin 
29% IS&rtC 
21% 10MB8N 
21% 9% Boota dm 
18% 11 Bradrai 

22 18%BotaCM 
28%2B%BHHtz 
38% 18% Brail FM 
34% SOME tap 
90%96%art*x 


64% SIBftfiaa 
77% 56%6Px 
2718% BP Plata 
25% 18BSM) 

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L‘. - — — 


FINANCIAL TIMJES 


MONDAY SEPTEMBER 5 1994 


NYSE COMPOSITE PRICES 


NASDAQ NATIONAL MARKET 


s/m&xpScptexsar: 




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34 


FINANCIAL. TIMES MONDAY SEPTEMBER 5 1994 


FT GUIDE TO THE WEEK 



MONDAY 


Population conference 

More than 15,000 delegates and 
representatives of non-governmental 
organisations gathered in Cairo for the 
United Nation's International Confer- 
ence on Population and Development 
The weeks before the conference 
have been dominated by a row between 
the Vatican, some of its Catholic allies 
and Islamic conservatives on one hand 
and the majority of the other 160 states 
on the other over the warding of the 
proposed Anal text. Sudan, Saudi 
Arabia and Lebanon are boycotting the 
meeting. Religious critics have accused 
the text of endorsing homosexuality, 
abortion and adolescent sex. 

The 126th annual meeting of 
Britain's Trade Union Congress, which 
opens in Blackpool today, is expected to 
present a more than usually unified 
front behind the modernising policies 
of Mr John Monks, general secretary. 
The week-long meeting will however, 
be overshadowed by the continuing 
strike by railway signal workers. 

Japanese prime minis ter Tomiichi 
Murayama meets Paul Keating, his 
Australian counterpart, who is on a 
two-day visit to Japan. Keating and 
Thai premier Chuan Leekpai, who is 
also in Tokyo this week, are expected 
to raise trade issues in the talks. 

Banks which bailed out WPP in a 
S271.6m (£i76m) debt for equity swap 
two years ago are today expected to 
make more than £l00m profit through a 
placing of the 26 Jj per cent stake in the 
international advertising agency. The 
placing is being organised by a consor- 
tium comprising Bankers Trust Inter- 
national. JP Morgan Securities and SG 
Warburg Securities. 

Berlin: The first European Union 
foreign ministers meeting with the 
South Africa Development Community 
(SADC) states opens today. Finland, 
Norway, Austria and Sweden, which 
will join the EU next year, are also par- 
ticipating. The main aim of the confer- 
ence is to increase political contacts 
between the EU and SADC. 

The British Association for the 

Advancement of Science annual festi- 
val gets under way in Loughborough. 
This year's theme is Science In The 
World Around Us (to Sept 9). 

The Booker Prize shortlist is 
announced in London. The prestigious 
literary award, which has 130 novels 
competing for the £20,000 prize, will be 
presented on October 11. 

Famborough Air Show, the 

biennial showcase for the world aero- 
space industry, is expecting around 
220,000 visitors. This year's event 
includes an aerobatic world cup with 34 
pilots from 15 nations (to Sept ll). 

Surveys: Reinsurance, Mobile 
Communications. 

Holidays: Canada, US (Labor Day). 
Israel (Eve of Rosh Hashanah), Luxem- 
bourg (local holiday). 



TUESDAY 


Slovakian sell-off 


The government 
of prime minister 
Mr Jozef Morav- 
cik (left) launches 

a mass privatisa- 

tion programme 
in Slovakia 
involving state 
companies worth 
up to Sfe250bn 
(£5-2bn). About a 

__ _ ^ quarter of the 

total is to be’sold through a voucher 

privatisation system, the remainder via 

tenders and direct sales. It is one of the 

biggest mas« sell-off programmes of 

any post -Comm uniat country outside 

the Czech Republic. 



William Perry, US defence secretary, 
takes his second trip to Russia this 

year for talks with his counterpart 

Pavel Grachev. Tomorrow he goes to 

Totskoye for the first joint peacekeep- 

ing exercise between American and 
Russian troops. 

The Bank of Japan releases its 
“Tankan" quarterly survey of business 
conditions, which should shed some 

light on the current state of the coun- 

try’s economy. 


Germany’s unemployment figures 

for August are due to be announced. 

Recent trends have pointed towards a 

gradual fall in the number of unem- 

ployed. The figures will be watched 
closely as Germany prepares for federal 
elections on October 16. 

The Tokyo District Court delivers 

its ruling in the trial of executives at 

Kajima - one of Japan’s leading con- 

struction company’s - accused of brib- 
ing Torn ishii. the former mayor of the 
northern town of Sendai, to win con- 

struction contracts. 

Japan Telecom is listed on the 
second sections of the Tokyo and Osaka 

stock exchanges. The issue’s high pub- 

lic offering price of Y4.7m (£30.616) per 
share is causing some investor anxiety. 


Cricket: the Holder's HOI cricket 

team, captained by Desmond Haynes, 

will become the first overseas village 

side to play at Lord's when they meet 

an MCC side captained by David 
Gower. Holder’s Hill, a tiny community 

in St James. Barbados, has nine men 

who have played for the West Indies. 


Rugby in Pais: 


:4i> 








The Barbarians 
are playing their 
'French counter- 
parts in Paris. 

The match is to 
commemorate the 
fiftieth anniver- 

sary of the 
Normandy land- 
ings and the 
e- liberation of 
Paris. 


Holidays: Israel (Rosh Hashanah). 



WEDNESDAY 


EU on plutonium security 

EU interior and justice ministers meet 

in Berlin to discuss a common response 
to trafficking in potentially weapons- 
grade plutonium from Russia, Ministers 
from neighbouring central European 
countries are to join the meeting tomor- 
row. The current German presidency of 
the EU also wants a formula an “bur- 
den-sharing” cm refugees from the for- 
mer Yugoslavia. 

Mr Kenneth Clarice, chancellor of 
the exchequer, and Mr Eddie George, 
governor of the Bank of England, face a 
policy dilemma in today's monthly 
monetary mppHwg interest rates have 
started to rise in Italy, Sweden and 
France, and Britain is further ahead in 
the economic cycle than most continen- 
tal countries. Yet official inflation fig- 
ures continue to come in below expec- 
tations, TnaVhiff ft hard to a base 
rate rise to the public. Analysts expect 
no rise until after November's meeting. 

Ryutaro Hashimoto, Japan's 
minister of international trade and 
industry, meets US trade representative 
Mickey Kan tor in Washington. Foreign 
minister Yohei Kono meets Mr Kantor 
in Los Angeles the following day. 
Tokyo’s two powerful ministries show 
signs of being at odds on how to resolve 
trade issues with Washington, which is 
threatening sanctions. 



The troubled Benetton team answer 
charges that they illegally interfered 
with their refuelling rigs, thereby caus- 
ing the pit-lane fire at the German 
Grand Prix. Their case is being consid- 
ered by the FIA. the sport’s governing 
body. 


Ca m paig ning begins for Slovakia’s 
general election on September 30 and 
October 1, its first since splitting from 
the Czech Republic at the mid of 1992. 
Opinion polls show the nationalist 
Movement for a Democratic Slovakia, 
led by former prime minister Vla dimir 
Me&ar, will emerge as the biggest 
party. 

The World Competitiveness Report 
will be published by the Institute for 
Management Development in Lau- 
sanne, Switzerland. Japan has finished 
top of the poll for the past eight years. 

Football: England play the US in a 
friendly match at Wembley Stadium, 
London. 

Survey: Enterprise in Wales. 

Holidays: Brazil (Independence Day), 
Israel (Rosh Hashanah). 



H 


THURSDAY 

The Pope in Sarajevo 

The Pope plans to visit Sarajevo if 
security can be guaranteed amid warn- 
ings from Bosnian Serb leaders. The 
visit is intended as a gesture of solidar- 
ity with the city’s inhab itants. Hie Pon- 
tiffs trip to the former Yugoslavia ends 
at the weekend with his first visit to 
Zagreb in Croatia. 

Germany’s first-half gross domestic 
product data are published by the fed- 
eral statistics office. Informal estimates 
suggest that the economy grew at an 
unsustainable rate of 3 per cent during 
the period. Some slowing is expected in 
the current quarter, but most econo- 
mists expect more than 2 per cent for 
the whole year. 

Jiang Zemin, China’s president, 
visits France until Sept 12 as part of a 
European swing that has also taken 
him to Russia aod Tikr ame. The French 
part of his tour is at the invitation of 
President Mitterrand. 

The Rio Group, which brings 
together presidents from 11 Latin 
American countries and representa- 
tives from Central America and the 
Caribbean each year, is to meet in Rio 
de Janeiro, (to Sept 10). 

Troops from the US, Britain and 
France leave Berlin today after a pres- 
ence of nearly 50 years. Chancellor Hel- 
mut Kohl will bid the troops farewell. 

Chr is tie ' s auctions Charlie Parker’s 
white plastic alto saxophone in 
London. 


9 


FRIDAY 


Quad meets on trade 

Trade ministers from the US, Canada, 
Japan and the EU wifi meet in Los 
Angeles (to Sept ll). The “Quad” meet- 
ing is expected to focus on multilateral 
cooperation to open markets and the 
speedy implementation of Uruguay 
Round talks on lifting trade barriers. 

EU finance ministers meet in 
Lindau near Lake Constance for two 
days of informal talks. The meeting, 
chaired by the rotating German presi- 
dency of the EU, will cover the latest 
macroeconomic developments in 
Europe and steps towards European 
monetary imirm 

The Japanese government’s 
Economic Planning Agency releases its 
monthly report cm the domestic out- 
look. It has so far avoided declaring 
that recovery is under way, noting only 
that there are bright spots. 

Berlin: The Conference of German and 
American Business Leaders is expected 
to focus on German-US political and 
economic relations. A1 Gore, US 
vice-president, will address the confer- 
ence by satellite and Chancellor Hel- 
mut Kohl will open the 
event 

The design team of Swan Hunter, 
the UK shipbuilder in receivership 
since May 1993, will be made redundant 
unless receivers Price Waterhouse have 
made a deal by today to sen the com- 
pany. The loss of the team would end 
prospects of a going concern sale. 


10-11 


WEEKEND 

US and N Korea resume talks 

The US and North Korea begin 
negotiations in Pyongyang to imple- 
ment last month’s framework agree- 
ment to end the dispute over North 
Korea's nuclear programme. Talks aim 
to establish low-level diplomatic rela- 
tions, and a later Berlin meeting will 
negotiate terms for the supply of safe 
light-water reactors to North Korea- In 
return North Korea has agreed to fan 

nuclear inspections. 

A by-elecfion in Aichi prefecture, 
near Nagoya, for the Japanese upper 
bouse wfll be the first electoral test for 
the two-month-old government 

EU foreign minis ters meet in 
Mecklenbmg-Vorpommem. east Ger- 
many. for two days. Talks are expected 
to address the Bosnian crisis, Rwanda, 
relations with central and eastern 
Europe and progress towards the devel- 
opment of a common foreign and secu- 
rity policy - 

Annual prime-41 me Emmy awards 
ceremony, television’s equivalent of the 
Oscars, will take place in Los Angeles 
on Sunday. 

Tennis: US Open tingles finals. 
Siwvey: Eating Out in London. 

Holidays: Sunday. Pakistan 
(anniversary of Quaid-e- Azam's death) 


Complied by Jam Crust 
and Angela Bleasdale. 
Fax: (+44) (0)71 373 3194. 


iMmgm 

Other economic news 

Monday: The UK’s narrow 
measure of money supply. M0, 
has consistently been growing 
outside its 0-1 per cent target 
range, a matter which has 
caused concern to the governor 
of the Bank of England, Mr 
Eddie George. Analysts are 
hoping that figures today will 
show that the annual rate 
edged down from July's 6.5 per 
cent. Consumer credit figures, 
also out today, will shed fur- 
ther light on the effect of the 
tax increases on consumer con- 
fidence. 

Tuesday: UK industrial pro- 
duction and manufacturing 
output figures will show 
whether economic growth is 
showing any signs of slowing 
down. Month-on month figures 
can be erratic but both figures 
are expected to show o.l per 
cent monthly growth. 

Wednesday-: The UK's trade 
performance has held up quite 
well this year. Figures for 
June's whole world trade are 
expected to show a monthly 
deficit of £S00m. down from 
£1.03bn in May. 

Thursday: The Confederation 
of British Industry's quarterly 
distributive trades survey, out 
today, will give a further indi- 
cation of the strength of retail 
sales and the health of con- 
sumer spending. 


ECONOMIC DIARY 


Sep 7 US 


Oay 

noteaaod 

Cowiby 

Economic 

Statistic 

Statistics to be reteasfed this week . . 

Median Pterion ■ . 1 CtxnonJa<- 

Forecast Acini ■ ' -Maned Cointiy . _ 8>nc \ * ’ 

rtKflm •• 
Rricad 


Prarioua 

A can 


Mon 

UK 

July Consumer Credit 

- 

683m 

;Thtn. 

Atsffe 

. 02 Rousing . Starts {sees ac© . 



44% 


Sept5 

UK 

Aug MO* 

03% 

07% 

Sep 8 

AutfW 

'• . Aug unamptayment fraas £d& 

9.7% 


.05% 



UK 

Aug MO” 

05% 

6 r 5% 

- (cant) 

Ausfta 

Aug eraptoymenf freas a30 ' 

- -27,506 

•• 

90,000 


Tue 

US 

July home conflations 

- 

1-33TO 

. . . M 

US • 

■ Aug PR , 

■ :*a 4% 


05% 


Sept 6 

US 

Aug domestic auto sates 

6.7m 

8.4m 

Sep 9 • 

US • ■ 

Ex-Food and Energy' • 

403% ’ 


oi» 



US 

Aug domestic light track sales 

5.3m 

53m 


■Canada 

’ ’Aug. Employment Rate ’ • j 

03% ' 


05% 



US 

Johnsons Rec&ook We Sept 3 

- 

-1-1% 


Canada 

Aug Unemployment Rate- 

. 103% 


103% 



Japan 

1994 Tankan Capital Spending 

41% 

- -3.7% 

• 

Cfenada 

.Jul Motor Vahtete Sates* 

03% 


4.3% 



UK 

Jul Manufacturing Output* 

0.4% 

-02% 

.- 

JtetMda 

Aug CFT" ' 

04% 


04% 



UK 

Jul Manufacturing Output** 

3.6% 

4.4% 


Nettfkts. 

Aug CPl** 

23% 


2.7% 



UK 

Jul Industrial Production* 

04% 

04% 


Norway 

Aog .CPr ’ 

6.1% 


' 63% 



Canada 

Jul Building Permits* 


06% 


Norway 

. Aug CPI* 

13% 


1.4% 


Wed 

US 

02 Productivity Review 

- 

-12% . 


SWtzId 

. 02 Real OOP. . 

1.7% 


1.1% 



Jul Wholesale Trade 


05% 


"fours 

US 

Initial Claims w/e Sep 3 

325400 

aay.nnn . 

Sep 6 

US 

State Benefits wte Sep 27 

- 

2.709m 


US 

1994 Heal Capital Spending 

- 

03% 


US 

Jul Consumer Cretft 

+S8bn 

$109brt 


US 

Ml vw/e Aug 29 

+S5bn 

SOSbn 


US 

M2 wte Aug 29 

+S3bn 

SOSbn 


US 

M3 

+$23bn 

S83bn 


Germany 

02 GOP - West (quarter on quartet] 

1% 

0.5% 


UK 

Jun Global Vsfcte Trade 

-600m 

-i-oatm 


Canada 

Aug Help Wanted Index (seas acQ 

97 

96 


Canada 

Jun Estimates of Labour Income 


-03% 


Doing tbs v we fc.. 


'.Germany 

. Jul fttate Sector CndR frees aegj • 

08% 

Germany • 

Jumna! M3 

. - .’ 

11.4% 

Germany . 

Aug Ftoa) Cost ofUvtag' * 

- 

0.1% 

.Germany 

Aug Final Cost of Living** 

- 

23% 

Austla 

M Prtvate Sector Qedt 

- 

03% 

AusfSa ■ 

Jut Buataesss Credt 

- 

03% 

AusTa 

■ Jul Broad Money 

■ - 

03% . . t . 

SwftzW 

Aug Unemployment F6aa 

43% 

43% ’ 

Belgium 

. Aug Unemployment 

■ - 145%" ; 

.. . J 42% 


•month on month; “yew on year 


Statistics, caurbxfyMMS tntsmaGoaa}, 


ACROSS 

1 Eccentric occupying nurse 
being soppy <tj> 

4 Firm, because in the chair, 
but certainly on edge \S) 

10 It's an arrangement the queen 
finds less attractive (7) 

11 Place article m box perhaps 
<71 

12 Stop providing support <4) 

13 Meant to be thoughtful (10) 

15 A woman fashioned these, 
right? (61 

16 Hiding defeat «7» 

20 A large number following the 
game made complaint (7) 

21 Warns assembly about 
English response <6t 

24 Manual worker and a gradu- 
ate involved in weighty Issue 
UP) 

26 Service for the many t4> 

28 A liule wench Anthony set 
out to charm t7) 

29 A biscuit and pop taken with 
some hesitation (7) 

30 Uuder-cover directions con- 
tained in a letter (8) 

31 The bench decide <6) 


DOWN 

1 Lett and that's not good (Si 

2 Individual who has divided 
the underworld class (9> 

3 Issue update 14) 

5 Checks, though no longer tn 
same mess t8j 

6 Even about cigarette ends 
he’s at odds with others (10) 

7 A personal distributor of vital 
supplies (5) 

8 Those people taking French 
art subjects (6) 

6 Sneak about a fellow’s rise (5) 

14 Repeat cure when afflicted, so 
get better ( 10 ) 

17 Modern business course (9) 

18 Lively exchange concerning 
some key point (8) 

19 Retain a little cash to make a 
booking (81 

22 A rest's essential for such 
plants (6) 

23 Power for the engineer (5) 

25 Large limousine maybe given 
to an outstanding player (5) 

27 The head wanted savoury 
food (4) 



MONDAY PRIZE CROSSWORD 

No.8,550 Set by VDCEN 

A prize of a Fdikan New Classic 390 fountain pen for the first correct 
solution opened and five runner-up prizes of £35 Petikan vouchers wifi be 
awarded. Solutions by Thursday Septsnber is, marked Monday Crossword 
&£60 on the envelope, to the Financial Times. 1 Southwark Bridge. London 
SE1 9EEU Solution on Monday September 19. 


Name 


Address. 


Winners 8338 

D. Smith, London SWi 
C.C. Andreas, Bembridge, Isle 
of Wight 

K. Ayton, Winchester, Hants 
C.M. Betterton. London SE12 
Gillian Malcolm. Chiswick, 
London W4 

P.j.r. Wright, Wistaston, 
Cheshire 


Solution 8.538 


□□□□□□aClQQD HBB 
□ aanaana 
annas anssBasea 

□ D 
□HQ 
0 □ 

□ □ 


BOB HQnQBQBlDEHB 



National Service 


At Erdman Lewis we do things differently. 

Determined to build bridges not barriers, 
we developed a national network of local 
offices. A genuine network. Each with its 
own identity yet working as an integral 
part of the whole. Offering the same 
range of services, the same expertise, the 
same understanding of the local market. 
And proriding continuity and stability 
through the same local contacts. Whatever 
your needs, now and in the future, we 
make it our business to anticipate the 
changes in yours. 


Local Heroes 


g'i Erdman 
" \ LEWIS 

07 V6 2 9 8191 





i 


landon, Birmingham, Edinburgh. Glasgow and feeds 


Of broking and jobbing the Pdikan’s fond. 

See him’ sweetly he puts your word onto bond - 

Sfefifuui© 


JOTTER PAD 









FINANCIAL TIMES SURVEY 


MOBILE COMMUNICATIONS 


Monday September 5 1994 


: *• ? M i 


res un»t$ : 


' lie? 
■_Vi. 

T_ 

- ires, 
■*.- 

• - 


I-” **=-“JSipra 

■ ' . V|>- 


Service 


■“i 


: - 


Lines that point to 
cellular growth 

It seems set to become a mass consumer market. 
But could the bubble burst? Or are the forecasts too 
pessimistic? Andrew Adonis looks at the evidence 


Mobile communications 
embraces everything from the 
simple tone pager to advanced 
radio data transfer systems. 
But the dynamic force in the 
sector is the cellular telephone, 
entering its second decade of 
commercial service in the 
developed world. 

The issue is no longer 
whether the cellular phone will 
take off, but how fast it will 
build a mass consumer market, 
and whether it is set eventu- 
ally to replace the traditional 
fixed wire. 

The Nordic countries already 
i boast about 10 mobile phones 
per 100 people. Every other 
household in Stockholm 
some form of mobile communi- 
cator. and the number of new 
mobile phone connections out- 
strips new fixed-line connec- 
tions across Scandinavia. The 
same will soon be true of most 
developed countries. The UK 
reached the crossover point at 
the turn of the year: industry 
estimates for June are of about 
115,000 net new nellniirr con- 
nections, against about 100,000 
new fixed-line connections. 

Between 1986 and 1993 the 
number of worldwide cellular 
phone subscribers increased to 
32m, with annual growth of 
between 45 and 50 per cent 
Projections vary wildly, but on 
current trends between 150m 
and 200m cellular subscribers 
is a plausible projection for 
2000. To put those figures in 
perspective, some 650m tele- 
communications lines are in 
service today. 

Unsurprisingly, the cellular 
industry has become a gold 
rush, with nothing but booms 
and profits apparently on the 
horizon, and a torrent of entre- 
preneurs and companies - 
many of them with no previous 
telecoms experience - mus- 
cling in to make their fortune- 
witness the extraordinary 
sums that operators are pre- 
pared to pay for licences: the 
Hungarian government last 
year netted $100m from the 
auction of two GSM licences, 
and far larger sums are chang- 
ing hands in richer economies. 

It would be rash, however, to 
suppose that operators will be 
able to continue opening their 
networks and then waiting for 
the cash to pour in. As the 
mass consumer market dawns, 
margins will Call, competition 
will hot up and serious mis- 
judgments are bound to be 
made. There is already evi- 
dence of overheating in some 
markets: as operators dash for 
growth and cut-price handsets 
flood highs tree ts, rates of 
“chum" - subscribers leaving 
the networks - rise and fraud 
becomes a problem. Some oper- 
ators are privately fearful that 
the cellular bubble will burst 
in developed markets, followed 
by a period of slower growth 
similar to that experienced in 
the early 1990s recession. 

Yet just as convincing an 
argument can be made for sup- 
posing that current growth 
projections are pessimistic. For 
instance, they could be dramat- 
ically upset by the most 
intriguing departure in the 
industry - the development of 
“fixed cellular” systems for the 
local loop. Fixed cellular is in 
its early infancy, but as reli- 
ability improves and costs foil 
it has clear potential. 

In the developed world fixed 
cellular afters a means for com- 
petitors to former monopoly 
PTTs to bypass the PIT local 
network without having to dig 
up the streets or erect pylons. 

It is also attractive to develop- 
ing countries ambitious to pro- 
mote rapid line growth and not 
immediately concerned about 
residential broadband “super- 
highway” services. 

^For us, fixed cellular is one 
or the most significant t hi ngs 
happening in the industry, 
says Mr Nagarajan Vittal. 
chairman of India’s telecom- 
munications commission. India 
has barely eight telephone 
Hues per 1,000 people: the gov- 
ernment's target is to d ouble 
India's number of lines - from 
8m to 16m. compared with 30m 
in the- UK today - over the 
next four years. Mr Vittal 
believes fixed cellular could 
have a crucial role to play, 
pointing to Mexico and Indon- 
esia which have recently 
licensed operators. 

The Integration of fixed and 
mobile services migbt have a 
similarly far-reaching nnpact 
in the developed world. Peo- 
ple want to call Pe?P le * 
places, says Mr Torbjom NUs- 
son, strategic planning director 
at Ericsson radio systems, toj? 

Swedish su PP lier -.« S SfiriS 
work operators will introduce 
mobility to their networks by 


means of personal numbers 
based on Intelligent network- 
ing' solutions.” 

The world of ma« personal 
numbers may be some way off, 
but the telecoms equipment 
market is already beginning to 
feature PABX software which 
enables calls to be directed to 
mobile numbers. Network 
operators are increasingly anx- 
ious to make their services 
complement the fixed line, 
even to compete with it In the 
UK, one of the two new cellu- 
lar operators to have launched 
in the past year is offering free 
local calls in the evenings 
(Mercury One-2-One), while the 
other (Orange) will give sub- 
scribers who want one a con- 
ventional fixed-line local num- 
ber for their cellular handset, 
allowing them to pay the dif- 
ference in incoming ean tariffs. 

Fixed/mobile business align- 
ments are also fairing shape. 
AT&T’s $12bn merger with 
McCaw Communications, the 
largest US cellular operator, 
was cleared last month. It is 
likely to be only the first of 
many such finkmps, and bag 
already helped to precipitate 
several proposed mergers 
between regional cellular oper- 
ators in the US. 

Three forces are driving 
growth: 

• New and competing net- 
works. Across much of the 
developing world networks 
have only recently been 
opened, or are still to be 
launched. Much of the world 
thus remains virgin ter rito ry 
for the cellular operators. In 
the developed world, with its 
established networks, digital 
technology and the introduc- 
tion of competition between 
operators are providing the cel- 
lular industry with a fresh 
wind. 

The US entrenched competi- 
tion from the outset, and it will 
become fiercer stQl with the 
auction of licences for Personal 
Communications Systems next 
year. 

Elsewhere, state-owned PTTs 
were licensed as monopoly cel- 
lular operators in the mid- 
1980s. Typically, they treated 
their cellular divisions as c ash 
cows, raking in large monopoly 
profits from growing business 
demand while making little or 
no pretence at marketing the 
service. 

That js all changing. Second 
network operators are being 
launched across Europe and 
the Asia-Pacific. Under strong 
pressure from the European 
Commission over the past two 
years, most EU states have 
licensed more than one opera- 
tor to provide a digital service 
on the pan-European digital 
GSM (Global System for Mobile 
Co mmuni cations) standard. 
The UK has gone farther still, 
licensing an additional two dig- 
ital operators at a higher fre- 
quency, providing so-called 
PCN (Personal Communica- 
tions Network) services. Other 
major EU states are following 
suit with PCN. 

Analysts disagree on the 
importance of competition to 
subscriber growth, but beyond 
Scandinavia it is hard to deny 
a relationship. The US, which 
had competition from the start, 
has about six subscribers per 
100 people. Hie UK, with its 
four competing operators, now 
has about 2.7m cellular sub- 
scribers - nearly five subscrib- 
ers per 100 people. Germany, 
which was a Deutsche Telekom 
monopoly until the launch of a 
GSM network by the Mannes- 
man consortium two years ago, 
has nearly trebled its number 
of subscribers over the past 
year but still has fewer than 
three subscribers per 100. 
Japan, which languishes at the 
foot of the league for large 
developed countries - with 
barely two cellular subscribers 
per 100 people, only this year 
liberalised its handset market, 
having previously required 
subscribers to rent handsets at 
infla ted prices. 

• Reducing costs. Prices erf all 
the telecoms components of 
cellular networks - base sta- 
tions. handsets, and intercon- 
nection charges for the use of 
public fixed-wire networks - 
are falling fast This is a func- 
tion of technological advance 
(base stations have shrunk 
from hut-size to street cabinets 
in a few years), computerised 
manufacture (it now takes a 
small fraction of the labour 
required even two years to 
assemble a handset), the 
enhanced capacity of digital 
systems, and lower prices for 
use of the fixed networks. All 
of these trends will continue, 
aided partly by technical 
advance, partly by greater 


competition, and partly by reg- 
ulation, although supply short- 
ages - particularly in digital 
handsets - may slow the pace. 
• Cultural changes. As the 
penetration of cellular phones 
rises, they come to be seen as 
essential by an ever larger 
social group, further reinforc- 
ing growth. A recent UK sur- 
vey by Ms Joyce Wood, a visit- 
ing fellow at Sussex 
University, shows that the 
image of mobile phone users as 
“swanky businessmen" no lon- 
ger tells the whole story. 

Nor is the cellular telephone 
the whole story of mobile com- 
munications. Paging, mobile 
data, and mobile satellite are 
all notable markets, covered in 
this survey. But in size and 
glamour they are no competi- 
tion for cellular telephony. 


IN TWS SURVEY 


□ Paging market Europe 
gets message 

□ Business market: 

Cordless systems gain 
ground Page 2 


□ Mobile phones: The 
consumer barrier 

□ GSM networks: 

Technology lor the next 
generation Rage 3 

□ Cellular market: 

Hothouse of competition 

□ Mobile data: Customers 

are confused Page 4 

□ Cordless prospects: 
Battle on standards 

□ Mobile handsets: 

Perfection may be within 
reach Page 5 

□ Mobile satellites: New 
breed goes into mbit 

□ Ericsson: A force to be 

reckoned with Page 6 

□ US market: Scramble 
for licences 

□ Europe: Tide of 
deregulation 

G Asia: Dash for mobility 
Pages 7 and 8 


ff you were a Finance Director faced with soaring 
mobile phone costs, who would you talk to? 

More to the point, who could you talk to? 

Well, this woman is talking to us. CtikieL Because 
we have a service called Call Access. 

It effectively makes a company's mobile phones 
an extension of the office phone system. With short 


codes, fast dialling and even lower priced calls. 

The savings are significant with up to 40% 
reductions on the cost of airtime. 

Call Access is just one of our many products 
and sendees. Each one designed to meet your needs 
and, more importantly, save you money. 

(To find out more simply ring 0800 214000.) 


On top of all that Cellnet has something no 
other network can offer, the technological expertise 
and backing of BT. 

With our help, you can run your mobile phones 
cheaply and efficiently. 

And if anyone tells you different? Put it this 
way; you’re talking to the wrong people. 


Shei responsible for a £7,000 mobile phone bill 
Who do you think she’s talking to? 




*7 


ft 




II 


FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


MOBILE COMMUNICATIONS 2 


Paul Taylor examines trends among business users 


Cordless systems gain ground 


Business users, particularly 
small businesses, helped fuel 
the growth of cellular mobile 
telecommunications In the 
early 1980s in the US and then 
in Europe. 

A decade later although 
attempts are being made to 
broaden the market for mobile 
telephony, for example 
through the introductions of 
Personal Communications 
Networks (PONs) like Mercury 
One-2-One and Hutchison's 
Orange network In the UK, the 
main focus of cellular network 
operators r emains the business 
customer. 

Indeed, the introduction of 
digital cellular networks such 
as the GSM networks which 
are being built across Europe 
and in many other countries 
around the world, and other 
new services like mobile data, 
promise to provide business 
users with a new set of 
telecommunications tools 
which can increase flexibility 
and improve productivity. 

One advantage of these new 
digital mobile services is that 
they are easier to integrate 
with corporate fixed 
teleco mmuni cations and data 

processing equipment and will 
enable network operators and 
others to provide a wide range 
of value added customer 
services such as voice 
messaging and data 
transmission. 

“With their intelligent net- 
work architecture and nation- 
wide digital networks, the 
mobile operators will soon be 
able to offer all the services 
that a (fixed network) tele- 


phone operator can, and 
more," says Mr Tim Harrabin, 
a principal consultant at the 
Cambridge-based Analysys 
telecoms, strategy and econom- 
ics consultancy, in a report 
published last year. 

Other telecommunications 
strategists believe that before 
the end of the decade, office 
cordless and mobile digital 
technologies will be integrated 
in dual mode handsets capable 
of operating at work, while 
travelling and at home. 

In the office itself most mar- 
ket research organisations pre- 
dict that cordless telephony 
based on either of the two 
main digital technologies cur- 
rently available, CT2 or Dect, 
will be gradually adopted by 
corporate customers over the 
next decade. 

Frost and Sullivan, the mar- 
ket research firm, is predicting 
that sales of wireless office 
equipment will grow from vir- 
tually no thing last year to 
nearly 20 per cent of the mar- 
ket by the year 2000. Among 
the benefits claimed for cord- 
less systems are increased effi- 
ciency, reduced outgoing call 
costs and savings on running 
costs. 

Already most of the main 
telecommunications equipment 
manufacturers are either sup- 
plying or developing cordless 
systems which can be added 
onto existing PBX (Private 
Branch Exchange) equipment 
The next step is likely to be to 
integrate these cordless voice 
systems with the emerging 
cordless data networks which 
are h^ giuTiiug to appear. 


Outside the office the cellu- 
lar telephone is already a vital 
business tool for a large num- 
ber of mobile workers includ- 
ing salesmen, site engineers 
and others whose jobs require 
them to leave the fixed tele- 
communications services avail- 
able in the office, factory or 
warehouse. 

For some mobile workers - 
including those whose occupa- 
tions mean they are often 
away from their desks or work- 
benches - pagers can provide a 
low cost and effective solution 
to the problem of “telephone 
tag”. Pager networks have also 
proved very successful in 
Asian markets such as Hong 
Kong where they are increas- 
ingly used along-side “tele- 


Pagers can provide an 
effective solution to 
the problem of 
“telephone tag” 


point" public mobile cordless 
systems. 

However, pager networks 
face a growing challenge from 
the new digital telecommunica- 
tions and from GSM in particu- 
lar. Vodafone, the UK cellular 
network operator working with 
Serna Group's telecom division, 
was the first GSM network 
operators successfully to test 
the short message service facil- 
ity included in the GSM specifi- 
cation. This allows an alphanu- 
meric message of up to 160 
characters - twice as long as 
the typi ca l mflrimnm length 
pa g in g message - to be dis- 


played on the handset 

The messages are sent via 
the short message service cen- 
tre and when they arrive at the 
mobile they are stored in the 
user’s SIM (smart) card ready 
for retrieval 

SMS's unique features 
Include the ability to send or 
receive messages at the same 
time as speaking or sending 
data, an alert feature for 
informing a third party when a 
mobile re-registers on the net- 
work, the ability to store a 
message and forward it to the 
mobile when it is switched on. 
and acknowledgement of suc- 
cessful message delivery. 

Mr Martin O'Byrne, manag- 
ing director of Serna’s telecom 
division, believes that SMS and 
other features like it will pro- 
vide network operators with a 
way of differentiating service 
offerings. 

Business users who want to 
send longer data files from 
their portable computers while 
on the move - as well as being 
able to use the network as a 
conventional voice link - will 
probably also turn to GSM. 
However those whose need is 
for frequent computer-to-com- 
puter communications will 
probably use one of the dedi- 
cated mobile data networks 
such as Ram Mobile Data in 
the UK. 

These data networks provide 
high speed, reliable wireless 
mobile data connections which 
typically enable mobile work- 
ers such as parking wardens, 
meter readers and others to 
pychang p data or E- mail with a 
central office network. 



THE THREE POINTS OF THE KENWOOD TRIANGLE REPRESENT ADVANCED TECHNOLOGY, QUALITY AND STYLE 


THIS GiTY'S 
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TRAFFIC WITH 
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THIS GUVS. 
STUCK IN 
TRAFFIC WITH 
A KENWOOD 
MOBILE RADIO. 

HE'S SPOKEN 
TO HIS 
OFFICE. 




Most users do not see 
mobile communications 
as a cost-saving 


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HOME AUDIO.. CAR AUDIO, COMMUNICATIONS EQUIPMENT, TEST AND MEASURING INSTRUMENTS. TELECOMMUNICATIONS 


include cutting down on staff 
and flccnmmndatinn — thereby 
allowing extra spend on mobile 
comm uni cations - and closer 
integration of mobile with pri- 
vate network facilities.” 

One worldwide office equip- 
ment supplier interviewed for 
the survey “Integrating Mobil- 
ity into the Corporate Net- 
work" said that by introducing 
voice mall for sales people they 
had made savings on message 
desk staffing. 

However, Ovum noted that 
most users do not see the intro- 
duction of mobile communica- 
tions as a cost-saving measure. 
But they are aware of how 
mobile services can benefit 
their business in other ways, 
for example by improving the 
productivity of mobile staff, 
m a ki ng an organisation more 
responsive to customers, 
Improving sales effectiveness 
and speeding up decision mak- 
ing. 

Given that mobile communi- 
cations products and services 
are widely regarded by tele- 
communications managers as 
too expensive, suppliers need | 
to find ways of simulating mar , 
ket growth which do not focus 
primarily on cost reduction, 
says Ovum. 

These include adding value 
to individual products and ser- 
vices such as data over GSM; 
moving new applications to 
mobile communications and 
educating corporate users 
about the benefits of using 
mobiles; and integrating ser- 
vices across technologies, 
adding value for users and pro- 
viding cost control for the com- 
pany. 




In the meantim e, the prolif- 
eration of mobile telecommuni- 
cations equipment is already 
causing problems in some 
large organisations which 
sometimes do not even know 
how many mobile telephones 
their employees are using and 
have few, if any, controls over 
their usage. 

The problem is so pro- 
nounced that Mercury Mobile 
Services in the UK offers a 
“consolidation” service which 
begins with a “consolidation 
audit” to discover the number 
and type of phones a customer 
has and to set up a database to 
monitor users and usage 
trends. 

If required. MMS can then 
arrange for all the equipment 
to be transferred so that it is 
all managed by a single service 
provider and will then provide 
the customer with detailed 
management reports and moni- 
tor whether the mobile fleet is 
being used efficiently. Custom- 
ers have included Digital, 
Shell, the AA and UPS. 

According to Ms Diana 
Jones, who handles marketing 
for MMS, same customers are 
now asking Mercury Mobile 
Services to manage their entire 
mobile teleco mm unications 
operations - including market- 
ing the services to internal 
users. 

As Ovum, the market 
research group, noted In a 
recent study, “so far neither 
suppliers nor user organisa- 
tions have paid much attention 
to how a large company ‘as a 
whole' can use mobile to best 
advantage." 

However, Ovum also noted 
that as the drive towards a 
mass market for mobile com- 
munications and fierce compe- 
tition force mobile operators to 
lower prices, developing prod- 
ucts and services for the corpo- 
rate sector will become 
increasingly important to 
mobile operators seeking to 
sustain margins. 

“The more experienced cor- 
porate users have identified 
how mobile communications 
can improve their efficienc y - 
they are starting to change the 
way they operate in order to 
take advantage of mobile ser- 
vices," said Ovum. “Changes 




mm 

Lj^j| • 





i «• 







Chris Neary, managing director of Meretwy Paging, hoids an Advisor pager which receives messages of up to 
80 words long by satsttts r«wr«anoM*i 


Andrew Adonis looks at the paging market 


Europe gets message 


In the US and Asia-Pacific 
countries public radio paging, 
although less high profile than 
mobile telephony, is nonethe- 
less a respectable and self-con- 
fident sector. In Europe, by 
contrast, the pager has long 
been the mobile communicator 
that dare not speak its name, 
with paging operators seem- 
ingly acquiescent in a course 
which hat condemned pa ging 
to obscurity. 

That appears set to change. 
Radical reform is sweeping 
through Europe's paging 
industry, stimulated by the 
success of Sweden’s state tele- 
coms operator in marketing 
pagers to high street consum- 
es. Meanwhile, paging contin- 
ues to race ahead in Asia, and 
looks set for a further spurt in 
the US on the back on two-way 
paging and other enhanced 
services. 

The next step in what could 
become a transformation of 
Europe's paging sector comes 
this month with the launch by 
Mercury Paging, the UK's 
third largest operator, of a ser- 
vice tailored for the consumer 
market 

Instead of the existing pag- 
ing package - unattractive to 
personal consumers - of 
monthly rental charges for 
restricted coverage zones, Mer- 
cury paging customers will be 
able to buy their pager from 
high street consumer electron- 
ics retailers with automatic 
connection and no subscrip- 
tion charge- Dubbed “Mini- 
call", Mercury will gain its 
revenue from the new service 
by charging callers premium 
rates for leaving messages. 
Each Message will cost the cal- 
ler about 20p, which Mercury 
believes is unlikely to deter 
would-be callers. 

“ Mini pa ll " is a numeric pag- 
ing service. Numeric pagers, 
which display the caller's 
number on a one-line display, 
are an advance on “tone" 
pagers, which simply bleep 
and Hash to alert the owner. 
They are one step down from 
alphanumeric pagers, which 
allow callers to leave a text 
message on a multi-line dis- 
play. 

“This is a real breakthrough 
in the UK paging business,” 
says Mr Chris Neary, manag- 
ing director of Mercury Pag- 
ing. “We have carefully stud- 
ied Sweden's experience with 
calling-party-pays paging, and 
think there is a real opening 
for a similar offering tn the 
UK. It is far cheaper to use 
than a cellular phone.” 

None of the other three UK 
paging operators offers a pure 
calling-party-pays service. BT, 
the largest operator with more 
than 400,000 subscribers, 
offers no alternative to 
monthly subscription charges 
related to zones: its tariff 
sheet setting out the options 
resembles a railway timetable. 


although subscribers can now 
buy their pager. But all three 
- BT, Vodapage and Hutchison 
Paging - are examining call- 
ing-party-pays (CPP) options, 
and may come up with similar 
services. 

Mercury cites three factors 
which have combined to make 
CPP at premium rates, with no 
subscription charges, a com- 
mercial proposition: 

• The elimination of han- 
dling costs. “Mini call” is a 
joint promotion with Moto- 
rola, the US telecoms equip- 
ment manufacturer, which 
will supply pagers directly to 
retailers. 

• A sharp fall in the cost of 
pagers. Numeric pagers now 
cost almost as little to make as 
simple tone pagers: the Moto- 
rola numeric pagers win retail 
at between £79 and £99. 

• The elimination of bureau 
costs, the most expensive part 
of a paging operators' over- 
heads. Callers with touch-tone 


Operators are going for a 
niche opened up by the 
cost of cellular telephony 
in a mobile-minded society 


phones leave numeric mes- 
sages by tapping in their con- 
tact phone number as 
requested by a voice prompt 
The small minority of callers 
without touch-tone facility can 
leave their number by voice 
after the prompt 

Mercury is also revamping 
its business service: subscrib- 
ers will get a numeric pager 
far the existing price of a tone 
pager, with a monthly sub- 
scription charge of only £5.49 
for national coverage. Mercury 
is keen to upgrade both new 
services to alphanumeric: the 
problem is the bureau costs, 
which are unavoidable until 
voice recognition technology 
produces a reliable service for 
turning voice messages into 
text It is still some way off. 

Motorola has a 20 per cent 
share tn Mercury Paging, but 
Insists that it bad little bear- 
ing on Mercury's decision to 
launch “Minicall”. Mr Greg 
Nelson, Motorola's European 
paging subscriber president 
has spent the last yea r tru m- 
peting the virtues of CPP to 
Europe’s paging operators, 
and claims that at least 10 
more European operators are 
p lanning to introduce a simi- 
lar service to the next three to 
six months. “This idea is 
catching on fast: our role has 
simply been to get the opera- 
tors to consider it seriously,” 
he says. 

According to industry 
sources, paging operators in 
Germany, Italy, the Nether- 
lands and Denmark wil l be 
among the next to launch CPP 
services. Some wfU be collabo- 
rating with Motorola, some 


with two or three partners, 
but the product will be 
broadly similar. All the opera- 
tors are going for the market 
niche opened up by the con- 
tinuing high cost of cellular 
telephony in an increasingly 
mobile-minded society - par- 
ticularly among the young. 

The CPP model is Sweden, 
whose state operator, Telia, 
launched a successful service 
last year despite Sweden's 
high level (10 per cent) of cel- 
lular phone penetration. “The 
crucial thing was to study the 
telephone market, not existing 
mobile markets,' says Mr Jan 
Holmgren, an ex-Motorola 
executive who moved to Telia 
to build up its paging division. 
Telia research showed a poten- 
tial paging market of 1.9m out 
of Sweden’s &5m population. 

More than 100,000 pagers 
have been sold through retail 
outlets since the launch of the 
service. They retail for as little 
as SKr 1,000 (£87), with no con- 
nection fee. Between 9am and 
4pm the calling charge is SKr6 
(about 50p) and at other times 
and all day at weekends, it is 
SKr 1.5 - a huge price differen- 
tial with mobile phones. The 
new regime has had almost as 
great an impact on the busi- 
ness market as on the con- 
sumer market. Telia's tradi- 
tional subscriber network has 
grown from about 70,000 to 
well over 100,000 since the 
CPP launch. 

Western Europe currently 
has about 3.2m paging sub- 
scribers. If CPP takes off, cur- 
rent projections of growth to 
about 5m over the next decade 
(from CIT Research, a London- 
based consultancy) could 
prove pessimistic. However, 
Europe wifi still lag far behind 
the US, which today has abont 
2lm paging subscribers, and 
the Asia-Pacific region with 
19m. Singapore alone has 
more than 600,000 paging sub- 
scribers, Hoag Kong lm, 
Taiwan L4m and Japan 7.7m. 
CIT projects that paging num- 
bers in Asia will more than 
double over the next decade. 

Two-way paging Is set to be 
the next innovation in the US. 
The auction last month by the 
Federal Communications Com- 
mission of eight blocks of 
radio frequency for narrow- 
band Personal Comm on i ca- 
tions Services win allow two- 
way paging for the first tune. 

Five companies are likely to 
compete in the two-way mar- 
ket, with services such as 
“acknowledgement” paging, 
allowing the recipient of a 
message to choose one of a 
number of set return mes- 
sages. Other enhanced services 
in the pipeline include a voice- 
based service allowing sub- 
scribers to play back voice 
messages stored on a device no 
larger than an existing pager 
- “an answering machine in 
your pocket.” 


For p 

with ■ 


talkti 


is a 






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FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


MOBILE COMMUNICATIONS 3 





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O ver the past two years the Europe- 
an-developed GSM (global system 
xor mobile communications) digital 
cellular standard has won widespread 
acceptance around the world, as the tech- 
mAjgy of choice to tha next generation of 
cellular telephone networks. 

Although North America led the first 
mobile telecommunications revolution In 
the early 1980s, it is Europe that has taken 
the lead in the move towards di gita l 
systems with the GSM standard. “The big 
impact of GSM is that it is a gfrigl p stan- 
dard.” says Mr Dean Byers, an industry 
a nalyst with Dataquest's European tele- 
communications group, “and this mpum 
enormous economies of scale for eqnte. 
TMunt manufacturers-" 

The big European equipment suppliers, 
have also benefited from disarray in the 
US where the telecamimmicatians indus- 
try is still divided in its support for two 
different digital technologies - digital 
Amps based on time division multiple 
access (TDMA) or the newly-developed 
code division multiple access (CDMA) 
technology. 

GSM networks are in operation, rm^oy 
construction or planned across Europe, 
the Middle East. Africa and the Asia/Pa- 
cific region, having brushed a side the chal- 
lenge from rival digital standards. O nly in 
the Americas and Jap an have alternative 
standards been adopted. 

By the end of July, the number of nsM 
subscribers worldwide totalled more than 
3m and is expected to top 4m by the year- 
end. These customers are in 59 countries 
with a combined population of more than 
2bn and the customer base is growing by 


I t is a cellular industry platitude that 
the consumer market is about to dawn. 
New connections are booming; in 
several western countries - fnehuftng the 
UK, Italy and Scandinavia - the number 
of new cellular connections Is already 
OUihii'ippfllg fixed-line wmnwfinm 

The latest figures from the FTs mobile 
communications newsletter show that 
more than 12 per cent of Swedes now have 
a cellular phone. Finland, Norway and 
Denmark are not far behind. The rest of 
Europe lags, but subscriber growth across 
western Europe was 60 per cent in the 
year to August 1, with the penetration 
rate across file region now up at three per 
100 . 

Cellular telephony is also booming in 
the US and Asia-Pacific. One to three 
people in Hong Kong have access to some 
form of mobile communicator, with 
cellular phone penetration r unning at 
more than five in 100l 
Add to that projections of global growth 
co ntin uing at 50 to 60 per cart a year, and 
the clear beginnings of marketing 
targeted at mnimiremn consumers, not 
Just “city slickers 1 ”, and the mobile age 
seems simply a matter of waiting and 
ensuring sufficient capacity. After all, 
who wcmld not want a mobile phone at 
the right price? . 

In reality, of course, it is not going to be 
that simple. A look at the UK, which with 
4.6 cellular subscribers per 100 people is 


Paul Taylor looks at the spread of GSM networks - in Europe and elsewhere 

Technology for the next generation 


more than 70 per cent a year. 

By 1999 EM&, the Washington-based 
market research firm, predicts there win 
be 453m digital cellular subscribers world- 
wide, With GSM subscribers repr esenting 
almost GO pa- cent of the total. 

"The GSM standard is now accepted 
worldwide as the basis for new digital 
mobile communications and networks,’’ 
Mr Bruno Massiet du Blest, the current 
chairman of the GSM Mpmuranrinm of 
Understanding (MotJ) group, said recently. 

The first GSM networks were launched 
in Germany, France and Denmark in mid- 
1992, and similar services are now being 
rolled out across Europe. Last year the 
number of GSM subscribers in Europe 
jumped from 184000 to L32m , according 
to figures from Mobile fVwmninriMtinna 
the Financial Times newsletter. 

New GSM subscribers represented over 
40 per cent of total western European sub- 
scriber growth and Dataquest is forecast- 
ing that the number of GSM subscribers in 
Europe will grow to 831m by the end of 
1996. However, the bare figures hide sub- 
stantial variations in GSM uptake in indi- 
vidual markets. Almost aB of the growth 
in 1993 - and much of the growth this year 
- was attributable to the German market 
which accounted for 74 per cent of all 
European GSM subscriber growth in 1933. 


hi Germany and other markets where 
analogue network capacity was restricted, 
or had not been developed, GSM sub- 
scriber growth has been spectacular over 
the past two years. As a result, the two 
GSM networks, Deutsche Telekom Mobil's 
D1 network and Mannesman!! MobOfunk’s 
D2 network, now both have more than 
700,000 subscribers each. 

GSM subscriber growth *has been 


strained, the pace of transition from anal- 
ogue to digital cellular systems has been 
much slower. Ms D iana Jones, in charge of 
marketing for Mercury Mobile Services, 
says there is still relatively little interest 
in Britain where GSM handsets are still 
£100 more than their analogue counter- 
parts. “Most business users do not at this 
stage feel the need to move over to GSM," 
she says. 


Last year subscribers went up from 184,000 to 1.32m. 
By the end of 1996 there could be 8.31m 


spurred by competition. Two or more GSM 
network operators have been licensed in 
all European countries except Ireland 
which bowed to Commission pressure and 
requested bids for a second GSM operat o r 
in July. Aggressive marketing which has 
resulted in the elimination of ftp price 
premium on GSM equipment, has also 
hrippd in both Germany ami Denmark, 
another fast-growing GSM market with 
over 200,000 subscribers to its two GSM 
networks. Motorola handsets have fallen 
to under £100 in promotion package 

But in those countries such as the OK 
which had well-established analogue 
systems which were not capacity con- 


Vodafone, which offers two GSM tariffs 
in the UK, has about 45,000 subscribers to 
its GSM network while its rival Cellnet 
only officially opened its GSM digital cel- 
lular network in mid-July. Like Vodafone, 
Cellnet is tnawiy tar ri ng the business 
user. The main selling point will be the 
ability to use a GSM handset anywhere in 
Europe - Cellnet has negotiated “roaming 
agreements" with 22 foreign operators. 

GSM networks are under construction in 
eastern Europe, iwrimihig Russia where 
the Russian Telecommunications Develop- 
ment Corporation (RTDC) holds 14 GSM 
licences. Asia, already the fastest growing 
eeflnlar mar ket in the world, has t yyorrw 


the biggest market for GSM. 

Japan and South Korea, which are devel- 
oping their own digital standards, are the 
only two teg Asian countries that have not 
adopted GSM At the end of last year there 
were 19 licensed GSM operators in 10 
countries throughout Asia, and poten- 
tially, 28 operators in 17 countries. 

Among them. Hong Kong has emerged 
as one of the most rapidly growing GSM 
digital cellular markets in the world. The 
colony's two GSM networks. Hong Kong 
Telecom and SmarTone. have been aver- 
aging more than 10.000 connections a 
month between them, and the total num- 
ber of GSM subscribers is now over the 
100,000 leveL 

Elsewhere in Asia, GSM networks are in 
operation in Singapore, China and Malay- 
sia. and are planned in Indonesia, the Phi- 
lippines, Cambodia, Vietnam, Taiwan and 
India where eight city-based GSM digital 
cellular licences have been awarded. 

China recently placed two further con- 
tracts for GSM digital cellular systems. 
Nokia will supply a system for the coun- 
try's capital, Beijing, while Ericsson of 
Sweden has won its second Chinese GSM 
contract for delivery of a system to Shan- 
tou in Guangdong province. 

GSM is seen to have two key advantages 
over the rival US digital Amps system in 


Market penetration is still some way off, writes Andrew Adonis 

Mobile phones meet a consumer barrier 


at the leading edge of the developed 
world's mainstream cellular industry, 
gives a fair picture of the market in 
tran s iti on. 

From the figures, growth appears 
unbounded. It took the UK's cellular 
operator s eight years from Mr hunch in 
1985 to attract their first Lhn gatume raL 
The number of subscribers has almost 
doubled since the start of 1993, with the 
increase running at more than 50 per cent 
a year. 

Recent advertising campaigns by 
mobile operators have been pitched at 
mainstream consumers, and one of the 
font networks - Mercury One-2-One - 
claims to be in direct competition with BT 
by offering free local mobile phone calls 
on its networks in the evenings and at 
weekends. Analysts expected that the 
mobile phone tide would ebb after 
Christmas, hot apart from January, »™i a 
customary lull in the depth of the 

uminur , demand 1**** r eiMinai Strong. 

It wonld be misleading, however, to 
believe that the mass market has dawned. 
Visit a mobile phone shop, or talk to a 


dealer, and it becomes evident that the 
mobile phone is not advancing into the 
co n s u mer market as a whole, bnt rather 
penetrating deep into discrete «cctinw^ 
The most obvious is the high-earning 
professionals. Much of the c urrent boom 
is caused by the fact that large numbers 
in this group are buying phones for then- 
personal use, or for their spouses to use. 


down. And thongh the number of 
‘non-professranal’ users is still small, the 
fact that mobile phones are being seen in 
the hands of ordinary people is vital to 
creating a mass market,” says Ms Wood. 
However, the key words are “upside 
down”: there is still not modi of a market 
between the better-off professionals and 
their families, and the blue-collar wor ke rs 


Operators admit handset prices have to fall by half before 
the "bulk** of the consumer market can be attracted 


Two other discrete growth segments are 
the self-employed blue-collar workers and 
vulnerable social groups - in both cases 
mostly equipped with cellular phones at 
the behest of employers or agencies. 

A survey late last year by Joyce Wood, 
a visiting fellow at Sussex University, 
highlighted this trend, citing utilities 
which now equip their repair staff with 
mobiles and police forces providing them 
for wo m e n at risk. 

The stereotype is being turned upside 


who need the phone as part of the job. 

The operators are aware of this. Mr 
Richard GosweU, managing director of 
Mercury One-2-One, frankly admits that 
PCN handset prices have still to come 
down by at least half - the cheapest 
currently retail for £199 - before the 
“bulk” of the con sum er market can be 
attracted. 

r Still more starkly, be says Hurt usage 
tariffs “will have to migrate a great deal 
further towards BTs tariffs" before the 


goal can be achieved. With call tariffs 
anything np to 50p a minute on low-usage 
schemes designed to attract the consumer, 
that suggests a long trek ahead. 

Ironically, One-2-One makes the 
consumer barrier more obvious, despite 
its free evening local calls, because of file 
high bandset prices- By contrast, 
established analogue operators Cellnet 
and Vodafone have experienced serious 
problems with “churn” - the number of 
subscribers leaving the network as a 
proportion of all subscribers - in part 
because of the cheap high street handset 
deals now available. 

Mr Hans Snook, manag in g director of 
Orange, believes churn could before long 
tarn into an “industry crisis”, although 
tike all operators be is careful to exclude 
Us own network from the crisis. 

According to BIS Strategic Decisions, an 
information technology consultancy, 
churn is now running at an annnai rate 
equal to about 30 per cent of the number 
of mobile subscriber s . BIS estimates that 
about half of all churn is caused by people 
moving between mobile phone' companies 






i&P-r ■- ■: - >•* 1 


« For people BBmlllM 
i t with something to say, 


Asia. First, GSM frequencies are already 
available, wbile digital Amps frequencies 
may be already occupied. Second, GSM's 
roaming capability is giving it the edge 
over rival standards. However, the thorny 
issue of encryption poses a potential 
threat to GSM sales In Asia and elsewhere 
outside western Europe. 

GSM equipment uses an encryption 
device based an an algorithm called A5(l). 
However export rules normally prevent 
non-European operators from buying 
equipment that incorporates the A5(l) 
encryption system because of concerns 
that it could be used for military purposes. 
Instead, prospective GSM network opera- 
tors outside Europe are being offered 
equipment with the newly-developed ASfift 
encryption system. 

Taiwan has already complained about 
the restrictions which are seen as a trade 
barrier and has accused European export 
authorities of undue discrimination. This 
is causing concern at the GSM MoU Group 
which is seeking to promote the adoption 
of GSM worldwide. 

Although GSM has been an outstanding 
success, US and Japanese equipment man- 
ufacturers continue to lobby operators 
worldwide to adopt their rival digital stan- 
dards. The MoU Group fears that non-Eu- 
ropean operators might feel that they are 
being asked to accept an inferior GSM 
technology and therefore turn to another 
system. 

Much is at stake. Frost and Sullivan, the 
market research group, estimates that the 
GSM cellular equipment market will peak 
next year at $l.6bn and then decline 
slowly as volumes and prices fall 


or between different calling plans offered 
by the same operator. However, that still 
leaves half due to a combination of fraud 
and the inability of customers to keep up 
with their bills. 

Ms Gail Kirby, a BIS analyst, says: 
“Churn is a serious problem, and it’s 
getting more serious for the network 
operators as the number of subscribers 
rises so dramatically. The numbers 
churning are equal to the entire cellular 
population of a few years ago.” 

The three months to the end of June 
saw tiie churn rate rise for the fourth 
successive quarter. Vodafone, the largest 
cellular operator, was worst hit, with a 
disconnection rate equal to 34 per cent of 
its subscribers over a frill year. Mr Terry 
Barwick, Vodafone's corporate affairs 
director, says: “We have had problems 
with fraud, and are tightening our 
credit-checking Systran to reduce it” 

He said some of the fraud appeared to 
be organised systematically, with some 
dealers stealing bonuses paid for new 
subscribers by means of take subscriber 
names and personal details. Bnt be 
conceded that “part at least” of the churn 
was probably cansed by customers unable 
to keep up with their bills. 

As one dealer puts it, neatly summing 
up what could become a serious industry 
predicament: “Many people who buy 
mobile phones don't have a cine how 
much it actually costs to keep a mobile 
phone going - particularly if yon nse~ft” 




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FINANCIAL TIMES MONDAY SEPTEMBER 1994 


MOBILE COMMUNICATIONS 


T he UK Is Europe's fore- 
most laboratory for test- 
ing the impact of compe- 
tition on telecommunications. 
Everyone knows that the pri- 
vatisation of British Telecom- 
munications a decade ago went 
hand-in-hand with the licen- 
sing of a competitor. Mercury 
Communications. And most of 
Britain's urban dwellers, 
whose streets are being dug up 
by cable companies construct- 
ing combined cable TV and 
telephone networks, are alive 
to the presence of more com- 
petitors. As other west Euro- 
pean countries, with a few 
exceptions still state monopo- 
lies, struggle to privatise and 
liberalise, it is to Britain that 
they look for inspiration. 

Less celebrated, but equally 
developed, is competition in 
the UK's cellular industry. 
When cellular telephony 
started seriously in the mid- 
1980s. most European govern- 
ments simply extended the 
existing monopoly in the provi- 
sion of telecoms services bo the 
cellular sector. Not the UK. 
which at the outset licensed 
two cellular operators, and 
allowed BT to take only a 60 
per cent stake in one of them. 

Since then, competition has 
been the hallmar k of UK gov- 


Andrew Adonis looks at trends and new entrants to the UK cellular market 

The hothouse of competition 


Net new UK phone 
connections 


Fixed CeHidar 
networks networks 

urn m 


eminent policy for mobile com- 
munications. At every opportu- 
nity it has offered competing 
licences. The policy has not 
Invariably succeeded: initial 
failures among Personal Com- 
munications Networks (PCN) 
operators might be entered on 
the dehit side. But most ana- 
lysts agree that the UK’s cellu- 
lar strategy has been more 
effective than monopoly at 
stimulating subscriber growth 
and effective price competition. 

The case is not beyond dis- 
pute. Scandinavia has achieved 
cellular penetration rates more 
than twice as high as the UK's, 
yet cellular competition is still 
in its infancy across the 
region. Cultural and business 
factors may explain the diver- 
gence: ail forms of telecoms 
are more heavily employed in 
Scandinavia t han across the 
rest of Europe, and the region's 
operators have long been con- 
ditioned to behave in an entre- 
preneurial fashio n. 


At any rate, the whole of 
western Europe - including 
Scandinavia - is proceeding 
fast down the UK road. Almost 
every EU state has now 
licensed competing GSM opera- 
tors. The Larger countries have 
either licensed a PCN operator 
or are about to do so. 

The UK has four operators: 
Vodafone, launched as a sub- 
sidiary of Racal Electronics but 
demerged as a free-standing 
company in 1991; Cellnet, a 
joint venture between BT and 
Securicor; Mercury One-2-One, 
a joint venture between Mer- 
cury. BT's main fixed-line com- 
petitor. and US West, a US 
regional Bell operator; and 
Orange, in which the largest 
shareholder is Hutchison 
Whampoa, the Hong Kong con- 
glomerate. 

Vodafone and Cellnet, the 
original competitors, both have 
analogue and GSM networks, 
the latter compatible with 
overseas built to the same 


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standard. Most of their 25m 
subscribers are signed up to 
analogue networks: analogue 
handset prices are cheaper 
than GSM. and service quality 
is- better. However, tariffs are 
comparable: as GSM service 
improves, the greater function- 
ality of GSM handsets becomes 
apparent, and the virtues of 
overseas "roaming” come to he 
appreciated. GSM will catch 
on. Mr Gerry Whent, Voda- 
fone's chief executive, predicts 
that Vodafone will be attract- 
ing GSM subscribers at the 
same rate as analogue by the 
end of the year. 

Mercury One-2-One and 
Orange, the new operators, 
have launched PCN networks 
in the last year. Both lack 
national coverage: One-2-One is 
currently limited to London 
and the southreast. Orange to 


■ | ,, he mobile data market 
I I has failed to live up to 
I early expectations. Set 
against the growth of cellular 
radio voice communications in 
particular, customer demand 
for mobile data has been dis- 
tinctly disappointing. 

As a result, most market 
analysts have downgraded 
their predictions for mobile 
data market growth in the 
1990s while network operators 
and others have reassessed 
their investment strategies. 

In the UK, for example, 
Hutchison Mobile Data ceased 
marketing its fledgling dedi- 
cated mobile data service last 
autumn and will now offer 
mobile data services on its 
recently launched Orange digi- 
tal Personal Comnnnri cations 
Network (PCN) later this year. 

“There has been a lot of 
'hype' and industry push over 
the years," says Mr Dean 
Eyers. a senior industry ana- 
lyst with Dataquest who has 
just completed a report enti- 
tled “Mobile Data Communica- 
tions in Europe - The Poten- 
tial for a Horizontal Market”. 

Another market research 
organisation. Ovum, conceded 
in a report on mobile data 
published last year that, 
“despite services being avail- 
able on cellular and public 
data-only networks, the mar- 
ket has been slow to develop". 

Ovum noted that despite the 
acknowledged benefits of 
mobile data, “data-only net- 
works are facing an uphill 
struggle to attract subscribers 
and the number of data users 
on the cellular network is in 
the region of 2-6 per cent of 
the user base.” By the end of 
1993 Ovum estimated that 
there were just 825,000 users 
of mobile data in North Amer- 
ica and Europe. 

In the UK the three dedi- 
cated mobile data networks 
have a total of about 5,500 cus- 
tomers. There are, however, 
indications that subscriber 
interest is growing. In the first 
six months of the year sub- 
scribers to Bom Mobile Data's 
network more than tripled. 

Meanwhile, about 15 per 
cent of the 45,000 subscribers 
to National Band Three’s 
two-way public access mobile 
radio communications net- 
work in the UK now use the 
service to transmit data. 

Mobile data customers fall 
into two main categories 
according to Ovum - vertical 
markets, particularly the ser- 
vice industries, and early hori- 
zontal markets involving 
industries wtth a significant 
service element in some aspect 
of their business. 

Typically, these mobile data 
customers use data services to 
transfer engineering; customer 
or product information to and 
from portable computers, or to 
retrieve information from 
mobile data terminals used by 
a mobile workforce such as 
meter readers. 

But the Ovum report 
suggested that the market for 
mobile data had been con- 
strained by customer concern 
over competition between 
mobile data services and over 
the availability of networks, 
the price of equipment and 
excessively complex and 
expensive applications, lack Of 
market understanding and the 
belief that perceived risks out- 
weigh cost benefits. 

Customer confusion is 

understandable. In the UK for 
example, excluding pager traf- 
fic, mobile data services are 
provided by both analogue and 
digital cellular telephone net- 
work operators, dedicated 
mobile data network operators 
and private and public access 
mobile radio networks - all 


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main population centres and 
travel routes. However, both 
are building out fast and so 
rapid is subscriber growth in 
the industry that last year's 
warnings that four networks 
were at least one too many 
have proved misplaced so far. 

Mobile phones are enjoying 
such a boom in the UK that 
new cellular phone connec- 
tions are racing ahead of lin ks 
to traditional fixed phone net- 
works. Net new connections to 
mobile networks overtook 
fixed network connections to 
BT and the cable TV compa- 
nies last December, on a surge 
of pre-Christmas mobile phone 
buying. Analysts expected the 
mobile phone tide would ebb 
after Christmas, but cellular 
has stayed ahead every month 
this year except January. 

The larger operators have 


proved adept at expanding the 
market without imperilling 
their margins. Vodafone, the 
most adept of all, believes it 
can sustain last year's revenue 
per subscriber figure of £665, 
despite pressure on prices. 
“There is plenty of room for 
four of us," says Mr Whent. 
"We trade on our quality, 
national coverage, and the 
potential of GSM." 

To gain market share, the 
new entrants have adopted 
strategies aimed at expanding 
the market. Both launched 
with an advertising blitz - 
which, predictably, did as 
much or more to boost their 
larger rivals as themselves. 
They have also sought to 
expand the market through 
careful positioning. 

One-2-One has been the 
bolder by far, with its re&iden- 


Jan 1993 

Feb 

Mar 

Apr 

May 

June 

July 

Aug 

Sept 

Oct 

Nov 

Dec 

Jan 1994 

Feb 

Mar 

Apr 

May 

June 


estimates 


tial offering of face local calls 
in the evenings and at week- 
ends. Orange's strategy has 
been more subtle, linking its 
tariffs to blocks of “free" call- 
ing time, geared particularly to 
more heavy-usage business 
customers. Both operators 


Paul Taylor looks at the mobile data market 

Customers are confused 


using incompatible standards 
tmd equipment 

It is possible to transmit 
data over an analogue cellular 
telephone net w orks, but this is 
generally more difficult and 
considerably slower than 
transmitting data over the 
fixed public switched tele- 
phone network. As a result, 
relatively few business cus- 
tomers use cellular telephone 
systems to transmit data. 

Data transmission over the 
new generation of digital cel- 
lular telephone systems, such 
as the GSM and PCN services 
in Europe should be much sim- 
pler, faster and more reliable. 
The GSM specification 
indudes a facility which, once 
implemented, will allow any 
terminal - such as a portable 
facsimile machine or a note- 
book computer - to be plugged 
directly into the handset 

In the US, analogue network 
operators led by AT&T's 
recently acquired subsidiary. 
Macaw Cellular Communica- 
tions, are upgrading their net- 
works to accommodate a new 
"open” technology called cel- 
lular digital packet-switched 
data (CDPD> which enables 
data to be sent in blocks over 
existing networks using the 
“spaces” between voice traffic. 
Because it provides digital 
transmission without the need 
for expanded system capacity, 
it is a cost-effective option. 

Public access mobile radio 


services such as NB3, owned 
by Geotek of the US, provide 
another alternative for cus- 
tomers who require both 
mobile voice and data commu- 
nications. NB3 customers buy 
their own communications 
equipment and then pay a 
fixed monthly subscription. 
They do not pay call charges. 

However Mr Andrew Robb, 
managing director of NB3, 
acknowledges that for high 
volume data customers who do 
not require voice communica- 
tions, the high speed and low 

“We are starting to see an 
industry with mass market 
characteristics in terms of 
size and potential” 

cost wireless data links pro- 
vided by dedicated packet- 
switched data networks make 
more sense. 

In the US the Anils network, 
which uses Motorola’s Data- 
Tac technology, covers the 400 
largest metropolitan areas and 
has around 35,000 subscribers, 
while Ram Broadcasting’s net- 
work uses Ericsson’s rival 
Mobltex technology. Similar 
packet-switched data net- 
works, mostly based on Mobi- 
iex, have bran built or are 
planned throughout Europe. 

Da the UK three mobile data 
networks survive: Cognito, 
Vodafone's Paknet and Ram 


Mobile Data - a Joint venture 
involving US-based Ram 
Broadcasting and BellSouth, 
France Telco m, Swedish Tel- 
com and Bouygnes. 

Elsewhere in Europe their 
are Mobitex-based networks 
built or under construction in 
France, Sweden (where there 
are two), Finland, Norway, the 
Netherlands. Germany and 
Belgium which will eventually 
be linked through roaming 
agreements to provide a pan- 
European network. There are 
only two DataTac networks in 
Europe, one operated by Deut- 
sche Telekom in Germany and 
the other Hutchison's moth- 
balled systems in the UK 

Although subscriber growth 
has been slow. Mr John Jarvis, 
Ram Mobile Data’s chief exec- 
utive, says: “We are starting 
to see an industry with mass 
market characteristics in 
terms of size and potentiaL” 
Ram’s customer list includes 
local authorities whose park- 
ing wardens use handheld 
computers, field service engi- 
neers working for Coca-Cola’s 
service company and emer- 
gency services in Cleveland 
and Manchester. 

BIS Strategic Decisions 
recently estimated that the 
European market for mobile 
data will grow 16-fold into a 
$l-5bn business by 1993. Mean- 
while Dataqnesfs Mr Eyers 
believes the emerging mobile 
data market will split into 


The Talkiand cellular 
audit gets your 
organisation organised. 


have introduced serious price 
competition into the industry 
for the first time. 

Branding is also becoming 
important, as independent ser- 
vice providers decline and 
operators seek to carve out a 
distinct identity based on price 
and network functionality. 
“Nobody has yet invented a 
brand in this business.” claims 
Mr Hans Snook, Orange’s man- 
aging director. “We intend to 
do so by marketing our brand 
benefits - lower prices, and the 
services available on our hand- 
sets such os multiple lines." 

All four operators are anx- 
iously positioning themselves 
for the rise of the mass con- 
sumer market. The dread is a 
repeat of the 1980s experience 
of the consumer electronics 
industry, where margins col- 
lapsed and price wars reigned 
supreme. Vodafone and Cellnet 
Insist they will not be dragged 
down that road, and so far they 
have managed the market suc- 
cessfully. But with two compet- 
itors who both need large vol- 
umes, fast, to repay their 
investments, the future is any- 
thing but predictable. 


three main segments which he 
has dnbbed “data heavy” , 
“data lite" and “consumer 
users" and predicts that the 
overall market in Europe will 
exceed 5m subscribers by the 
end of the decade. 

Dataquest expects data 
heavy users - frequent mobile 
data service users such as traf- 
fic wardens, meter readers and 
organisations which use the 
services every day - will grav- 
itate towards dedicated mobile 
data networks such as Ram. 

Data lite users - Infrequent 
mobile data users, such as 
travelling salesmen or execu- 
tives who want to read their 
electronic mail or access an 
office database - are expected 
to turn to GSM and other net- 
works which also provide 
voice services. However. Data- 
quest does not expect the con- 
sumer market for mobile data 
to develop on a large scale 
until “towards the back end of 
this decade”. 

The Dataquest report con- 
cludes: “While paging, public 
mobile radio and analogue cel- 
lular have all paid lip service 
to supporting mobile data 
communications, strong candi- 
dates to support a significant 
market are only now emerging 
in the form of packet mobile 
radio and digital cellular tech- 
nologies. Further support from 
manufacturers and operators 
for new services and applica- 
tions are required and expec- 
ted." 

Corporate users had “a posi- 
tive attitude towards mobile 
data communications but will 
need to be sold on the value 
which such solutions can pro- 
vide if tills sector is to reach 
its potentiaL" 


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FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


Paul Taylor on cordless prospects 


MOBILE COMMUNICATIONS 5 


Joia Shillingford looks at trends in mobile handsets 


Battle on standards Perfection may be within reach 


The launch of telepoint 
services in Britain in the late 
1980s was, by general agree- 
ment, little short of a debacle 
which culminated in Hutchi- 
son Telecom's decision to poll 
the plug on its Rabbit cordless 
public telephone service last 
November. 

Babbit was the last of four 
telepoint services in the UK to 
fold because of lack of cus- 
tomer interest but, in spite of 
this inauspicious start, tele- 
point, the UK-developed public 
cordless telephone service, is 
proving a success in some 
overseas markets Including 
south-east Asia, where there 
are more than 300,000 sub- 
scribers. 

Unfortunately, the UK 
systems were incompatible 
with each other, overpriced 
and poorly marketed in com- 
petition with cellular services. 

Elsewhere in Europe, Deut- 
sche Telekom abandoned plans 
two years ago for a telepoint 
service and Telecom Finland 
recently announced it would 
dose its Pointer telepoint ser- 
vice because of the low level of 

take-up of the 

service. „ .. 


"Wireless office equipment 
will grow from virtually noth- 
ing in 1998 to nearly 20 of the 
market by the year 2000 while 
wireline-based PBXs (private 
branch exchanges) and key 
systems dip correspondingly,” 
said Frost & Sullivan, the US- 
based market research finn in 
a recent report 

The uptake of cordless busi- 
ness communications systems 
is expected to be driven by 
falling hardware prices and 
the perceived benefits of the 
technology in terms of mobil- 
ity, flexibility and productiv- 
ity. The Frost & Sullivan 
report predicted: “The wireless 
office will gain popularity as 
the prices of systems decline. 
Prime target end-users include 
salespeople, top management, 
employees in distri b uti on and 
manufacturing firms and 
healthcare personnel. 

“The popularity of cellular 
phones and the emergence of 
personal communications 
systems will stimulate use of 
wireless handsets for in-bmld- 
ing use as users increasingly 
seek the same convenience 

they are used 

_ ^ to outside the 


This leaves Cordless systems may cut 0 jRflce inside 
France and the customers' bills by up to bufldrngs.” 
JJtofirbuute as 30 per cent by reducing Ericsson, the 
SLtUC the need far returned calls SS5J* 
still offering tions eqnip- 

telepoint services. There are ment manufacturer, claims 
over 50,000 subscribers to that cordless business systems 
France Telecom’s Bi-Bop ser- can save customers up to 30 
vice, which recently cut its per cent of their bills as a 
prices, and 35,000 subscribers result of reducing the need for 
to the Dutch Greenpoint ser- returned calls. Cordless 
vice but the prospects for tele- systems can also save on the 
point elsewhere in Europe costs of rewiring and other 
look bleak. configuration operations. 

In contrast in Hong Kong, which can be around 10 per 
three operators Hutchison, cent of the capital cost of the 
Chevalier Telepoint and system for organisations run- 
pacific Telelink, which is nlng medium-sized or large 
backed by Vodafone, the UK PBX systems, 
cellular telephone network Eo addition, as Mnltftone, 
operator, have all launched the UK-based pager and card- 
successful services and now less telephone system supplier, 
have more than 170,000 sub- points out, cordless systems 
scribers between them out of a are extremely cost-effective to 
population of 3m. run once installed since time i 

Their success has been are no airtime charges, inter- 
ascribed to the density of the nal calls are free and external 
population and the relatively calls cost the same as from an 
few base stations required to ordinary desk telephone, 
provide coverage in the col- like most other cordless 
ouy. All three telepoint opera- systems, Mnltitone’s CSS 00 
tors in Hong Kong have over- product connects directly to a 
come one of telepoint's main PBX, so no expensive changes 
limitations - its one-way only are required to an existing 
operation by basing services hard-wired system and the 
on telephone and pager pack- same desk telephones and 
ages facilitating pseudo two- extension numbers can con- 
way operation. Calls to a tele- tinue to be used, 
point telephone activate a However, if cordless busi- 
pager and if subscribers are in ness systems are to flourish, 
range of a base station they there are several obstacles to 
can connect with the caller by overcome. In particular, in 
pressing one button on the Europe there are two rival 
phone. cordless business system teeb- 

In order to further increase oology standards: CT2, which 
competition in Hong Kong, the has been adopted as an 
government said in duly it interim European standard 
would award four additional and the mure recent Dect (Dig- 
telepoint licences to build net- ital European Cordless tele- 
works based <m the Japanese communications) standard, 
personal handyphone stan- GPT Communications 
daid. DDI, one of Japan’s three Systems, a joint venture 
domestic telephone companies, between Germany's Siemens, 
announced plans in July to group and Britain's GEC, and 
Invest £ 2 bn on a telepoint net- Canada’s Northern Telecom 
work covering about half the have been supplying cordless 
Japanese population. office systems based upon CT2 

Telepoint has also proved digital technology since early 
popular elsewhere in Asia, last year. Northern Telecom, 
Services have been launched which is also developing a 
in half a dozen countries, Dect system for op to 1,000 
indudtog Singapore, Malaysia usere in cofljhmction with OH- 
and Thailand- However China, vetti, launched its Companion 
Where the first telepoint ser- CT2 cordless business systems 
vices wee recently launched. In Europe last March and has 
represents by far the largest sold over 1,000 systems in 
potential market for CT2 Europe and the Middle East 
equipment suppliers. since then and over 2,000 

Meanwhile, the technology systems worldwide. 

behind telepoint has found CTS's supporters cla im it is 
other applications - by the a proven and cost-effective 
end . of the decade market ana- technology ideally suited to 
lysts predict that up to a fifth small and medium-sized 
of new office telecommunica- offices. C?2 bmidseto cost 
tions equipment installed will around a third of toe price of 
be cordless. their Dect rivals and are likely 


Tit 


When you're talking a better class 
of mobile communications, no 
one comes close to DX. 

We offer impartial advice on the 
right network, the right phone. 
And most of all. the right price. 
DX. Business-wise, you’ll never. . 
be better informed. 


to retain a price advantage 
because of the adaption of tele- 
point outside Europe. 

However CIS cordless busi- 
ness systems face a serious 
challenge from systems based 
an the De ct stan dard which is 
backed by ETSI (the European 
Telecoms Standards Institute) 
and was designed to solve the 
problem of providiiig cordless 
telecommunications in high- 
density business environments 
such as offices. 

Five of Europe's largest tele- 
comm tun cations equipment 
suppliers - Alcatel, Ericsson, 
Nokia, Philips and Siemens - 
which between them represent 
nearly 70 per cent of the Euro- 
pean PBX adopted the Dect 
standard in Marf ft 1993 
toe first Dect systems began to 
appear shortly afterwards. 

Beet’s supporters claim their 
systems have key advantages 
over those based on CT2, par- 
ticularly in huge office build- 
ings where traffic is high, or 
for mixed voice and high speed 
data - and they are trying to 
block moves which would 
upgrade CT2 from an interim 
to a full European standard. 

Ultimately, however, it will 
be the end users who decide 
which of these two cordless 
digital technologies succeeds. 
The battle between them has 
only just begun. 


So small and perfectly formed are 
today's mobile phone handsets that 
many question whether they will get 
much smaller. In fact, the perfect 
mobile phone handset - small, light 
and cheap - may not be for away. 

Ms Diana Jones, marketing manager 
of service provider Mercury Communi- 
cations Mobile Services, says: “I don't 
believe handsets mil get much smaller 
than the gmanpgfr models produced by 
Sony and Ericsson because of the 
mouth-to-ear ratio." She believes that 
"handsets could even move in the other 
direction like calculators. Calculators 
got smaller and smaller, but then peo- 
ple found them fiddly to use. And larger 
calculators with easy-to-press buttons 
started to be sold as well” 

So on traditional analogue networks 
(Hke those operated by Vodafone and 
CeEtnet), toe expects most business peo- 
ple to stay with middle-sized phones 
about the size and design of NEC’s P4. 

However, there is still scope for 
phones designed for the newer digital 
services to get smaller and lighter. Mr 
Byan Van Dussen, a senior analyst at 
Yankee Group Europe, says: "Improve- 
ments in battery technology are the key 
for weight to reduce, profiles to become 
slimmer and talk time to increase.” 

Restricted battery lift is a problem 
for both analogue and digital phones. 
The current generation of batteries typ- 
ically give two hours of continuous talk 
Hmft anA lusts 22 hours if left On and 
not used. This means that heavy mobile 
phone users often have to carry spare 
batteries and charge them up at night 


The problem is worse with GSM. which 
can drain battery life more quickly. 

But battery technology is changing, 
Nicad batteries have been replaced by 
Nickel metal hydride on the latest 
phones - some give a choice of Nicad or 
Nickel metal hydride. The next step 
will be metal ion batteries. Phones 
using metal ion could be more expen- 
sive initially but will have more power. 

Improvements in battery technology 
are likely to benefit service providers 
and manufacturers. Airtime distribu- 
tors such as Securicor Cellular Services 

and Mercury 

Mobile Services It is possible 
should gam if users „ 

can spend more P* 1 **”® m °_ ne c 


oaoDiie services it is possible to buy a GSM should fall to the 
should gain if users 1M - same level as more 

can spend more ^ 030 n expensive analogue 

time tailring on the another, where it may be dearer phones. Ms Sandra 


tore than their analogue counterparts 
because they are not yet sold in the 
same volumes. But because the GSM 
standard has been adopted across 
Europe, manufacturers will be able to 
make large quantities and lower prices. 

This has not yet happened and in fact 
component shortages have restricted 
the supply of GSM phones. However, 
because any GSM phone should work 
with any GSM network, it is possible to 
buy a phone in one country for use in 
another, where it may be dearer. It pays 
to shop around. But before long, prices 

for GSM phones 

> buy a GSM should fall to the 
lrM - same level as more 
ifrtry for use in expend analogue 


phone. 

Manufacturers should benefit 
because, as the weight and profile of 
handsets falls, they win become more 
pocketable and therefore more appeal- 
ing to the mass market 

Price is also critical. Mr Terry Bar- 
wick, director of corporate affairs for 
Vodafone, says: “Customers always ask 
three questions: How much will the 
equipment cost? How much is the 
monthly charge? and How mnrh are the 
calls? The lower the cost of entry, the 
faster the market will grow." 

At present, analogue phones can cost 
as little as £49 and are sometimes given 
away free. Those aimed at business 
users will usually cost £99 to £299. 

GSM phones cost about £100 more for 
the same type of handset, and range 
from £200 to £500. They are more expen- 


Richards, cellular 
phones marketing manager at NEC of 
japan's UK subsidiary, expects this to 
happen by the end of the year. 

Call charges and monthly charges for 
UK analogue business services have 
fallen in real terms, according to Mr 
Barwick. He says the monthly charge 
has stayed at around £25 and peak call 
charges at 25p a minute since 1985. 
Charges for GSM services offered by 
Vodafone and Cellnet are similar 
(though their GSM services are com- 
pletely separate from their analogue 
services and require different handsets). 

Though service providers and net- 
work operators argue otherwise, there 
will be continued pressure on charges 
with the entry into the market of 
Hutchison's Orange and Mercury’s One- 
2-0 ne services - both based on PCN 


digital technology - a variant of GSM. 

But there are still areas where 
charges will be high for some time. One 
of these is pan-European roaming, 
which allows a GSM user in one coun- 
try to send and receive calls in other 
countries with GSM networks. Roaming 
works through reciprocal agreements, 
with each operator adding a premium. 

Handset manufacturers will be able 
to charge more for handsets that do 
more than just connect to GSM. Far 
example, Nokia of Finland sells a phone 
that can be integrated easily into 
mobile data applications - such as 
sending and receiving text on the move. 

In the longer term, dual handsets 
may start to appear, which can connect 
to mare than oue network. The drive 
for these is mainly coming from the US, 
where there is more than one digital 
standard. But in Europe, dual handsets 
could be used to connect to both GSM 
and Dect - a European standard 
starting to be used to provide wireless 
office switchboards. 

The idea is that when customers 
phone a business, they could be put 
through to the person they want (with- 
out redialing) whether that person is in 
the office or on the move. Mr Von Dus- 
sen believes that in three ur four years' 
time, this area could be “a terrific 
bonanza" for the few leading handset 
manufacturers who are looking into it 

This is because though dual-purpose 
phones may be small and light, they are 
unlikely to be cheap. 

Joa Shttngfaid a edBor nf Buama Contput ng 

Brut a Flm new lima net nkimr . 


INTRODUCING AIRTOUCH 


COMMUNICATIONS, we to# 


construir y operar WIRELESS 

NETWORKS AROUND THE WORLD. * 


sHsyg! 


CHEW*. SIUGE? FORMERLY A PART OF 


PACIFIC TELESIS GROUP. o| 


bleiben miser Service, unsere Fachkenntnis 


RESOURCES AND COMMITMENT si- - > - rf 


&m< REMAIN THE SAME. 


In case this introduction wasn’t quite dear, allow us to 
rephrase ic. 

WfeH like to introduce you to our newly independent 
company — AirTouch Co mmuni cations. Actually, it’s more: 
Uke a reintro duction . That's because for over 10 years we 
helped design, build and operate world-class wireless 
networks as a part of Ihrific Telesis Group. 

Although our name has changed, nothing else has.Vte 
are the same people whose partnerships built successful 
cellular businesses such as D2 in Gennan^lelecel in Portugal 


and Tokyo Digital Phone — businesses that were established 
on time, within budget and are now growing rapidly. 

Our technological capabilities, exceptional customer 
service and ability to adapt to local ailtmes are unparalleled. 
Wfe remain committed to our existing partnerships as well 
as to developing new ones. 

Itls our name change that we’re unveiling here — a 
name we expect will become quite familiar As will the fact 
that whatever your wireless communications needs may 
be, AirTouch speaks your language. . 



AirTouch 

International 




CAU. FOR YOUR HIEE 

GUIDELINES 

CATALOG II E 




APPROveosaeancor cellular servicesoEAL&i 



GHMTOttMXlA 

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MRioucHzaaMM-aawA hht*« w 




FINANCIAL- TIMES MONDAY SEPTEMBER 5 1994 


MOBILE COMMUNICATIONS 6 


Profile: ERICSSON 


A force to be reckoned with 


Ericsson, the Swedish telecommunications 
equipment supplier, is without question 
the dominant force in the international 
cellular infrastructure market It has a sig- 
nificant foothold in every major market, 
and its sights are firmly focused on new 
opportunities - notably new digital 
systems, mobile data and fixed cellular 
systems. 

Ericsson owes its success to the classic 
Machiavellian combination of fortune and 
exertion. The company’s cellular division 
grew out of SRA. a well-established mili- 
tary radio joint venture between Ericsson 
and Marconi. Marconi chose to sell its 30 
per cent stake In 1981, the year SRA 
entered the cellular mobile market; where- 
upon the venture became an integral part 
of Ericsson. 

The radio division's rapid expansion 
thereafter owed much to Ericsson's exist- 
ing marketing and distribution networks 
worldwide. Tt built on the success of its 
public telecommunications products - 
notably the AXE switch, which is now 
installed in 105 countries. 

Furthermore, Scandinavia has been the 
world's most dynamic cellular market 
since the launch of the mobile phone. Swe- 
den tops even the Nordic league with 10 
mobile phones per 100 inha bitants. Cul- 
tural factors are partly responsible; but 
early agreement on a common Nordic cel- 
lular standard - NMT - provided a signifi- 


cant boost as did the mid-1980s decision to 
liberalise the supply of cellular handsets, a 
step taken in Japan as recently as this 
year. The extent to which Ericsson acted 
as a catalyst for these developments is 
debatable, but the benefit it has derived 
from t hem is iministalrahlp 

The bald figures tell alt In revenue. 
Ericsson's radio communications division 
last year overtook public telecommunica- 
tions as the company's largest division, 
accounting for 41 per cent of sales. The 
division's sales amounted to $3.1bn - a 73 
per cent increase on 1992. The first half of 
this year saw a still more dramatic surge 
of 78 per cent in pretax profits, powered by 
a 60 per cent rise in radio communications 
sales. Sales of mobile telephone systems 
and terminals were up 80 per cent. 

“Everyone in the mobile industry has 
been successful with the massive cellular 
growth of recent years," says Mr Kurt 
Helistrom, president of Ericsson radio 
systems, with a modesty befitting the divi- 
sion’s plain and functional headquarters 
at Kista. a northern suburb of Stockholm. 
Nonetheless, he is quick to identify the 
“strong suits" which have made Ericsson 
outstanding. “We realised early on the 
potential for cwiiniar mobile technology, 
and we were fortunate in having strong 
in-house divisions in all the main areas 
needed to develop a portfolio." 

Ericsson's radio division has never 


rested on Us inherited laurels: it has been 
quick to exploit new market opportunities 
and has not stinted on the large R&D 
outlays critical to innovation in the sector. 
R&D spending in the radio division is run- 
ning at about 20 per cent of sales. Ericsson 
is the only supplier to have developed 
widely-used digital systems based an the 
world's three standard digital systems - 
GSM fin Europe and beyond), D-Amps fin 
the US), and PDC fin Japan). In Janaary, 
more than half of the world’s L3m GSM 
subscribers were linked to Ericsson 
systems. 

Last year, it responded to the acute 
shortage of digital GSM handsets by rap- 
idly increasing its own supply - output 
rose by ISO per cent last year - although it 
had previously treated the handset busi- 
ness as marginal. Motorola of the US 
remains the largest handset manufacturer, 
but Ericsson claims now to be the world’s 
leading supplier of digital pocket tele- 
phones. 

Ericsson is the international wwnpany 
par excellence: its Swedish ammmt to 
only about 10 per cent of the total. It is 
important, however, to get h*»>”Tv3 the slo- 
gan and to understand the meaning of 
“international" in the Ericsson con te xt. 

Although the radio division bag indige- 
nous mai-botlng - RJtTI and twhnii-y| sup- 
port staff in all its principal markets. 
Ericsson's senior managemant is almost 



Ericsson has derived unmistakable benefit from Its Swedtoh base 


exclusively Swedish and most of its manu- 
facturing is carried out in Sweden. Some 
companies go intpmaHnnai by recruiting 
foreigners, others by inducing an interna- 
tional mind-set mtn home-grown manag- 
ers. Ericsson, like most of Swedish indus- 
try, is emphatically in tha second camp, 
and has long fostered close links with all 
the country's technical universities. 

About two-thirds of the radio division’s 
blue-collar workforce is located in Sweden, 
mainly at plants at Kumla, west of Stock- 
holm (for handsets) and Gavle, 160km 
north of Stockholm (for infrastructure). 
Another plant in Visby, on the Swedish 


island of Gotland, is being expanded for 
infrastructure. The only large plants 
abroad are at Lynchburg. Virginia, which 
manufactures equipment for the AMPS 
system, and is the main centre for land 
mobile radio, and at Nanjing and Guang- 
zhou in China, where local content is in 
effect a condition of entry. 

Increased production is unlikely to lead 
to a si gnificant increase either in blue-col- 
lar staff or in plants abroad. Five years 
ago it took three hours to assemble a cellu- 
lar handset; now it takas about IS min- 
utes. It is the same story with radio base 
stations. 


As for overseas production. Ericsson 
recently designed, built and installed a £3 
cellular network for the Digital Phone 
Group, a new competitor to NTT in Japan, 
in 18 months from the placing of the order. 

It was a record, and the entire production 
took place in Sweden. "It is speed of pro- 
duction most customers want, not local 
content," says Mr Bjorn Bostrom. produc- 
tion director. "The closeness between 
desig n and production is the key. Today, 
when you design a product, it has to be 
manufactured instantly and in high vol- 
umes: production lines are becoming more 
complex, so the need to have your develop- 
ment production staff in close contact 
is increasing." More than a quarter of 
Ericsson Radio’s Swedish workforce have 
degrees, many of them higher degrees. 

More important than production abroad 
is the dedicated teams working with cus- 
tomers to design and install their net- 
works. “This raises tricky questions of 
confidentiality and intellectual property," 
says Mr Helistrom. “Certain operators still 
think that to have a vendor and to have a 
monopoly over them is an advantage. We, 
on the other hand, want to put our R&D 
people to use with as many customers as 
possible - and it is to their advantage, 
too." 

Ericsson sees three new large cellular 
markets on the horizon: mobile data; fixed 
cellular systems to replace copper or even 
fibre in the local loop; and a mass con- 
sumer market for cellular phones and 
cordless communications. It is difficult to 
predict their growth rates, but safe to 
assume that Ericsson will play a key role 
in all three. 

Andrew Adonis * 


’ ft 


B y the end of the decade, a new gen- 
eration of telecommunications sat- 
ellites wSJ provide global mobile 
telephone services, using lightweight 
pocket-sized handsets for voice as well as 
data communications. 

Plans for multi-billion dollar global sat- 
ellite mobile communications systems 
such as Iridium. Gtofaalstar and Inmar- 
sat-P are already well advanced and on 
target to launch services beginning in 
1998. Others, including American Mobile 
Satellite, plan to launch satellite-based 
telecommunications services in the North 
American market next year. 

Satellites are not new to the telecommu- 
nications industry. Geo-stationary satel- 
lites. which operate at an altitude of 
22JI00 miles, have played a key role in 
fixed and mobile telecommunications net- 
works since the early 1960s, providing 
voice, data and video links over conti- 
nents and oceans, maritime and aeronau- 
tical communications where land-based 
systems are ruled out and global position- 
ing and tracking services for military and 
commercial customers. 

The)’ also provide telecommunications 
facilities to geologists, journalists, aid 
workers and others in remote regions of 
the world using briefcase-size portable 
terminals, such as those supplied by 
Inmarsat, the London-based 74-member 
International Maritime Satellite Organisa- 
tion. Inmarsat uses five operational satel- 
lites to provide services to 40,000 custom- 
ers. most of them in its specialist 
maritime and aeronautical markets. 

However, projects like Iridium and 
Globalstar are based on a new breed of 
low-earth orbit (Leo) satellites which 
operate at altitudes of 400 to 1,000 miles. 
Because they are closer to earth than Geo- 


Paul Taylor looks forward to the global mobile systems of the future 

New breed of satellites into orbit 


stationary satellites. Leo-based systems 
will work with less powerful, smaller, 
lighter and cheaper equipment. 

But there are disadvantages. Leo satel- 
lite technology - much of it based on 
Reagan -era “Star Wars” research - is 
costly and largely untested. In order to 
provide reliable global coverage, many 
more Leos are needed than would be the 
case with their higher-flying counterparts 
which also means a large number of 
launches, and an extended roll-out period. 
In addition, the satellites themselves will 
have a relatively short life-span of five to 
eight years for Iridium satellites com- 
pared with 10 years or more for conven- 
tional Geos. 

Undaunted, high-powered international 
consortia have unveiled proposals for 
about half a dozen Leo-based mobile 
systems over the past lew years while 
other groups have announced proposals to 
build new wireless networks based on 
conventional satellite technology. As a 
result, satellite communications has 
become one of the hottest subjects in the 
global communications industry. 

Nevertheless, as KPMG Peat Marwick 
concluded in a recent study for the Euro- 
pean Commission, “limits on finance and 
radio spectrum probably mean that only 
two or three of the .systems will ever 
reach the launch stage.” . 

Among the front-runners are the $3.4bn 
Iridium project, conceived by Motorola, 
the US-based electronics group, and the 


$1.8bn Globalstar project developed by 
Loral, the US defence group, and Qual- 
comm. Both Iridium and Globalstar have 
crossed an important financing threshold 
by raising initial finance from investors. 

Iridium will be based on a “constella- 
tion" of 66 small Leo satellites weighing 
L500 lb ringing the earth at a height of 
420 nautical miles. Handsets for use of the 
system win be dual-mode, also allowing 
calls to be made on the local cellular 
network where available. 

When a call cannot be routed via the 


discussing investing $70m to acquire a 
small stake In the project 
As prime contractor for Iridium. Moto- 
rola will be responsible for designing and 
building the entire network and has a 
$2.8bn contract to maintain and operate 
tiie system for five years after its commer- 
cial debut in 1998. By then, Motorola's 
stake in the project is expected to have 
fallen from 34 per emit to 15 per emit 
But Iridium is likely to face fierce com- 
petition from Globalstar which has 
secured $275 m of equity funding from 


More Leo satellites are needed and they will have a 
relatively short life-span of five to eight years 


terrestrial cellular network, it will be 
relayed to the nearest satellite, transfer- 
ring between satellites if necessary, 
before being beamed down through one of 
15 to 20 terrestrial gateways connected to 
the public telephone network or direct to 
its destination. 

A year ago, Motorola raised $800m from 
an international consortium, in eluding 
Raytheon, Lockheed and Sprint of the US, 
Bell Canada and 18 Japanese companies 
including Sony, Mitsubishi and Kyocera 
as a first stage towards financing the Irid- 
ium project More recently, a group of 
Indian financial institutions agreed to 
invest 832m in Iridium and Comsat, the 
US satellite operator, is understood to be 


another international consortium. Global- 
star’s list of strategic partners now 
includes France Telecom and Alcatel of 
France, Airtoucb Co mmunic ations of the 
US, Deutsche Aerospace, Dacom and 
Hyundai Electronics of South Korea and 
Vodafone, the UK-baaed cellular network 
operator. 

The company is now in talks with satel- 
lite launchers including China’s Great 
Wall Industries. Two or three are expec- 
ted to be chosen by the end of the year. 
Globalstar will use 48 Leo satellites orbit- 
ing at 750 nautical miles. It has been 
designed by Loral as a low-cost global 
access satellite-based mobile telephone 
system. Globalstar telephones will be sim- 


ilar in size and cost to digital cellular 
telephones and wOl be able to make and 
receive mils anywhere in the worlds 

A key feature of the proposed Global- 
star system is that all calls will be set up 
and processed on the ground by a distrib- 
uted gateway system. Loral claims the 
ground processing not only permits a 
more efficient, less complex and cheaper 
satellite network; it also uses, rather than 
bypasses, existing co mmunic ations carri- 
ers making it more attractive to them. 

For example Vodafone, which has 
acquired a 10 per cent share in Globalstar 
under a $51m agreement, wifi have exclu- 
sive use of the Globalstar satellite service 
in the UK, Hong Kong, Greece, Denmark, 
Malta and Australia. In Australia, Voda- 
fone plans to use the satellite based ser- 
vice to supplement its ground-based cellu- 
lar networks - when a mobile phone 
customer on the Vodafone network goes 
into an area that is out of range of a 
ground base station, the phone can switch 
to satellite reception, ensuring total cov- 
erage and reliability. 

Inmarsat, which h«i originally planned 
tobmld its own Leo system, has opted 
instead for a system based on a new inter- 
mediate circular orbit satellites orbiting 
at 10,000km which it believes will over- 
come some of the technical and other 
problems associated with Leos and meet 
the concerns of some its members 

The fnmarsat-P system win cost $2.4bn 
and be developed by an affiliate company. 


at least 70 per cent owned by Inmarsat 
and its signatories, which will also invite 
outside investment It will use 12 to 15 
satellites and be operational by 1999 or 
2000. 

To supplement revenues from voice traf- 
fic, most of these new satellite systems 
also plan to provide facsimile, paging, 
computer data and position determination 
services. This will bring them into direct 
competition with another group of net- 
work operators that plan to use “little" 
Leos to provide non-voice telecommunica- 
tions services and with Teledesic, a $9bn 
satellite communications project backed 
by Mr Bill Gates, chairman of Microsoft, 
and Mr Craig McCaw, of McCaw Cellular 
Communications, the largest US cellular 
telephone company which was recently 
acquired by AT&T. 

Tdedesics envisages 840 little Leos put 
into orbit 435 miles above the earth. The 
system, due to come into operation by 
2001, is designed to deliver high capacity 
data, video and voice services worldwide 
using receivers and small antennas 
installed in homes and businesses. 

Just how large a market there will be 
for these voice and other mobile satellite- 
based services by the end of the century is 
a moot point The KPMG study suggested 
that the value of satellite delivered mobile 
phone services will reach Ecul0-20bn a 
year within the next decade. 

Among the prospective network opera- 
tors, Iridium expects to have 1.5m sub- 
scribers by 2002 while Globalstar, which 
promises to be the “low cost service sup- 
plier 9 , aims to have signed up 2.7m sub- 
scribers by the same date, the bulk of 
which wiH be in rural areas and develop- 
ing nations where wired systems are not 
cost-effective. 



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Louise Kehoe looks at the US market 


Mark Newman tries to unravel the cost of a cellular phone 


Scramble for licences Tariff packages get more complicated 


AT&T’s 812. 6bn acquisition of 
McCaw Cellular Communica- 
tions, which was approved by 
US regulators this summer, 
has set the stage for the 
reshaping of the US mobile 
communications industry as 
regional cellular telephone 
companies and new entrants 
race to create nationwide 
mobile communications ser- 
vices. 

The union of the 
long-distance telephone giant 
with the leading US cellular 
carrier creates an industry 
behemoth. AT&T invented cel- 
lular telephone technology 
more than 30 years ago and is 
a big manufacturer of cellular 
equipment, but until now it 
has been unable to offer mobile 
phone services. 

The megadeal is driving 
regional phone companies and 
cellular carriers into each oth- 
ers’ arms as they scramble to 
get ready to compete with the 
new industry force. 

Since early July, two 
regional “Baby Bell" phone 
companies, Bell Atlantic, 
which serves the mid-Atlantic 
region, and Nynex, which 
serves New York and New 
England, have decided to unite 
their cellular operations to cre- 
ate a giant east coast network, 
stretching from Maine to Vir- 
ginia and serving t sm custom- 

CIS# 

US West, which serves 14 
mid-western states, has agreed 
to merge its ceOular interests 
with Airtouch, a recent spin-off 
from Pacific Teksis, the west 
coast regional telephone com- 
pany. Together they will have 
1.7m customers. Ameritech, 
the Chicago-based Baby BeO, is 
reported to be seeking a sum- 
lar alliance. 

The US cellular market has 
been fragmented since it began 
in the early 1980s when the US 
government gave out just two 
operating licences in each 
region, one for each of the 
established local telephone 
companies and one for a new, 
independent rival 

McCaw, winch build up a 
national presence by tsldwg 
over many of these indepen- 
dents, is already a tough rival 
to local phone companies and 
the injection of AT&T's long 
distance resources promises to 
make it even tougher. 

Although regional telephone 
companies have bought op cel- 
lular licences outside their 
regions, this has created a jum- 
ble of networks of differing 
standards. As a result, cellular 
telephones purchased in one 
part of the country do not 
always work in other places 
and charges for accessing dif- 
ferent networks can be prohibi- 
tive. 

Nonetheless, the US cellular 
market has grown from virtu- 
ally nothing in the early 1980s 
to more than 16m subscribes 
at the end of 1993 with some 
14,000 new easterners signing 
up every day, according to 
EMG, a Washington-based 
communications consultancy. 
The total number of US cellu- 
lar telephone subscribers win 
reach 3 0m by the end of this 
year, the researchers predict. 


with growth c ontinuing at a 
rate of a per cent a year for 
the next two years. 

In addition, more than 18m 
people in the US subscribe to 
paging services, which have 
become very popular as a low 
cost form erf mobile messaging 
services among - teenagers as 
well as by business people. 

New technology la driving 
ch a n g e In the US wireless com- 
munications industry. In 
December, the Federal Commu- 
nications Commission will put 
up for auction licences to oper- 
ate new “personal oonn-nmifc a. 
tdons services” - using low 

Paging services have 

become popular with 
teenagers as welt with 
business people 

powered, high frequency, digi- 
tal microceH tran smit ters that 
promise to make wireless tele- 
phone services price-competi- 
tive with conventional “wire- 
line" networks. 

If the recent auction of 
licences for advanced two-way 
paging services is any indica- 
tion, demand for the broad- 
band PCS licences will be 
strong. The paging licences 
were sold for $617m, well above 
the anticipated amount. 

Ellen & Associates, a Calif- 
ornia market research group, 
estimates that the sale of PCS ! 
licences will raise $25bn to 
$30bn, well abovB government 
and industry estimates of 
$L0tm to $l2bn. 

“The FCCs recent auction of 
advanced paging and interac- 
tive video date service licences 
surprised many economists 

and financial analysts, who 
thought the government would 
collect only $S0m or so," says 
Mr Mtehael KTOen, the group's 
president 

“A winning bid at the broad- 
band spectrum auction may be 
the regional telephone compa- 
nies’ last dial*** to m ai ntain 
soma control of their core busi- 
nesses,” he adds. 

More than 200(1 PCS licences 
will be put up for sale. Some 
will be for metropolitan, 
markets, others for large 
regions. Companies hoping to 
put together enough licences 
around the US to create a 
nationwide PCS network will 
probably have to bid hundreds 
of milUnma of dollars. 

Both local and long-distance 
companies are preparing to bad 
for PCS licences, some of them 
in teams. The looming PCS 
auctions are another factor 
driving industry alliances as 
companies join forces and fig- 
ure out where they need PCS 
licences to complete nation- 
wide mobile communications 
networks. 

By the year 2003 nearly one 
in 10 US residents will be sub- 
scribing to PCS according to 
Donaldson Lufkin & Jenrette, a 
Wall Street brokerage firm. 
The analysts predict that PCS 
will not make a significant 
im pact nwtiT 1997, but will then 
grow rapidly to account for 
25.4m users out of a total mar- 
ket for cellular-type users that 


Telecommunications. Data Processing. Media 
16th International Conference of (DATE 

The New Frontier 

Montpellier. France - 16-17-16 NOV. 1994 


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will have grown to 103.6m sub- 
scribers by the end of 2003. 

Yet another challenge to 
established cellular telephone 
service providers is posed by 
Nextel, a dispatch radio service 
ram pan y with ambitious plana 
to create a nationwide mobile 
communications network com- 
bining voice, date, paging and 
dispatch radio services. 

Nextel has amassed “special 
mobile radio” licences, tradi- 
tionally used for ^vehicle dis- 
patch services, from coast to 
coast through a series of acqui- 
sitions ^ licence purchases. 

But it suffered a setback last 
month when MCI , the US long 
distance carrier, withdrew 
from plans to acquire a 17 per 
cent stake in Nextel for $L3bn. 
MCI was to have been Nextel’s 
maryuHng partner. The compa- 
nies are still exploring the pos- 
sibility of a strategic alliance, 
but on different terms. 

Whatever happens, Nextel 
claims that it wffl be the first 
company to offer advanced 
wireless voice and data com- 
munications services nation- 
wide. Analysts predict that 
Nextel wiQ win 15 per cent of 
mobile communications sub- 
scribers by the end of the 
decade, by which time PCS 
systems are expected to 
acco un t for about 35 per cent 
of the totaL 


1 Buying a cellular telephone 
used to be straightforward. UK 
| operators CeUoet and Voda- 
fone had only one set of prices 
mid the same telephone could 
be used on either net work- 

But since the two introduced 
new consumer tariffs two 
years ago, things are more 
complicated. The UK now has 
four cellular operators, offer- 
ing a total of 15 price packages 
on six different networks. Cel- 
lular phones cost from £25 to 
£300, and there are different 
telephones for different types 
of n etworks . If you change net- 
works, the chances are that 
you wiQ need a new telephone. 

Choosing a cellular tele- 
phone and network is a con- 
fusing business. Market 
research company Bomtec esti- 
mates that only 3 per emit of 
those who buy cellular tele- 
phones know in advance what 
network and tariff band they 
want A survey of cellular tele- 
phone dealers by Cellnet ear- 
lier this year found that deal- 
ers are involved in 88 per cent 
of an connection decisions. 
But they do not always give 
impartial advice. A deal er is 
more likely to recommend a 
network and telephone which 
generate a high p u fi t marg in 
than a low one. 

A report this summer by the 
Londonrbased X25 Partnership 


shows the total cost of sub- 
scribing to cellular telephone 
services across Europe over 
three years. Mercury One-2- 
One and Orange, the two new- 
est UK cellular operators, offer 

the cheapest services, 
although their level of net- 
work coverage is not as good 

as Cellnet or Vodafone. 

There are wide fluctuations 
in the price of cellular tele- 
phones and services in western 

Europe. Scan- 

dinavia is the _ 


than ordinary services. 

Soaofon again ranks as the 
cheapest operator for occa- 
sional users. A customer who 
makes 50 minutes of calls a 
month, of which 25 minutes 
are at peak times and 25 min- 
utes off-peak, pays $318 a year 
over three years in Denmark. 
This compares with 9433 in the 
UK, $591 in Italy, <783 in Ger- 
many and $1,020 in France. 

Cellular operators are begin- 


But operators such as Mer- 
cury One-2-One and E-Plus, 
Germany’s third cellular oper- 
ator, are introducing a 
regional element into tariff- 
ing. This is partly because it 
will take them several years to 
build nationwide networks. At 
first, services will be available 
only in urban areas. 

In response to competition 
from Mercury One-2-One, 
Vodafone has launched its 

own regional 

_ service called 


cheapest Denmark is cheapest; France and Germany MetroDigitai. 

region in among the most expensive in Europe 5* re m fiv * 
Europe, and o v- ^ different peak 


southern mmmmmmmm 
Europe tends to be the most 
expensive. The cheapest ser- 
vice for a high user is offered 
by the Danish operator Sono- 
fon at an average annual cost 
of $708, according to the X25 
Partnership. France and Ger- 
many are two of the most 
expensive conn tries with 
annual costs of $1374 and 
$1,728 respectiv e ly. The Euro- 
pean average is $1,302. The 
costs assume 140 minutes of 
peak-rate usage 10 min- 
utes of off-peak calls a month. 

Several operators in Europe 
now offer services geared to 
people who make only occa- 
sional use of their telephones. 
These have lower monthly 
charges but higher call rates 


niug to offer innovative tariff 
packages to differentiate them- 
selves from their e u mpet itois . 
Some include free cans in the 
monthly subscription charge. 
UK operator Orange has five 
different monthly su bscr iption 

packages varying in price 

from £15 to £100. The cheapest 
package indudes 15 minutes 
of free calls, and the most 
expensive, 540 minutes. 

Operators are also starting 
to offer regional distance- 
related tariffs. When wfllwlar 
services first appeared in 
Europe, operators had only 
one peak and one off-peak 
rate. It did not matter whether 
the call was local or 

lrn gJinfaiiwv. 


rates according 
to whether calk are local or 
long-distance, and if they are 
made from a rural or an urban 
area. Calls are charged at half- 
rate if they are made from the 
customer’s home call - a small 
area centred around the sub- 
scriber’s home or office. 

A sharp fell in the price of 
GSM telephones since 1992 
means that in most countries 
GSM services are cheaper than 
those on the original analogue 
networks. In Germany, which 
accounts for more than 50 per 
cent of Europe's 2J5m to 3m 
GSM subscribers, the retail 
price for telephones was 
DM2JHM) to DM3,000 when ser- 
vices were latmdied in 1992. 
But a combination of price 


How 

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communications 

system? 


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Congratulations. 

You've just designed today's pager. 

Find out now how to connect with the paging operator in your country. 

Fax EPPA on 445 3337 7148 



European Public Paging Association T 


cuts by manufacturers and 
heavy discounting by German 
service providers means that 
the street price of telephones 
has now fallen to DM100. 

There is a large discrepancy 
in the price of GSM telephones 
in different countries despite 

the feet that a telephone sold 
in one country can be used in 
any other. The average price 
of a GSM hand portable tele- 
phone in Europe is 5557, 
according to the X-25 survey. 
But in Austria. Ireland and 
Italy, telephones cost more 
than $1,000. The cheapest mar- 
kets tend to be those where 
GSM sales are highest such as 
Denmark and Germany, or 
where prices have to be low to 
compete with analogue net- 
work services such as the UK. 

The growing maturity of the 
cellular telephone business in 
Europe is evidenced by a more 
sophisticated approach to tar- 
iffing. Most operators now 
have a range of packages, 
aimed at different segments of 
the market But potential sub- 
scribers should beware. Cellu- 
lar telephone services are still 
several times more expensive 
than fixed network services, 
and subscribing to a service 
which does not correspond to 
your needs could prove an 
expensive mistake. 

Th> wwHr b motor ot FT UabUt Camn j n oi aana 


I 




C ontinental Europe was slow to 
embrace competition in mobile 
communications networks ser- 
vices. Only three countries - the UK, 
France and Sweden - bad more than one 
cellular telephone operator before the 
launch of GSM digital cellular networks in 
1392. 

But within the last two years most coun- 
tries have licensed at least one competitor 
to the state-owned telephone operator. 
Even Europe’s most reluctant deregulators 
— Spain, Belgium Ireland — are being 
swept along in a tide of deregulation and 
tr i flu stiy re s tr uc t uri n g 
The transition to competitive markets is 
having major implications for the telecom- 
munications services sector as a whole. It 
has acted as the catalyst for change at 
lumbering, inward-facing state-owned tele- 
phone operators whose own mobile com- 
munications businesses had, for several 
years, operated in a monopoly environ- 
ment. 

Deutsche Telekom has spun, off its 
mobile communications division as a 
wholly-owned autonomous subsidiary in a 
bid to infect private sector discipline and 
commercial practices. In Belgium. Belga- 
com has sold a 25 per cent stake in its 
mobile division to AirTouch Communica- 
tions, the Pacific Telesis subsidiary. Tele- 
fonica of Spain is also considering the 
recruitment of a foreign partner, while 
Stet in Italy Is being advised by its part- 
ners to float its mobile communications 
subsidiary. 


Mark Newman sees state-owned operators give way to competition 


Tide of deregulation sweeps Europe 


The introduction of competition has 
given expansionist-minded US telephone 
companies the opportunity to gain a foot- 
hold in Europe. AirTouch, the company 
spun-off from Pacific Telesis, is the most 
successful US telecommunications ser- 
vices company in Europe. It has stakes in 
cellular telephone networks in five Euro- 
pean countries: Belgium, Germany, Italy, 
Portugal and Spain. 

Two other Baby Bells. BellSouth and US 
West, have also taken positions in Europe. 
BellSouth is the dominant force in mobile 
data with stakes in operators in the UK, 
France and the Netherlands. It is also a 
shareholder in cellular operators in Den- 
mark. France and Germany. US West 
owns 50 per cent of Mercury One-2-One, 
the UK’s third cellular operator. 

Vodafone Group, the UK cellular tele- 
phone operator, is emerging as the domi- 
nant force in cellular communications in 
Europe airngpriH* AirTouch. It stakes 
in cellular operators in six European coun- 
tries other than the UK - Denmark, 
France, Germany, Greece, Malta and Swe- 
den. Vodafone is relying an its overseas 
interests to boost its profits in the second 


half of the 1990s when competition in the 
UK will inevitably slow profits growth. 
Vodafone’s overseas cellular interests, 
which also include stakes in cellular oper- 
ators in Australia, Hong Kong and South 
Africa, are valued at around £L5bn. 

In most cases, companies such as Voda- 
fone and AirTouch have taken only minors 
tty stakes in cellular operators. Licences 

axe awarded on the 

basis of "beauty con- 
tests" and national 
licensing bodies tend 
to favour bidders 
with strong local 
interests. The largest single shareholder in 
a bidding cnmanr t him is usually a local 
company. For «amp>i» German industrial 
group Mannesmann has a 51 per cent 
stake in Mannesmann MobOfunk, and in 
Italy, Olivetti is a 36 per cent shareholder 
in Omrutel Pronto Italia, the group winch 
won Italy's second cellular telephone net- 
work licence earlier this year. 

For companies like Olivetti and Mannes- 
mann with little or no tradition of oper- 
ating in the tolflwwnmiminaHnna sector, 


possibility of expanding into a profitable 
new sector and reducing their reliance on 
core businesses. 

The European Commission firmly, 
endorses the transition to competitive 
markets. Its green paper on mobile com- 
munications published In May says mem- 
ber states should license at least two GSM 
digital rrfiniar operators, and one personal 

itwnmnniwitinna net- 

US phone companies have been fR.* 
given the opportunity to gam sion ^ not 

a foothold in Europe instrumental in the 

deregulation of the 


the award ctf licences has offered them the 


mnhilfl ra m mi miration* sector .By the time 

its green paper was published in May this 
year - years later than originally 
planned — most governments had already 
decided in favour of Licensing at least one 
competi to r to the state-owned operator. 

“The Co mmissio n is ran firming trends 
that have already been established," says 
Mr George Metaxas, a legal expat at the 
Brussels office of Stanbrook and Hopper. 
"This market has been driven in a legal 
sense by itself. What Brussels has done is 
not exactly an llth-hour intervention, hut 


they have certainly left it until the ninth 
or 10 th hour.” 

In other respects, however, the Commis- 
sion is making a bid to lay down its own 
agenda, according to Mr Metaxas. “Thera 
are now new issues emerging such as 
roaming and restrictions to service provid- 
ers.” 

Roaming is the ability to to use your 
telephone on a network in another coun- 
try. With the new GSM system it is pos- 
sible to make and receive calls across the 
whole of western Europe. But cross-barder 
roaming has aroused controversy because 
it makes it posable for someone to take 
out a subscription in one country, but use 
tiie telephone primarily on a network, in 
another country. 

Telefan und Funk, a German cailalar 
telephone dealer, started selling subscrip- 
tions last year to a Danish GSM network. 
Telefon und Funk customers could make 
calls on both German GSM ne tworks but 
would be billed by the Danish operator. 
The German operators complained and the 
dealer was forced to abandon the sale of 
subscriptions to the Danish network, dot 
the dealer, ba c ked by the Oammisstan, is 


now having its case heard at the European 
Court of Justice. 

Another Brussels proposal which is 
opposed by a number of cellular operators 
is that they should be required to sell their 
services via wholesalers or service provid- 
ers. Service providers would retain a share 
of around 20 to 30 per cent of subscriber 
revenues, would be resp o nsible for 
billing and customer management 

The concept of service provision is cen- 
tral to the Commission's green paper on 
Tnnhile comnnmicatians published in May. 
Another important recommendation - one 
which the cellular operators are firmly 
behind - is that they should be allowed to 
build their own longdistance networks, or 
use third-party networks, rather than 
hand over to the state-owned opera- 
tors. A number of cellular operators 
believe that the charges levied by the 
state-owned operators for handling calls 
are too M g b . and are preventing them 
from lowering the price of their cellular 
services. 

After a slow start, continental Europe is 
now warming to (he potential of mobile 
communications and the benefits of com- 
petitive markets. The total number of cel- 
lular subscribers in Europe is growing by 
60 per cent a year compared to only 30 per 
cent in the period 1990 to 1992. This coin- 
cides with the impact of competition. In 
1990 there were 22 cellular operators in 19 
countries offering 22 different services. 
Tbday, 33 operators offer 87 different ser- 
vices. 


f 


F 


T ele communica tions operators across 
the world will be eyeing Hong Kong 
over the coming months after the 
recent news that the mobile communica- 
tions market is about to be cracked wide 
open. 

The territory’s industry regulator, the 
Office of the Telecommunications Author- 
ity (Ofta), has decided to move ahead with 
plans that will bring unprecedented com- 
petition, perhaps even as early as April 
next year. Ofta aims to license up to 10 
new operators across two new technolo- 
gies, offering six licences for digital PCN 
- a high capacity derivative o f Eu rope’s 
popular GSM, and four using PHP - an 
almost untried Japanese technology half- 
way between conventional cellular and 
the telepoint (CT-2) phone. 

Not surpris in gly, the existing four oper- 
ators - Hongkong Telecom, Pacific Link, 
Hutchison Telecommunications and Smar- 
Tone - are not overjoyed by the news. 

Few markets measure up to Hong 
Kong’s almost feverish appetite for 
mobile. Even CT-2, which proved a disas- 
ter In the UK, has been lapped up in Hong 
Kong. The arrival of digital technology in 
the ter ri tory has caused so much demand 
that by June, one operator, SmarTone, 
was forced temporarily to halt accepting 
new subscribers to dear a backlog of sev- 
eral thousand applicants. 

One consequence of mobile telephony’s 
mass market appeal in Hong Kong is that 
pricing does not impact as it does in 
Europe or the US - a situation upon 
which industry has not been slow to capi- 
talise. 


The Hong Kong market is to be thrown open to competition, Jenny Walker reports 

A dash for mobility all across Asia 


Ofte’s plans to throw open the market 
has left analysts divided. Some claim that 
the market will be swamped, causing 
prices to plummet, meaning casualties for 
some operators. Others say that the opera- 
tors have long acted as a cartel maintain- 
ing artificially high char g es , so ini-roamj 
competition wonld be welcome. What is 
sure is that the tenders for operators will 
see international giants queuing up with 
hopeful bowls extended. 

One question which Ofta’s move has 
thrown up is just how high the demand 
for mobile telephony can go. Hong Kong 
already has one of the highest penetration 
levels of mobile users in the world at 49 
per cent, yet Ofta believes the market is 
far from saturated. It suggests that 
demand could rise to Llm users by 1988 - 
almost a quadrupling of existing users 
over the next four years. 

While Hong Kong's runaway mobile 
success now rarely makes haadiiups, Chi- 
na's booming cellular market does so reg- 
ularly. With a fast-growing economy, an 
increasing proportion of well-heeled 
potential customers, and a sorry shortage 
of fixed-line connections, cellular phones 
sales have rocketed, with subscribers 
increasing by more than 300 per cent 
annually over the past two years. 


China’s most important economic 
region, Guangdong, win have spent $ibn 
on cellular equipment by the end of the 
year, by which time its mobile users could 
even overtake Hong Kong. This growth 
has been achieved despite the high cost of 
connection and handset fees which at 
Yuan 20,000 ($2900) work out at 12 years’ 
salary for the average worker. 

One interesting 

phenomenon unique 
to the Chinese mar- 
ket is a preference 
for large handsets. 

The bulkier the 
model, the greater the attraction, for 
these Is great prestige in being seen to 
carry a large handset, however brick-tike 
it may appear across the cultural divide. 

With little alternative in terms of fixed- 
fine connections, over 150 cellular net- 
works covering all major cities and ambi- 
tions plans far far greater « parity com- 
ing on stream, China’s extraordinary 
growth levels look set to continue. By the 
end of 1994, the number of mobile users is 
expected to top 19m. There are few mar- 
kets where cellular telephony can truly 
rfaim to have tafcaw the place of fixed 
networks, but China is one. 

While India too offers this potential. 


In China, there is great prestige in 
being seen to carry a large handset, 
however brick-like it may appear 


with fixed-line penetration at a mere 

eight lines per thousand population, plans 

have been stalled by lengthy court battles 
over licence allocations for Delhi, Bom- 
bay, Calcutta and Madras. When mobile 
finally arrives in the subcontinent, the 
effect could be dramatic. 

Interest throughout south-east Asia has 
quickly picked up, with Malaysia and 

Thailand clinching 

growth rates of 
around 70 per cent 
in 1993. Not far 
behind were Austra- 
lia, the Philippines 
and South Korea, all docking up over 50 
per cent growth. 

Even the Japanese market - where 
interest has long been modest given the 
sue of potential dumand — has recently 
seen a sudden d««h far mobility. Mobile 
phone users jumped by 488,000 between 
April *wd July — more than the total of 
new subscribers recorded for the whole of 
1993 - and handset sales are e xp ected to 
top 19m by the end of the year. This 
sodden spurt of interest coincides with 
the opening or digital networks and a 
cha n ge in the law, allowing Japanese cus- 
tomers to purchase their handsets, rather 
than rent them, for the first time. 


The latest digital handsets are proving 
far more popular than analogue, varieties, 
despite being about 30 per cent more 
expensive. The result has seen Japan 
kick-started onto a higher plane of 
growth. 

Another market rapidly rising np 
mobile statistics charts is Thailand. Here 
the "»«"» spur to damand , particularly in 
Bangkok, has been competition between 
handset dealers. A basic mwinp w model 
now retails at Bt30,000 (about £780) and a 
digital handset goes for Bt33,000 to 
Bt35,000. in the capital, a shortage of pub- 
lic phone boxes and relentless traffic 
jams, which keep people in their cars for 
hours at a time, has also helped boost 
inter e st in mobile. 

Unlike China, a dearth af fixed tinai 
may not matter so much in Bangkok, 
since those who can afford a mobile 
almost certainly have a fixed-line phone. 
This does not hold true for provincial 
areas where waiting lists for connection 
to fixed Hn«c are long. Demand in rural, 
areas is set to rise for the odd reason that 
long-distance calls are cheaper on a 
mobile than on the fixed-line network. 

One spur to growth in Asia’s mobile 
markets is competition. Hie regulators 
have been willing to issue licences to new 


operators. The Philippines has five, Mal- 
aysia has six, while Hong Kong and Thai- 
land have four. Japan tops the list with a 
total of nine competing networks. Yet the 
country that lays claim to the highest 
penetration level of mobile users, Singa- 
pore, has achieved a base of 69 per hun- 
dred population, through a monopoly-pro- 
vider, Singapore Telecom. ST offers 
attractively-priced tariffs with monthly 
access fees at £$50 and airtime charges of 
20 cents per minute across the board. 

But the wave of liberalisation sweeping 
across Asia has not stopped at Singapore, 
ami ST will be working hard to ensure the 
greatest returns from its mobile monop- 
oly before it is joined by a second cellular 
operator in three years’ time. 

While analogue networks still form the 
lion’s share of Asia’s mobile networks, 
they wQl soon be overtaken by digital. 
Almost all new licence awards in the 
region stipulate that digital technologies 
be employed, of which Europe's GSM has 
proved the most popular. 

According to the London-based commu- 
nications consultancy, C1T Research, 
there could be over 30m digital cellular 
users in the Asia-Pacific by 2003. The 
largest market will he Japan with over 
12.8m, followed by China with around 
7 -1wi. In only nine years' time, says CTT, 
some 2Jm South Koreans, L9m Austral- 
ians, 19m Thais and 19m Taiwanese will 
be carrying digital cellular phones, at 
which time the total market for mobile 
services in the region will be worth 
$209bn. 

Ttm aadw to odOoro/ mm FT Ada nac*: TMeamt Ana&at 


FT 


FINANCIAL timl.s 

C 'unfci'i'fit i'n 


WORLD MOBILE 
COMMUNICATIONS 


17 & 18 October 1994 - London 

Mobile communications is taking centre stage in the worldwide expansion of 
telecommunications and this conference brings together an international panel 
of speakers to share their views on the current state of play and the trends that will 
shape the industry in the future. 

ISSUES INCLUDE: 

• EC Green Paper on mobile communications 

• US cellular industry 

• Cellular telephones in a consumer market 

• New operator strategies 

• Role of independent service providers 


SPEAKERS INCLUDE: 

• Dr Herbert Ungerer 

Head of the Regulatory Department 

European Commission 

• Ms Pauline Creasey 
Group Director 

i Hutchison Telecommunications (UK) Ltd 

• Mr Charles Wigoder 
Managing Director 

The Peoples Phone Company Pic 


Mr Barry A Kaplan 
Vice President 
Goldman Sachs & Co 

Mr W- Rudiger Struck 
Managing Director 
E-Plus MobiUunk GmbH 

Dr Joachim Dreyer 
Chairman of the Board 
Debitel Ko mmunflca tionstec hnik 


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Broker’s lot is not a happy 
one; liberalisation becomes 
a global trend Page 2 


FINANCIAL TIMES SURVEY 

REINSURANCE 


A slightly easier year for 
London Page 3; liability of 
employers reviewed Page 4 


Monday September 5 1994 




Reinsurers are reviewing their traditional ways of 
doing business as they cope with the mounting cost 
of catastrophe losses, says Richard Lapper 

Price cuts are in 
the wind again 


P rice reductions are 
again on the agenda 
of international rein- 
surance underwriters 
and brokers, gathering in 
Monte Carlo this week for their 
annual conference. But the 
increasing scale of catastrophe 
losses, graphically underlined 
by the mounting toll of Haw 
from this January's Los 
Angeles earthquake, means 
rate competition is unlikely to 
be acute. 

Despite the introduction of 
some $7bn of fresh capital into 
reinsurance ventures in the 
past two years, growing expo- 
sures - the result of economic, 
demographic and even climat ic 
change - are putting an 
increasing strain on the indus- 
try’s capital base and forcing 
reinsurers to reexamine tradi- 
tional approaches to their busi- 
ness. 

Barber this year the influx of 
new capital - much of it raised 
to support new ventures based 
in the offshore Bermuda mar- 
ket - stirred fears in some 
quarters that the reinsurance 
industry was returning to the 
kind of competition which 
proved so disastrous in the late 
1380s. 

Events this year provide 
some evidence of softer market 
conditions. Some Australian 
and Japanese insurers - who 
renew their annual policies in 
April and July - did pay less, 
with rates down by as much as 
15 per cent for Japanese buy- 
ers, for example. And a num- 
ber of brokers expect to be able 
to obtain quite substantial cots 
in prices when they start nego- 
tiating to renew covers for 
European and some American 
buyers over the next few 
months. 

“We can probably obtain a 25 
per cent saying in reinsurance 
costs, taking into account 
deductibles and price,'' said 
one leading London broker. 
“And you can certainly budget 
for a 15 per cent cut" 

However, there are indica- 
tions that rates will not foil 
much further. Reinsurers point 
out that prices for catastrophe 
cover are many times hi ghm- 
than they were five years ago. 
Mr Richard Reeling, one of the 
leading reinsurance underwrit- 
ers at Lloyd’s, says that rates 
are holding in the US and that 


his syndicate has shed expo- 
sures rather than follow the 
market down. Following the 
violent fluctuations in interna- 
tional capacity in recent years, 
many buyers want to secure 
long-term relationships with 
reinsurers, pnink out Mr Ree- 
ling, adding that concerns 
about “longevity” are out- 
weighing those linked to price. 

"Many companies realise 
they really need reinsurance. 
They’ve seen the dark side of 
the moon and are not reckless 
in abandoning long-term rela- 
tionships,'’ explains Mr Ree- 
ling. Other Uoyd’s underwrit- 
ers also argue that the market 
is likely to remain stable. 
Another Lloyd's underwriter 
says he expects "the market 
will renew pretty well as 
before”. 

Every area of the Lloyd's 
market is under "gentle pres- 
sure” he continues, but under- 
writers are stfll more worried 
"about losing their jobs than 
losing premium”. 

Especially for reinsurers 
with US exposures the Los 
Angeles earthquake has pro- 
vided a useftil reminder about 
both the scale and uncertainty 
of exposures. Loss estimates 
from the quake were originally 
estimated at some $ 2 bn but 
have been successively revised 
upwards, with the current fig- 
ure of $7.2bn, representing the 
US industry's second most 
expensive catastrophe after 
hu rricane An drew. 

“Everybody is kidding them- 
selves over the extent of the 
exposure," notes Mr Jacques 
Blond eaU, Chairman and chief 
executive of SCOR, the rapidly 
growing Paris-based reinsur- 
ance company. 

“People were over optimistic. 
Computer models woe just not 


accurate enough It is striking 
to see how poorly equipped we 
are to measure these catastro- 
phes.” 

These perceptions mean that 
reinsurers are continuing to 
insist on much tougher condi- 
tions for insurers underwriting 
business in areas highly 
exposed to catastrophe risks, 
with more selective pricing 
and higher deductibles the 
norm. 

And reinsurers are also 
becoming much more selective 
about the companies they 
choose to reinsure. “They want 


One longer-term 
response is that 
reinsurers increasingly 
recognise the need for 
financial strength and 
security 


to understand what the under- 
writer is doing much more 
than they did before.” says the 
chief executive of one of the 
UK’s composite insurance com- 
panies. 

Outside the catastrophe area 
reinsurers have questioned the 
logic of granting unlimited lia- 
bility coverage on. employers’ 
liability and third party liabil- 
ity covers. Unlimited cover of 
this kind looks likely to disap- 
pear from the market almost 
entirely in 1995. 

"It is very hard to argue that 
any individual or corporate 
body actually needs the luxury 
of unlimited coverage. The loss 
events covered can be quantif- 
ied and as insurers and rein- 
surers we should not leave the 
door open to rampant legal and 
social inflation, ” points out Mr 
John Engestrom, chief execu- 
tive of Mercantile ft General 


Re, the UK’s biggest reinsur- 
ance company and a subsidiary 
of Prudential Corporation. 

Caps have been placed on 
exposures under proportional 
covers (policies in which rein- 
surers taka a fired share of the 
risk for the same share of the 
p remium ips$ a ceding commis- 
sion). "Uncapped exposures 
\ witter proportional covers are 
impossible to price ade- 
quately.” notes Mr Engestrom. 

More broadly, Mr Engestrom 
argues that insurers and rein- 
surers need to rethink their 
roles and redefine the concept 
of fair sharing of risk. He adds 
that there sho uld be "open and 
t r nwH ng information sharing in 
the widest sense”. 

The theme is echoed else- 
where in the market, where 
groups as diverse as Centre Re, 
the Bermuda-based subsidiary 
of Zurich Insurance, and Ben- 
field Re, the highly successful 
reinsurance broker, are 
increasingly keen to develop 
multi-year relationships 
between insurer and reinsurer. 

The use of sm tk» reinsurance 
products - such as “spread 
loss” contracts — bag declined 
following c hang es in accoun- 
tancy rules. Nevertheless rein- 
surers are continuing the 
search for policies which 
reward buyers who agree to 
share some of the risk and 
renew their policies with the 
same reinsurer. 

“All we are really trying to 
do is provide contractual 
encouragement for long-term 
relationships,” explains one 
London reinsurance broker. 

"Nobody wants to buy or 
write a risk for just 12 
months." says Mr Matthew 
Harding, chairman of Benfield, 
who insis ts that cedants take a 
compulsory co-insurance on all 


contracts he brokes. "The cus- 
tomer base in the industry 
wants continuity and cer- 
tainty. The emphasis should be 
on continuity rather than 
price.” 

in other ways, too, reinsur- 
ers - both brokers ami under- 
writers - are looking for longer 
term responses. Tor one thing, 
there has been an increasing 
recognition within the indus- 
try of the need for financial 
strength and security. Many 
smaller firms have withdrawn, 
while bigger ones have chosen 
to work closely together. 

Earlier this year, two of the 
industry's largest companies - 
Cologne Re of Germany and 
General Re of the US - agreed 
to form a “strategic alliance” 
The new holding company, in 
which the US group will have a 
majority interest, has been 
hailed as a third force in the 
market to challenge Munich Re 
and Swiss Re. “There has been 
a sorting out of the industry, 
with those companies that 
offer size, security and capac- 
ity coming out on top. The top 
seven or eight are playing a 
different game from the rest,” 
said an industry analyst 

There are also signs that 
reinsurers are developing prod- 
ucts which can attract a 
broader class of investor. Scep- 
ticism in the industry about 
the future of reinsurance deriv- 
atives is widespread. Neverthe- 
less there are signs that inter- 
est and take-up of the new 
derivative products is growing, 
following the launch in Decem- 
ber 1992 of the Chicago Board 
of Trade’s catastrophe futures 
and options contract. 

Although the volume of busi- 
ness at the exchange is still 
modest - exposures an the Chi- 
cago contract amount to an 
estimated - interest in an 

“over the counter” product - a 
loss warranty product which 
uses the Chicago contract's 
loss index - is much gr pata r 
Entbusiasts such as Mr 
Andrew Martin, m anag ing 
director Sedgwick Payne Insur- 
ance Strategy, say the dev 
elopment of derivative prod- 
ucts could eventually bring 
greater flexibility and trans- 
parency to the reinsurance 
market Capital markets could 
become more willing to trade 
reinsurance risks, he suggests. 



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FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 





I n recent months liberalisa- 
tion of the Insurance indus- 
try throughout the world 
has reached a speed which 
only the most optimistic would 
have predicted at the begin- 
ning of the 1990s. 

Steady progress towards the 
single market in western 
Europe, finally completed on 
July 1 tills year, has been par- 
alleled by the creation of the 
North American Free Trade 
Area (NAFTA) linking the US, 
Canada and Mexico, and in 
Sooth America by the Merco- 
sur Common Market between 
Argentina, Brazil, Paraguay 
and Uruguay. 

The opening of the markets 
of eastern and central Europe 
followed naturally from the 
collapse of the centrally- 
planned economy. 

Although most states have 
retained a measure of control 
over foreign involvement in 
insurance and reinsurance, it 
is anticipated in most cases 
that this will disappear by the 
end of the decade. 

With the exception of the 
Baltic states, these restrictions 
are generally tightest in the 
former USSR. Earlier this year, 
important progress was made 
when both Russia and Ukraine, 
as part of wide-ranging eco- 
nomic cooperation agreements 
with the European Union, 


Trevor Petch examines the new growth markets in Europe, Asia and Latin America 


(Nothin;; iWSRESftNfflN 
THE NEW I HCPE? j 


Liberalisation is in full swing 


tfWM. 
Di CM 
16* 


agreed to liberalise access for 
EU insurers by spring 1999. 

hi Asia, the impetus for more 
open markets was the Uruguay 
Round of the General Agree- 
ment on Tariffs and Trade 
(GATT). The General Agree- 
ment on Services (GATS) was 
eventually agreed at the end of 
last year. 

Insurance is one of a number 
of problematic areas dealt with 
by complex anuerei agreed in 
a last minute compromise. One 
effect of these was to create a 
period of two years during 
which the US in particular will 
remain free to fry to use bilat- 
eral pressure to force access to 
TTiCTirnnrtP markets it considers 
dosed. Insurance is one of the 
three areas it has chosen to 
include in negotiations with 
Japan. 

A number of governments 
which have traditionally 

favoured purely national insur- 
ance markets have recognised 
that, in the mediiim4erm, open 
markets are inevitable. This 
year, Taiwan has permitted 


investment in insurance by 
non-US insurers (US companies 
were already able to operate), 
and measures of demonopolisa- 
tion and f fonatirrofllisfltim i are 

under way or under active dis- 
cussion throughout the Ind i an 
subcontinent. 

Most major international 
insurers are opening offices in 
China in preparation for the 
expected opportunities there. 


In former Communist 
states, risks for which 
cover was not provided 
are now being insured 


and a number have also set up 
in Vietnam. 

The growth potential tor pri- 
mary insurance is perhaps 
most obviously apparent In the 
Communist and former Com- 
munist countries in economic 
transition. Property and liabil- 
ity risks for which there was 
no perceived need for cover are 
now being mnirpa, and privati- 


sation creates its own addi- 
tional requirements, especially 

in wwnmffrrial Tinea 

Last month an important 
breakthrough was made when 
American Re announced that it 
had successfully placed a 
g500m (£75dm) property cover 
for Russia’s largest truck- 
maker KamAZ with leading 
International reinsurers and 
Russian insurers. Last year 
KamAZ lost its western- 
equipped en gine plant in fire 
which cost in the region of 
$375m and was completely 
uninsured. 

Another particular area of 
growth, in which the idle of 
reinsurers been is 

motor and health ifaea related 
to foreign travel. 

Growth in any insurance 
market will also follow general 
economic growth, and this is 

the maj or fa rfor tn tho Indian 

subcontinent. In some ASEAN 
member countries, growth by 
medium-sized industrial com- 
panies Is particularly strong. 

International investors are 


once again turning thsr atten- 
tion to T^Hn Amer ica after the 
“lost decade" of the 1980s, and 
as in the more developed 
industrialising markets of 
Asia, the traditional progres- 
sion from domination of insur- 
ance merfeiet v rihnne by com- 
mercial lines to a greater 
Incidence of personal property 
and life and savings business is 
to be expected. 

In most of the major markets 
of Latin America, the pension 
and private health sectors axe 
also major areas of expansion 
as the role of the state 
decreases. 

In all areas, however, while 
Munich Re is “prudently opti- 
mistic” about the potential for 
growth of insurance and rein- 
surance business, it is careful 

to gm phasisp that it IS EDUCh 
more circumspect in its analy- 
sis of the prospective results. 

In the ASEAN countries, for 
example, the reinsurance mar- 
ket is already very competi- 
tive, and margins are “quite 
low, to say the least,” the com- 


pany says. 

Catastrophes are another 
worry, especially in areas 
where there is risk both from 
windstorms and earthquake. 
Last year Cologne Re 
announced that it planned to 
cease providing catastrophe 
cover in Latin America on a 
proportional basis. 

Munich Re began to require 
clients to take 'more active 
measures to control aggregate 
catastrophe exposure, and 
expressed particular concern 
over adequate pricing of the 
earthquake dement of prop- 
erty covers. 

The same concerns apply in 
much of Asia. For reinsurers 
rather than primary insurers, a 
longer-term concern is that 
economic growth which 
increases personal wealth and 
insurance demand brings with 
it a marked increase in aggre- 
gate exposure in the event of a 
catastrophe. 

Property previously unin- 
sured becomes insured, and 
tiie amount available to be 




insured increases both in 
terms of volume and of value. 
There is also the danger of 
“Florida syndrome” as residen- 
tial buildings become both 
more concentrated and sited in 
ever more unsuitable locations 
from a meteorological point of 
view. 

As one reinsurer points text, 
a significant proportion of any 
major catastrophe loss is a 
large number of householder 
claims of relative low average 
value, a value which tends to 
increase the worse the catas- 
trophe is because of the 
upward pressure on repair 
costs. 


The lesson of this year’s 
Northridge earthquake in the 
US was to demonstrate that a 
“number of extremely well-run 
incurs no* companies mis-eval- 
uated their exposure”, he says. 

Nor does deregulation bring 
automatic benefits to reinsur- 
ers. In countries such as Chile, 
Colombia and Mexico, deregu- 
lation was at first accompanied 
by a sharp increase in oampeti- 
tfon and a decline in original 
premium rates. 

In markets which have been 
protected by a domestic rein- 
surance monopoly and regu- 
lated tariff the level of under- 
writing expertise is often low, 
while fear of competition can 
delay correction In rates even 
when results deteriorate. 

Nor does the volume of rein- 
surance premium itself auto- 
matically Increase with liberal- 
isation. If there is market 
concentration or significant 
local investment by large mul- 
tinational insurers, retentions 
may Increase significantly, in 
Argentina, for example, in-1989 
reinsurance represented 28.7 
per cent of total direct pre- 
mium. The monopoly reinsurer 
INdeR was dosed tn 1991. and 
premium ceded is now around 
13 per cent 

• Timor Petch is editor of the 
Financial Times newsletter 
World Insurance Report 


T he world of the reinsur- 
ance broker is no longer 
the cosy, clubby place It 
once was. 

The same harsh reality that 
has prodded the retail and 
wholesale sectors into action 
hag finally penetrated through 
to the reinsurance layer, 
prompting widespread and 
large-scale changes. 

Some firms wfll not survive 
tiie brush with reality; those 
that do will emerge as risk 
consultants with a much wider 
brief than their ancestors. The 
harsh reality is a shrinking, 
hut more demanding client 
base. Brokers are having to 
prove their worth to their cus- 
tomers by cu tt ing costs and 
adding value. 

It is a difficult juggling act 
to perform when toe squeeze is 
on remuneration and when 
brokers are still servicing long 
tail liabilities. Brokers work 
within modi tighter marg iiw 
than nnrier w rllnra and admin- 
istering old accounts is expen- 
sive and time-consuming. The 
problems are exacerbated by 
the reluctance or inability of 
some reinsurers to shell out 
for claims and by the switch 
from the standard 10 per cent 


Brokers discover that the good old days of assured profits are gone for ever, writes Naomi Caine 


Now it’s every firm for itself 


commission on premium 
income to more flexible and 
creative arrangements. 

“The cost to brokers of rein- 
surance run-off in toe London 
market alone could be more 
than £Llbn”, says Mr David 
Corben, flhfllrmaw and chief 
executive of Jardlne Thomp- 
son Graham. “The general 
squeeze on the rates of broker- 
age will continue and there 
may wen be pressure for fees 
or negotiated commission.” 

Some broken are farther 
hampered by past, expens i ve 
forays into the underwriting 
arena. Alexander & Alexan- 
der's ownership of Sphere 
Drake in the early 1980s is 
proving to be a costly mistake. 

Willis Cartoon has laid its 
underwriting company. Sover- 
eign, to rest and C E Heath has 
disposed of its companies, 
mainly in Australia. Sedgwick 
has recently recapitalised 
River Thames, but the decision 


surprised the market and cost 
the broker BWm. 

The shakeout in the insur- 
ance industry has created a 
market of fewer, larger clients. 
Brokers are therefore desper- 
ate to hang on to their exist- 


The harsh reality is a 
shrinking customer base 
that wants lower costs and 
higher value 


ing clients and to engage in 
tire bitter battle for new ones. 

But toe sophisticated insur- 
ance company client base 
demands that brokers prove 
their worth. There is, after all, 
always the temptation to deal 
direct. “It is no longer enoug h 
for a. reinsurance broker sim- 
ply to place a client's risk. 
Nowadays, the successful bro- 
ker is a fully-fledged consul- 
tant who offers toe client a 


whole range of «knis and ser- 
vices,” says Mr John Pelly, 
chairman of non-marine rein- 
surance at WUHs Corroon. 

Mr Corben agrees: "The 
reinsurance broker of toe 
future wifi provide a for more 
toriinfeal and knowledgeable 
service than has been the 
norm in order to add value to 
the process. He must be 
sufficiently trained to 
understand aggregations and 
be able to do some basic 
statistical an alysis." 

The insurance Industry is 
often accused of living in toe 
technological stone age, but 
reinsurance brokers are 
embracing technology as a 
maaiw of offering their clients 
a bespoke service. Facilities 
such as CATMAP in the US 
allow brokers to analyse risk 
profiles down to the very last 

de tail, whiut ing rJtewta buy a 

policy that exactly matches 
their risk exposure. 


This type of risk analysis by 
computer wifi come into its 
own if the trend away from 
proportional business towards 
excess of loss continues. “An 
exces s of loss risk or event is 
more difficult and complicated 
to analyse and rate than a 
proportional programme,” 
explains Mr Pelly. “The broker 
who is up to speed and who 
can help the client ralcnlaia 
the extent of his exposure will 
steal a march on his 
competitors.” 

Brokers can also sharpen 
their competitive edges with 
security analysis. Client 
confidence in the reinsurance 
market has been eroded by a 
reduction in market capacity 
and by tiie troubles at Lloyd’s 
of London. More and more 
clients ask more and more 
questions, down to the name 
of the lead unde r w rite r on u 
Lloyd's syndicate. 

“Clients want to know who 


is underwriting their risk and 
need to have the utmost 
confidence in the security of 
that underwriter,” says Mr 
Alan Williams, deputy 
chairman of Alexander 
Howden reinsurance brokers. 


The search is on for high 
calibre personnel who can 
strengthen the push for 
professionalism 


“It is toe broker's job to vet 
security with an up-to-date 
system.” 

Networks, such as LIMNET 
and RINET and the Electronic 
Placing Support, a London 
market initiative due to go 
live on January 1 1996. should 
speed up toe broking process 
and lead to a more efficient 
and cost-effective business. 
But brokers have mixed 
feelings. They have read the 


mandate to move with the 
times, but they look back with 
longing at toe old ways. 

“Technology is 

revolutionising the broking 
industry. But we should not be 
afraid of change if it enhances 
the service we offer our 
clients,” says Mr WfiUams. “I 
do not believe that co mp uters 
will replace face-to-face 
negotiations, certainly not 
with lead underwriters, they 
will simply reduce tiie amount 
of time and effort spent 
trudging round the market 
from one underwriter to 
another." 

■ By streamlining the 
b usin ess, brokers hope to cot 
costs mid promise to pass the 
savings on to their clients. The 
broker’s raison d’etre is to 
serve the needs of the client if 
there are fewer clients it 
stands to reason there will be 
fewer brokers. Some, 
particularly flw* smaller firms 


with scant resources, wfll not 
keep up with the pace of 
change. Those that do, should 
finish in better shape. 

Emphasis is now on the 
recruitment of high -calibre 
personnel who can put their 
shoulders behind the push for 
professionalism. But if client 
numbers are dwindling, 
brokers need to forage for new 
business. Although they refute 
the claim that they are 
creating markets, a number of 
the larger broking houses are 
pioneering developments in 
toe burgeoning economies of 
eastern Europe and Latin 
America. 

The government of 
KYwflkhgfein, for example, has 
selected Alexander Howden to 
be its insurance consultant 
MaHtrt mnilHIiwm and client 
demand have forced toe 
reinsurance broker to take a 
long hard look at tiie business 
he conducts and the way he 
conducts it. And these 
everflexflrie middlemen have 
responded to the challenge of 
change. They may take toe 
occasional look back at toe 
past, but they have always got 
at least (me eye firmly on the 
future. 



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FINANCIAL TIMES MONDAY SEPTEMBER 5 1994 


III 


REINSURANCE 3 


Bermuda’s success raises hackles, says Trevor Petch 

A faster profits centre 


r ■ 

1 f.c . 
’ " ' ■•£ 
-:-n: 

■3 It" 


Id July, Dr Hans-Jfirgen 
Schinzler, chair man of Munich 
Re, the largest reinsurance 
company in the world, warned 
that it was already becoming 
difficult again, for reinsurers to 
obtain reasonable conditions 
for catastrophe business. 

He told a German newspaper 
that it would not emulate some 
of its competitors in 
establishing a subsidiary in 
Bermuda to specialise in this 
area, and in an unusually 
forthright comment suggested 
that some of these, attracted 
by the high rates currently on 
offer wanted “to make a Quick 
dollar". 

Such comments are familiar 
to the eight property 
catastrophe specialists based 
on the Island. One local 
observer suggests wryly. that 
Bermuda has suffered "a slide 
into critical acclaim". 

Mr Henry Keeling, chief 
underwriter tor Mid Ocean Re. 
the first of the new specialist 
companies established in 
November 1992, believes any 
supposed conflict with 
“traditionalists” is illusory. 
"Reinsurance is a truly global 
business." he says. “Bermuda 
is simply the most efficient 
place to put our capital to 
wOik. 

According to Mr John 
Dowling, chief executive of 
International Property 
Catastrophe Re, mainly owned 
by leading OS insurers and 
reinsurers, the key issue is the 
success of the Bermnda 
market; the problem is that 
some observers measure 
success in a different way. 


The new companies are not a 
threat to the rest of the world 
market but a complement to it, 
Mr Dowling believes, drawing 
attention to the Quality of both 
the capital and the personnel 
which they have recruited. 
They have also passed the add 
test of securing a customer 
base among major - and very 
discriminating - property 
insurers, he says. 

Mr Michael Butt, chief 
executive of Mid Ocean, also 
identifies the “flight to 
quality” as the key feature of 
the new market, which he 
suggests requires investors 

with a first 

class 
reputation, and 
capital of the 
order of $4O0m 
to $500m 
(£265m-335m). 

Bermuda’s 

initial role was as the main 
centre for captive insurers 
owned by big commercial 
entities, a position which it 
stm retains. The mid-1980s saw 
the establishment of the large, 
privately-owned high-level 
liability insurers ACE and XL 
and so-called financial or finite 
risk reinsurers which needed a 
tax-efficient location. There are 
now half a dozen of each, as 
well as two companies in 
formation aimed at coping 
with the OS Oil Pollution Act 

In a sense, therefore, the 
arrival of the catastrophe 
specialists marks Bermuda’s 
coming of age, in providing 
capacity for part of the core 
business of the global 
reinsurance market rather 


Bermuda’s coming of 
age has been marked by 
the coming of the 
catastrophe specialists 


than speciality requirements. 

The importance of this 
development is demonstrated 
by the updating of Bermuda’s 
insurance legislation, an 
outline of which was expected 
to be announced last week. 
This is aimed primarily at 
removing any suggestion of 
insufficient supervision of 
companies active in 
international markets by 
introducing four categories of 
company, from simple captives 
to those writing commercial 
liability. 

After struggling for years to 
obtain some improvement from 

unwilling 

cedants, some 
European 
reinsurers 
might be 
forgiven for 
rather 
resenting any 
factor which mi ght reduce the 
limited length of time for 
which they could enjoy better 

mar g in 

Mr Dowling points out that 
while Bermuda may have 
raised $A5bn in new capital, 
with perhaps another new 
$l-5bn in London, this still 
represents less than the $10bn 
which is often given as the 
amount withdrawn from the 
reinsurance market since 1987 
- and there have been huge 
global losses from hurricane 
Andrew and the Northridge 
earthquake since the new 
companies were formed. 

Mr Keeling observes that 
“there is still too much 
demand and not enough 
supply, especially in the US”. 



Insurers who value 
strategic advice based on 
global industry knowledge, 
longstanding pan-European 
presence, and demonstrated 
cross-border expertise, 
can rely on one firm. 


JPMorgan 


OlVhJP. Utrptfi Ac <i>. btarpanHrd Uarpun Cbamnir Trust Coapum-if'iv tor* hammbrrvfthfSFX 


He points out that the new 
companies write a “completely 
different” business mix than 
the so-called traditional 
reinsurer. By focusing closely 
upon property catastrophe 
business, stronger 
und erwriti ng discipline can be 
exercised and aggregation and 
volatility controlled. By taking 
advantage of a low cost base 
and efficient use of capital, the 
m aximum benefit of such 
wider margin business can be 
enjoyed. 

Mr Butt believes that the 
quality of the security offered 
will become “ever more 
important" as client concern 
over uncollectable reinsurance 
increases. 

A variant of the “margin 
reduction" criticism runs: 
>mi f»sR catastrophes simply foO 
to occur, how can the above 
average returns promised to 
investors be generated except 
by writing other lines where 
marg ins are also temporarily 
attractive? 

In order to protect their asset 
base, the property catastrophe 
specialists must underwrite 
premium as a fraction of their 
capital (30 to 50 per cent is 
typical). Mr Dowling stresses 
that $4.5bn in capital for 
underwriting predominantly 
low frequency/high severity 
business does not mean the 
same volume of premium 
written as it would for a 
multi-line reins urer 
While it is true that most of 
the property catastrophe 
companies do write perhaps 40 
per cent of then- book in other 
property reinsurance, marine 
and aviation. Partner Re (the 
largest in terms of share 
capital). Tempest Re and 
Centre Cat are currently 
exclusively property 
catastrophe companies. 

More significant is the fact 
that none of the new 
companies write long-tail 
liability business. “Our capital 
is transparent, unencumbered 
by such claims from the past ” 
Mr Dowling says. 

A third area of concern, 
hinted at by Dr Schinzler 
concerns the period and terms 
on which capital has been 
committed to the new 
ventures. One new facility 
which did not receive support 
from the capital markets was 
Compass Re, which was to 
have had a life span of about 
five years. The Compass Re 
vehicle will be finally wound 
up on September 23. 

If the non-insurance 
institutional backers of the 
new ventures are not long-term 
investors and are not to be 
rewarded by high current 
dividends, the implication is 
that they expect to make 
substantial gains through 
stock placements, as the initial 
investors in finite risk 
reinsurers were able to do. 
They will maximise their 
return if they can sell at the 
top of the market 
Although most if not all of 
the new ventures emphasise 
that their return on capital is 
to be measured over a long 
period, and stress their 
long-term commitment, 
observers such as rating 
agency Standard & Poor’s have 
indicated reservations about 
whether the new facilities can 
prosper in a soft market as 
well as in a bard one. 

Mr Butt responds that the 
reputation of the investors is 
such is that they cannot afford 
simply to walk away. “Over 
the next 10 years, reinsurers 
must offer their clients a 
greater degree of stability." he 
says, adding that “The 
concentration of capital into 
larger units with professional 
investors is necessary if that 
role is to be fulfilled." 


IPCRe 


onal Frccerty Cii 


: insurance Cctfparsy Lid 


International Property Catastrophe Reinsurance Co Ltd 

Capitalised at $309,000,000 
Opened 1st July 1993 


Located 


Lloyd's of London 
Suite 463 
1 Lime Street 
London 
EC3M7HA 

Contact: Mr. Peter Cozens 
London Representative 

Tel: 071 327 4889/90 
Fax: 071 327 4888 


American International Building 
29 Richmond Road 
Pembroke 
Bermuda 

Contact Mr. James Bryce 
Senior Vice President 

Tel: 0101 809 295 2121 
Fax: 0101 809 292 8085 


F or reinsurers, September 
brings the Rendezvous in 
Monte Carlo and the 
start of the North American 
hurricane season. Last year, 
however, proved relatively 
disaster free and against the 
background of harder reinsur- 
ance rates, much improved 
results for the 1983 year are 
already emerging, writes LEE 
COPPACK. 

The UK’s largest reinsurance 
company, Prudential subsid- 
iary Mercantile & General, 
transformed a loss of £14&5m 
on its general business in 
1992, which pushed the whole 
company into loss in 1992, into 
a £8m profit in 1993 and an 
overall profit of £i04m. 

For the first time since 1989. 
members of the London com- 
panies group, the London 
Insurance and Reinsurance 
Market Association (LIRMA), 
enjoyed a positive cadi Cow 
during 1993 - this was the 
£549m by which members* pre- 
miums processed by URMA’s 
processing bureau exceeded 
claims. 

To some extent the current 
situation mirrors the market 
conditions of the mid-1980s 
when underwri t ers took mea- 
sures to improve deteriorating 
results. Better rates, together 
with a year, 1986, which was 
extraordinarily free of major 
losses, resulted in a sur ge of 
capital into the market. 
Lloyd’s capacity doubled from 
£5bn in 1984 to £10bn in 1987. 
The effect of the resulting 
competition on rates and con- 
ditions was exacerbated by an 
unprecedented series of catas- 
trophes. The results are well 
known, the repercussions stiff 
being felt 

The spectre of profi ts slip- 
ping has already made its 
appearance. As Matthew Hard- 
ing, file chairman of specialist 
reinsurance group Benfield, 
puts it “There hasn’t been a 
disaster for five minutes, so 
people think there won’t be 
another.” 

He believes that for the mar- 
ket to work insurance and 
letiauiance rot retain a size- 
able element of fortuity; pre- 
miums can only be a relatively 
small proportion of the poten- 
tial exposures. Therefore, 
catastrophe risks which may 
remain dear for several years 
before a disaster strikes are 
particularly vulnerable to mis- 
placed optimism. 

Competition certainly has 
returned in some classes, 
according to John Felly, group 
managing director of UK and 


North American reinsurance 
at broker Willis Faber & 
Dumas. For example, Bermuda 
companies anxious to avoid an 
accumulation of North Ameri- 
can catastrophe risks want to 
write business from other 
parts of the world. But reduc- 
tions have not been sweeping, 
be says. 

However, that does not 


There hasn’t been a 
disaster for five minutes, 
so some people think 
there won’t be one’ 


mean that the spate of natural 
disasters partly responsible for 
the recent losses is necessarily 

(JV 0 J 1 , Anm i i M ]ptTig tin* coDipfl. - 

n^s 1993 results, the chair- 
man of Munich Re, Dr Hans- 
Jurgen Schinzler, commented: 

The insurance industry’s 
exposure to large catastrophe 
losses was quickly demon- 
strated again by the Los 
Angeles earthquake cm 17 Jan- 
uary 1994 and the windstorm 
and flood damage in Germany 
that also occurred at the 
beginning of the year.” 

He added that there were 
“no grounds for relaxing our 
efforts to determine and imple- 
ment risk commensurate 
prices". 

The problem for reinsurers 
is to determine and keep to 
such a price. Because of the 
nature of reinsurance, by the 
time it is clear that the rates 
charged were inadequate, com- 
petition may well already have 
depressed them further. 

The 10 yea r s at reinsurance 
statistics published earlier fids 
year by London Insurance and 
Reinsurance Market Associa- 
tion (LIRMA) reveal that, 
while in property business the 
claims picture is reasonably 
clear after two years, there 
can still be blips, and even 
without the complications of 
asbestos and environmental 
pollution, in long tail business 
the account may continue to 
develop over four or five years 
and the picture in marine may 
be more exaggerated. 

When rates look profitable, 


|F JACKSON? KtoDL iNG THfi INftjftANCE, 
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WEteE HANDLING THE RETfcO INSURANCE, Wffc) 

THE HEU- 1 f vmuw THE 8£-f2fnao WSUWCfe? 
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rtf 


■ LONDON AND LLOYDS 

A suspiciously 
long lull 


there are few real barriers to 
entry into the market. The 
shortage in capacity produced 
by insolvencies and withdraw- 
als brought $5bn new capital 
into Bermuda in 1993, and an 
additional £2.Ibn capacity into 
Uoyd’s. 

However, other factors may 
help to slow the pace of com- 
petition. The benefits of 
increased rates and the rela- 
tively few insured catastrophe 
losses in 1993 are unlikely to 
last long enough to make up 
more than a small proportion 
of the funds which haemor- 
rhaged from Uoyd’s and the 
London market companies. 

Over four years Lloyd’s has 
lost £6Jbn. Including boosting 
reserves for past years. In 1991 
and 1992 LIRMA members lost 
£1 .4bn net on their reinsur- 
ance underwriting, and this 
does not in cl ode now those 13 
groups which have become 
insolvent since 1990. 

So institutional investors 
from outside the industry are 
cautious. Interest rates are 
now significantly lower than 
they were in the mid 1980s 
which should make reinsur- 
ance less tempting as a wki* 
flow machine, and economies 
recovering from recession are 
offering other investment 
prospects. 

The stock market perfor- 


mance of toe Lloyd’s invest- 
ment trusts, initially spar- 
kling. has been lacklustre 
since April and analysts ques- 
tion how much unsatisfied 
demand there is for corporate 
involvement in Lloyd’s. “We 
do not think a lot of new capi- 
tal will be coming into Lloyd’s 
corporate capital,” says 
Roman Cizdyn of Smith New 
Coart. an experienced 
observer of the London insur- 
ance market “The launch of 
the trusts this year was proba- 
bly unique, a once only oppor- 
tunity.” 

The Lloyd’s market board 
has just published an estimate 
of £10.3bn maximum for 
Lloyd's capacity in 1995, down 
from £l0.9bn this year as 
names have to meet cash calls 
ami a study from Smith New 
Court issued in August sug- 
gests toe fall could be larger. 
Bermuda, now a major com- 
petitor. is estimated to have 
about $13.7 bn (£8.8 bn) in cap- 
ital, excluding captives. 

A noticeable change in 
Lloyd’s has been a fall in the 
proport i on of Its underwriting 
classed as reinsurance. 
According to figures collected 
by Lloyd's Planning Depart- 
ment, from a peak of 58.6 per 
cent of premiums including 
brokerage in 1991, reinsurance 
last year made up 49.6 per 


cent of the premiums pro- 
cessed through toe market. 

One explanation has been 
that onderwriters have seen 
greater opportunities in direct 
business. Between 1990 and 
last year, total direct business 
has risen by 39.3 per cent; 
reinsurance by only 9.1 per 
cent which, against the back- 
ground of firmer reinsurance 
rates, suggests that Lloyd’s 
share of the world reinsurance 
market is likely to have 
slipped. The fastest growing 
class in Lloyd's has been UK 
motor, which has more than 
doubled since 1990. 

Investment in Lloyd's will 
largely be affected hr the suc- 
cess of its plans to create an 
authorised reinsurance com- 
pany, NewCo. to take over the 
US liability risks, such as 
asbestos and environmental 
pollntion. dating from the 
1985 year and before. Lloyd's 
intends that NewCo should be 
up and running at December 
31, 1995. 

This problem continues to 
plague the London market, 
particularly Lloyd's, because it 
has gone on so long. Half of 
Lloyd's loss of £2.048bn for 
1991. the most recently closed 
underwriting year, was made 
up of increases in reserves for 
prior years of account, but its 
chairman, David Rowland, 
argues that Lloyd's is almost 
certainly better reserved than 
most of its competitors.” 

The latest estimate by 
respected rating agency A. M. 
Best puts the ultimate cost to 
the US insurance industry 
over the next 25 years of envi- 
ronmental and asbestos dam- 
ages in the US at around 
$I32bn, excluding any mean- 
ingful refund of Superfund. 
This amount is equal to 72 per 
cent of the industry's current 
capital and surplus. Yet US lia- 
bility rates remain sofL 

What now seems a terrible 
harden to the London market 
may eventually provide a sig- 
nificant, competitive advan- 
tage, because adequately 
reserved insurers will be in a 
strong position if others are 
forced to raise prices to pay 
for old losses. 

• Lee Coppack is co-editor of 
Global Reinsurance and Global 
Risk Manager. 



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F rom the beginning of 
next year reinsurers plan 
to introduce limits on all 
employers' liability contracts, 
restricting cover to between 
£5m and £10m per policy. For 
UK employers, by law required 

tO p urchas e a minimum of £2m 
inde mni fy, these restrictions 
spell the end of unlimited 
cover. 

Increasing exposures to cata- 
strophic liability claims, com- 
bined with a rise in occupa- 
tional disease claims, have led 
reinsurers to make the break 
from tradition. The Association 
of British Insurers (ABI), esti- 
mates that employers’ liability 
insurers, excluding Lloyd's, 
paid out cl aims of £54 lm in 
1992, compared with £430m in 
1988. 

“Over the last few years the 
market generally for reinsurers 
has been hit by all sorts of 
losses so we have been trying 
to make oar business more 
controllable. We certainly have 
not been making enough prof- 
its to justify continuing to offer 
unlimi ted cover,” says Stephen 
Riley, deputy general manager 
(non-life) at Swiss Re (UK). 

The 1988 disaster on the 
North Sea’s Piper Alpha oil rig 
cost the market an estimated 
£120m and induced reinsurers 


REINSURANCE 4 

Claire Wilkinson discusses the forthcoming changes in reinsurance of UK employers’ liability 

Unlimited cover is on the way out 


to reconsider the issue of 
unlimited cover. 

Stephen Riley explains: “the 
Piper Alpha loss gave force to 
the worries that there was 
potential for a large industrial 
accident to occur affecting 
large numbers of people and 
for there to be a mega claim. 
Frankly, the premium basis we 
were operating on was not suf- 

The Piper Alpha blaze 
showed that premiums 
had been insufficient 


ficient to cover that claims 
exposure." In the wake of Piper 
Alpha, the reinsurance indus- 
try imposed treaty restrictions, 
leading most insurers to 
exclude offshore exposures, or 
limit their liability to n»n per 
occurrence. 

Accidents apart, the growth 
of occupational diseases such 
as daafnpgs and asbes tosis baa 


placed Anther pressure on the 
employers' liability market. 
Emerging diseases such as 
repetitive strain injury (RSI) 
have also contributed to the 
rise in claims. 

According to ABI estimates. 
Industrial diseases now 
account for about 50 per cent 
of total employers' liability 
claims, compared to under 20 
per cent some 10 years ago. 
While individual disease 
claims tend to be relatively 
low, liability is spread over 
many years, making it djffimn 
for insurers to predict future 
claims. “The problem is that 
you’ve got large numbers of 
people involved and the time 
lag between first exposure, 
manifestation and settlement 
of the claim can be 25-40 
years,” says Stephen RQey. 

Reinsurers are not so 
exposed to the occupational 
disease problem, however. “We 
don’t have a major back-year 
problem on UK employers' lia- 


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CUR. PSLSfcMAL 1MJURV FfaUcy Bffcfe 
WE ADDRESS' THE SHAREHOLDSir 





bOity, but ft has to be said that 
employers’ liability is not a 
pro fitab le riaw; of business,” 
he says. According to David 
Thomas, executive director, 
Willis Corroon London, the 
typical employer liability 
claims experience can feilrp up 




to nine years to run off. “For a 
risk insured in 1994, for exam- 
ple, it may be 2003 before all 
Haim g are paid outstand- 
ings reduced to zero.” he says. 

Lack of profits and high 
exposure to long-tail risks has 
driven both Insurers and rein- 


surers from the market in 
recent years. In 1993, two 
mqjor players in the unlimited 
liability reinsurance market, 
Nederlandse Reassurantie 
Groep (NRG), and NW Reinsur- 
ance Corp, ceased underwrit- 
ing. According to Stephen 
RUey. their withdrawal 
increased the likelihood that 
there would be no further 
cover available or that many 
companies would have diffi- 
culty in placing unlimited rein- 
surance. 

At thp camfl Hmp Insurers 
have been questioning their 
commitment to provide 
employers' liability insurance. 
“It now appears that 80 per 
cent of employers insurance 
measured in premium terms is 
written by only eight insurers. 
Of these eight three control 
something like 40 per cent of 
the market,” says David 
Thomas. 

Contraction in cover and 
imppnHing limits on exposures 


will undoubtedly lead employ- 
ers to seek protection outside 
the conventions of the com- 
mercial reinsurance market. 
Increasing levels of self-inSUT- 
»niy and formation of captives 
are likely alternatives. But are 
reinsurers concerned about the 
potential competition posed by 
insureds? “No captive or 
mutual is going to be able to 

Risk management is the 
key issue for both 
insurers and insured 

retain ail that risk unless it is 
very well capitalised. From our 
point of view, I don't see it as a 
major threat,” says Stephen 
Riley. 

Others view the competition 
as more of a challenge, as Ian 
Sinclair, man agin g director, 
underwriting, at Unionamericn 
Insurance Co. says: “obviously 
we make our living by writing 


insurance and reinsurance. If 
our own Insureds are trying to 
compete with us, that is not a 
very easy pill for us to swal- 
low." 

According to employers’ lia- 
bility reinsurers, the introduc- 
tion of limits will enable them 
to gauge their future liabilities 
more accurately and ultimately 
to offer more capacity in the 
market 

As Stephen Riley says: “plac- 
ing limits on it will certainly 
lead to more accurate assess- 
ment of the price that ought to 
be charged. In the long term if 
we all feel more comfortable 
about it we will be able to 
offer more capacity to our cli- 
ents.” 

It is also hoped the restric- 
tions on cover may coax 
employers to take more pre- 
ventive measures to limit their 
own exposures, in turn reduc- 
ing the level of claims. 
"Employers must recognise 
that the only way to control 
the cost of employer liability 
insurance is to control the cost 
of claims. Risk management is 
the key issue both for Insurers 
and the insured,” says David 
Thomas. 

• Claire Wilkinson is a writer 
on the Financial Times newslet- 
ter World Insurance Report 



: j £*?*.-*■• 
SfJ** ’ 


T alk to a typical reinsur- 
ance underwriter, broker 
or claims nmnag w a hunt 
insurance and reinsurance 
derivatives and you will usu- 
ally be met with a b lank gaze 
- what one enthusiast for this 
new breed of financial prod- 
ucts calls the “dead mullet 
look”. 

Yet despite widespread scep- 
ticism in traditional circles, 
interest in reinsurance futures 
and options contracts is slowly 
growing. Trade in the catastro- 
phe futures and options con- 
tracts launched in December 
1992 by the Chicago Board of 
Trade is small but the volume 
of transactions has Increased 
more than ten-fold in the last 
year. 

More important, the devel- 
opment of the exchange-traded 
product is directly influencing 
the reinsurance market, lead- 
ing to the effective emergence 
of an “over the counter mar- 
ket” for catastrophe reinsur- 
ance options. 

Leading reinsurers such as 
the Centre Re, part of the 
Swiss Zurich group, are 
already active in the market. 
Brokers are exploring the 
potential. And there are signs 
that US investment Hanks see 
the development of the market 


Richard Lapper finds that a widening range of derivative products Is arousing growing interest 

Into line with other financial markets 


as a means to gain access to 
the billion dollar reinsurance 
industry. 

Mr Andrew Martin, manag- 
ing director, Sedgwick Payne 
Insurance Strategy, and one of 
a growing band of enthusiasts 
from within the traditional 
reinsurance market, says the 
growth of derivative products 
signals the beginnings of a 
securitisation of the reinsur- 
ance market which will bring 
the multi-billion pound indus- 
try into line with other finan- 
cial services. 

“Insurance and reinsurance 
may be the last frontier”, he 
says. 

The Chicago Board of Trade 
(CBOT), which lists a range of 
financial and commodities 
derivative contracts, launched 
its innovative catastrophe 
reinsurance product in Decem- 
ber 1992. 

The contract is based upon 
an Index prepared by the 
Insurance Services Office, an 


CS insurance industry body 
which collects rating and 
claims information fr om insur- 
ance companies. 

The ISO index is based on a 
loss ratio (premiums as a per- 
centage of claims), which is 
calculated from reported 
losses and premium income 
reported by companies over a 

The trade in catastrophe 
futures, launched in 1992, 
is steadily expanding 

three month period. Contracts 
are priced according to moves 
in the ISO loss ratio with the 
settlement price of each 
Increasing by |250 far each 1 
per cent upwards movement in 
the ratio. 

For example, while a loss 
ratio of 20 per cent would give 
each contract a value of 
55,000, a loss ratio of 100 per 
cent would give a value of 


$30,000 (ie 5250 multiplied by 

120 ). 

Contracts priced on this 
HiHpt are lahniimf in the last 
month of each quarter with 
the price of the March contract 
based an losses incurred from 
January 1 to March 31 as 
reported from January 1 
through to June 30. 

Trade in these futures con- 
tracts has been non-existent 
However, reinsurers and 
investors have been more 
active in trading options on 
these co n tracts. Indeed by the 
beginning of August the CBOT 
registered 5,370 separate 
trades on the eastern catastro- 
phe options, the mo6t heavily 
traded catastrophe contract 

Most of the contracts are 
“call spreads” options, used to 
limit and isolate ^ particular 
layer of risk, expiafag Dr Mor- 
ton Lane, manag in g par te er of 
Lane Financial, a company 
winch advises broken trading 
on the exchange. 


For example, buyers might 
pay for an option to boy a con- 
tract when the loss ratio 
reaches 40 per cent and sell an 
option for the loss ratio 
exceeding 60 per cent This 
effectively gives the buying 
company a tranche of protec- 
tion «™il»r to that available 
in excess of loss reinsurance 
contracts. 

Mr Lane concedes that the 
amount of exposure covered 
by the eastern and national 
options contracts is “tiny”, 
with exposures covered (as 
represe n ted by open int e res t - 
those contracts that have yet 
to be settled) amounting to no 
more than 525m. 

Premiums paid for the 
options amount to about 55m, 
he estimates. Yet interest 
risen steadily. Exposures are 
up from between $2m and 55m 
a year ago. The number of 
houses active in trading the 
contract has risen from 
between six and eight a year 


ago to more than 20 today. 
“Most significantly many of 
th e big Investment hanks have 
now got involved,” says Mr 
Lane. 

In adriftfem , despite the lim- 
ited activity on the exchange, 
tlw developments in Chicago 
have given a boost to aver the 
counter trading in derivative 

Derivative contracts can 
be purchased at any time 
and can be traded 

products. 

The most important trend 
here is the willingness of a 
small number of reinsurers to 
use the ISO index as an inte- 
gral element of a specialist 
excess of loss contract, the loss 
warranty policy. 

Claims on a loss warranty 
policy are triggered by two 
sets of losses: firstly, those on 
the reinsurance policy of the 


buyer; secondly overall indus- 
try wide claims In the quarter. 

“The exchange has stimu- 
lated a change in the way cer- 
tain franchise covers are 
underwritten. People have 
started using the ISO numbers 
and the trigger related to the 
industry-wide loss has become 
more important,” says Mr 
Lane. 

Observers believe that as 
much as 20 tunes more busi- 
ness could be traded over the 
counter as on the exchange 
itself. The g rowt h in the OTC 
market is attracting attention 
inside the reinsurance indus- 
try. 

Already significant reinsur- 
ance companies are becoming 
significant players. Zurich 
Insurance - through its US 
subsidiaries - is one active 
player, and a number of other 
companies have hedged their 
own exposures by buying call 
options on the exchange. 

Traditional reinsurance con- 


tracts retain important advan- 
tages. Not least, they are indi- 
vidually underwritten and 
directly cover an agreed group 
of exposures, providing - in 
derivatives parlance - a “per- 
fect hedge”. 

Yet derivatives also have 
their attractions. While the 
price of a traditional reinsur- 
ance contract is generally 
known only by broker and 
underwriter, derivative con- 
tracts are transparent 

Reinsurance contracts are 
negotiated once a year and 
their price can vary sharply 
from year to year. Derivative 
contracts by contrast are more 
flexible. Cover can be 
purchased at any time and 
contracts can be traded. 

Advocates of the new 
products also argue that the 
traditional reinsurance 
insurance industry cannot 
provide enongh capital to 
cover the mounting scale of 
catastrophe risks. 

“The risks exposed are 
increasing faster than 
insurers' capital and 
capacity,” points out 
Sedgwick’s Mr Martin. “We 
want to move to the point 
where we can buy and sell 
insurance and reinsurance 
risk to the capital markets.” 




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