Corpus of articles from the English newspaper 'The Financial Times' from the year 1993. MLCC machine readable version 1995 This TEI conformant electronic version edited by the MLCC project, 7 July 1995. This file (ignoring this header) is 2044816 bytes long, its text includes 304018 words.

This electronic version was produced by the Multilingual Corpora for Cooperation (MLCC) project funded by the European Union. It has been converted to use the iso-latin-1 character set (where possible) and to be TEI(P3) conformant SGML.

This file is available for non-commercial purposes only on signature of the MLCC user agreement form.

The original electronic version of this file was produced by the 'The Financial Times' newspaper.

This version produced by the Language Technology Group, Human Communication Research Centre, University of Edinburgh for the MLCC and MULTEXT projects of the European Community.

For a description of the SGML tags used in this corpus and the methods used to convert it to TEI SGML, see the associated file editdecl.txt.

English 7 July 1995 Masja Kempen David Mckelvie processing of original corpus files into tei conformance.
World Stock Markets: Advisers in quandary over Hong Kong boom - Overseas investors are ignoring recent hints that it is time to get out of the market Publication 930522FT Processed by FT 930522 By SIMON DAVIES

When new issues are hundreds of times over-subscribed, second line stocks double over-night, and the stock market shrugs off negative news with historic highs, it is generally-assumed to be time to get out of the Hong Kong stock market.

Certainly, there are enormous profits to be taken. The Hang Seng index has celebrated a major bull run since the start of 1991 and in spite of the political uncertainties of the moment, it has still achieved a 30 per cent rise this year, closing yesterday at a record high of 7,169.96.

The stock market has focused on seemingly-improved Sino-British relations, and has chosen to ignore crucial issues such as the debate over the renewal of China's Most Favoured Nation status, and the over-heating of the Chinese economy.

However, the move has not been entirely irrational. For the past three years, Hong Kong has been gradually eroding its substantial political risk discount, as investors have realised that the 1997 hand-over to China offers huge economic benefits, in addition to its political challenges.

The economic boom in Southern China, the fastest growing region in the world during the past decade, has been the engine for corporate earnings growth (in earnings per share terms) of 21 per cent in 1991, 22 per cent in 1992 and an anticipated 20 per cent in 1993.

This growth is eroded by the high inflation rate, which remains alarmingly close to double digits, but the corporate earnings trend remains impressive.

There have been other fringe benefits from China, with mainland money pushing up the property and stock markets, as a means of switching out of the rapidly devaluing Renminbi.

The story of Hong Kong as gateway to the Chinese economic miracle has caught the imagination of US fund managers, with a stream of fresh capital flooding in.

To US institutions, Hong Kong offers the twin advantages of its currency peg to the strengthening US dollar, and its strong regulatory framework (at least by Asian standards). In addition, when Hong Kong experiences an economic slowdown, as in 1989, it has tended to achieve growth figures that outpace the economic booms of the major economies.

But there are a number of reasons for caution. One of the keys to Hong Kong's boom has been local liquidity. Hong Kong has experienced sizeably negative interest rates for two years, leaving locals with the option of shoring up savings in either the stock market or property market. As a result of the currency's US dollar link, interest rates are expected to push upwards soon.

The annual US debate on China's MFN will also cause some unease, as the impact on Hong Kong would be devastating, if China lost this status. Next year's renewal may hang on some conditions, but while there is little indication that it is seriously at risk, the uncertainties of the debate could have some impact on current enthusiasm for stocks.

Finally, and most important, there is the issue of China's economy. Last week's announcement of a 25 per cent increase in China's retail sales for April is the latest in a line of statistics which demonstrate unequivocally the overheating of the Chinese economy.

The last time this happened, austerity measures led to a 60 per cent drop in Hong Kong's GDP growth, back in 1989. This time round the impact would be less severe, as the economy in the neighbouring Chinese province of Guangdong has reached a greater level of autonomy, but with a substantial devaluation of the RMB expected and a credit crunch already being imposed, Hong Kong will be affected.

Mr Sheldon Kasowitz, research analyst at Jardine Fleming Securities, says: 'Huge increases in interest rates, the collapse of the currency and a deteriorating trade balance are not the things that bull markets are made of'.

However, the index is not overvalued on a current year basis. Based on Jardine Fleming's forecasts, the Hong Kong market is trading on a price-earnings ratio of only 12.4 times 1993 earnings. By comparison, Thailand is on 13.2 and Malaysia 21.

This represents the top-end of Hong Kong's historical trading range, but that could be said to reflect the rapidly-changing attitude towards Hong Kong's future relationship with China.

Of greater concern is the fact that share prices have been rising on the basis of political interpretation, rather than on political fact.

It is widely assumed that there has been a dramatic narrowing of the political impasse over Governor Patten's controversial political proposals, yet the meetings between Britain and China have not yet succeeded in moving beyond principals.

Furthermore, it can be argued that China has a certain amount of self-interest in appearing more conciliatory, during the course of the debate over its MFN status. China has already demonstrated its ability to influence the stock market when it wants to make a political point.

Against this, there is the enthusiasm of overseas investors. Mr Richard Witts, managing director of United Mok Ying Kie Securities, says: 'It is going to take a lot to stop money flooding in from the US and Europe. These investors are going to be prepared to suffer a little for the long-term attractions'.

Brokers' targets of a year-end Hang Seng index of between 7,500 and 8,000 still do not seem far-fetched, on current earnings forecasts. But given the numerous uncertainties facing Hong Kong, it is hard to imagine there will not be any blood and tears before it gets there.

HK Hong Kong, Asia P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page 21 960
World Stock Markets (Europe): Bourses remain wary about Wall Street Publication 930522FT Processed by FT 930522 By Our Markets Staff

BOURSES were chary about responding to consecutive record highs on Wall Street, writes Our Markets Staff, as Paris and Brussels extended their Ascension day holidays.

FRANKFURT was lifted by options-related buying in the last 10 minutes of trading, but the DAX still closed 6.82 lower at 1,610.59, down 1.5 per cent on the week, in volume up from DM5.1bn to DM5.4bn.

Schering rose DM14 to DM780.50. Mr Reinhard Fischer of Paribas Capital Markets, which has brought Germany up from slightly underweight to average as the dollar has strengthened, said that the pharmaceuticals group had moved on its 80 per cent export ratio, and the potential effect of dollar/mark relationship on its export margins.

ZURICH finished at a fourth consecutive record high although profit-taking erased most of the early gains and Wall Street's weaker opening dampened the mood. The SMI index finished 6.5 higher at 2,233.1, after a day's peak of 2,245.3. The market rose 2.1 per cent over the week.

Nestle and Brown Boveri were lifted by the strong dollar, rising SFr10 to SFr1,140 in the bearers, and SFr10 to SFr813 respectively.

MILAN edged lower as the market digested yesterday's supplementary budget package. Thursday's late and cautious half percentage point discount rate cut had been widely expected and investors focused on the prospects for further cuts. The Comit index eased 0.72 to 558.45 for a 3.6 per cent rise on the week.

Recent out-performers bore the brunt of profit-taking. Against the trend, Italmobiliare found favour with domestic fund managers, adding L1,500 or 3.5 per cent to fix at L44,500 before easing to L44,400 after hours.

MADRID closed virtually in balance, with banks higher and utilities mostly lower after Fecsa blamed low demand, low rainfall and the peseta devaluation for its decision not to pay a final dividend.

Fecsa fell Pta44 to Pta685 as the general index closed 0.92 higher at 256.33, up 1 per cent on the week.

AMSTERDAM saw early gains eroded after news of Wall Street's weak opening in modest trade with many investors extending the Ascension Day holiday into the weekend. The CBS Tendency index added 0.30 to 104.50, a weekly decline of 2.8 per cent. Heineken, under pressure in recent weeks, shed another 90 cents to Fl 177.90 on news of higher first quarter losses at its Spanish El Aguila affiliate.

STOCKHOLM advanced in heavy trading, mainly on foreign buying of the pharmaceutical group, Astra, and the telecommunications giant, Ericsson. The Affarsvarlden General index rose 16.2 to 1,092.7, up 1 per cent on the week. Astra A rose SKr21 to SKr751 and Ericsson B by SKr9 to SKr320 as turnover rose from SKr966m to SKr1.12bn.

HELSINKI climbed further after Wednesday's news that a threatened labour market conflict had been settled, the Hex index rising 31.06, or 2.5 per cent to 1,248.24, up 7.2 per cent on the week. Dealers said that hopes of lower interest rates and the affirmative Danish vote on Maastricht had also created optimism.

COPENHAGEN ended a politically crucial week with the Maastricht result that it expected and and the CSE index 0.23 lower at 303.66, stood 0.5 per cent down from its May 14 peak.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ May 21 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes* Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1154.83 1155.16 1154.80 1154.49 FT-SE Eurotrack 200 1218.72 1218.66 1217.88 1216.90 ------------------------------------------------------------------------ Hourly changes* 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1155.26 1155.74 1156.02 1155.78 FT-SE Eurotrack 200 1216.41 1216.18 1215.95 1215.46 ------------------------------------------------------------------------ May 20 May 19 May 18 May 17 May 14 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1156.03 1147.97 1152.98 1146.07 1148.21 FT-SE Eurotrack 200 1220.19 1212.27 1217.75 1214.06 1212.97 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1156.65; 200 - 1220.32 Low/day: 100 - 1153.31 200 - 1213.69 *Partial. ------------------------------------------------------------------------

DE Germany, EC CH Switzerland, West Europe IT Italy, EC ES Spain, EC NL Netherlands, EC SE Sweden, West Europe FI Finland, West Europe DK Denmark, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 21 688
London Stock Exchange: Rights issue worries restrain equities Publication 930522FT Processed by FT 930522 By STEVE THOMPSON

A TURBULENT week in the London equity market drew to a close with prices of the leading blue chips moderately easier as dealers continued to fret about cash demands on the market and ignoring more good news on the domestic economic front.

Continuing the trend of recent weeks, however, the second-line stocks attracted renewed buying interest from the big institutions.

The FT-SE 100 index ended the day a net 4.6 lower at 2,812.2, down 34.8, or 1.2 per cent, on the week. Over the two-week account, however, the index has risen 18.5, or 0.6 per cent. The FT-SE Mid 250 index extended its strong showing, moving up 5.0 to a record 3,165.1; on the week the 250 index rose 22.8, or 0.7 per cent. Over the account the 250 index showed a gain of 55.76, or 1.8 per cent.

Gilt-eged stocks rose strongly in mid-session, helped by the upward move by sterling after the economic data, but lost ground towards the close of business as the pound eased against the dollar, although maintaining its strength against the D-mark.

Longer-dated gilts, up around 1/4 at the day's best, eventually closed around 3/16 down on balance. Index-linked, meanwhile retained gains of around 1/4 , having been up 3/8 earlier in the session.

The FT-SE 100 began the day in good form, opening around six points higher in response to Wall Street moving up to an all-time high overnight. The market's optimism was quickly dented, however, by the latest fund raising moves in London. Brixton Estates joined a long list of companies seeking additional capital asking shareholders for Pounds 100m, albeit at favourable terms. This week's heaviest calls have come from British Airways, which is raising Pounds 442m and Allied Lyons, asking for Pounds 200m via a convertible rights. Saatchi & Saatchi launched a Pounds 73m cash call while Compass proposed an Pounds 86m call. The market was awash yesterday with suggestions that the new trading account could well see another wave of funding calls with the property sector said to be a prime area.

The cash market was firmly in negative territory within an hour of the opening and dropped to the day's low, down 15.7 FT-SE points, as Wall Street opened with a fall of around 15 points on the Dow Jones Average. A gradual recovery in the US steadied London towards the close. Turnover was a healthy 699.2m shares.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 434
London Stock Exchange: New highs and lows for 1993 Publication 930522FT Processed by FT 930522

NEW HIGHS (148).

BRITISH FUNDS (1) Treas. 7 1/4 pc '98 A, AMERICANS (1) Lowe's, CANADIANS (1) Hawker Siddeley Can., BANKS (7) Bk. Scot., Barclays, Mitsubishi, Natl. Aust., NatWest., Sumitomo, Toyo T & B, BLDG MATLS (5) BPB, Br. Dredging, Johnston, Manders, Wolseley, BUSINESS SERVS (3) Br. Data Mngemt., ISS, Securiguard, CHEMS (2) Ellis & Everard, Porvair, CONGLOMERATES (1) Cannon St. Inv., CONTG & CONSTRCN (5) Ashtead, Crest Nicholson, Gleeson, Hewden-Stuart, McAlpine, ELECTRICALS (1) BICC, ELECTRONICS (1) Control Techs., ENG GEN (3) Haden MacLellan, Richardsons Westgarth, Vosper, FOOD RETAILING (1) Greggs, HEALTH & HSEHOLD (1) Swallowfield, INSCE COMPOSITE (1) Domestic & Gen., INV TRUSTS (27) Brazilian Inv., Do Wts., Candover, City of Oxford Zero Pf., Cons. Venture, EFM Inc., Elect. & Gen., Flmg. High Inc., Gartmore Emrg. Pac., Gartmore Scot., Henderson Strata, Jos Cap., Lloyds Smllr. Co's Cap., M & G Recovery Pckg. Units, Do Zero Pf., Martin Currie Pac., Do Wts., Mezzanine Cap. & Inc., Oriental Smllr. Co's, RIT Cap., Do 2 1/2 pc Cv. '00, River & Merc. Geared Prf., Scot. Asian Wts., Second Cons., TR Prop., Templeton Emrg. Mkts. Wts., Yeoman, MEDIA (9) Holmes Marchant, Metro Radio, Mirror, Sterling Publs., Taylor Nelson AGB, Trinity, Ulster TV, WPP, Watmoughs, MERCHANT BANKS (2) Kleinwort Benson, Warburg, MTL & MTL FORMING (3) Castings, Cook (Wm), Cooper (Fr), MISC (8) AB Consulting, Airsprung Furn., Danka, Fairway, Frost, Gt. Southern, Lionheart, Young (H), OIL & GAS (2) Aminex, Blackland, OTHER FINCL (1) East German Inv., PACKG, PAPER & PRINTG (5) Capital Inds., Enso-Gutzeit, Jarvis Porter, Kymmene, Stat-Plus, PROP (33) Allied London, Asda Prop., Barlows, Bilton, British Land, Do. 8 5/8 pc Cv. Pf., Brixton Est., Burford, Dencora, Derwent Valley, Evans of Leeds, Five Oaks, Gt. Portland, Green Prop., Hambro Countrywide, Helical Bar, Hemingway, Land Sec., MEPC, Molyneux, PSIT, Safeland, Savills, Scot. Metropolitan, Shaftesbury, Slough Ests., Southend Prop., Do Wts., Tops Ests., Town Centre, Trafford Park, Warner Est., Wates City of Lon., STORES (1) Kleeneze, TEXTS (6) Albion, Alexandra Workwear, Dewhirst, Gaskell, Lamont, Leeds, TRANSPORT (6) Br. Airways 9 3/4 pc Cv., Dawsongroup, Forth Ports, P & O 5 1/2 pc Prfd., Sea Cntrs., TIP Europe, SOUTH AFRICANS (1) Gold Fields, MINES (10).

NEW LOWS (36).

BRITISH FUNDS (3) Treas. 12 1/2 pc '93, Treas. 13 3/4 pc '93, Exch. 13 1/2 pc '94, BREWERS (1) Bass, BLDG MATLS (1) Chieftain, BUSINESS SERVS (3) Hogg Robinson, Rentokil, Sherwood Cmptr., CHEMS (2) Allied Colloids, Courtaulds, CONTG & CONSTRCN (2) Andrews Sykes, Baris, ELECTRONICS (2) Forward Tech., Linx, ENG GEN (1) Simon Eng., FOOD MANUF (5) Cadbury Schweppes, Dalgety, Tate & Lyle, Do 7 1/4 pc Pf., Unilever, FOOD RETAILING (1) Argyll, HEALTH & HSEHOLD (6) Bespak, Haemocell, London Intl., Proteus, Reckitt & Colman, Smith & Nephew, INSCE BROKERS (1) Bradstock, INSCE COMPOSITE (1) Comm. Union, INV TRUSTS (1) Kleinwort Endowment Policy, MEDIA (1) Radio Clyde, MISC (3) Business Tech., Cosalt, Shanks & McEwan, OTHER INDLS (1) Williams 8p Prf., STORES (1) Owen & Robinson.

GB United Kingdom, EC US United States of America CA Canada ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 534
London Stock Exchange: LIG declines Publication 930522FT Processed by FT 930522 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Condom manufacturer and photo processor London International saw its shares fall 7 to 178p on news that Superdrug the high street retailer had slashed the price of condoms by a third. The news led to fears of a price war in the same mould as recent battles over perfume and suncare products. One analyst pointed out that prices cuts were most likely to be suffered by the retailer rather than the manufacturer.

Nevertheless, the concerns gave an opportunity for dealers to mark down the price of what has become an unloved stock following a poor performance by its photo processing arm and a recent censure by the stock exchange over the selective dispensing of information. Also dragged into the mire was Boots, which fell 11 to 435p, with Morgan Stanley said to have also downgraded its profit forecast.

Lubricants and chemicals company Burmah Castrol fell sharply as financial advisers drew parallels with Brent Chemicals, which issued a profits warning on Thursday.

Both companies have significant exposure to Germany - Burmah generates a fifth of its turnover there - and there was additional pressure from a weak D-Mark.

Burmah's shares were off 22 at one stage but securities house SGST argued that the company was 'one of the few reliable success stories around', and advised clients to see the price weakness as a buying opportunity. The shares recovered to close 15 lower at 688p.

Brent bounced 3 to 102p but other chemicals groups were dragged down by the worries it expressed. Courtaulds fell 10 to 517p and Laporte lost 6 to 607p.

Kleinwort Benson was one broker said to be recommending the regional electricity stocks, strong in recent sessions on dividend hunting ahead of the results season. East Midlands, which announced a restructuring yesterday, added 8 1/2 to 457p and Norweb 12 to 503p.

British Gas fell 8 1/2 to 285 1/2 p on renewed concern over an on-going Monopolies and Mergers Commission inquiry, due to report at the end of July, and negative press coverage of the company's earnings prospects.

Profit-taking in Next, following the group's agm, sent the shares down 6 1/2 to 164 1/2 p. retail sales were in line with forecasts but hopes had been raised after bullish noises from other retailers - with a consequent rise in the shares.

An agency cross in Morrison Supermarkets of 4.8m, left the shares a penny adrift at 161p.

Shares in Bass, which have fallen 15 per cent in three days following poor results, tested the 450p level before finding support. They closed 2 ahead at 464p.

P&O, with substantial property interests, was one of the main beneficiaries of the re-appraisal of property stocks. Strong demand from Salomons saw the shares jump sharply but they came back on subsequent profit-taking to close 11 better at 603p. Ladbroke Group, also exposed to property, gained 3 to 179p.

Recovery buying boosted British Airways and the shares put on 9 to 310p. Volume was 4.3m at the close. Volume in Vickers jumped to 4.7m after an agency cross of 2.2m shares. The stock hardened a penny to 142p. Strong two-way business in British Steel saw the shares firm 1 1/4 to 99 1/2 p.

Securiguard, the subject of a bid from Rentokil Group, added 2 to 292p, on speculation that its predator would be forced to make a higher offer to win control. Talk of an alternative offer was also heard. Rentokil eased 3 to 185p.

London International Group Boots Burmah Castrol Brent Chemicals International East Midlands Electricity NORWEB Peninsular and Oriental Steam Navigation GB United Kingdom, EC P3089 Plastics Products, NEC P5912 Drug Stores and Proprietary Stores P2869 Industrial Organic Chemicals, NEC P2819 Industrial Inorganic Chemicals, NEC P2992 Lubricating Oils and Greases P4911 Electric Services P4482 Ferries CMMT Comment & Analysis P3089 P5912 P2869 P2819 P2992 P4911 P4482 The Financial Times London Page 15 663
London Stock Exchange: Banks marked down Publication 930522FT Processed by FT 930522 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

A welter of 'also-ran' recommendations in the banking sector was countered by the realisation that the sector index had closed above the FT-All share for the first time in 16 years.

Rather than celebrate, marketmakers on the banking pitches took the moment as a perfect opportunity to take profits and most of the banks closed down on the day.

The morning rise was partly prompted by BZW which issued a buy note saying banks had benefited from recession by being able to justify greater charges and cutting costs. Also, Mr John Aitken at UBS recommended NatWest and Lloyds after raising 1993 forecasts.

NatWest was marked up 14 in early trading but sold down throughout the day to close 2 lower at 473p. Lloyds was 11 higher but closed a net 7 off at 541p and Barclays turned around from a high of 470p to end the day 3 lighter at 457p.

The day's exceptions were Bank of Scotland and Royal Bank of Scotland which rose 5 to 146p and 4 to 282p respectively. They benefited from a sharp rise in results announced by National Australia Bank.

National Westminster Bank Lloyds Bank GB United Kingdom, EC P6021 National Commercial Banks CMMT Comment & Analysis P6021 The Financial Times London Page 15 232
London Stock Exchange: Property cash calls rumoured Publication 930522FT Processed by FT 930522 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

A SPATE of rights issues in the property sector was being predicted following Brixton Estates successful Pounds 100.7m cash call yesterday.

Analysts said the renewed appetite for the sector was likely to encourage other property groups to come to the market. Hammerson in particular, and MEPC, were widely tipped to follow suit within the next two weeks. They would be likely to seek combined funds in the region of Pounds 500m, and smaller property companies are also likely to join the fray.

Rights issues are seen as important for those companies needing to buy good quality properties to ensure healthy cash flow. Meanwhile, with property shares again racing forward yesterday, some property specialists underlined their caution over embracing the whole sector. Mr Marc Gilbard at NatWest Securities said: 'We prefer to be more selective. While institutional appetite is high at the moment and supporting both issues and share rises, when it runs out the quality differentiation will return.'

A more bullish Mr Andrew Causer at James Capel said: 'The sector has gone ballistic. Investors should be buying across the board for a significant recovery in the direct market in 1994 and 1995.'

Among the leaders, Land Securities jumped 9 to 574p, British Land 12 to 314p and MEPC 7 to 437p. Brixton's rise of 11 to 207p seemed to support criticism from some analysts that the rights issue discount was too large. The cash call talk around Hammerson pulled the 'A' shares back to close 2 down at 337p.

Brixton Estate Hammerson Property Investment and Development Corp MEPC GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 15 302
London Stock Exchange: Equity futures and options trading Publication 930522FT Processed by FT 930522 By JOEL KIBAZO

WORRIES that the London market might have to soak up a spate of rights issues and fears of a turnaround on Wall Street led to a slide in stock index futures yesterday, writes Joel Kibazo.

In a volatile session, the June contract on the FT-SE started trading at 2,828. A sizeable sell order brought a decline but June was later boosted by the late morning release of favourable inflation figures. It was then that June hit the day's high of 2,832.

However, talk of a flood of rights issues particularly in the property sector, and fears that the New York market would start to tumble following its recent strength once again encouraged strong selling and the contract fell to the day's low of 2,803 in the last half hour of trading.

June finished at 2,812, more or less in line with the cash market on volume of around 11,000 contracts.

The main feature in the traded options was the expiry of the May Index options at 10.30 am. Total volume was 35,517 lots with Land Securities the most active issue.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 15 215
Money Markets: Sterling contracts up Publication 930522FT Processed by FT 930522 By JAMES BLITZ

THERE was a fractionally more bullish tone about UK base rate cuts yesterday after Britain's inflation figures came in slightly better than had been expected, writes James Blitz. The retail prices index showed a 1.3 per cent rise in inflation in the year to April after a year-on-year increase of 1.9 per cent in March. This meant that there was an overall fall of 0.6 percentage points in the inflation rate.

The move from the poll tax to the council tax had a big impact in forcing down the inflation rate.

Dealers in interest rate futures markets took the view that the lower inflation rate would make a cut in UK base rates possible if the authorities decided to introduce one later this year.

However, the June contract rose only 3 basis points closing at 93.95, a level that was more or less consonant with 3-month sterling cash.

The September contract rose 10 basis points at one stage, to a high of 94.06, later falling back to close at 94.02. Trading in the September contract was a great deal heavier than for June, indicating that the market believes a cut is more likely to happen in the autumn, if at all.

Rates in the sterling cash market softened slightly during the day. Three-month interest rates closed at 6 per cent, having been at 6 1/16 per cent earlier in the day. There was a daily shortage of Pounds 1.5bn in the discount market, with only Pounds 125m left as late assistance. The overnight rate fell as low as 4 per cent.

In Europe, Finland and Portugal joined in the general round of official interest rate cutting that has dominated the week of the Danish referendum. Finland reduced its tender rate from 8.59 per cent to 8.37 per cent. Portugal reduced its discount rate by 100 basis points to 13 1/2 per cent and its reference rate by 150 basis points to 14 1/2 per cent.

German futures contracts fell back yesterday as dealers took the view that the D-Mark's weakness on the currency markets might threaten the established pace of German monetary easing.

The September Euromark contract fell 7 basis points to close at 93.46. Call money also remained firm near Wednesday's level of 7.85 per cent with the drain on liquidity caused by this month's tax payments prompting the central bank to provide the market with short term funds.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 432
Foreign Exchanges: Sterling and yen surge ahead Publication 930522FT Processed by FT 930522 By JAMES BLITZ

THE D-MARK continued to show signs of weakness against most currencies yesterday, allowing sterling to break through the DM2.52 barrier at one point, and falling to new lows against the Japanese yen, writes James Blitz.

Yesterday's trading brought little in the way of fresh news to the market. However, the D-Mark continued to trend downwards at the end of a week which has brought Denmark's ratification of the Maastricht treaty and new confidence in European Monetary Union. Inside the European exchange rate mechanism, the French franc again broke below the FFr3.37 level against the German currency and closed at FFr3.365, despite the fact that most of the French market remained on holiday.

The Dutch guilder also broke through to a new 5-year high against the German currency, moving from NFl 1.1230 to a London close of NFl 1.120.

By the close of trading, the guilder was some 59 basis points higher than the D-Mark in the ERM grid.

Another indication of the D-Mark's softness was the fall in its ERM divergence indicator from minus 17 percentage points to minus 23 percentage points. It was 38 basis points above the weakest currency, the French franc. However, the D-Mark could recover next week if provisional data for consumer price inflation in Germany indicate lower annual inflation.

The dollar benefited from the D-Mark's general softness to close 1.4 pfennigs up on the day at DM1.6275. But sterling and the yen moved higher against the D-Mark as a result of special factors.

Sterling broke through the DM2.52 level, peaking at DM2.5215 following retail price inflation figures that were a little better than the market had expected. However, it later succumbed to profit-taking to close at DM 2.5075, down 1/4 pfennig on the day.

A good inflation figure would normally raise speculation of another base rate cut, weakening the currency. But Mr Mark Austin, an economist at Midland Global Markets in London, said the figure underlined that the government's inflation target was intact - and that this compounded the general confidence in the UK authorities following the Maastricht ratification vote in the House of Commons.

The Japanese currency also moved strongly against the D-Mark, closing at Y67.90. from a previous Y68.53. The yen is likely to remain on the firm side in the run-up to next week's trade talks between the US and Japanese government. In the wake of this week's very poor US trade figures, there are expectations that the US authorities will again push Tokyo into a strong yen policy.

DE Germany, EC NL Netherlands, EC US United States of America GB United Kingdom, EC JP Japan, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 465
International Company News: Nintendo ahead as sales rise strongly Publication 930522FT Processed by FT 930522 By MICHIYO NAKAMOTO and WAYNE APONTE TOKYO

NINTENDO, the Japanese company that leads the video games market, yesterday reported a 5 per cent increase in pre-tax profits to Y163.8bn (Dollars 1.48bn) for the year to end-March, as sales of its games continued to rise strongly.

Nintendo said demand for its most advanced games machine, the Super Nintendo Entertainment System, grew strongly to support an 11 per cent rise in sales to Y562.75bn from Y507.50bn the year before.

Net income rose 2 per cent to Y87.16bn and the directors are proposing to increase the net dividend by Y10 to a total of Y70 per share for the year.

Although Nintendo managed to stage a buoyant performance, it was not immune from the effects of the worldwide economic slump and the impact of the sharp appreciation of the yen.

The rise in earnings was however much lower than in the previous year when pre-tax profits rose 11 per cent and net profits by 21 per cent.

Nintendo, which has an export ratio of more than 60 per cent, expects to face a difficult trading environment in the year ahead, with the yen forecast to continue its rise and the Japanese and European economies unlikely to recover significantly in the near term.

The company faces growing competition in the games market not only from Sega, which has been building up its share of overseas markets, but also from new entrants into the market such as consumer electronics manufacturers.

Kyocera, the leading Japanese manufacturer of semiconductors, reported a 7.5 per cent fall in pre-tax profits to Y38bn for the year to March due to weak domestic demand, foreign exchange-rate considerations and lower interest rates, writes Wayne Aponte.

Net profits slipped by 13.9 per cent to Y20bn while sales dropped 5.2 per cent to Y300bn.

Nintendo Kyocera JP Japan, Asia P3944 Games, Toys, and Children's Vehicles P3674 Semiconductors and Related Devices FIN Annual report P3944 P3674 The Financial Times London Page 12 342
International Company News: Canadian airline hit by two setbacks Publication 930522FT Processed by FT 930522 By BERNARD SIMON TORONTO

CANADIAN Airlines International has suffered two potentially serious setbacks in its struggle to remain in the air as Canada's second leading airline.

Tokyo Leasing, a creditor of the airline, said yesterday that it would not support financial restructuring proposals in their present form, and declared Canadian in default on a Y10bn (Dollars 90m) loan.

In addition, a Canadian newspaper reported yesterday that the National Transportation Agency will urge the government to reject a proposed alliance between Canadian and American Airlines of Dallas. The NTA's findings are due to be made public next week.

The link between Canadian and American, which includes a CDollars 246m (Dollars 195.20m) equity injection by the US carrier, is crucial to Canadian's survival. Canadian has warned that it will collapse if the deal does not go through.

The NTA was reported to be unhappy with provisions of the deal which would give American Airlines control over some aspects of Canadian's business, including major capital expenditures. Under Canadian law, foreign shareholders are limited to a 25 per cent stake in a Canadian airline.

Canadian Airlines yesterday dismissed Tokyo Leasing's action as a negotiating ploy. It said that several other creditors have also filed default notices, and that negotiations with the leasing group are continuing.

Canadian Airlines International Tokyo Leasing American Airlines Inc CA Canada JP Japan, Asia US United States of America P4512 Air Transportation, Scheduled P7359 Equipment Rental and Leasing, NEC COMP Strategic links & Joint venture P4512 P7359 The Financial Times London Page 12 268
International Company News: Restructuring boosts Ricoh Publication 930522FT Processed by FT 930522 By WAYNE APONTE TOKYO

RICOH, a leading Japanese office automation equipment maker, yesterday announced a 52.2 per cent rise in pre-tax profits to Y11.6bn (Dollars 9m) for the year ended in March, and attributed the increase to its recent restructuring efforts.

Net profits rose by 1.8 per cent to Y4.9bn for the year, in spite of a decline in sales of 3.1 per cent to Y651.8bn. The Tokyo-based company had streamlined its product range and research capacity, and strengthened sales to offset the country's economic slump.

Brokers said the company's stock has risen in tandem with the overall advance of the Nikkei average since mid-March.

Ricoh Corp JP Japan, Asia P3579 Office Machines, NEC FIN Annual report P3579 The Financial Times London Page 12 136
International Company News: Directors reject Icahn's bid for E-II Holdings Publication 930522FT Processed by FT 930522 By JEREMY BENNALLACK-HART NEW YORK

MR CARL ICAHN has been rejected in his multi-billion dollar bid for E-II Holdings, the bankrupt parent company of Samsonite luggage, Culligan water softener and McGregor clothing.

The creditors committee of E-II advised the directors to turn down the Dollars 1.8bn all-cash offer made last week. E-II has its own reorganisation plan that will be put before a bankruptcy court on Monday.

The directors agreed with the rejection, saying that the reorganisation plan was 'in the best interests of all of E-II's constituencies, including its subsidiaries and employees,' because it allowed creditors to share in any appreciation in the value of the company.

The creditors committee indicated in its response to the bid that it 'was sceptical that a sale of E-II's assets at this time would maximise value'. But, a company statement added, the committee noted it would recommend that the new board, which will take office after consummation of the reorganisation plan, 'give con-sideration to' Mr Icahn's proposal.

E-II said yesterday that it was filing in court modifications to its reorganisation plan which would reflect a higher liquidation value and would provide 'a recovery to creditors in excess of the recovery which would have been received by them under a proposal made by Carl Icahn, had that proposal been capable of being implemented'.

The company said that, from studying the offer, 'it became obvious that there were no firm financing arrangements supporting the Icahn proposal, and that the Icahn proposal did not take into consideration a number of critical legal and financial requirements for confirmation or the significance to the company of the settlements reached with certain creditors'.

Mr Icahn, who owns almost 32 per cent of the group's junior bonds, reacted by saying that E-II 'has finally admitted what we charged all along - that the values used in formulating the plan were materially understated to the dis-advantage of the junior creditors'.

Earlier, he said after his offer was rejected that he would be at Monday's court hearing 'with the cash'.

E-II Holdings Inc US United States of America P3161 Luggage COMP Mergers & acquisitions CMMT Comment & Analysis P3161 The Financial Times London Page 12 380
International Company News: Bank move leads to Ciga shares being suspended Publication 930522FT Processed by FT 930522 By HAIG SIMONIAN MILAN

TRADING in the shares of Ciga, the Italian luxury hotels chain controlled by the Aga Khan, was suspended yesterday in a further twist to the group's long-running battle to remain afloat.

The suspension, which included Fimpar, the Aga Khan's holding company which controls Ciga, resulted from a formal request by the subsidiary of an Italian bank following the expiry of Dollars 100m revolving credit to Fimpar.

Istituto Mobiliare Italiano, the public sector investment banking and credit institution has taken legal action to freeze Fimpar's assets - triggering the share suspensions by Italy's Consob companies and stockmarket watchdog.

IMI's move followed the expiry earlier this month of the Dollars 100m three-year facility and failure so far to reach agreement on an extension.

'Fimpar was not aware of the initiative,' said Mr Claudio Miorelli, a Ciga official. 'We are now defining the terms of extending the facility,' he said. He played down the assets freeze as a 'formal procedural step' taken by IMI as lead manager of the syndicated credit facility.

Ciga Hotels Fimpar IT Italy, EC P7011 Hotels and Motels COMP Company News P7011 The Financial Times London Page 12 210
International Company News: Shake-up helps Bombardier advance 20% Publication 930522FT Processed by FT 930522 By ROBERT GIBBENS MONTREAL

BOMBARDIER, the Canadian aerospace and transit equipment group, yesterday unveiled a 20 per cent rise in first-quarter profits, due to a turnround in its consumer products and financial services divisions and a rationalisation programme throughout the group.

For the three months ended April 30, Bombardier's net profits rose to CDollars 39.2m, or 25 cents a share, from CDollars 32.7m, or 21 cents a share, a year earlier, on sales of CDollars 993m, up nearly 6 per cent.

Bombardier Inc CA Canada P3799 Transportation Equipment, NEC P3743 Railroad Equipment FIN Interim results P3799 P3743 The Financial Times London Page 12 117
International Company News: Hollinger turns in flat first-quarter earnings Publication 930522FT Processed by FT 930522 By BERNARD SIMON TORONTO

HOLLINGER, the holding company for Mr Conrad Black's international publishing group, has reported flat first-quarter earnings.

An improved performance by the 68 per cent-owned Telegraph group in the UK was not reflected on Hollinger's bottom line as a result of the weakening of the pound against the Canadian dollar and the reduction of Hollinger's stake at the time of the Telegraph's listing last July.

Hollinger's net income from continuing operations was CDollars 6.8m (USDollars 5.4m), or 8 cents a share, up from CDollars 6.6m, or 7 cents a share, a year earlier. Revenues dropped slightly to CDollars 205.7m from CDollars 209m.

These figures exclude an unusual gain of CDollars 18.5m this year and a charge of CDollars 38.4m in 1992.

Excluding these charges as well as discontinued operations and the cost of Hollinger's recent purchase of a stake in Canada's Southam Newspapers, first-quarter earnings were CDollars 13.7m, or 20 cents a share, compared with losses of CDollars 31.7m, or 63 cents a share, a year earlier.

Hollinger Inc CA Canada P2711 Newspapers FIN Interim results P2711 The Financial Times London Page 12 201
World Commodities Prices: Spices Publication 930522FT Processed by FT 930522

White pepper prices showed a steady undertone, Man-producten reports. Spot Muntok USDollars 1,675 a tonne, May-June Dollars 1,575 cif ebp; black pepper unchanged. Indonesian cassia steady; ka/va sticks spot Dollars 2,260, shipment Dollars 2,070. Madagascan cinnamom FFr 6.20 a kg spot, FFr 5.65 shipment cif; Seychelles spot Dollars 1,375 a tonne, shipment Dollars 1,275 cif. China cassia lignea, whole Dollars 1,460, broken Dollars 1,300 cif. Cloves unchanged. Indonesian nutmegs/mace unchanged, Grenada at official quotes; bwp spot Dollars 700, shrivels spot Dollars 1,150. Pimento unchanged. Nigerian ginger unchanged, price Dollars 200-Dollars 600 ex-warehouse Rotterdam.

US United States of America FR France, EC P0161 Vegetables and Melons COSTS Commodity prices P0161 The Financial Times London Page 12 124
International Company News: Newmont shares prompt new gold rush - The Denver-based group's glittering attraction for investors Publication 930522FT Processed by FT 930522 By LAURIE MORSE

Mr Gordon Parker, long-time chairman of Denver-based gold producer Newmont Mining, is remarkably composed for a man who has just received a large and largely faceless group of new bosses.

'I've been institutionalised,' he jokes, referring to the portfolio and money managers who have bought nearly 30 per cent of Newmont's shares in the last six months.

Many of these investors rushed in following Mr George Soros' widely publicised purchase of a 14 per cent stake in Newmont on April 24. A spokesman for Mr Soros, who has some Dollars 7bn under global management, says the investment is passive and Mr Soros will not seek a seat on the board.

Since the Soros trade gold prices have hit their highest level since 1991 and Newmont stock is at the top of its 52-week range.

Newmont's business is, literally, pure gold. Through its 90.1 per cent ownership of Newmont Gold it is the largest gold producer in North America. And the glitter of Newmont Gold's 19.5m ounces of gold reserves, most of them in the rich Carlin Trend area of Nevada, has proved irresistible to a generation of billionaire financiers.

Mr Parker, a South African mining executive who joined Newmont in 1981, has repelled Mr T. Boone Pickens, the US corporate raider who wanted to grab Newmont's gold mines in exchange for junk bonds in 1987. That forced Mr Parker into the arms of Consolidated Gold Fields to recover some of the Dollars 1.9bn debt incurred in the Pickens battle, and he later ended up with Lord Hanson as boss when Gold Fields was taken over by the Hanson conglomerate in 1989.

Sir James Goldsmith, the Anglo-French industrialist, who is perhaps the world's most prominent gold bull, became Newmont's main shareholder in 1990. Sir James came on board when Lord Hanson swapped Gold Field's 49 per cent stake in Newmont for about Dollars 1.6bn in US Pacific north-west forestry operations owned by Sir James and his partner Lord Rothschild.

His purchase coincided with a long-term sag in gold prices. Even the biggest gold bugs grew tired of waiting for inflation and global calamity to bolster prices. Enormous central bank gold sales, 600 tonnes net last year, stifled potential for a rally driven by the growing gap between gold demand and new production.

As gold prices headed for seven-year lows, Sir James and Lord Rothschild - through General Oriental Investments and RIT Capital Partners, their respective investment vehicles - began to wriggle out of their Newmont shares.

Newmont is a very efficiently run gold company, but investors buy gold company shares for exposure to the gold market, and the metal's performance has been dismal for the past decade. The long-term slide in gold prices has been much more bothersome to Newmont than the continual change of big shareholders.

As prices fall, all of the definitions of a gold mining company have to be re-examined. Reserves must be revalued and revenues slip, even if, as is the case with Newmont, production is rising. Newmont's income from continuing operations dropped to Dollars 90.6m, or Dollars 1.30 a share, in 1992, from Dollars 168.5m, or Dollars 2.49 a share, in 1990.

The fall was largely due to the sagging gold price. Mr Parker, despite his reputation as a conservative executive, is wildly speculative when it comes to pricing, and rarely hedges his production. Exposed to the market, Newmont Gold's average sales price dropped from Dollars 403 per ounce in 1990 to Dollars 379 in 1992.

Newmont Gold's production costs, at Dollars 210 per ounce, are among the lowest in the world, but margins have been squeezed. The company produced 1.59m ounces of gold in 1992, and plans 1.7m ounces of output this year.

Newmont's 40 per cent income drop hampered Sir James' plans to reduce his holdings, which comprised an uncomfortably large portion of his portfolio. General Oriental Investments and the RIT group managed to sell 1.8m Newmont shares to an Australian investor in October who immediately sold them on through Salomon Brothers to about 50 institutional investors. The deal received little notice, and gold prices continued their slide.

The machinations of the gold market are as opaque and malleable as the metal itself, and in a remarkable turnround, spot prices for an ounce of gold in New York rebounded from a January low of Dollars 328 to Dollars 347.50 on the April day that Mr Soros bought 10m Newmont shares from the Goldsmith group for Dollars 39.50 each.

Sir James, for his part, fanned the rally by telling the Press he had used the Newmont proceeds to buy call options on gold. His options position demonstrated he wanted to remain invested in gold, and its execution sent the traders who granted the options into the market to buy gold to back the trades. The deal worked neatly for Newmont, and for Sir James, who still held some 30 per cent of the company and sits on its board.

Three days after the widely-publicised Soros deal, Newmont unloaded its 14 per cent interest in an Australian gold producer, Newcrest, netting about Dollars 67m.

As the present gold fever which he helped to start worked its way through world markets, Sir James sold another 10 per cent stake, or 6.5m Newmont shares, to a consortium of investment banks that quickly remarketed the block in a public offering at Dollars 45.50 per share. In another public relations coup, the May 11 offering coincided with the release of the widely-followed annual survey of the gold market by Gold Fields Minerals Services, which is partly owned by Newmont.

The data showed gold demand far outstripping production last year and pointed to China as an important gold buyer.

The excitement over gold may also help Newmont raise Dollars 115m to finance a 15-year gold-leaching venture in Uzbekistan. It expects the European Bank for Reconstruction and Development to put up Dollars 90m of the project finance, but is also courting other investors to help finance the deal.

Beyond the vagaries of the gold market, Newmont is well positioned for growth. It plans to spend Dollars 68m this year to find and develop gold reserves, more than half of this outside the US.

Its core operation, Newmont Gold, is mining lower-grade ore as it goes deeper into the Carlin Trend. The company is buying a Dollars 230m roaster to process some of this ore and is developing other extraction technologies.

Newmont Mining, meanwhile, is exploring properties in Nevada, near its existing operations, and in Oregon and Idaho. In August, production will begin at the company's 40 per cent joint venture in Peru, a low-cost, high-yield leaching operation. Together, Newmont's share of proven reserves in Oregon, Peru and Uzbekistan total 4.3m ounces. Two ventures in Indonesia and one in Thailand are also under development, with Newmont geologists prospecting in other areas in Asia, including Vietnam and China.

See Lex, Page 24

Newmont Mining Corp US United States of America P1041 Gold Ores CMMT Comment & Analysis PEOP People P1041 The Financial Times London Page 12 1198
Commodities (Week in the markets): Gold market surges still higher Publication 930522FT Processed by FT 930522 By RICHARD MOONEY

GOLD CONTINUED to hold centre-stage on the world commodities scene this week as options-related activity added to the upward momentum generated at the end of last month by the concerted operations of two high-profile international investors.

Most buyers seemed to have taken the day off on Monday following last week's exertions, but with producer selling not making its expected appearance the market was still able to edge up a few cents. That bolstered the buyers confidence and they had little trouble pushing the price through resistance at Dollars 370 a troy ounce on the way to Wednesday's 27-month high of Dollars 384.50 an ounce on the London bullion market.

That was more than Dollars 40 above the level ruling four weeks ago when the market learnt that Sir James Goldsmith had sold Dollars 400m worth of shares in Newmont Mining, the biggest US gold producer, to Mr George Soros and had used some of the money to buy gold options.

A retracement from the mid-week peak was linked by some New York traders to unconfirmed reports that Mr Soros had been selling gold. They said the reports had 'spooked' the market, although analysts were generally highly sceptical about them. 'They haven't achieved any credibility,' Mr George Milling-Stanley, analyst at Lehman Brothers told the Reuter news agency. But he thought they might nevertheless be doing the market a service by helping to 'shake out some of the silly money'.

The shake-out, which took the gold price down to Dollars 372 at one stage, seemed to be over yesterday, however, when it consolidated to end at Dollars 375.15 an ounce, up Dollars 1.90 on the day and Dollars 7.35 on the week.

Traders thought the short-term technical outlook remained bullish and there was optimism for the longer term. In a report issued yesterday Union Bancaire Privee, a Geneva-based private bank, suggested that a further rise in the gold price to between Dollars 380 and Dollars 400 an ounce looked justified in coming months. It said market fundamentals had improved with production levelling off, demand picking up and sales by Russia and central banks likely to diminish.

Looking still further ahead Mr Paul Lennie, deputy managing director of Mase Westpac, a leading bullion house, told mining analysts in London that he expected the bull market to be maintained over the next year. In the absence of central bank selling and with diminished forward sales by producers the gold price had to rise, he said, and heavy overhead resistance at Dollars 440 an ounce was likely to be tested 'sometime in the next 12 months'.

At the London Metal Exchange copper prices continued last week's rally, helped by a 6.7 per cent rise in April US housing starts, but failed to break resistance at the equivalent of Dollars 1,850 a tonne for the three months delivery contract. That level was briefly exceeded yesterday as the market continued to defy bearish fundamentals and shrugged off a further rise in exchange warehouse stocks to a nine-year high. But the price slipped back to just below Dollars 1,840 a tonne at the close. In sterling terms the three months position was Pounds 37 up on the week at Dollars 1,201.50 a tone.

Lead was again the weakest LME market as warehouse stocks rose to a fresh record of 254,125 tonnes. The three months price slide another Pounds 9 on the week to a 6 3/4 -year low of Pounds 265.25 a tonne.

Three months tin reversed an early rise to end Dollars 37.50 down on the week at Dollars 5,505 a tonne. It had touched Dollars 5,500 yesterday morning before finding support.

The market derived little encouragement from a meeting last weekend of the Association of Tin Producing Countries, from which officials were reported to have emerged confused about what action to take to try to shore up world prices.

Mr Redzwan Sumun, the association's executive secretary said its members, who account for about 60 per cent of world tin production, were debating whether it was worthwhile carrying on with their export quota scheme. The ATPC estimates world tin stocks at about 40,000 tonnes, double the level it had originally set as the target for the end of this year.

Producers outside the ATPC, like Peru, Burma, Vietnam and Portugal, have been increasing their tin exports, while the foreign exchange-hungry former Soviet Union, which used to be a big importer, has become an exporter.

London's robusta coffee market put in a stronger performance as short positions were covered against the possibility of progress being made at weekend producer talks on proposals to withhold beans from the market in an effort to push prices to more a remunerative level. The July position finished at Dollars 947 a tonne, up Dollars 19 on the day and Dollars 61 on the week.

Technically-inspired selling weighed down raw sugar prices and New York's October futures contract was trading late yesterday at 12.31 cents a lb, down 0.50 on the week, having moved below 12 cents at one stage.

Nearby prices are still some 30 per cent higher than they were three months ago but investors are looking for signs of improved demand before restoring the uptrend.

On the supply side there was more bullish news this week when C. Czarnikow, the London broker, cut its forecast of world production in 1992-93 by 3m tonnes to 111.6m tonnes. It now predicts a supply deficit of 2.84m tonnes.

------------------------------------------------------------------------ LME WAREHOUSE STOCKS (As at Thursday's close) tonnes ------------------------------------------------------------------------ Aluminium +4,625 to 1,796,975 Copper +2,125 to 413,675 Lead +3,275 to 254,125 Nickel +2,154 to 94,656 Zinc +6,875 to 655,375 Tin -125 to 20,360 ------------------------------------------------------------------------

US United States of America GB United Kingdom, EC P1041 Gold Ores P9311 Finance, Taxation, and Monetary Policy P1099 Metal Ores, NEC P1031 Lead and Zinc Ores P1021 Copper Ores P0179 Fruits and Tree Nuts, NEC P0133 Sugarcane and Sugar Beets CMMT Comment & Analysis COSTS Commodity prices P1041 P9311 P1099 P1031 P1021 P0179 P0133 The Financial Times London Page 11 1019
UK Company News: Finsbury Smaller plans to raise Pounds 10m Publication 930522FT Processed by FT 930522

Finsbury Smaller Companies Trust plans to raise about Pounds 10m through a placing and open offer of C ordinary shares and an open offer of C preference shares.

The C ordinary shares and C preference shares will convert into ordinary shares and zero dividend preference shares respectively by December 31.

The issue is fully underwritten by SG Warburg Securities and it is expected that dealings will begin in early July.

Finsbury Smaller Companies Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Share issues P6726 The Financial Times London Page 11 108
UK Company News: Albion advances 50% to Pounds 507,940 Publication 930522FT Processed by FT 930522

Pre-tax profits of Albion, the Northern Ireland-based maker of tailored mens wear, showed a 50 per cent improvement, from Pounds 338,378 to Pounds 507,940, in the half year ended March.

Turnover was up by Pounds 1.72m to Pounds 9.14m. Earnings per share came out at 9.6p (5.6p) and the interim dividend is being raised to 1.6p (1.2p).

The company said its order book was satisfactory, bearing in mind that trade on the high street remained highly competitive.

Further profit improvement is dependent on growth, the directors said. And with this in mind the acquisition of Maitland Menswear was finalised on April 30 this year.

Albion GB United Kingdom, EC P2311 Men's and Boys' Suits and Coats P2329 Men's and Boys' Clothing, NEC FIN Interim results P2311 P2329 The Financial Times London Page 11 148
UK Company News: Richards Pounds 0.33m in the red Publication 930522FT Processed by FT 930522

THE COLLAPSE in spending on home furnishings in the second half of the period left pre-tax profits at Richards, the Aberdeen-based textile company, with a pre-tax loss of Pounds 326,000 for the six months to March 31.

The comparable loss was Pounds 1.94m, restated for FRS 3, after taking in the loss of Pounds 1.65m on disposal of the linen activities. Operating losses this time were Pounds 349,000 against losses of Pounds 76,000, which included profits on continuing activities of Pounds 277,000.

In the second half the performance has improved with the housing market recovering and exports increasing.

Turnover was Pounds 34.6m (Pounds 37m) of which Pounds 144,000 (Pounds 1.88m) related to discontinued activities. Losses per share came out at 0.63p (5.97p). The interim dividend is held at 1.07p.

Richards GB United Kingdom, EC P2281 Yarn Spinning Mills P2273 Carpets and Rugs FIN Interim results P2281 P2273 The Financial Times London Page 11 168
Economic Diary Publication 930522FT Processed by FT 930522

TOMORROW: Cambodians vote in UN-organised elections.

MONDAY: Balance of trade with countries outside the European Community (April). Second African/African-American summit in Libreville (until May 29). European Community agriculture ministers meet in Brussels to agree 1993-94 farm price package (until May 25). European Parliament in session in Strasbourg. Office of Electricity Regulation publishes annual report on electricity supply.

TUESDAY: Capital expenditure and stockbuilding (first quarter-provisional). UK output, income and expenditure (first quarter). US consumer confidence (May). National conference in Louisville, Kentucky, to follow up last year's Rio earth summit (until May 29). Nato defence planning committee and nuclear planning group hold ministerial session in Brussels (until May 26). European Community development council meets in Brussels. Start of two-day Financial Times conference on 'Asian Electricity- The Growing Commercialisation of Power Generation' in Singapore. International conference on railways at Wembley Conference Centre. Preliminary figures from Thorn EMI.

WEDNESDAY: New construction orders (March-provisional). US durable goods (April). Commonwealth of Independent States summit meeting in Moscow. CBI holds conference 'Private finance for Public Projects' in London. Speakers include Mr Norman Lamont, Mr John MacGregor and Mrs Virginia Bottomley. Preliminary figures from Courtaulds.

THURSDAY: Engineering sales and orders at current and constant prices (March). New vehicle registrations (April). Energy trends (March). US jobless claims. BankAmerica Corp annual meeting.

FRIDAY: Confederation of British Industry publishes trends enquiry (May). US gross domestic product (first quarter- preliminary); merchandise trade and balance of payments (first quarter). House of Commons rises for Whitsun recess (until June 7).

XA World P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 11 271
UK Company News: Brent bears brunt of recession - Trading at the chemicals group has hit a wall Publication 930522FT Processed by FT 930522 By RICHARD GOURLAY

LORD LANE of Horsell, chairman of Brent Chemicals and grandee of the Conservative party, is not a popular man in the City. In March his chairman's statement accompanying the results rang with confidence for the future; though European markets were weak, the US market was improving, and he praised the successful strategy of expanding internationally.

By this Thursday, his view had changed dramatically. Lord Lane told the AGM that profits for the speciality chemicals company for the first half would be well below those for the same period in 1992.

US recovery has not worked through to industrial companies, and in continental Europe - which provides 55 per cent of profits - recession, particularly in Germany and Spain, has hit hard. As a result, the shares shed 26p to 103p, down from the 165p high in March, leaving analysts floundering as to where they should pitch forecasts for the year.

From owning a share that carried an above average yield and some recovery potential, shareholders must now question whether their dividend will still be paid - or at least whether it will be covered by earnings.

Mr Steve Cuthbert, chief executive, chooses not make a profits forecast. Chastened and disappointed, he does say the following; 'A shareholder concerned if he would get a dividend or not would be over-reacting to the position.'

But the abrupt turnround in trading is not the first time Brent shareholders have been disappointed by their board. The company's progress has been funded partly by organic growth. But it has also had a string of placings and rights issues, to the extent that earnings per share are lower now than they were in 1987.

Most recently Brent followed a 1991 rights issue to buy Hebro in Germany with a March 1992 profits warning. Credibility was just beginning to be restored when this latest warning came. While the Stock Exchange might applaud Brent for favouring a public statement, rather than a series of meetings with key brokers, the City would have preferred more realism first time around.

As often happens when a company's trading hits a wall, attention has focused on the balance sheet it must now fall back on. While the company has called this 'strong' and claimed no net debt at the end of last year, some analysts remain concerned. With unfortunate timing, Hoare Govett's long time bear of Brent, Mr Martin Evans, turned a buyer only days before the latest profit warning, but even then pointed to the creeping level of debt.

One reason for this is deferred payments for past acquisitions. Payments of Pounds 7.8m this year - Pounds 5.7m is payable in 1994 - would have pushed gearing to 40 per cent by the end of 1993 on the pre-warning figures. Mr Cuthbert recognises it will be somewhat higher now.

But Brent does not include another Pounds 6.5m of finance leases or Pounds 12m of preference shares, which some analysts think should be considered as part of debt. It is stretching definitions to call this a strong balance sheet, although Mr Cuthbert says interest is covered seven times by profits.

Operationally, Brent is facing considerable constraints. It has a limited scope to improve profits in Germany - which accounts for 30 per cent of income - or in the rest of Europe, which together provided 55 per cent of the Pounds 11.5m profits in 1992. With the exception of British Vita, Brent has the highest relative exposure to the weakening Continental economy of any UK chemicals company.

And the company has already enjoyed 18 months of the usual cost cutting and overhead control medicine. It therefore remains heavily dependent on these unpromising economies, slowing their slide into recession.

Sales of some of its products - packaging inks and coatings, and metal treatment chemicals - are heavily dependent on an economic upturn in its markets - a factor which even better management could not control.

Brent now has an exceptionally tough task to restore credibility and some shareholders may decide they have had enough.

Its message about European and US markets has not been missed by a wider audience. Following Brent's warning, Burmah Castrol shares fell yesterday on fears of its German exposure through its Foseco subsidiary. Courtaulds and Hickson also slipped. Recovery may be around the corner, but it is turning out to be a longer corner than many imagined.

Brent Chemicals International GB United Kingdom, EC P2869 Industrial Organic Chemicals, NEC P2819 Industrial Inorganic Chemicals, NEC FIN Annual report CMMT Comment & Analysis P2869 P2819 The Financial Times London Page 11 787
UK Company News: Sticky patch for abrasive entrepreneur - The career of Clive Smith, former chairman of Petranol Publication 930522FT Processed by FT 930522 By KENNETH GOODING

MR CLIVE Smith was 25 years old when he made his first million pounds. He had started with one truck, built up a transport company and sold it to Unilever.

Mr Smith had expanded the business by trucking subsidised meat from the Irish Republic to Turkey. He claims that, by the time he sold it, Comarte Europa International, was the biggest international refrigerated transport company in the European common market.

That sale was in 1974, paving the way for Mr Smith, a self-made man with a flair for deal-making, to move on to promote the Stock Exchange flotation of several natural resources companies in the 1980s.

At the moment his career has hit a sticky patch. The share prices of many of the companies in which he has substantial shareholdings have collapsed. The Serious Fraud Office is investigating possible irregular share dealings in two of them - Butte Mining and Richmond Oil & Gas - and he is negotiating with his cred-itors.

He had a three-year contract with Unilever to continue managing Comarte but his style did not match that of a big corporation and the contract was ended by mutual agreement after 12 months.

He subsequently owned and managed companies in industrial property, plant hire, industrial chemicals and car hire and leasing. He once told a colleague that he became fascinated by commodity trading. Then one day which is for ever etched in his memory, he made a Pounds 100,000 profit in the morning but lost Pounds 250,000 in the afternoon. 'I realised commodity trading could become addictive so I quit,' he said.

Mr Smith had his first taste of what the natural resources sector had to offer in September 1977 when he acquired Parkland Colliery, a private coal mine needing modernisation. It was a wonderful deal. Parkland had cash in its books but he bought the company on deferred terms. He had already established, drawing on his transport and plant hire experience, that Parkland owned a great deal of good, saleable mechanical equipment and plant. Asset sales covered the whole of the purchase price.

Colleagues say the simplicity of the Parkland deal made an indelible impression on Mr Smith. 'He always looks for deals where there is no downside for him,' said one.

In 1978 he acquired Podmore Hall Colliery Company which had a license to mine substantial coal reserves. By 1981 Podmore had become the biggest privately owned coal mine in the UK. That year both coal companies, which had been bought for a total of Pounds 250,000, were sold to Anglo International Mining for Pounds 1.875m.

Mr Smith said at the time that he sold out of coal because he felt that investment in the production and development of oil and gas would show a greater return on his capital. So he invested some of the proceeds in the US oil and gas industry. In September 1981, with some partners, he set up a chemical trading company to supply the oil and gas industry. Through the contacts this brought, Mr Smith was introduced to some oil and gas prospects and in October 1982 his company acquired its first interest in this sector.

In 1983 the company changed its name to Petranol and in February the following year it was launched on the London Stock Exchange. Some 2.8m shares, or 27 per cent of the equity, were offered for sale at 125p a share, valuing Petranol at Pounds 13m. Mr Smith controlled 3.8m shares or 36.5 per cent, worth, at the launch, Pounds 4.75m.

The Petranol launch forced Mr Smith into the public eye for one of the very few times in his career. It was a time when Dallas was among the most popular television shows so for a while newspapers were calling him 'the JR of the Potteries'.

In fact, his home is between Nantwich and Crewe and some of his acquaintances call him, unkindly, because he lost a thumb in a car accident, 'the nine-fingered, fat man from Cheshire.' This is not entirely fair because, although a little portly, Mr Smith is not fat. One acquaintance says: 'It is just that he looks as if he lives on chip butties.'

He has a benevolent but forceful north country manner and can be very charming. But he can also be volatile if he is crossed. 'He likes to bark at people and uses lawyers letters and writs a lot,' said one business colleague. Another said: 'He is a guy who is easy to fall out with. He can be very charming but he can be abrasive too.'

Like many north country businessmen, often with good reason, Mr Smith is very distrustful of the City and its establishment.

This distrust intensified after the Petranol board in March 1986 voted him out of the chairmanship. He subsequently left the board but was back in the limelight again only weeks later when Petranol received an all-paper bid worth Pounds 21m from another small oil and gas company, Inoco.

The Takeover Panel intervened and took the unusual step of ruling that Inoco and Mr Smith had been acting in concert. It said Inoco should add a cash alternative to its offer. Inoco did not have the financial resources for this so it had to drop the bid. At that time it was said Inoco owned 6.6 per cent of Petranol and Mr Smith 25 per cent. They undertook to reduce their combined holdings to below the 29.9 per cent which automatically triggered a bid.

Mr Smith seems to prefer to keep in the background, often not even taking a non-executive directorship in those companies he has helped bring to market or in which his family trusts have big shareholdings.

Consequently he uses a large number of people to do his bidding. One person who has had business dealings with Mr Smith says: 'He has more accountants and advisers than anyone I have ever known. He also has used up more lawyers than anyone I have ever known.'

Mr Smith recently described himself as 'an independent businessman who acts internationally as an adviser and consultant in the sale and purchase of companies, generally with oil, gas or mineral assets in the US.'

Virtually all of his interests are held in offshore trusts. 'My entire affairs are dealt with offshore by different administrators,' he said recently. He has told acquaintances that this is because he does not trust the City of London and its representatives.

In spite of this dislike, Mr Smith took a substantial shareholding in Corporate Broking Services, set up by Mr David Wilkinson after he left TC Coombes, another stockbroker. Mr Smith had several dealings with Coombes which in the mid-1980s was one of the most aggressive broking houses in the natural resources sector. Coombes went into receivership and CBS went into liquidation in 1991.

These brokers were involved with Mr Smith in the Stock Exchange flotations of Butte Mining, Richmond Oil & Gas and Globe Petroleum (launched first as Far East Resources). Mr Smith also took a substantial shareholding in another resource company, Geevor, which started as a Cornish tin miner.

Acquaintances speak in awe of Mr Smith's capacity for hard work. He frequently commutes on the 7am train from Crewe to London and does not return until 11 at night. 'You can often find him in his office at midnight,' said one.

In his more mellow moods, Mr Smith frequently tells people that he is not interested in money for himself but is working to secure the future of his two daughters.

However, some acquaintances suggest that, like many entrepreneurs today, he is not as rich as he once was and that many of his assets are pledged to the banks as collateral for loans.

Butte Mining Richmond Oil and Gas Petranol Globe Petroleum Geevor GB United Kingdom, EC P1099 Metal Ores, NEC P1311 Crude Petroleum and Natural Gas PEOP People CMMT Comment & Analysis P1099 P1311 The Financial Times London Page 10 1354
UK Company News: New computer trade association Publication 930522FT Processed by FT 930522 By ALAN CANE

A GROUP of small UK personal computer companies yesterday launched a new trade association with the object of improving the reputation of suppliers who sell 'direct' - through newspaper and magazine advertisements, writes Alan Cane.

Mr Keith Warburton, a personal computer consultant and founder of the Personal Computer Direct Marketers' Association said it had been formed after the failure of a number of direct marketing companies in recent months.

The PCDMA will not reimburse customers for money lost if a company fails but it insists that its members meet minimum standards including a two year track record.

The larger personal computer companies have shown little interest in joining the association.

GB United Kingdom, EC P8611 Business Associations NEWS General News P8611 The Financial Times London Page 10 142
UK Company News: Isosceles agrees debt package and standstill extension with lenders Publication 930522FT Processed by FT 930522

ISOSCELES, the heavily-indebted parent of the Gateway food retail chain, said yesterday that its lending banks had agreed a restructuring package for its Pounds 1.4bn debts.

Its current standstill agreement, under which debt repayment was suspended last year pending agreement on the restructuring, has been extended beyond its May 28 deadline.

This is to allow time for shareholders to decide on the package at an extraordinary general meeting likely in the last week of June.

The restructuring, put to lenders in early April, creates a new company, Gateway Holdings, to assume responsibility for Pounds 500m of debt, while the balance of about Pounds 923m will remain in Isosceles in a restructured form.

Gateway Holdings will run the Gateway Foodmarkets Group and will be wholly-owned by Isosceles, a highly leveraged management buy-out vehicle. It ran into trouble when recession and the slump in values of retail businesses meant that disposals planned to cover debt could not be made at high enough prices.

Gateway Holdings will have no liability for Isosceles' debt and in effect will be 'ringfenced' from the borrowings.

Gateway this week announced a price and promotion campaign, making permanent price reductions on between 1,000 and 1,500 lines across a range of products.

Isosceles Gateway Holdings GB United Kingdom, EC P5411 Grocery Stores COMP Company News P5411 The Financial Times London Page 10 241
UK Company News: Spring Ram board wins day on auditor Publication 930522FT Processed by FT 930522 By IAN HAMILTON FAZEY, Northern Correspondent

ANGRY small shareholders tried but failed to oust Arthur Andersen as auditor to Spring Ram, the manufacturer of kitchens, bathrooms and home improvement products, at the company's AGM in Leeds.

They won on a show of hands by 48 to 40, but Mr Bill Rooney, chairman, said he had 105m proxy votes for reappointment and only 8m against. The vote on the floor was re-taken and most of those against then abstained.

However, this was the only blemish on the day for Mr Rooney, Spring Ram's founder. Shareholders backed him after he apologised for management mistakes and promised appointment of a second non-executive director and a strong finance director within weeks.

Clearly nervous, Mr Rooney told the packed meeting of about 200 people that a senior manager in Balterley Bathrooms, a subsidiary, had overstated profits to impress his superiors, mainly by manipulating stock figures. No money was stolen, Mr Rooney said, and the fraud was so clever that neither management nor auditors could have reasonably been expected to spot it.

The report and accounts and dividend were approved unanimously on a show of hands, as was the election of Mr Roy Barber, a company doctor.

Arthur Andersen Spring Ram Corp GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P3431 Metal Sanitary Ware P3261 Vitreous Plumbing Fixtures FIN Annual report PEOP People P8721 P3431 P3261 The Financial Times London Page 10 254
UK Company News: Clive Smith faces creditors in fight against bankruptcy Publication 930522FT Processed by FT 930522 By PEGGY HOLLINGER

MR CLIVE SMITH, the Midlands entrepreneur known for his involvement in the flotations of several natural resources companies in London in the 1980s, will seek to avoid personal bankruptcy next month when he faces creditors demanding repayment of about Pounds 20m.

Mr Smith has been involved in UK quoted companies such as Butte Mining, Geevor, Petranol, Richmond Oil & Gas and Globe Petroleum, formerly called Far East Resources.

The Serious Fraud Office has launched an investigation into at least two, Richmond and Butte, following a raid on the offices of Bryant & Co, a Jersey accountant last year.

Mr Smith is due to meet a group of 15 creditors in London on June 7 where he will propose to repay approximately 8p for every pound of debt owed, against 0.1p if he is forced into bankruptcy.

The meeting was scheduled for Monday but was adjourned following questions from some creditors over certain debt claims. In order to be approved, the arrangement must be approved by creditors representing 75 per cent of the debt.

Some Pounds 12m is being claimed by Richard Pearce & Sons, a Hong Kong registered company. The address for Richard Pearce is listed in Mr Smith's schedule of creditors as Danore, Drogheda, Co Meath, Ireland. This is the same address as Mr Kelvin Myles, who managed many of Mr Smith's offshore interests from an accountant's office in Jersey.

A further Pounds 3.8m is being claimed by Newsham Investments, an offshore vehicle for the Smith family.

Other creditors include Societe Banquaire de Paris, which a court ruled in November was owed Pounds 2.7m by Mr Smith. Last year the bank issued proceedings against him to recover this amount, the balance of a Pounds 3m loan made in 1990.

Mr Smith offered security in the form of shares in Geevor, Richmond, Butte, and two other companies, Western & Pacific and Image Store Holdings. The value of the collateral is at present estimated at Pounds 1.5m.

In his voluntary arrangement, Mr Smith has proposed to repay Pounds 12,000 in the first year of the agreement, the proceeds from his work as a 'finance cum project consultant'.

Mr Smith argues that he would be able to improve his contribution in the second and third years and holds out the promise of a further Pounds 1.67m payment if he is able to recover money due to the CJ Smith Life Trust.

Butte Mining Geevor Petranol Richmond Oil and Gas Globe Petroleum GB United Kingdom, EC P1099 Metal Ores, NEC P1311 Crude Petroleum and Natural Gas PEOP People P1099 P1311 The Financial Times London Page 10 453
UK Company News: Net asset value edges up at Worth Publication 930522FT Processed by FT 930522

The net asset value of Worth Investment Trust stood at 26.7p at March 31 against 25.2p.

Net revenue for the year was Pounds 110,000 compared with losses of Pounds 16,000. The dividend is held at 0.1p, payable from earnings of 0.35p (0.05p losses).

Worth Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 10 80
UK Company News: Owen & Robinson restructures capital and makes Pounds 2.1m placing Publication 930522FT Processed by FT 930522 By NIGEL CLARK

OWEN & ROBINSON, the jewellery and sports footwear retailer, has announced plans to overcome its high level of debt and accumulated losses and finance development by raising Pounds 2.1m through a placing and open offer.

Mr Alan Gaynor, chief executive, said that the company had done as much it could to 'get a grip on the losses' but it would be unable to move forward without a capital reconstruction.

The company also reported pre-tax losses for the year to January 31 of Pounds 2.53m (Pounds 2.92m) on turnover of Pounds 25.5m (Pounds 26.3m).

The reconstruction involves the agreed conversion into equity of Pounds 2m of debt held by Hill Samuel, the company's principal banker, Pounds 1.35m of loan notes held by two principal shareholders and Pounds 1.1m nominal of A preference shares.

It is proposed to convert the Pounds 8.2m nominal convertible preference shares at a rate nearly six times greater than the existing provisions and make a capital reduction involving the elimination of the share premium account and the capital redemption reserve and consolidate the present 1p shares into 20p shares.

Mr Gaynor and Mr Mike Smith, finance director, are being given options over a total of 1.05m shares at 27p.

Credit Lyonnais Laing is placing or will subscribe for 9.25m new shares. Existing shareholders are being offered the shares at 27p each on the basis of 171 for every 100 new shares.

As a result of the changes Mr Gaynor said that gearing would be cut from 2,200 per cent to 35 per cent.

The loss for the year was after exceptional charges of Pounds 1.13m (Pounds 832,000). Losses per share were 7.6p (12.88p).

Owen and Robinson GB United Kingdom, EC P5944 Jewelry Stores FIN Share issues FIN Annual report P5944 The Financial Times London Page 10 321
UK Company News: 300 jobs go in East Midlands Electricity cost cutting move Publication 930522FT Processed by FT 930522 By MICHAEL SMITH

EAST MIDLANDS Electricity is to cut 300 jobs and reduce the size of its headquarters in a restructuring of the core business which will also see a rationalisation of the board of directors.

Yesterday's announcement is the latest in a series of cost-cutting moves by electricity companies. Like several others in the sector, East Midlands is consolidating the number of districts and sharpening its focus on profits.

Thirteen districts, which have in the past been cost centres, will be turned into seven profit centres. The management of profits from buying and selling electricity will be devolved to the regions.

At the top of the company the 11-person board is being cut by two.

Mr Keith Jackson is taking early retirement and Mr Philip Champ, while retaining responsibility for generation and overseas operations, is relinquishing his board position.

The restructuring of the distribution business will cut annual operating costs by about Pounds 10m.

The job losses, which will take place over 18 months, are expected to cost Pounds 13m, but Mr John Harris, chairman, said this was already built into cost forecasts.

The 300 job losses follow a reduction of 100 in the last year and 400 since privatisation. Mr Harris said the move was part of a gradual process, rather than a step change.

Middle management jobs would be cut, said Mr Harris. Others would move out of head office to the business units.

The seven business units are Coventry, Derby, Leicester, Lincoln, Milton Keynes, Northamptonshire and Nottingham.

The new structure incorporates a six month pilot project at Derby which the company says resulted in wider spans of control and shorter lines of communication.

East Midlands Electricity GB United Kingdom, EC P4911 Electric Services PEOP Labour PEOP People P4911 The Financial Times London Page 10 317
UK Company News: Spring Ram board wins day on auditor Publication 930522FT Processed by FT 930522 By IAN HAMILTON FAZEY, Northern Correspondent

ANGRY small shareholders tried but failed to oust Arthur Andersen as auditor to Spring Ram, the Yorkshire manufacturer of kitchens, bathrooms and home improvement products, at the company's AGM in Leeds yesterday.

They won on a show of hands by 48 to 40, but Mr Bill Rooney, the chairman, said he had 105m proxy votes for reappointment of the accountancy firm and only 8m against. The vote on the floor was re-taken and most of those against then abstained.

However, this was the only blemish on the day for Mr Rooney, Spring Ram's founder. Shareholders backed him unanimously after he apologised for management mistakes and promised appointment of a second non-executive director and a strong finance director within weeks.

The value of Spring Ram's shares has halved recently after two surprises. First, the company revealed false accounting at a subsidiary. Then shares were suspended briefly to allow an announcement that last year's pre-tax profits would be nearly Pounds 13m below expectations of Pounds 39m after Arthur Andersen had insisted on a more conservative approach.

Clearly nervous, Mr Rooney told the packed meeting of about 200 people that a senior manager in Balterley Bathrooms, a subsidiary, had overstated profits to impress his superiors, mainly by manipulating stock figures.

Although no money was stolen, Mr Rooney said, the fraud was so clever that neither management nor auditors could have reasonably been expected to spot it.

Mr Rooney added that all new accounting standards had been, or would be, introduced ahead of obligations. New systems also ensured that no manager could act alone to falsify figures, reducing risks of problems arising again.

Spring Ram's report and accounts and dividend were approved unanimously on a show of hands, as was the election of Mr Roy Barber, a company doctor. Mr Barber will supervise internal audit and oversee corporate governance policy.

Mr Rooney said Spring Ram had continued investing heavily throughout the recession. 'But we didn't expect 4 1/2 years of depressed times. Had we known, we would have phased developments.'

Spring Ram Corp Arthur Andersen GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services P3431 Metal Sanitary Ware P3261 Vitreous Plumbing Fixtures FIN Annual report PEOP People P8721 P3431 P3261 The Financial Times London Page 10 395
UK Company News: Fleming Far Eastern asset value ahead Publication 930522FT Processed by FT 930522

Fleming Far Eastern Investment Trust lifted net asset value from 228.96p to 294.82p over the year to March 31. Net revenue fell to Pounds 1.89m (Pounds 2.42m), or 1.18p (1.53p) per share. The dividend is cut from 1.5p to 1.1p.

Fleming Far Eastern Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 10 78
UK Company News: Wolverhampton & Dudley static in chilly climate - Trading areas are 'battleground for market share' Publication 930522FT Processed by FT 930522 By PHILIP RAWSTORNE

WOLVERHAMPTON & Dudley Breweries, reporting a marginal increase in first-half profits, said yesterday that its trading area in the Midlands and north-west England had become, 'the battleground for market share' between the national brewers.

'We cannot avoid some of the effects,' said Mr David Miller, chairman.

Pre-tax profits for the six months to March 28 edged ahead from Pounds 16.52m to Pounds 16.65m in a trading climate that was 'still pretty chilly.' Excluding property and investment disposals, profits declined from Pounds 16.1m to Pounds 15.97m.

Earnings per share rose slightly from 17.6p to 17.7p while the interim dividend is increased 9.3 per cent to 4.7p.

Trading profit of Pounds 18.55m was 2.8 per cent higher on turnover 5.3 per cent ahead, at Pounds 107.3m, with a full contribution from the Camerons brewery acquisition,

Beer volumes declined by 'a not discouraging' 0.6 per cent. Operating margins were under pressure from competition in the wholesale trade, and from rising costs of maintaining service standards to pub customers, but brewing costs were reduced. Trading margins fell from 17.7 per cent to 17.3 per cent.

Mr Miller said:'We aim to avoid the disruption to margins in the wholesale trade arising from the larger brewers' market share ambitions. Improved profitability is much more likely to be achieved by lower production and distribution costs and an improvement in managed house throughputs than through the wholesale trade.'

Margins improved in the tenanted estate, but pubs classified as 'boozers' suffered from the recession, particularly in the building industry. 'It is the skilled hourly-paid man who has been the backbone of trade in these pubs. For him, this recession has been interminable, and he is hard up,' said Mr Miller.

Camerons expanded its distribution and pub estate in north -east England, but operating profits do not yet match the carrying costs of the acquisition made in January last year.

Aggressive bidding for conference and business trade lifted hotels' turnover by 9.7 per cent.

See Lex

Wolverhampton and Dudley Breweries GB United Kingdom, EC P2082 Malt Beverages P5813 Drinking Places FIN Interim results P2082 P5813 The Financial Times London Page 10 378
UK Company News: Brixton Estate seeks Pounds 100.7m - Other property companies expected to make cash calls Publication 930522FT Processed by FT 930522 By ROLAND RUDD

BRIXTON Estate, the seventh largest property group in the UK, yesterday launched a 2-for-5 rights issue to raise Pounds 100.7m to take advantage of low property prices.

The new shares are being offered at 155p. Yesterday the shares rose 11p to 207p.

Brixton is the second big property company after Slough Estates to tap shareholders. Analysts believe other property companies may embark on similar exercises.

The cash call, a further sign that confidence is beginning to return to the battered property sector, should find favour with institutional investors. In the last few months, a growing number have started to move back into the property market, believing it will begin to recover within the next 18 months.

Mr Harry Axton, chairman, said: 'Since the company went public in the thirties we have only had one rights issue which raised Pounds 15m in 1980. We resist asking shareholders for money if we can manage without it.'

The value of Brixton's property portfolio at the year-end dropped from Pounds 724m to Pounds 679m. Net borrowings rose to Pounds 346m, representing gearing of 114 per cent.

With significant undrawn borrowing facilities still available, Mr Axton said the group had not been under any pressure to raise new finance.

A quarter of the debt is repayable over the following five years and 1 per cent within 12 months.

Two of Brixton's biggest shareholders, Clerical Medical & General Life Assurance Society and Royal Insurance Asset Management, which own 37.4 per cent of the group, have undertaken to take up their rights. The rest of the issue is underwritten by J Henry Schroder Wagg.

'If we are going to take advantage of the present situation we need more money,' said Mr Axton. 'We are looking for the right sort of properties, which are let or partially let.'

Mr Axton said he had spotted 'short green shoots' in the letting business, the number of sales, however, was still small compared to the increase in new visits.

Net rental income last year was in excess of Pounds 55m and the majority was derived from tenants described by the group as 'good quality credit risks'.

The group holds land where planning permission exists for 600,000 sq ft of industrial and office space.

Shareholders will be asked to approve the increase in share capital at an extraordinary general meeting on June 7.

See Lex

Brixton Estate GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries FIN Share issues CMMT Comment & Analysis P6552 The Financial Times London Page 10 445
UK Company News: Ferraris profit boost and Pounds 2m rights Publication 930522FT Processed by FT 930522 By PAUL CHEESERIGHT, Midlands Correspondent

FERRARIS, the medical equipment and specialist engineering group, formerly known as Stainless Metalcraft, yesterday moved to strengthen its financial base with a two-for-three rights issue to raise Pounds 1.95m and said it is applying for its shares to be admitted to the official list.

The group also announced pre-tax profits of Pounds 251,000 for the six months to last February, compared with Pounds 77,000 in the same period of 1991/92. Turnover rose to Pounds 5.43m against Pounds 4.83m. Ferraris returned to profit in the year to last August, after two years of losses.

The rights issue is priced at 55p a share, a discount of 12p to its overnight price. It has been underwritten by Singer & Friedlander in Birmingham and brokers are Peel, Hunt.

Proceeds of the rights will be used to buy the freehold of its main operating site at Chatteris, Cambridgeshire, as well as the outstanding minority interest in its US subsidiary and reduce gearing.

Between 1989 and 1991, when Ferraris reorganised its business, moving out of general engineering, gearing rose from 70 to 154 per cent and last year was 98 per cent. After the rights issue it will fall to under 20 per cent and said Mr Ken Baker, the chairman, 'we plan to keep it that way for the future.'

He described the fund-raising as 'tidying up the garden,' a financial reorganisation to complement the operational reorganisation. One element of this has been to widen the shareholder base.

The directors and the Childs family, holders of the largest block of shares, are renouncing their rights entitlement so that their combined holdings will decline from 40 per cent to under 24 per cent of the equity.

Based on earnings per share of 2.4p, against 0.7p in the comparable half, shareholders will receive an interim dividend of 0.75p a share. In 1991/92 they received no interim, but a final of 1p.

Ferraris Medical GB United Kingdom, EC P3841 Surgical and Medical Instruments P3443 Fabricated Plate Work (Boiler Shops) FIN Share issues FIN Interim results P3841 P3443 The Financial Times London Page 10 367
It's lost that faltering feeling: A couple of weak spots in the UK economy do not detract from current optimism about the recovery Publication 930522FT Processed by FT 930522 By PETER NORMAN

Britain's economic recovery is still on track after a week of wayward statistics which left egg on forecasters' faces.

For a day or two, reports that retail sales fell unexpectedly in April and manufacturing output dipped in March suggested that recovery was faltering. But these doubts were confounded by Thursday's equally surprising news that seasonally adjusted unemployment fell in April for the third month in a row - by 1,400 to 2.94m.

The week's blips have brought the recovery back to earth. Between December and February, manufacturing output increased by a spectacular 2.7 per cent after a year of stagnation, while in the same two months the volume of retail sales rose by 2.2 per cent.

Such growth rates were clearly unsustainable. The latest hints of a corrugated upturn after months of the economy bumping along the bottom of the business cycle suggest that the recovery is likely to be moderate. This will be no bad thing, if it means that inflationary pressures stay subdued.

But at the same time, the controversy surrounding Mr Michael Portillo, the chief secretary of the Treasury, amid reports of Treasury plans to cut health and social security spending, is a reminder of problems further down the line.

The recovery could still hit the buffers. Recession in continental Europe is a growing worry for exporters although Britain may be increasing its share of total world trade. Britain's budget and current account deficits are more intractable problems that could one day trigger a crisis of confidence if financial markets believe they are running out of control.

For the moment, however, international investors are relatively optimistic about the British economy, as evidenced by sterling's firm performance over the past week. Yesterday's news that the annual rate of retail price inflation fell last month to 1.3 per cent - its lowest level for nearly 30 years - while bank and building society lending grew by a larger than expected Pounds 2.9bn suggest that the UK may succeed in using sterling's devaluation since September to spur economic growth without falling prey to high inflation. However, the future path of inflation is likely to be upwards.

But this week's news has also left a strong impression that something special is happening in UK manufacturing industry, which has emerged as the main beneficiary of the devaluation. April's fall in unemployment was unspectacular compared with declines of more than 25,000 in each of the preceding two months. But other official figures on Thursday showed that seasonally adjusted employment in manufacturing industry rose by 5,000 in March and by 11,000 in the first quarter after years of decline.

'You have to go back to the 1960s to find the start of a recovery in which manufacturing employment rises,' comments Mr Peter Spencer, chief economist at Kleinwort Benson, the investment bank. The last time that manufacturing employment increased for three successive months was in 1988, when the UK economy was booming. The long term post-war trend in manufacturing employment has been inexorably downwards: from a peak of 7.89m in June 1971 to about 4.2m today.

Almost certainly, there are special factors behind the rise. Many companies were too quick to shed labour in the dark days of last September when business and consumer confidence slumped after sterling's forced departure from the European exchange rate mechanism. The labour market reforms of the 1980s and the much tougher disciplines imposed on managements by financial markets seem also to have encouraged a 'hire and fire' culture in Britain more akin to that of the US than Britain's European Community partners.

Some growth in the manufacturing workforce could also reflect increased economic growth. But here government and independent economists are cautious. Nobody is suggesting that unemployment will not rise again.

What is clear, however, is that manufacturers have come through the recession in reasonably good fettle. The 0.3 per cent fall in manufacturing output between February and March seems to have been statistical 'noise' rather than evidence of the recovery's fragility.

Manufacturers report rising orders and expect further increases in output. The Bank of England says their profitability was maintained through the recession. Manufacturing productivity is growing strongly: up 7.8 per cent in the three months to the end of March compared with the first quarter of last year. Unit labour costs are falling: down an annual 2.9 per cent over the same period. By contrast, the Bank of England is forecasting a 9.8 per cent increase in the unit labour costs of west German manufacturers this year.

Mr Spencer believes the improved fortunes of Britain's manufacturers could trigger 'an emulation effect' in other parts of the economy. There is some anecdotal evidence to support such hopes. Mr Charles Burton, joint managing director of Business Strategies, an economic consultancy, has noticed a change in his customers' requirements that might point to future economic growth.

'A financial institution, two retailers and even some construction companies have asked BSL to think about where in the UK they should expand their activities,' Mr Burton says. 'That is first time we have had such business since the late 1980s.'

But manufacturing is too small a part of the economy to ensure recovery on its own. The key to sustained growth lies with the hitherto recession-shocked British consumer.

Here too there are encouraging signs. April's surprise 0.3 per cent decline in retail sales compared with March has to be set against a sharp improvement in consumer confidence as measured by Gallup, the opinion poll company, and a survey this week from the Confederation of British Industry forecasting further increases in retail sales in May.

The high levels of debt and debt-servicing costs, which have crimped consumer demand, may also be easing slightly. The accompanying chart, based on Bank of England data, shows how personal income gearing (which measures personal sector interest payments as a proportion of disposable income) has fallen to about 10 per cent from 14 per cent in 1990, largely because of falling mortgage interest rates. The recent slight rise in house prices may have halted the rise in capital gearing, the measure of outstanding lending as a proportion of consumers' financial and tangible wealth.

One of the most hopeful indicators is the May Gallup survey of unemployment expectations. The 28 percentage point gap between the 49 per cent of respondents expecting unemployment to rise and the 21 per cent expecting it to fall was the smallest since May 1990 and suggests that fear of losing one's job is falling sharply.

If so, the way will be open for a more broadly based upturn, supported by a more active housing market and increased personal borrowing.

But the recovery is bound to be modest so long as the economy is weighed down by Britain's current account and budget deficits and the prospect of future tax increases and public spending cuts to correct these problems.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs CMMT Comment & Analysis ECON Economic Indicators ECON Employment & unemployment ECON Industrial production P9311 P9611 The Financial Times London Page 9 1211
Letter: Selective briefings 'patently unfair' to the small investor Publication 930522FT Processed by FT 930522 From Mr I CAMERON

Sir, I fully support the action of the London Stock Exchange in cracking down on selective leaking of price-sensitive information ('Crackdown on private briefings for analysts', May 15/16). As a hobby in my retirement, I am a small investor in the equity of London-listed companies. I believe that all the generally known facts relevant to making investment decisions are reflected in the price of a company's shares and, with this in mind, I have written a simple program in Basic which, when run on my pc, extracts this information and suggests which shares are a good buy.

At present I scan 125 listed companies daily. I also use information acquired via the FT's 'Free annual report service' and the 'Directors' share transactions in their own companies' listed in the FT. I supplement this with data from Monday's FT and Extel cards.

In each of the years that my program has influenced my share dealings, the increase in the net value (after allowing for actual buying and expected selling costs) of investments has comfortably exceeded the increase in the FT-SE 100 Index. Indeed, I would consider I had failed if it had not done so.

It would seem patently unfair if, after I had taken all this trouble, a 'group of analysts and institutions' were handed, on a plate, price sensitive information denied to the rest of us.

I Cameron,

2 Gamlingay Road,

Potton, Sandy,

Beds SG19 2RQ

GB United Kingdom, EC P6231 Security and Commodity Exchanges P6211 Security Brokers and Dealers NEWS General News P6231 P6211 The Financial Times London Page 9 280
Tough road to travel: The challenges facing Adele Biss, the new head of the British Tourist Authority Publication 930522FT Processed by FT 930522 By MICHAEL SKAPINKER

Ms Adele Biss smiled broadly for the cameras in central London yesterday as the government announced she was to be Britain's new tourism chief.

If she is still smiling when her term as chairman of the British Tourist Authority and the English Tourist Board ends in three years that will be an achievement in itself. Her predecessor, ex-Punch editor Mr William Davis, rounded off his stint by declaring: 'The pay is absurd and the chances of achieving any worthwhile results are slim.'

Ms Biss, who takes up the part-time, Pounds 35,000 a year appointment on June 1, has the advantage that the tourist industry has no preconceived ideas about her. 'I've never heard of her,' said one senior industry figure. 'No one seems to have heard of her.'

Ms Biss, 48, has, however, had a successful business career. She was a founder of the Biss Lancaster public relations company which was acquired by WCRS, the advertising group, in 1985. She was also a non-executive director of the British Railways Board for five years. She is currently a director of European Passenger Services, the BR subsidiary that will run rail services through the Channel tunnel.

In the 1970s, she worked for Thomson Holidays, the UK's biggest travel group. As a public relations consultant, she represented the Association of British Travel Agents, Pickfords Travel, Holiday Inn and several charter airlines and cruise companies. She also, as an economics student at University College London in the 1960s, took coach-loads of tourists on 10-day trips around Europe, for which they had paid Pounds 19.

While her experience with the travel industry has mostly involved taking tourists out of the UK rather than bringing them in, she is not a complete novice. That some in the British travel trade reacted sceptically to her appointment has far more to do with an unwillingness to believe the government will treat the industry fairly and generously than with any personal antipathy.

The UK tourist industry employs 1.5m people - more than the construction sector or the health service. It represents about 4 per cent of gross domestic product and contributes Pounds 25bn to the economy annually. Yet it is barely discussed by ministers. Responsibility for tourism has been passed from the Department of Trade and Industry to employment and now to the Department of National Heritage. At national heritage, formed after last year's general election, tourist industry managers believe they are regarded as unimportant compared with broadcasting and the arts.

The House of Commons did debate tourism last March, for the first time in nearly five years. But Mr Robert Key, the national heritage minister, was derided for his claim during the debate that the flying of more Union Jacks would assist the industry.

The delay in appointing Ms Biss, when the government had known since last January that Mr Davis would not be continuing in the post, was seen as further evidence of official lack of interest.

As always, however, the chief gripe is money. While the BTA's grant is to rise from Pounds 32.1m this year to Pounds 33.5m in 1995, the ETB's funding will be cut from Pounds 15.4m this year to Pounds 9.1m in 1995. The BTA promotes Britain abroad, while the ETB attempts to improve the quality of tourist facilities and encourage the locals to take their holidays at home. The government argues that the ETB's work should be done by the 11 English regional tourist boards.

Some in the industry agree that at a time of public spending cuts, what money there is should be devoted to the BTA. However, Mr John Jarvis, chairman of the privately-owned Jarvis Hotels group, who has served as interim ETB chairman for the past two months, believes Ms Biss should fight for the ETB's survival. English tourism needs a central co-ordinating board to ensure that standards are maintained and improved. 'To co-ordinate tourism will take more than Pounds 9m,' he says.

Mr Jarvis, who described Ms Biss's appointment as a 'refreshing choice', says that a still unpublished study he has commissioned from management consultants Coopers & Lybrand will strengthen the argument for the ETB's retention.

Mr Peter Brooke, the national heritage minister, accepted, during the parliamentary debate, that the BTA performs a function which the private sector cannot. 'Overseas promotion is difficult to organise and the returns to individual businesses may be quite small and unpredictable - not worth the investment.

'The industry, unaided, would not put sufficient money and effort into overseas promotion. The tourism industry is particularly fragmented; it covers many sectors and it is not in the direct interest of any one private sector company to promote Britain as a destination,' he said.

While the BTA is a frequent winner of awards for the service offered by its overseas offices, some comment on how paltry its efforts seem when compared with other countries.

Mr Mario Bodini, managing director of Jac Travel, which brings tour groups to the UK, said: 'Given the funds they have available, the BTA, for the most part, is fairly good. Still, I get quite embarrassed when I'm at international trade shows and I see that the British stand is feeble compared with quite small destina-tions such as Holland, Austria or Portugal.'

Mr Peter Bates, marketing director of the Savoy Hotel group, said the BTA needed to focus its energies more clearly when promoting the UK's attractions. He said, for example, that the relative cheapness of the UK to American visitors after sterling's effective devaluation last September had not been sufficiently stressed in the US market.

In 1991-2, the BTA received Pounds 24m in funding from the private sector and other public bodies such as local authorities. Mr Bates argued the BTA needs to pay more attention to travel companies' views on how that money should be spent.

Ms Biss insists she is ready to listen and does not think she will suffer her predecessor's frustrations. 'I would guess my expectations are a little bit different from what his were. A lot of my past has been spent persuading people and reconciling different points of view.'

Unlike Mr Davis when he began, she has no illusions about the level of government support she is likely to get. 'Anyone going into a public appointment now understands the economic background, the whole problem of public finances. Maybe I've got a different starting point from him.'

GB United Kingdom, EC P9611 Administration of General Economic Programs PEOP People P9611 The Financial Times London Page 9 1107
Rogues on the run: Havens are available to fugitives with cash Publication 930522FT Processed by FT 930522 By FT Writers

Whatever the outcome of his flight from Britain three weeks ago, Mr Asil Nadir looks set to go down in the history books among a long list of fugitive businessmen who have eluded the arm of the law.

Ensconced in the sunlit fastness of northern Cyprus, the former chairman of Polly Peck International might ponder the experiences of others who have swapped the world of high finance for lives removed from the limelight.

Jabez Spencer Balfour, a notorious 19th-century British fraudster, escaped to Argentina but was brought back to stand trial in 1895. He was given a 14-year sentence to punish what the judge called 'a long career of cold-blooded villainy by which he has ruined thousands of humble and happy homes'.

Staying beyond the reach of police and judiciary requires stamina, cash and top-level contacts, as well as expert knowledge of extradition laws.

A small, secretive industry of companies tracks down fugitives. The work can be risky. 'People in hiding can play hard-ball,' says one UK accountant involved in this area. 'There are some you definitely do not want to go after without protection.'

'You're dealing with sophisticated individuals,' says Mr John Conyngham, managing director of the UK arm of Kroll Associates, the New York-based corporate investigations company. Mr Conyngham says the refusal of some countries to extradite their own nationals can pose problems.

Mr Ted Clements, executive director for consulting and investigations at the London office of the California-based Pinkerton's security group, specialises in unravelling cross-border financial transactions. These can be exotic: Pinkerton's UK operation is considering helping the Russian government track down 500 tonnes of missing Czarist gold.

One worry for absconders is that the number of countries offering firm protection is shrinking. China, for instance, has tried conspicuously to help international justice authorities, part of its efforts to collaborate with the west.

Spain's Costa del Sol used to be a favourite haunt for suspected criminals, but the Spanish authorities have now become more helpful on extradition. 'If the paperwork is put to them, they are more co-operative,' says Mr David Sherwin, head of fraud investigations and risk management at accountants Ernst & Young.

Yet there are still plenty of havens. Governments in the Gulf, for instance, have been reluctant to extradite individuals involved with the collapsed Bank of Credit and Commerce International. Several key BCCI figures wanted by the New York district attorney's office are thought to be holed up in the Middle East.

South-east Asia is a favourite place in which suspects disappear. 'If you are dealing with poor countries, where money will buy a lot, you do just that - you buy a lot,' says one Hong Kong police official.

A celebrated Hong Kong case concerned the Ma family, who own the Oriental Daily, Hong Kong's biggest-selling daily newspaper. Facing drugs-related charges, the Ma brothers, Ma Shek Yu (or 'White powder' Ma) and Ma Sik Chun, jumped Hong Kong bail and fled to Taiwan as long ago as 1976.

Somewhat closer to Mr Nadir's current refuge, Switzerland can offer solace for people fleeing fiscal inquiries, as it does not consider tax evasion a crime. Mr Octav Botnar, former chairman of the Nissan car importing company in the UK, was usefully in Switzerland in January last year when the Inland Revenue issued an arrest warrant for him.

Another well-known Swiss resident is Mr Marc Rich, head of the eponymous commodity trading group. In 1983 he was charged in New York with racketeering, fraud, tax evasion and illegally trading with Iran. Mr Rich moved his headquarters to the tiny but extremely wealthy canton of Zug, where he and his company have lived comfortably ever since.

Mr Jean Ziegler, a Swiss parliamentarian and author of a book on Switzerland's role as an illicit financial haven, suggests Mr Nadir could follow Mr Rich's lead - but underlines he should become a benefactor to the canton. 'If you do something in the interest of Zug, it will look after you,' he says.

However, for Mr Werner K Rey, the Swiss financier who formerly headed the collapsed Omni conglomerate, Switzerland offered no hiding place. Charged with defrauding the group, Mr Rey disappeared early last year. He was traced in December to the Bahamas, where he has been trying to block the Swiss government's extradition demands.

For many fugitive financiers, the main threat to their well-being stems not from government and judicial authorities, but from creditors. Some may be seeking both cash and revenge. Fear of reprisals has occasionally led runaways to seek protective custody. Mr George Koskotas, former chairman of the Bank of Crete, fled to Brazil in 1988 after being charged with large-scale fraud. But, concerned that his life might be in danger, he later effectively gave himself up by travelling to the US, from where he was extradited back to Greece in 1991.

Mr Eugene Mastrangelo, managing director of the Pinkerton's Risk Assessment Services in the US, says the Bank of Crete story may contain lessons for Mr Nadir. 'If I was him, my least concern would be the authorities. I would worry more about the individuals who had staked me out.'

He says Mr Nadir would probably be safer if he went underground in the Lebanon. 'There, he'd slip off the screen - and he could do whatever he's got to do to correct his personal situation.'

Report by David Marsh, Andrew Jack, Simon Holberton and Ian Rodger

XA World P9721 International Affairs PEOP People P9721 The Financial Times London Page 9 934
Letter: Lavishness of dinner in eye of the beholder Publication 930522FT Processed by FT 930522 From Mr DAVID IVES

Sir, Your reporter David Owen writes of a 'lavish dinner' to mark the chancellor's 21st anniversary as member of parliament for Kingston-upon-Thames ('Knives out for Lamont again', May 15).

As somebody who was also there I can confirm that it was a very pleasant and convivial occasion, but 'lavish dinner'? - it depends on one's standards.

David Owen also refers to 'days when Conservative governments used sometimes to win mid-term by-elections'. In fact, Norman Lamont won the Kingston by-election in May 1972 with a negligible swing against a Conservative government nearly two years into office. This was attributable to his impressive qualities as a candidate, the legacy of the retiring member John Boyd-Carpenter, and an efficient Conservative organisation with more than 6,000 members.

David Ives,

76 Florin Court,

6-9 Charterhouse Square,

London EC1

GB United Kingdom, EC P9199 General Government, NEC NEWS General News P9199 The Financial Times London Page 9 169
Letter: Economic success at right social cost Publication 930522FT Processed by FT 930522 From Mr NORMAN WILLIS

Sir, I heartily endorse your view that 'high and rising unemployment is now the biggest problem facing all European governments, and their most urgent need is growth and job creation' ('Get Europe to work,' May 19), but would disagree equally strongly with your conclusion that this does not allow for measures of social protection.

The real challenge for Europe is how to combine high levels of employment, economic success and high social standards. Popular political pressures make it impossible for Europe to seek to match the wage costs of its competitors in Asia and elsewhere by driving down living standards.

The realistic course open to us is one based on high quality 'value-added' production, improved training, better use of resources and maximising our creative skills. But the support of Europe's working people for change depends on us having a solid base of social protection and a genuine all-Europe co-operative growth strategy. We won modest gains on this at the Edinburgh Summit, and have had very positive and practical discussions with the Danish government and the European Commission.

This could set the country on a new and popular course. If it does, I am sure nobody will attack Jacques Delors for 'coming over and interfering with our unemployment'.

Norman Willis,

general secretary,

TUC,

Congress House,

Great Russell Street,

London WC1B 3LS

QR European Economic Community (EC) P9441 Administration of Social and Manpower Programs NEWS General News P9441 The Financial Times London Page 9 258
Letter: Timetable for telecoms tenders Publication 930522FT Processed by FT 930522 From Mr MICHAEL SCARGILL

Sir, Re your your editorial 'Cable telecoms' (May 19) I was left wondering whether all you were suggesting was that one of the government's proposals in the duopoly review be brought forward by 10 1/2 months. The March 1991 white paper stated that 'the government intends. . .from April 1 1994 to allow the national PTOs (public telecommunications operators) to tender in their own right for a local delivery service licence for any part of the country not at that time covered by a cable or local delivery licence. Any such application would fall to be considered under the normal ITC procedures as specified at that time. . .'

Michael Scargill,

9 Cheapside,

London EC2V 6AD

GB United Kingdom, EC P4813 Telephone Communications, Ex Radio NEWS General News P4813 The Financial Times London Page 9 149
Letter: Dissatisfied with BR's reaction to complaint Publication 930522FT Processed by FT 930522 From Mr JOHN PARKER

Sir, The contents of the article 'Citizen's Charter cuts BR payouts' (May 17) did not surprise me. I took a journey by train from Euston to Chester, via Crewe, in September last year. The InterCity was late, the connection was not held despite being shown in the InterCity timetable and I, with about six others, was left stranded.

The station manager had no authority to do other than (very politely) explain the BR structure and authority levels, to advise who we could complain to, and when the next train left for Chester. A further hour's delay would have invalidated my appointment and so I took a taxi.

I wrote to Chris Green, managing director of InterCity, and was rapidly passed down to a customer relations officer in Birmingham who quoted internal procedures and regulations to me to prove that he could only take responsibility for the InterCity delay. I guess that if you chop your organisation into enough bits and force your customer to deal with each, he gets fed up and goes away. I did and have not travelled by rail since.

BR's best solution would have been to give the station staff at Crewe the authority to put us into a taxi, with profuse apologies. The next best would have been for Mr Green to apologise and offer some compensation which had a greater value to me than cost to BR - upgrade to first class on my next journey or provide a discount voucher.

The worst was the course of action BR took, which demonstrated that top management delegates customer service and satisfaction as low down the organisation as possible. When I phoned the clerk concerned he was surprised I could contact him and then quoted more regulations at me. As your article on on Charterline confirms (Management: 'Manning the hot lines', May 19), dissatisfied clients tell many friends and are very costly.

John Parker,

24 Compton Crescent,

Chiswick, London W4 3JA

GB United Kingdom, EC P4011 Railroads, Line-Haul Operating NEWS General News P4011 The Financial Times London Page 9 359
Leading Article: Life after Maastricht Publication 930522FT Processed by FT 930522

THIS HAS been a historic week for the European Community. For almost five years - to be precise, ever since the Hanover summit of EC heads of government in June 1988 - debate about economic and monetary union has been all-consuming. This week, which saw both the Danish vote in favour of the Maastricht treaty and the successful third reading of the ratification bill in the House of Commons, should mark the end of that long and painful debate. The treaty should be ratified. But this will not end the controversy. It will not even be the beginning of the end. It will just be the end of the beginning.

Deciding the form of the treaty was the first stage. Ratifying it was a second, still more contentious, one. But implementing it in current economic circumstances will be most difficult of all. What is the EC to do with a solemn treaty that has been ratified, but in some respects cannot be implemented?

While the policy-makers grapple with these dilemmas, markets have decided that, Emu or no, exchange rate stability is back, at least for a select group of hard currency countries.

For this group, the decline in interest rate differentials vis-a-vis the D-Mark has been nothing short of remarkable. Since the beginning of this year, interest rate differentials on three-month money have fallen from more than 14 percentage points to 0.85 percentage points for the Danish krone, from 24 percentage points to 0.1 percentage points for the Irish punt and from 5.1 percentage points to 0.1 percentage points for the French franc.

On the Dutch guilder, the comparable interest rate has been consistently below that on the D-Mark, most recently by half a percentage point. But the Belgian franc has joined the guilder, with a decline in the differential from a percentage point in February, to minus 0.3 points.

Long-term bonds

More important as an indicator of long-term expectations are differentials in yields on long-term bonds vis a vis the D-Mark. For the Irish punt, these have tumbled from 3.1 points in January to 0.9 points; for the Danish krone, from 2.4 percentage points last September to 0.6; for the Belgian franc, from 1.2 points last September to 0.6; for the French franc, from 1.4 percentage points last October to 0.3; and for the Dutch guilder, from 0.5 points last September to -0.2 points.

Markets have already decided that these currencies are in the inner core of the exchange rate mechanism. By contrast, the Italian lira, with a bond yield differential of 5 1/2 percentage points, and the Spanish peseta, with one of 4 points, are judged to offer an altogether different class of risk. But sterling, with a bond yield differential of 1 percentage point, is another matter again.

The increased chance of reaching monetary union is far from being the sole reason for the markets' greater confidence in long-term currency stability. The recently narrowing - and by now decidedly small - interest rate differentials for the Danish krone, with its opt out, show that.

Germany's position

Investors have probably concluded that Germany is simply in the same leaky economic boat as other core members of the ERM. Unification has swept away its fiscal stability and the historic strength of the German current account; inflation is now well entrenched; and the all-German unemployment rate is the highest in the EC. Nor are there merely these structural similarities. The cyclical position is also now fully comparable.

It is at least a reasonable assumption that the Bundesbank will be driven, willy nilly, towards a monetary policy suitable for all the core countries. There is also little reason to expect the D-Mark to remain a particularly strong currency, even by European standards. Globally, things look worse still. The D-Mark hit an all-time low against the Japanese yen this week. Interest rate differentials suggest it is set to lose still more of its value against both the yen and the dollar.

So is Emu, albeit a distant prospect, also increasingly an irrelevant one? Will it be possible for currencies in the ERM core to sustain stability on the basis of fundamental convergence, rather than hopes for a rapid march to Emu? It is quite conceivable that this will happen, but investors may be too optimistic in assuming that this is almost certain. The question is whether the electorates of these countries will all be equally tolerant of policies that generate slow growth and high unemployment. In practice, enduring confidence in exchange rate stability depends on the emergence of policies that generate recovery now and lower unemployment in the longer term.

Ratification of Maastricht was necessary. But the next five years must not be as dominated by the provisions of that treaty as the last five have been dominated by debates about it. The European Commission has at last recognised that the EC has severe cyclical and structural economic problems. Monetary and economic policies are needed to deal with these. The search should start now.

QR European Economic Community (EC) DE Germany, EC P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9721 P9311 The Financial Times London Page 8 871
The town without pity: Congressional setbacks and a drumbeat of media criticism have made Bill Clinton appear vulnerable Publication 930522FT Processed by FT 930522 By JUREK MARTIN

Is the Washington political establishment seriously down on Bill Clinton or, in its own way, merely testing him? If the former, are his current troubles comparable to those that eventually paralysed Jimmy Carter and, domestically, George Bush? If the latter, does he have the stuff to pass the exam?

The questions have to be recognised because Washington, where comment is the staff of life, is asking them insistently. The rest of the country seems more patient with the new president but it is still plugged in to what comes out of the capital. It is possible to win the White House by running against Washington, as Messrs Carter, Reagan and Clinton demonstrated, and even easier to acquire popular cult status by keeping up the drumbeat of criticism, which is Ross Perot's modus operandi. But once installed, a president has got to come to terms with his new neighbours. He may seduce them, cow them, deal with them or even go over their heads - avoid them he cannot.

The establishment itself is both easy and hard to define. Its clear component parts are the politicians, the media and the special interest lobbies. But all eat and drink from the central trough, which is the president and his government, and all have radically or subtly different agendas.

At present there is no denying their collective appetite for Mr Clinton's flesh. The issues may be Bosnia, deficit reduction, still unannounced healthcare reform, gays in the military, campaign financing, federal land use, the North American Free Trade Agreement, and more; and they are drawing blood. For the first time, there has been a touch of petulance in the president's responses and an acceptance, in the recent White House staff reshuffle, that some of the criticisms had merit.

It was no coincidence that the president chose to take his economic message, campaign-style, on the road for several days. It was equally predictable that he was promptly criticised for leaving the superheated Washington kitchen, just as he had been previously attacked for not getting out and about enough.

Even commentators sympathetic to Mr Clinton have taken on a harder edge. Joe Klein of Newsweek, condemning his 'marshmallowly all-inclusive empathy', wrote: 'He has neutered the eternal political question - what's he for? - and raised a darker, more perverse, test of his leadership - what, if anything, is he against?' David Gergen of US News wrote: 'Friend and foe alike think he can be rolled. . . . He has a wonderful head and a big heart, but people are looking for more backbone.'

This is most evident in Mr Clinton's relations with Congress, where politicians, more than ever, can no longer be defined simply by their party allegiance. The Republicans may have held together to block the economic stimulus package but desertions from Senator Bob Dole's fold enabled easier voter registration (the 'motor voter' bill) to pass and may allow campaign finance reform to get through. Some Republicans are nervous about being blamed for 'gridlock'.

However, the adjustment after 12 years to a Democrat in the White House is proving harder for the president's own party. Their universal public catechism is that they want him to succeed, not least because if he fails they may go down too, but many have difficulty separating the general wood from their own favourite trees. In the House this week teeth have been bared by a group of fiscal conservatives led by Congressmen Charles Stenholm of Texas and Tim Penny of Minnesota, now strengthened by Congressman Dave McCurdy of Oklahoma, a bosom friend of Mr Clinton until he was not rewarded with either the Defense Department or the CIA. Their beef is that the president's deficit reduction plan relies too much on revenue raising and not enough on spending cuts.

Tom Foley, the speaker of the House, nursing a comfortable Democratic majority, can probably contain their opposition by cracking the whip. Mr Clinton helped by going to Capitol Hill this week. But the more independent-minded Senate is a tougher nut to crack, as witnessed on Thursday when David Boren, the Democrat from the oil state of Oklahoma and a key member of the finance committee that has a Democratic majority of only 11 to nine, joined John Danforth, the Missouri Republican, in proposing deeper spending cuts and fewer new taxes, including abandoning the BTU-based energy tax. Their plan probably cannot pass the Senate but their opposition makes more problematic and protracted the enactment of Mr Clinton's version of the package in most of its proposed form.

The proliferation of special Democratic causes is also now pressing Mr Clinton. Senator Bennett Johnston of Louisiana, a wily operator in defence of his state's oil and gas interests, will ride his other hobby horse, a value-added tax, for all it is worth, including siding with Messrs Boren and Danforth. Congressman Richard Gephardt of Missouri and Senator Max Baucus of Montana have laid down clear markers on Nafta passage, as has Senator George Mitchell, the majority leader, on renewing China's most-favoured-nation trading status. Chairman Dan Rostenkowski, who chairs the important House ways and means committee, was more direct in simply eliminating the investment tax credit from the president's agenda (with no complaints from Mr Clinton because the committee approved a revenue bill broadly to his liking).

Cross-party and regional coalitions are now a constant possibility, beyond the farm and oil-state assault on the energy tax. Westerners combined to frustrate Mr Clinton's plans to increase revenues from federal lands; high-tech states such as Texas want to preserve multi-billion-dollar prestige projects such as the super collider (a giant atom smasher) and the space station.

None of this is new to Washington, though it now assumes particular intensity. Congress is also set in some of its other ways, seemingly oblivious to last year's electoral mandate for change. For example, much of the blame for the slowness in administration appointments does lie with the White House's relentless pursuit of diversity - but not all of it. The Senate was not shown in its best light this week when a routine session to confirm 16 nominees was endlessly delayed by special pleadings for potato farmers in Maine, a commuter trunk road in St Louis, and changes in the Treasury's family income statistics. Only half the nominees got the nod and the perception of business as usual, now captured by live cable television coverage, was reinforced.

If the body politic is fretting, the media is even more fractious. Instant punditry is now the norm, no longer confined to the established columnists or notorious talk show hosts who became celebrities last year because the candidates all wanted to appear on their programmes. Every action by the president is deemed worthy of an absolute life-or-death verdict, as in some Roman amphitheatre. The sense of government and politics as a process is getting lost.

Mr Clinton shares some blame for this phenomenon, because his chronic activism invites so many judgments. Also, unlike Presidents Reagan and Bush, both often inarticulate unless speaking from a script, his natural tendency, now slightly curbed, is to talk knowledgeably all around any given subject. This still delights many - Chris Patten, the governor of Hong Kong, was quite bowled over by his recent Oval Office session - but it also may confuse the public as much as it enlightens.

The Bosnian petard has been particularly illustrative. Having tried, like the grand old Duke of York, to march the American people and the allies up the hill of forceful intervention, his retreat, even if understandable, reinforces an impression of indecision. A common complaint, from press and politicians alike, is that support would be there if only the president explained what he was going to do and why. Some red-blooded pundits apart, this would probably extend to doing relatively little in the Balkans, barring some new wave of atrocities or threats to other countries.

However, some of the media assaults seem less well-founded. This week's controversies over the sacking of the White House travel staff for non-competitive practices and sloppy bookkeeping and the circumstances of Mr Clinton's haircut on board Air Force One at Los Angeles Airport do not suggest a willingness to give the president a fair shake. But they do increase the perception that he is vulnerable.

Explanations include a media sense that he got too easy a ride at the end (not the beginning) of last year's campaign; the media's piqued relations with the very young and workaholic White House staff; and a punchier and more herd-like brand of contemporary political journalism, which is now more of a blood sport and less of a contemplative occupation.

In a sense, Mr Clinton's good start - the first budget bill passed, Boris Yeltsin succoured, fine speeches given - set him up for a fall, which the Washington establishment always enjoys facilitating. Even the capital's new star, Janet Reno, the attorney-general, is feeling this phenomenon. Having risen to staggering heights of popularity by the mere, but abnormal, act of 'taking responsibility' for the Waco denouement, she is now under fire for protecting those who gave her bad advice. 'Only in Washington,' said a tart column in the iconoclastic New Republic, 'would this make her a hero.'

Observing the political and media fray is Washington's largest private-sector industry - the special interest lobbyists. They are vultures in the populist eye of Ross Perot and a target of Mr Clinton, who wants to take away some of their tax deductions. While it is far too facile to place all lobbyists in the hall of reactionary shame normally reserved for the National Rifle Association, it is dangerous to ignore their power. Their influence in Oklahoma on Senator Boren was palpable.

One such clash of the lobbying titans already endangers healthcare reform even before its unveiling. Abortion rights advocates are demanding that national health insurance cover be provided to all reproductive services while the right-to-life forces are threatening to scuttle the whole package if a single cent is spent to reimburse abortions. Totally lost in the passionate wash is the reality that only a minute share of national healthcare costs, which everybody accept must be curtailed, are accounted for by abortions.

It has always been said of Mr Clinton that he is a fast learner. It was true in last year's campaign and was certainly the case over 12 years as governor of Arkansas, especially after a hyperactive first term ended in defeat. But the campaign and Little Rock were the minor leagues. In Washington, he is seriously expected to be the boss, using whatever tactics work, and the first year is when that essence of leadership needs to be shown. In short, he needs to win 'a big one' - and soon.

US United States of America P9111 Executive Offices PEOP People CMMT Comment & Analysis P9111 The Financial Times London Page 8 1837
Tendering change planned to facilitate cost savings Publication 930522FT Processed by FT 930522 By JOHN WILLMAN, Public Policy Editor

THE GOVERNMENT is considering proposals to change the rules on competitive tendering after a warning from contractors that confusion over the rights of employees is reducing the scope for cost saving through market testing and contracting out.

The proposals, which include increasing the length of public sector contracts, have been drawn up by the Cleaning and Support Services Association, which represents public sector contractors.

In a recent letter to the prime minister the association says that the Transfer of Undertakings (Protection of Employment) Regulations 1981, known as Tupe, have made it 'very difficult' for contractors to bid for public sector work.

Where the Tupe regulations apply a contractor must take over the existing workforce at their current terms and conditions. This makes it hard to reduce labour costs, often the main source of cost savings for contractors.

The prime minister has asked government departments for information about how the Tupe regulations are affecting market testing and contracting out and has promised a co-ordinated reply.

The association says that if the Tupe regulations apply it is hard for the contractor to achieve cost savings in the three years which contracts commonly last. It argues that longer contracts would allow labour costs to be gradually reduced through natural wastage or negotiated reorganisation.

The association says: 'The longer the contract term the greater the opportunity there is for a more competitive approach.'

The association recommends a minimum of five years for contracts, with an option to extend them for a further two years before re-tendering.

Other proposals from the association include amendments to the Tupe regulations to make it easier for contractors to reorganise their workforces.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs NEWS General News P9441 The Financial Times London Page 7 312
Lending up sharply but money growth sluggish Publication 930522FT Processed by FT 930522 By EMMA TUCKER, Economics Staff

LENDING BY banks and building societies to the private and corporate sectors rose sharply last month, but the underlying growth of broad money was sluggish, pointing to low levels of inflation for some time.

Bank of England figures showed that bank and building society lending, known as M4 lending, rose by Pounds 2.9bn last month after falling Pounds 1.3bn in March as the private and corporate sectors continued to repay debt. M4 lending has been erratic in the past few months.

Economists said much of the the sharp rise in April represented a bounce back from the March figure.

Broad money - notes and coins in circulation plus bank and building society deposits - grew a seasonally adjusted 0.4 per cent on the previous month to give a year-on-year growth rate of 3.5 per cent, slightly weaker than expected.

Mr Neil MacKinnon, chief economist at Citibank in London, said: 'The underlying trend in broad money growth is consistent with at best a very modest economic recovery.'

The 3.5 per cent increase in provisional M4 was at the bottom of the Treasury's 3 per cent to 9 per cent monitoring range set in the March Budget.

Data from the British Bankers Association showed that sterling lending by the nine big high-street banking groups to the private sector (about 70 per cent of total bank lending) rose almost Pounds 2.5bn in April. This compared with a revised fall of Pounds 1bn in March.

The association said a similar pattern occurred last year with a big fall in March followed by a larger rise in April. It said the most likely explanation was the exceptional size of the public sector borrowing requirement in March of both years which allowed the temporary repayment of bank borrowing by companies.

A better idea of the trend is given by averaging out the March and April figures. The result, monthly growth of Pounds 733m, is only slightly higher than the trend figure for the previous three months.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Economic Indicators P9311 P9611 The Financial Times London Page 7 374
Building society inflow up to Pounds 1bn Publication 930522FT Processed by FT 930522 By SCHEHERAZADE DANESHKHU

BUILDING SOCIETIES had a net inflow of deposits from savers of Pounds 1.07bn in April compared with Pounds 249m in March, enjoying their best month for two years.

The last time building societies had a comparable monthly inflow was April 1991, when net receipts totalled Pounds 1.3bn. Net inflow was Pounds 820m for the whole of the previous three months.

Mr Mark Boleat, director-general of the Building Societies Association, said the rise represented 'a significant departure from the modest inflows experienced over recent months'.

He attributed the increase to 'the specific marketing efforts of individual societies and seasonal factors rather than a general trend. As such the inflow of savings may well fall back next month'.

Mr Nigel Richardson of Yamaichi Securities said the figures indicated that people were saving more of their discretionary income, which had been rising as a result of the fall in mortgage rates.

Mr Ian Shepherdson, UK economist at Greenwell Montagu, said: 'Building societies will find it more difficult to whinge against National Savings as a result of these figures.'

The increase in mortgage activity recorded in March was sustained in the April building society figures. Gross mortgage lending was Pounds 2.71bn in April, up fractionally from March.

GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents CMMT Comment & Analysis P6162 The Financial Times London Page 7 238
Sellafield radiation readings Publication 930522FT Processed by FT 930522

FIVE workers at British Nuclear Fuels' Sellafield site received more than 15,000 microsieverts of radiation last year, the company's 1992 reports on health, safety and the environment say.

BNF said none of the 11,500 registered radiation workers received more than 20,000 microsieverts, the maximum permitted level for radiation workers.

British Nuclear Fuels GB United Kingdom, EC P4911 Electric Services TECH Safety & Standards P4911 The Financial Times London Page 7 79
Computer hackers jailed for 6 months Publication 930522FT Processed by FT 930522 By JOHN MASON

TWO COMPUTER hackers who broke into systems belonging to companies and institutions around the world were imprisoned for six months yesterday, John Mason writes.

Mr Neil Woods and Mr Karl Strickland had earlier pleaded guilty to offences under the Computer Misuse Act - legislation introduced in 1990 to outlaw computer hacking.

For two years the two men hacked into computers belonging to the investment bank SG Warburg, British Telecommunications, the European Community and Nasa, the US space agency.

The court heard that the cost of the damage they caused was conservatively estimated at more than Pounds 123,000.

Passing sentence on the men at Southwark Crown Court in London Judge Michael Harris said he fully accepted that their hacking activities were not designed to damage systems, to misuse the information they contained or to make a profit from what they were doing.

He told them custodial sentences were appropriate, however, 'to penalise you for what you have done and for the losses caused and to deter others who might be similarly tempted'.

Mr Strickland, a Liverpool University research assistant, and Mr Woods, a computer salesman from Oldham, Greater Manchester, both pleaded guilty to conspiring to obtain telegraphic services dishonestly and to engaging in the unauthorised publication of computer information.

GB United Kingdom, EC P9211 Courts NEWS General News P9211 The Financial Times London Page 7 238
Smith warns Major over 'a privatisation too far' Publication 930522FT Processed by FT 930522 By IVOR OWEN, Parliamentary Correspondent

MR JOHN SMITH, the Labour leader, yesterday called on the government to bow to public opinion and drop its 'crazy' proposals for privatising British Rail, the Post Office and British Coal.

He accused Mr John Major, the prime minister, of acting like a 'runaway train' by ignoring the verdict of the voters in recent elections that they were opposed to any further privatisations. Mr Smith warned the prime minister that if he refused to listen to the British people 'privatisation will be his Waterloo'.

Mr Smith, in a speech to the Welsh Labour party conference at Llandudno, ridiculed the performance of Group 4, the security company, in escorting prisoners to the courts - 'the privatisation scheme that allowed enterprising prisoners to privatise themselves'.

Instead of learning the lesson of what was 'a privatisation too far', he said, the prime minister was taking this 'ideological claptrap' into areas which even his predecessor, Baroness Thatcher, had realised were beyond the pale.

Mr Smith also scoffed at Mr Major's appeal for a climate of partnership between government and industry, made earlier in the week at the Confederation of British Industry's annual dinner.

The Tories had 14 years in which to build such a partnership, Mr Smith said, so why should anyone believe they were serious about it now?

Mr Smith underlined the role played by Mr Major as chief secretary to the Treasury, chancellor and prime minister in the conduct of policy which produced a Pounds 50bn borrowing requirement and threats to the welfare state. He said that the prime minister, having broken his pledges on tax, now seemed set on tearing up his promises not to cut public expenditure.

Mr Smith accused the government of shaming the nation with its strategy of trying to boost inward investment by selling Britain as a low-skill, low-pay economy. The strategy was doomed because there would always be countries which would do the work more cheaply, pay their people less and exploit them even more.

Dealing with his proposals to improve the Labour party's internal democracy, Mr Smith denied that they involved breaking the links with the unions. Under existing arrangements political levy-paying union members already made a voluntary contribution to the party and they would be encouraged to play a full role at constituency level by paying a special membership rate.

Mr Smith said: 'It is a twin-track strategy - one member, one vote, but also many more members, many more votes.'

GB United Kingdom, EC P8651 Political Organizations NEWS General News P8651 The Financial Times London Page 7 442
Labour MP for Vauxhall sacked from Citizen's Charter bench Publication 930522FT Processed by FT 930522

MS KATE HOEY, Labour MP for Vauxhall, was yesterday sacked as a front bench spokesman on the Citizen's Charter. She voted with 64 other Labour rebels against the third reading of the Maastricht Bill in the Commons on Thursday night in defiance of whips' orders to abstain.

GB United Kingdom, EC P8651 Political Organizations PEOP People P8651 The Financial Times London Page 7 77
Proposal to help property recovery Publication 930522FT Processed by FT 930522 By VANESSA HOULDER

BANKERS have been asked to adopt an innovative approach to dealing with their problem property loans by selling the underlying assets to a jointly owned company, Vanessa Houlder writes.

The suggestion, by Mr Ken Caesar, a partner of Richard Ellis Chartered Surveyors and Mr Colin Bird, a partner of Price Waterhouse, is designed to improve the prospects of a recovery in the property market by reducing the overhang of property for sale.

They said the company, which would own Pounds 1bn to 2bn of property, would require the injection of several hundreds of millions of pounds of equity to gain approval from the Bank of England. The company could be sold or floated after several years. Several bankers dismissed the idea as unrealistic because of likely difficulties in raising outside equity and reaching agreement among themselves.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P6021 National Commercial Banks NEWS General News P6552 P6021 The Financial Times London Page 7 174
Paisley's party and Sinn Fein make gains in Ulster poll Publication 930522FT Processed by FT 930522 By TIM COONE DUBLIN

EXPECTATIONS OF an early resumption of the round-table talks on Northern Ireland appeared to fade last night as the final results for the province's local elections showed that Sinn Fein and the Democratic Unionist party, which is led by the Rev Ian Paisley, had reversed their electoral decline.

In Belfast Sinn Fein emerged with 23.2 per cent, the biggest share of the vote for any party, outpolling even the Ulster Unionist party.

Mr Gerry Adams, the Sinn Fein president, said the result 'has dramatically renovated Sinn Fein's mandate'.

Across the province the Sinn Fein vote increased by 1.5 percentage points to 12.5 per cent, winning it 51 council seats out of the 582 total.

The Ulster Unionist party, the largest party in Northern Ireland, saw its support slip by 5 points to 29 per cent, although it increased the number of seats it holds from 193 to 197.

Mr Herbert Ditty, the hard-line unionist Lord Mayor of Belfast, lost his seat to Mr Chris McGimpsey, an independent unionist, but control of the council remains in Unionist hands by a slim majority.

Mr Ken Maginnis, deputy leader of the UUP, lost his seat in Dungannon, while the nationalist SDLP consolidated its hold on Derry council, winning an absolute majority of 17 seats.

The turnout across the province was 55 per cent. The overall nationalist vote apparently rose as Unionist participation fell. The main loser has been the Conservative party, which saw most of the gains it made in the 1989 local elections wiped out.

The Conservatives won only six seats, against more than 10 last time, with support apparently drifting back to the centrist Alliance party.

The Alliance vote increased by 1 point to 7.7 per cent, but its support appears increasingly concentrated in the middle-class areas of the east and south-east of the province.

Mr Brian Feeney, a spokesman for the SDLP, said the vote for the political extremes had hardened in those areas which had suffered the most political violence over the past year, while the vote for the more moderate SDLP, UUP and Alliance parties had held up or improved where there was greater stability.

He said the Belfast result 'will have knocked a lot of people back on their heels'.

Mr Addie Morrow, until recently the chairman of the Alliance party, said: 'I believe the result is very bad for the future of Northern Ireland. The electorate has given no encouragement for the parties to get together and negotiate.'

Mr Richard McCaulay, the spokesman for Sinn Fein, whose party has been excluded from talks because of its support for the IRA, said future political talks 'are almost certain to fail unless a process is developed which excludes no-one'.

The DUP described its result as 'a left hook' to efforts by Sir Patrick Mayhew, the Northern Ireland secretary, to get talks going again.

Mr Peter Robinson, the DUP deputy leader, said: 'If Sir Patrick Mayhew cannot read the message of this election then he needs glasses.' The DUP 'is not interested in the talks on the basis of the blueprint that (Sir Patrick) has offered'.

Results: UUP 197 seats; DUP 103; SDLP 127; Sinn Fein 51; Alliance 44; Conservatives 6; Independents 51.

GB United Kingdom, EC P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 7 571
Scrapping poll tax helps curb inflation Publication 930522FT Processed by FT 930522 By PETER MARSH, Economics Correspondent

CUT-PRICE lettuces, apples and cauliflowers and a shift in local taxation were behind the big fall in inflation announced yesterday.

Many types of seasonal foods are much cheaper than a year ago because of bumper harvests around the world. The move from the poll tax to the council tax last month had a big impact in forcing down the inflation rate. Higher central government grants mean the average household is paying 8.7 per cent less under the new system.

The retail prices index for last month came to 140.6, up 0.9 per cent from the 139.3 registered in March.

The index is worked out on the basis that in January 1987 it was 100.

In the year to last month the RPI rose by just 1.3 per cent, after a year-on-year increase of 1.9 per cent in March, for an overall fall of 0.6 percentage points in the inflation rate.

The impact of the switch in taxation took 0.7 percentage points off this rate between March and April.

Rising prices - albeit of a moderate degree - for other types of goods and services were responsible for pushing up the rate by a meagre 0.1 of a percentage point.

Between March and last month seasonal foods fell in price by 2.8 per cent, the biggest April decrease for these items since the Central Statistical Office started records in 1956.

Seasonal foods - one of the 15 main categories of goods and services forming the basis for the RPI - last month cost 7.7 per cent less than in April last year after a year-on-year fall of 6.8 per cent in March.

Fresh fruit was sold last month for 17 per cent less than a year previously while prices of vegetables were down 2 per cent.

Shoppers also found fresh fish at bargain prices, down 10 per cent from the corresponding month last year.

Potatoes were down 4 per cent in price, but lamb and cheese cost 12 per cent and 10 per cent more respectively. Non-seasonal foods as a whole cost 3 per cent more last month than a year previously.

Of all 15 categories in the RPI only six experienced an increase between March and April in the year-on-year rate of price changes. Housing costs - in which local taxation is a key component - were down 6.9 per cent in the 12 months to April after a 3.6 per cent fall in the year to March.

The average housebuyer has seen mortgage interest payments fall by 23 per cent in the year to last month, reflecting lower interest rates.

Household fuel and light bills fell 0.6 per cent between April last year and last month, while leisure goods were up in price by only a muted 1.7 per cent.

Cigarettes and tobacco showed price increases of 7 per cent over this period while canteen meals were up 8 per cent.

Furniture has risen in price by only 2 per cent over the past year and electrical appliances have not increased.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Inflation P9311 P9611 The Financial Times London Page 7 544
Computer hackers jailed for 6 months Publication 930522FT Processed by FT 930522 By JOHN MASON, Law Courts Correspondent

TWO COMPUTER hackers who broke into systems belonging to companies and institutions around the world were imprisoned for six months yesterday.

Mr Neil Woods and Mr Karl Strickland had earlier pleaded guilty to offences under the Computer Misuse Act - legislation introduced in 1990 to outlaw computer hacking.

For two years the two men hacked into computers belonging to the investment bank SG Warburg, British Telecommunications, the European Community, and Nasa, the US space agency. The court heard that the cost of the damage they caused was conservatively estimated at more than Pounds 123,000.

Passing sentence on the men at Southwark Crown Court in London, Judge Michael Harris said he fully accepted that their hacking activities were not designed to damage systems, to misuse the information they contained, or to make a profit from what they were doing.

He told them, however, custodial sentences were appropriate 'to penalise you for what you have done and for the losses caused, and to deter others who might be similarly tempted'.

He said hacking was not harmless and hackers needed to be given a clear signal that their activities would not be tolerated.

Mr Strickland, a Liverpool University research assistant, and Mr Woods, a computer salesman from Oldham, both pleaded guilty to conspiring to obtain telegraphic services dishonestly, and engaging in the unauthorised publication of computer information.

Mr Woods also admitted causing Pounds 15,000 damage to a computer owned by Central London Polytechnic.

GB United Kingdom, EC P9211 Courts NEWS General News P9211 The Financial Times London Page 7 273
Building society inflow up to Pounds 1bn Publication 930522FT Processed by FT 930522 By SCHEHERAZADE DANESHKHU

BUILDING SOCIETIES had a net inflow of deposits from savers of Pounds 1.07bn in April compared with Pounds 249m in March, enjoying their best month for two years.

Net inflow was Pounds 820m for the whole of the previous three months. The last time building societies had a comparable monthly inflow was April 1991, when net recipts totalled Pounds 1.3bn.

Mr Mark Boleat, director-general of the Building Societies Association, said the rise 'represents a significant departure from the modest inflows experienced over recent months'.

He attributed the increase to 'the specific marketing efforts of individual societies and seasonal factors rather than a general trend. As such the inflow of savings may well fall back next month'.

Mr Nigel Richardson of Yamaichi Securities said the figures indicated that people were saving more of their discretionary income, which had been rising as a result of the fall in mortgage rates.

Mr Ian Shepherdson, UK economist at Greenwell Montagu, said: 'Building societies will find it more difficult to whinge against National Savings as a result of these figures. They discount fears of mortgage rate rises.'

National Savings contributed Pounds 249m to government funding in April, and most of this - Pounds 162m - came from accrued interest.

Last year building societies claimed unfair competition by National Savings. Its First Option Bond raised Pounds 800m in four months and Cheltenham & Gloucester building society raised its mortgage rates as a result.

The increase in mortgage activity recorded in March was sustained in the April building society figures. Gross mortgage lending was Pounds 2.71bn in April, up fractionally from March. Net new commitments increased to Pounds 3.18bn, up from Pounds 3.09bn in March. Voluntary company liquidations in England and Wales rose to 3,454 in the first quarter of the year compared with 3,416 in the same period last year, KMPG Peat Marwick said.

GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents CMMT Comment & Analysis P6162 The Financial Times London Page 7 343
Way opened for BR bill changes Publication 930522FT Processed by FT 930522 By RICHARD TOMKINS, Transport Correspondent

THE GOVERNMENT yesterday rejected calls from a Commons select committee for changes to its rail privatisation plans. It appeared to leave open the possibility of last-minute amendments to the Railways Bill, to be debated in the Commons next week.

The cross-party transport committee last month published the results of a four-month investigation into the government's plans and called for a series of changes, warning that privatisation could otherwise go badly wrong.

Several of its criticisms focused on the idea of open access to the tracks for competing passenger-train operators and the separation of ownership of the tracks and trains. The committee also warned that budgetary constraints could lead to line closures.

The government response rejects fundamental changes to the structure of privatisation. It says: 'As the report itself recognises, the grain of current trends in Europe and elsewhere is away from unitary railway undertakings and towards greater freedom of access.'

The government also says, however, that it has been considering the issues addressed by the report and will continue to do so as the Railways Bill passes through parliament.

This statement may give encouragement to rebel Conservative backbenchers seeking changes to the Railways Bill at report stage in the Commons on Monday and Tuesday.

The rebels want clauses added to the bill which would preserve discounted railcard schemes and give British Rail the right to bid for franchises. Train passengers have registered a large vote of no-confidence in the privatisation plans, a survey shows. Some 71 per cent of people interviewed at mainline stations said they were opposed to the plans, according to a Gallup survey in today's Daily Telegraph. Gallup interviewed 575 passengers.

British Rail GB United Kingdom, EC P4011 Railroads, Line-Haul Operating P9611 Administration of General Economic Programs COMP Company News P4011 P9611 The Financial Times London Page 6 318
Deception causes Sumitomo loss Publication 930522FT Processed by FT 930522 By TRACY CORRIGAN

SUMITOMO Finance International, the London-based arm of the Sumitomo Bank, suffered losses of Dollars 2m to Dollars 3m on its interest rate options book last autumn after an employee concealed his true trading position from senior management.

The losses were linked to the partial breakdown of the European exchange rate mechanism, which overturned the assumptions about volatility and market correlation on which options prices are based, making the market extremely difficult to trade.

A number of houses suffered losses. But at Sumitomo Finance, the manager of the interest rate options desk falsified prices in order to foil the management's control procedures. Unchecked, the losses mushroomed.

The full affair came to light yesterday, when the Securities and Futures Authority, the UK regulator, expelled Mr Zahid Mannan, the manager in question, from its registers. This in effect bars him for life from the business in the UK. There was no suggestion that Mr Mannan was seeking to profit personally.

Mr Mannan was also fined Pounds 10,000 and ordered to make a contribution of Pounds 4,000 towards the SFA's investigation costs.

As manager of the interest rate options desk Mr Mannan had to record the value of his positions in management reports submitted to his chief executive.

He gave falsely inflated values in order to hide his true position. Mr Mannan then persuaded an employee with another firm, which he knew was used by Sumitomo's accounts department to check those valuations, to quote inflated prices that corresponded with those in his own internal management reports.

This arrangement was brought to light while Mr Mannan was on holiday and the subsequent investigation showed that his actions had resulted in Sumitomo's qualifying capital being overstated in the preceding months, the SFA said. The amount of capital held by firms is adjusted according to their exposure.

Sumitomo Finance declined to comment.

Among a number of serious 'hits' as a result of options trading is Allied-Lyons, the UK food and drinks group, which lost Pounds 150m in 1991 on foreign exchange positions taken without the knowledge of senior management.

The Sumitomo losses, while much less severe, underline the problems involved in managing the risk generated by derivatives business.

Sumitomo Finance International GB United Kingdom, EC P6141 Personal Credit Institutions PEOP People P6141 The Financial Times London Page 6 394
Broad Left wins in BT union poll Publication 930522FT Processed by FT 930522 By ROBERT TAYLOR, Labour Correspondent

GROWING unrest over changes in working practices and job cuts at British Telecommunications have led to an unexpectedly victory by the Broad Left in this year's executive committee elections in the 125,000-strong National Communications Union.

The success of the left may threaten the union's policy of co-operation with BT over its plans to cut 15,000 jobs this year with a further 15,000 due to go in 1994.

The election has left a group of leftwing Labour party members and members of far left groups holding 20 of the 35 executive seats. The rightwing Members First organisation suffered a loss of 10 seats, being reduced to only three places with the clerical group holding the other 12 executive places. One NCU official said the main reason for the sweeping victory by the Broad Left was the threat of compulsory seven-day shift working and extension of the existing working day under BT's customer improvement programme.

Mr Tony Young, the NCU's moderate general secretary, said yesterday there were 'no viable options' to the NCU's current strategy towards BT. He added that any refusal by the union to work with BT would be 'unwise' and ensure it exercised 'less influence' in the company.

The change in the executive's balance of power could also lead to a shift in its policy to the rejection of one-member-one-vote for the selection of Labour party parliamentary candidates. This would be a setback to the chances of Mr John Smith, the Labour leader, winning a vote on the issue at the autumn party conference.

GB United Kingdom, EC P8631 Labor Organizations PEOP People P8631 The Financial Times London Page 6 288
Trade visit targets the Far East Publication 930522FT Processed by FT 930522 By IVOR OWEN

MR RICHARD Needham, the trade minister, is to lead a delegation of 25 business executives on a five-day export promotion mission to the Far East at the end of the month, Ivor Owen writes.

This was announced by Mr Edward Leigh, junior trade and industry minister, in the Commons yesterday when pledging full government backing for the efforts of British companies to maximise their share of the world's fastest-growing market.

He said South Korea was among the 17 countries to which ministers would lead trade missions in the next 12 months.

Mr Leigh said British exports to China had doubled in the first two months of this year, and Mr Needham, who had been there three times in the last year, was planning an early return visit.

Mr Leigh said Britain's share of world trade had stabilised in volume terms after three decades of decline.

GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 176
Many London hospital services face axe Publication 930522FT Processed by FT 930522 By ALAN PIKE, Social Affairs Correspondent

A SERIES of reviews ordered by Mrs Virginia Bottomley, health secretary, is about to recommend widespread closures of specialist hospital services in London.

The six reviews of the allocation of specialist services in London are also about to propose several transfers of facilities to areas of population growth outside the capital.

An unexpected consequence of the reviews, which came after the Tomlinson report into London healthcare, is that they could undermine the financial stability of successful hospitals identified for survival by Tomlinson.

St Mary's, Paddington - one of the capital's most financially viable teaching hospitals - stands to lose 10 per cent of its annual income if the government accepts a recommendation that its cardiac surgery and renal transplant facilities close.

Mrs Bottomley will receive the final recommendations of the review teams - which have examined the provision of cancer, renal, neurosciences, plastic surgery and burns, cardiac and children's services - next week. But confidential briefings of the review teams' overall thinking, given this week to senior managers and medical school academics, indicate that there will be radical restructuring of specialist services around fewer, bigger units.

The inquiry concluded that the 14 inner London hospitals providing specialist cardiac services should be reduced to five, with a new cardiac centre located at Brighton. A similar reduction in neuroscience services is proposed, with some of the capital's surplus specialist capacity transferring to Guildford.

The survival chances of Charing Cross hospital, one of those threatened with closure after the Tomlinson report, have risen as a result of the reviews, which envisage retaining it as a specialist centre. Other inner London teaching hospitals likely to emerge from the reviews with a strong range of specialist services are the combined Guy's-St Thomas'; St George's; the Royal London and University College.

The review teams are expected, however, to support the removal of specialist services from St Bartholomew's hospital in the City, another of those recommended for closure in the Tomlinson report. This would make it increasingly probable that St Bartholomew's would be fully amalgamated with the Royal London on the latter's East End site.

There is general acceptance that London's many scattered specialist services need rationalisation, but some of the specific recommendations will cause anger and alarm. Staff at St Mary's reacted with dismay yesterday to the proposed loss of specialist activities.

The Tomlinson report concluded that St Mary's ranked 'fairly low' on a vulnerability list of London hospitals and had a stable financial position. But the review recommendations would lead to the loss of Pounds 10m from its Pounds 100m annual income.

Lord Glenarthur, chairman of the St Mary's Trust, said: 'This hospital has worked hard to become viable and is a good example of the fact that the NHS reforms are working. But instead of rewarding success, we are apparently now being told to try to walk on one leg.'

GB United Kingdom, EC P8062 General Medical and Surgical Hospitals P9431 Administration of Public Health Programs P8069 Specialty Hospitals, Ex Psychiatric NEWS General News P8062 P9431 P8069 The Financial Times London Page 6 526
Hopes rise for launch of investment watchdog Publication 930522FT Processed by FT 930522 By NORMA COHEN, Investments Correspondent

PROSPECTS for the creation of the Personal Investment Authority, the proposed new self-regulatory body for financial services, have been boosted by a compromise proposal on membership rules intended to encourage banks, building societies and independent sales agents to join.

The proposal from Sir Brian Jenkins, a senior partner at Coopers & Lybrand, the accountancy firm, and a former Lord Mayor of London, involves moderating the controversial proposal by the Securities and Investments Board that independent financial advisers be required to have minimum capital of Pounds 10,000.

Sir Brian has proposed that only those who, after submitting a three-year business plan, cannot demonstrate solvency will have to present an enforceable guarantee that up to Pounds 10,000 could be put into the business.

The solvency test will also have to be met if their gross revenues fall by 25 per cent, or if a single source providing more than 10 per cent of their business is lost.

Bankers, who had been particularly keen to see minimum capital rules, privately said they did not believe the compromise would weaken regulatory standards.

One bank official said: 'If this report is adopted in its present form it will go a long way towards encouraging at least some of the big banks to join the PIA.'

Both Barclays Bank and National Westminster Bank have said they would join the PIA provided it raised regulatory standards along the lines suggested last year by SIB chairman Mr Andrew Large.

The PIA had asked Sir Brian to review the SIB proposals, intended to make the PIA a tougher regulator than the existing self-regulatory bodies.

The PIA is intended to replace Lautro, the self-regulatory body for life insurers, and Fimbra, the body for independent financial advisers.

Life insurers have said they will not join unless the banks and building societies which sell financial services join as well. Most of those are regulated directly by SIB.

Sir Brian endorsed SIB's proposal that all those joining the PIA be vetted before admission, even if they had previously been members in good standing of a similar body.

He urged, however, that as far as possible, those vetting new members should rely on information already on file at other self-regulatory bodies.

The proposals are also expected to be largely welcomed by large independent financial adviser firms which already exceed the minimum requirements spelled out in the paper.

Mr John Bridle, chief executive at Towry Law, a large chain of independent financial advisers, said: 'One needs to do something so the industry as a whole can demonstrate it is committed to raising standards.'

GB United Kingdom, EC P6282 Investment Advice P9651 Regulation of Miscellaneous Commercial Sectors TECH Safety & Standards P6282 P9651 The Financial Times London Page 6 470
SFO seeks two men who fled with Nadir: Officials 'gnash teeth at borders' Publication 930522FT Processed by FT 930522 By GILLIAN TETT and JIMMY BURNS

DETECTIVES FROM the Serious Fraud Office want to question two UK businessmen, Mr Peter Dimond and Mr David Hamilton, who are living in northern Cyprus after flying there with Mr Asil Nadir.

Mr Dimond, a former aircraft dealer, this week described how he helped Mr Nadir jump his Pounds 3m bail by flying to Beauvais in France, where they were met by a Cessna Citation jet which flew them to northern Cyprus.

Mr Hamilton has been identified as having at least a part interest in the US-registered Cessna Citation. Mr Dimond and Mr Hamilton were on the plane with Mr Nadir when it landed in Kyrenia on May 4.

Mr Michael Hamlin, owner of Hamlin Jets, which manages the Citation, yesterday said Mr Hamilton had been a 'co-owner' of the plane for three years. He confirmed Mr Hamilton had been on board.

He said that two other passengers, Mr Timothy Lambon, a Zimbabwean, and Mr Anthony Sawyer had also been on board. The SFO also wants to question them.

Mr Hamlin said yesterday the jet had not flown directly to Beauvais, as originally thought, but had spent a night in Dinard, France. He said he had been unaware of the purpose of the flight.

Mr Dimond said in Cyprus yesterday he had no intention of returning to England to face police questioning. 'If you were in my shoes would you go back?' he said. 'The police can come here and question me here. There is nothing to stop me talking to them. But they know they can do nothing.'

Asked about possible extradition, he said that so far the Turkish Cypriot authorities had left him alone, adding he did not know the status of his stay on the island.

Foreign Office officials indicated that efforts to secure Turkey's help in having Mr Nadir and British citizens linked to his escape brought back to the UK remained deadlocked.

The growing frustration felt by British officials was summed up by a senior detective last night: 'We are sitting at the borders, champing and gnashing our teeth, but there is very little we can do.'

Police hope Mr Dimond will eventually return to England voluntarily to rejoin his wife and family in his Hampshire home. Under UK law anyone who helps a financial fugitive to jump bail faces a potential prison term of anything up to five years.

GB United Kingdom, EC CY Cyprus, Middle East P9211 Courts NEWS General News P9211 The Financial Times London Page 6 439
Nadir gains control in his move to regain control of Turkish assets Publication 930522FT Processed by FT 930522

MR ASIL NADIR, the fugitive Cypriot businessman, has successfully intervened in the Turkish courts to prevent the sale of Gunaydin, the Istanbul newspaper, in his latest move to regain control of his Turkish assets.

On Thursday an Istanbul court postponed the sale by the official receivers of Gunaydin, pending settlement of dispute over ownership of the newspaper's title.

The former Polly Peck chairman, who jumped bail in the UK earlier this month and fled to northern Cyprus, has said he will fight to regain his assets in Turkey.

Gunaydin TR Turkey, Middle East P2711 Newspapers COMP Disposals P2711 The Financial Times London Page 6 122
420 jobs at Swan Hunter to go soon Publication 930522FT Processed by FT 930522 By CHRIS TIGHE

A TOTAL of 420 of the 2,200 jobs at Swan Hunter, the Tyneside shipbuilder, will be lost next week, receivers Price Waterhouse said yesterday.

The cuts, described by union leaders as a devasting blow, are mainly among steelworkers and technical staff. The 420 planned redundancies comprise 212 blue-collar workers, 134 white-collar workers and 74 short-term contract workers.

Mr Ed James, one of the receivers, said the redundancies were necessary to bring employment levels into balance with the company's workload, while retaining technical expertise as the search continued for a buyer for the business as a going concern.

Labour MP Mr Steve Byers, in whose Wallsend constituency the company is headquartered, attacked the decision to shed jobs as premature.

Union leaders, who were told further jobs would be at risk in the near future if Swans did not win an Oman order it has tendered for, expressed concern that cutting 89 technical jobs, one third of the total, could handicap attempts to clinch new contracts - a view rejected by Price Waterhouse.

The job losses take effect next Friday, the last date the Ministry of Defence has agreed for outfitting work to continue at Swans on three Type 23 frigates, its main workload. Finishing the vessels, providing work until late 1994, offers Swans the best chance of finding a buyer as a going concern. Talks between Price Waterhouse and the ministry are continuing.

Yesterday HMS Westminster left the Tyne for sea trials, postponed when Swans went into receivership last Thursday after its failure to win a helicopter carrier order. Price Waterhouse denied Mr Byers's claim that the Westminster might not return to the Tyne next week for completion.

Mr Byers also said that the ministry on Thursday invited Vosper Thornycroft of Southampton to submit a price for completing work on the frigates. The ministry said it could not comment. Mr Martin Jay, Vosper's managing director, said the ministry had issued no such statement. The company refused to comment further.

Mr Jay said his company, which has a Pounds 700m order book reaching to 1997, had 'plenty of spare capacity'.

AV Seawork, a wholly owned Vosper subsidiary, advertised in Tyneside's Evening Chronicle on Thursday for experienced ship design engineers. Interviews will be held at a Wallsend hotel on Tuesday. Mr Jay said the engineers were needed for the company's existing workload.

The Tyne and Wear Development Corporation announced yesterday it was providing, with the Tyneside Training and Enterprise Council, up to Pounds 100,000 to study the merchant shipbuilding market and help Price Waterhouse evaluate bids.

Tomorrow in Carlisle shop stewards from all UK shipyards will be asked to back a motion urging workers at other yards to refuse to work on the frigates.

Mr Mike Hubbold, outfitting trades secretary at VSEL in Barrow-in-Furness, said unions there had taken no stance yet on what would happen should the frigates be moved there.

Swan Hunter Shipbuilding and Engineering Group Vosper Thornycroft Holdings GB United Kingdom, EC P3731 Ship Building and Repairing PEOP Labour MKTS Contracts P3731 The Financial Times London Page 6 525
Health authority cuts 250 staff Publication 930522FT Processed by FT 930522

REDUNDANCY notices were yesterday handed to 250 workers at West Midlands Health Authority after a directive from Mrs Virginia Bottomley, the health secretary.

Notices were given to staff including the acting managing director and personnel director following the order that authorities across the country should employ no more than 200 administrative staff.

GB United Kingdom, EC P9431 Administration of Public Health Programs P8062 General Medical and Surgical Hospitals PEOP Labour P9431 P8062 The Financial Times London Page 6 88
New Oxleas plan Publication 930522FT Processed by FT 930522

A NEW PLAN to save the ancient Oxleas Wood in south-east London was put forward yesterday by the British Road Federation, the road user lobby group. The plan, the latest in the long saga to preserve the 8,000-year-old wood, proposes linking the East London River Crossing with the A2016 at Thamesmead south of the river rather than with the A2 at Falconwood.

GB United Kingdom, EC P9512 Land, Mineral, Wildlife Conservation NEWS General News P9512 The Financial Times London Page 6 89
Liquidations rise Publication 930522FT Processed by FT 930522

VOLUNTARY company liquidations in England and Wales rose to 3,454 in the first quarter of the year compared with 3,416 in the same period last year, KMPG Peat Marwick said. A KMPG survey showed nearly 60 per cent of creditors' voluntary liquidations in the quarter were in south-east England, reflecting the way in which the recession had hit the service sector.

GB United Kingdom, EC P6231 Security and Commodity Exchanges P9611 Administration of General Economic Programs NEWS General News P6231 P9611 The Financial Times London Page 6 94
SIB acts on Melton Medes Publication 930522FT Processed by FT 930522

The Securities and Investments Board yesterday launched a High Court action to recover money from Melton Medes, the mini-conglomerate, and two of its senior executives following an alleged breach of Investment Management Regulatory Organisation rules.

The writ issued by SIB names Mr Nathu Ram Puri, the Melton Medes chairman, and Mr James Edward Philpotts, the company's chief executive, as individual defendants.

Three companies also named as defendants are Melton Medes Pension Trustees Ltd, Melton Medes Ltd and MM Nominees Ltd.

The court action follows an Imro inquiry into pension funds controlled by Melton Medes, which ended in July last year when the case was passed up to SIB.

Melton Medes GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P9211 Courts COMP Company News P6371 P9211 The Financial Times London Page 6 144
BCCI auditor probe halted Publication 930522FT Processed by FT 930522 By ANDREW JACK

THE HIGH COURT yesterday granted Price Waterhouse, the accountancy firm, the chance to delay an investigation into its role as auditor to the collapsed Bank of Credit and Commerce International by the profession's highest disciplinary body, Andrew Jack writes.

Mr Justice Tuckey granted the firm leave for judicial review at a two-day hearing in July to determine whether it could delay an inquiry by the Joint Disciplinary Scheme of three of the UK's leading accountancy bodies.

The JDS maintains that it has a duty in the public interest to examine the role of the firm in the circumstances surrounding the collapse of BCCI.

But Price Waterhouse said any proceedings from the inquiry would be subject to discovery and could prejudice the outcome of writs against the firm by the liquidators to BCCI for more than Dollars 8bn.

It also disclosed for the first time that the joint monitoring unit which regulates auditors in chartered accountancy firms had inspected PW with an extended remit to consider its role as auditor to BCCI. It has not had its right to conduct bank audits rebuked as a result.

Price Waterhouse GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services COMP Company News P8721 The Financial Times London Page 6 220
Natfhe defiant Publication 930522FT Processed by FT 930522

NATFHE, the union for further education college lecturers, yesterday defied employers by instructing its members to refuse to mark registers.

GB United Kingdom, EC P8631 Labor Organizations NEWS General News P8631 The Financial Times London Page 6 44
Nadir successfully intervenes in Turkish courts to prevent sale of Gunaydin Publication 930522FT Processed by FT 930522

MR ASIL Nadir, the fugitive Cypriot businessman, has successfully intervened in the Turkish courts to prevent the sale of Gunaydin, the Istanbul newspaper, in his latest move to regain control of his Turkish assets.

On Thursday an Istanbul court postponed the sale by the official receivers of Gunaydin, pending settlement of dispute over ownership of the newspaper's title.

The former Polly Peck chairman, who jumped bail in the UK earlier this month and fled to northern Cyprus, has said he will fight to regain his assets in Turkey.

Gunaydin's staff, owed more than TL60bn by Mr Nadir, created a new company called Yeni Gunaydin last year, printing on machinery auctioned by the state receivers.

Imar bank, the newspaper's creditors, unsuccessfully challenged the move in the courts.

This week Mr Osman Adas, acting for Mr Nadir, claimed the Gunaydin title was vested in Veb Holding, a private company, which according to Turkish Treasury records is 100 per cent owned by Mr Nadir.

Mr Nadir's action has blocked the sale of Gunaydin to Mr Mustafa Suzer, a businessman of Kurdish origin and owner of the Pera Palas Hotel, immortalised by the writer Agatha Christie.

Gunaydin TR Turkey, Middle East P2711 Newspapers COMP Disposals P2711 The Financial Times London Page 6 225
National Mutual offshoot is fined Pounds 45,000 by Lautro Publication 930522FT Processed by FT 930522 By NORMA COHEN

NM FINANCIAL Management, the UK life insurance division of Australia-based National Mutual, has been fined Pounds 45,000 by regulators for failing to vet its sales staff properly and for failing to insure that 'best advice' was given to clients.

NMFM will also have to pay the costs of the investigation and pay compensation to investors who have been sold unsuitable products.

Lautro, the self-regulatory body for the life insurance industry, said yesterday that its compliance staff initially uncovered deficiencies in NMFM's procedures for vetting sales staff during a visit in December 1990.

In May last year Lautro conducted a further visit and found there were still deficiencies and that moreover, there was insufficient information in company files for regulators to see whether best advice had been given.

Under Lautro rules sales agents must conduct a 'fact-find' on each prospective customer to discover his financial position, needs and goals. Without this information sales agents cannot properly advise a client about the product most appropriate to his needs.

This may lead to mis-selling of unsuitable products which are likely to be cancelled by clients in the first few years, leading to a loss of most of the premiums paid.

NMFM said that since that visit it had improved its vetting procedures and had reviewed policies sold to customers where insufficient fact-finds were recorded. It said that compensation required to be paid in only one case.

NM Financial Management GB United Kingdom, EC P6311 Life Insurance COMP Company News P6311 The Financial Times London Page 6 271
HK anxious over China MFN decision: What the colony stands to lose if Beijing's trade privileges are curtailed Publication 930522FT Processed by FT 930522 By SIMON HOLBERTON

THE MOST interested bystander in the run-up to President Bill Clinton's decision on June 3 to renew or not to renew China's most favoured nation trading status is Hong Kong.

Hong Kong, which over the past decade has become China's most important international port, has much to lose if the US decides to curtail China's trading privileges.

China dominates the colony's burgeoning re-export trade. Last year Hong Kong re-exported to the rest of the world goods of Chinese origin with a value of HKDollars 403.8bn (Pounds 33.9bn) (up 28 per cent on 1991) and re-exported to China goods with a value of HKDollars 212bn (up 38 per cent).

This re-export trade - which in real terms earns the colony between HKDollars 16 to HKDollars 20 in every HKDollars 100 of re-exports - has confirmed the colony's role as China's pre-eminent entrepot. But the enmeshing of the two economies has made Hong Kong vulnerable to actions taken against China.

The Hong Kong government reckons that in the worst case - the removal of China's MFN status - Hong Kong's growth rate could halve from about 6 per cent to 3 per cent and up to 70,000 workers lose their jobs.

The impact on southern China, principally Guangdong, has not been the subject of economists' estimates. It is, however, a fair bet that in the worst case many of the 3m who are employed in Hong Kong-owned factories there would suffer the same fate as their Hong Kong compatriots.

One Hong Kong manufacturer of toys and electronic games in southern China has told the local authorities that half its 3,000-member work force will be shed if China loses its MFN status. 'We will immediately set up a factory in Macao if China loses MFN,' a senior executive said.

Other observers in the colony, mostly academic economists, greet the annual MFN renewal process with a degree of puzzlement. They point out that by imposing conditions on China's MFN status, the US will be harming the process that it has most applauded in the past, the growth of a capitalist market in China.

They also observe that the US is trying to have it both ways. On the one hand it applauds the migration of Hong Kong and Taiwanese businesses to the mainland, and the 'subversive' impact that may have on the regime's control of China, but on the other hand by seeking to make MFN conditional it undermines that business migration.

Others, like Professor Y Y Kueh, of Lingnan College in Hong Kong, point to the effects this business migration has had on the bilateral trade balances of Hong Kong, Taiwan, and China with the US. From this perspective it is possible to argue that the motivating force behind China's trade surplus with the US is not China as such, but the transplanted factories of Hong Kong and Taiwanese companies.

The links between investment and trade are well known and for Professor Kueh it is no coincidence that the trade surpluses of Hong Kong and Taiwan with the US fell off sharply at the same time as China's trade surplus with the US began to take off. 'The downturn in the Hong Kong and Taiwan trade surpluses with the US are the mirror images of the upturn in the mainland's surplus with the US,' he said.

Whether the recognition of this will have much impact in Washington remains to be seen. Yet curiously the prospect that President Clinton may attach conditions to China's renewal of MFN - or threaten tough conditions in a year's time if improvements in human rights, arms sales and trading practices are not made - has failed to stir the colony as much as it has in the past.

This is best seen in the behaviour of the local bourse which rises ever higher on larger and larger volumes of transactions. This time last year and indeed since 1990, when a Republican president was in the White House and showed little interest in MFN conditionality, the annual ritual of MFN renewal always had the power to undermine investor confidence.

What has changed this time is that Hong Kong has seen the likely list of conditions Mr Clinton might apply and concluded that the colony, and probably China, can live with them. Mr Paul Cheng, chairman of Hong Kong's General Chamber of Commerce and the head of Inchcape, the UK trading house, says: 'I am cautiously optimistic.'

Mr Chris Patten, the colony's governor, is also confident that he was able to convince the US administration and Congress not to make Hong Kong's political development a condition of renewal, if conditions are placed on MFN. He also points out that for the US to enforce the sanction most touted - that higher tariffs be applied to goods from China's state-owned sector - would be virtually impossible.

But in the end is also the view that annual MFN renewal process is the best stick with which the US has to influence policy in China. According to Mr Enzio von Pfeil, economist with Warburg Securities: 'At the end of the day I do not think the Americans want to remove China's MFN. If they do they will have lost their stick.'

CN China, Asia HK Hong Kong, Asia P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 4 915
Japanese trade surplus 'likely to decline' Publication 930522FT Processed by FT 930522 By MICHIYO NAKAMOTO

JAPAN'S Ministry of International Trade and Industry has responded to growing criticism of the country's massive trade surplus with a report which argues that it is likely to decline in the long run because of changes in Japanese society and corporate organisations.

In its annual white paper on trade submitted to the cabinet yesterday, Japanese trade officials rebut the argument that the country's trade surplus is a result of its closed markets.

The report strongly criticises results-oriented approaches to solving trade issues, which it says leads to protectionism, and calls for greater co-operation between countries to promote a multilateral approach to world trade.

The Japanese position on its trade surplus and proposals to deal with the problem through a multilateral, free-market approach comes as the Clinton administration has stepped up pressure on Japan to adopt a more 'managed' approach in tackling its trade surplus.

The US has recently been showing impatience with its inability to reduce its trade deficit with Japan, which grew for the 28th consecutive month to Dollars 10.25bn (Pounds 6.6bn) from Dollars 7.11bn a year ago.

Miti's white paper argues that the common perception of Japan's trade surplus as being due to the closed nature of markets is mistaken. Its recent increase, according to Miti, is due to a number of factors unrelated to the openness of its markets, such as the appreciation of the yen and weaker oil prices, which make up for about half of the rise in the surplus since 1990.

At the same time, the recent rise of the surplus is due to the fall in imports resulting from the bursting of the Japanese economic bubble.

Miti also argues that Japanese competitiveness in certain industries is what lies behind Japan's surpluses in those specific sectors rather than the closed nature of these markets as claimed by some.

The ministry further questions the view that having a trade surplus is damaging to the world economy.

It says that in order to tackle the trade imbalance a re-evaluation of the nature and effect of trade surpluses and multi-lateral co-operation in promoting economic growth is needed.

JP Japan, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 4 380
Hopes raised by Japanese money growth Publication 930522FT Processed by FT 930522 By ROBERT THOMSON TOKYO

MONEY SUPPLY in Japan expanded 0.6 per cent in April, following a revised contraction of 0.4 per cent in March, prompting the Bank of Japan to suggest that signs of economic recovery are emerging.

Bank officials said the preliminary year-on-year expansion in M2 plus certificates of deposit reflected the effects of two stimulatory packages announced in recent months by the government, which has pumped extra funds into public works. Money supply has contracted in six of the past seven months, but the bank argues that firm growth will be seen this quarter, partly because of the government packages, but also because lower interest rates have encouraged economic activity.

The bank said the broadest measure, which includes postal and agricultural institution savings, grew 2.5 per cent in April, up from a revised 2.0 per cent in March, as money continued to flow into the postal savings system. The preliminary expansion in March had been 2.3 per cent.

But bank officials are concerned that consumer demand remains weak and that two-thirds of Japanese companies have announced profit falls during the present profit season, the third year of decline, with many forecasting a fourth year of decline and a reduction in capital spending.

Japan's Securities and Exchange Surveillance Commission yesterday asked for indictment of a property company executive and a former finance company manager for alleged stock price manipulation. Mr Makoto Araya, president of Teishin Fudo, and Mr Hiroshi Kimura, a former managing director at Sumitomo Fudosan Finance, are alleged to have unlawfully ramped Nihon Unisys stock.

Teishin Fudo Sumitomo Fudosan Finance JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy P9651 Regulation of Miscellaneous Commercial Sectors P9222 Legal Counsel and Prosecution ECON Economic Indicators PEOP People P9311 P9651 P9222 The Financial Times London Page 4 309
EC ministers focus on growth prospects Publication 930522FT Processed by FT 930522 By LIONEL BARBER KOLDING, DENMARK

EC FINANCE ministers last night opened a two-day informal meeting expected to focus on prospects for growth to tackle Europe's unemployment problem and tensions within the European exchange rate mechanism.

The Danish presidency of the EC is hoping the tax cuts unveiled after this week's successful referendum on Maastricht will galvanise other member states to follow suit. The aim is to create momentum for an EC growth package ahead of next month's summit in Copenhagen.

Ministers will also discuss a report on last September's ERM crisis which led to the withdrawal of the British pound and the Italian lira. But the report, by the EC's monetary committee of senior treasury officials and central bankers, does not recommend substantial changes.

The UK declared this week it would not rejoin the ERM in the near future and stuck to its argument that there are fundamental 'fault-lines' in the system which act to the detriment of weaker currencies. Yet EC and British officials say the UK has not put forward proposals to change operation of the ERM, mainly because it does not wish to offend France and Germany.

Mr Philippe Maystadt, Belgian finance minister, is likely to be questioned about his call for revision of 'convergence criteria' for monetary union if recession continues.

QR European Economic Community (EC) P9441 Administration of Social and Manpower Programs P9311 Finance, Taxation, and Monetary Policy ECON Employment & unemployment P9441 P9311 The Financial Times London Page 4 256
Zambian opposition arrests Publication 930522FT Processed by FT 930522 By REUTER LUSAKA

Zambian authorities yesterday revoked detention orders against eight opposition figures, including a son of former President Kenneth Kaunda, but then arrested them again on new charges of sedition, Reuter reports from Lusaka.

Mr Kaunda's son Wezi, an MP for the main opposition United National Independence party, and two other men were granted bail and their cases were adjourned until June 21.

ZM Zambia, Africa P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 88
Stoiber to become Bavarian PM Publication 930522FT Processed by FT 930522 By QUENTIN PEEL

After 10 days of negotiations, the leaders of Bavaria's Christian Social Union, junior partners in the Bonn coalition, decided yesterday that Mr Edmund Stoiber should become the new Bavarian prime minister, after Mr Max Streibl resigns in the summer, writes Quentin Peel.

The decision means that Mr Theo Waigel, the party leader, will remain finance minister in the Bonn government - although it was clear that he would have preferred to come home to Bavaria. Mr Stoiber, now interior minister in Munich, has emerged as the strong man in the CSU, but has agreed to step down from his post as deputy party leader as part of the compromise.

DE Germany, EC P9199 General Government, NEC PEOP People P9199 The Financial Times London Page 3 138
India's exports up 3.6% Publication 930522FT Processed by FT 930522 By STEFAN WAGSTYL NEW DELHI

India's exports grew by just 3.61 per cent to Dollars 18.4bn (Pounds 11.9bn) in the year to March, far short of the government's target of 15 per cent, according to figures published by the Commerce Ministry, writes Stefan Wagstyl in New Delhi.

The reformist government of Mr PV Narasimha Rao, the prime minister, sees export expansion as a key motor for India's economic growth. However, export growth was held back in the year to March by a slump in sales to the countries of the former Communist bloc and by inter-religious violence in Bombay and elsewhere. Imports in the year grew 12.05 per cent to Dollars 21.7bn, leaving an overall trade deficit of Dollars 3.3bn.

IN India, Asia P9611 Administration of General Economic Programs MKTS Shipments P9611 The Financial Times London Page 3 147
Cairo bomb kills four Publication 930522FT Processed by FT 930522 By REUTER CAIRO

A bomb killed four people and injured 16 outside a police station in central Cairo yesterday, the bloodiest bomb attack in more than a year of political violence in Egypt, Reuter reports from Cairo.

The explosion fits a pattern of violence by Moslem militants fighting to turn Egypt into a strict Islamic state. More than 120 people have been killed since March last year, by militant gunmen and bombers or in retaliatory raids by the security forces.

The blast was in an area near the headquarters of two daily newspapers and Cairo's main railway station.

EG Egypt, Africa P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 3 126
Portugal lowers its discount rate Publication 930522FT Processed by FT 930522 By PETER WISE LISBON

THE BANK of Portugal, the central bank, yesterday lowered the central bank discount rate and its bond reference rate for the first time in five years, writes Peter Wise in Lisbon. The discount rate was brought down from 14.5 per cent to 13.5 per cent and the bond reference rate from 16 to 14.5 per cent.

The discount rate is a little used non-binding reference rate with little impact on the money markets. Today, the central bank's main intervention rates are its liquidity mop-up rate and liquidity injection rates, now at 13 and 13.75 per cent respectively. The bond reference rate is widely used in both private and public bond issues.

The bank has been encouraged by falling inflation: the year-on-year rate for April fell to 6.2 per cent, the lowest since 1973.

PT Portugal, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 3 166
Perez trips up over his own reforms: The suspension of Venezuela's president over corruption charges Publication 930522FT Processed by FT 930522 By JOSEPH MANN

PRESIDENT Carlos Andres Perez of Venezuela who was suspended from office yesterday over allegations of corruption - is in part a victim of his own attempts to reform Venezuela.

In trying to change the country's traditionally corrupt judicial system, he encouraged the independence of the Supreme Court. It was this body that on Thursday handed down a crucial ruling that there was sufficient cause to try him for corruption.

The court ruling paved the way for yesterday's unanimous vote by the Senate for impeachment - meaning that Mr Perez is automatically suspended from his duties as chief executive and must answer criminal charges before the 15 members of the Supreme Court.

Previously, a president could count on the highest court to support any government initiative, since most justices were closely linked to the ruling party. But Mr Perez last year appointed five new justices who were political independents.

It was also the president who supported more independence for a central bank whose foreign exchange receipts have provided evidence against him in the case. He also openly encouraged political debate and tolerated vociferous opposition and calls for his resignation, eventually culminating in the corruption charges.

The irony is that many of the trends Mr Perez tried to reverse in his second term of office - big government, state inefficiency and an arrogant political class - were those that he set in train himself in his first administration during the oil boom in the 1970s.

In a TV address after the Supreme Court voted on Thursday on the charges of fraudulently managing Dollars 17m in government funds, the President's voice broke and he seemed ready to burst into tears. 'I would have preferred a different death,' he said.

As a result of the Senate vote, a former underling, Senator Octavio Lepage, takes over as acting president until the full Venezuelan congress decides on a legislator to fill the rest of Mr Perez's term.

Mr Perez, 70, was elected by a large majority in 1988 and his period in office is due to expire in February 1994.

His critics assert that charges sent to the Supreme Court by Attorney General Ramon Escovar Salom on March 11 show that Mr Perez and two former cabinet ministers, Mr Alejandro Izaguirre and Mr Reinaldo Figueredo Planchart, used Dollars 17m allotted for security and defence purposes for other ends.

The president and his supporters say that while administrative irregularities did occur in handling the money, there is no evidence of criminal action by Mr Perez or his two former ministers. They consider the charges and subsequent actions as vengeance against Mr Perez by foes collected in more than 50 years of politics. The attorney general's charges centre on documented evidence that money from a secret fund slated for security and defence purposes outside Venezuela were paid to the wrong ministry: the ministry of the presidential secretariat rather than to the ministry of the interior, which had original responsibilities for the funds.

Mr Perez has said he will not divulge how the money was spent since it involved confidential actitivities. He is only the latest in a line of presidents who had access to secret government funds and there was previously no accounting of how these funds were used.

Another accusation made against Mr Perez - although not in formal charges - was that he and associates used their knowledge that the government would soon eliminate multiple exchange rates to make a large foreign exchange gain in early 1989. The money - 250m Bolivars was converted at 14.5 to the dollar to around Dollars 17m. When a few days later exchange controls were lifted, the Bolivar was devalued to more than 34 to the dollar.

Almost since he took office in February 1989, Mr Perez has been unpopular. He instituted highly unpopular economic reforms in keeping with an extended agreement with the International Monetary Fund. His economic reforms, which lifted generalised food subsidies, for example, created hardship for many poor Venezuelans and brought strong opposition early in his government.

These political and economic problems exploded in February 1992 when army officers attempted a coup. They said they tried to topple the government to make Venezuelan democracy more responsible, to eliminate corruption and to rid the country of IMF-inspired measures.

The political situation worsened during 1992 and another attempted coup was staged in November. Throughout all this, Mr Perez came under attack not only as the father of unpopular economic reform but also a representive of old, corrupt politics.

Mr Perez admitted to numerous errors. In the end, the task of overhauling the country turned out to be too much. He could not complete economic or political reform, and was unable to carry through plans to privatise government companies or rebuild Venezuela's crumbling health, education and public safety systems.

He became a lightning rod for grievances caused by accumulated mistakes, corruption and abuses of recent decades.

VE Venezuela, South America P9111 Executive Offices PEOP People P9111 The Financial Times London Page 3 856
Outcry over life sentence for East Timor rebel leader Publication 930522FT Processed by FT 930522 By PETER WISE LISBON

AN Indonesian court yesterday sentenced Mr Xanana Gusmao, the East Timor rebel leader, to life imprisonment, provoking international criticism.

Mr Gusmao, leader of the Fretilin movement which has been waging a guerrilla campaign for independence since 1975, was found guilty of separatism, rebellion and illegal possession of arms after a three-month trial.

Portuguese President Mario Soares described the sentence as 'hard, violent and illegitimate'.

Amnesty International, the human rights group, said Mr Gusmao had suffered a blatantly unfair trial in which he had been ordered to stop after reading two pages of his final 29-page defence plea because the judge said his remarks were 'irrelevant'.

Indonesia invaded and annexed the island territory of East Timor after the Portuguese colonial administration withdrew in 1975. Relief organisations believe up to 200,000 East Timorese have died from disease, starvation and in fighting. Indonesian sovereignty is not recognised by the United Nations.

International pressure over widespread allegations of human rights abuses in East Timor was stepped up after November 1991 when soldiers fired into a crowd of independence demonstrators. Witnesses said up to 180 people died. Indonesia accuses Mr Gusmao of backing the demonstration, which Jakarta says incited the troops to fire.

The life sentence was sought by the prosecution. Judge Hieronymus Godang told the court in Dili, capital of East Timor: 'The reason the punishment is so heavy is that the defendant's actions disturbed stability in East Timor.'

Mr Anibal Cavaco Silva, Portuguese prime minister, said the sentence served to undermine the dialogue between the Lisbon and Jakarta governments aimed at reaching an internationally acceptable solution for East Timor.

The countries' foreign ministers have been meeting under the auspices of Mr Boutros Boutros Ghali, United Nations secretary-general, to seek confidence-building measures to help reach a solution for East Timor. The next meeting is set for September in New York.

ID Indonesia, Asia P9211 Courts P9721 International Affairs PEOP People P9211 P9721 The Financial Times London Page 3 342
Pollution fund run by IADB may end Nafta conflict Publication 930522FT Processed by FT 930522 By STEPHEN FIDLER, Latin America Editor

A PROPOSAL to establish an environmental fund within the InterAmerican Development Bank to help tackle pollution problems on the Mexican border with the US is being examined by the two governments.

The suggestion, which comes from the IADB, is aimed at helping to defuse opposition by environmentalists to the North American Free Trade Agreement between the US, Canada and Mexico.

The Nafta agreement has to be ratified by the legislatures of all three countries, but is opposed by an important section of the US Congress. Side agreements to cover labour and environmental issues - meant to prevent companies shifting operations to Mexico to take advantage of lax enforcement of labour and environmental standards - are now being negotiated.

The trust fund would be supported by the three Nafta and set up with only a small amount of paid-in capital: a Dollars 10bn (Pounds 6.4bn) fund would require Dollars 250m to be paid in, with the rest callable. The cost to government budgets would be substantially reduced.

Once established, the fund could then borrow on international capital markets, with the guarantee of its three government shareholders, at relatively low interest rates. The fund would be administered by the Bank, which has experience in lending for environmental improvements throughout Latin America, and would lend to regional and municipal authorities and utilities in Mexico.

One idea gaining ground in Washington has been for the establishment of a North American Development Bank to fund environmental clean-up and help areas which suffer job losses apparently because of the agreement. However, such a bank would be expensive to establish and would take a long time to start operations.

On the other hand, other mechanisms would probably be required to cover problems in Canada or the US - such as job losses or clean-ups on the US side of the border with Mexico - since all the Bank's past experience has been in Latin America and the Caribbean. With the fund borrowing at market interest rates, it would be unable to provide concessional resources.

MX Mexico US United States of America CA Canada P9511 Air, Water, and Solid Waste Management RES Pollution P9511 The Financial Times London Page 2 382
Most CIS states to get own currencies Publication 930522FT Processed by FT 930522 By JOHN LLOYD and REUTER MOSCOW

MOST OF the former states of the Soviet Union are expected to introduce their own currencies in the next year, as a result of the International Monetary Fund's stance on linking its support to the control of inflation.

The IMF, now negotiating with Russia over a Pounds 1.5bn initial tranche of support, changed its position of encouraging the former Soviet states to remain in the rouble zone after it became clear that the Russian central bank's generous credits to industry and the budget would continue, and with it very high levels of inflation.

The reversal will place some pressure on the other states to leave the rouble zone to benefit from Fund, World Bank and bilateral support for a reform programme.

Its consequences have been highlighted this month by the introduction in Kyrgyzia, one of the smallest and poorest of the newly independent states, of its own currency, the som. The currency has Dollars 400m (Pounds 260m) backing from the IMF, the World Bank and the Japanese government - a relatively large sum for a small and poor country - to support its pegged rate of four som to the dollar.

Mr Tursunbek Chyngyshev, the Kyrgyz prime minister, said officials from other states had told him before the som was introduced that they supported his move and would all follow suit shortly. 'They all believe it is inevitable and that Russia itself will soon make the decision to create its own currency.'

Russia is still the banker for most of the 15 former Soviet states - though it is increasingly limiting the credits paid out to them and in some cases, as with Ukraine, has stopped issuing credits entirely. Mr Boris Fyodorov, the Russian finance minister, this week welcomed Kyrgyzia's adoption of the som as an example for others.

The rouble has been, since the beginning of this year, printed with 'Bank of Russia' rather than 'USSR'. However, it is still available to all states, in both cash notes and so-called 'cashless' credits through accounts between the central banks of the republics and of Russia.

IMF officials are making it clear to the republics that a decision to remain in the rouble zone is their own to make, but if they decided to remain they would be treated as an economic extension of Russia. If an agreement was reached between the Fund and Russia, these states could also hope to conclude one; if none was, they would probably be unable to conclude their own.

Besides the three Baltic states - which declared independence first and introduced currencies or coupons last year - only Ukraine has yet to conclude an agreement with the IMF, and its currency is closer to a coupon than to a fully-fledged money issue.

Turkmenistan, another Central Asian state, has said it will create its own currency in the autumn. Its economy, based on huge reserves of natural gas, is much stronger than Kyrgyzia's.

Kazakhstan has only a few days to prevent crops in the south of the country from being devastated by locusts, but a government official said yesterday he was confident the threat would be eliminated. Reuter reports from Moscow.

Deputy agriculture minister Viktor Kosarev was quoted in the Kazakh capital Alma-Ata as saying more than half of the 300,000 hectares of pasture land infested with locust larvae had already been sprayed with chemicals in an operation using 14 aircraft and 200 tractors. The locusts would be destroyed this month.

XV Commonwealth of Independent States KZ Kazakhstan, East Europe KG Kyrgyzstan, East Europe RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy P0191 General Farms, Primarily Crop NEWS General News P9311 P0191 The Financial Times London Page 2 632
Democratic senators close ranks behind Clinton Publication 930522FT Processed by FT 930522 By GEORGE GRAHAM

DEMOCRATIC senators yesterday closed ranks behind President Bill Clinton's budget plan, but Senator David Boren of Oklahoma, who earlier this week broke with the White House, remained adamant in his opposition to the energy tax which is a key component of the plan.

Even Democrats from oil-producing states, who share Mr Boren's hostility to the energy tax, rallied behind the administration's plan, criticising Mr Boren's alternative proposals for hurting the elderly.

'The breakaway group broke too far,' said Senator John Breaux of Louisiana, who earlier in the week had been expected to join Mr Boren in his rebellion.

Senate Democratic leaders, however, held out the possibility of further concessions to help shield certain industries from the impact of the energy tax, which will be levied on the thermal content of fuels, and Mr Boren, too, opened the door to some form of energy tax.

Mr Boren's opposition is enough to block the Clinton budget bill from moving forward from the Senate finance committee, in which he holds a crucial swing vote.

The Boren alternative, unveiled with the backing of Senator Bennett Johnston, another Democrat, and two Republicans, would eliminate the energy tax, which is expected to raise Dollars 71.5bn (Pounds 46.4bn) over five years, and replace it with caps on pension and health benefits for the elderly.

It stands no chance of passage, because it trips over Senate procedural rules that would require it to win 60 votes, not just a normal majority of 51. But its backers believe it could form the basis for a bipartisan compromise.

Town without pity, Page 8

US United States of America P9199 General Government, NEC NEWS General News P9199 The Financial Times London Page 2 296
US health task force comes under fire: Proposed radical shift in responsibility for medical malpractice is criticised Publication 930522FT Processed by FT 930522 By GEORGE GRAHAM WASHINGTON

US PRESIDENT Bill Clinton's health care task force has come under fire from several directions over its proposal for a radical shift in the burden of responsibility for medical malpractice.

The proposal would transfer the burden of liability away from individual doctors and on to the hospitals, insurers or health plans they work with.

Doctors have long complained that the threat of malpractice lawsuits drives up their costs and forces them to prescribe unnecessary defensive medical procedures, but the move to 'enterprise liability' proposed by the White House task force, chaired by the president's wife, Hillary Rodham Clinton, has failed to satisfy them.

Insurance companies complained that the shift would not address the underlying problems of escalating jury awards of damages for medical malpractice, and might make the situation worse.

'It just shifts the liability,' said Mr Tom O'Day, associate vice-president for government affairs at the Alliance of American Insurers, a grouping of insurance companies. Consumer advocates are critical of the enterprise liability proposal, fearing it may mean inadequate discipline is applied to incompetent doctors.

The shift to enterprise liability rests on the assumption that most people will, after the Clinton reforms, be covered by a health plan grouping particular doctors and hospitals who have agreed to a certain scale of fees, instead of by a general insurance policy that allows them to visit any doctor. A patient would then sue the health plan, rather than the individual doctor.

Doctors in the US are estimated to pay about Dollars 7bn (Pounds 4.5bn) a year in liability premiums to cover themselves against the cost of malpractice lawsuits. In addition, some studies have estimated that Dollars 20bn to Dollars 30bn a year of unnecessary medical tests and procedures are prescribed by doctors to guard against any accusation of negligence.

Other analysts, however, say that many of these tests would be performed anyway, and that the threat of malpractice suits may have led to better medical care.

Critics of the current system say the most severe costs may be invisible: many newly qualified doctors steer clear of specialities such as anaesthesiology and obstetrics because of the prevalence of lawsuits and the higher liability insurance rates. Many communities have to travel far afield to obtain care as a result.

Whether the impact of liability suits is exaggerated, public perception is that they are a big factor in rising health care costs.

US United States of America P6331 Fire, Marine, and Casualty Insurance P8062 General Medical and Surgical Hospitals P8011 Offices and Clinics of Medical Doctors NEWS General News P6331 P8062 P8011 The Financial Times London Page 2 459
Greece liberalises capital movement Publication 930522FT Processed by FT 930522 By KERIN HOPE ATHENS

GREECE has loosened controls on medium-term capital movement to other European Community countries, making it easier for residents to borrow in foreign currency and buy securities abroad.

Under the new central bank directives, Greeks are no longer required to hold foreign securities for at least one year and are also allowed to invest abroad in derivatives for the first time.

Companies can borrow in foreign exchange without restriction, while all forward transactions in drachmas with a duration of more than three months are permitted.

The liberalisation will be extended to non-EC countries later this year, the Bank of Greece said.

The central bank has also transferred its responsibility for day-to-day monitoring of capital movements to the commercial banks, in an effort to reduce bureaucratic delay in handling foreign exchange transactions.

'Effectively, we have taken away 90 per cent of remaining exchange restrictions. The rest will be automatically lifted next July,' a Bank of Greece official said.

Greece was allowed by its Community partners to maintain existing controls on capital movement for 18 months after the launch of the single market.

GR Greece, EC P6231 Security and Commodity Exchanges P9311 Finance, Taxation, and Monetary Policy NEWS General News P6231 P9311 The Financial Times London Page 2 218
Italian budget raises taxes Publication 930522FT Processed by FT 930522 By ROBERT GRAHAM ROME

THE government of Mr Carlo Azeglio Ciampi yesterday unveiled a L12,500bn (Pounds 5.3bn) mini-budget raising taxes and cutting spending to hold down Italy's public sector deficit.

Most of the L5,950bn extra revenue will come from raising the tax on petrol and increasing the size of the end-of-year advance VAT payments required of companies.

Spending cuts will mainly affect central government transfers to local authorities, block hiring of new teachers (Italy has the highest number of teachers per capita in Europe) and involve a selective freeze on disbursements from the treasury's numerous special funds.

'This sort of action is certainly not popular; but it is unfortunately necessary,' Mr Ciampi said after yesterday's cabinet meeting.

The former central bank governor, who assumed the premiership on April 26, added: 'This is a correction during the course of the year because the deficit was moving away from the target.'

The clear commitment by the Ciampi government to austerity, combined with encouraging signs of continued falling inflation and a fresh cut in the Bank of Italy's discount rate, boosted the lira. Yesterday the Italian currency was trading close to L900 against the D-Mark, a strengthening of nearly L100 in a month.

In January the Amato government agreed with the EC as a condition of obtaining a Ecu8bn (Pounds 6.3bn) loan facility that Italy's 1993 deficit would be held below 11 per cent of GDP or around L150,000bn.

The new measures should ensure that the deficit is around L154,000 - providing the L7,000bn promised from privatisation materialises.

Officials estimated the petrol price rises would add no more than 0.2 percentage points to inflation during the year. Yesterday, preliminary figures in the big cities for May indicated inflation was running at an annualised rate of 4 per cent - the lowest since 1969.

Although work on the mini-budget was begun by the previous government, the final shape was provided by the new economic team. This is still headed by Mr Piero Barucci, the treasury minister, but now includes Prof Luigi Spaventa, the budget minister, and Mr Franco Gallo in the Finance Ministry.

Yesterday Prof Spaventa said the primary deficit would be L37,500bn for the year. This small primary deficit underlines the extent to which servicing Italy's huge debt weighs on the budget.

But the cost of interest payments on the debt was eased this week by the cut in the discount rate to 10.5 per cent.

IT Italy, EC P9199 General Government, NEC GOVT Taxes P9199 The Financial Times London Page 2 428
Falcone murder commemorated Publication 930522FT Processed by FT 930522 By ROBERT GRAHAM

ITALIAN authorities, for the first time, have decided to make the commemoration of a Mafia murder a national event.

Instructions have gone out to all schools to observe a minute's silence today for Mr Giovanni Falcone, the leading anti-Mafia magistrate who was killed with his wife and their bodyguards on May 23 last year. The commemoration also covers Mr Paolo Borsellino, Mr Falcone's colleague, killed with his escort two months later.

In Palermo where both killings occurred, as well as throughout all big Italian cities, ceremonies and demonstrations are planned over the weekend to commemorate these two brutal killings.

Magistrates investigating the Falcone murder revealed this week that his secret movements were almost certainly betrayed to the Mafia from inside Italy's security services. Since last December, Mr Bruno Contrada, head of Mafia intelligence in Sisde, the domestic intelligence service, has been in custody on allegations of consorting with the Mafia.

Recent tests on cigarette butts - left by those who planted the huge explosive device which killed Mr Falcone as he drove into Palermo from the airport - show three people were involved. But no arrests have been made of those who carried out the bombing. In the case of the Borsellino killing, police have arrested a man for alleged involvement in placing the fatal car bomb. This week also saw the capture of Nitto Santapoala, the number two in the Sicilian Mafia who is believed to have been behind the killings.

IT Italy, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 2 269
Spanish Socialists put up a fight Publication 930522FT Processed by FT 930522 By PETER BRUCE MADRID

A SHORT, sharp Spanish election campaign officially began yesterday, as two nationwide opinion polls showed the ruling Socialists of Mr Felipe Gonzalez in the lead but well short of winning enough seats on June 6 to be able to govern on their own.

Addressing 25,000 supporters in a Valencia bullring, Mr Gonzalez appealed to voters for help to continue modernising Spain and to ensure it was never again isolated from the rest of the world as under the Franco regime.

The latest polls - one in the Madrid daily newspaper Diario 16 and the another in the Catalan daily El Periodico - both seem to reflect a surge in Socialist support even after May 13. That was when the government was forced to devalue the peseta by 8 per cent and when it published official figures showing that 253,000 people had lost their jobs in the first three months of the year.

The opinion polls confirmed the feelings of some seasoned observers of Spanish politics that the main challenger, the conservative Partido Popular - whose leader, Mr Jose Maria Aznar, was welcomed in Britain by Prime Minister John Major this week as 'Spain's next prime minister' - has failed to capitalise on the government's economic troubles.

Diario 16 said its poll showed the Socialists winning 35 per cent of the vote to the PP's 33 per cent. El Periodico had the Socialists at 35 but the PP at 30.7 per cent, well down on most recent polls.

Voter turnout on June 6 is expected to be as high as 80 per cent. But some polling organisations say as many as 5 per cent of the electorate may not make up their minds how to vote until they have their ballot papers.

While the Socialists appear to have made big gains at the expense of their opponents after the devaluation, the party has been made to appear incompetent in the principality of Asturias, which it governs. In an effort to capture votes, the regional government recently announced it had secured agreement from a foreign investor to build a Dollars 3bn (Pounds 1.9bn) oil refinery in the region.

But the Saudi International Bank, which the Asturians had announced was leading the project, has denied all knowledge of it. It seems that no-one in Asturias ever bothered to call the bank to check the credentials of a mystery middle-man who conducted negotiations and who has now disappeared.

The Asturian Socialists are not saying whether they paid the man any commissions.

ES Spain, EC P9199 General Government, NEC P8651 Political Organizations GOVT Government News P9199 P8651 The Financial Times London Page 2 453
Ukraine MPs back prime minister Publication 930522FT Processed by FT 930522 By CHRYSTIA FREELAND KIEV

UKRAINIAN legislators yesterday refused to accept Prime Minister Leonid Kuchma's resignation, offered on Thursday. It was a big political setback for President Leonid Kravchuk, who had tried to undermine him.

The unexpected surge of support for the reformist Mr Kuchma has resulted in a political stalemate which must be resolved in the coming weeks if Ukraine is to address its mounting economic problems.

Although the president lost his bid for extra powers, parliament also failed to give Mr Kuchma the expanded economic authority he requested at the beginning of the week.

On Thursday, Mr Kravchuk asked that the president should take the place of the prime minister as the head of the Ukrainian cabinet.

On Thursday, parliament appeared inclined to back Mr Kravchuk's proposal. Mr Kuchma has bluntly warned MPs that if he remains in office they can expect price increases and slashed government subsidies. That was a message the industrialists and collective farm chairmen who dominate the legislature appeared reluctant to accept.

By contrast, during his 18 months as president Mr Kravchuk has shied away from tough economic decisions and many MPs appeared to expect that with the president at the head of the government they would get a softer ride, at least in the short term.

The swing issue appeared to be Mr Kuchma's brief announcement of a telegram sent from Russia late on Thursday demanding world prices for its oil and gas. This would deliver a crushing blow to Ukraine's economy, traditionally dependent on subsidised energy from its northern neighbour.

In these circumstances, MPs overwhelming voted to reject Mr Kuchma's resignation. However, the fickle parliament's shift has not resolved the question of who is to steer the economy through what is likely to be a hot summer.

UA Ukraine, East Europe P9199 General Government, NEC PEOP People P9199 The Financial Times London Page 2 321
Steel industry changes may see stockholders sold Publication 930522FT Processed by FT 930522 By ANDREW BAXTER

RESTRUCTURING Europe's recession-torn steel industry could have important knock-on effects as mills dispose of stockholding subsidiaries to concentrate their cash on steelmaking, according to a report.

The shake-out could produce some 'interesting opportunities' for the financially stronger mills, since there are good reasons to integrate downstream into stockholding, says the study by London-based CRU International.

Almost all European mills have expanded into stockholding - many during the late 1980s, when profits from steel production were high.

British Steel also has stockholding interests in Germany, France, the Netherlands, Ireland, Spain and Norway. Usinor-Sacilor, meanwhile, has bought stockholders in nine European countries outside France where it is based.

Some mills have acquired stockholders to gain market share. But CRU says that the most compelling reason for integration between a steel mill and a stockholder is that it adds to the mill's processing capacity.

The capital spending needed for additional processing facilities could introduce a valuable barrier to entry into a business where barriers are now low, says CRU.

This could cause two types of stockholders to emerge. Larger companies, often owned by steel mills, will tend to specialise in the product range of their parent companies, and will increasingly focus on processing steel.

These companies may have better profit margins than the second category of general stockholders, which do little or no processing. But takeovers may be more frequent in this category, because asset values have been depressed by the recession or owners have come under financial pressure.

Steel Distribution in Western Europe. CRU International, 31 Mount Pleasant, London WC1X 0AD. Pounds 11,500.

GB United Kingdom, EC FR France, EC XG Europe P3312 Blast Furnaces and Steel Mills P5051 Metals Service Centers and Offices COMP Disposals CMMT Comment & Analysis P3312 P5051 The Financial Times London Page 2 311
Sweden may conclude EC negotiations this year: Stockholm plans a referendum Publication 930522FT Processed by FT 930522 By REUTER LONDON

SWEDEN may be able to conclude its negotiations for membership of the European Community by the end of the year, Ms Anne Wibble. Swedish finance minister, said yesterday, Reuter reports from London.

'There are of course a number of important issues to discuss but neither we nor the Commission can see any serious problems,' she said.

'The negotiations are now well under way and we hope to make substantial progress during the Belgian presidency, possibly even conclude the negotiations.'

Belgium will hold the six-month rotating EC presidency for the second half of 1993.

Ms Wibble said the issues to be discussed included Sweden's financial contributions, regional and agricultural policy and trade relations with third countries.

Negotiations are also taking place on EC membership for Sweden's Nordic neighbours, Finland and Norway. Sweden plans to hold a referendum on the question next year.

Ms Wibble said Sweden would plan to join the European single currency proposed in the Maastricht treaty on European union.

But she and Mr Thomas Franzen, the Swedish central bank deputy governor, said the Swedish crown, whose link with the European Currency Unit was severed during last year's upheaval in the European currency markets, would continue to float for now.

Mr Franzen said the crown's 17 per cent devaluation since the break was 'excessive' and could lead to economic imbalance as exports grew while the home market stagnated.

'We must have a more balanced situation in our economy and a more stable international environment before we can return to a fixed exchange rate regime,' he said.

SE Sweden, West Europe QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 298
Progress on Bosnian peace moves, say UK and Russia Publication 930522FT Processed by FT 930522 By JUREK MARTIN WASHINGTON

THE RUSSIAN and British foreign ministers claimed yesterday that substantial progress was being made on new initiatives to end the fighting in Bosnia, in spite of President Bill Clinton's reservations on setting up expanded 'safe havens' for Bosnian Moslems.

Neither Mr Andrei Kozyrev nor Mr Douglas Hurd disclosed details after discussions in Washington with Mr Warren Christopher, the US secretary of state. But both hinted that all three, plus Mr Alain Juppe of France, could meet again today in either Washington or New York.

The foreign minister of Spain, which is one of the nations with peacekeeping troops in Bosnia, has also been invited to join the discussions.

Mr Clinton, speaking after a White House meeting with Mr Kozyrev, said the US was 'sceptical that we'll be able to resolve this satisfactorily within the framework that has been proposed'. He went on: 'I don't want to see the US get in a position where we're re-creating Northern Ireland, Lebanon or Cyprus or anything else.'

He saw 'some potential down the road' for a peacekeeping operation, but added: 'We don't want our people in there basically in a shooting gallery.'

His comments contrasted sharply with those of Mr Kozyrev, who insisted after meeting the president that the US and Russia were 'very, very close' to an agreement that could be presented to the European allies.

But a senior British official emphasised that the allies accepted that the US would not send ground troops as a contribution to an expanded military force to protect the safe havens.

The United Nations Security Council is due next week to consider the safe havens, as well as the setting up of a war crimes tribunal and the stationing of possibly 500 inspectors on the Serbia-Bosnia border to observe whether Serbia is honouring its pledge to stop military and fuel supplies to the Bosnian Serbs.

Mr Hurd conceded that the question of the implicit recognition of Serb territorial gains 'will have to be answered' when full details of the new peace initiative are made known.

Mr Christopher, according to several US press reports, has come round to the view that it is impossible to roll back all the Serb gains and is prepared to accept the safe haven notion so long as it is, as one senior official put it, 'a temporary measure and not the endorsement of any concept of partition'.

That concern seems to underline Mr Clinton's reservations. The White House also made clear on Thursday that the US wants to avoid the impression that 'ethnic cleansing' by both Serbs and Croats is being rewarded.

Mr Clinton was not entirely dismissive of chances of an international agreement. He said that 'ultimately there will have to be some reasonable borders and some political solutions which have a reasonable territorial component'. In such circumstances, he implied, US ground forces could be peacekeepers.

Town without pity, Page 8

BA Bosnia-Hercegovina, East Europe HR Croatia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 520
Ministers put spending target under threat Publication 930522FT Processed by FT 930522 By PHILIP STEPHENS, Political Editor

SPENDING departments in Whitehall have ignored a firm Treasury instruction not to seek increased resources for next year and instead submitted bids for extra funds totalling several billion pounds.

The threat to the Treasury's public spending targets emerged as the Prime Minister's Office sought yesterday to calm the political row which erupted this week over radical proposals to shrink the welfare state.

With Mr John Major anxious to direct attention to the latest batch of favourable economic indicators, his aides said that options thrown up by the Treasury's long-term spending review were unlikely to result in immediate decisions.

But the decision by virtually all the main departments - the exception is defence - to fight for additional resources in this summer's spending negotiations underlined the severity of the looming cabinet clash over Whitehall budgets.

There were renewed indications that some departments are determined to press for the extension into 1994 of a published current public sector pay limit.

The Treasury opposes maintaining the present 1.5 per cent pay ceiling, arguing for informal restraint. But several cabinet ministers - including those on the party's right wing - believe it will be impossible to hold the line on public sector wages without the formal ceiling.

The expected clashes have prompted Mr Michael Portillo, the chief secretary to the Treasury, to bring forward to mid-June the traditional cabinet discussion on spending priorities. Mr Portillo will have time to hold an intense round of discussions with his spending colleagues before the August holidays.

Yesterday, shadow chancellor Gordon Brown said he planned to raise the whole question of public spending and public service cuts - including the possible introduction of charges for National Health Service beds - when he addresses the Welsh Labour party conference in Llandudno today.

Mr Portillo insisted this week that the government was determined to stick to the cash ceilings for Whitehall spending set last autumn for the financial years 1994/95 and 1995/96.

The ceilings for the two years - Pounds 253.6bn and Pounds 263.3bn respectively - were agreed by the cabinet last autumn and re-affirmed in Mr Norman Lamont's March Budget. They imply small cuts in overall expenditure once inflation has been taken into account.

In an attempt to hold the line earlier this year, Mr Portilloasked colleagues to abandon the traditional practice of bidding for extra cash and to provide the Treasury with options for cuts of between 2.5 and 5 per cent.

But ministers said the home office and social security, health, education, environment, and transport departments - which account for more than three-quarters of all spending - have rejected any budget reductions. Instead they have submitted additional bids which one senior Whitehall official said ran into 'many billions'.

The Treasury has set aside a Pounds 7bn contingency reserve for unforeseen expenditure in 1994/95 but only half can be allocated during the summer.

A substantial proportion of the remainder has already been earmarked to cover the knock-on effect of additional expenditure agreed for the present financial year.

Centurion off-guard, Page 8 Smith warns Major over 'a privatisation too far', Page 7

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 1 549
Ireland's president to take tea at the palace Publication 930522FT Processed by FT 930522 By RALPH ATKINS

AFTER seven decades during which British monarchs seemed to overlook the existence of the neighbouring Irish Republic, the royal frost has now thawed a little. Ireland's President Mary Robinson has been invited to London for tea with the Queen.

Buckingham Palace did not announce next Thursday's visit, but it confirmed leaks from Dublin. It will be a private visit, a courtesy call, a palace official said yesterday. There is no question of a state occasion.

The Queen went to Germany last year, hoping to heal wounds of the second world war. She visited Spain in 1988, shrugging off the UK's territorial dispute over Gibraltar. In the US, once a British colony, the Queen draws crowds. The French have been known to wave flags for her.

But historical divisions between Britain and Ireland live on. No British king or queen has met an Irish president. The last monarch to visit southern Ireland was Edward VII in 1903 - almost 20 years before the partitioning of Ulster and the creation of an Irish Free State.

Next week's visit illustrates the improvement in UK-Irish government relations which - even as late as the 1980s - were punctuated by ill-tempered outbursts over the extradition of Irish terrorists, or the quality of British justice.

The neighbourliness is not reflected, however, in Northern Ireland. Yesterday local election results in the province set back hopes of Irish and British ministers that 'round-table' political talks on the province's political future would be re-started soon.

The better-than-expected performance of the Rev Ian Paisley's hard-line Democratic Unionist party will only encourage him in his pledge not to resume negotiations until Ireland compromises on its territorial claim on the north. Also faring well was Sinn Fein, the political wing of the IRA which is excluded from talks by both the Irish and the British governments.

The territorial dispute over Northern Ireland remains the unofficial reason why diplomats in London and Dublin continue to advise their respective heads of state against a formal meeting.

But there are, perhaps, personal memories too; the Queen's cousin Lord Mountbatten was murdered by the IRA in 1979.

Northern Ireland election results, Page 6

GB United Kingdom, EC IE Ireland, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 1 393
Inflation lowest for 29 years: Chancellor hails 1.3% annual RPI rate as 'astonishing' achievement Publication 930522FT Processed by FT 930522 By PETER MARSH, Economics Correspondent

THE GOVERNMENT'S battered reputation for economic management received a boost yesterday with news that inflation had come down to its lowest level for 29 years.

Mr Norman Lamont, the chancellor, hailed the drop in retail price inflation in April to a year-on-year rate of 1.3 per cent as an 'astonishing' achievement that would underpin an upturn by helping investment and jobs.

UK inflation is now well below half the 3.5 per cent average in European Community countries. Only Denmark among Britain's EC partners has a lower figure.

The response in financial markets was more muted, with gilts, London share prices and sterling all registering falls. Many investors believe UK inflation has bottomed, and may rise strongly in coming months assuming the recovery picks up. The retail prices index last month was 1.3 per cent higher than in April last year, after a year-on-year rise of 1.9 per cent in March. Excluding mortgage interest payments, the RPI rose 2.9 per cent between April 1992 and last month, after increasing 3.5 per cent in the 12 months to March. The lowest rate by this measure since the government started records in 1975 was exceptionally good news for the Treasury, which aims to keep this figure below 4 per cent.

Although generally weak demand pressures caused by the recession played their part, the overriding reason for the shift in the headline RPI rate was the switch from poll tax to council tax last month. The average householder now pays a far smaller bill for local taxes.

Another measure of inflation - the RPI excluding both mortgage payments and local tax payments - showed a small rise between March and April from 3.2 per cent to 3.3 per cent. The year-on-year rise in this measure stood at 3.3 per cent in December last year and reached a low of 2.9 per cent in January.

Mr Lamont, in bullish comments to reporters outside 11 Downing Street, concentrated on the headline RPI figure, heralding this as 'excellent news'. He added: 'Britain is very firmly in the low inflation camp among the major economies and I am determined that we are going to stay that way.'

Mr Gordon Brown, the shadow chancellor, was less enthusiastic. He warned that inflation would go up in coming months.

A similarly downbeat mood was evident on financial markets, where the inflation news failed to excite investors, even though the headline RPI figure was slightly lower than the City had expected. Mr John Shepperd, an economist at SG Warburg Securities, said: 'We are not seeing any fundamental improvement (on inflation), more a statistical blip.'

Such sentiments unsettled investors on the gilt market, where 10-year securities lost a quarter of a point. London shares slid fractionally, with the FT-SE 100 index of leading stocks shedding 4.6 to close at 2,812.2. On the foreign exchange markets, the pound lost a quarter of a pfennig against a weak D-Mark to finish at DM2.5075, though up more than 4 pfennigs on the week. In New York, sterling closed at DM2.50945. Against the dollar, the pound closed in London at Dollars 1.5415 and in New York at Dollars 1.543.

RPI details, Page 7 Faltering feeling lost, Page 9 Lex, Page 24

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Inflation CMMT Comment & Analysis P9311 P9611 The Financial Times London Page 1 588
Stock and Currency Markets Publication 930522FT Processed by FT 930522

------------------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------------------ FT-SE 100: 2812.2 (-4.6) Yield 4.05 FT-SE Eurotrack 100 1155.78 (-0.25) FT-A All-Share 1392.63 (-0.1%) FT-A World Index 158.16 (-0.2%) Nikkei 20,557.47 (+227.08) New York: Dow Jones Ind Ave 3,492.83 (-30.45) S&P Composite 445.84 (-4.75) ------------------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------------------ Federal Funds: 3% (3%) 3-mo Treas Bills: Yld 3.054% (3.013%) Long Bond 101 7/32 (101 3/4) Yield 7.023% (6.991%) ------------------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------------------ 3-mo Interbank 6 1/16% (6 1/16%) Liffe long gilt future: Jun 104 1/8 (Jun 104 5/16) ------------------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------------------ Brent 15-day (July) Dollars 18.42 (18.455) ------------------------------------------------------------------------ Gold ------------------------------------------------------------------------ New York Comex (June) Dollars 377.9 (374.7) London Dollars 375.15 (373.25) ------------------------------------------------------------------------ STERLING ------------------------------------------------------------------------ New York: Dollars 1.543 (1.55655) London: Dollars 1.5415 (1.556) DM 2.5075 (2.51) FFr 8.44 (8.465) SFr 2.27 (2.28) Y 170.25 (172) Pound Index 80.6 (80.9) ------------------------------------------------------------------------ DOLLAR ------------------------------------------------------------------------ New York: DM 1.6255 (1.6155) FFr 5.473 (5.444) SFr 1.46805 (1.466) Y 110.3 (110.605) London: DM 1.6275 (1.6135) FFr 5.475 (5.44) SFr 1.4725 (1.465) Y 110.4 (110.5) Dollar Index 64.3 (64.1) Tokyo close Y 110.52 ------------------------------------------------------------------------

GB United Kingdom, EC US United States of America P9311 Finance, Taxation, and Monetary Policy P1311 Crude Petroleum and Natural Gas P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P9311 P1311 P6231 The Financial Times London Page 1 227
Cambodians set for poll Publication 930522FT Processed by FT 930522

TROOPS stand guard at United Nations headquarters in Phnom Penh, capital of Cambodia, where the first democratic election of a new government for over two decades starts tomorrow under UN auspices. Khmer Rouge guerrillas have threatened to kill Cambodians who vote.

Report, Page 24

KH Kampuchea, Asia P9199 General Government, NEC P8651 Political Organizations GOVT Government News P9199 P8651 The Financial Times London Page 1 74
World News in Brief: Arnhem leader dies Publication 930522FT Processed by FT 930522

Major-General John Frost, whose paratroopers reached the bridge at Arnhem during the offensive against the Rhine bridges in 1944, died aged 80.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 1 51
World News in Brief: Australia win Publication 930522FT Processed by FT 930522

Australia beat England by six wickets in yesterday's one-day Texaco Trophy match at Edgbaston, Birmingham.

Sport, Wkd IX

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page 1 49
World News in Brief: Queen Mother spends second night in hospital Publication 930522FT Processed by FT 930522

The Queen Mother, 92, spent a second night in hospital in Aberdeen after an operation to clear a piece of food lodged in her throat.

GB United Kingdom, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 1 58
World News in Brief: Aircraft crashed on M-way Publication 930522FT Processed by FT 930522

The pilot of a light aircraft was seriously hurt when it crashed on the M2 motorway shortly after taking off from Rochester, Kent. Four tourists in a German-registered coach which hit the wreckage were injured.

GB United Kingdom, EC P3721 Aircraft NEWS General News P3721 The Financial Times London Page 1 64
Treasury public spending target under assault Publication 930522FT Processed by FT 930522 By PHILIP STEPHENS, Political Editor

SPENDING departments in Whitehall have ignored a firm Treasury instruction not to seek increased resources for next year and instead submitted bids for extra funds totalling several billion pounds.

The threat to the Treasury's public spending targets emerged as the prime minister's office sought yesterday to calm the political row which erupted this week over radical proposals to shrink the welfare state.

With Mr John Major anxious to direct attention to the latest batch of favourable economic indicators, his aides said that options thrown up by the Treasury's long-term spending review were unlikely to result in immediate decisions.

But the decision by virtually all the main departments - the exception is defence - to fight for additional resources in this summer's spending negotiations underlined the severity of the looming cabinet clash over Whitehall budgets.

There were renewed indications that some departments are determined to press for the extension into 1994 of a published current public sector pay limit.

The Treasury vigorously opposes maintaining the present 1.5 per cent pay ceiling, arguing for informal restraint. But several cabinet ministers - including those on the right wing of party - believe it will be impossible to hold the line on public sector wages without the formal ceiling.

The expected clashes have prompted Mr Michael Portillo, the chief secretary to the Treasury, to bring forward to mid-June the traditional cabinet discussion on spending priorities. Mr Portillo will have time to hold an intense round of discussions with his spending colleagues before the August holidays.

The chief secretary insisted this week that the government was determined to stick to the cash ceilings for Whitehall spending set last autumn for the financial years 1994/95 and 1995/96.

The ceilings for the two years - Pounds 253.6bn and Pounds 263.3bn respectively - were agreed by the cabinet last autumn and re-affirmed in Mr Norman Lamont's March Budget. They imply small cuts in overall expenditure once inflation has been taken into account.

In an attempt to hold the line earlier this year Mr Portillo asked colleagues to abandon the traditional practice of bidding for extra cash and to provide the Treasury with options for cuts of between 2.5 and 5 per cent.

But ministers said the home office and social security, health, education, environment, and transport departments - which account for more than three-quarters of all spending - have rejected any budget reductions.

Instead they have submitted additional bids which one senior Whitehall official said ran into 'many billions'. The treasury has set aside a Pounds 7bn contingency reserve for unforeseen expenditure in 1994/95 but only half can be allocated during the summer.

Centurion off-guard, Page 8

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 1 475
Construction Contracts: Pounds 30m orders won by Taylor Woodrow Publication 930521FT Processed by FT 930714

Three new contracts won by TAYLOR WOODROW companies for facilities management and general construction work in the defence industry bring the total value of current projects by the group in this sector to nearly Pounds 30m.

One of the latest is a Pounds 6m contract for works services management at three naval bases in the Plymouth area, won by Taylor Woodrow Management (TWM).

Another, worth Pounds 1.3m, was won by Taylor Woodrow Construction Southern (TWCS) for refurbishment work at RAF Brize Norton. The third, for Pounds 2.2m of building work at RAF Northolt, was won by Myton, a subsidiary of the Taylor Woodrow group.

Work on TWM' s three-year management contract is under way at the Royal Naval Engineering College at Manadon, HMS Raleigh training base, and the Royal Naval Gunners' School at HMS Cambridge.

TWM also has a three-year works services management contract worth Pounds 7m for two facilities in Portsmouth - the Royal Naval Hospital, Haslar, and Fort Monckton.

The 18-month contract to refurbish the junior ranks mess at RAF Brize Norton near Witney in Oxfordshire, has begun. TWCS is also undertaking a similar refurbishment project at Castlemartin army training camp in Pembrokeshire, for completion this spring .

Myton's Pounds 2.2m contract to build a non-commissioned officers' mess at RAF Northolt in Middlesex is already under way.

Taylor Woodrow Construction GB United Kingdom, EC P1629 Heavy Construction, NEC P1542 Nonresidential Construction, NEC MKTS Contracts P1629 P1542 The Financial Times London Page 18 258
UK Company News in Brief: Bulgin (AF) Publication 930521FT Processed by FT 930621

BULGIN (AF) has purchased ACM (Components) for Pounds 110,000 cash. ACM distributes surface mount electronic components. In 1992 it made a loss of Pounds 49,000.

AF Bulgin and Co ACM (Components) GB United Kingdom, EC P3679 Electronic Components, NEC P5065 Electronic Parts and Equipment COMP Mergers & acquisitions P3679 P5065 The Financial Times London Page 26 67
London Stock Exchange: ICI climbs Publication 930521FT Processed by FT 930609 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Ahead of its demerger, ICI rose 11 to 1260p as the group announced that the sale of its European polypropylene arm to BASF, of Germany, would not be referred to the Monopolies and Mergers Commission.

Nevertheless, the enthusiasm remained with the chemicals side. The initial gulf between ICI 'new' and the bioscience arm Zeneca, which have been traded in the officially sanctioned 'grey' market, was closed up yesterday. ICI 'new' rose 121 to 630p, while Zeneca ex-rights closed at the same level and Zeneca nil-paid lost a penny to 39p.

Tobacco and insurance group BAT Industries recovered some of its recent fall, ending 12 up at 834 1/2 p.

Results from Storehouse came in at the top end of expectations, although recent reports from the retail trade had indicated the rising strength in high street sales and the shares reacted mildly. They closed 2 adrift at 199p.

The retirement of Sir Bernard Ashley from the board of Laura Ashley coincided with the sale of a large chunk of his stake in the clothing group. Close on 30m shares were placed by Kleinwort Benson and Robert Fleming at 108p with institutions, according to dealers. The stock closed a penny off at 112p.

Bearish comment and marketmakers' short positions combined to send Kingfisher down 15 to 592p. James Capel was said to be negative over the French retailer Darty.

Brent Chemicals fell 30 to 99p after announcing sales and margins for the first four months of the year that were well below expectations. The group added that its first half profits would be significantly below last year's figure.

The details highlighted the dire performance of the chemicals industry in mainland Europe and companies with exposure to the area also saw their share price totter. Burmah closed 3 lower at 706p after being up in early trading.

Regional electricity shares made strong progress as investors focused on the prospect of 10 per cent-plus rises in dividends during the preliminary reporting season.

Double-figure rises were common throughout the sector, with Northern Electricity the best performer and finally 13 higher at 501p, closely followed by Southern, the only FT-SE 100 stock in the sector, which closed 10 1/2 up at 459 1/2 p. Eastern was a similar amount better at 462 1/2 p and South West gained 10 at 482p.

Scottish Power moved forward 5 to 315p on good turnover of 4.1m after the company delivered a 10 per cent increase in the dividend along with satisfactory preliminary figures.

British Gas closed 1 1/2 higher at 294p after first-quarter figures towards the top end of the range of forecasts. Bears continued to point to the outcome of the MMC inquiry, while bulls said the market had possibly overlooked the profit potential of an aggressive cost exercise at the company.

Media stocks performed well yesterday, with suggestions that US domestic funds had been buying selectively. That interest, often in tight markets, was helped by some specific factors.

Watmoughs, the design to packaging group, rose 5 to 665p after saying it was renewing a magazine production contract. Ferguson International, which supplies products and services to the retail and communications industries, added 18 at 323p on encouraging results. Dorling Kindersley, the publisher, recovered from recent profit-taking, bouncing 7 to 267p, and Haynes Publishing was lifted 15 to 323p. Among the larger groups, United Newspapers rose 7 to 595p and Reuters 12 to 1276p.

Celestion, the clothing and hi-fi group which was transmuted into Magellan at its agm on Monday, put on 13 at 166p. The company was featured at a smaller companies exhibition hosted yesterday by its joint broker Hoare Govett.

Cookson Group moved 3 1/2 ahead to 199 1/2 p after NatWest Securities urged investors to switch out of ECC following a forecast cut on Wednesday. Mr Geoff Allum at the house said: 'Earnings at Cookson are likely to continue growing over the next two years, whereas earnings at China Clays remain under pressure.' Bargain hunters helped ECC claw back some of Wednesday's losses and the shares ended 5 up at 438p.

Hopes of disposals at Cannon Street Investments boosted the shares and they finished 2 better at 26p. A favourable annual meeting and reports of a recommendation from Kleinwort Benson boosted BTR by 5 to 590p. Some 4.4m shares had been dealt by the close of trading.

The placing of Pounds 39m of convertible prefence shares in John Laing by BZW went without a hitch, according to dealers. Laing 'A' closed marginally higher at 266p.

Redland shares eased 2 to 492p in spite of plenty of good news on increases in UK housebuilding and a 7 per cent jump in housing permits in Germany, announced at the company's annual meeting.

A stock overhang depressed Siebe. The shares eased 6 to 461p, with Kleinwort Benson and SG Warburg said to have been among the day's main sellers.

James Wilkes hardened a penny to 82p on the news that Suter, unchanged at 144p, had raised its stake in the engineering group to 15.3 per cent. Further profit-taking in Rolls-Royce saw the shares slip 2 1/2 to 145p on turnover of 3.1m.

Laura Ashley Holdings Kingfisher Brent Chemicals Celestion Industries Cookson Group English China Clays Cannon Street Investments BTR John Laing Siebe GB United Kingdom, EC P2899 Chemical Preparations, NEC P6719 Holding Companies, NEC P1521 Single-Family Housing Construction P3339 Primary Nonferrous Metals, NEC P5961 Catalog and Mail-Order Houses P5064 Electrical Appliances, Television and Radios P5621 Women's Clothing Stores P3624 Carbon and Graphite Products P1442 Construction Sand and Gravel CMMT Comment & Analysis P2899 P6719 P1521 P3339 P5961 P5064 P5621 P3624 P1442 The Financial Times London Page 42 959
UK Company News: Crabtree gains listing via Pounds 19m move into Somerset Publication 930521FT Processed by FT 930521 By PETER PEARSE

CRABTREE Holdings, a supplier of metal decorating printing presses, coaters and sheet metal feeders, is coming to the stock market via the Pounds 19.4m reverse takeover of Somerset Trust.

Shares in Somerset, formerly the Children's Medical Charity Investment Trust, were suspended at 178p on May 4.

The consideration consists of Pounds 5m in shares to the vendors, Pounds 8.4m in loan notes and Pounds 6m cash.

To fund this, a placing by Credit Lyonnais Laing of 6.67m new 10p ordinary Somerset shares at 150p apiece to raise Pounds 10m has been proposed, along with a 3-for-1 rights issue, underwritten by Hill Samuel Bank, of 3.6m new 10p ordinary shares at 150p to raise Pounds 5.4m.

Of the Pounds 14.7m raised, after expenses, Pounds 14.4m will finance the acquisition. The balance with be used to cut borrowings and increase working capital.

It is also proposed that Somerset's existing shares of Pounds 1 be subdivided into one 10p ordinary and one 90p deferred. Furthermore, Somerset's name is to be changed to Crabtree Group. Shareholders' approval for these proposals will be sought at an egm on June 21.

Somerset also yesterday announced pre-tax profits of Pounds 35,000 (Pounds 39,000) for 1992, after exceptional charges of Pounds 6,000. Income from fixed net assets was Pounds 49,000 (Pounds 55,000).

Crabtree Holdings Somerset Trust GB United Kingdom, EC P3555 Printing Trades Machinery P6726 Investment Offices, NEC COMP Mergers & acquisitions FIN Share issues P3555 P6726 The Financial Times London Page 26 266
UK Company News: Starmin offers enhanced scrip 50% higher than dividend Publication 930521FT Processed by FT 930521 By NIGEL CLARK

STARMIN, the Guildford-based quarry products group, has joined the growing trend for proposing enhanced scrip dividends to ease the company's unrelieved advance corporation tax situation and conserve cash resources.

The scrip offer is worth 30p per 100 shares, a 50 per cent improvement on the unchanged cash dividend of 0.3p including a recommended maintained final payment of 0.2p.

Although Starmin now operates mainly in the UK the unrelieved ACT arose from the companies in the group when the Abdullah brothers bought into it in 1989 following their departure from Evered, and the operations of acquisitions.

Mr Raschid Abdullah, chief executive, added that cash conservation was as important a reason as the ACT. 'Although smaller companies are returning to fashion raising funds is still difficult,' he said.

In the 1992 year the company reported a pre-tax loss of Pounds 8.06m, compared with profits of Pounds 1.94m. The maintenance of the dividend was based on the company's prospects, which the board viewed with a little more confidence than at the interim stage.

In the current year there had been some signs of increased activity and a satisfactory result in the first three months. But the company warned that the recovery would be slow and difficult.

The pre-tax figure was achieved after exceptional charges of Pounds 9.21m (Pounds 924,000) relating to reorganisation and restructuring costs less earlier provisions and property sale profits.

Of the pre-exceptional profits of Pounds 1.87m (Pounds 3.38m) Pounds 2.24m (Pounds 3.35m) related to continuing operations. Turnover was static at Pounds 20.1m (Pounds 20m) and losses per share came out at 2.5p against earnings of 0.5p.

Mr Abdullah said that the company had taken a cautious view of the year and was one of the reasons for the delay in publishing the results.

At the annual meeting Mr Owen Rout is being replaced as chairman by Lord Parkinson, the present deputy.

See Observer

Starmin GB United Kingdom, EC P3541 Machine Tools, Metal Cutting Types P6719 Holding Companies, NEC FIN Share issues FIN Annual report P3541 P6719 The Financial Times London Page 26 362
UK Company News: Brent Chemicals warns of downturn Publication 930521FT Processed by FT 930521 By RICHARD GOURLAY

SHARES in Brent Chemicals, the speciality chemicals group, shed nearly a quarter of their value yesterday after the chairman said sales and margins had been hit in the first four months of trading.

Lord Lane, chairman, told shareholders at the AGM that he expected profits for the first half to be 'significantly below' those achieved in the same period in 1992.

The shares closed down 30p at 99p.

City analysts were shocked at the comprehensive nature of what amounted to a profits warning. The statement appeared to show not only a turn down in business in continental Europe and the UK, but also in the US.

It was also a marked contrast to the statement made by the chairman at the time of the 1992 results. In late March, Lord Lane was acknowledging tough trading conditions but talking confidently to the City about the future.

Lord Lane said yesterday that after a promising start, sales in the US had recently slowed, particularly in the aerospace-linked field, and sales in the UK industrial metal finishing had continued to weaken.

Germany had produced profits below those for the same period last year, although they were still 'healthy' and cash flow was strong.

Elsewhere in continental Europe, the company was experiencing 'difficult market conditions.'

Brent Chemicals International GB United Kingdom, EC P2899 Chemical Preparations, NEC P2869 Industrial Organic Chemicals, NEC COMP Company News P2899 P2869 The Financial Times London Page 26 255
UK Company News: SBC to issue 5m covered call warrants on BAT Publication 930521FT Processed by FT 930521 By TRACY CORRIGAN

SWISS BANK Corporation is to issue 5m covered call warrants on BAT Industries, the financial services and tobacco group, which is likely to earn the bank a healthy profit on its purchase of the shares through BAT's recent scrip issue.

SBC will sell the covered call warrants through its retail network. The warrants give holders the right to buy the underlying shares at a set price during a set period.

Like other large Swiss banks, SBC is known for its retail placement ability in Switzerland, where investors are strongly influenced by banks' 'buy' lists. BAT shares are recommended as a long-term and short-term buy by SBC.

SBC expects to own about 10m BAT shares, after offering to pay holders 2 per cent less than the market price for the shares issued as a scrip dividend, undercutting Barclays de Zoete Wedd's offer of a 5 per cent discount. The scrip dividend scheme was devised by BZW for BAT for tax reasons.

The call price - that is, the price at which warrant holders can buy the shares - is set at 835p, yesterday's closing price.

Each warrant costs 110p, which represents a premium of 13.1 per cent over the share price and can be exercised at any time from June 8, 1993 to November 25, 1994.

SBC bought the shares at 816.66p so stands to make a profit if the warrants are exercised. Even if the warrants are not exercised, SBC has knocked 55p off the cost of holding each share if it sells 5m warrants at 110p each.

Swiss Bank Corp BAT Industries GB United Kingdom, EC CH Switzerland, West Europe P2111 Cigarettes P6081 Foreign Banking and Branches and Agencies COMP Shareholding FIN Share issues P2111 P6081 The Financial Times London Page 26 314
UK Company News: Ferguson doubles to Pounds 9.7m as managing director resigns Publication 930521FT Processed by FT 930521 By CATHERINE MILTON

FERGUSON International Holdings, the printing and publishing group, almost doubled pre-tax profits to Pounds 9.7m in the year to February 28. The advance from Pounds 4.9m was thanks partly to flattering comparisons under the FRS 3 accounting rules.

The company, whose shares closed up 18p at 323p, also announced the resignation by 'mutual consent' of Mr Michael Saint as group managing director.

Having managed the refocusing of the company over the past three years, Mr Saint said it was time to move on. A successor would be announced later, the company said.

Underlying profit growth was 28 per cent after stripping out exceptional costs for the closure of loss-making operations, disposals and restructuring. These were a net Pounds 849,000 this time and Pounds 3.3m a year earlier.

Operating profits on continuing activities rose 25 per cent to Pounds 11.4m. Interest charges fell to Pounds 777,000 (Pounds 1.1m) while gearing was reduced to 15.1 per cent (25.1 per cent).

The clothing hangers division was the only one to show a fall in operating profits to Pounds 2.47m (Pounds 2.63m) on improved turnover of Pounds 31.5m (Pounds 31.1m).

The company's biggest business, labels, improved margins and contributed Pounds 6.7m (Pounds 4.4m) on turnover of Pounds 58.1m (Pounds 51.8m).

Communications components improved profits to Pounds 1.67m (Pounds 1.56m) on turnover of Pounds 20.5m (Pounds 16.8m).

Printing and publishing raised its input to Pounds 533,000 (Pounds 493,000) on turnover of Pounds 11.1m (Pounds 10.5m) and took a small loss on discontinued operations.

Turnover from continuing operations rose to Pounds 121m (Pounds 110m). The proposed unchanged final dividend of 8.25p maintains the total at 12.5p, out of earnings per share of 19.5p (16.5p)

Ferguson International Holdings GB United Kingdom, EC P2732 Book Printing P2741 Miscellaneous Publishing P2759 Commercial Printing, NEC FIN Annual report PEOP People P2732 P2741 P2759 The Financial Times London Page 26 330
UK Company News: Laing seeks Pounds 39m in placing - Funds needed for privately-financed infrastructure projects Publication 930521FT Processed by FT 930521 By ANDREW TAYLOR, Construction Correspondent

JOHN LAING, one of Britain's biggest construction groups, is raising Pounds 39m, part of which will be used to invest in privately-financed European infrastructure projects.

The company is a member of joint ventures bidding to construct a privately-financed road toll bridge across the Firth of Forth in Scotland and a toll bridge across the river Tagus in Lisbon, Portugal.

It is currently building a toll bridge across the river Severn, between England and Wales, in the joint venture with GTM Entrepose, the French construction group.

Laing is raising the cash through a placing and offer to shareholders of 40.2m of 6.4 per cent convertible cumulative preference shares. The issue is being handled by Barclays de Zoete Wedd. Shareholders are being offered 9 convertible shares at Pounds 1 each for every 20 ordinary shares held.

The company, which made a Pounds 11.6m pre-tax profit last year following a Pounds 65.3m loss in 1991, says it needs the money to increase its involvement in private infrastructure projects.

It will also be used to to expand Laing's overseas contracting business, particularly in the Far East and to expand its private housebuilding operations from south-east England, where it currently operates, into the Midlands.

Laing says it is also looking at opportunities in continental Europe through its recently formed Societe Europeenne de Construction joint venture with GTM Entrepose of France, NCC of Sweden and Strabag Bau of Germany,

Laing had net cash of Pounds 34m at the end of April, but this excluded Pounds 125m of guarantees, performance bonds and letters of credit which increasingly are being sought by UK and international construction clients.

The group said that increased demand for performance bonds and the requirement of a strong financial base to bid for private infrastructure projects had persuaded it to increase shareholders' funds through a preference issue rather than raise debt, despite its strong cash position.

Mr Martin Laing, chairman, said: 'The increasing requirement for contractors to provide performance guarantees means that balance sheet strength is, and will continue to be, a competitive consideration in securing new business.'

Performance bonds of up to 10 per cent of a contract's value mean that large amounts of capital can remain tied up in jobs that have already been completed, putting increased strain on balance sheets. A shortage of construction work in the UK meant that customers have been in a much stronger position to demand performance guarantees.

John Laing GB United Kingdom, EC P1542 Nonresidential Construction, NEC FIN Share issues P1542 The Financial Times London Page 26 448
International Company News: Hungary pledges help for troubled commercial banks Publication 930521FT Processed by FT 930524 By NICHOLAS DENTON and REUTER BUDAPEST

HUNGARY vowed yesterday to recapitalise its troubled financial sector after the disclosure in the Financial Times that loan losses at Magyar Hitel Bank and Kereskedelmi Bank, the two largest commercial banks, had wiped out their capital.

AV RT, the state holding company, said it would be ready to put proposals on new capital for the banks it owns before the government's economic cabinet in two or three weeks.

A World Bank-International Monetary Fund mission is then due in June to discuss a broader programme to restructure Hungary's problem debtors as well as to recapitalise problem banks, said Mr Teleki, chairman of the AV RT.

Mr Teleki conceded yesterday new capital was necessary but would not comment on a recommendation by the World Bank for an infusion of Ft100bn (Dollars 1.1bn) to bring the capital adequacy of the whole banking sector up to 4 per cent of assets on international accounting.

However, an AV RT official said that the World Bank was considering a package worth upwards of Dollars 400m in structural adjustment and enterprise restructuring loans to help put Hungary's financial system in order.

Mr Teleki's comments came in an angry response to yesterday's publication of data from a confidential World Bank document which revealed that Hungary's top commercial banks were 'technically insolvent'.

Mr Teleki accepted that Hungarian banks did not meet international norms for capital strength. But added: 'That is not the aim. While they are still not privatised there is no point in them meeting international standards.'

Hitel Bank yesterday responded to the revelation of its technical insolvency by stressing it remained liquid and stated that it had positive capital under Hungary's, more flattering, accounting principles.

Citibank Overseas Investment is to lift its stake in Citibank Budapest to 100 per cent by acquiring a 20 per cent stake from the National Bank of Hungary, Reuter reports from Budapest.

The Budapest-based bank earned pre-tax profits of Ft2bn in 1992.

Magyar Hitel Bank Kereskedelmi Bank Citibank Overseas Investment Citibank Budapest HU Hungary, East Europe P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis COMP Mergers & acquisitions P6081 The Financial Times International Page 20 378
Fall in demand hits Matsushita and Sony Publication 930521FT Processed by FT 930524 By MICHIYO NAKAMOTO TOKYO

MATSUSHITA and Sony, two of the world's leading consumer electronics companies, yesterday reported sharp declines in pre-tax profits for the year ended March as demand continued to be severely depressed in major markets.

They warned that conditions were unlikely to improve significantly in the current year.

Both companies were also under considerable strain from higher depreciation costs, including amortisation resulting from their acquisition of important film studios in the US and from the yen's sharp appreciation in the past year.

Matsushita, the world's largest electronics group, reported a 54 per cent decline in pre-tax profits to Y168.4bn (Dollars 1.52bn) from the previous year. Sales were down 5 per cent to Y7,055.9bn, while net profits decreased 71 per cent to Y38.4bn.

Sony saw a 57 per cent decline in pre-tax profits to Y92.6bn on sales up 1.6 per cent at Y3,993bn.

Net profits fell 70 per cent to Y36.3bn. The sharp fall was partly due to an extraordinary gain from sales of shares in a subsidiary the previous year.

The 6 per cent appreciation of the yen during the period also had a significant impact. Sony, which is dependent on exports for 66 per cent of sales, said that the yen's appreciation had resulted in a Y154bn decline in revenues.

For Matsushita, which has an export ratio of 36 per cent, the impact was just Y7.3bn.

Both companies faced difficulty in the market for audio and video equipment. Matsushita also saw declines in most of its other product areas such as home appliances, electronic components and entertainment. The group was hit by restructuring costs for JVC, the troubled audio-visual affiliate, and by costs relating to defective refrigerators sold by another subsidiary.

Sony said that in the past six months it had sold 240,000 units of the MiniDisc, one of its newest products.

One area in which Sony did particularly well in contrast to Matsushita was in the entertainment field. Sony's film division increased sales by 16 per cent in yen terms and 25 per cent on a dollar basis.

Sony's music division, reported a slight decline in yen but a 16 per cent increase on a local currency basis.

Meanwhile Matsushita's entertainment division, which includes MCA studios, reported a 3 per cent sales decline in yen terms although this would have been a slight increase on a dollar basis.

Both Matsushita and Sony are cutting costs to meet what they expect will be continued weakness in their markets.

Capital expenditure has been nearly halved at Sony while Matsushita has been reducing the number of product models it offers as well as other costs.

Matsushita is forecasting flat sales for next year at Y7,060bn on a consolidated basis and a 25 per cent increase in pre-tax profits to Y210bn.

Sony is forecasting a 2 per cent decline in sales to Y3,910bn and a 6 per cent decline in pre-tax profits to Y87bn due in part to higher interest charges.

Matsushita Electric Industrial Corp Sony Corp JP Japan, Asia P3651 Household Audio and Video Equipment P7812 Motion Picture and Video Production FIN Annual report MKTS Sales P3651 P7812 The Financial Times International Page 19 538
Belgium stresses European union Publication 930521FT Processed by FT 930524 By ANDREW HILL BRUSSELS

MR Jean-Luc Dehaene, Belgium's prime minister, said yesterday greater European integration would be a priority when the country takes over the EC presidency from Denmark in six weeks' time.

'It has to be said quite clearly that the best response to the political and economic crisis we are going through is not less, but more Europe,' said Mr Dehaene in a speech in Waregem, northern Belgium.

'That means, first, implementing the Maastricht treaty and, secondly, ensuring (economic) growth in Europe,' Mr Dehaene, a Flemish Christian Democrat, told a meeting of Catholic employers.

Mr Dehaene's speech is likely to create disquiet among Euro-sceptics in Britain, which has yet to ratify the Maastricht treaty. They fear that Belgium, backed by other enthusiastic EC members, will pursue a strong line in favour of greater integration during its six-month presidency, especially now that Denmark has voted in favour of the treaty.

He added that monetary union would underpin the European economy and 'finally put an end to competitive devaluations' of EC currencies, which have put pressure on Belgium's export-based economy.

Senior Belgian ministers have suggested in the last week that the EC might have to consider relaxing Maastricht's strict economic conditions for monetary union, if the recession persists.

BE Belgium, EC QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times International Page 3 238
Russian leaders agree to reforms tied to IMF loan Publication 930521FT Processed by FT 930524 By LEYLA BOULTON MOSCOW

THE Russian authorities yesterday patched up divisions over proposals for economic reform which are linked to a new Dollars 3bn loan from the International Monetary Fund.

Mr Viktor Chernomyrdin, the prime minister, Mr Viktor Gerashchenko, the central bank chairman, and Mr Boris Fyodorov, the finance minister, reached broad agreement to make no new spending decisions for the rest of this year, to increase interest rates, and to maintain quarterly limits on credit expansion.

The agreement follows modifications discussed with the IMF. Earlier this week, the measures were criticised by Mr Gerashchenko, who has deep reservations about Mr Fyodorov's strategy for cutting inflation and restructuring the economy.

Mr Gerashchenko told bankers that restrictions on credit expansion agreed with the government would be overshot in the second quarter, not to mention the rest of the year. He also challenged proposals for the rate at which the Central Bank gives credit to the economy to track a so-called market rate.

But agreement among the three men is by no means the end of internal squabbling in the Russian camp. The proposals for instance run directly counter to the views of old-time conservatives such as first deputy prime minister Oleg Lobov, in charge of the Economics Ministry.

Mr Fyodorov, who has sought to make the proposals as binding as possible for his colleagues, said at the beginning of the week he expected the government and Central Bank to make a joint pledge yesterday. But Mr Sergei Vasiliev, head of the government centre to monitor economic reform, said the document would not be ready until Saturday.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times International Page 2 299
Italian interest rate cut to 10.5% Publication 930521FT Processed by FT 930524 By ROBERT GRAHAM ROME

THE Bank of Italy yesterday cut the discount rate by half a percentage point to 10.5 per cent, the lowest level since 1978.

The move followed the positive outcome of the second Danish referendum on the Maastricht treaty and is in response to calls from recession-hit industries to ease the still high cost of borrowing. The rate cut is the third this year.

Commercial banks immediately began to bring their prime rates into line. On average the commercial banks looked set to cut their prime rates by half a percentage point to 11.75 per cent.

The fall in interest rates, reflected in the reduced cost of financing the budget deficit, brought some relief to the Ciampi government as the economic team finalised measures for a mini-budget.

This could be announced today with a mix of new taxes and spending cuts which are aimed at producing an extra L13,000bn (Dollars 8.8bn). The bulk is expected to come from higher taxes, specially on petrol.

The mini-budget is also being planned in conjunction with the 1994 budget which for the first time will be ready before the summer recess of parliament.

Austerity is expected to continue with the need to hold down the public sector deficit which remains over 10.5 per cent of GDP.

This week the government received another harsh reminder of the continued demands on the Treasury. A constitutional court sentence has declared that some 3.6m civil servants and members of the military are eligible to have their severance pay on retirement topped up to accommodate inflation. The court allowed parliament a reasonable period to implement legislation but this will add at least L9,000bn in public spending.

IT Italy, EC P9311 Finance, Taxation, and Monetary Policy ECON Economic Indicators P9311 The Financial Times International Page 2 310
Window on the west reopens: St Petersburg could be Russia's Milan Publication 930521FT Processed by FT 930524 By LYNNLEY BROWNING

WESTERN tobacco companies are among the growing number of investors choosing St Petersburg, Russia's former imperial capital, as the home base for their operations in the former Soviet Union.

While most Moscow-based companies such as Coca-Cola, IBM and 3M have representative offices in the city, other companies, including Procter & Gamble, Phillip Morris, RJR Reynolds and Gillette, have made St Petersburg their CIS headquarters.

'St Petersburg could be to Moscow what Milan is to Rome,' says Mr Ruud Wittkampf, St Petersburg manager of Ernst & Young, one of six accounting, auditing and consulting firms represented here. 'Rome may be Italy's political locus, but Milan is its economic centre.'

Built by Peter the Great as 'a window on the west' nearly three centuries ago, St Petersburg has long been Russia's most European city. With geographic proximity to the west, a more co-operative bureaucracy, architectural grandeur, a well educated population and military-industrial enterprises ripe for conversion, the city has significant advantages over Moscow.

Nearly half of about 6,000 foreign joint ventures in Russia are based in the city. Gillette, which plans to build a factory to supplement its joint venture partner Leninetz's existing factory, intends to make St Petersburg one of the company's top three manufacturing points in the world.

Rothmans, which recently announced plans for a Dollars 90m factory, joins tobacco concerns Phillip Morris and RJR Reynolds in establishing manufacturing operations in St Petersburg.

Coca-Cola is also negotiating land agreements to build a bottling factory, the first stage of a Dollars 34m project. Otis Elevator, which operated in the city before the 1917 revolution, recently opened its manufacturing facility and plans full production capacity and export to the rest of Europe in 1996, while 3M is building a factory to make telecommunications products.

Western consumer-goods companies are marketing their products to an urban, highly educated population in a city long considered the cultural and intellectual capital of Russia.

St Petersburg's 5m population is the most highly educated in Russia; more than half have university degrees; 60 per cent are of working age; one in seven is an engineer working in military-industrial enterprises. The city also provides a choice pool of highly qualified labour.

Mr Konstantin Karczmarczyk, director of Arctls, a Russian company involved in the conversion of military industries, is less sanguine than those who see the city as an east European hub. He says western companies looking for manufacturing partners often find inefficient management and disastrous balance sheets alongside high levels of quality and technology.

'Military enterprises have real visions of capitalism but the practices of the old Soviet system,' he adds.

When joint ventures do materialise, they are not always happy marriages.

Gillette spent months in fraught negotiations with its partner Leninetz, which promised to reconstruct an existing factory to produce 1bn razor blades a year, but the project is believed to be long behind schedule.

Part of St Petersburg's appeal lies in its reputation as a city less entangled in red tape than other Russian cities, and in the reputation of its first elected mayor, Mr Anatoly Sobchak. He advocates tax incentives for big business, private ownership of land, and banking reforms. He is the architect of the Free Economic Zone project, in which tax breaks, abolition of import/ export tariffs, and simplified joint venture registration procedures would boost foreign trade and encourage manufacturing.

Popular opposition to Mr Sobchak is also growing. His critics say he pays too much attention to western companies offering products few can afford while neglecting housing, transport and other infrastructural problems and failing to combat rising crime.

There are problems. Crime has risen significantly. Eight Marlboro kiosks were firebombed recently for 'undercutting' the price of cigarettes sold in stands controlled by racketeers, and Coca-Cola pays the taxi fare home for its Russian employees, who are routinely harassed.

Businessmen also complain that property negotiations are hampered by disputes over who owns what. Unlike Moscow, where gigantic Stalin-era structures dominate the skyline, St Petersburg has endless rows of once elegant 19th-century, Italianate buildings which will be prime investments once the bureaucratic wrangling over property rights are overcome.

But despite the problems, life is starting to get easier. Satellite telecommunication is now available, sales of centrally located privatised apartments to executives are soaring, and the city's second five-star hotel, the Nevskij Palace, is due to open soon.

RU Russia, East Europe P6231 Security and Commodity Exchanges COMP Strategic links & Joint venture CMMT Comment & Analysis P6231 The Financial Times International Page 2 766
Denktash offers port to UN Publication 930521FT Processed by FT 930524 By REUTER NICOSIA

TURKISH Cypriot leader Rauf Denktash said yesterday the resort of Varosha could be handed over to the United Nations in return for the lifting of an international embargo on Turkish Cypriot ports and airports, Reuter reports from Nicosia.

'We indicated that provided the embargo which has been going on for 29 years is lifted from our ports and airports, we could discuss this,' he said. But, he added, transfer of the former Greek Cypriot resort would have to await agreement on a wider Cyprus deal.

CY Cyprus, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times International Page 2 115
World News in Brief: French magazine to close Publication 930521FT Processed by FT 930524

Marie-France, French monthly fashion magazine owned by Bauer of Germany, is to close in July because of falling advertising revenue. Sales of more than 500,000 in the 1970s slipped last year to below 250,000.

Heinrich Bauer Verlag Bauer FR France, EC P2721 Periodicals COMP Company News P2721 The Financial Times International Page 1 67
International Company News in Brief: US Shoe Publication 930521FT Processed by FT 930521 By Our New York Staff

SHARES in US Shoe fell sharply as the retailer reported a first-quarter net loss of dollars 9.7m compared with earnings of dollars 2.8m. Net sales fell 1.1 per cent to dollars 640m, our New York staff writes.

The company said the losses were primarily due to the women's clothing retailing division, which had operating losses of dollars 20.3m against dollars 3.3m. A new president of these operations had recently been appointed, the company added.

On Wall Street, the shares dropped dollars 1/2 to dollars 9, a 52-week low.

US Shoe US United States of America P5661 Shoe Stores FIN Annual report P5661 The Financial Times London Page 29 126
International Company News in Brief: Time Warner Publication 930521FT Processed by FT 930521 By JEREMY BENNALLACK-HART NEW YORK

FORMER US trade representative Ms Carla Hills is to join the board of Time Warner, the US media and entertainment group, writes Jeremy Bennallack-Hart in New York.

She was elected at the group's annual meeting in New York at which Mr Gerald Levin, chairman and chief executive, said he expected a strong performance this year despite the static state of the econonmy.

Since the election of President Clinton, Ms Hills has been nominated to the board of several US companies, including AT&T, Chevron and UAL.

Time Warner Inc US United States of America P2721 Periodicals PEOP Appointments P2721 The Financial Times London Page 29 122
International Company News in Brief: Hilton Hotels Publication 930521FT Processed by FT 930521 By REUTER BEVERLY HILLS

Hilton Hotels is to consoidate its operations into two divisions, one for gaming and one for hotels, the president and chief operating officer, Mr Raymond Avansino, told the company's annual meeting, Reuter reports from Beverly Hills.

Previously, Hilton had separate divisions for international and domestic gaming operations and for international and domestic hotels.

After the meeting, Mr Avansino said the move would involve job losses but declined to give details. Hilton expects to save at least dollars 6m annually through the plan.

Hilton Hotels Corp US United States of America P7011 Hotels and Motels FIN Annual report P7011 The Financial Times London Page 29 121
International Company News in Brief: Olympic Airways privatisation stalled Publication 930521FT Processed by FT 930521 By REUTER ATHENS

THE Greek government has abandoned plans to privatise Olympic Airways quickly and now aims to restructure the state carrier, Reuter reports from Athens.

'Let's leave out for the time the word privatisation. This is not the objective. The objective is to have a viable company which will not depend on government subsidies,' Olympic's recently appointed president, Mr Emmanuel Fthenakis, said.

'(This) objective cannot be reached by going out and selling shares. I won't do that,' he said.

The government decided in 1991 to sell 49 per cent of Olympic and give management rights to the strategic investor. Officials had said privatisation was going ahead, but investors showed little interest because of Olympic's dollars 1.3bn debt.

'The short-term policy now is to keep Olympic from closing down. The middle-term policy is to restructure it by writing off its debt and in the long run the company could still be partly privatised,' a senior government official involved in the sell-off said in an interview. 'But this (privatisation) will not take place before the next elections,' he added.

Olympic Airways GR Greece, EC P4512 Air Transportation, Scheduled P9611 Administration of General Economic Programs COMP Company News P4512 P9611 The Financial Times London Page 29 219
London Stock Exchange: New highs and lows for 1993 Publication 930521FT Processed by FT 930521

NEW HIGHS (157).

BANKS (1) Bank Scot., AMERICANS (1) Lowe's, CANADIANS (1) Gulf Can., BREWERS (1) Wetherspoon, BLDG MATLS (10) Blockleys, Br. Dredging, Erith, Ibstock Johnsen Wts., Lilleshall, Manders, Meyer, Pheonix Timber, Polypipe, Wolseley, BUSINESS SERVS (1) Br. Data, CHEMS (2) Ellis & Everard, Hickson, CONGLOMERATES (1) Wassall, CONTG & CONSTRCN (8) Ashtead, Bett Bros., Crest Nicholson, Gleeson, Havelock Europa, Hewden-Stuart, Persimmon, Wimpey, ELECTRICALS (3) BICC, Motorola, Oxford Instrs., ELECTRONICS (3) Control Techs., Hewlett-Packard, Lynx, ENG GEN (6) Dobson Park, Meggitt, Syltone, Vickers, Vosper, Wilkes, FOOD RETAILING (3) Dairy Farm, Greggs, Merchant Retail, HEALTH & HSEHOLD (1) Huntleigh Tech., HOTELS & LEIS (3) Fairline Boats, Kunick, Do 8 1/4 pc Pf., INSCE COMPOSITE (1) Domestic & Gen., INV TRUSTS (28) Aberforth Smllr. Co's, China & Eastern, EFM Java, Elect. & Gen., Fidelity Euro. Values Wts., First Pacific, For. & Colonial Pacific, Do Wts., Gartmore Emrg. Pacific, Govett Oriental, Lloyds Smllr. Co's Cap., M & Dual Cap., M & G Recovery Zero Pf., Martin Currie Pac., Do Wts., Mezzanine Cap. & Inc., Nth. Amer. Gas Wts., RIT Cap., Do 2 1/2 pc Cv. '00, River & Merc. Smllr. Co., Do. Wts., Scot. Asian, Sphere Zero Pf., TR Prop., TR Smllr. Co's, Templeton Emrg. Mkts., Turkey Tst., Value & Inc., MEDIA (9) Anglia TV, Johnston Press, Metro Radio, Mirror, Osprey Comms., Trinity Intl., VTR, WPP, Watmoughs, MERCHANT BANKS (2) Kleinwort Benson, Warburg 6pc Pf., MTL & MTL FORMING (5) Br. Steel, Clayhithe 9 1/2 pc Cv. '00-01, Cook (Wm), Cooper (Fr), Downiebrae, MISC (3) Danka, Fairway, Gt. Southern, MOTORS (1) Lookers, OIL & GAS (1) Aminex, OTHER FINCL (5) Broadcastle, King & Shaxson, Rathbone Bros., Smith New Court Pf., St James's Place, PACKG, PAPER & PRINTG (2) Br. Polythene, Ferguson, PROP (28) Allied Lon., Barlows, Bradford, Br. Land, Br. Land 8 5/8 pc Pf., Burford, Cap. & Regional, Chesterfield, Do 5 1/4 pc Pf., Daejan, Derwent Valley, Evans of Leeds, Five Oaks, Greycoat, Gt. Portland, Helical Bar, Land Sec., MEPC, Safeland, Scot. Metropolitan, Slough, Southend Prop., Stanhope, Tops Ests., Town Centre, Warner Est., Wates City of Lon., Wood (JD), STORES (4) Arnotts, Ashley (L), French Connection, Owen & Robinson, TEXTS (6) Albion, Celestion, Dewhirst, Gaskell, Lamont, Shani, TRANSPORT (2) Forth Ports, Powell Duffryn, MINES (15).

NEW LOWS (27).

BREWERS (4) Allied-Lyons, Bass, Grand Met., Wolv. & Dudley, BUSINESS SERVS (1) Rentokil, CHEMS (2) Allied Colloids, MTM, CONTG & CONSTRCN (1) Andrews Sykes, FOOD MANUF (5) Cadbury Schweppes, Dalgety, Tate & Lyle, Do 7 1/4 pc Pf., Unilever, FOOD RETAILING (3) Argyll, Low (Wm), Tesco, HEALTH & HSEHOLD (2) Bespak, Haemocell, INSCE BROKERS (1) Bradstock, INV TRUSTS (3) Hungarian Inv., Kleinwort Endowment Policy, Melville St. Wts., MEDIA (1) Radio Clyde, MISC (3) Shanks & McEwan, Sthn. Business, Toye, TRANSPORT (1) Transport Dev.

GB United Kingdom, EC US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 499
London Stock Exchange: Cadbury falls Publication 930521FT Processed by FT 930521 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

With brand worries continuing to haunt food manufacturers, the fall in Cadbury Schweppes was further fuelled by renewed rumours that the company was about to launch a rights issue.

Although heard before, particularly in relation to a bid for United Biscuits, rights hints have received fresh impetus from the recent spate of issues by other consumer groups. However, while food analysts remain sceptical, Cadbury has often emphasised its strategy that a rights issue would only be contemplated for acquisition purposes.

Underpinning Cadbury's decline and general weakness in the sector was the continuing fallout from comments this week from French food group BSN, which have reignited recent fears over the vulnerability of food brands to discount retailers. Among those to fall yesterday, Unilever retreated 18 to 996p, Hillsdown 8 to 139p, Cadbury 14 to 422p and Associated British Foods 5 to 469p. UB lost 2 to 403p.

Cadbury Schweppes United Biscuits (Holdings) GB United Kingdom, EC P2099 Food Preparations, NEC P2064 Candy and Other Confectionery Products P2052 Cookies and Crackers CMMT Comment & Analysis P2099 P2064 P2052 The Financial Times London Page 42 203
London Stock Exchange: RTZ active Publication 930521FT Processed by FT 930521 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

RTZ shares dipped 3 to 637p, with turnover reported by Seaq reaching a hefty 9.8m shares, the heaviest for many months. Dealers noted a block trade of 5.5m shares transacted in the morning period at 582 1/2 p and a substantial number of following trades at 625p a share.

RTZ is one of the six leading companies to have offered an enhanced scrip dividend to its shareholders since the changes incorporated in the budget earlier this year. The company was said to have issued almost 30 shares to holders as part of the scrip issue scheme.

The Financial Times London Page 42 119
London Stock Exchange: Properties in favour again Publication 930521FT Processed by FT 930521 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

FURTHER signs that investor confidence is returning to the property market was signalled by improved results and positive comments from Chesterfield Properties, and shares rose impressively across the sector. The Chesterfield improvement follows more bullish reports from other property groups, most recently Land Securities, the biggest in the sector.

Property analysts remain largely cautious towards the sector as a whole, arguing that the selective nature of the recovery in property is mirrored in the diversity of property stocks.

Yesterday, however, investors appeared keen on a wide variety of shares, among which Chesterfield surged 58 to 330p, Bilton 16 to 531p, helped by news on housing starts from Laing, British Land 11 to 302p, Hammerson 'A' 14 to 339p, Land Securities 12 to 565p and Slough Estates 14 to 209p.

Chesterfield Properties Land Securities GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 42 177
London Stock Exchange: Early gains wiped out at the close Publication 930521FT Processed by FT 930521 By TERRY BYLAND, UK Stock Market Editor

FIRMNESS in sterling foll-owing good UK unemployment figures proved a somewhat negative factor yesterday in a UK stock market no longer confident that domestic interest rates can be reduced again in the near future. Having been buoyed for much of the session by Wall Street's surge to a new peak overnight, the London blue chips turned off towards the close. The FT-SE 100 Index ended a shade easier, contrasting with a sharp rise in the FT-SE Mid 250 Index, which broke through to a new closing high of 3,160.1.

London's response to Wall Street's rebound in the previous session was somewhat disappointing. Although the Footsie gained 13 points in early trading, dealers said there was little support behind it. The big institutions were unwilling to buy stock at these levels, in fact a fairly high level of Seaq volume suggested that some were selective sellers.

However, the market held on to its initial gains until early afternoon when the combination of a firm pound and a dull Wall Street brought a sharp reaction. The Dow Average was a couple of points off in UK trading hours amid general nervousness ahead of today's Triple Witching Hour when a batch of important futures contracts expire.

By the close, the FT-SE 100 was a net 2.9 down at 2,816.8. The contrast with the FT-SE Mid 250, which gained 11.1 points, raised the perennial question of whether the smaller stocks favoured by private investors lead, or merely follow, the blue chip market. Some traders commented that the smaller stocks which are included in the Mid 250 index were 'not always easy to sell' in a market which has become increasingly nervous regarding economic prospects on both domestic and international fronts.

Seaq volume increased sharply yesterday, totalling 700.8m shares compared with 647.8m in the previous session. But non-Footsie business remained at the slightly reduced levels of recent sessions, constituting only about 56 per cent of the day's total, against averages of around 62 per cent over the past few months.

The market was undermined by the weakness in consumer issues which has followed the disclosure of a fall in domestic retail sales last month. This cloud over the progress of the recovery in the domestic economy has been pressed home by disappointing results from the brewery sector and a lukewarm reception in the stock market to the latest trading figures from Marks and Spencer, the monarch of the high street retailers.

Renewed falls among consumer shares were accompanied by fresh hints that a large takeover bid was in the air, and would perhaps bring the sizeable rights issue of which the stock market is in fear.

At the same time, the London market lacked the lead from the big blue chip sectors yesterday. Oil shares made no response to Wall Street's advance and the pharmaceuticals sector also stayed in the shadows.

Several leading UK houses appeared to be avoiding taking on any big trading positions in the international blue chips. The London market has become nervous of the near-term outlook for the continental European economies in the wake of this week's indications of inflationary pressures in Germany.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 563
London Stock Exchange: Equity futures and options trading Publication 930521FT Processed by FT 930521 By JOEL KIBAZO

TALK OF an impending rights issue, along with the availability of large lines of stock in the equity market, depressed a futures sector already disappointed with the lack of a further cut in interest rates, writes Joel Kibazo.

Taking its cue from the strong overnight performance of Wall Street, the June contract on the FT-SE 100 opened firmly at 2,837. But with disappointment on the interest rates front still very much a feature, the contract traded in a tight 10-point range for the rest of the morning, with the favourable unemployment figures making little impact.

The availability of sizeable amounts of stock in the cash market led June lower, with many of the big insitutions unwilling to buy the future. Talk of a rights issue late in the day helped cause a sell-off that saw the contract fall to the day's low of 2,815.

The usual bargain hunting helped June off the bottom and it closed at 2,818, down 10 from Wednesday's close, with the premium to the cash market having fallen to a mere two points. Turnover was poor, reaching 7,746 lots by the official close.

In traded options, volume fell to 32,777. However, the FT-SE 100 and the Euro FT-SE 100 options were busy ahead of today's expiry of the May index options. They traded 8,762 and 6,331 lots respectively. Land Securities was the busiest stock option with a total of 3,205 contracts dealt.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 271
World Stock Markets (America): Late demand again propels Dow to record Publication 930521FT Processed by FT 930521 By PATRICK HARVERSON NEW YORK

Wall Street

AFTER spending most of the session in a narrow trading range close to opening values, a fresh late burst of program buying lifted US stocks to record highs for the second consecutive day, writes Patrick Harverson in New York.

The Dow Jones Industrial Average closed 23.25 ahead at a record 3,523.28, with most of the gain coming in the final few minutes of trading. The Standard & Poor's 500 ended 3.02 stronger at 450.59, while the Nasdaq composite was 7.00 higher at 697.43. New York SE volume came to 289.2m shares.

The volatility and confusion of Wednesday - when an early 30-point fall in the Dow was turned into a record-breaking 55-point romp in the wake of a bond market rally and a sudden dip in gold prices - gave way to calm and contemplation at yesterday's opening.

In spite of the new index highs, investors initially remained uncertain about the outlook, although in the first few minutes of trading it looked as if stocks were heading yet again into record territory. An early 14-point gain, however, quickly disappeared as the institutional buying that opened the day petered out.

The day's economic news was not good, helping to keep prices in check. State unemployment claims rose by 7,000 during the second week of May, and the Philadelphia Federal Reserve's index of local business activity fell. It was not until the last 15 minutes before the close that stocks took off, lifted by program trading related to today's expiration of stock and stock index futures contracts.

Some of the market's recent leaders ran into profit-taking. Hewlett-Packard, in great demand following good earnings news early in the week, receded Dollars 3/4 to Dollars 87. AT&T, at the forefront of the rally on Wednesday, eased Dollars 1/4 to Dollars 60.

Other leading issues built on their gains. Walt Disney added Dollars 2 3/8 at Dollars 44. Gold shares, which saw heavy selling on Wednesday, were firmer after a small rally in the gold price. Battle Mountain rose Dollars 5/8 to Dollars 9 3/8 .

Citicorp put on Dollars 1/2 at Dollars 28 3/4 in volume of 4.07m shares on news that Mr Chris Steffen, former chief financial officer of Eastman Kodak, is joining the bank's management team.

Canada

TORONTO advanced as positive sentiment about Wednesday's Ontario budget and Wall Street's record-breaking run swept most indices higher. 'Banks were better on the fact that they do not get slapped with a heavy tax,' a trader commented.

The TSE 300 index ended 20.3 up at 3,831.6 and rises led declines by 392 to 301 after volume of 79.6m shares. The financial services sector climbed 30.6 to 2,930.5.

US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 485
World Stock Markets: Brazil Publication 930521FT Processed by FT 930521

SAO PAOLO rose 7.1 per cent in heavy trading, with investors remaining optimistic after Mr Fernando Henrique Cardoso, the former foreign minister, was named as economy minister. The Bovespa index at the close of trading was 2,135 ahead at 32,011.

BR Brazil, South America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 68
World Stock Markets: Wall Street triumphs over its fear of inflation - The abrupt shift of sentiment that took the US market to new highs Publication 930521FT Processed by FT 930521 By PATRICK HARVERSON

Confusion, uncertainty, rumour and a touch of hysteria reign on Wall Street this week.

There is confusion and uncertainty about where stocks, bonds, gold prices and the economy are heading. There are wild rumours about what well-known investment managers are doing with their money. And there has been a burst of hysteria about inflation and monetary policy.

In spite of all this, US stock markets have managed to rise to record highs. On Wednesday, the Dow Jones Industrial Average jumped 55.64 to 3,500.03, an impressive recovery from a morning which had seen it 30 points down.

The Standard & Poor's 500 index moved to within 10 points of its all-time peak. Other market indices also approached, or broke through, their records, in some of the heaviest trading ever seen on Wall Street.

The week opened with investors in a gloomy mood, fearful that recent news of rising consumer, producer and commodity prices heralded the return of higher inflation. The resurgence in the price of gold, a traditional inflation hedge, had reinforced those fears.

The same worries had already undermined bond prices, sending the yield on the benchmark 30-year government bond back above 7 per cent for the first time in more than a month. This made equity investors even more nervous, because rising bond yields make stocks look less attractive.

Both the stock and bond markets fretted that signs of revived inflation might prompt the Federal Reserve to raise interest rates. The fretting reached a peak this week because the Fed's open market committee was meeting to review monetary policy. Pessimists feared that the open market committee would put up short-term interest rates to head off a rise in prices.

When the committee meeting ended with no apparent change of policy, the markets' mood suddenly brightened. Simultaneously, gold prices were hit by profit-taking and dropped almost Dollars 10 from their Wednesday morning high of Dollars 383 an ounce. The stage was set for a sharp reversal of market sentiment.

As Mr Richard Hoey, chief economist at fund group Dreyfus, explained: 'What we saw was a popping of the bubble of hysteria about accelerating inflation.' He believed that stock market and bond market investors had 'built up a negative psychology based upon bad inflation numbers, the rising gold price and falling bonds'. It was a fragile psychology which crumbled easily.

First, bond prices rallied, bringing the yield on three-year treasuries down from 7.07 per cent to 6.97 per cent. Then stocks turned upwards, heading to new highs.

Rumours abounded. During the afternoon Mr George Soros, the well-known investor who had helped spark the rally in gold, was rumoured to be switching back out of the metal into bonds. Then word spread that Fidelity Investment's huge Magellan fund had started to pour money into stocks in anticipation of a big market rally. Neither rumour was true, but they contributed to Wednesday's frenzy.

Other factors were at work. The most recent survey of market sentiment had shown that investment advisers were more bearish about the market's outlook that at any time since October 1990. To the professional investors, this was an indication that the bears had exhausted their selling, and a sign that the market was ripe for a rally. Many immediately began buying stocks.

Although the buying quickly petered out yesterday - at midday, bond and equity prices were virtually unchanged - at least the fuss over gold prices and inflation appeared to have died down. Mr Laszlo Birinyi, the veteran market watcher with Birinyi Associates in New York, said: 'The whole gold play was overworked. The conventional wisdom that gold is some sort of harbinger of inflation is simply not true.'

Yet, the nagging uncertainties that were evident at the start of the week had not gone away. While interest rates will probably remain where they are for a few months, the next move in rates is more likely to be up than down. Stocks still look pricey, and the huge inflows of investor cash (via mutual funds) that has propped up prices for so long will slow down this summer because of seasonal factors.

The recent performance of stock and bond markets has left Wall Street feeling dazed and confused. Mr Birinyi is one observer who thinks that there is more to the market's strength than just low interest rates and heavy buying of mutual funds by investors chasing attractive yields. 'Maybe the market is saying something major about the future. What it is, I do not know.'

US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 801
World Stock Markets (Europe): Bourses fail to match Eurotrack response Publication 930521FT Processed by FT 930521 By Our Markets Staff

CONTINENTAL shares quoted in London offered a positive response as Wall Street held its overnight gains, the Eurotrack 100 ending nearly a percentage point ahead in the post bourse.

Where they were open on Ascension day, as in Milan and Madrid, senior bourses seemed more subdued, writes Our Markets Staff.

MILAN remained at a 21-month high, the Comit index adding 0.68 to 559.17 in strong turnover, on continued expectations of lower interest rates.

Mr Fabio Ferrando of Albertini in Milan believed that, given the continuing strength of the lira, a half point cut in the discount rate was likely to follow swiftly on the heels of agreement on a supplementary budget, expected today.

Over the medium term, he thought that further reductions might be expected when agreements are reached on labour reform and on the shape of the 1994 budget, which is due at the end of July.

Olivetti continued ahead, after the launch of its rights issue on Monday. The shares rose L64 or 4.5 per cent per cent to fix at L1,474, before L1,470 after hours.

Mondadori, the publisher slumped L1,150 or 8.5 per cent to fix at L12,000 before rebounding to L12,500 after-hours amid profit-taking after the recent speculation about a restructuring.

MADRID closed virtually flat, the general index closing 0.22 higher at 255.41, block trades keeping turnover relatively respectable at Pta18.2bn, though well down from Wednesday's Pta28.6bn.

Tabacalera stood out in share price terms, rising Pta145 or 4.1 per cent to Pta3,695 in volume of 335,436 shares, almost half of which was attributed to block trades by brokers Asesores Bursatiles.

WARSAW shot up again. Of 17 stocks listed on the main market, 14 hit new highs and the WIG index rose 254.1 or 9.2 per cent to 3,002.9, its sixth record high in two weeks. Turnover was 345.8bn zloty.

Brokers said that the market was simply too small to soak up the sheer pressure of buying at the moment. Meanwhile, the state-owned EL AL Israel Airlines said in New York that it expects to be privatised soon and has seen interest from financial investors in Israel and around the world.

ISTANBUL saw further profit-taking which left the 75-share index 105.07 or 1.3 per cent lower at 7,919.59 and 5.15 per cent down from last Thursday's record high of 8,349.31.

Mrs Nur Pekin of Schroders in London noted that liquidity was being withdrawn from the market as advance income tax payments totalling TL3 trillion fell due this week and next. Activity was also slowing ahead of a week-long national holiday which begins on May 31 and amid rumours that the Public Participation Administration, which is responsible for Turkey's privatisation programme, was selling some of its holdings.

TEL AVIV managed a token recovery in thin trading after several days of losses, the Mishtanim blue chip index closing 0.53 higher at 206.98 in turnover of Shk182m.

DUBLIN recovered its momentum, led higher by financial issues, with the central bank's cut in its short-term facility by 25 basis points to 8.25 per cent widely expected. The ISEQ overall index rose 4.4 to 1,528.85.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ May 20 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes* Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1154.86 1154.50 1153.93 1155.00 FT-SE Eurotrack 200 1216.91 1218.20 1218.51 1218.80 ------------------------------------------------------------------------ Hourly changes* 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1155.35 1155.21 1156.00 1156.03 FT-SE Eurotrack 200 1219.71 1219.07 1219.32 1220.19 ------------------------------------------------------------------------ May 19 May 18 May 17 May 14 May 13 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1147.97 1152.98 1146.07 1148.21 1155.16 FT-SE Eurotrack 200 1212.27 1217.75 1214.06 1212.97 1219.59 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1156.27; 200 - 1221.21 Low/day: 100 - 1153.93 200 - 1216.65 *Partial. ------------------------------------------------------------------------

IT Italy, EC ES Spain, EC TR Turkey, Middle East IE Ireland, EC JO Jordan, Middle East P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 668
World Stock Markets (Asia Pacific): Rumours spur Hong Kong rally as Nikkei wavers Publication 930521FT Processed by FT 930521 By WAYNE APONTE TOKYO

EQUITIES settled lower as weakness in futures and small-lot sales erased earlier gains in light volume. But the nation's revised industrial output data for March encouraged a minor rally in late trading, lifting the Nikkei average off its intraday low, writes Wayne Aponte in Tokyo.

The Nikkei ended 50.40 easier at 20,330.39, after moving between 20,122.78 and 20,535.79. The Topix index of all first section stocks lost 3.63 at 1,594.33. In London the ISE/Nikkei 50 index put on 1.39 at 1,228.26.

Volume contracted to 350m shares from Wednesday's 397m and falls led rises by 611 to 396, with 173 issues unchanged.

Brokers said Japan's revised output growth rate for March of 2.5 per cent, up from 1.5 per cent, suggested that the domestic economy is improving and encouraged some investors to buy back futures contracts during the afternoon session. This, ultimately, aided the cash market.

However, the day's lower level of trading activity left the Nikkei susceptible to waves of arbitrage-related sales, which put pressure on many large-capital issues, brokers added.

Technical analysts predict that the market's weakness will pull equities lower in the short term. Without government support through public fund purchases, it is likely that the Nikkei would trade closer to 19,500, they said.

Retreating gold prices in overnight trading prompted investors to take early profits from Sumitomo Metal Mining, the recent market leader. It ended Y40 lower at Y1,120. Mitsui Mining and Smelting eased Y8 to Y550.

An appreciation of the yen against the dollar lifted regional power suppliers. Kyushu Electric Power rose Y60 to Y2,940 and Chubu Electric Power Y40 to Y2,920.

Individual investors continued to support companies with good earnings results. Aiwa, the Japanese audio maker, climbed Y120 to Y1,490 on better than expected earnings.

Some shipbuilding issues moved higher after figures from Namura Shipbuilding, Y10 up at Y1,270. Sasebo Heavy Industries gained Y35 at Y594.

In Osaka the OSE average dipped 275.76 to 22,552.98 in volume of 17m shares.

Roundup

PACIFIC Rim markets put in a mostly firm performance.

HONG KONG turned higher after rumours, later denied, of a resumption soon of meetings of the Sino-British Joint Liaison Group on handing over Hong Kong to China in 1997.

Institutional bargain hunting helped the Hang Seng index to advance 25.08 to 7,118.96 in turnover down to HKDollars 4.28bn from Wednesday's HKDollars 5.43bn.

SYDNEY felt the effects of positive results in the banking sector and the All Ordinaries index ended 1.6 up at 1,684.2 in turnover of ADollars 398.7m.

National Australia Bank added 24 cents at ADollars 9.46 after announcing profits at the top end of expectations. Westpac Banking, which reported an ADollars 204.6m interim loss, held steady at ADollars 3.61.

SINGAPORE retreated for the second consecutive session, with the market failing to maintain record intraday highs set in early trade. The Straits Times Industrial index eased 0.21 to 1,876.40, having peaked earlier at an intraday record of 1,883.25.

Turnover was a record SDollars 847.46m, beating the previous high of SDollars 740.65m seen on April 15, with continued heavy demand for Malaysian shares.

KUALA LUMPUR extended its record-setting run, posting gains for the fifth consecutive day. The composite index added 5.68 at 735.11.

NEW ZEALAND finished fractionally below its high for the year in active trade, the NZSE-40 capital index gaining 11.54 at 1,627.45.

Telecom put on 7 cents at NZDollars 3.02 - its highest ever close - in volume of more than 3.5m shares, in continued reaction to Tuesday's results.

TAIWAN fell 2.3 per cent as a wave of late selling left the weighted index 99.91 lower at 4,336.63. Turnover remained thin at TDollars 25.07bn.

HK Hong Kong, Asia SG Singapore, Asia NZ New Zealand TW Taiwan, Asia MY Malaysia, Asia JP Japan, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 656
Money Markets: More rate cuts Publication 930521FT Processed by FT 930521 By JAMES BLITZ

THE central banks of both Ireland and Italy cut their official short-term interest rates yesterday, as tensions continued to ease inside the European exchange rate mechanism, writes James Blitz.

Denmark, Portugal, Sweden, Belgium and the Netherlands have all eased monetary policy this week in the wake of Denmark's approval of the Maastricht treaty.

Yesterday, the Italian central bank joined this group, cutting its discount rate to 10.50 per cent from a previous 11.0 per cent. A little while later, Ireland's central bank cut its short-term facility rate to 8.25 per cent from 8.50 per cent.

Yesterday's moves raised new questions about whether European central banks might be able to cut interest rates without waiting for the Bundesbank to do so first.

Mr Adrian James, an economist at NatWest Markets in London, said that a crucial test of the structure of European rates will come on Monday when the Bank of France operates in the money market.

The Bank of France's intervention rate - which effectively acts as its repo rate - is currently at 7.75 per cent, only 15 basis points above Germany's.

Mr James says the Bank of France may seize the opportunity to push their short-term rates below Germany's for the first time since their aborted attempt in the winter of 1991.

One sign that the markets are at least expecting German and French short-term rates to converge is that the June futures contracts for both currencies' interest rates are getting closer together.

The Euromark contract closed at 92.78 yesterday, on very thin trading. The French contract remained at 92.66 on a day when the Matif was closed for the public holiday.

In sterling markets, there was a downbeat attitude towards rate cuts after the April unemployment figures registered their third consecutive monthly drop.

The September short sterling contract dropped 11 basis points at its low point, but later rebounded amid sterling's strong performance against the D-Mark on the foreign exchanges. It closed at 93.99, down 6 basis points on the day.

In the cash market, the three-month deposit rate was unchanged at 6 per cent. There was a large shortage of Pounds 1.7bn, and the overnight rate peaked at 9 per cent.

IT Italy, EC FR France, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 399
Foreign Exchanges: More pressure on the D-Mark Publication 930521FT Processed by FT 930521 By JAMES BLITZ

THE weakening of the D-Mark inside the European exchange rate mechanism continued to occupy dealers' minds yesterday, with sterling and the French franc performing strongly against the German currency, writes James Blitz.

Although the Bundesbank decided not to ease any of its official rates this week, the behaviour of market practitioners and central bankers might have led outsiders to believe that there had been a significant policy easing in Germany.

Yesterday, Ireland and Italy joined the growing band of European countries who have lowered official interest rates in the wake of the Danish referendum result - and in spite of the unchanged Bundesbank discount rate.

Their ability to ease policy was justified by the fact that no European currency has weakened against the D-Mark in the wake of these moves. Yesterday, the Italian lira closed at L910 to the D-Mark from a previous L914.9. The Irish punt stayed firmly at the top of the hard core of countries in the ERM grid.

However, the two most significant movers in Europe yesterday were currencies whose central banks have left policy unchanged. The French franc closed little altered, but again broke down through the FFr3.37 per D-Mark barrier earlier in the day. The French currency's strength is that its central bank has replenished the reserves used when defending its position in the ERM.

Sterling was also the beneficiary of powerful inflows of funds, convincingly breaking through the DM2.50 barrier and ending in London at DM2.5100, its highest finish since January 13.

The pound benefited from the third consecutive drop in the UK unemployment figures, which took the market by surprise.

The dollar weakened moderately against the D-Mark yesterday, following a powerful performance earlier in the week. It closed a pfennig down at DM1.6135 in London, but it improved a little in New York to end at DM1.6155.

Although the D-Mark remains third from bottom of the ERM grid, a sharp fall in its EMS divergence indicator - from minus 3 percentage points to minus 17 percentage points in the last three days - testifies to its weakness.

Thus far, the Italian lira has probably benefited more than most from that weakness. Mr Jeremy Hawkins, economic adviser at Bank of America in London, believes that the lira now looks tired, and that Scandinavian currencies may be the next beneficiaries of asset reallocation.

He points out that the European Community's finance ministers are meeting in Denmark today and that a possible subject of discussion will be the repegging of the Swedish krone and Finnish markka to the D-Mark.

The Swedish krone has been devalued by 20 per cent since its decoupling from the Ecu last year, and the markka by 19 per cent.

DE Germany, EC IE Ireland, EC GB United Kingdom, EC IT Italy, EC SE Sweden, West Europe P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 496
Commodities and Agriculture: Thai Agriculture Ministry seeks approval for special rubber budget Publication 930521FT Processed by FT 930521 By REUTER BANGKOK

THAILAND'S Agriculture Ministry will seek cabinet approval this month for a special 500m baht (Pounds 13m) budget to be allocated to finance a government effort to shore up weak rubber prices, reports Reuter from Bangkok.

Mr Sanit Samosorn, director of the Rubber Research Institute, said the budget, together with similar previous allocations, will enable the government to buy 30,000 to 40,000 tonnes of unprocessed rubber.

He said the government fund was aimed at keeping the price of domestic unsmoked sheets USS-3 at B17 a kilogram, compared with the present market price of B15.50-16.00.

He said that the ministry would also ask the central bank to extend short-term soft loans to private and state-owned agricultural co-operatives to help them stock more rubber.

The concessionary loans will carry a 5 per cent annual interest rate, compared with the 15 per cent commercial banks charge small borrowers.

TH Thailand, Asia P0831 Forest Products COSTS Commodity prices P0831 The Financial Times London Page 32 180
Commodities and Agriculture: Rhodium plunge forces Westplats to close shaft Publication 930521FT Processed by FT 930521 By KENNETH GOODING, Mining Correspondent

THE COLLAPSE of rhodium's price has forced Western Platinum, the world's third-largest platinum group metals producer, to close a shaft at its biggest mine in South Africa and to lay off 1,500 people or 10 per cent of the workforce.

This was revealed yesterday by Mr Terry Wilkinson, Westplats' managing director in an otherwise upbeat presentation to the Association of Mining Analysts in London.

Mr Wilkinson pointed out the group put the shaft on care and maintenance only to cut costs and to ensure that Westplats' borrowings did not rise above the present R800m (Pounds 106m). Westplats' rhodium output, scheduled to be about 50,000 troy ounces in the financial year to end-September, would not be affected because production would be increased in other mining areas.

Rhodium, an essential material for some automotive anti-pollution catalysts, raced up to a record Dollars 7,000 an ounce in 1990 but had fallen back to Dollars 1,850 by the end of last year and recently fell to about Dollars 800 an ounce.

In its annual survey of the platinum metals market published earlier this week, Johnson Matthey, the world's biggest platinum marketing group, warned that the recent rise in platinum's price was unlikely to compensate the South African producers for the fall in rhodium and that production cuts might have to be made.

JM suggested there was a small supply surplus of platinum last year but Mr Wilkinson said his impression was that the platinum and rhodium markets were in balance.

Westplats sells directly to only 14 customers - including Engelhard in the US and Mitsubishi in Japan - and Mr Wilkinson said that there had been no sign that they had been using rhodium from stock.

Westplats aims to produce 480,000 ounces of platinum this year and by 1995 expects annual production to include 550,000 ounces of platinum and 65,000 ounces of rhodium. Mr Wilkinson said the group's recent expansion had been, and would continue to be, driven by demand from the small group of customers. 'We would not put platinum into the spot market.'

He said that Westplats was 'over the capital expenditure hump' and needed to spend only about R40m a year for some time. No decision had yet been taken on various methods of reducing debt but a rights issue had not been ruled out. Mr Wilkinson pointed out, however, that Mr Dieter Bock, new chief executive of Lonrho, which owns 73 per cent of Westplats, had said that Lonrho would retain at least 51 per cent of Westplats. Gencor of South Africa owns 27 per cent of Westplats and has indicated that it would like to increase its stake.

Analysts said that the positive tone of the presentation, during which Mr Wilkinson said Westplats was the lowest-cost platinum metals producer with the highest profit margins, implied the company was being readied for stock market flotation.

Western Platinum ZA South Africa, Africa P1099 Metal Ores, NEC COSTS Commodity prices COMP Company News P1099 The Financial Times London Page 32 519
Commodities and Agriculture: Full capacity reached after expansion at Bolivian open pit Publication 930521FT Processed by FT 930521 By CHRIS PHILIPSBORN LA PAZ

ASSIGNED CAPACITY at Inti Raymi's Kori Khollo gold/silver open pit mine in western Bolivia, which recently underwent a Dollars 163m expansion, has now been reached according to Mr Alvaro Ugalde, the general manager.

The expansion of Karl Khollo was concluded in January. Inti Raymi is 85 per cent owned by Battle Mountain Gold Company of Nevada. The remaining 15 per cent is held by Emusa, a Bolivian mining enterprise. The expansion programme will boost production capacity from 45,000 troy ounces of gold a year to 240,000 ounces. Silver capacity will increase from 250,000 ounces a year to lm ounces.

Expansion was prompted by the exhaustion of the pit's 6m tonnes of gold/silver oxide deposits. Exploration showed a further 60m tonnes of sulphide deposits below, with a grade of 2.3 grams of gold and 14.5 grams of silver per tonne. Following installation of a new carbon leaching plant, the sulphide deposits are now being exploited. The recovery rate is 64.2 grams of gold and 28.7 grams of silver per tonne.

Production of oxide deposit ceased in February. The production figures for that month were 15,400 ounces of gold and 131,000 ounces of silver. Mr Ugalde said overall production in 1992 reached 50,000 ounces of gold and 250,000 ounces of silver. Projected production for 1993 is 212,000 ounces of gold and 900,000 ounces of silver rising in 1994 to 240,000 ounces and lm ounces.

Funding for the company's expansion breaks down into Dollars 95m from outside funding agencies, Dollars 55m from Battle Mountain and Dollars 13m from Inti Raymi itself. Mr Ugalde believes a gold price of Dollars 330 an ounce is necessary to cover interest payments.

Battle Mountain Gold Emusa BO Bolivia, South America P1041 Gold Ores P1044 Silver Ores RES Facilities RES Natural resources MKTS Production P1041 P1044 The Financial Times London Page 32 327
Commodities and Agriculture: Production to be doubled at Amazonian gold mine Publication 930521FT Processed by FT 930521 By BILL HINCHBERGER SAO PAULO

COMPANHIA VALE do Rio Doce, the state-controlled Brazilian mining group, is investing Dollars 20m to double gold production at its Igarape Bahia mine in the Carajas region of the Amazonian state of Para. Last year, output from the site was 4.9 tonnes.

When the new facilities come on line in mid-1994, CVRD's annual gold production capacity will stand at 17 tonnes. The company produced 11.3 tonnes in 1992.

Brazil's overall production will probably remain about the same as last year's 76.5 tonnes, however, predicted Mr Peter Rich, a consultant based in Rio de Janeiro. CVRD's growth is likely to be offset by a drop off from other mining companies. Some older sites are nearing depletion, and other inefficient operations will be unviable unless the metal's current price recovery becomes even more bullish, said Mr Rich. Multinationals cannot be expected to invest unless there is a change in the constitutional restriction on foreign majority ownership of mining operations, he added.

The expansion of Igarape Bahia is part of a programme designed to boost annual production to about 30 tonnes by the year 2000, said Mr Francisco Viveiros, CVRD superintendent of gold operations. That would make the company 'part of the club of the world's biggest producers,' he noted.

If that sounds ambitious, it must be remembered that CVRD produced just 1.7 tonnes as recently as 1989. 'Brazil doesn't have a tradition of hard rock mining, but they've performed miracles,' said Mr Rich.

To reach its goal, CVRD is investing about Dollars 40m this year for prospecting and geological surveys, according Mr Viveiros. About Dollars 25m of that is specifically earmarked for potential gold discoveries, with the other Dollars 15m part of the general prospecting budget where gold is one of several minerals sought, said the company official.

Some analysts are sceptical about the investment figures, but if they are accurate, CVRD is spending twice as much this year in Brazil as all other mining companies combined.

The company, the world's biggest exporter of iron ore, has been able to gamble with gold and maintain satisfactory margins in an era of low prices thanks to low production costs. It spent Dollars 200 to produce an ounce of metal, less than the most efficient US and Australian producers, said Mr Viveiros. Factors helping to reduce costs are Igarape Bahia's proximity to infrastructure at the nearby Carajas iron ore site, and competitively priced hydroelectric power.

Mr Viveiros stressed the benefits of a 'fly in-fly out' labour scheme, whereby miners and their families maintain their permanent homes away from the jungle site, decreasing infrastructure outlays, and cost-cutting negotiations with suppliers of processing chemicals and other inputs.

Companhia Vale do Rio Doce BR Brazil, South America P1041 Gold Ores P1099 Metal Ores, NEC RES Facilities COMP Company News RES Natural resources P1041 P1099 The Financial Times London Page 32 495
Commodities and Agriculture: Bigger sugar deficit forecast Publication 930521FT Processed by FT 930521 By DAVID BLACKWELL

WORLD SUGAR production will fall 2.84m tonnes below consumption in 1992-93, according to Czarnikow, the London trade house.

The group's latest sugar review puts production at 111.6m tonnes, down 3m tonnes from the last estimate in February, and substantially below last year's 116.42m tonnes.

Consumption is now estimated at 113.9m tonnes, and 600,000 tonnes has been allowed for what Czarnikow terms 'unrecorded disappearance'. The deficit is well ahead of the International Sugar Organisation's figure of 1.61m tonnes, announced earlier this week.

Mr Chris Pack, analyst at Czarnikow, said yesterday that the latest figures showed a swing from last season's surplus to this season's deficit of 7m tonnes.

'It is not surprising that the market has moved sharply ahead,' he said. 'It is trying to find a new level.'

For most of the six months between last September and February, the New York nearby raw sugar contracts were trading between 8 and 9 cents a lb. But as perceptions increased of much lower crops than expected in Cuba, Thailand and India, the market has risen sharply. On Monday the New York July contract reached a high of 13.26 cents a lb before profit taking set in. Yesterday in late trading it was at 11.98 cents a lb.

Czarnikow estimates Cuban production at 5.5m tonnes, on the high side compared with other forecasters but still well down on last year's 7m tonnes. Indian production is put at 11.5m tonnes, down 3m tonnes from last year, while Thailand is expected to produce 3.8m tonnes, down from 1991-92's 5.1m tonnes.

Mr Pack said that now a clearer picture of production was emerging, the market was looking for signs of demand, which has been restricted by the higher price levels. 'This market is fundamentally driven,' he said, 'but demand is a little cool for some of the rampant bulls to follow.'

XA World P2061 Raw Cane Sugar CMMT Comment & Analysis MKTS Production P2061 The Financial Times London Page 32 340
Commodities and Agriculture: India lifts foodgrain production target Publication 930521FT Processed by FT 930521 By KUNAL BOSE CALCUTTA

THE INDIAN agriculture ministry has raised its foodgrain production target for 1993-94 to 188m tonnes, encouraged by indications that this year's south-west monsoon will arrive on time and that rain levels will be normal.

Until recently the foodgrain production target was a subject of contention between the Planning Commission, which suggested a figure of 188m tonnes, and the agriculture ministry, which wanted it to be pegged at 183m tonnes.

In addition to the monsoon hopes, the agriculture ministry has been induced to come round to the Planning Commission's view by a rise in the 1992-93 estimate from 177m tonnes to 180.3m. Few had expected that output would touch 180m tonnes as the monsoon broke late and there was drought in many parts.

The restoration of subsidy on phosphatic fertiliser in response to pressure from the powerful farmers' lobby should make the increased production target attainable. The south-west monsoon, begining in June, is crucial for India's summer crop, which is bigger than the winter crop. Last year's summer foodgrain crop amounted to 101m tonnes.

The Indian monsoon is considered normal if the rainfall is within 10 per cent of 88 cm; last year it was 77.4 cm. The Meteorological Department will this month issue a formal monsoon forecast.

IN India, Asia P0119 Cash Grains, NEC P0191 General Farms, Primarily Crop MKTS Production P0119 P0191 The Financial Times London Page 32 246
Commodities and Agriculture: Sagging rubber prices put pact in jeopardy - Next week's crucial meeting between producers and consumers Publication 930521FT Processed by FT 930521 By KIERAN COOKE

THE FUTURE of the International Natural Rubber Agreement will be decided next week when producing and consuming countries meet here to make one last attempt to avert the collapse of one of the world's more enduring commodity pacts.

The negotiations - under the auspices of the International Natural Rubber Organisation - come at a time when rubber prices have slumped to their lowest level in real terms for more than 30 years, partly because of uncertainties about the future of the agreement.

'I just hope some compromise can be worked out,' said a delegate from one of the consuming country members. 'When it comes down to it the abandonment of Inra is in no one's interests - the producers are going to suffer the most if it collapses.'

The early signs are not good. Indonesia, Thailand, Malaysia, Sri Lanka, Nigeria and the Ivory Coast, together accounting for about 80 per cent of global natural rubber production, are on one side of the Inro negotiating table. On the other side are the European Community, the US, Japan, China, the Commonwealth of Independent States and some smaller consumers.

The producers see pricing as the main issue. They say that the agreement, which has been in existence in one form or another since the late 1970s, has not been effective in ensuring fair prices to rubber growers, particularly over the last five years. Malaysia, until recently the world's biggest producer, has seen its production fall in each of the last four years as low prices have forced plantation owners and farmers out of business. The producers say Inra must be renegotiated to give them a better deal.

The consumers, while recognising the difficulties producers are facing, say that with the recession in much of the industrialised world, demand is weak. 'It's all about supply and demand, it's as simple as that,' said one rubber trader.

The consumers - mostly the big tyre companies - say the immediate issue is the failure of producers to abide by the terms of the agreement. They say producers broke Inra rules by refusing to agree to a downward revision of prices earlier this year. Until that issue is resolved there can be no discussion of renegotiating Inra, which expires at the end of this year, they warn.

Increasingly harsh words have bounced back and forth, with the producers, in particular, making little effort to hide their anger.

Mr Lim Keng Yaik, Malaysia's minister of primary industries, has accused consumer countries of not caring whether price levels are remunerative for producer countries.

'We want Inra but not at any cost,' said Mr Lim. 'Producers must protect themselves. They should not allow themselves to be trampled on by the rich and powerful consuming countries.'

Producers have threatened to bring in their own pricing mechanisms if the agreement collapses, setting export quotas for producer countries in an effort to drive up prices. But producers privately admit that with a large number of rubber deals now being concluded on a direct producer-to-buyer basis rather than through an international exchange, such a system would be very difficult to implement.

Producers face a further dilemma in that if the agreement does collapse then nearly 200,000 tonnes of natural rubber stockpiled by its buffer stock manager will start being sold on the open market, exerting further strong downward pressure on world natural rubber prices.

This might all sound like good news for the consumers. But in the medium to long term they would also face problems. Consumers need security of supply, but if prices continue dropping then inevitably more producers will go out of business and eventually world supply will contract. Furthermore consumers cannot afford to lose sources of supply like Malaysia, which, with its long history of rubber production, delivers high quality product.

Even in the short term the consumers would face difficulties if the agreement was abandoned. Inra has provided some sort of global framework for the rubber industry and, for all its limitations, a pricing guide. Consumers do not relish a free-for-all in the rubber market, with all the extra negotiations and paper work that would entail.

A Malaysian negotiator at the talks says that if what he calls enlightened self interest prevails, then Inra might yet be saved. 'But there is a lot of belligerence about. I'd put the chances of saving Inra at only about one in three at best.'

ID Indonesia, Asia TH Thailand, Asia MY Malaysia, Asia P0831 Forest Products MKTS Production COSTS Commodity prices CMMT Comment & Analysis P0831 The Financial Times London Page 32 786
World Commodities Prices: Market Report Publication 930521FT Processed by FT 930521 By REUTER

Comex GOLD futures had rebounded by midday after early selling dried up, but the market appeared to be looking for direction. 'We're at a key point here. People are nervous about going long and about going short,' one New York analyst said. Producer selling depressed the market overnight, although buying out of the Middle East was seen providing some support. On the London bullion market business was relatively quiet. Dealers said the market had a more negative tone in the short term. 'One day it looks okay over Dollars 380, and then the next day, it looks bad Dollars 10 lower,' one commented. COPPER consolidated earlier gains on the LME, and ended firmer, while other base metals ended narrowly mixed after routine trading. Dealers said copper benefited from short-covering away from Dollars 1,800 a tonne for three-month metal, but did little to threaten the Dollars 1,850 target on the upside. Three-month ZINC spent the day trading just above Dollars 980 a tonne, where some support was expected. Dealers see the market building a base above recent lows of Dollars 970.

Compiled from Reuters

GB United Kingdom, EC US United States of America P6231 Security and Commodity Exchanges P1041 Gold Ores P1021 Copper Ores P1031 Lead and Zinc Ores COSTS Commodity prices P6231 P1041 P1021 P1031 The Financial Times London Page 32 233
World Commodities Prices: Fruit and vegetables Publication 930521FT Processed by FT 930521

Imported strawberries from Spania are priced at 55-65p per 8oz punnet (55-65p), with Dutch, Belgian and French varieties available at Pounds 1.70-1.80 a lb, reports FFVIB. Homegrown breakfast mushrooms at 50-60p a 1/2 lb (50-60p) are this week's best vegetable chooice, along with Jersey Royal new potatoes at 25-35p a lb (25-45p), English onions at 18-20p a lb (20-25p), asparagus at Pounds 1.40-1.70 a lb (Pounds 1.50-1.80) and Spring greens at 30-35p a lb (35-40p). Supplies of English tomatoes are increasing and are 65-70p a lb (60-70p). Round lettuce at 30-35p each (30-35p) and Iceberg at 55-60p each (75-90p) round off this week's best salad buys.

ES Spain, EC P6231 Security and Commodity Exchanges P0161 Vegetables and Melons P0179 Fruits and Tree Nuts, NEC COSTS Commodity prices P6231 P0161 P0179 The Financial Times London Page 32 147
Government Bonds: Gilts shrug off decline in jobless figures Publication 930521FT Processed by FT 930521 By JANE FULLER and PATRICK HARVERSON LONDON, NEW YORK

THE UK government bond market was not too perturbed about the possible implications for inflation of the continued fall in unemployment. Losses across the yield curve were small yesterday.

The surprise of a third month's decline in the jobless figures did raise fears of impending pay pressure. Signs of anxiety about inflation showed through in gains in the longer-dated index-linked stock.

However, a decline from 4.5 per cent to 4 per cent in the annual rate of wage increases assuaged some of the concern, as did continued hopes of a historically-low advance in the retail prices index, to be announced today. Another cushion against inflation fears was provided by sterling, which strengthened to more than DM2.51. The background remained cautious before next week's auction.

A HALF-POINT cut in interest rates by the Bank of Italy, reducing the discount rate to 10.5 per cent, sparked a late rally in government bonds, with the BTP futures contract gaining about 1/4 point.

The cut came a day earlier than expected and confirmed the easing made possible by increased confidence in the lira.

Among the high yielders, Spain was hit by profit-taking. Worst affected was the five-year area, where a spate of buying had exaggerated the 'U' in the yield curve, leading to the correction.

JAPANESE government bonds opened on a stronger note, helped by the yen's buoyancy against the dollar and by a recovery in US Treasuries.

Nerves also steadied after the Bank of Japan squashed residual speculation about a rise in interest rates.

However, there was little to give real impetus to the bond market, which has started to look to next week's auction.

The No 145 5.5 per cent bond due 2002 opened in Tokyo on a yield of 4.625 per cent, compared with the previous evening's 4.665 per cent. It closed at 4.63 per cent. The September futures contract opened 20 basis points higher at 106.28, and closed at the same level.

AUSTRALIAN government bonds firmed as currency regained some ground against the US dollar.

The decline in the Australian dollar to less than 70 cents had been bad news for the market because it wiped out hopes of an imminent cut in interest rates. A half-point cut had been built into the short end of the market and the resultant sell-off in that area had flattened the yield curve by as much as 25 basis points.

US TREASURY prices were little changed in light trading yesterday as the bond market caught its breath after Wednesday's wild fluctuations.

In late trading, the benchmark 30-year government bond was down 1/32 at 101 7/8 , yielding 6.971 per cent. At the short end of the market, the two-year note was also down 1/32 , at 99 3/4 -to yield 3.992 per cent.

After Wednesday's remarkable late rally, when the long bond bounced back from early losses to end sharply higher, dealers and investors stayed mostly quiet. If anything, the market's mood remained on the bullish side, buoyed by two sets of data.

First, the news that state unemployment claims rose 7,000 in the second week of May reinforced the view that labour market conditions remain weak. Second, the Philadelphia Federal Reserve's index of local business activity showed a sharp decline in May, further evidence that economic conditions throughout the US remain patchy, spotty, with the economic recovery evident in some regions, but not others.

GB United Kingdom, EC JP Japan, Asia AU Australia US United States of America P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 615
International Capital Markets: Latin American corporate bond fund to be launched Publication 930521FT Processed by FT 930521 By JANE FULLER

TAKING advantage of the increasing flow of Eurobond issues from Latin America, a new dollar-denominated corporate bond fund is being launched with an initial size of Dollars 50m to Dollars 100m.

The Latin American Corporate Bond Fund will invest in companies which are 'market leaders with first-rate balance sheets, but the wrong address', according to Mr Audley Twiston Davies of Latin American Securities, advisers to the fund. It will be set up as a closed-end trust with a 10-year term.

Most of the borrowers will be from Mexico, Brazil, Argentina, Venezuela and Chile, of which only the last has investment grade status from Standard & Poor's or Moody's, the two main credit rating agencies. The country rating provides a ceiling on corporate ratings.

The International Finance Corporation, the private sector affiliate of the World Bank, has said it will invest up to Dollars 15m in the new fund.

Mr Twiston Davies said the yield spread on the new fund was expected to be more than 400 basis points over five-year US Treasuries, giving a yield of about 9.5 per cent. There was also scope for capital gains as Latin American countries and companies were re-rated.

Among Latin American corporate bonds, some Mexican issues have yield spreads of less than 400 basis points, while the better Brazilian ones range from 450 to 500 basis points, according to one expert on the region.

Last year, Latin American borrowers tapped the Eurobond market with about 90 issues, raising nearly Dollars 10bn. Well over 100 issues are expected to be made this year, raising up to 50 per cent more.

XC Latin America P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 304
International Capital Markets: Moody's assigns B2 rating to Kloster Cruise secured notes Publication 930521FT Processed by FT 930521 By KAREN FOSSLI OSLO

MOODY'S Investors Service, the US-based rating agency, has assigned a B2 speculative grade rating to the Dollars 300m senior, 10-year, secured notes issued earlier this month by Kloster Cruise, a unit of Vard, the Norwegian ferry and cruise group.

The coupon was set at 13 per cent and the notes were placed with a group of 'qualified' institutional investors, and secured against mortgages on two of the company's 12-strong cruise ship fleet.

'The appraised value of the ships - Dollars 360m in aggregate - provides only a slim cushion of asset coverage,' according to the rating agency.

Moody's said a decline in earnings combined with a heavy debt-service burden had created a liquidity crisis within Kloster, the third-largest cruise ship operator in the world. 'The company was in violation of covenants under its key bank agreement and auditors expressed doubt about its ability to continue as an on-going concern,' but doubt was removed, Moody's said, by the financial restructuring.

Kloster earlier warned it will post a net loss in 1993. First quarter losses rose to NKr88.2m (Dollars 12.8m) from losses of NKr17.4m in the same period in 1992. Besides the issue, Kloster doubled its debt maturity profile to six years from three years.

Moody's warned that Kloster faces new capital expenditures to strengthen its competitive position and this may necessitate additional borrowings.

This year, Kloster will have to meet debt-servicing requirements of Dollars 230m while total interest bearing debt is estimated at Dollars 1bn. The financial restructuring increased Kloster's annual interest payments by Dollars 10m to Dollars 80m.

Moody's said Kloster may be forced to divest some of its cruise lines or shift resources between lines to achieve economies of scale and pursue market share as a result of aggressive expansion of larger and better-capitalised competitors.

'Lacklustre economic growth could prolong cautious consumer spending and dampen a recovery in Kloster Cruise's earnings and cash flow despite historically stable and growing demand for cruise vacations,' Moody's believes.

Kloster Cruise NO Norway, West Europe P4482 Ferries P4481 Deep Sea Passenger Transportation, Ex Ferry CMMT Comment & Analysis P4482 P4481 The Financial Times London Page 31 375
International Bonds: Two issues rekindle interest in asset-backed area Publication 930521FT Processed by FT 930521 By SARA WEBB THE asset-backed area of the international capital market

which has experienced a dearth of deals in recent months - saw the launch of two new issues yesterday.

Goldman Sachs launched a Pounds 116m deal for European Bank Investment Trust, which holds 20 per cent risk-weighted assets with Credit Suisse Financial Products providing the cash-flow from swaps.

According to Goldman Sachs, investors have two lines of security - a guarantee from Financial Guaranty Insurance (FGIC), and a pool of assets which are senior fixed-rate sterling obligations from European banks with a credit rating of AA-/AA3 or better. The bank obligations will consist of bonds, letters of credit or loans and are procured in the market by a specialist boutique. The structure is expected to be bought by banks, according to the lead manager. One market participant commented that the payment - of three-month Libor plus 0.2 per cent 'seems a bit tight'.

The day's other asset-backed deal came from Daiwa Europe which is launching Dollars 100m of secured extendable notes for Grace 1 International, a special purpose vehicle. These are secured by US commercial mortgages. The maturity can be lengthened from 2001 to 2002 at the bondholders' option.

Elsewhere, Petrobras, the Brazilian oil group, launched its long-awaited floating rate deal yesterday, offering Dollars 300m of five-year notes.

The notes are priced at 99.5 and have a coupon of six-month Libor plus 440 basis points. At the current level, that would mean a coupon of 7.775 per cent and a yield of 7.82 per cent, according to lead-manager Chase Investment Bank, although the coupon will not be set until June 4.

Mr Jorge Jasson, managing director with Chase's international capital markets group, said Petrobras was keen to create a liquid benchmark in the five-year area. 'The deal has had a warm reception as the market welcomes floating-rate notes at a time when interest rate vulnerability is increasing,' he said, adding that only a handful of emerging market names have launched floating-rate deals.

Petrobras already has one floating-rate note deal under its belt, having launched Dollars 140m of two-year notes maturing in August 1994. However, the borrower was keen to test investor appetite for a bigger, longer-dated issue.

Chase said the deal was priced with an eye on both the existing FRN and other fixed rate issues in the market from similar borrowers. The existing notes are trading at around 100.75, giving a yield of 365 basis points over Libor, according to Chase, while other fixed rate bonds from Petrobras are trading at 450 to 475 basis points over US Treasury bonds.

BR Brazil, South America US United States of America XG Europe P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 473
International Capital Markets: Matsushita to borrow Y200bn Publication 930521FT Processed by FT 930521 By AP-DJ and REUTER TOKYO, SYDNEY

MATSUSHITA Electric Industrial, a leading manufacturer of electronic goods in Japan, plans to issue Y200bn (Dollars 1.8bn) of straight corporate bonds next quarter, the company announced yesterday, AP-DJ reports from Tokyo.

The company said it had not determined terms and conditions for the borrowing, which is to finance the Y185bn buy-out of the company's longstanding semiconductor joint venture with Philips Electronics of the Netherlands.

The borrowing, which could comprise several issues, would represent a sizeable tap on the growing corporate market. Companies have increasingly been turning to bonds to raise funds because of the weak equity market and because bank finance is more expensive.

Alcatel Alsthom, the Paris-based telecommunications and transport group, said a ADollars 500m domestic commercial paper programme would go towards working capital used throughout the Asia-Pacific region, Reuter reports from Sydney.

Matsushita Electric Industrial Alcatel Alsthom JP Japan, Asia FR France, EC P3639 Household Appliances, NEC P3679 Electronic Components, NEC COMP Company News P3639 P3679 The Financial Times London Page 31 183
International Company News: Sharp contrast in Australian bank results Publication 930521FT Processed by FT 930521 By BRUCE JACQUES SYDNEY

WESTPAC Banking Corporation and National Australia Bank, the largest Australian banking groups, yesterday revealed widely contrasting financial performances for the six months to March.

The National consolidated its position as the country's most successful major bank with a 25 per cent rise in net earnings, after extraordinaries, to ADollars 507.3m (USDollars 362.3m), an interim dividend increase from 22 cents to 24 cents a share, and a 5 per cent fall in bad and doubtful debt charges to Dollars A392.1m.

In contrast, Westpac reported a Dollars A204.6m loss, a halved interim dividend of 6 cents a share, large new bad and doubtful debt write-offs of almost Dollars A800m, and plans to raise a further Dollars A500m in converting preference shares to top up its capital adequacy ratios.

Although still in the red, the latest Westpac result was far better than the previous corresponding half, when the bank's property and other problems first surfaced with a Dollars A2.7bn bad and doubtful debt write-off, causing a Dollars A1.7bn net loss.

Property problems again bit hard into the latest Westpac result. Non-property write-offs were reduced to a manageable Dollars A275m, but revaluations of problem property assets caused a further Dollars A525m in bad debt charges.

The Westpac result was also hit by abnormal losses of Dollars A178.3m (Dollars A266.6m previously), including a Dollars A137m charge for restructuring expenses.

The managing director of Westpac, Mr Robert Joss, pointed yesterday to progress achieved by the bank towards recovery targets. He said operating expenses had been reduced markedly and the company's earnings before write-offs and tax had risen from Dollars A686.7m to Dollars A729.1m in the half.

This reflected improved performances in the bank's Australian, New Zealand, US and European operations and a return to profits by the troubled finance offshoot, Australian Guarantee Corporation.

'The group's results will be largely influenced by the successful completion of restructures now in process to reduce operating expenses and the effect of reducing low-performing corporate assets, mainly offshore,' Mr Joss said. 'The adverse impact of non-performing loans has been diminishing.'

Westpac's gross problem loan portfolio eased from Dollars A9.72bn to Dollars A8.57bn in the half. In contrast, the National's problem loans, although not strictly comparable because of differing accounting practices, grew from Dollars A4.25bn to Dollars A5.31bn.

The National's result reflected higher earnings from its Australian, UK and Irish banks and a bigger contribution from New Zealand following the takeover of Bank of New Zealand (BNZ) late last year. UK and Irish banks lifted their combined contribution from Dollars A83.9m to Dollars A152.5m.

The Clydesdale Bank lifted its net contribution from Dollars A37.7m to Dollars A65.8m; Northern Bank was up from Dollars A23.8m to Dollars A32.6m; Yorkshire Bank rose from Dollars A45.8m to Dollars A89m; National Irish lifted from Dollars A5.9m to Dollars A9.5m; but NAG (UK) increased its loss from Dollars A12.4m to Dollars A16m.

The managing director of the National, Mr Don Argus, said the latest result had been achieved without any significant upturn in economies where the bank operates. He said profit before tax and provisions had risen by 10.3 per cent to Dollars A1.24bn.

'Gains were generated through increased productivity, successful cost containment, improved credit management and by the development of successful new banking products targeted at key segments of the market,' Mr Argus said.

The National's total capital adequacy ratio was reduced from 11.7 to a still-comfortable 10.8 per cent in the half, against the required Reserve Bank minimum of 8 per cent. Westpac's corresponding ratio rose from a shaky 8.4 per cent to 10 per cent.

Westpac directors yesterday approved a request by the bank's newest major shareholder, Lend Lease Corporation, to lift its Westpac stake to 15 per cent. They also invited two Lend Lease executives, Mr Stuart Hornery and Mr John Morschel, to join the Westpac board.

Meanwhile, the chairman of Westpac, Mr John Uhrig, announced he would resign from the board of the bank's existing 15 per cent shareholder, the AMP Society.

Westpac Banking Corp National Australia Bank AU Australia P6081 Foreign Banking and Branches and Agencies FIN Annual report CMMT Comment & Analysis P6081 The Financial Times London Page 30 708
International Company News: New drug sales help net at Ono climb by 15% Publication 930521FT Processed by FT 930521 By WAYNE APONTE TOKYO

ONO Pharmaceutical, a medium-sized Japanese drug maker, announced a 21.2 per cent increase, to Y36.3bn (Dollars 327.02m), in pre-tax profits for the year to March. It attributed the rise to sales of new drugs. Net profits rose 15.5 per cent to Y15.5bn.

Sales grew 19.9 per cent to Y95.1bn as a result of solid sales of Kinedak, its remedy for diabetes, and Vega, its anti-asthmatic compound.

The company is to raise dividends by Y6 to Y20 per share for the last fiscal year in tandem with the increase in profits and sales.

The Osaka-based company expects pre-tax profits to climb 3.2 per cent to Y37.5bn for the current financial year.

Taisho Pharmaceutical said pre-tax profits rose 1 per cent to Y54.3bn last year. Net profits increased 1.5 per cent to Y28.3bn.

Sales rose 7.3 per cent to Y204bn against the last fiscal year, on steady sales of antibiotic and new tonic drinks.

ONO Pharmaceutical Taisho Pharmaceuticals JP Japan, Asia P2834 Pharmaceutical Preparations FIN Annual report P2834 The Financial Times London Page 30 195
International Company News: Matsushita and Sony suffer heavy declines Publication 930521FT Processed by FT 930521 By MICHIYO NAKAMOTO TOKYO

MATSUSHITA and Sony, two of the world's leading consumer electronics companies, yesterday reported sharp declines in pre-tax profits for the year to March as demand continued to be severely depressed in major markets. They warned that conditions were unlikely to improve significantly in the current year.

Both were also under strain from higher depreciation costs, including amortisation resulting from their acquisition of important film studios in the US and from the yen's sharp appreciation in the past year.

Matsushita, the world's largest electronics group, reported a 54 per cent decline in pre-tax profits to Y168.4bn (Dollars 151m). Sales were down 5 per cent to Y7,055.9bn, while net profits decreased 71 per cent to Y38.4bn.

Sony saw a 57 per cent decline in pre-tax profits to Y92.6bn on sales up 1.6 per cent at Y3,993bn.

Net profits fell 70 per cent to Y36.3bn. The sharp fall was partly due to an extraordinary gain from sales of shares in a subsidiary the previous year.

The 6 per cent appreciation of the yen during the period also had a significant impact. Sony, which is dependent on exports for 66 per cent of sales, said that the yen's appreciation had resulted in a Y154bn decline in revenues. For Matsushita, which has an export ratio of 36 per cent, the impact was just Y7.3bn.

Both companies faced difficulty in the market for audio and video equipment. Matsushita also saw declines in most of its other product areas, such as home appliances, electronic components and entertainment. The group was hit by restructuring costs for JVC, the audio-visual affiliate, and by costs relating to faulty refrigerators sold by another subsidiary.

Both Matsushita and Sony are cutting costs to meet what they expect will be continued weakness in their markets.

Capital expenditure has been nearly halved at Sony while Matsushita has been reducing the number of product models it offers as well as other costs.

Matsushita is forecasting flat sales for next year of Y7,060bn on a consolidated basis and a 25 per cent increase in pre-tax profits to Y210bn.

Sony is forecasting a 2 per cent decline in sales to Y3,910bn and a 6 per cent decline in pre-tax profits to Y87bn due in part to higher interest charges.

Matsushita Electronics Corp Sony Corp JP Japan, Asia P6719 Holding Companies, NEC P3651 Household Audio and Video Equipment FIN Annual report P6719 P3651 The Financial Times London Page 30 420
International Company News: Japanese synthetic fibre maker falls 6.6% Publication 930521FT Processed by FT 930521 By ROBERT THOMSON TOKYO

TORAY Industries, the leading Japanese maker of synthetic fibres, reported a 6.6 per cent fall, to Y48.2bn (Dollars 434.23m), in pre-tax profit for the year to end-March. The result reflects reduced domestic demand, which led to increased price competition and smaller margins in most sectors.

Sales for the year were down 3.2 per cent to Y580bn, with a 6.8 per cent decline in fibres and textiles and a 5.5 per cent fall in plastics and chemicals. However, new products and other businesses, including materials used in sporting goods and pharmaceuticals, surged 20.6 per cent.

Sluggish demand for consumer electronics in Japan was partly responsible for the fall in plastics and chemicals sales, while intensified competition in the polyester film market reduced the company's overseas margins.

Consolidated sales slipped a marginal 0.6 per cent to Y970.5bn, while net profit was down 3.1 per cent, as demand in east Asia for industrial materials remained relatively strong.

For the current year, the parent is expecting a slight increase in sales to Y590bn, but pre-tax profit at around the same level as last year's Y48bn.

Mitsui Toatsu Chemicals reported a 58 per cent plunge in pre-tax profits to Y6.3bn, which it blamed on weaker sales of synthetic resins and plastics to the car and electronics industries, and increased depreciation charges. Sales were down 6.4 per cent to Y395bn.

Mitsui Toatsu plans to halve its dividend to Y3 and forecast another 20 per cent fall in profits to Y5bn this year on sales of about Y390bn.

Mitsubishi Petrochemical experienced a 72.7 per cent fall in pre-tax profit to Y8.3bn, as prices weakened for core products such as ethylene. While sales volume remained flat, sales value was down 8.5 per cent to Y372.1bn.

Toray Industries Mitsui Toatsu Chemicals Mitsubishi Petrochemical JP Japan, Asia P2221 Broadwoven Fabric Mills, Manmade P2899 Chemical Preparations, NEC P2879 Agricultural Chemicals, NEC FIN Annual report P2221 P2899 P2879 The Financial Times London Page 30 341
International Company News: Foster's signs second Chinese brewing deal Publication 930521FT Processed by FT 930521 By TONY WALKER BEIJING

FOSTER'S has signed a second joint brewing venture deal in China as part of its push into the fast-growing Chinese beer market.

The Australian brewer's subsidiary, Carlton and United Breweries, signed a USDollars 7m agreement with the state-owned Princess Brewery in Guangdong province, south China.

Foster's executives expect to invest about USDollars 140m by the end of this century in a network of breweries in China.

The Guangdong brewery, at Doumen near the Portuguese enclave of Macao, will be upgraded, and a second brewery built later. Carlton and United Breweries expects to be producing 300m litres a year at the Princess Brewery within five years, compared with present production of 35m litres.

On Tuesday, CUB agreed a joint venture with the Huaguang brewery, one of Shanghai's leading brewers. It expects to sign a further agreement soon with a brewer in northern China, and anticipates that within five years it will be producing more beer in China than in Australia.

Foster's expects China to displace the US as the world's biggest beer market by the end of the century.

Carlton and United Breweries Princess Brewery AU Australia CN China, Asia P2082 Malt Beverages COMP Strategic links & Joint venture P2082 The Financial Times London Page 30 224
International Company News: Asset sales boost profit at NZ lingerie maker Publication 930521FT Processed by FT 930521 By TERRY HALL WELLINGTON

CERAMCO, the biggest lingerie maker in Australasia, yesterday announced operating profits after tax for the year to March 31 up from NZDollars 16.7m (USDollars 9.3m) to NZDollars 19.3m. Total profits for the year, after an extraordinary profit of NZDollars 7m, were up 61 per cent to NZDollars 26.3m from NZDollars 16.6m.

Directors said they expected continuing improvements in earnings and in the group's financial position.

The results include trading profits of NZDollars 851,000 from the sale of two subsidiaries outside of its key interests of clothing and exporting china clays. Directors said both these activities were well placed in the international market with high cash-flows and export growth potential.

During the year, Ceramco sold its interests in Steel and Tube Holdings, realising NZDollars 32.5m, a surplus of NZDollars 3.7m over the written-down book value. It also eliminated all debt from the balance sheet and had NZDollars 4.5m in cash on deposit at the year's end.

It had also repaid to shareholders half the company's paid-up capital, or NZDollars 24.2m, and cancelled 48.4m shares. Operating revenue was NZDollars 163m, compared with NZDollars 133m.

Ceramco Corp XZ Australasia P2342 Bras, Girdles and Allied Garments FIN Annual report P2342 The Financial Times London Page 30 223
International Company News in Brief: Snow Brand Milk Products Publication 930521FT Processed by FT 930521 By AP-DJ TOKYO

Snow Brand Milk Products, the largest manufacturer of dairy products in Japan, said yesterday its unconsolidated, or parent-only, pre-tax profit fell 3.8 per cent in the year March 31 from the year earlier, AP-DJ reports from Tokyo.

Pre-tax profit fell to Y15.2bn from Y15.8bn, although net profit was down only 0.5 per cent to Y6.79bn against Y6.83bn the previous year. Meanwhile, Meiji Milk Products, Japan's second-largest producer of dairy foods, reported unconsolidated pretax profits down 5.1 per cent during the year to March 31.

Snow Brand Milk Products Meiji Milk Products JP Japan, Asia P2026 Fluid Milk P2023 Dry, Condensed, Evaporated Products FIN Annual report P2026 P2023 The Financial Times London Page 30 131
International Company News in Brief: Toppan Printing Publication 930521FT Processed by FT 930521 By AP-DJ TOKYO

Toppan Printing, Japan's second-largest printing company, yesterday reported a 20 per cent fall in unconsolidated pre-tax profits for the year to March 31 from the previous fiscal year, AP-DJ reports from Tokyo.

Pre-tax profits were Y51.6bn (Dollars 464.9m) against Y64.6bn, while net profits fell to Y27.3bn from Y34bn. Sales were down just under 6 per cent to Y842.6bn. The dividend is unchanged at Y10.

Toppan Printing JP Japan, Asia P2752 Commercial Printing, Lithographic FIN Annual report P2752 The Financial Times London Page 30 99
International Company News in Brief: Singapore industrial group falls slightly Publication 930521FT Processed by FT 930521 By KIERAN COOKE KUALA LUMPUR

CYCLE & Carriage (C&C), the Singapore-based food, property and motor distribution group, has announced net profits for the six months to March 31 of SDollars 38.44m (USDollars 23.5m), a drop of 0.6 per cent on the equivalent period last year. Group turnover, at SDollars 836.1m, was 4.5 per cent up on last year.

Late last year, the Jardine group of Hong Kong bought a 16 per cent stake in C&C for SDollars 212.5m. The stake had previously been owned by the Kuwait Investment Office.

Jardine has announced that Mr Boon Yoon Chiang, chairman of Jardine Matheson (Singapore), will take over as C&C's managing director.

Cycle and Carriage SG Singapore, Asia P2099 Food Preparations, NEC P5511 New and Used Car Dealers FIN Interim results PEOP Appointments P2099 P5511 The Financial Times London Page 30 154
International Company News: Reduced domestic demand squeezes margins at Toray Publication 930521FT Processed by FT 930521 By ROBERT THOMSON TOKYO

TORAY Industries, the leading Japanese maker of synthetic fibres, reported a 6.6 per cent fall, to Y48.2bn (Dollars 434.23m), in pre-tax profit for the year to end-March. The result reflects reduced domestic demand, which led to increased price competition and smaller margins in most sectors.

Sales for the year were down 3.2 per cent to Y580bn, with a 6.8 per cent decline in fibres and textiles and a 5.5 per cent fall in plastics and chemicals. However, new products and other businesses, including materials used in sporting goods and pharmaceuticals, surged 20.6 per cent.

Sluggish demand for consumer electronics in Japan was partly responsible for the fall in plastics and chemicals sales, while intensified competition in the polyester film market reduced the company's overseas margins.

Consolidated sales slipped a marginal 0.6 per cent to Y970.5bn, while net profit was down 3.1 per cent, as demand in east Asia for industrial materials remained relatively strong. For the current year, the parent is expecting a slight increase in sales to Y590bn, but pre-tax profit at around the same level as last year's Y48bn.

Mitsui Toatsu Chemicals reported a 58 per cent plunge in pre-tax profits to Y6.3bn, which it blamed on weaker sales of synthetic resins and plastics to the car and electronics industries, and increased depreciation charges. Sales were down 6.4 per cent to Y395bn.

Mitsui Toatsu plans to halve its dividend to Y3 and forecast another 20 per cent fall in profits to Y5bn this year on sales of about Y390bn.

Mitsubishi Petrochemical experienced a steep 72.7 per cent fall in pre-tax profit to Y8.3bn, as prices weakened for core products such as ethylene.

While sales volume remained flat, sales value was down 8.5 per cent to Y372.1bn, and is expected to remain at the same level this year. Pre-tax profit is forecast to slip to Y4bn.

Toray Industries Mitsui Toatsu Chemicals Mitsubishi Petrochemical JP Japan, Asia P2221 Broadwoven Fabric Mills, Manmade P2899 Chemical Preparations, NEC P2879 Agricultural Chemicals, NEC FIN Annual report P2221 P2899 P2879 The Financial Times London Page 30 362
International Company News: NZ unit matches expectations Publication 930521FT Processed by FT 930521

BANK of New Zealand yesterday announced an unaudited operating tax-paid profit of NZ134.6m (USDollars 74.8m) for the year to March 31, which the new owners, National Bank of Australia, said was in line with expectations.

The result is not comparable with last year's profit of NZDollars 172m as NAB changed the company's accounting policies in November when it bought the bank for NZDollars 1.45bn. It said then that the changes were being made to reflect its own accounting and provisioning policies. This led to an abnormal item of NZDollars 277.2m after tax. If the abnormal item is included, BNZ made a loss of NZDollars 151.3m.

The managing director, Mr Bob Prowse, said the results reflected reduced income from treasury-related activities such as securities and foreign exchange trading, where the bank was adopting a more cautious approach. He said trading margins had tightened significantly during late 1992 and early 1993.

Bank of New Zealand NZ New Zealand P6081 Foreign Banking and Branches and Agencies FIN Annual report P6081 The Financial Times London Page 30 186
International Company News: BAT Indian affiliate bucks profit trend Publication 930521FT Processed by FT 930521 By R C MURTHY and KUNAL BOSE BOMBAY, CALCUTTA

ITC, India's largest tobacco company and an affiliate of BAT Industries of the UK, yesterday reported a rise in net profits to Rs1.55bn (Dollars 50m) for the 12 months to March, up from Rs1.15bn the year before, bucking the country's general trend of falling profits.

Sales rose by a quarter, to Rs38.09bn, mostly due to strong growth in the tobacco business. After provisions, net profits rose by more than a third to Rs1.55bn.

Earnings per share rose to Rs13.30 from Rs9.87, reversing the fall in the previous year.

ITC IN India, Asia P2111 Cigarettes FIN Annual report P2111 The Financial Times London Page 30 128
International Company News: Parametric looks to Asia for expansion Publication 930521FT Processed by FT 930521 By ANDREW BAXTER

PARAMETRIC TECHNOLOGY, one of the fastest-growing high-technology companies in the US, has begun a big expansion into Asia to tap the market for its mechanical Cadcam (computer-aided design and manufacturing) software.

The Massachusetts-based Parametric, founded in 1985 and valued at about Dollars 1bn on Wall Street, has been rapidly developing its operations in Europe over the past two years. But in recent months it has stepped up its Asian presence, opening direct sales offices to complement existing distribution arrangements.

Mr Louis Volpe, vice-president for marketing and operations, said in London that Parametric wanted to achieve a broad balance between its US, European and Asian sales over the next 10 years.

With turnover doubling in the US each year, this would imply even faster growth in Europe and Asia.

Parametric sees Japan as its biggest market in Asia. Along with other Cadcam vendors, it is keen to exploit the Japanese move from two-dimensional to three-dimensional mechanical design, which is occurring rather later than in Europe and the US.

But Mr Volpe said Chinese companies had expressed much interest in its products. It had also just received the largest-ever Cadcam order from an Indian company, Tata Engineering and Locomotive.

In Europe, Parametric is targeting electronics packaging and automotive companies. It is hoping to use its new Pro/Dieface software for complex body-panels as a way into the European automotive market.

Parametric's sales surged from Dollars 11m in 1989 to Dollars 86.7m last year due to the popularity of its Pro/Engineer family of software products and their applicability to a number of different workstations.

Net earnings over the same period rose from Dollars 2.24m to Dollars 21.1m. The company said in April its second-quarter earnings rose 109 per cent to Dollars 9.8m.

Parametric Technology Corp US United States of America P7372 Prepackaged Software RES Capital expenditures RES Facilities P7372 The Financial Times London Page 29 329
International Company News: US airline widens talks in Europe Publication 930521FT Processed by FT 930521 By NIKKI TAIT

MR Bob Crandall, chairman of American Airlines, says the US carrier has held talks over possible partnerships with a number of European carriers, including Lufthansa, British Midland, Air France, SAS, and KLM Royal Dutch Airlines.

Speaking after his company's annual meeting in Texas, Mr Crandall said: 'We haven't been able to structure a deal that makes sense for us and a European partner.' However, he said talks were continuing although he did not specify which carriers these involved.

Although talks in the past had covered equity investments, discussions under way now were more about marketing relationships, he said.

American Airlines Inc Lufthansa Air France Scandinavian Airlines System KLM Royal Dutch Airlines Air France US United States of America GB United Kingdom, EC DE Germany, EC FR France, EC NL Netherlands, EC XK Scandinavia, West Europe P4512 Air Transportation, Scheduled COMP Strategic links & Joint venture P4512 The Financial Times London Page 29 170
International Company News: Greek telecoms group ahead Publication 930521FT Processed by FT 930521 By KERIN HOPE ATHENS

INTRACOM, the Greek telecommunications equipment manufacturer in which Ericsson of Sweden holds a 12 per cent stake, increased net earnings by 4.4 per cent to Dr6.6bn (Dollars 30m) for 1992 after delays in signing contracts held up production.

Sales rose by 11.2 per cent to Dr33.8bn. They were led by the company's expansion into eastern Europe with the launch of a computerised lottery game in Russia.

Exports amounted to 16 per cent of sales in 1992, compared with 7 per cent in the previous year.

Olympic Lotto, a Dollars 15m joint venture between Intracom and the Russian Olympic Committee, uses hardware and software designed in Greece.

Intracom has also signed contracts with the governments of Ukraine, Bulgaria, Romania and Moldavia to set up similar lottery games.

The company also exports specialised software, both for Ericsson's digital switching systems and the GSM mobile telephone system, as well as equipment for IBM personal computers manufactured in Europe.

The company forecasts that turnover will rise to Dr69bn this year following the award of a Dr50bn contract to modernise the Athens telephone network after several months' delay.

The turnkey project for OTE, the state-owned telecommunications operator, will be partly funded by the European Community.

Intracom is also participating in one of two international consortia setting up competitive mobile telephone networks in Greece. Both networks are due to start operating later this year.

The company projects that investment this year will reach Dr7.5bn, focusing on further automation and improving quality control.

Intracom GR Greece, EC P3661 Telephone and Telegraph Apparatus P3663 Radio and TV Communications Equipment FIN Annual report P3661 P3663 The Financial Times London Page 29 289
International Company News: Molson suffers downturn Publication 930521FT Processed by FT 930521 By ROBERT GIBBENS MONTREAL

MOLSON, the Canadian brewing and retailing group, says that strength in its brewing and overseas special chemicals operations were more than offset by difficulties in retailing and other problems in North America in the year ended March 31.

The company reported a fall in net profits to CDollars 113.7m (USDollars 89.3m), or CDollars 1.90 a share, for the year compared with CDollars 126.2m, or CDollars 2.25, in fiscal 1992.

Sales and other revenues rose by 6 per cent to CDollars 3.1bn, from CDollars 2.9bn.

Including a special gain of CDollars 51m after tax from the sale by Molson of 20 per cent of a brewing subsidiary to Miller Brewing of the US, total profit for the latest year was CDollars 164.7m, equal to CDollars 2.76 a share.

Mr Marshall Cohen, president, said that conditions were difficult in some markets and management is taking corrective steps. Molson's brewing profits rose 3.8 per cent to CDollars 167.6m.

The recession and a poor summer season were offset by higher prices and more efficient production.

Molson Breweries is now 40 per cent owned by Molson, 40 per cent by Foster's of Australia and 20 per cent by Miller.

The link with Miller would raise sales of Molson brands significantly in the US, said Mr Cohen.

Operating profits from Diversey, Molson's special chemical business, rose 39 per cent, but its North American operations were affected by the recession and problems with absorbing an acquisition.

Diversey's sales were flat at CDollars 1.3bn and operating profits fell 9 per cent to CDollars 70m but US operations are being rationalised and European marketing strengthened, said Mr Cohen.

Hardware retailing was restructured and took a special CDollars 83m charge.

Molson's new Aikenhead warehouse store subsidiary reported a CDollars 9.9m operating loss, but should be profitable this year.

It plans 28 stores in Ontario and western Canada by fiscal 1998. Aikenhead is Molson's answer to the invasion of the Canadian market by Home Depot of the US.

The sports and entertainment activities recorded a fall in operating profits to CDollars 2.9m from CDollars 8.3m.

Molson Breweries CA Canada P2082 Malt Beverages P5813 Drinking Places FIN Annual report P2082 P5813 The Financial Times London Page 29 381
International Company News: TCI to buy 49% of Televisa cable offshoot Publication 930521FT Processed by FT 930521 By DAMIAN FRASER MEXICO CITY

TELE-COMMUNICATIONS (TCI), the world's largest cable television operator, has agreed to buy 49 per cent of Cablevision, the cable subsidiary of Mexico's giant media company Grupo Televisa.

As part of the deal, TCI and Televisa will set up a joint venture to develop cable and pay television in Latin America, including Brazil, the region's largest television market.

The new company will benefit from TCI's advanced pay television technology and expand by forming joint ventures with or buying up existing Latin American cable companies, or starting new ones from scratch, Televisa said.

Mr Fernando Diez Barrosa, Televisa's vice-chairman, said: 'Together, Grupo Televisa and TCI will build the Spanish and Portuguese-speaking world's ultimate pay television system for information and entertainment. We will deliver limitless product options on-demand into the living rooms of over 350m consumers where the growth of cable and pay television will be explosive.'

Cablevision says it is the largest pay television company in Mexico, although its main rival, Multivision, also claims this title. Last year, Cablevision had 193,000 subscribers, with revenues of nearly Dollars 80m, up 40 per cent on 1991.

Televisa is the biggest and most powerful media company in the Spanish-speaking world with revenues last year of Dollars 1.36bn. It has a near-monopoly in Mexico and stakes in television stations in the US, through Univision, the Spanish-speaking network, in Peru and Chile, and production agreements in Venezuela and Argentina.

However, its dominance in Mexico will come under threat next month when the government privatises two state-owned channels. The favoured bidding group for the state channels includes the owner of Multivision.

In the US, TCI serves 10.2m customers in 49 states. It also has investments in nine countries - including the UK franchise, Tele-West, in partnership with US West. The Denver-based company has more than 1m international subscribers, and other international joint venture arrangements have taken it into Israel, Sweden, Norway and New Zealand.

Tele-Communications Inc Cablevision Grupo Televisa MX Mexico US United States of America XL East Europe P4841 Cable and Other Pay Television Services COMP Mergers & acquisitions COMP Strategic links & Joint venture P4841 The Financial Times London Page 29 377
International Company News: News Corp Dollars 3bn credit facility complete Publication 930521FT Processed by FT 930521 By NIKKI TAIT NEW YORK

MR RUPERT Murdoch's News Corporation announced yesterday that it had completed arrangements for a revolving credit facility amounting to Dollars 3bn.

The facility is being provided by a 27-member banking group, and will permit borrowings in US dollars, Australian dollars and sterling.

It has a final maturity date of June 1999 and, according to News Corporation, the facility will cut the company's bank borrowing rates by 75 basis points.

The proceeds from the new facility will be used to repay News Corp's outstanding borrowings under a Dollars 2bn 'override' facility - set up in early 1991, with 146 lending banks - and a Dollars 901m stand-alone facility for HarperCollins

The Dollars 3bn refinancing represents a further big step in the restructuring of News Corp's debt. In late 1990, it was facing severe financial problems with debts of more than Dollars 7.6bn.

The company held lengthy negotiations with international banks and after months of talks, it was agreed that about Dollars 7.6bn of debt would be restructured over three years.

News Corp AU Australia P2711 Newspapers COMP Company News P2711 The Financial Times London Page 29 206
International Company News: Fiat tightens grip on Italian market Publication 930521FT Processed by FT 930521 By HAIG SIMONIAN MILAN

THE PURCHASE of the outstanding 51 per cent of Maserati for L75.8bn (Dollars 51.3m) has allowed Fiat, Italy's leading private company, to tighten its hold over the domestic car industry.

Fiat bought 49 per cent of Modena-based Maserati, best known for its expensive sports saloons, in 1989. The acquisition included 51 per cent of Innocenti, the Maserati-owned maker of compact cars.

The agreement to buy out the remaining shares in Maserati follows the illness earlier this year of Mr Alejandro De Tomaso, whose family controlled the company via the New York-listed De Tomaso Industries concern. Mr De Tomaso's continuing ill-health prompted the decision to sell out.

Maserati made about 1,000 cars last year, well down on its pre-recession output of between 1,500 and 1,800 units a year. The company has been badly hit by the slowdown in sales and is believed to have suffered rising losses in 1992. Sales are divided almost equally between Italy and foreign markets, notably Germany, France and Switzerland.

The seemingly high price for Maserati in view of its financial performance may be explained by the inclusion in the deal of the company's former Lambrate plant on the eastern fringe of Milan. Production at Lambrate ceased recently and Fiat is expected to redevelop the site as a big new shopping centre.

Fiat said the acquisition would not trigger any change in Maserati's identity nor closer contacts with Ferrari, the prestige Fiat-owned sports car maker also located near Modena.

Fiat's original investment in Maserati was expected to give it a new lease of life. but, despite some limited financing, the investment had few obvious benefits for Maserati. That may be explained by the fact that the stake was purchased in the same year as Fiat failed in its bid to take over Saab of Sweden and may have reflected a broader strategy of developing synergies between Fiat's Lancia marque and Saab and Maserati.

By contrast, Fiat has had some success in developing Innocenti, which no longer produces cars, as an additional brand for vehicles from its foreign factories. Innocenti's Elba model is actually the station wagon version of Fiat's Uno model made in Brazil.

GFT, the troubled Torinese clothing and textiles group, said talks on selling a substantial stake to Miroglio, another privately-owned clothing concern, had been broken off by mutual agreement.

The two companies said negotiations between them and with outside partners had revealed 'considerable difference in the interpretation of and ways of looking at methods of operation in the market'.

Maserati Fiat GFT Miroglio IT Italy, EC P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories P2399 Fabric Textile Products, NEC P2339 Women's and Misses' Outerwear, NEC P2329 Men's and Boys' Clothing, NEC COMP Mergers & acquisitions P3711 P3714 P2399 P2339 P2329 The Financial Times London Page 29 485
International Company News: Hungary promises to support state banks Publication 930521FT Processed by FT 930521 By NICHOLAS DENTON BUDAPEST

HUNGARY vowed yesterday to recapitalise its troubled financial sector after the disclosure in the Financial Times that loan losses at Magyar Hitel Bank and Kereskedelmi Bank, the two largest commercial banks, had wiped out their capital.

AV RT, the state holding company, said it would be ready to put proposals on new capital for the banks it owns before the government's economic cabinet in two or three weeks.

A World Bank-International Monetary Fund mission is then due in June to discuss a broader programme to restructure Hungary's problem debtors as well as to recapitalise problem banks, said Mr Teleki, chairman of the AV RT.

Mr Teleki conceded yesterday new capital was necessary, but would not comment on a recommendation by the World Bank for an infusion of Ft100bn (Dollars 1.1bn) to bring the capital adequacy of the whole banking sector up to 4 per cent of assets on international accounting.

HU Hungary, East Europe P6081 Foreign Banking and Branches and Agencies P9311 Finance, Taxation, and Monetary Policy NEWS General News P6081 P9311 The Financial Times London Page 28 196
International Company News: Warehouse clubs pay price for wafer-thin margins - The gloom surrounding large discount stores in the US as profits and sales recede Publication 930521FT Processed by FT 930521 By NIKKI TAIT

AFTER two decades of heady expansion, has the 'warehouse club' explosion in the US come to an abrupt halt?

If so, what does this mean for the nation's large discount store operators, who own many of these cut-price, no-frills retail barns, and whose 'everyday low pricing' strategies have dominated the stores sector for the past few years?

The worries are real. Only this week, K mart - in the process of reporting an 80 per cent slump in first-quarter profits - noted that 'like-for-like' sales in its 114-outlet PACE warehouse chain dipped by almost 6 per cent during the three months to April.

Waban, which owns the smallest of the five big warehouse club chains, reported a 28 per cent fall in underlying first-quarter profits.

On the west coast, shares in Washington-based Costco, which has plans to introduce warehouse clubs to the UK, have halved over the past year. Even the mighty Wal-Mart Stores has been affected.

Wal-Mart's Sam's Clubs division, the largest club chain, saw revenues from comparable outlets decline in February and March. That, in turn, fuelled Wall Street's perennial worries over whether America's top-selling retailer would be able to sustain its remarkable growth rate. Wal-Mart shares are flirting with their 52-week low.

Such gloom contrasts sharply with the results established by warehouse clubs over the past 15 years. The concept was born in California in the late-1970s, when an aptly-named entrepreneur, Mr Sol Price, opened the first outlet in San Diego.

Competitors quickly followed Mr Price's lead and club sales erupted. Having stood at only Dollars 2bn in 1984, they rose to almost Dollars 18bn in 1989. Last year, they totalled Dollars 33bn. These advances have come partly from new openings, but some operators - such as Costco - have enjoyed comparable store sales growth in excess of 20 per cent in recent years.

Today, the typical warehouse club outlet comprises a large shack, probably on the outskirts of an urban area and stocked with anything from office supplies to food items, which are sold at bargain-basement prices.

Many of the customers, who usually pay a one-off membership fee, are small businesses. To keep costs down, warehouse clubs carry a limited range of items (perhaps 3,500 to 4,500 compared with a discount retailer's 20,000-plus), have shorter opening hours, and use minimal advertising.

Gross margins in the warehouse club business have always been thin, making sales growth essential to any profit momentum. Now, it seems, this is waning.

'Warehouse clubs have found it difficult to get any real sales growth,' says Mr Walter Loeb, retail consultant.

Mr Jeffrey Feiner, analyst at Salomon Brothers, estimates same-store sales growth at Costco and Sam's will probably reach 5 per cent in 1993, way below the double-digit figures seen in recent years.

However, this stagnation, say the pessimists, is only symptomatic of more fundamental problems faced by the warehouse club industry:

Clubs are seeing increased competition from a new breed of specialised superstores. These have sprung up in many product sectors, from books to footwear, and, in many cases, have yet to prove themselves in profit terms.

Such outlets are large (at upwards of 100,000 sq ft, they are at least three times the size of an average UK supermarket) and carry an extensive range of products within a clearly defined merchandise category.

The Incredible Universe stores, which Tandy Corporation opened in Texas and Oregon last year is a good example. At about 150,000 sq ft, these outlets are about 50 per cent larger than the average warehouse club.

They are filled solely with electronic goods, from refrigerators to cameras, which are proffered at highly attractive prices.

'These power retailers have well-informed sales people to advise on selection,' comments Mr Loeb. 'They carry competitively-priced products, so many customers no longer regard warehouse clubs as the lowest price source.'

He notes that some supermarkets are devoting part of their store space to warehouse-style racking, bulk-packaged goods and selling at club-style prices.

There is the lack of growth in the economy generally, and in the small business sector in particular.

According to Dun & Bradstreet, the financial information group, the number of new business incorporations was on a steady five-year decline between 1986 and 1991, while business failures have been mounting steadily and reached record levels in 1992.

In an effort to stimulate sales, some warehouse club operators have been experimenting with new product lines. Costco, for example, has tested garden equipment and professional tools, while others have added drug store products and optical services.

The clubs' success is intrinsically linked to their very tight operating parameters, and the wafer-thin margins leave little room for error. Any significant increase in items offered, tends to result in a disproportionate rise in selling costs.

Club operators, buoyed by the apparent success of their sub-sector, have been opening new outlets at a formidable rate. This has led to congestion in certain geographical regions.

In the Dallas-Fort Worth area, for example, Sam's had more than a dozen stores by the end of 1992, PACE had four, and Price Club, one. Almost two-thirds of these outlets had opened over the past two years.

That said, some analysts think the recent reaction to the clubs' sales slowdown has been overdone.

They note that food items account for over half the clubs' turnover, and that food prices have been falling - meaning that sales in this area have had to run to stand still. That is unlikely to be a long-term trend.

The warehouse club sector may have scope for some further consolidation, alleviating the congestion difficulties. To an extent, this has happened. An example is the merger of PACE and Price Savers, once owned by Kroger, the supermarket group.

'Similar to other retail sub-sectors, we believe that the warehouse club sector will have to undergo some type of shake-out,' say analysts at Salomon.

What seems likely is that, if home market growth is slowing, warehouse club operators will be increasingly anxious to expand their horizons. This has started to happen.

Wal-Mart and Price Company, have crossed the border into Mexico in conjunction with local partners.

Price Company, in a joint venture with Littlewoods, and Costco, in which France's Carrefour owns a minority stake, plan to open outlets in the UK. Both companies operate a dozen or more club outlets in Canada.

Price, while denying that overseas expansion is simply a response to sluggish conditions at home, has a joint venture in Spain and Portugal, where it is looking for sites in the hope of opening its first warehouse on the outskirts of Madrid next year.

However, Price is more cautious about some pundits' suggestions that the warehouse clubs could work well in parts of eastern Europe.

'Eastern Europe is a procurement question,' it comments. 'One can establish clubs, but will one have products to sell?'

------------------------------------------------------------------------ US WAREHOUSE CLUBS ------------------------------------------------------------------------ Chain Sales Operating Number of (Dollars bn) profits stores (Dollars m) ------------------------------------------------------------------------ Sam's Club 12.3 270 256 Price Club 7.5 223 94 Costco Wholesale Club 6.6 184 100 PACE 4.4 3 114 BJ's Wholesale Club 1.8 30 39 ------------------------------------------------------------------------ Figures at end January 1993. Source: Loeb Retail Letter ------------------------------------------------------------------------

Sam's Wholesale Club Inc Price Co Inc Costco Wholesale Corp Pace Membership Warehouse Inc BJ's Wholesale US United States of America P5411 Grocery Stores P5399 Miscellaneous General Merchandise Stores P5199 Nondurable Goods, NEC CMMT Comment & Analysis P5411 P5399 P5199 The Financial Times London Page 28 1269
International Company News: Japan's trading houses hit by portfolio losses Publication 930521FT Processed by FT 930521 By ROBERT THOMSON TOKYO

JAPAN'S leading trading houses yesterday reported sharply lower profits after booking losses on securities investments made during the late 1980s.

Mitsubishi Corporation, the core company of the Mitsubishi group, reported a 62 per cent fall in net profits, to Y15.3bn (Dollars 137.83m), for the year to March, after making provisions of Y66bn for stock losses and the restructuring of MC Finance, a subsidiary which became a symbol of its investment excesses during the late 1980s.

The profits of several other trading houses, including Sumitomo Corporation, Marubeni, and Itochu were also dragged down by losses on their securities funds, which had been regarded as an important profit centre to supplement core profits during the late 1980s, when stock prices rose sharply.

Mr Tetsuo Kamimura, Mitsubishi's managing director, said the company covered some losses by realising Y30bn from the sale of equities. He said the company still had Y918bn in unrealised gains on stocks, but it included Mitsubishi group cross-holdings that were unlikely to be sold.

Transactions by Mitsubishi for the year totalled Y14,996bn, down 4.5 per cent, while pre-tax profit was 12 per cent lower at Y75.6bn and was forecast to slip to Y75bn this year.

Sumitomo Corporation reported a 12 per cent fall in turnover to Y16,530bn, and pre-tax profit fell 35 per cent to Y41bn as the company reported a Y18.7bn appraisal loss on securities holdings and made a Y12.9bn special profit on a property sale.

Mitsui and Co reported a 4 per cent decline in total turnover to Y15,496bn, but a 5.9 per cent increase in net profit to Y23.9bn, mainly because its exposure to securities investment funds was less than that of other trading houses.

Itochu reported a 7.4 per cent decline in transactions to Y18,529bn but a 10 per cent increase in pre-tax profit to Y49.8bn, attributed to a decrease in interest payments following a reduction of interest rates over the year.

Marubeni said turnover fell 7.5 per cent to Y16,863bn, while pre-tax profit was 2.6 per cent lower at Y37.4bn, and net profit slipped 37.4 per cent to Y10.9bn.

Mitsubishi Corp Sumitomo Corporation Mitsui and Co Itochu Corp Marubeni Corp JP Japan, Asia P6719 Holding Companies, NEC FIN Annual report P6719 The Financial Times London Page 28 392
International Company News: Navistar ends run of 10 quarterly deficits Publication 930521FT Processed by FT 930521 By LAURIE MORSE CHICAGO

AN INCREASE in medium and heavy truck sales in the second quarter allowed Navistar International, the US truck and engine maker, to claw back to a quarterly profit after 10 consecutive quarters of losses.

Navistar said net income was Dollars 8m, or 1 cent per common share, in the second quarter of this year against a net loss of Dollars 35m, or 17 cents, in the same quarter of 1992.

Sales jumped 36 per cent to Dollars 1.24bn.

Navistar increased its share of the North American truck market to 28.7 per cent from 26.4 per cent last year. Shipments of medium and heavy trucks and school bus chassis rose 40 per cent to 20,700 units. Diesel engine shipments rose 19 per cent. Navistar sold 71,500 trucks in the quarter, up 19 per cent.

The rise in sales prompted Navistar to increase its projections for overall industry demand for trucks in 1993-94. The company expects North American demand for heavy trucks to rise 27 per cent, while medium truck and school bus chassis demand will rise 10 per cent.

'Orders for heavy trucks remain strong, while the market for medium trucks is improving as well,' said Mr James Cotting, Navistar's chairman.

The profitable quarter comes just as the troubled truck maker is in the final stages of negotiating a settlement with employee unions to restructure retiree health care and life insurance programs.

The settlement, which has been accepted by the unions and is awaiting court approval, involves issuance of 255m shares of new common stock. The issue will double Navistar's share base.

As the result of 1980's restructurings and the sale of its International Harvester heavy equipment operations, Navistar supports three retirees for every active worker. The proposed settlement, while diluting stock, is projected to save Navistar Dollars 90m per year in costs.

Navistar intends to seek shareholder approval of the settlement at a special meeting scheduled for late June.

Navistar International Corp US United States of America P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories FIN Interim results P3713 P3714 The Financial Times London Page 28 369
International Company News: Telefonica improves 17.4% in first term Publication 930521FT Processed by FT 930521 By PETER BRUCE MADRID

TELEFONICA, the state-controlled Spanish telecommunications monopoly, has reported consolidated group pre-tax profits for the first three months of 1993 of Pta19.3bn (Dollars 166.4m), a 17.4 per cent increase on the same period last year.

According to figures filed with the CNMV, the Spanish stock market commission, Telefonica's group sales reached Pta306.5bn, up from Pta284.8bn in the first quarter of 1992.

Earlier this month, the Telefonica parent reported first-quarter pre-tax profits of Pta18.3bn, up from Pta14.9bn last year, while it said turnover totalled Pta292bn, up from Pta270bn.

The fact that group profits have overtaken the parent's will come as some relief to the company. Consolidated profits last year were hit by losses at some of Telefonica's smaller domestic service companies.

Telefonica de Espana ES Spain, EC P4813 Telephone Communications, Ex Radio FIN Interim results P4813 The Financial Times London Page 28 159
UK Company News: Airflow Streamlines Publication 930521FT Processed by FT 930521

Further progress in the second half led Airflow Streamlines, the vehicle cab maker and Ford main dealer, to report substantially higher annual pre-tax profits of Pounds 1.5m.

The surge from Pounds 87,000 was achieved on sales of Pounds 66.1m (Pounds 61.1m) for the year to February 28.

The recommended final dividend of 2p makes a total of 3p against 0.1p previously. Earnings per share of 10.38p compare with a 0.07p deficit.

Airflow Streamlines GB United Kingdom, EC P5511 New and Used Car Dealers P3713 Truck and Bus Bodies FIN Annual report P5511 P3713 The Financial Times London Page 27 110
UK Company News: Chesterfield Props Publication 930521FT Processed by FT 930521

Chesterfield Properties' share price rose 21 per cent from 272p to 330p yesterday after the company reported a Pounds 1m increase in 1992 pre-tax profits to Pounds 7.66m.

Since the year-end borrowings had been reduced by Pounds 79m.

Net asset value fell by 25 per cent to 398p (534p) due to the reduced value of the investment portfolio.

A reduced final dividend of 7.5p (11.5p) has been recommended, for a total of 11p (18.5p) on earnings per share of 15.71p (12.02p).

Chesterfield Properties GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries FIN Annual report P6552 The Financial Times London Page 27 114
UK Company News: Southern Radio Publication 930521FT Processed by FT 930521

Southern Radio, which broadcasts in Hampshire, Kent, Sussex and the Isle of Wight, reported pre-tax profits up from Pounds 165,000 to Pounds 263,000 in the six months to end-March - a 59 per cent advance.

The outcome was achieved on turnover up from Pounds 3.17m to Pounds 4.01m. Earnings per share worked through at 0.62p (0.49p) and an interim dividend of 0.3p (nil) is declared.

Southern Radio GB United Kingdom, EC P4832 Radio Broadcasting Stations FIN Interim results P4832 The Financial Times London Page 27 96
UK Company News: Warner Estates Publication 930521FT Processed by FT 930521

Warner Estates reported pre-tax profits of Pounds 3.76m for the six months to March 31, com-pared with Pounds 4.11m restated on an FRS 3 basis to take account of realised capital surpluses less released revaluation gains.

The main interest of the company is property investment but the pre-tax figure also included losses of Pounds 268,000 from marble and tiling activities.

Turnover was Pounds 5.41m (Pounds 6.42m) including Pounds 1.16m (Pounds 505,000) from marble and tiling.

Earnings per share came out at 5.43p (6.08p) and the interim dividend is raised to 3.65p (3.5p).

Warner Estate Holdings GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries FIN Interim results P6552 The Financial Times London Page 27 126
UK Company News: Drayton improves Publication 930521FT Processed by FT 930521

Drayton Blue Chip Trust achieved a 35 per cent rise in net assets per share to end the year to March 31 at 81.8p, against 60.5p at the end of March 1992.

Net revenue was little changed at Pounds 1.14m (Pounds 1.12m) and earnings per share showed a small improvement to 9p (8.88p). A same again final dividend of 5.495p is proposed to maintain the total at 8.4p.

Drayton English & International Trust also reported an increase in net asset value. The year to April 5 ended with nav at 75.5p (66p).

Net revenue was Pounds 1.65m (Pounds 1.69m).

The dividend for the year is unchanged at 1.2p, including a final of 0.6p, on earnings per share of 0.63p (0.71p).

Gross income declined to Pounds 3.86m (Pounds 4.4m). The directors said that unless income improved in the next year they would have to reconsider the level of payment.

Drayton Blue Chip Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 27 181
UK Company News: OGC oversubscribed Publication 930521FT Processed by FT 930521

Applications under the placing and offer of 12m OGC International ordinary shares have been received for a total of 20.26m, resulting in the offer being subscribed 1.7 times.

The 47 applications for 77,450 shares, which were received from eligible employees, will be allotted in full, while the 298 by eligible Fairhaven shareholders for 1.98m shares will be allotted on the following basis.

For up to 30,000 applied for: in full; up to 40,000: 75 per cent; over 40,000: 65 per cent.

There were 14,003 public applications for 18.2m shares.

OGC International GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas FIN Share issues P1311 The Financial Times London Page 27 122
UK Company News: SelecTV Publication 930521FT Processed by FT 930521

Mr Michael Buckley resigned yesterday as a director of SelecTV two months after he was ousted as chairman of the independent television production company.

SelecTV said only that he had left to 'devote more time to his other business interests'. He will, however, offer consulting services to the company. In March, Mr Buckley lost a battle against Mr Allan McKeown who heads the Los Angeles office of SelecTV.

SelecTV GB United Kingdom, EC P4833 Television Broadcasting Stations PEOP People P4833 The Financial Times London Page 27 96
UK Company News: Merchant Retail falls to Pounds 1.08m Publication 930521FT Processed by FT 930521

PRE-TAX profits of Merchant Retail Group fell by Pounds 640,000 to Pounds 1.08m in the year to March 27, although turnover increased from Pounds 170m to Pounds 186m.

The results include property profits of Pounds 664,000 and a provision of Pounds 574,000 for the closure of Barnum's.

Capital expenditure amounted to Pounds 6.6m (Pounds 9m), but tighter controls on working capital had resulted in a reduction in bank borrowings to Pounds 16.7m (Pounds 17.8m).

A final dividend of 0.75p (nil) makes an unchanged total for the year of 1.1p. Although not fully covered by earnings of 0.84p (1.24p), the directors said the payment was appropriate as action had been taken to deal with the loss-making businesses and further cost reductions were being introduced.

The shares rose 1 1/2 p to 16 1/2 p.

Merchant Retail GB United Kingdom, EC P5411 Grocery Stores FIN Annual report P5411 The Financial Times London Page 27 167
UK Company News: Southern Business shares fall after provisions warning Publication 930521FT Processed by FT 930521 By PEGGY HOLLINGER

SHARES in Southern Business Group fell by 19 per cent yesterday to 67p as the the photocopier leasing company warned it would make provisions of Pounds 3m in the second half to pay for a reorganisation of existing contracts.

The company said it had decided to make fundamental changes to the way in which its contracts were marketed and administered.

Customers would be sent bills showing the amount of copies actually made, along with the volume agreed in the contracts. In many cases, because of the effects of recession on smaller businesses, the actual number used would be lower. Southern Business Group plans to bring its existing contracts in to line with the actual number used.

'This policy will enhance the group's reputation for customer service,' said Mr David McErlain, chairman. 'While it will inevitably lead to an ongoing cost, the board believes the benefits . . . will significantly outweigh these costs.'

The decision follows the group's revelation earlier this year that it had uncovered 'improprieties' in its dealings with some customers. About 12 salesmen and one director subsequently left the company.

Southern issued the warning yesterday as it revealed virtually static pre-tax profits for the first half of Pounds 7.2m (Pounds 7.1m). Sales were 8 per cent ahead to Pounds 29.4m for the six months ended March 31.

Although Mr McErlain said market conditions remained difficult, the dividend was raised by 10 per cent to 1.27p. Earnings were ahead from 4.93p to 4.99p.

The group also announced the appointment of Mr Roger Limpenny, previously finance director, as joint managing director with Mr McErlain. Mr David Holton, company secretary, was appointed finance director.

Southern Business Group GB United Kingdom, EC P7359 Equipment Rental and Leasing, NEC FIN Interim results P7359 The Financial Times London Page 27 316
UK Company News: Downiebrae in acquisition talks Publication 930521FT Processed by FT 930521

Shares in Downiebrae Holdings, the Glasgow-based engineering group, closed 6p up at 82p yesterday after the announcement that it was in talks which could lead to a substantial acquisition.

Downiebrae Holdings GB United Kingdom, EC P8711 Engineering Services COMP Mergers & acquisitions P8711 The Financial Times London Page 27 62
UK Company News: Denton stirs debate on future of junior market - Minister calls for an entrepreneurial approach Publication 930521FT Processed by FT 930521 By PEGGY HOLLINGER

THE DEBATE over the future structure of a junior market was given added impetus yesterday with a call from Baroness Denton, the minister for small companies, for a more entrepreneurial market aimed at encouraging growth in smaller companies.

Speaking to the Financial Times at the opening of the Hoare Govett Small Companies Exhibition, Baroness Denton called for a 'greater sense of risk and enterprise' in any new market which might succeed the Unlisted Securities Market, due to close in 1996.

'Some people want to gamble with their investments and I would rather they gambled on industry than on horses,' she said.

Referring to the Stock Exchange's role as a regulatory body, which is often quoted as one the main obstacles to the creation of a higher risk professional market, the minister said:'I think there is a balance which can be achieved between risk and security.'

She stressed the importance of smaller companies to the UK economy. Figures published this week showed that companies with fewer than 20 employees had helped create 350,000 new jobs between 1989 and 1991. 'Britain's prosperity depends on the continuing vitality of this sector,' she said.

The minister is due to meet Stock Exchange representatives next month to discuss alternatives to the USM.

Proposals include the call by the lobby organisation, Cisco, for a three-tier market, including a higher risk sector aimed at professional investors. The Stock Exchange has also set up a working party on the issue, which meets for the first time next week.

The small companies exhibition, the second organised by Hoare Govett, attracted some 45 companies ranging in market value from Pounds 5m to Pounds 250m.

Hoare Govett estimated that between 300 and 350 brokers, institutional investors and visitors were due to attend the exhibition in London's Barbican centre.

Mr Peter Meinertzhagen, chairman of Hoare Govett, said the recent revival in the UK smaller companies market had begun to attract international investors. Representatives from the US had attended the London exhibition.

Exhibition participants welcomed the opportunity to meet a wide range of institutions and brokers.

'We have seen a lot of fund managers we might never have met,' said Mr James Wallace of Pifco Holdings. 'From that point of view it is definitely worth a day out.'

GB United Kingdom, EC P9611 Administration of General Economic Programs P6231 Security and Commodity Exchanges CMMT Comment & Analysis P9611 P6231 The Financial Times London Page 27 428
British Gas says it may have to cut 15,000 jobs Publication 930521FT Processed by FT 930521 By DEBORAH HARGREAVES

BRITISH GAS could be forced to cut as many as 15,000 jobs or 20 per cent of its workforce in its core gas business over the next couple of years because of increasing competition and regulatory pressure.

But Mr Cedric Brown, chief executive, said the company's plans depend on the outcome of an inquiry by the Monopolies and Mergers Commission, which is due to make its report by the end of July.

By the end of this year, British Gas plans to cut around 4,000 jobs in its UK gas business division - about 1,000 more than previously planned - and just over 1,200 among its headquarters staff.

The cost-cutting move is being prompted by a squeeze on British Gas's profits from a price cap on household sales and the growth of competition in the industrial and commercial market.

Competition and regulatory pressure led to a Pounds 75m reduction in first-quarter profits on sales in the UK, but this was largely offset by lower gas purchase costs and growth in British Gas's overseas operations.

Overall, first-quarter profits slipped by Pounds 8m to Pounds 650m after the exploration and production division showed a Pounds 60m increase in profit to Pounds 175m.

The UK gas business reported a drop in profit to Pounds 743m from Pounds 789m.

Mr Brown said the MMC report would have an important effect on future profitability: 'The ability for the company to expand and prosper depends on getting a fair reward for investment. The alternative is a damaging squeeze on profits.'

He said that if the household supply market were opened up to competition, some customers would gain price savings of as much as 15 per cent. But British Gas estimates that only 6m - a third - of its customers would gain and 12m households would end up paying more, some as much as 90 per cent more.

In an effort to encourage competitors into the market for high-volume, low price sales - the so-called interruptible market - British Gas is discussing setting up peak sales trading. This would help rivals to balance supply and demand by providing a marketplace for excess gas where large users could buy cheap supplies.

Legal action threat, Page 10 Lex, Page 22

British Gas GB United Kingdom, EC P4923 Gas Transmission and Distribution PEOP Labour FIN Interim results P4923 The Financial Times London Page 23 414
UK Company News: Warner Estates declines to Pounds 3.76m at midterm Publication 930521FT Processed by FT 930521

WARNER Estates reported pre-tax profits of Pounds 3.76m for the six months to March 31, compared with Pounds 4.11m restated on a FRS 3 basis to take account of realised capital surpluses less released revaluation gains.

The main interest of the company is property investment but the pre-tax figure also included losses of Pounds 268,000 from marble and tiling activities.

Turnover was Pounds 5.41m (Pounds 6.42m) including Pounds 1.16m (Pounds 505,000) from marble and tiling.

Rental income increased slightly and this was expected to continue as rent reviews and lettings occurred. Further restructuring has been undertaken at marble and tiling where indications for the second half were more hopeful.

Earnings per share came out at 5.43p (6.08p) and the interim dividend is raised to 3.65p (3.5p).

Warner Estate Holdings GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries FIN Interim results P6552 The Financial Times London Page 26 166
UK Company News: Net assets improve at MCIT Publication 930521FT Processed by FT 930521 By PHILIP COGGAN, Personal Finance Editor

MEZZANINE Capital and Income Trust (2001) maintained its final dividend at 7.5p yesterday, as it announced an increase of 43 per cent in the net asset value of its capital shares and 9.6 per cent in the nav of its income shares in the year to March 31.

The split capital invest- ment trust invests in the debt and in the shares of US com- panies. The portfolio, which is managed by Jordan-Zalasnick, the US group, has in- vestments in just eight companies.

During the year, the trust realised an investment in Rockwood, which brought in Dollars 9m. A restructuring of American Safety Razor, another of the group's investments, resulted in MCIT receiving Dollars 1.2m of payment-in-kind notes.

Although these are classed as revenue, they are not cash, and the board accordingly cut its interim dividend. The total dividend is thus down at 13.75p, against 14.5p.

However, ASR has filed to make a public offering in the US. If this happens, MCIT will receive cash for the payment-in-kind notes, which it will distribute as a special interim dividend.

The trust's equity assets were valued at Pounds 55.9m, up from Pounds 43.3m at the end of the previous financial year, an increase of 29 per cent.

The net asset value per capital share was 255.3p, while nav per income share was 120.7p.

Mezzanine Capital and Income Trust 2001 GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 26 265
UK Company News in Brief: Vardy (Reg) Publication 930521FT Processed by FT 930521

VARDY (REG) is to acquire for Pounds 1.5m the business of Callanders Engineering, the Mercedes-Benz dealership for Glasgow, and Specialist Cars (SNM), the Fiat dealership for Aberdeen. Both are subsidiaries of Lex Service.

Reg Vardy Callanders Engineering Specialist Cars Lex Service GB United Kingdom, EC P5511 New and Used Car Dealers COMP Mergers & acquisitions COMP Disposals P5511 The Financial Times London Page 26 77
UK Company News in Brief: Severn Trent Publication 930521FT Processed by FT 930521

SEVERN TRENT has bought AM-TEX Corporation, a water and waste water contract operator based in Houston, Texas for Dollars 9.9m (Pounds 6.4m).

Severn Trent AM-TEX Corp GB United Kingdom, EC US United States of America P4941 Water Supply P4953 Refuse Systems COMP Mergers & acquisitions P4941 P4953 The Financial Times London Page 26 66
UK Company News in Brief: Regent Fund Management Publication 930521FT Processed by FT 930521

REGENT FUND Management has agreed to cut its holding in South East Asia Warrant Fund from 29.95 per cent to 19.3 per cent as the purchase of some of the shares was in breach of Takeover Panel. Regent will not vote the 159,250 shares involved at a forthcoming meeting of SE Asia shareholders, where it intends to vote against reconstruction resolutions before putting forward alternative proposals.

Regent Fund Management South East Asian Warrant Fund GB United Kingdom, EC P6722 Management Investment, Open-End P6726 Investment Offices, NEC COMP Shareholding COMP Disposals P6722 P6726 The Financial Times London Page 26 112
UK Company News in Brief: Oliver Resources Publication 930521FT Processed by FT 930521

OLIVER RESOURCES' offer for Kirkland AS has been accepted in respect of 94 per cent. It has been extended.

Oliver Resources Kirkland AS IE Ireland, EC NO Norway, West Europe P1311 Crude Petroleum and Natural Gas COMP Mergers & acquisitions P1311 The Financial Times London Page 26 60
UK Company News in Brief: Minstergate Publication 930521FT Processed by FT 930521

MINSTERGATE: Pre-tax profit for six months to February 28 was Pounds 723,000 (Pounds 951,000). Sales Pounds 1.49m (Pounds 1.93m); interest received Pounds 793,000 (Pounds 958,000) and loss on trading activities Pounds 83,000 (Pounds 24,000). Earnings per share 18.1p (25.43p).

Minstergate GB United Kingdom, EC P6719 Holding Companies, NEC FIN Interim results P6719 The Financial Times London Page 26 70
UK Company News in Brief: Millwall Holdings Publication 930521FT Processed by FT 930521

MILLWALL HOLDINGS rights issue taken up by 85.79 per cent.

Millwall Holdings GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters FIN Share issues P7941 The Financial Times London Page 26 45
UK Company News in Brief: Kalamazoo Publication 930521FT Processed by FT 930521

KALAMAZOO has made its first significant expansion into Europe by acquiring CBA/Nederland for Fl 2.6m (Pounds 962,000) cash. CBA is a leading supplier of computer systems and services to the motor trade.

Kalamazoo CBA/Nederland GB United Kingdom, EC NL Netherlands, EC P3571 Electronic Computers COMP Mergers & acquisitions P3571 The Financial Times London Page 26 67
UK Company News in Brief: Bowthorpe Publication 930521FT Processed by FT 930521

BOWTHORPE is acquiring 81 per cent of United Sciences of Pittsburgh, which is in the continuous emission monitoring business. Total purchase price will be a maximum Dollars 14.3m (Pounds 9.27m), of which Dollars 11m will be settled in Bowthorpe shares.

Bowthorpe United Sciences GB United Kingdom, EC US United States of America P3679 Electronic Components, NEC P3822 Environmental Controls COMP Mergers & acquisitions P3679 P3822 The Financial Times London Page 26 83
UK Company News in Brief: Avesco Publication 930521FT Processed by FT 930521

AVESCO rights issue taken up by 94.1 per cent.

Avesco GB United Kingdom, EC P3663 Radio and TV Communications Equipment FIN Share issues P3663 The Financial Times London Page 26 42
UK Company News in Brief: Atlas Converting Publication 930521FT Processed by FT 930521

ATLAS CONVERTING rights issue taken up by 98.84 per cent.

Atlas Converting Equipment GB United Kingdom, EC P3549 Metalworking Machinery, NEC FIN Share issues P3549 The Financial Times London Page 26 44
UK Company News in Brief: ACAL Publication 930521FT Processed by FT 930521

ACAL has acquired certain business assets from the liquidator and suppliers of Transtech for about Pounds 750,000. Transtech is an exclusive distributor in Germany for international manufacturers of microwave and RF components.

ACAL GB United Kingdom, EC P5065 Electronic Parts and Equipment RES Facilities P5065 The Financial Times London Page 26 63
UK Company News in Brief: AAF Industries Publication 930521FT Processed by FT 930521

AAF INDUSTRIES said all of the 2.47m ordinary shares (53.6 per cent of the issue) which W&A Investment Corporation and a subsidiary agreed not to take up under the rights issue, have gone to institutional investors. Total number of shares taken up represented 97.6 per cent of the issue.

AAF Industries GB United Kingdom, EC P3714 Motor Vehicle Parts and Accessories P1521 Single-Family Housing Construction FIN Share issues P3714 P1521 The Financial Times London Page 26 89
UK Company News: UniChem purchase Publication 930521FT Processed by FT 930521

A UniChem subsidiary, E Moss, has acquired a pharmacy in Guisborough, County Cleveland from AJ Leeming for a maximum of Pounds 540,000. The consideration consists of Pounds 315,000 cash and the balance through the issue of 96,804 UniChem ordinary.

E Moss AJ Leeming GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores COMP Mergers & acquisitions FIN Share issues P5912 The Financial Times London Page 26 78
UK Company News: OGC placing and offer is oversubscribed Publication 930521FT Processed by FT 930521

APPLICATIONS under the placing and offer of 12m OGC International ordinary shares have been received for a total of 20.26m, resulting in the offer being subscribed 1.7 times.

The 47 applications for 77,450 shares, which were received from eligible employees, will be allotted in full, while the 298 by eligible Fairhaven shareholders for 1.98m shares will be allotted on the following basis.

For up to 30,000 applied for: in full; up to 40,000: 75 per cent; over 40,000: 65 per cent.

There were 14,003 public applications for 18.2m shares and these will be allotted on the following basis: up to 500 shares: in full; up to 600: 500; up to 700: 550; up to 800: 600; up to 900: 650; up to 1,000: 700; between 1,500 and 5,000: 50 per cent; between 6,000 and 10,000: 45 per cent; between 15,000 and 50,000: 40 per cent; between 55,000 and 100,000: 35 per cent; between 110,000 and 300,000: 30 per cent and over 300,000 approximately 26 per cent.

Dealings are expected to start on June 1.

OGC International GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas FIN Share issues P1311 The Financial Times London Page 26 211
UK Company News: Laing joins growing number of UK housebuilders to report sharp improvement Publication 930521FT Processed by FT 930521

John Laing yesterday joined the growing number of UK housebuilders to report a sharp improvement in the housing market since the beginning of this year.

The company said that agreed sales, on which a deposit had been paid, rose significantly compared with the first four months of last year. Part of this was because of a temporary rise in sales to Housing Associations taking advantage of a government spending initiative which ended in March.

If Housing Association business was excluded, private sector sales had still risen by 20 per cent, said the company, which operates only in south-east England.

'Downward pressure on prices in the south-east has virtually ceased and the need to employ sales incentives is reducing,' according to Laing which said it had seen a considerable improvement in the level of deposits taken in the first three months of 1993.

John Laing GB United Kingdom, EC P1521 Single-Family Housing Construction MKTS Production MKTS Sales P1521 The Financial Times London Page 26 183
UK Company News: French Connection returns to the black with Pounds 102,000 Publication 930521FT Processed by FT 930521 By PETER PEARSE

AFTER a plunge to losses of Pounds 8m last time, French Connection, the USM-quoted clothing wholesaler and retailer which is 80 per cent owned by Mr Stephen Marks, scraped back into the black with Pounds 102,000 pre-tax in the year to January 31.

Mr George Wardale, chairman, pointed out that second-half profits were Pounds 637,000, a position with which he said he could be 'cautiously positive.'

Operating profits emerged at Pounds 2.48m (losses Pounds 3.94m).

The year saw further rationalisation and reorganisation of the group. This restructuring followed the management changes, and the consequent shifts in activity, of a year ago.

Exceptional costs of Pounds 1.32m (Pounds 2.93m) included some Pounds 800,000 for the closure or disposal of seven French Connection concessions. There are now 31 outlets in the UK and eight in the US.

Mr Wardale said that, all things remaining equal, the rationalisation of the retail business was complete. The Pounds 500,000 balance in the exceptionals was for the closure of the warehouse in France and professional fees connected with the group refinancing.

These moves were part of the concentration on the core - made up of the brands and outlets of French Connection and Nicole Farhi.

Although sales in French Connection Wholesale declined Pounds 2m to Pounds 10.3m operating losses were cut to Pounds 1.1m (Pounds 2.8m).

Nicole Farhi Wholesale lifted sales to Pounds 6.8m (Pounds 5.4m) and, with improved margins, made profits of Pounds 1.6m (losses Pounds 300,000).

Retail sales grew Pounds 600,000 to Pounds 13.6m and losses shrank to Pounds 200,000 (Pounds 300,000).

Profits of Pounds 900,000 (losses Pounds 100,000) were struck in the US. The French operation broke even (Pounds 400,000 loss) on lower sales, and in Hong Kong profits were held at Pounds 300,000 because of adverse currency movements.

Group turnover decreased to Pounds 47.4m (Pounds 49.9m). Losses per share were 3p (40.6p).

French Connection GB United Kingdom, EC P5136 Men's and Boys' Clothing P5137 Women's and Children's Clothing FIN Annual report P5136 P5137 The Financial Times London Page 25 358
UK Company News: FT-A Bank Index above All-Share Publication 930521FT Processed by FT 930521 By JOHN GAPPER, Banking Correspondent

UK BANK shares yesterday ended a 16-year run of underperforming the equity markets, a turning point that underscored their recovery in investors' opinion.

The FT-Actuaries Bank Index rose 1.5 per cent yesterday to close at 1,406.97 compared with the FT-Actuaries All-Share Index's which ended at 1,393.64.

Thus, the ratio of the bank index to the All-Share, known as the sector relative, was greater than 100 per cent for the first time since 1977.

The bank index - based on shares of the large high street clearing banks and others including Standard Chartered and Abbey National - stayed below the All-Share in the 1980s because of losses on loans to less developed countries and high interest rates.

Some analysts have predicted that the sector would continue to outperform this year as expectations of bank profitability rise.

Investor confidence in bank shares has grown strongly over the past 18 months as banks are perceived to have improved their management, and to have set in train profit recoveries extending to 1995 or 1996.

The sector relative figure has risen from around 70 per cent at the end of 1991 to 101 per cent yesterday. It was boosted last July by the addition of HSBC Holdings to the sector following its acquisition of Midland Bank.

Mr Nick Collier, analyst at Morgan Stanley, said the banks' sector relative figure would have stood at about 88 per cent yesterday without the addition of HSBC Holdings.

This left scope for further outperformance by banks this year.

Mr Collier said he believed banks would be inherently more profitable in a low interest and low inflation economy where the risks accompanying loans were cut.

Banks are still suffering from losses on loans made in the late 1980s.

Mr Robert Law, analyst at Lehman Brothers, said bank shares had underperformed during the 1980s because of loan problems, and the dilution of capital through high inflation, which had required a series of rights issues.

He said current share prices largely discounted recoveries in earnings up to 1995 or 1996, and the outperformance of bank shares could be fragile if assumptions that future loans would be less risky than past ones proved wrong.

The last time that the FT-A All Share was at the same level as the banks' index was January 17, 1977.

Bank shares reached their lowest relative level in April 1989, when they fell to 66 per cent of the FT-A All Share.

GB United Kingdom, EC P6021 National Commercial Banks CMMT Comment & Analysis P6021 The Financial Times London Page 25 441
UK Company News: Gerrard & National rises 61% - EC directive requires disclosure of hidden reserves for the first time Publication 930521FT Processed by FT 930521 By ROBERT PESTON, Banking Editor

GERRARD & National, the financial group which owns one of the City of London's leading discount houses, yesterday made a full disclosure of its profits and reserves for the first time in its 137-year history.

Following the implementation of the European Community's second banking directive, Gerrard has ended the practice of making transfers of undisclosed sums to and from hidden reserves.

On the new accounting basis of making full disclosure, Gerrard made pre-tax profits of Pounds 25.2m in the year to April 5, a rise of 61 per cent on a restated Pounds 15.7m.

It also disclosed that it had Pounds 6.1m in hidden inner reserves, which have now been transferred to published reserves. On this new basis, published shareholders' funds totalled Pounds 109m at the year end.

Gerrard's business is divided into two parts, a trading division, which acts as a principal in securities and money markets, and a broking division, which is an agent in the same markets.

The trading division made pre-tax profits of Pounds 11.3m, a rise of 74 per cent, while the broking division made Pounds 13.9m, 53 per cent higher.

Mr Brian Williamson, chairman, said the group was a substantial beneficiary from the trading activity generated by the UK's withdrawal from the Exchange Rate Mechanism last autumn and the subsequent falls in UK interest rates.

Gerrard & National Limited, the group's discount house which is part of the trading division, made pre-tax profits of Pounds 8m, up from Pounds 3m. Discount houses are traders in short-term money market instruments such as bills of exchange, and have the privilege of being able to trade directly with the Bank of England.

The dividend for the year is being increased from 21p to 21.5p, an increase of 2.4 per cent on 1992. Earnings per share were 38p, up from 24.3p.

Mr Williamson said the small dividend increase was justified by Gerrard's record of always increasing the dividend, even during more difficult trading conditions, ever since the group took its modern form in 1969 with the merger of two discount houses, Gerrard & Reid and the National Discount Company.

He pointed out that the group had diversified its interests substantially over the past few years. As a result, earnings from non-discount interests last year contributed 90 per cent of the cost of the group's dividend, compared with 20 per cent four years ago.

King & Shaxson, another discount house group, also disclosed yesterday that it more than doubled profits in the year to April 30. Profits before exceptional items but after providing for rebate and taxation were Pounds 2.21m, up from Pounds 920,000.

The full year dividend proposed by the group is 9p, up from 5p.

The consolidated profit and loss account for the year includes the results of Smith St Aubyn, a discount house owned by King & Shaxson.

Gerrard and National Holdings King and Shaxson Holdings GB United Kingdom, EC P6719 Holding Companies, NEC P6099 Functions Related to Deposit Banking FIN Annual report P6719 P6099 The Financial Times London Page 25 536
UK Company News: Inveresk valued at Pounds 79m in 150p share offer Publication 930521FT Processed by FT 930521 By JAMES BUXTON, Scottish Correspondent

INVERESK, the Scotland-based speciality paper maker, is valued at Pounds 78.8m in a placing and intermediaries offer launched yesterday, with shares being issued at 150p.

The company, which was bought out by its management from Georgia-Pacific in 1990, is going public in order to expand and, over time, to make acquisitions.

It operates four mills, three in eastern Scotland and one in Somerset, making speciality types of paper.

The offer will raise Pounds 32.1m. Of this Pounds 7.8m will be used to pay off preference shares and outstanding borrowing, leaving about Pounds 2m to help finance future expansion.

After the issue Inveresk will be without debt and will have unutilised borrowing facilities of Pounds 20m.

On the basis of historic earnings per share of 11.5p for the year to November 28 1992, the offer values the company at 13 time earnings. Notional net dividend per share last year was 5p, producing a yield of 4.2 per cent.

Of the 22.6m shares being issued, some 14.7m are being placed with institutions and 7.9m are offered to directors, employees and intermediaries. Directors are retaining 85 per cent of their holdings and, with employees, will own 26 per cent of the company after the issue. Existing institutional shareholders will own 23 per cent.

COMMENT

Inveresk is floating without a profits forecast and with an operating profits line that does not soar upwards. But that is good by the standards of the paper industry over the last three years. As an MBO company it paid off its debt rapidly and invested in plant improvements. Having recently extricated itself from high volume, commodity sectors of the paper market, it is purely a niche operator with a broad spread of products and customers. Pulp represents only 30 per cent of total costs. It now has a low cost base and enjoys operational gearing in spare capacity to take advantage of the economic upturn in the UK. Management is experienced, though not necessarily in making acquisitions, which it intends to do. Opinion is divided on whether Inveresk will itself be taken over, but that is not its intention. The placing has proved popular with institutions looking for a stock which will benefit from this stage of the cycle and allocations have been much smaller than those asked for. The issue is fairly priced at a modest discount to the market on a historic p/e ratio of 13, which could easily go to 15 when trading begins.

Inveresk GB United Kingdom, EC P2675 Die-Cut Paper and Board FIN Share issues CMMT Comment & Analysis P2675 The Financial Times London Page 25 456
UK Company News: SmithKline alliance with genes company Publication 930521FT Processed by FT 930521 By CLIVE COOKSON, Science Editor

SMITHKLINE Beecham, the Anglo-American pharmaceutical group, is setting up a wide-ranging strategic alliance with Human Genome Sciences, one of the new wave of US companies set up to identify the structure and function of human genes in health and disease.

The goal is to convert genetic discoveries into new drugs and diagnostic products. By the nature of pharmaceutical research, these are unlikely to reach the market for several years.

The companies refused to disclose any financial details, but SB will have to spend tens of millions of pounds on R&D if the collaboration is to lead to significant new products.

Dr George Poste, SB's pharmaceutical R&D chairman, said the work would lead to new drugs and vaccines and also to accurate molecular tests for the early detection of disease, including the identification of people at risk before any symptoms have appeared.

SmithKline Beecham Human Genome Sciences GB United Kingdom, EC US United States of America P2834 Pharmaceutical Preparations COMP Strategic links & Joint venture P2834 The Financial Times London Page 25 190
UK Company News: Sindall shares suspended Publication 930521FT Processed by FT 930521

Shares in William Sindall were suspended at 90p yesterday at the company's request pending the outcome of an appeal by Cambridgeshire County Council against a judgment in favour of the company.

The High Court had found for Sindall, the building, civil engineering and property development group, in respect of an action for rescission of a contract made in 1988 under which land was purchased from the council for Pounds 5.08m.

Sindall postponed announcement of its annual results pending the appeal, which is expected today.

William Sindall GB United Kingdom, EC P1521 Single-Family Housing Construction P6552 Subdividers and Developers, Ex Cemeteries COMP Company News P1521 P6552 The Financial Times London Page 25 123
UK Company News: Improvement at Martin Currie Publication 930521FT Processed by FT 930521

Net asset value per share of the Martin Currie European Investment Trust stood at 92.5p at the April 30 year end, against 82.6p six months earlier and 85.5p a year ago.

Net revenue for the 12 months grew from Pounds 121,000 to Pounds 152,000. Earnings per share improved to 0.66p (0.53p) and a final dividend of 0.29p (0.2p) is recommended.

Martin Currie European Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 25 96
UK Company News: France and nursing homes boost Kunick Publication 930521FT Processed by FT 930521 By PEGGY HOLLINGER

KUNICK, the leisure group, reported pre-tax profits of Pounds 2.06m for the six months to March 31, a 29 per cent increase on the comparable pro forma profits of Pounds 1.6m. There was a significantly improved performance in France and a turnround in the UK nursing homes, writes Peggy Hollinger.

Last year it sold 50 per cent of Goldsborough Holdings, its UK nursing home business to County NatWest Ventures. The results assume that the business had been a 50 per cent associate throughout both periods.

Sales were 5 per cent ahead at Pounds 49.3m (Pounds 47m). After preference dividends losses per share were 0.26p (0.43p).

Mr Christopher Burnett, chairman, said Goldsborough's performance had encouraged the joint owners to aim for a flotation within the next 12 months.

Kunick GB United Kingdom, EC P7011 Hotels and Motels P7999 Amusement and Recreation, NEC FIN Interim results P7011 P7999 The Financial Times London Page 24 170
UK Company News: Brewers' heads down for prolonged in-fighting - The effects of discounting, the latest weapon in the battle for market share Publication 930521FT Processed by FT 930521 By PHILIP RAWSTORNE

A WAR of attrition is being fought in the UK beer market: a series of sporadic, intensive, skirmishes between national brewers intent on gaining or defending market share.

None of the participants so far has gained much ground; all are beginning to show the cost of their efforts.

Bass, the UK's leading brewer, this week reported that it had advanced its market share by 0.2 percentage points in six months, while its profit margin had fallen from 9.7 per cent to 8.3 per cent.

The aggression is likely to continue for some time, as market conditions have rarely been better for winning share - or for losing it.

Government orders which forced the national brewers to free about 11,000 pubs - about 10 per cent of the total - from exclusive beer supplies have opened opportunities for competitors to move into outlets from which they were previously excluded.

The free trade will expand further. The proportion of beer sold through the brewers' tied pubs is forecast to decline from 44 per cent of the total in 1989 to about 20 per cent by the end of the decade.

At the same time, take-home trade volume - beer sold through supermarkets and off-licences - is expected to grow from 18 per cent of the total market to 30 per cent.

Against a background in which total beer consumption is set to fall by about 5 per cent during the 1990s, largely because of demographic changes, the national brewers have been forced to sharpen their competitive edge.

With the loss of much of the assured, high-margin flow of sales through their own pubs, they must now battle to capture outlets controlled by new pub retailing companies and multiple grocers, by individual licensees and liquor stores.

The initial response to this prospect saw Courage seek to strengthen its position by acquiring Grand Metropolitan's breweries and beer brands; and Allied-Lyons merge its brewing operations with Carlsberg in Carlsberg-Tetley.

Like GrandMet, regional brewers Greenalls, Boddington and Devenish quit the industry to become retailers.

Since these dispositions, the struggle for market share has been fought with a variety of weapons: discounts, supply agreements, loan ties, and increased marketing.

Courage, despite its denials, is widely regarded as the most aggressive price-cutter. As its outlets in the GrandMet and Inntrepreneur pub estates are freed over the next four years, it may be left at a disadvantage with rivals who each retain several thousand pubs.

That prospect, says one analyst, has led to 'erratic and sometimes frantic' discounting to gain a more secure position.

But, whoever may have started the latest campaign, discounting is, and has long been, a weapon in the armoury of all the other brewers - Allied, Bass, Whitbread and Scottish & Newcastle.

In the competition to supply some of the bigger pub companies - where increased volumes may compensate for lower prices - discounts have risen to about Pounds 80 a barrel, or about half the list price. The signs are that discounting, though on a lesser scale, is spreading to other areas of the free trade.

The key question is how far the brewers will be prepared to go, and for how long.

Mr Martin Hawkins, analyst at Nikko Securities, says: 'It does not make commercial sense for the national brewers to have maintained a high level of capital investment in restructuring brewing and distribution operations if it is accepted that the overall return will continue to diminish.

'A committed volume-oriented strategy can ultimately only be successful through bankrupting the competition and running the risk of bankrupting oneself. It is in no-one's interests to discount so aggressively for a protracted period that the major players go broke in the process.'

Brewers, facing equal pressures on margins in the expanding take-home market, are well aware of the dangers.

Some of the pressure has been eased by cost benefits from the closure of breweries and other rationalisation measures. But there is still substantial over-capacity in the industry.

It would take the closure of another brewery by each of the nationals to remove it, says Mr Roy Moss, chairman of Carlsberg-Tetley.

It seems more likely that weaker regional brewers could be forced out of the industry first.

However, brewers are already finding that discounting alone is not enough to secure more volume.

It is significant that the price war so far has been confined to standard lagers and keg ales - and even there the better-known brands have had to concede less.

All the brewers' leading brands - Whitbread's Boddington and Stella Artois; Bass's Carling Black Label and Worthington; Allied's Tetley and Castlemaine, have increased volume without price cuts.

Such brand portfolios, backed by a supporting package that combines value for money, and quality of service including loans, long-term agreements, and promotional and business support, hold increasing attraction for retailers.

Provision of such packages does not come cheap: bad free trade debts have cost Whitbread Pounds 37m. Allied's bad debt charges were Pounds 17m last year and Bass's provisions nearly doubled to Pounds 19m in its first half.

But the costs do not have quite the unnerving effect on investors as the prospects of a full-scale price war. That consideration may help to restrain the present hostilities.

Bass Grand Metropolitan Whitbread Scottish and Newcastle Allied Lyons GB United Kingdom, EC P2082 Malt Beverages P5813 Drinking Places CMMT Comment & Analysis MKTS Sales P2082 P5813 The Financial Times London Page 24 935
UK Company News: Reduced write-downs cut Westbury loss Publication 930521FT Processed by FT 930521 By CATHERINE MILTON

WESTBURY, the Cheltenham-based housebuilder, saw pre-tax losses contract to Pounds 2.18m in the year to February 28 against losses of Pounds 15.1m.

The company said it was 'cautiously optimistic', reporting in the first 11 weeks of this financial year a 15 per cent increase in site visitors and a 20 per cent increase in reservations compared with a strong performance at the same time last year.

The losses followed exceptional charges of Pounds 7.3m (Pounds 15.8m), including a Pounds 5.6m write-down on the land bank bringing the total in land bank write-downs to Pounds 32m over three years.

There was also a Pounds 700,000 provision against losses in associated companies and the projected shortfall in the cost of completing a joint venture. The company also provided Pounds 1m against outstanding home loans made as part of incentive packages.

Turnover was Pounds 133m (Pounds 132m).

Losses per share were 0.3p (17.4p) and a final dividend of 3.25p (5.75p) gives a total for the year of 5p (9p).

Westbury GB United Kingdom, EC P1521 Single-Family Housing Construction FIN Annual report P1521 The Financial Times London Page 24 202
UK Company News: Pru helped by accruals accounting Publication 930521FT Processed by FT 930521 By NORMA COHEN, Investments Correspondent

PRUDENTIAL Corporation, Britain's largest life assurance company, yesterday reported that under the new proposed 'accruals' basis of accounting for profits, its 1992 earnings rose 9 per cent to Pounds 807m.

The Pru had earlier reported profits for the same period using the so-called embedded value method of accounting, which is currently the industry standard.

That method however has been criticised by securities analysts as flawed because it does not recognise profits or losses from insurance policies until they mature. Under accruals accounting, profits are much more closely related to ongoing activities.

So far, the Pru is the only big UK insurer to have reported results on an accruals basis.

The Association of British Insurers, after a two-year study, had asked the industry to begin experimenting with the method. Earnings were somewhat lower than analysts had anticipated, reflecting somewhat worse than expected continuous disability business in its M&G reinsurance arm. However, analysts noted that the effects of a reorganisation in Prudential's UK life assurance businesses, which has absorbed Pounds 180m in costs, has produced unexpected cost savings which will be reflected in the 1993 statutory profits.

Profits on new business rose 30 per cent to Pounds 226m, largely on sales of single premium products and the so-called prudence bond in particular. But profits on business in force fell sharply from Pounds 52m to Pounds 36m, partly reflecting reduced investment returns in Australia and Canada.

Meanwhile, it emerged that a leading shareholders group, Pensions Investment Research Council, has sharply criticised the Pru for failing to follow best practice in corporate governance. The Pru is one of the UK's largest shareholders and its chief executive, Mr Mick Newmarch, has been outspoken on matters of board behaviour.

Prudential Corp GB United Kingdom, EC P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance CMMT Comment & Analysis FIN Annual report P6331 P6311 The Financial Times London Page 24 332
UK Company News: Control agrees with creditors Publication 930521FT Processed by FT 930521 By PAUL TAYLOR CONTROL SECURITIES, the debt

laden property, pubs and brewing group, announced agreement in principle with its major creditors yesterday on restructuring proposals which would enable its shares to resume trading by the end of July.

The proposals, which will be subject to shareholder and bondholder approval, are designed to provide the group with what Mr John Kerslake, finance director, described as 'a one year breathing space,' while it embarks on a new business plan aimed at reducing gearing and strengthening the balance sheet by converting debt into equity.

Control's shares have been suspended at 16 1/2 p since October 1991, when the group's offices were raided by the Serious Fraud Office in connection with the investigation into the Bank of Credit and Commerce International.

The group was not under investigation, but Mr Nazmu Virani, its former chairman and chief executive, was arrested in March last year in connection with BCCI. Since July last year the group has been operating under a series of 30-day standstill agreements with its banks, led by Barclays, while the restructuring negotiations were conducted.

The centerpiece of the proposals is a new business plan under which the bulk of the group's assets would be sold in a 'controlled programme of disposals' with the proceeds being used to repay the group's Pounds 148m bank debt in full.

The asset sale would include the group's mixed property portfolio which, it is hoped, would be largely sold by mid-1995, the group's UK and Spanish hotel operations and the Belhaven brewery in Scotland and 61 Scottish pubs.

In addition the group's Swiss franc bondholders will be offered a mixture of new 8 1/4 per cent deferred interest bonds and cumulative convertible redeemable preference shares in exchange for their existing securities.

If the restructuring is approved at an extraordinary meeting on June 14, Mr Sydney Robin will step down as chairman and chief executive, and be replaced by Mr Howard Dyer, a consultant to the group since September who has been responsible with Mr Kerslake for devising the proposals. Under these the group will be renamed Ascot Holdings and will focus on the leisure industry, initially on the group's existing English pub estate which will be streamlined.

The estate currently comprises 588 tenanted pubs across the country. Under the plan a streamlined initial core of 150 English pubs would be kept.

Presenting the proposals, Mr Kerslake emphasised that there were substantial risks inherent within the restructuring proposals, but the board believes they represent the only practicable means for the group to continue to trade.

Control Securities GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P5813 Drinking Places FIN Share issues P6552 P5813 The Financial Times London Page 24 465
Dialling for dollars, yen, pounds . . .: The government's sale of shares in BT Publication 930521FT Processed by FT 930521 By ROLAND RUDD

When Lord Cairns, chief executive of SG Warburg, launches the marketing campaign for the sale of the government's remaining shares in BT on Monday, he will be looking forward to a relatively trouble-free few months.

There is a marked contrast with the atmosphere surrounding the second sale of BT shares in 1991, in which Warburg also played the leading role. That sale was dogged by political uncertainty in the run-up to the general election; by concern over the imminent price review by Oftel, the industry regulator; and by a row with investment institutions over how the float was marketed.

This time, Lord Cairns will have fewer worries as he announces the timetable for the sale. He is expected to say that, subject to demand, the Treasury plans to sell all of its 21.9 per cent holding valued at more than Pounds 5bn in mid-July.

Still, though the current sale is progressing smoothly, a number of concerns remain.

The first of these is the emergence of wider competition to BT's basic business. Mr Tim Hirst, analyst at Kleinwort Benson, one of the stockbrokers which declined to take part in the sale when it was not asked to be a global manager, says the potential impact has been underestimated. He expects that cable operators will be providing telephony to more than 2m residential and 550,000 business customers by 1997, compared with a total of 150,000 today.

Mr Hirst estimates that this could cost BT Pounds 550m a year in lost line rental and call volumes. That is only 4 per cent of BT's current revenues, but since much of BT's network costs are fixed, there may be a painful impact on profits. In any event, the entry of the cable operators indicates the extent to which BT core business, UK telephony, is at last becoming a competitive market.

The second area of potential concern is, as always, the attitude of the regulator. Uncertainties currently hang over how much BT should charge its competitors for the use of its lines; and how it should separate out its accounts for local and long-distance business. Oftel is expected to report on this shortly.

For Warburg, global co-ordinator to the offer, the third issue is closer to home. The structure of the sale is proving controversial. For the first time in any privatisation 11 global managers will compete among each other to sell the new shares to the top 500 institutions throughout the world.

The government decided against the usual practice of giving brokers exclusive rights in different parts of the globe. Instead, it decided that competition among selected managers would drum up demand and increase the price at which it can sell its BT shares.

But the idea that there is going to be vigorous competition is not as simple as it seems.

During the pre-marketing phase, which lasts for around two weeks, all the brokers - apart from Warburg - may only approach institutions in an region allocated to them as their home base. Merrill Lynch and Morgan Stanley, for example, may only market the offer to US institutions, while Daiwa will be restricted to Japan.

Warburg, however, will be able to market shares anywhere in the world. Only at the end of the pre-marketing phase can all the managers compete for big investors in any country.

The delay in competition is meant to prevent institutions from being pestered by over-zealous government advisers. Warburg is so keen to avoid such an annoyance that it has introduced rules to control the competition throughout the sale:

Every week each global manager has to report on how it sees the market in BT shares developing, with a copy for Warburg.

All contacts with institutions, even within an allocated region, must be reported to Warburg.

During the roadshows in which BT will actively market the government's shares around the world, Warburg will be the only adviser in the one-to-one meetings between the company and potential investors.

Mr James Sassoon, a director of SG Warburg, said: 'In any competition one needs a set of rules to make sure competition is fair and to make it fair there has to be some control. We have to make sure the control is not excessive.'

What has emerged is a hybrid structure combining both competition and control. But some of the global managers are not convinced that Warburg has got the balance right.

Some have described the global co-ordinator as 'erring in favour of excessive control', introducing 'heavy policing' and keeping a 'tight rein' on the sale.

One global manager advised Warburg 'to play it very carefully and to play it straight because the potential for conflict is so great'.

The particular concern of some global managers is that Warburg will use the information passed to it by other brokers to win a greater share of business, particularly in overseas markets.

However, Warburg says this will not happen because it has established a 'Chinese wall' between the directors co-ordinating the sale and the team competing for business with the global managers.

Mr Sassoon says that the UK Treasury has made sure that Warburg is not in a position to 'steal the deal'. The bank is also making it clear to investors that their bids will be treated on an equal basis regardless of which manager puts in the bid.

Though relations between the issues' managers may prove delicate, they are likely to meet considerable appetite for the shares. A number of big UK institutions, for example, said they were underweighted in BT shares and welcomed the opportunity to buy more.

Since around two-thirds of the new shares are expected to go to private investors, as in the previous BT share sale, some institutions may be left bidding for the stock in the after-market, which should help the shares to go to a premium after the sale.

There is one other comforting factor. In the last sale, some institutions felt Warburg was being heavy-handed in threatening to penalise investors who tried to go short of the stock ahead of the sale. In practice, however, they had no complaints about the relatively relaxed way the policy was implemented. Though it will also apply this time, fund managers do not expect the row to recur.

British Telecommunications GB United Kingdom, EC P4813 Telephone Communications, Ex Radio FIN Share issues CMMT Comment & Analysis P4813 The Financial Times London Page 23 1089
Companies in this issue Publication 930521FT Processed by FT 930521

------------------------------------------------------------------------ UK ------------------------------------------------------------------------ Airflow Streamlines 27 BAT Industries 26 BT 23 Brent Chemicals 26 Cadbury Schweppes 42 Chesterfield Props 42, 27 Control Securities 24 Crabtree 26 Drayton Blue Chip 27 Drayton English 27 Ferguson Intl 26 French Connection 25 Gerrard & National 25 ICI 42 Inveresk 25 King & Shaxson 25 Kunick 24 Laing (John) 26 MCIT 26 Martin Currie 25 Merchant Retail 27 OGC Intl 27 Prudential 24 RTZ 42 ScottishPower 23 SelecTV 27 Sindall (Wm) 25 SmithKline Beecham 25 Somerset Trust 26 Southern Business 27 Southern Radio 27 Starmin 26 Storehouse 23 Vosper Thorneycroft 8 Warner Estates 27 Westbury 24 ------------------------------------------------------------------------ Overseas ------------------------------------------------------------------------ Bank of New Zealand 30 Ceramco 30 Citicorp 23 Eastman Kodak 23 Fiat 29 Foster's 30 Grupo Televisa 29 Hilton Hotels 29 ITC 30 Intracom 29 Itochu 28 K mart 28 Kloster 31 Marubeni 28 Maserati 29 Matsushita 30, 23 Mitsubishi 28 Mitsui 28 Nat. Australia Bank 30 Navistar 28 News Corp 29 Olympic Airways 29 Ono 30 Parametric Tech 29 Sony 30, 23 Sumitomo 28 Swiss Bank Corp 26 TCI 29 Telefonica 28 Time Warner 29 Toray 30 US Shoe 29 Wal-Mart 28 Westpac 30 ------------------------------------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 23 216
ScottishPower beats forecast for full-year result Publication 930521FT Processed by FT 930521 By DAVID LASCELLES, Resources Editor

SCOTTISHPOWER launched the electricity results season yesterday with better than expected profits, but a dividend that fell slightly below forecasts.

The Glasgow-based company, which engages in electricity generation as well as distribution, made a pre-tax profit of Pounds 297m in the year ending March 31, an increase of 14 per cent. Analysts had been expecting a figure around Pounds 290m. The shares gained 5p to 315p.

The result included a Pounds 23m reorganisation provision offset by a Pounds 9.7m credit for a reassessment of energy losses in the system. There was also a net interest charge of Pounds 9m and a Pounds 10.4m net premium charge on redemptions of government debt.

The board is recommending a final dividend of 7.43p, bringing the total for the year to 11.15p, an increase of 10.1 per cent. The board said this was in line with a policy of providing sustained real dividend growth, but dividend cover was maintained at 2.5 times.

Mr Murray Stuart, the chairman, described the past year as 'extremely active and successful'.

The main source of revenue was the company's home market where sales reached Pounds 1.2bn, up 5.7 per cent. The rise came both from a price increase and higher volumes due to the poor weather. Exports to England rose 3.1 per cent to Pounds 73m.

These are expected to show further increases as the capacity of the cross-border interconnector is raised.

Turnover in the appliance retailing business rose 37 per cent to Pounds 90m, producing a profit of Pounds 4.5m, up from Pounds 1.8m the year before.

ScottishPower's profits were boosted by further reductions in costs, particularly manpower. Staff numbers have fallen by more than 1,400 to 8,038 in the two years since privatisation, contributing to a 49 per cent increase in operating profit per employee to Pounds 41,000 over the period.

Strong cash flow permitted repayment of Pounds 142m of high- interest government debt which should provide significant savings until the year 2005, though new accounting rules obliged a write-off of the Pounds 10.4m premium paid. This reduced gearing from 17.7 per cent to 12.2 per cent.

Lex, Page 22

ScottishPower GB United Kingdom, EC P4911 Electric Services FIN Annual report CMMT Comment & Analysis P4911 The Financial Times London Page 23 392
Ex-Eastman Kodak chief of finance joins Citicorp Publication 930521FT Processed by FT 930521 By NIKKI TAIT NEW YORK

MR Christopher Steffen, chief financial officer at Eastman Kodak until he quit after 11 weeks because of differences with the chairman of the troubled film products company, is to join Citicorp, the biggest US bank.

An announcement from the bank yesterday said that Mr Steffen would become a member of its management committee and 'concentrate on internal operations, productivity programmes, control and audit'. Mr John Reed, Citicorp's chairman, added that he expected to recommend that Mr Steffen be made a Citicorp director, and a senior executive vice-president at the bank.

The move seems likely to be interpreted as an attempt by Citicorp to introduce solid industrial management experience and a fresh approach to operational controls. 'Chris brings . . . a breadth of international and modern industrial experience that will contribute significantly to our continued focus on . . . operational performance,' said Mr Reed.

Mr Steffen, who was formerly chief financial officer of Honeywell, had come to Kodak with a reputation for taking tough, rapid action to improve a company's performance.

His departure appeared to result from a clash with the group's chairman, Mr Kay Whitmore, over how to approach the company's problems. Mr Whitmore said at the time that Mr Steffen had left 'not because we disagreed on what needs to change, but because we could not agree on the process for making that change happen'.

Citicorp US United States of America P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 23 268
Recovery continues at Storehouse with profit of Pounds 15.2m Publication 930521FT Processed by FT 930521 By NEIL BUCKLEY

STOREHOUSE, the retail group that includes BhS and Mothercare, continued its recovery yesterday as it announced a pre-tax profit of Pounds 15.2m.

That was slightly down on last year's Pounds 15.8m, but was after exceptional costs of Pounds 31.4m to cover losses on the sale of the Habitat and Richards chains last autumn. Before those costs, the profit was Pounds 46.6m - outstripping City forecasts.

Operating profits for the continuing retail businesses rose fourfold to Pounds 43m. But Storehouse shares fell 2p to 199p in a subdued market.

Mr Ian Hay Davison, chairman, said Storehouse had 'made great progress in the last year on all fronts', and expected sales and profits growth to continue in the coming year.

Sales in the continuing businesses rose from Pounds 880.8m to Pounds 966.8m, although total sales fell to Pounds 1.14bn from Pounds 1.18bn because of the disposals.

Mr Graham Rider, finance director, said year-on-year sales increases were still running at about 10 per cent, and margins had improved by 1.5 percentage points. But he insisted this was due to improvements in Storehouse's organisation and merchandising rather than a general pick-up in consumer spending.

Earnings per share after exceptionals fell to 0.1p from 2.6p, mainly due to a significantly higher tax charge. But the company held its final dividend at 2.5p, making a total pay-out of 5p.

The company is close to drawing up a short list for a new chief executive to replace Mr David Dworkin who left in February to head US stores group Carter Hawley Hale. However it could not say when an appointment might be made.

Mr Dworkin, who joined Storehouse in 1990, is widely credited with turning the group around. He reduced the staff by 900, cut out layers of management and improved organisation, display and merchandising at BhS.

His reforms helped BhS double its operating profits to Pounds 44.1m last year. Mothercare, where Mr Dworkin's work is being continued by Ms Ann Iverson, his former colleague at a US stores chain, moved from a Pounds 3.9m loss to a Pounds 5m profit.

Ms Iverson said this was due to an operational revamp and price cuts which helped regain market share.

Lex, Page 22

Storehouse GB United Kingdom, EC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores FIN Annual report P5719 P5611 The Financial Times London Page 23 409
Plan to seize BR pension fund assets abandoned Publication 930521FT Processed by FT 930521 By NORMA COHEN, Investments Correspondent

THE GOVERNMENT yesterday abandoned its plan to seize part of British Rail's pension fund assets after privatisation in the face of opposition from trustees, employees and Conservative party backbenchers.

Instead, the roughly Pounds 8.5bn in pension fund assets will be used to create a joint industry scheme for current employees as long as they remain in the rail industry. A portion of those assets will be set aside in a separate pool to pay benefits to present and deferred pensioners.

Mr John MacGregor, transport secretary, said yesterday: 'There can be no question of a U-turn as this is a decision being taken for the first time.' He said the move was not a blueprint for the future of the pension schemes of other soon-to-be-privatised industries. 'This plan is particular to the railway industry.'

Trustees of the Rail Pension Scheme had been urging the government to back down on its 'Option Two', outlined in the white paper on rail privatisation. The government had proposed seizing a portion of the pension scheme's assets in exchange for a promise to pay index-linked pensions indefinitely.

'This is largely what the trustees were looking for, but there are still some safeguards we are seeking,' said one trustee.

In particular, the trustees want assurances that ministerial powers over the pension scheme may not be used to weaken the benefit structure in the future nor to shift the cost-sharing in a way that forces members to increase their proportion of contributions.

Answering questions at a news conference, Mr MacGregor said the new owners of the privatised BR companies would be represented on the Joint Industry Scheme board of trustees but would not have the power either to wind up the scheme or weaken its benefits without the consent of parliament.

It is envisaged that the JIS will have a trustee company consisting of employees and representatives of BR's new owners. There will then be a series of local boards who decide matters relating to conditions of individual schemes.

BR freight, Page 6

British Rail GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds COMP Company News P6371 The Financial Times London Page 22 376
Nadir masterminded his own escape, businessman claims Publication 930521FT Processed by FT 930521 By GILLIAN TETT

THE British businessman who helped Mr Asil Nadir jump his Pounds 3m bail yesterday rebutted police claims that there had been a 'Mr Big' who had organised the fugitive businessman's escape to northern Cyprus.

Mr Peter Dimond, a former aircraft dealer, also said Mr Nadir's escape had been 'ridiculously easy' to organise, in spite of police surveillance.

Speaking from northern Cyprus, for the first time since Mr Nadir fled the country, Mr Dimond told the Financial Times that he had organised the 'minute by minute' details of the flight which had taken Mr Nadir from Compton Abbas in Dorset to Beauvais in France - but insisted that Mr Nadir had masterminded the overall plans.

'Mr Big was Mr Nadir. He organised it himself,' said Mr Dimond, in response to reports that the Serious Fraud Office was seeking an individual who masterminded Mr Nadir's escape.

Mr Dimond said new EC regulations, which do not require passport checks at airfields, had made it easy to arrange the journey, which had involved two aircraft and six airfields.

'It was so simple it was unreal. Anyone in the street could have done what I did,' he said.

Mr Dimond said he had no intention of returning to England in the near future.

If found guilty of aiding Mr Nadir to jump bail he could face charges under British law - although in practice it would be impossible to extradite him without the co-operation of the north Cypriot authorities.

A senior British customs official confirmed last night that the aircraft carrying Mr Nadir had evaded UK customs and immigration checks.

Referring to his escape from Compton Abbas, the official said that in an airport of that kind 'nobody would do anything about it', adding: 'We are in the single market.'

Mr Dimond's role in the flight had started through his family friendship with Mr Nadir, who had known his wife, Mrs Hope Dimond, since the 1970s.

Speaking from the family home in Hampshire yesterday, Mrs Dimond said: 'It was basically a social connection - we were friendly with his family. We had no business connection with Mr Nadir or Polly Peck at all.'

According to Mr Dimond, he had decided to help with the escape because of frustration at the British authorities' treatment of Mr Nadir.

'We have watched very closely the way the situation has been handled,' he said. 'There was a time when it was time to go and so his friends said 'OK, let's do it.' It was just an act of friendship - like giving a friend a lift in a car.'

A regular user of Compton Abbas airfield, Mr Dimond approached the airfield owner, Mr Clive Hughes, a week before Mr Nadir's departure to book an aircraft for himself and a friend.

Then, on the morning of May 4, Mr Dimond and his friend arrived at the airfield. Mr Hughes said yesterday he had not recognised Mr Nadir, who had been dressed in dark glasses and a hat, and introduced to him as an 'aviation friend' of Mr Dimond.

'I did it as a private flight for a friend,' said Mr Hughes yesterday, who claimed that because the aircraft's intercom had been broken during the hour-long flight he had not spoken to Mr Nadir who had sat, facing backwards, in the rear of the aircraft. The only payment Mr Hughes had received had been Pounds 300 to cover the cost of fuel, he said.

Mr Clive Vleiland-Boddy, owner of the piper aircraft, registration number G-BSPG, yesterday said that he had not known who had been using it.

Under new EC regulations, Mr Hughes said, he had not been required to carry out any customs check, apart from handing out a leaflet explaining the passport regulations for passengers leaving England.

When the aircraft arrived in Beauvais, Mr Dimond and Mr Nadir had joined a second aircraft, a Cessna Citation executive jet, registration N-11HJ, which had flown from Hatfield to meet them.

'I left them at the aircraft side. Peter knew I had to get back in a hurry,' said Mr Hughes, who said he was back in England three hours after he left.

Mr Michael Hamlin, owner of Hamlin Jets, which manages the Hatfield airfield where the Citation jet was based, yesterday confirmed that the Citation had travelled from Hatfield to Beauvais and then on to Cyprus.

He denied he had had any knowledge of the purpose of the journey.

Polly Peck International CY Cyprus, Middle East P6719 Holding Companies, NEC P7389 Business Services, NEC PEOP People P6719 P7389 The Financial Times London Page 22 780
Democratic rebellion poses threat to Clinton energy tax Publication 930521FT Processed by FT 930521 By GEORGE GRAHAM WASHINGTON

DEMOCRATIC senators launched a rebellion yesterday which threatened to kill or water down President Bill Clinton's proposed energy tax, a cornerstone of his economic proposals aimed at raising about Dollars 70bn (Pounds 45bn) over five years.

The revolt came only a day after Mr Clinton headed off dissent over his economic plan in the House of Representatives.

Senators David Boren and Ben nett Johnston teamed up with moderate Republican allies led by Senator John Danforth to launch a rival economic plan. This would raise taxes by Dollars 150bn over five years, rather than the Dollars 272bn Mr Clinton proposed, and instead cut Dollars 163bn of spending on health and pension benefits for the elderly.

Although the senators presented their plan as a fiscally prudent alternative to the Clinton proposals, their main target is the elimination of the energy tax, levied on fuels according to their energy content, which is opposed by oil and gas producers in their home states. Their opposition to the president's economic bill creates a severe obstacle to its passage. An Oklahoman, Mr Boren sits on the Senate finance committee, and his defection would make it extremely difficult to move the economic bill forward.

Mr Johnston yesterday declared the energy tax dead. 'It will not succeed because it will not get the votes,' he said.

However, Mr George Mitchell, the Senate majority leader, said he was 'convinced that the President's budget plan will pass the Congress largely intact', but explicitly left the door open for further exemptions from the energy tax.

Mr Mitchell and Senator Daniel Patrick Moynihan, chairman of the finance committee, expressed confidence that Mr Boren's plan would not pass the committee, still less the full Senate, while Mr Lloyd Bentsen, the Treasury Secretary, said long term interest rates would rise if the Clinton budget were to fail.

Mr Clinton argued yesterday that alternatives to the energy tax such as a petrol tax fell unevenly on different US regions, while benefit cuts for the elderly would shift the burden of reducing the budget deficit disproportionately on those who could least afford it.

Mr Clinton has been able to head off dissent in the House by standing firm and appealing for party loyalty. Many Democrats in the Senate, however, are immune to such appeals.

The Democratic majority in the Senate is also much slimmer than in the House of Representatives - 57-43 in the full chamber and just 11-9 on many committees.

Less clear, however, is how many Republicans will be willing, for the sake of inflicting a defeat on Mr Clinton, to add their names to the Boren-Danforth proposal. This not only enters the politically explosive territory of pension cuts, but also accepts the increase in top income tax rates proposed in the Clinton plan - traditionally taboo for Republicans.

Mr Clinton finds himself caught in a tug of war between the left and right wings of his party.

US United States of America P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining P5541 Gasoline Service Stations P6371 Pension, Health, and Welfare Funds P9199 General Government, NEC GOVT Taxes P1311 P2911 P5541 P6371 P9199 The Financial Times London Page 22 542
The Lex Column: ScottishPower Publication 930521FT Processed by FT 930521

There is clearly something to be said for being first in the privatisation queue: nervous ministers and merchant bankers tend to err on the side of caution when making business assumptions and pricing offers. It is thus ScottishPower's misfortune to have been the government's third attempt to price correctly the UK electricity industry. The Treasury has managed to truss the business so that it has neither the slack RPI caps of the regional electricity companies, nor the generous dividend cover of the generators. Small wonder, then, that the shares have underperformed the FT-A electricity sector since privatisation.

Yesterday's figures give some support to those who argue that ScottishPower can start to make back some ground. Underlying profits growth was 18 per cent, and the expansion of the interconnector between Scotland and England will provide a growing stream of unregulated earnings. The company's management is also making strides to throw off the cosy pre-privatisation culture. Yet there are worries - most notably the failure to achieve the rate of return on the electricity transmission business projected at the time of flotation. Turnover growth is also likely to be sluggish unless some fierce Scottish winters spark demand. Despite the interconnector, there is little reason to suppose that the shares can yet move to a below-market yield.

ScottishPower GB United Kingdom, EC P4911 Electric Services CMMT Comment & Analysis FIN Annual report P4911 The Financial Times London Page 22 246
The Lex Column: Storehouse Publication 930521FT Processed by FT 930521

Pity about FRS3. The adoption of the new accounting conventions rather wrecked Storehouse's annual results, knocking down pre-tax profits to Pounds 15.2m and almost wiping out earnings per share. The damage caused by disposing of businesses also meant the company had to dip into reserves to fund its maintained dividend. But the market chose to ignore such technicalities, concentrating instead on Storehouse's underlying trading. At that level, the company buffed up its reputation as one of retailing's most promising recovery stocks, lifting trading profits more than four-fold to Pounds 43m. BhS doubled its contribution. Mothercare, at last, came back into the black.

Storehouse's share rating certainly demands as much. Fortunately, the recovery momentum seems to have a long way to run - although the appointment of a chief executive would help convert the doubters. BhS's sales per square foot remain pitiful in comparison with Marks and Spencer. Mothercare's profit margin is still less than 2 per cent. Yet Storehouse is also laying firm foundations for solid organic growth over the longer term. Although expensive in the short run, the repurchase of property freeholds will lower its future cost base. Its continuing restructuring of store operations will do the same. Storehouse's recovery is a classic example of the benefits of concentrating on core businesses - and the joys of starting from a low base. Would that Burton and Sears were to follow suit.

Storehouse GB United Kingdom, EC P5719 Miscellaneous Homefurnishings Stores P5611 Men's and Boys' Clothing Stores FIN Annual report CMMT Comment & Analysis P5719 P5611 The Financial Times London Page 22 272
The Lex Column: British Gas Publication 930521FT Processed by FT 930521

With all eyes focused on the Monopolies and Mergers Commission inquiry, there is a tendency to forget British Gas's current financial condition. The result of the investigation will be vital to the company's future, but on any likely outcome life will continue to be pretty tough. With the RPI-5 price formula and increased competition, earnings this year are likely to be around 22p a share. That means dividend cover will only be 1.5 times against the company's declared target of a twice covered payout. Interest cover is close to the company's own comfort level of four times. Meanwhile capital expenditure - particularly on exploration and production - will mean a further cash outflow this year.

Those financial ratios might seem comfortable for a pure utility, but the profile of the business is shifting markedly. Even if some of the more radical suggestions are ignored by the MMC, competition in the UK gas business will increase, lessening the security of the utility franchise. At the same time, the heavy investment in exploration and production is taking the company into higher risk areas which will not start to produce substantial returns until 1995. If the MMC produces a particularly tough report, that might even force a hard look at the dividend. On a milder outcome, the prospects for dividend growth will still be severely limited. The 6 per cent yield on British Gas shares is supposed to reflect uncertainty over the MMC investigation. But unless that review increases the rate of return on the UK gas business, a re-rating looks unlikely.

British Gas GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P4923 Gas Transmission and Distribution CMMT Comment & Analysis RES Capital expenditures FIN Interim results P1311 P4923 The Financial Times London Page 22 305
The Lex Column: Doling out good news Publication 930521FT Processed by FT 930521

Once again, the economic indicators seem to be pointing in every direction. After disappointing figures for manufacturing output and retail sales earlier in the week, yesterday brought the unexpected news that unemployment fell in April for the third month in a row. Viewed in a slightly longer perspective, though, the figures are not so confusing. Manufacturing output rose 2 per cent in the three months to March; retail sales were up 1.4 per cent in the quarter to April. That is consistent with a moderate recovery in which the latest figures simply offset earlier months of exceptionally good figures. Similarly, the recent good news on unemployment compensates for the particularly bleak period last autumn when the rate of increase seemed to be accelerating.

Only time will tell if there are also structural changes at work, or how far the lower jobless rate also reflects pressure on claimants to leave the register. This time, though, there is a hint of underlying improvement in the small increase in the manufacturing workforce.

The unequivocally encouraging point is the further fall in average earnings and the resulting drop in unit labour costs, which are 3 per cent below March last year. That points to a recovery based on improved competitiveness with, as yet, no threat to inflation. It is small wonder that sterling took the figures well. The only trouble is that an exchange rate over DM2.50 does not provide much incentive for overseas investors to buy gilts. As the running in the auctions gets tougher, the government might come to regret that it did not clamp down more in the Budget. It now appears the economy was strong enough to take such treatment.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P3999 Manufacturing Industries, NEC ECON Employment & unemployment CMMT Comment & Analysis MKTS Production P9311 P3999 The Financial Times London Page 22 324
No need to hit the panic button: The growing fear in the US of higher inflation and faltering growth looks exaggerated Publication 930521FT Processed by FT 930521 By MICHAEL PROWSE

The irrationality of financial markets is sometimes remarkable. A few weeks ago, the fear on Wall Street was that the US economic recovery had ground to a halt. In the past few days that concern has been replaced by fear of galloping inflation.

The price of gold - still regarded by many small investors as the ultimate hedge against inflation - has surged and is now 15 per cent higher than in early March. And the yield on long-dated bonds climbed briefly above 7 per cent, on worries that the Federal Reserve might begin to tighten monetary policy.

When the Fed concluded its policy meeting this week without signalling an immediate rise in interest rates, there was a collective sigh of relief. On Wednesday, the Dow Jones Average rose more than 50 points to a new record. Bond yields and the gold price retreated from earlier highs. But confidence is fragile: the next bad economic number is liable to set off another wave of concern.

Faltering growth and faster inflation are ever-present risks. But both at the same time? If the economy is really slowing, inflation is unlikely to pose a threat - and vice versa. History suggests that 'stagflation' is a product of 'supply shocks' - such as the sudden increases in oil prices that hit the world economy in the 1970s. Nothing of that kind is happening today.

The most legitimate source of concern lies in Washington politics. With conservative Democrats, Republicans and Texas billionaire Ross Perot all taking pot shots at the Clinton economic plan, the fate of the deficit-cutting package is uncertain. If the end result is a substitution of bigger spending cuts for some of the tax increases, markets will be well pleased; but the risk is that the various factions in Congress will be unable to agree on anything.

Meanwhile, if you allow for the 'noise' that seems to envelop nearly every US statistical series, the stagflation fear looks greatly overstated. Inflation probably has passed its low point for this business cycle, but it seems unlikely to gather momentum rapidly. At the same time, the vigour of the US corporate sector suggests the outlook for growth is better than widely appreciated.

Mr Paul Mastroddi, senior economist at J P Morgan, the New York bank, notes that business investment in new equipment has accounted for about a third of total economic growth in the past year even though this sector represents only 8 per cent of gross domestic product. Equipment investment was up 14 per cent in real terms in the first quarter of this year against the same period of last year.

This startling rate of growth helps explain why business leaders showed no interest in the temporary investment tax credit proposed in President Bill Clinton's economic plan but since axed by Congress.

The investment surge is being led by huge purchases of computers and other information processing equipment. Investment in these items (which now accounts for 45 per cent of all equipment investment) was up more than 21 per cent in real terms in the year to the first quarter. But other categories of business capital formation are also doing well: investment in transport equipment and general industrial equipment was up 11.5 per cent and 7.5 per cent respectively.

Capital formation is admittedly recovering from a relatively low base. But the investment recovery looks secure because it is underpinned by higher profits and productivity following extensive corporate restructuring. After-tax profits rose 10 per cent last year and may rise by nearly 20 per cent this year.

Productivity was up 3.3 per cent last year, the sharpest increase for a decade. Gains in service-sector efficiency slowed in the first quarter but manufacturing productivity was up 5 per cent compared with the same period last year, the strongest rise since 1977. Mr Bruce Steinberg, senior economist at Merrill Lynch in New York, reckons the underlying rate of productivity growth in all sectors of the economy is 2 per cent a year, or about twice the average rate in the past two decades.

The investment-driven recovery reflects a special feature of this upturn: it is the first in recent decades to occur spontaneously - that is, without a big artificial boost from fiscal or monetary policy.

Fiscal policy could not be loosened because of the huge federal deficits carried over from the 1980s. The Federal Reserve has eased monetary policy, but not as quickly or as sharply as in some previous business cycles. Real short-term interest rates are roughly zero, rather than negative; long-term real rates are 3.5 to 4.0 per cent, high by historical standards.

The federal government's inability to lend a hand together with 'structural' impediments - such as defence cuts and weak balance sheets in the personal and corporate sectors - explain the halting recovery. The ballooning of the trade deficit in March may result in first quarter growth being revised down to an annual rate of as little as 1 per cent. This sounds awful, but it follows growth at an annual rate of nearly 5 per cent in the fourth quarter and is merely the latest of a succession of 'growth dips' since the economy stopped contracting two years ago.

More recent data is mixed but on balance quite encouraging. Housing starts and retail sales rebounded in April after bad weather hit businesses in the first quarter. Car sales early this month were well above first quarter levels. Industrial production and payroll employment, however, are growing only slowly. But provided consumer confidence does not sink further, the economy seems capable of an annual growth rate of 2.5 per cent this quarter, rising to perhaps 3 per cent in the second half of the year.

Americans are frustrated by the slow recovery. But it may be no bad thing. The lack of an artificial public-sector stimulus means that companies, rather than consumers, are taking the lead; ultimately this could result in a more durable upturn. But will inflationary pressures force the Fed to tighten monetary policy and ruin everything?

Superficially, there are grounds for concern. Sharp increases in consumer and producer prices in April were the third set of bad figures in four months. Since the beginning of the year, the consumer price index has risen at an annual rate of 3.9 per cent against a 2.9 per cent increase last year. This cannot all be put down to distortions such as a surge in the price of fresh vegetables following bad winter storms. The 'core' consumer price index - which excludes the volatile food and energy components - has risen at an annual rate of 4.5 per cent since January.

Some of the Clinton administration's policies are also having an adverse effect. A ruling to block steel imports has allowed US steel companies to raise prices sharply. The yen's sharp appreciation is forcing Japanese companies to raise US prices. Instead of concentrating on regaining market share, US competitors seem to be following suit.

Yet it hard to get too alarmed. Industrial capacity utilisation rates are well below the levels that sparked inflation in the past. Wage pressures are subdued, reflecting the 7 per cent jobless rate. Unit labour costs were up only 1.4 per cent in the year to the first quarter, reflecting the improvement in productivity.

Price increases, moreover, have been bunched in the first four months in each of the past three years, casting doubts on the quality of seasonal adjustments. Some of the biggest sources of price pressures in recent months, such as higher air fares and tobacco prices - are already being reversed.

Bond markets are upset because they had anticipated a decline in inflation from 3 per cent to 2.5 per cent. This no longer looks feasible. But few of the leading forecasters expect inflation to rise much above 3.5 per cent this year and some say 3 per cent is still achievable.

In his Delphic public utterances, Mr Alan Greenspan, the Fed chairman, has shown every sign of leaning towards this relatively relaxed view of inflation trends. Under his leadership, the Fed has sensibly responded to 'facts not forecasts'.

At some point in the next six months to a year, the Fed probably will have to prove its anti-inflation credentials by raising short-term rates. But when that crucial turning point arrives, Mr Greenspan will want to confront a sceptical Clinton administration with incontrovertible evidence of the need for action. With unemployment high and the vigour of the recovery still a matter of debate, he does not yet have that compelling evidence.

US United States of America P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges ECON Inflation CMMT Comment & Analysis COSTS Commodity prices P9311 P6231 The Financial Times London Page 21 1488
Observer: Smoked out Publication 930521FT Processed by FT 930521

Burglars trying to open a building-society safe in Littlehampton early yesterday were caught red-handed by the arrival of the fire brigade. The smoke from the robbers' blow torch was spotted by a resident, who raised the alarm.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 21 65
Observer: Not so happy birthday Publication 930521FT Processed by FT 930521

Things have looked pretty bleak for Franz Steinkuhler, Germany's cigar-smoking top trade unionist, in the past few days, after all the publicity about his dealings in Daimler-Benz shares.

So nice to note that, just in time for his 56th birthday yesterday, he has been getting a few loyal messages among the flood of predictable calls for his resignation.

The engineering union loyalists quoted an old proverb from the Ruhr, to the effect that: 'It's the chap who does the work who makes the mistakes. An idle bloke never blunders.'

While the Mercedes works councils say Steinkuhler is an embarrassment (he sits on Daimler's supervisory board), the boys at Volkswagen (where he's also on the supervisory board) say magnanimously they think a bit of solidarity is in order even if their leaders are prone to err.

Wonder who'll be sending greetings for his 57th.

Daimler-Benz DE Germany, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies COMP Company News P3711 P3713 The Financial Times London Page 21 180
Observer: Testing time Publication 930521FT Processed by FT 930521

If you are interested in how honest business types can slip off the rails, don't forget to watch It's a Steal on BBC2 tomorrow night. In the last of the current Hypotheticals series, Professor Arthur Miller of Harvard Law School does a first rate job cross-examining a group of leading British businessmen employed by an imaginary company. Out of a cast list which includes Sir John Quinton, Lord Spens and Sir Nicholas Goodison, it is less well-known types such as Kingfisher's Nigel Whittaker, Michael East of Eastcastle Management, personal assistant Fiona Alfred, and Roger Pincham of Gerrard Vivian Gray, who turn in the best performances.

However, the real star of the show is G Ware Travelstead, the US property developer. Watch him and it's easy to see why he is about the only person to have made money out of Canary Wharf.

GB United Kingdom, EC P7812 Motion Picture and Video Production NEWS General News P7812 The Financial Times London Page 21 170
Observer: Grave economies Publication 930521FT Processed by FT 930521

Even death no longer provides South Korea's citizens with an escape from their government's national austerity campaign. The ministry of health and social affairs has pronounced a ban on unduly ornate tombs for ancestors.

To shame ostentatious descendants into conforming, the ministry has published a list of 109 cases of excessive embellishment, of which 55 have already been corrected by the removal of stone statuary and the like. The posthumous offenders included former law-makers, several leading businessmen, and Unification Church leader Moon Sun-myung.

KR South Korea, Asia P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 21 109
Observer: Farewell Publication 930521FT Processed by FT 930521

Modest to the very last, Sir Owen Green stepped down as chairman of BTR, Britain's ninth-biggest company, after yesterday's annual meeting. Eschewing the opportunity granted by one shareholder who asked for a resume of his guiding principles, Sir Owen summed up 37 years of corporate wheeling and dealing simply; 'All I offered was integrity and competence and all I would seek from my successors is integrity and competence.'

He departed with none of the razzmatazz that marks Hanson's meetings. There was no carefully orchestrated speech by a big city figure, nor any offer of an honorary life presidency. Just a few words from his old colleague Norman Ireland and Sir Owen was off.

BTR GB United Kingdom, EC P3069 Fabricated Rubber Products, NEC P6719 Holding Companies, NEC COMP Company News P3069 P6719 The Financial Times London Page 21 146
Observer: Sin and shame Publication 930521FT Processed by FT 930521

Giessen University psychologists studying the characteristics of different types of workers evidently had to settle for second best in choosing their latest research topic - 'pride in software developers'.

Word has it that they'd have preferred to study humility in chief executives, but were unable to find any examples.

GB United Kingdom, EC P7372 Prepackaged Software NEWS General News P7372 The Financial Times London Page 21 75
Observer: Chemistry lesson Publication 930521FT Processed by FT 930521

Sounds as if the 38,000 members of the Royal Pharmaceutical Society of Great Britain do not have quite as high an opinion of Allen Lloyd, chairman of the fast-expanding Lloyds Chemists, as does the stock market.

Lloyd, the Pounds 348,000 a year boss of Britain's second biggest chemist chain, has failed in his first attempt to get elected to the council of the 152-year-old society. Lloyd, not normally lost for words, refuses to say whether he will risk being snubbed a second time. Pity, since now that he has split the role of chairman and chief executive he should have more time on his hands.

Lloyds Chemists GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores COMP Company News P5912 The Financial Times London Page 21 136
Observer: Number One problem Publication 930521FT Processed by FT 930521

Forget the impending take-over by China. Today's hot topic in Hong Kong is who should be the number one citizen under the present regime . . . and governor Chris Patten isn't even a contender. The row centres on the licence plate '1', now gracing the car of police commissioner Li Kwan-ha. Some members of the legislative council want it auctioned for charity.

The proceeds, they claim, would be sure to exceed the record Pounds 100,000-plus reputedly paid by businessman Wong Ming-hung for the '2' plate charitably surrendered for sale by finance secretary Hamish Macleod. So the police chief ought to follow suit.

But 55-year-old Li disagrees, claiming his licence plate is essential to his force's esprit de corps. 'When the balloon goes up, our many fine young men and women are working in the street. If No 1 comes up, it has a tremendous morale-boosting effect,' he explained.

'In that case,' rejoined one of the auction lobby, 'he ought to drive around town 24 hours a day.'

HK Hong Kong, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 21 194
Leading Article: Danish stimulus Publication 930521FT Processed by FT 930521

THE violence in Copenhagen perpetrated by a minority of demonstrators has sounded a discordant note amid the general relief prompted by Tuesday's Maastricht referendum result. However, the Yes vote has given the Social Democrat-led coalition an opportunity to bring in a modest stimulus programme for the hard-pressed Danish economy.

Mr Poul Nyrup Rasmussen, prime minister since January, is the current president of the EC council. His personal success in securing a Yes, though based on treaty opt-outs negotiated by the previous government, makes Mr Rasmussen one of the few EC leaders entitled to walk with a spring in his step. He intends to capitalise on this victory by using next month's EC's summit in Copenhagen as a platform to launch Community-wide measures to combat the European recession.

Accounting for just 2 per cent of EC GDP, Denmark has limited room to act alone. Furthermore, the tax cuts and accelerated public sector investment announced on Wednesday may not be large enough to boost GDP expansion from 1 per cent this year to 3 per cent in 1994, as the government hopes. But by seizing the opportunity to push for non-inflationary growth, Mr Rasmussen is setting a good example.

With unemployment now 12 per cent after six years in the doldrums, there is no doubt that Denmark needs higher growth. There is also no doubt that the economy is capable of delivering it. Denmark has curbed its spending habits of the early 1980s. It boasts an inflation rate of 1 per cent and a current account surplus. Ironically for a country which wants to steer clear of the plan for a single currency, Denmark is one of the few EC states close to fulfilling the Maastricht targets set down to guide the path to economic and monetary union.

Foreign exchange market doubts about Denmark's ability to stay in the ERM 'hard core' have forced the Danish National Bank to maintain high interest rates during the past 12 months. Uncertainties will remain unless Denmark provides evidence it can shake off the damage to competitiveness caused by the European devaluations since last autumn. In view of its Emu opt-out, Denmark has to work doubly hard to convince the markets that it is serious about monetary stability.

However, the gap between short-term German and Danish interest rates, in April as much as 5 percentage points, has now fallen to less than 1 point. Following this week's 1 point cut in the discount rate, there is now room for the National Bank to reduce rates further.

By holding down wage rises and putting up with high unemployment, the Danes have made big sacrifices. Assuming the recession in the larger EC economies - above all Germany - does not worsen, Mr Rasmussen now has a chance to show that rigorous economic management can bring its own reward.

DK Denmark, EC QR European Economic Community (EC) P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis ECON Gross domestic product ECON Inflation P9721 P9311 The Financial Times London Page 21 514
Leading Article: Spending choices Publication 930521FT Processed by FT 930521

TO PARAPHRASE one of its ministers, Mr John Major's cabinet should come clean about just how deep a hole it is in. The government is heading for the largest primary budget deficit in peacetime. Its commendable target is to cut the borrowing requirement, expected to reach Pounds 50bn this year, from 8 per cent of gross domestic product to 3.75 per cent in 1997-98.

If the rate of economic recovery is rapid, some of this may be achieved without pain. Revenue from taxation would then rise sharply while the demand for social security payments fell. Some of the shortfall in revenue could be met by further increases in taxation, but this the government is understandably anxious to avoid. The remaining option is deep cuts in spending.

A strong government would set out its stall thus, and invite the public to accept the consequences. The administration moves from flap to exasperation, as it did yesterday over suggestions that the Treasury was pressing for the withdrawal of the National Health Service from dental care and the scrapping of free prescriptions for all but the poorest.

To his credit, Mr Michael Portillo, the chief secretary to the Treasury, has been graphic in his delineation of the problem, but necessarily cagey about possible solutions. The trouble arose when talk of NHS cuts stole headlines from a prime minister who had spent a day working on restoring his authority after Maastricht.

On Wednesday Mr Portillo said that something would have to give. At question time yesterday Mr Major read out a long prepared answer which suggested that, while everything remained open, the idea of making worse-off pensioners and parents of sick children pay for their prescriptions could not have been further from his thoughts. Fine, but he should have explained that the deficit could not be tackled without some inroads being made into previously sacrosanct areas, although he could not yet say which ones.

That would be a reasonable if tough line to take. Mr Portillo has been given until next March or April to find and negotiate long-term reductions in public spending. There will be plenty of interdepartmental infighting between now and then. An interim result can be expected in the autumn, when the expenditure limits for 1994-95 are announced. Genuine reductions should at that time be demanded of most departments. Will the government be able to make them stick?

In the present climate there can be little confidence that it will. A government reversal of policy is no longer a surprise. The Conservatives are divided; their majority is small; the house is fractious. The cabinet cannot always have its way; any rebellious dozen of its supposed supporters can prevent it from doing almost anything. The budget deficit is too serious a matter to be left to these parliamentary high-jinks. Mr Major must spell this out, and thereby reassert his leadership.

GB United Kingdom, EC P9199 General Government, NEC P8099 Health and Allied Services, NEC GOVT Taxes CMMT Comment & Analysis P9199 P8099 The Financial Times London Page 21 514
Personal View: IMF leads where others must follow Publication 930521FT Processed by FT 930521 By RICHARD D ERB

'Much ado about lending', by Edward Balls and John Lloyd (May 12, 1993), had too much ado about gossip among unnamed officials, and more than a little misinformation about help provided in the past and now made available to Russia and other transition economies by the International Monetary Fund. Readers may be misled into believing that money is about to be dispensed without regard for the pace and quality of economic reforms. Such misperceptions could harm the reform process and western support.

A closer look at what transpired last year would have helped Mr Balls and Mr Lloyd to appreciate why the IMF recently initiated a fresh approach. They might have avoided repeating the myth that only Dollars 1bn of an original Dollars 24bn aid package (for Russia) was disbursed in 1992. In fact, the IMF alone disbursed Dollars 1bn. Bilateral credits and European Community disbursements totalled another Dollars 16bn, and formal debt rescheduling plus the accumulation of arrears conferred effective debt relief of Dollars 14bn. Views may differ on how to count all this against the ill-defined Dollars 24bn promised by western governments but everyone should understand that Russia, by standard measures of external financing applied by the IMF to all countries, effectively received financing of about Dollars 30bn.

Russia could have obtained more help by now from the IMF and elsewhere, and be closer to a stable market economy, if it had been able to adhere to the economic and financial programme the government drew up last summer. Unfortunately, support within Russia for halting inflation and accelerating basic reforms was not broad enough, and crucial supporting institutional arrangements were not in place. Credit expansion by the central bank and the government's budget went badly off track, while most legal and institutional reform failed to accelerate.

The problem was not that 'the IMF tried to nail down too many details', but that the government and central bank did not implement their own programme. From long hard experience in many countries the IMF has learned that the devil is usually in the details. Successful implementation of a stabilisation programme requires that the authorities themselves pay full attention to the details. Some states of the former Soviet Union and other transition economies have also encountered unanticipated difficulty in sustaining economic reform programmes, although by contrast the three Baltic states have had considerable success so far, and not by ignoring the 'details'.

What could be done? Long before any Group of Seven pronouncements, the IMF was evaluating ways to help transition economies to focus on the preliminary steps necessary in vital areas before they could execute comprehensive, fully articulated economic programmes. Concern was also mounting over the deteriorating external payments situation facing many of them, due to the collapse of state-directed trade and payments systems and to abrupt hikes in oil and gas import costs as energy prices were raised towards world market levels. An innovative form of IMF engagement was needed, and quickly.

The solution devised was a special temporary lending window, similar to others set up by the IMF in the past, with a more concentrated, streamlined version of the conditionality associated with traditional IMF standby credits. That is where Mr Balls and Mr Lloyd are especially wide of the mark: far from jettisoning 'financial considerations', the chief element for countries to qualify for the new IMF loans will be adoption of the critical measures needed to move towards financial stability. Mr Lawrence Summers is right: conditionality is being focused, not weakened.

In all its lending operations the IMF seeks credible assurances - including initial actions - that sound financial policies will indeed be taken by borrowing countries. Only then does the IMF begin to disburse. Further drawings are conditional on agreed indicators of financial stabilisation being met.

The IMF's new 'Systemic Transformation Facility' (STF), to provide modest opening round help to hard-pressed transition economies, was unveiled to strong support from its executive board. The ensuing Tokyo endorsement by the G7 of the IMF proposal was gratifying, but equally vital will be additional G7 financial support. A large G7 bilateral aid package for Russia is welcome, but support for the other transition economies, many highly interdependent with Russia, has still to be announced. Here again the IMF is taking the lead - the first STF drawing has just been approved for Kyrgyzstan. The G7 and others must soon follow.

The author is deputy managing director of the International Monetary Fund (IMF)

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P6011 Federal Reserve Banks CMMT Comment & Analysis P9311 P6011 The Financial Times London Page 21 784
Leading Article: Good news on UK earnings Publication 930521FT Processed by FT 930521

CELEBRATIONS ARE indeed in order. But this is not mainly because seasonally adjusted unemployment has declined for the third successive month, if by a mere 1,400. Far more encouraging is the further fall in pay inflation. The UK now has a chance to secure the stable, low-inflation economy for which so many have suffered so much.

Over the three months to April 8 seasonally adjusted unemployment fell by 52,700. This is unprecedented at so early a stage of an upturn. One explanation for the good news is the strength of the recovery, as shown in data on retail sales and manufacturing output published earlier this week. The 'hire and fire' mentality is another explanation, the implication being that the falling unemployment must be set against the huge increases at the end of last year. The inflow into the labour force is also smaller than in the early 1980s.

Against such optimistic views of the prospects must be set the lack of any significant increase in the stock of vacancies, following its jump between January and February. The unexpected declines in unemployment may simply reflect an overhang of Jobcentre placement targets last financial year. If so, they will not continue. The picture should be clearer when information on employment in the first quarter of 1993 becomes available in the next Labour Force Survey, due in June.

Less murky, and more encouraging, is the decline in the underlying annual increase in whole economy earnings, to 4 per cent. Seasonally adjusted earnings rose 2 per cent in manufacturing in March, but fell 0.6 per cent in services. This divergence, already apparent earlier this year, may reflect sterling's departure from the ERM. Nevertheless, wages and salaries per unit of manufactured output fell by 2.9 per cent over the year to March, because of a 7.8 per cent rise in output per head.

Taken with the Bank of England's latest forecast for underlying inflation over the next 18 months, these trends imply negligible growth in real earnings. One implication is that growth in real expenditure per worker would make little contribution to the recovery in demand. A more favourable one is that real earnings would grow more slowly than labour productivity. That is precisely how to combine devaluation with stable inflation. It is also how to increase incentives for employment. Low growth in real wages has to be a better way to sustain competitiveness than fast productivity growth in an economy with some 3m unemployed.

If the underlying increase in earnings were kept to 4 per cent, or less, it would be possible to combine low inflation with modest increases in real earnings per worker. This mixture can give the UK the steady rise in output and employment that it needs. It could even justify the stringent disinflationary policies of the past several years. Mr Major may U-turn elsewhere. On this he must not.

GB United Kingdom, EC P3999 Manufacturing Industries, NEC P9311 Finance, Taxation, and Monetary Policy PEOP Labour ECON Employment & unemployment CMMT Comment & Analysis P3999 P9311 The Financial Times London Page 21 523
Raise a glass to Mr Clarke Publication 930521FT Processed by FT 930521 By JOE ROGALY

Mr Kenneth Clarke is a jolly chap, full of warm beer and words like 'judgment', 'common sense' and 'reasonable decisions' - the home secretary who personifies England. It is he who, following a waffly intervention by Mr Robert MacLennan, Liberal Democrat, replied: 'In response to the honourable gentleman, I ask him to go away, lie down in a dark room, keep taking the tablets and think carefully about whether the Liberal Democrats have an opinion one way or the other on the merits of any of the proposals that I have just announced.'

That is the authentic voice of the cheerful thug at his most cheerful and his most thuggish. It earns him this season's second prize for the most successful speech announcing a government retreat from a previous position; the first is still firmly in the grasp of Mr Douglas Hurd, although whether he earned it defending Maastricht or failing to defend Bosnia is a fine point. The foreign secretary can make the most guilt-ridden slide down the back drainpipes of policy seem like an elegant drawing room pirouette. The home secretary simply puts his foot on the bar rail, his elbow on the counter, looks up at the house and asks: 'What're you having squire?'

What the Commons is having is bar-room wisdom from a politician who was highly rated for having roughed up the nurses when he was health secretary and the teachers when he was at education, which is to say overrated. Our Mr Clarke's performance is perpetually diminished by hindsight. Do not mistake the import of this seemingly harsh judgment. Everything has a context. When you consider the home secretary's colleagues - men such as, say, the chancellor, or the first lord of the Treasury - our hero stands out as certainly their equal and, some venture, their better.

True, he did not leave either of his two previous departments in a condition of smoothly oiled perfection. That accounts for his less than triple-A overall rating. But his quick wit, his bonhomie and his willingness to tackle powerful interest groups should take him far in this administration, in spite of what can now be seen as questionable results at health and education.

None of this has much to do with the principal task of the Home Office, which is to protect us from criminals. We should not blame Mr Clarke for that. His preoccupation, like that of his fellow-ministers, is with the office politics of his chosen profession. Who will be promoted, where to, and when? These are the motivating questions. A healthy concern about such matters keeps ministers from trying to invent any new policies. That is to the good. Most policies, especially on crime, are neutral. Some, such as the elements of the government's own brand-new criminal justice bill that the home secretary reversed last week, may be positively harmful. Few do any good.

The figures tell the tale. Between 1979 and 1991 the government increased the number of police officers by 12 per cent. This enhanced force succeeded in putting 8 per cent more people in prison. It was a wasted effort. For during the same period the number of recorded crimes rose by 112 per cent. This does not mean that the actual number of crimes more than doubled. Criminal statistics are the most misleading of all measures of anti-social behaviour. People have become increasingly willing to report break-ins, rapes and the like; the police are more assiduous at writing entries in the book. Yet even when this is taken into account we are left with the impression that during the 1980s there was a steady increase, of imprecise amount, in crime, particularly violent crime. Anecdotal evidence supports this view.

It is also clear that nobody has a sure-fire answer to the problem. Professor David Pyle, senior lecturer in economics at the University of Leicester, has produced a paper* whose depressing conclusion is that there are few novel approaches to crime in which the benefits outweigh the costs. It is even more depressing that the production of such a thesis has been sponsored by Securicor Services, but that is the age in which we live.

It is, however, clearly possible to sup with Securicor and go home with an independent mind. The best that the author can say of the privatisation of crime prevention is that the case is 'not proven'. The professor looks at neighbourhood watch schemes, electronic tagging and the privatisation of prisons. 'There may be dangers,' he says, 'in placing too much reliance on the private sector in this field.' Policing, which is a 'public good' should be financed through 'compulsory public subscription'.

Prof Pyle is no kinder to us soppy old liberals. For he tells us that the remedies popular in the bar-room do apparently work. Various studies demonstrate that increases in the certainty and severity of punishment can be effective in reducing crime. This may be news to the Home Office, if not to its political head. As to which is better, 'certainty' or 'severity', the conventional wisdom is again challenged. The rise in police strength necessary to make it more likely that criminals will be caught is seen as less cost-effective than simply sending more offenders to prison, for longer periods. This will be disputed by those whose basic discipline is sociology rather than economics. Liberals will, however, enjoy his finding that 'recorded property crime is much more closely related to the level of economic activity in England and Wales than had previously been thought'.

One remedy does stand out. Most crimes of violence are caused by drunkenness; the majority occur after pub closing time, especially at weekends. Prof Pyle postulates a market solution, namely raising the price of alcohol. This might be reinforced by encouraging the sale of low-alcohol beers and wines; his analogy is the differential tax that has brought about a switch to unleaded petrol. 'There seems to be no reason why such a policy would prove to be ineffective, even if, as seems likely, the demand for alcoholic drink is price inelastic,' he writes. Mr Clarke is the ideal minister to propound such a scheme. 'Common sense,' he would mutter. 'Stands to reason.' It could do both him, and our Saturday nights, a modicum of good.

* An Economist Looks at Crime in Britain. European Policy Forum/Social Market Foundation, 20 Queen Anne's Gate, London SW1H 9AA

GB United Kingdom, EC P8651 Political Organizations P9199 General Government, NEC NEWS General News P8651 P9199 The Financial Times London Page 20 1101
Cambodian Elections: Ballot despite the bullets - Cambodia's continuing civil war is unlikely to stop Sunday's election Publication 930521FT Processed by FT 930521 By VICTOR MALLET

The calendar on the wall of a Pakistani-manned UN police station north of Phnom Penh has only one entry for May 23: 'Election - Inshallah (God willing).' In spite of a continuing civil war, in spite of the failure to implement the peace plan signed by the four main Cambodian factions in Paris in 1991, and in spite of threatened attacks on polling stations by Khmer Rouge guerrillas, the United Nations is grimly determined to go ahead with Sunday's election.

Nearly Dollars 2bn has been committed to one of the UN's costliest and most criticised peacekeeping operations. Short of an overwhelming upsurge of violence, it is unlikely that the UN will risk further attacks on its performance by cancelling or postponing the election, being contested principally by the government communist party (the Cambodian People's party or CPP) and the royalist party, Funcinpec.

Mr Yasushi Akashi, who leads the 22,000 peacekeepers of the UN Transitional Authority in Cambodia (Untac), said yesterday that political parties had held more than 1,500 peaceful meetings during the six-week campaign period, but admitted that the five-day elections would be held in less than satisfactory conditions.

'We are going through this important chapter in the history of Cambodia, in the history of south-east Asia, in the history of the UN itself,' Mr Akashi told Untac staff this week in a rousing pre-election pep-talk. The election itself would be 'fairly respectable and credible', he added.

But the obstacles to a 'free and fair election' in Cambodia in the 'neutral political environment' outlined in the Paris peace accords have been evident for many months. Untac was charged with monitoring a ceasefire, but the two principal combatants - the Khmer Rouge and the Phnom Penh administration installed by Vietnam in 1979 - never stopped fighting. Untac's mandate was confined to peacekeeping, not peacemaking, and it was not allowed to impose peace by force of arms.

The Khmer Rouge also denied Untac access to most of its strongholds in the north-west and refused to disarm its guerrillas or regroup them in cantonment areas in accordance with the peace plan. With Khmer Rouge fighters still at large, the other factions decided to keep their own soldiers armed.

This year the Khmer Rouge withdrew from the peace process altogether and threatened to disrupt the election; the government, meanwhile, mounted a campaign of assassination and intimidation against its remaining election rivals, which Untac was unable to stop.

Mr Akashi managed to persuade Funcinpec, which says at least 50 of its supporters and officials have been killed, and the Buddhist Liberal Democratic party (BLDP) to stay in the running; their withdrawal would have further undermined the election's credibility.

But even if it is deemed reasonably fair, with no serious outbreaks of violence or vote-rigging, the election's outcome is not guaranteed to bring peace to Cambodia, or to allow the UN to withdraw with its reputation intact.

Consider the options. If the government wins, it will achieve the international recognition and foreign aid denied it since the Vietnamese invaded and overthrew the Khmer Rouge regime 14 years ago. France and Russia both favour a government victory.

Mr Hun Sen, the prime minister, says that if the government wins, it will treat Khmer Rouge guerrillas as 'armed bandits'. The idea would be to wear down the Khmer Rouge until it becomes a containable left-wing insurgency that can be eventually defeated.

The newly-elected government would still be riddled with corruption. But, like its patron in neighbouring Vietnam, it would probably be quick to accept economic reforms and might even adapt to the democratic ideals enshrined in the Paris peace plan in coming years.

Unfortunately, many Cambodians and western diplomats doubt that the government would be able to crush the Khmer Rouge. If the CPP wins, the opposition parties are likely to cry foul and point to the UN's own numerous reports of government human rights abuses and intimidation during the campaign. Some defeated opposition leaders may even join the Khmer Rouge, as they did in the years before the peace agreement.

'If the CPP wins, we've got another Angola on our hands,' says one UN election officer, referring to the decision by Mr Jonas Savimbi, the Angolan opposition leader, to resume fighting after the communist government in Luanda won the Angolan election.

While the Khmer Rouge guerrilla force is not thought strong enough to hold important towns, it has used the 19 months since the peace deal to enlarge its presence in the countryside, partly by seizing territory from other factions.

Though China may have stopped backing the Khmer Rouge, Thai generals and businessmen remain its staunch supporters. The elusive Pol Pot, leader of the Khmer Rouge, has a house in eastern Thailand and has close relations with the Thai military.

The government is by no means certain to win. A Funcinpec victory would at least convince most observers that the election result was fair. Funcinpec has only a vestigial army and has been on the receiving end of government-sanctioned attacks on its campaign workers and supporters.

Prince Norodom Ranariddh, the Funcinpec leader, has promised to try to appoint his father Prince Sihanouk as the Cambodian president if his party wins. Prince Sihanouk, backed by China, has spoken of the need to bring all four factions, including the Khmer Rouge, into a government of national reconciliation.

However, few believe that if Funcinpec wins the government - with more than 200,000 soldiers, policemen, and militiamen - will hand over power to a party which it regards as infiltrated and easily influenced by the Khmer Rouge.

'The UN must make sure that power will be transferred to whoever wins the election,' says a somewhat hopeful Mr Ung Huot, the Funcinpec election campaign manager.

If the election proceeds and results emerge on schedule in early June, even an outright winner may decide that it is wiser to form a coalition government. As one western diplomat puts it: 'We are not going to wake up on May 31 and find ourselves with an ideal political situation.'

Untac's mandate is due to expire in August, and pressure is mounting for a withdrawal because of the rising cost and the dangers to UN staff. But many UN officials believe some kind of presence will be required for the foreseeable future no matter who wins the election. For Mr Akashi, who once described his job as suitable for a 'masochist', the pain is not yet over.

KH Kampuchea, Asia P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 20 1113
Letter: Importance of whaling to Japanese society Publication 930521FT Processed by FT 930521 From Mr FUMIO YOSHINO

Sir, Although Robert Thomson's several articles (Whaling ban wins strong US backing, May 11; Whale sanctuary vote set for today, May 12; and Japan irked by rejection of whale plan, May 14) were all informative and objective, I nevertheless feel that additional information is needed in order to inform non-Japanese readers about the tradition and importance of whale meat in Japanese society.

It now appears to the average Japanese person that a fever called 'environmental protection' has dominated the International Whaling Commission seminar in Kyoto.

Of course, Japanese people fully realise that the whaling ban proposal does not stem from any hostility towards our race.

However, what we are uneasy about is the implicit lack of understanding of our way of living.

Japan's fish catch was 96.9kg per person in 1991 compared to 14.9kg per person in the UK and 19.8kg in the US.

Nevertheless, the level of imports of marine products in this country exceeds that of our exports by more than three times.

Our daily calorie intake comprises 13.1 per cent of marine products, compared to 17.7 per cent of meat such as beef, pork and poultry. (Seaweed, which the Japanese love and consume in large amounts, has no calories.)

The consumption of whale meat in Japan can perhaps be likened to the consumption of snails in France. Without snails no Frenchman would die, but to take away this cherished foodstuff would no doubt cause great commotion and much disgruntlement.

Japanese people realise that this peculiar dish is a speciality to a particular country, but we would never consider doing away with the custom of eating such a dish.

The Japanese are said to have a history of whaling dating back to before Christ, although we only began eating meat roughly 100 years ago, after centuries of abstinence for religious reasons.

Since the introduction of meat into Japan, our tastes have certainly changed. We now consume more than twice the amount of meat that we did 20 years ago.

The opinion that the whale is a great symbol of nature and that the mammal is some kind of higher form of animal seems strange to me.

I feel that the only hope of proceeding with discussions at the seminar in Kyoto is to base them on a mutual understanding of different ways of living. Otherwise the commission would simply be a witchhunt by culturally less intelligent people who could not accept other peoples' values.

Fumio Yoshino,

associate professor of

economics,

Takasaki City University,

Takasaki,

Japan

JP Japan, Asia P0919 Miscellaneous Marine Products NEWS General News P0919 The Financial Times London Page 20 450
Letter: Headline earnings per share figure may allow confusion and manipulation Publication 930521FT Processed by FT 930521 From Mr RON PATERSON

Sir, I see that your published company statistics will in future use the 'headline' earnings per share figure proposed by the Institute for Investment Management and Research, which broadly seeks to distinguish trading results from capital items. You are confident that their formula provides a 'factual and robust' basis for the statistics on which your readers rely. That may not be entirely justified.

Your decision has no doubt been provoked by dissatisfaction with the all-embracing earnings per share figure now required by FRS3. However, the Accounting Standards Board chose that figure precisely because the headline numbers which many people prefer cannot deliver what they promise.

As my firm has commented to the IIMR, headline earnings per share will not in practice be 'factual and robust'. That is because the seemingly attractive theoretical distinction between trading performance and capital gains and losses does not work in practice.

An example concerns the costs of closing down a business. The headline earnings per share figure is supposed to exclude the costs of discontinuing the business, but to include trading results during the run down period. This distinction will often be meaningless, if not impossible to make.

There is a danger that earnings per share figures based on these distinctions will be misunderstood and that misconceptions about the 'important' figures in accounts will be created. Experience has shown that focusing on an intermediate figure in the profit and loss account tends only to corrupt the figure itself. In making this change, you are in danger of putting the clock back and undermining the ASB's efforts to promote a deeper analysis of accounts rather than reliance on a simplistic and manipulable ratio.

Ron Paterson,

Ernst & Young,

Rolls House,

7 Rolls Buildings,

Fetter Lane EC4A 1NH

GB United Kingdom, EC P6231 Security and Commodity Exchanges NEWS General News P6231 The Financial Times London Page 20 330
Letter: UK shipbuilding policy riddled with anomaly Publication 930521FT Processed by FT 930521 From Dr JOHN TOMANEY

Sir, Your editorial ('Swan song', May 17) arguing that the downfall of Swan Hunter was inevitable is flawed.

Despite assertions to the contrary, the argument that there is too much shipbuilding capacity in the UK does not stand scrutiny. A reasonable level of success in export markets, together with the Ministry of Defence's plans to procure further logistics and assault vessels as well as Type 23 frigates, suggests that the market will provide enough work for all the warship yards. Indeed, some observers fear that government procurement strategy may be creating a potential capacity shortage, especially of design and technical skills, later in the decade. The government should take account of this possibility in its dealings with the sector.

Your editorial also ignores both the fact that Swan Hunter has a record of producing merchant ships and that most predictions are for this market to grow in the 1990s, largely because of the ageing of the world fleet.

Swan Hunter is the only UK yard that has a record of producing both merchant vessels and the full range of military vessels in its own right. As a monopsonist in the naval sector, the government should have made this a factor in its decision to order the helicopter carrier. More importantly, it should make this a consideration in the vital effort to save shipbuilding on the Tyne.

The position of the government is riddled with anomaly and inconsistency. It allowed a consortium that included Kvaerner, a merchant yard whose contracts have been supported with intervention funding, to compete with Swan Hunter, whose diversification efforts were hindered by the government's refusal to support an application for intervention funding for the yard. As a consequence Swan Hunter's very future depended on winning naval orders. Good luck to Kvaerner, but where is the logic in all of this?

Finally, your implication that because UK yards struggled to maintain market share in the past, the UK should withdraw from shipbuilding, seems neatly to encapsulate the reasoning that has underpinned the manufacturing decline that is at the heart of the UK's economic problem.

John Tomaney,

Centre for Urban and

Regional Development Studies,

University of Newcastle,

Newcastle upon Tyne NE1 7RU

GB United Kingdom, EC P3571 Electronic Computers NEWS General News P3571 The Financial Times London Page 20 397
Letter: Simpler way to encourage use of Ecu Publication 930521FT Processed by FT 930521 From Mr BEN COLEMAN

Sir, Lord Cobbold suggests some interesting ideas for easing the introduction of a single European currency ('How to make the Ecu user-friendly', May 12). A simpler way of encouraging use of the Ecu might be to improve the general ability of companies, particularly smaller ones, to manage their foreign exchange exposure and, in so doing, show them how the Ecu can be useful now.

While many large firms already use the Ecu to hedge against overseas exposures, smaller ones are often unaware of even basic Treasury management techniques and of the Ecu-based services their local bank offers.

A study we undertook for the European Commission last year revealed that most EC banks offer a comprehensive range of Ecu-based services. It should be easy to set up an Ecu bank account for payments made to and received from several EC countries, thus reducing exchange costs. Equally, assuming overseas purchasers agree, there are few problems to invoicing in Ecus, which lessens the risks of volatile exchange rates. The main obstacle is ignorance.

Both the Commission, as promoter of the Ecu, and our own resurgent Department of Trade and Industry, as promoters of overseas trade, might like to consider how they could assist small firms to manage foreign currency exposure better.

Ben Coleman,

European business unit,

Stoy Hayward,

8 Baker Street,

London W1M 1DA

QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 20 259
Arts: St Petersburg Philharmonic - Concert Publication 930521FT Processed by FT 930521 By RICHARD FAIRMAN

The death of Tybalt is one of the most dramatic sections of Prokofiev's Romeo and Juliet, but this performance was determined to outdo any other. As the mortal blows struck, the conductor Mariss Jansons leapt in the air, slashing at each chord with vicious stabs of his baton, driving the music brutally, violently, decisively, to its grim and noisy conclusion. By the end Tybalt was well and truly dead.

That was the spine-tingling end to the first half of the St Petersburg Philharmonic Orchestra's concert on Wednesday. It was the orchestra's only appearance in London on this tour and so there should not have been any empty seats - certainly not the rows of vacant places visible upstairs at the Barbican. Surely the message has got round that this is still a marvellous orchestra and Jansons a conductor unrivalled today for sheer excitement?

Any implication that their performances together are merely over-dramatised must quickly be put to rest. The Prokofiev was high on adrenalin, as was Rakhmaninov's Second Symphony after the interval, but half the intensity comes from the scrupulous way in which Jansons has rehearsed the orchestra, so that every note, every dot and dash of the score is in the right place. (I do not refer here to the cuts in the symphony's finale, where many pages were missing completely.)

The ensemble was exact. The inner ear of the orchestra balances the music superbly. Yet for much of the evening the playing sounded mushy. Why? Part of the reason will probably have been the unusual layout of the instruments, which put first violins and basses (top and bottom of the aural spectrum) on the left, middle strings and brass together on the right - an arrangement which clearly did not work.

The rest, I fear, was down to the Barbican's acoustics, which not for the first time scuppered a visiting orchestra's best efforts. It was very noticeable that nothing sounded better than the opening of the slow movement, where the exemplary solo clarinet was accompanied by rustling violas and pizzicato basses. As soon as the rest of the orchestra came in, clarity and focus of sound were lost as cross-echoes bounced back and forth.

For a performance of this symphony that had passion, lack of indulgence, an absolute grip on the music from first to last, it would be difficult to improve upon this conductor and the St Petersburg Philharmonic. If only the swashbuckling Jansons could have slayed the Barbican acoustics while he was about it.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 19 451
Arts: Enterprising 'Soundbites]' - Opera Publication 930521FT Processed by FT 930521 By DAVID MURRAY

The BOC Covent Garden Festival, a highly various affair, got underway this week. At the Donmar Warehouse on Tuesday and Wednesday we had 'Soundbites]' There was loose talk in advance about the commissioned '10-minute' pieces; in fact the norm for the five mini-operas - three commissioned, two older pieces by Gerald Barry and the late Stephen Oliver - was about twice as long as that. The company was the ENO's Contemporary Opera Studio (artistic director David Pountney), whose musical director David Barry and the producer and designer David Fielding achieved more than creditable results for every work.

The composers, it seemed, were allowed to draw upon only a modest band: string quartet, flute, clarinet, harp and keyboards. In fact Sally Beamish used only three of them for her Ease, and Barry's 1977 The Garden just a whimsical cello and piano. But the striking thing (so to speak) was the absence of any percussion whatever, unless you counted the typewriters in Ease: even five years ago, I believe, the notion that a bunch of young composers might forgo percussion would have seemed wildly improbable.

There was not a single synthesiser to be heard, nor any taped sounds; there were TV sets in David Horne's Jason Field, but their screens showed nothing. And where the teenage opera-composers reviewed here (glumly) by Andrew Clements last week resorted wholesale to minimalism - it enables you to write many more minutes of music with much less effort - there was no trace of that at the Donmar. Barry's Things that gain by being painted does offer minimal music in another sense; its quaint text, drawn from a 10th-century Japanese pillow book (and mostly spoken), is really all, and the instrumental duo supplies only airy asides.

As the snobbish aesthete-heroine, Jacqueline Horner was encouraged toward theatrical over-statement, where a more innocent manner might allow us to relish her comic self-revelation more. Cooler impersonations by Lynne Davies and Andrew MacKenzie-Wicks, as bereaved wife and mysterious gardener, served The Garden better. As often with Oliver, the score sounded fluently effective, without promising that further acquaintance would discover anything more strongly coherent.

Ease is a punning title, for its 'E's are the suicidal Emma Bovary and Eleanor Marx, who made the first English translation of Flaubert's novel. In Edward Kemp's text they become ghostly, anguished intimates, to no great purpose, though Miss Davies and Margaret Preece enacted them with fervour. The Beamish score sports some interesting, short-breathed ideas of its own, but scarcely turns the situation into music-drama. At different, confident extremes, the music of Horne's Jason Field and Colin Huehns' Solid Assets lent far more vital charges to their texts.

In the former, a 27-year-old labourer meets - perhaps only in imagination - the parents of a 12-year-old boy he has murdered. In the cast-list they appear simply as Mother, Father and Son, which suggests how their instinctive family roles will reach across the dreadful confrontation.

Overlapping sung lines left many details inaudible; but in any case, what Horne has through-composed is really a dramatic cantata a tre, one with an instrumental ensemble as prominent and as urgently expressive as the voices. The idiom is up-to-date but palatable and clear, and respectful of British tradition (he is a Scot): it struck me that Jason Field seemed a natural descendant of, say, Vaughan Williams' On Wenlock Edge.

Huehns is plainly a natural theatre composer. Meredith Oakes's rhyming text for Solid Assets is a wry, neatly amusing sketch, and Huehns finds bright musical touches, sometimes bare-faced devices, for bringing it all to crisp life.

As a 'gross', middle-aged art-lover who is happy to pay millions for an ancient Egyptian piece that is now less than dust, the baritone Karl Morgan Daymond was no less apt and sonorous than as the homicidal young hunk in Jason Field: this singer has a fine career before him. The role of the art-dealer allowed MacKenzie-Wicks at last to exercise his lyrical tenor to best effect, and Miss Horner made a doughty art-widow. Huehns is bound to go off in some enterprising direction; it will be interesting to learn which one he chooses.

Festival sponsored by the BOC Group, with support from Guardian Royal Exchange and American Express

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 19 735
Arts: The Nederlands Dans Theatre 2 - Ballet Publication 930521FT Processed by FT 930521 By CLEMENT CRISP

Nederlands Dans Theater has a second, smaller, younger ensemble, NDT2, made up of dancers who are being groomed to join the main troupe. (NDT3, you may recall, also exists - a ghetto of performers who are identified as being old but still able to function on stage. The mind shrinks from the idea of what might be found in an NDT4.) NDT2 is at Sadler's Wells with a repertory all too familiar in its concerns. 'Never mind the steps; think of the message' is the motto for the NDT companies, but moral worth and, I suspect, political correctness, are fatal ingredients for choreography.

I saw the second of two programmes on offer this week, and though it proposed the work of four choreographers, there was little differentiation between the pieces. Hans van Manen's Shorthand found three men and three women in figure-hugging shiny black plastic leotards - they looked like animated caviar - who struggled, posed, made duets (one, of course, for a couple of chaps) and behaved in rather stolid, and possibly Dutch, fashion. These activities sat rather oddly with Stravinsky's Gesualdo score, but I do not find that musical aptness is the banner under which NDT often sails.

Two other works - Ohad Naharin's Passomezzo and Jiri Kylian's Stoolgame - I have reported on before. The first is an awkward courtship ritual between a hideously dressed couple - she tries to get her man with a display of sagging limbs and very determined winter underwear; he has forgotten to put on his trousers - while Tudor songs are sung. It lasts, thank Heaven, only ten minutes. The second is grimly determined about an individual fighting with a group and turning into a martyr, while a tiresome sound-track by Arne Nordheim is played. (The music is probably ideal for NDT because it was assembled as a result of Nordheim's having seen Soviet troops preparing to crush the Prague Spring uprising.) The angst hangs heavy on the vine.

The closing piece of the programme is Paul Lightfoot's Step Lightly, in which four girls and two men fling themselves about on the ground - like Old Man River, they just keep rolling along - and suggest that they are enjoying really juicy nervous break-downs. It is accompanied by Bulgarian folk songs performed with steel-cutting timbre by a women's chorus. (My own belief is that peasantry are better employed doing something useful in the fields.)

Much of this nonsense would be inadmissible were it not that the NDT2 dancers are very impressive. The men are uniformly excellent, moving with big, flashing dynamics, taut and clear in energy. Among them Urtzi Aranburu and Miguel Rodriguez are exceptionally fine. The women are pleasing - if generally less challenged by the choreography - and in Step Lightly I was very taken by the airiness and delicacy of Catherine Riesi's dancing. They all deserve better things.

NDT 2 is at Sadler's Wells until May 22

NL Netherlands, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 19 523
Arts: Uncomfortable installations - Lynn MacRitchie reviews the disturbing work of Mona Hatoum Publication 930521FT Processed by FT 930521 By LYNN MACRITCHIE

The exhibition of the work of Mona Hatoum at the Arnolfini Gallery in Bristol demonstrates that it is possible to observe the progression and growth associated with work in the more conventional media such as painting and sculpture just as clearly in the work of an artist who has so far chosen to work in those media generally considered more extreme - performance, video and installation. Examples of Hatoum's video works of the 1980s are included in the exhibition, along with new installation pieces and smaller objects, giving an excellent opportunity to study the progression over a decade of the work of an artist committed to exploring some of the darker aspects of the human condition.

While her subject matter is frequently disturbing, Hatoum is quite clear where the priority in her work lies. 'In the process of developing a piece of work, I go through a rigorous paring down of all that is superfluous to arrive at a precise and contained form. Always in my work, in all its manifestations, whether it is performance, video or installation work, formal considerations are of primary importance.'

Hatoum is a Palestinian, born in Beirut, who studied in London at the Byam Shaw and Slade schools from 1975 to 1981, thus finding herself safe while her family faced the horrors of civil war. An enduring theme of her work, whether expressed quite obviously in her early performances, in which she endured actual discomfort and pain and not a little danger or in the latest installation pieces, is the expression of physical and mental unease.

In earlier pieces this was equated with her own disablement through blindfolding or entrapment in containers of mud or plastic body bags, while the spectator looked on uncomfortably, hoping that actual injury would not be the price of the artist's dedication to this particular choice of formal means to manifest her explorations of torment and fear.

In the new installation pieces, the spectator is almost further confounded, experiencing in their own person the dislocations and conundrums the works use to such powerful effect. I doubt whether anyone approaching 'The light at the end' made in 1989 and exhibited at the Hayward Gallery in 1990 as part of The British Art Show will forget their moment of real fear on approaching the six red neon strips suspended between a metal frame at the end of a dimly lit enclosed space and discovering that the piece did not just resemble a grid of radiating elements but was in fact exactly that, the sensation of growing heat and danger as one approached not counterfeit but only too real.

Her recent installations, while not involving actual danger, still pack a physical punch. At the Arnolfini, the first room contains a new work, at first glance an exemplary minimalist composition. Sheets of thick plate glass fill the space between two iron girders which support the roof. The wall to the right is covered in sheets of metal, of the same proportion as the sheets of glass. Both glass and metal are studded with smaller metal plugs, marking off the space at regular intervals in a grid pattern. It is not certain whether these have a structural function, or are entirely decorative. Nor is it certain why their outline, unlike that of the larger elements, is unclear. Closer inspection - for the ambiguity of the shapes invites closer inspection - reveals that they are small magnets, thick with iron filings, their role as spatial indicators subverted by their other, inescapable function as part of a natural and ineluctable process.

Nothing is at it seems: even the calm perfection of minimalism, the artist reminds us, must in the end be subject to the darker forces of nature, just as we, as human beings, are subject to the darker forces which make us into the persecutors of our fellows.

Those who do not wish to journey to Bristol may see its second large scale piece, 'Light Sentence', concurrently exhibited in London, where it forms part of the Serpentine's 'Four Rooms' exhibit of installation works. It is simply constructed, of ready-made industrial elements, wire mesh lockers and a bare light bulb. The lockers are arranged to form a curve, at the centre of which the bulb ascends and descends, controlled by a motor. Its motion, almost imperceptible in itself, causes a mesmerising pattern of ever shifting shadows to be traced on the enclosing walls, enveloping the shadow of the spectator within their traces.

In the elegant spaces of the Arnolfini, the work is menacing but also richly beautiful. At the Serpentine, its windows blocked off to accommodate the piece, darkness and threat become its most powerful characteristics, the haunting beauty of the play of light becoming secondary to a menacing sense of enclosure. Our shadows are part of its structure: we have been trapped in our admiration, complicit in an experience which is darker than it seems.

Mona Hatoum, Arnolfini Gallery, until 6 June. 16 Narrow Quay, Bristol, BS1 4QA, telephone 0272 299191.

GB United Kingdom, EC P8412 Museums and Art Galleries NEWS General News P8412 The Financial Times London Page 19 875
Arts: Nanci Griffith, country girl - Concert Publication 930521FT Processed by FT 930521 By ANTONY THORNCROFT

Nanci Griffith was a school teacher before she became the self-appointed guardian of country music. And don't you know it. Her Wednesday night appearance at the Albert Hall was as much a lecture as a concert.

Not that it was boring: Griffith is too much of an enthusiast, and too, well, odd for that. She has a Texan drawl that stretches into Oklahoma. She also has a disarmingly mimsy speaking voice which miraculously converts into a resonant toe curler when she finally gets around to singing.

But the most mesmerising thing about her performance is her ability to centre the universe around her girlish shoulders. Without Nanci, you are made to feel, country music would have gone the way of the drawing room ballad. Fortunately she has playing the guitars in her band both the 'greatest acoustic guitar player in my life time' as well as 'my favourite singer-songwriter'. It was a relief that the percussionist's life time achievement was that he came from Hemel Hempstead.

The whole performance is one long roll call of inspirations and good friends. We learn, rather remarkably, that Nanci, and the equally decorative Emmylou Harris, spend their New Year Eves playing lonesome country duets. Other singers actually dropped in on the concert. Carolyn Hester, the primal force behind Griffiths decision to go on the road, turned up to chorus on 'Boots of Spanish Leather', and a crinkly Ralph McTell was happy to share the verses on Nanci's latest single 'From Clare to Here', which he wrote. By the final rousing version of 'Its a hard life wherever you go', the eleven musicians on stage had even been joined by the guitar tuner.

Actually Nanci Griffith has good reasons to present herself as the incarnation of country. She was plugging a latest album 'Other voices, Other rooms', which is devoted to songs by contemporaries and precursors, one precursor stretching back to 1877. It made for a strange blend of the personal and the universal. We learned a great deal of Nanci Griffiths experiences with the security system at Dallas Airport; we also heard her covers of fine songs by Tom Paxton and Townes Van Zandt.

It has taken Nanci Griffith many years to reach her current eminence. For decades her songs were hits for others; now in repaying the compliment she has somehow appropriated the entire country music catalogue. The audience sat in quiet reverence. Griffith has obviously moved swiftly from school teacher, to head mistress, to chairman of the governors. There is a great deal of steel inside the frock.

Nanci Griffith is touring the country until early July

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 19 469
Arts: Today's Television Publication 930521FT Processed by FT 930521 By GARY MEAD

Were it not for Brookside (Channel 4, 8.30pm) you could tonight happily part-exchange the TV for a take-away pizza. Will Mandy Jordache finally confess she has stabbed her husband to death? Can the producers find such a good plot-line again?

Measure For Measure (BBC2, 9.30pm) is an excellent programme dealing with an off-beat subject - measurement - but even it is not good enough to keep this viewer tuned into Have I Got News For You (BBC2, 10pm), which has definitely lost the spark of the previous series. Paul Merton is terribly funny but seems bored with it all; Ian Hislop is now just smug; pretty-boy Angus Deayton probably no longer needs the money.

You need to sit up till midnight for the good stuff. Rock Docs: Three Steps to Heaven (BBC2, 12.10am) is a repeat of an Arena documentary on rock 'n roller Eddie Cochran. Five minutes later there is The Quatermass Experiment (Channel 4, 12.15am), a vintage Hammer movie.

For insomniacs who went to work, Cricket: One-Day International (BBC1, 12.20am) reviews highlights.

GB United Kingdom, EC P4832 Radio Broadcasting Stations P4833 Television Broadcasting Stations TECH Services & Services use P4832 P4833 The Financial Times London Page 19 210
Construction Contracts: Football stadium Publication 930521FT Processed by FT 930521

EC HARRIS reports that the Pounds 3.1m improvement of Coventry City Football Club's Highfield Road stadium has started on site. E C Harris is acting as employer's agent.

The FA Premier League club is bringing its ground up to the standards of the 1990 Taylor report on stadium safety.

The design-and-build contract, due for completion in July 1994, involves building an east and corner in-fill stand, and re-roofing the north stand.

EC Harris GB United Kingdom, EC P1629 Heavy Construction, NEC MKTS Contracts P1629 The Financial Times London Page 18 100
Construction Contracts: Cambodian study Publication 930521FT Processed by FT 930521

Engineering consultant HALCROW has won its first ever project in Cambodia. With UNDP assistance, the Mekong Secretariat is financing an irrigation rehabilitation study, worth USDollars 530,000 (Pounds 349,000), for selected projects in different parts of the country.

Against international competition, Halcrow has been selected to undertake the 12-month study - in association with Madecor Consultants of Philippines - and will have a team based in Phnom Penh.

Halcrow Holdings KH Kampuchea, Asia P8711 Engineering Services MKTS Contracts P8711 The Financial Times London Page 18 94
Construction Contracts: Servicing the oil industry Publication 930521FT Processed by FT 930521

EDMUND NUTTALL has won a Pounds 4m contract from Peterhead Bay Authority to construct a new jetty and breakwater in Peterhead Harbour, in the Grampian region of Scotland. The jetty is to provide berthing facilities for North Sea service vessels, while the breakwater will give protection to a future marina development planned for the harbour area.

The main works involve the construction of a reinforced concrete jetty 170 metres long and 23 metres wide, supported on tubular steel piles. The breakwater will consist of a 250-metre long layered rubble mound.

Associated works include dredging and rock removal, the placement of graded fill over the existing foreshore and sea bed to reclaim a 180 x 40 metre storage area and a marina base area. Sheet piling, and electrical and drainage provisions will also be undertaken.

The location of the works is to the west end of the ASCO (Aberdeen Service Company) south base berths within Peterhead Bay harbour.

Edmund Nuttall GB United Kingdom, EC P1629 Heavy Construction, NEC MKTS Contracts P1629 The Financial Times London Page 18 188
People: Non-executives Publication 930521FT Processed by FT 930521

member of the Engineering Training Authority and a former director of GEC, at TRANSFER TECHNOLOGY GROUP.

Transfer Technology Group GB United Kingdom, EC P3463 Nonferrous Forgings PEOP Appointments P3463 The Financial Times London Page 18 43
People: Non-executives Publication 930521FT Processed by FT 930521

Rhys Williams, chairman of the council of the University of Warwick, a founder council John Salkeld, chairman of Southern Newspapers, as chairman at KYNOCH GROUP.

Kynoch Group GB United Kingdom, EC P3463 Nonferrous Forgings P5199 Nondurable Goods, NEC PEOP Appointments P3463 P5199 The Financial Times London Page 18 56
People: Non-executives Publication 930521FT Processed by FT 930521

Eric de Bellaigue, recently retired from Panmure Gordon, at The QUARTO Group.

Quarto Group Inc GB United Kingdom, EC P2731 Book Publishing PEOP Appointments P2731 The Financial Times London Page 18 39
People: Non-executives Publication 930521FT Processed by FT 930521

Philip Martin has retired from HAEMOCELL.

Haemocell GB United Kingdom, EC P2084 Wines, Brandy and Brandy Spirits PEOP People P2084 The Financial Times London Page 18 34
People: Non-executives Publication 930521FT Processed by FT 930521

David Legg has retired from LEX SERVICE.

Lex Service GB United Kingdom, EC P5511 New and Used Car Dealers PEOP People P5511 The Financial Times London Page 18 36
People: Non-executives Publication 930521FT Processed by FT 930521

Roger Rowland has retired from LAMBERT HOWARTH.

Lambert Howarth Group GB United Kingdom, EC P3149 Footwear, Ex Rubber, NEC PEOP People P3149 The Financial Times London Page 18 36
People: Non-executives Publication 930521FT Processed by FT 930521

Joe Palmer, former group chief executive of Legal & General, as chairman of SPRINGMAN TIPPER CAMPBELL.

Springman Tipper Campbell GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Appointments P99 The Financial Times London Page 18 43
People: Non-executives Publication 930521FT Processed by FT 930521

Ray Way as chairman at HAMPSON INDUSTRIES on the retirement of John Wardle.

Hampson Industries GB United Kingdom, EC P1799 Special Trade Contractors, NEC PEOP Appointments P1799 The Financial Times London Page 18 41
People: Non-executives Publication 930521FT Processed by FT 930521

Donald Carpmael, chairman and senior partner of Tyser and Co, as chairman at NHK (Aviation), in place of Alfred Kingsnorth who becomes deputy chairman and chief executive.

NHK (Aviation) GB United Kingdom, EC P3721 Aircraft PEOP Appointments P3721 The Financial Times London Page 18 52
People: Non-executives Publication 930521FT Processed by FT 930521

Anthony Simonds-Gooding, a former group md of Whitbread who lost his job as chief executive of British Satellite Broadcasting when it merged with Sky, at ROBINSON & SONS, a private healthcare and packaging company based in Chesterfield.

Robinson and Sons GB United Kingdom, EC P8099 Health and Allied Services, NEC P2671 Paper Coated and Laminated, Packaging PEOP Appointments P8099 P2671 The Financial Times London Page 18 74
People: Non-executives Publication 930521FT Processed by FT 930521

Pete Kerlet at DC COOK HOLDINGS.

DC Cook Holdings GB United Kingdom, EC P5511 New and Used Car Dealers PEOP Appointments P5511 The Financial Times London Page 18 36
People: Non-executives Publication 930521FT Processed by FT 930521

Lord Parkinson, 61, the former Conservative minister of transport, is taking over as chairman of Starmin, the quarry products group in which the Abdullah brothers, Raschid and Osman, have a substantial interest.

Starmin, which has a market capitalisation of Pounds 16.8m and has just reported an after-tax loss of Pounds 8.5m for 1992 after heavy asset write downs, has been hard hit by the recession.

However, its balance sheet is stronger than many of its smaller rivals and it is understood that Lord Parkinson is keen to take advantage of expansion opportunities.

Lord Parkinson, a former non-executive director of Tarmac, joined Starmin just over a year ago as deputy chairman.

He will take over from the current chairman Owen Rout, a former senior executive with Barclays Bank. Rout, 63, who has been chairman for three years, will remain on the board as non-executive deputy chairman.

Starmin GB United Kingdom, EC P1442 Construction Sand and Gravel P1459 Clay and Related Minerals, NEC PEOP Appointments P1442 P1459 The Financial Times London Page 18 179
People: Non-executives Publication 930521FT Processed by FT 930521

What type of Guinness are you - draught or overdraft? British Nuclear Fuels' chairman, John Guinness, 57, (right) is used to being asked the question and is rather proud of the fact that he has reasserted his ties with the overdraft side of the family by becoming a non-executive director of Guinness Mahon, the city merchant bank founded by Robert Rundell Guinness.

His father and grandfather were partners in the bank and his elder brother, Sir Howard, spent a couple of years there before joining S G Warburg. However, John Guinness is not the family's sole representative in the bank, now owned by Japan's Bank of Yokohama.

Tim Guinness, 45, joint managing director of Guinness Flight Asset Management, has kept the family name alive, but he's a descendant of the brewing side.

Guinness Mahon Holdings GB United Kingdom, EC P6029 Commercial Banks, NEC PEOP Appointments P6029 The Financial Times London Page 18 160
Construction Contracts: Office development in Marylebone Publication 930521FT Processed by FT 930521

lMS International, a division of the Dun & Bradstreet Corporation, has chosen TILBURY DOUGLAS as its preferred contractor to complete a new corporate office in Marylebone, under a Pounds 14m design and build contract.

The nine-storey development at 1-9 Harewood Avenue will provide the client with 85,000 sq ft of office facility, 15 residential units and space for basement car parking.

The construction works pose a number of challenges that will require innovative solutions by Tilbury Douglas. The building is already partly constructed.

The first task of Tilbury Douglas's design and build team will be to evaluate the condition of the existing building structure, fabric and services.

Access will be restricted as the site of the inner city development is bounded by adjoining properties on two sides.

The offices will incorporate a high content of mechanical and electrical services.

The contract includes all internal finishings and fitting out of the office and reception areas and will administered on behalf of lMS International by Monk Dunstone Associates.

Tilbury Douglas GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 18 197
People: Avis Europe Publication 930521FT Processed by FT 930521

Jean Suaudeau, formerly general manager of Avis' French operations, has been appointed chief operating director at AVIS EUROPE.

Avis Europe GB United Kingdom, EC P7514 Passenger Car Rental PEOP Appointments P7514 The Financial Times London Page 18 46
People: Hardy Oil & Gas Publication 930521FT Processed by FT 930521

John Wilson, previously general manager of exploration, has been appointed to the board of HARDY OIL & GAS. From 1960 to 1972 Wilson was head of the British Geological Mission in Peru and worked for BP until 1989 culminating in the position of business development manager responsible for Australasia and Latin America.

In 1990 he joined the energy unit of International Finance Corporation, a World Bank affiliate.

Hardy Oil and Gas GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas PEOP Appointments P1311 The Financial Times London Page 18 101
People: Linx to listen carefully Publication 930521FT Processed by FT 930521

Linx Printing Technologies, the manufacturer of continuous ink jet printing equipment that issued a profits warning on Tuesday, has parted company with its sales and marketing director, John Shead.

The parting was 'amicable' according to Linx chief executive, Derek Harris, but follows recognition that the group's sales strategy had gone astray in Europe.

Replacing Shead is John Cetti, who has spent eight years building from scratch the European ink jet business of Videojet, a company based in the US but controlled by GEC of the UK.

Videojet appears to have been among the companies taking market share from Linx and the other UK-quoted ink jet printer maker, Domino Printing Sciences - which six weeks ago also issued a profits warning.

While Linx and Domino may have run into trouble meeting their plans, they will both be aware of another UK competitor. Willett, a private Northampton company with sales of Pounds 50m, says sales of its wider range of products including ink jet printers are still growing in Europe, possibly as a result of selling through subsidiaries rather than through foreign distributors.

Harris said Cetti's arrival is the first stage of a reorganisation in Europe that has yet to take a firm shape. 'We have to listen carefully to what John says now,' he says.

Cetti will have responsibility for Linx worldwide sales and marketing operations.

Linx Printing Technologies GB United Kingdom, EC P3555 Printing Trades Machinery P3861 Photographic Equipment and Supplies PEOP People P3555 P3861 The Financial Times London Page 18 262
People: Sir Bernard Ashley's flowery farewell Publication 930521FT Processed by FT 930521

Sir Bernard Ashley yesterday stepped down as chairman of Laura Ashley, the international clothing and home furnishings group, 40 years after the business was founded by his wife. His departure marks an end of an era for the company, and the symbolic completion of its transition from family-owned business to public company.

Sir Bernard was also reported to have sold about a quarter of the Ashley family's 49 per cent shareholding in the company yesterday. He had previously said he planned progressively to reduce the stake to about 25 per cent.

Although some other members of the Ashley family are involved in PR activities, none of them has an active role in running the company, which will now be headed by Jim Maxmin, the American chief executive, and Hugh Blakeway Webb, who moves up from deputy chairman to chairman.

Sir Bernard's departure was not unexpected, after the company admitted last month that he had not attended a board meeting since last May, and was devoting increasing amounts of time to his hotel interests in Wales and the US.

Laura Ashley said yesterday Sir Bernard had intended to retire for some time, and decided the 40th anniversary year was an appropriate time to do so, especially now the company seemed to be staging a recovery after several years of losses. He will become honorary life president and remain a non-executive director, as well as being involved in 'conceptual design'.

Hugh Blakeway Webb, a former barrister and partner of accountants Deloitte Haskins & Sells joined the company as deputy chairman in 1991 and has frequently represented Sir Bernard at board meetings. He has been an adviser to the family for some years and was involved in the 1985 floatation. He also helped negotiate the minority investment by the Aeon group, setting the company back on a firm financial footing, and was involved in assembling the present management team.

Laura Ashley Holdings GB United Kingdom, EC P5621 Women's Clothing Stores PEOP People P5621 The Financial Times London Page 18 348
Construction Contracts: Public Record Office at Kew Publication 930521FT Processed by FT 930521

A contract worth in the order of Pounds 10m has been awarded to HOW ENGINEERING SERVICES by the Property Service Agency for the new Public Record Office (pictured) at Kew Gardens.

Kew is already the largest repository for the national archives of the government and this new Public Record Office which is to be constructed predominantly as an additional repository facility also includes offices, document conservation and other sundry areas.

A new link with the existing building is also to be constructed together with the refurbishment of part of the original building which will remain in occupation by staff and public.

The sophisticated and integrated mechanical and electrical services incorporate addressable fire alarm systems with specialised smoke detection and low velocity air-conditioning system with building management to protect and serve the specialist requirements of the new repository.

In addition to the traditional M & E services How Engineering Services will be providing lighting protection, security and voice alarm systems.

How Engineering Services GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 18 192
Management: The Major problem with quiet leadership Publication 930521FT Processed by FT 930521 By CHRISTOPHER LORENZ

VISIONARY, charismatic, inspirational, extrovert, relentlessly energetic and assertive, even autocratic and arrogant. That, in a cliche-clad nutshell, is most people's picture of the effective leader, whether in politics, the military, or business.

Consider a representative list of such leaders: Churchill, Kennedy, De Gaulle, Thatcher, Montgomery, MacArthur, Alfred Sloan, Jack Welch, Lee Iacocca, John Harvey-Jones, Anita Roddick.

But what about Dwight D. Eisenhower and Harry S. Truman? To quote the inimitable Peter Drucker, they were singularly effective yet 'possessed no more charisma than a dead mackerel'. Nor, in the usually accepted sense of the word (charisma, not mackerel), did Abraham Lincoln, Clement Attlee - Britain's first post-war prime minister - or Konrad Adenauer. In our day the same goes, for such manifestly successful and 'transformational' business leaders as Donald Petersen, ex-chairman of worldwide Ford, Geoffrey Whalen of British Peugeot-Talbot, Sir Geoffrey Mulcahy of Kingfisher (UK Woolworths) and - arguably - Sir Christopher Hogg of Courtaulds and Reuters.

All are shy and at best are average communicators on a public platform. Some are downright grey: the remarkably successful Mulcahy has been dubbed 'Mogadon Man'. Most are keener to listen and consult than to hold forth and believe strongly in team leadership.

Which brings us to the unfortunate and accident-prone John Major, Britain's nice prime minister. Over the past fortnight he has been vilified as never before - for possessing what appear, at first sight, to be similar characteristics and style of my second group of heroes.

How come the paradox? Does what works in business fall flat in politics? Or is Major a Petersen or Mulcahy in the making, if only his critics will get off his back?

Sadly for Major, he is less similar to the second cast-list than his admirers might think. The most obvious contrast is with Hogg.

Hogg may be 'ultra-cerebral and terribly reserved' as a UK academic puts it, and he certainly inclines to consensus rather than assertive leadership-from-the-front. Yet he conforms completely to a description of outstanding leaders given by Peter Senge, a US academic expert on the subject. Rather than conventional charisma, 'What distinguishes them is the clarity and persuasiveness of their ideas, the depth of their commitment and their openness to continually learning more,' says Senge. 'They instil confidence in those around them.'

To some extent, Whalen and Mulcahy also fit this picture. They may be reticent, but at the same time their manifest drive and sense of strategic direction - even if not quite a vision in the usual sense - create a sort of charisma, at least among close colleagues.

Petersen had that too, but also something rather different. His 'vision' was as much to do with reforming Ford's internal structures and processes - creating what he called 'a teamwork dynamo' - as with achieving distinction in the US car market, though he did that in spades. Every account of his tenure during Ford's remarkable revival in the 1980s stresses his collegial, listening, and 'enabling' style.

In theory, that makes Petersen the closest parallel to John Major - or, rather, to the way Major tries to operate. Which brings us to what academics would call the 'systems differences' between political and business leadership.

Andrew Kakabadse, a Cranfield professor who studies business leadership in nine countries, boils the usual long list of key attributes down to three: 'visioning'; good communications; and a 'team orientation'.

Visioning involves a degree of creativity, but also the ability to make sense of immense 'systems detail', he says. Communications must be consistently excellent, both internally and externally. Teamwork is more a matter of open, thorough dialogue, than whether the final decision is taken by consensus or autocratically.

Few leadership experts would score Major highly on clarity and consistency of vision. Most would agree with Philip Sadler, the former head of Ashridge Management College, that Major's goals are 'unstrung beads'. They lack the unifying thread which a good business leader finds vital.

On the second attribute, communications, Major has demonstrably failed to perform. Unlike reticent chief executives, who can delegate much of their external relations downwards to specialists, or upwards to an extrovert chairman, political leaders are only as effective as their own ability to communicate.

It is a moot point whether Major deserves a high score on the third key attribute, teamwork, in spite of his belief in it. Given the poor quality of so many of his government's decisions and subsequent climbdowns - or inconsistent refusals to compromise - it is far from clear that he is stimulating a sufficiently thorough team dialogue. Moreover, instead of allowing his more headstrong colleagues to take ill-considered decisions, he should, in common with Attlee or Petersen, show he has the steel to overrule them from time to time.

In politics as well as business, leaders who want to have staying power must tailor their style to changing situations. At US General Electric, Jack Welch has done that, becoming more consultative than a decade ago. Thatcher could not recognise or accept the need and suffered the consequences.

In Major's case the question may be more whether a halfway adequate manager can transform himself into someone who, however quietly, can galvanise others into cohesive action. Mulcahy had a decade to do so, Petersen two. Major has no such luxury.

GB United Kingdom, EC P9199 General Government, NEC PEOP People GOVT Government News P9199 The Financial Times London Page 17 912
Technology: The intelligent car hits the road - Crumbling highways and congestion have forced the US to re-think transportation Publication 930521FT Processed by FT 930521 By VICTORIA GRIFFITH

The experience of driving down a US highway has not changed much over the last 40 years.

The car models may be far more sophisticated, but motorists feel the same, often bumpy surface under their wheels and pass through toll booths which could easily serve as a backdrop to a film set in the 1950s.

But new technologies are about to shake up the staid world of highway transportation in the US.

In the pipeline are such innovations as stronger, more durable concrete surfaces and automatic sensors which collect tolls simply by debiting a motorist's bank account.

After trailing behind Japan and Europe for years in the area of transportation technology, the US is finally catching up and, in some cases, moving to the cutting edge of highway innovations.

The new attention being paid to transportation is triggered by necessity. Traffic problems are worsening, bridges and highways continue to crumble and the cost of repair is mounting.

These factors are forcing the federal and state governments to take a hard look at longer-lasting infrastructure.

If they succeed in extending the life of US highways, the savings could be tremendous. The National Research Council, a privately funded research group, estimates that improving the durability of the country's roads and bridges by just one percentage point would yield savings to the federal government of between Dollars 10bn (Pounds 6.4bn) and Dollars 30bn over a 20-year period.

One reason that new highway technologies have been slow to take hold is that spending on infrastructure is ultimately controlled by bureaucratic state and federal governments.

However, the private sector, lured by government grants for research and the promise of a mass market for transportation products, is beginning to take on more responsibility.

State-of-the-art technology, known as 'intelligent vehicle highway systems' (IVHS), is set to revolutionise the way Americans use their cars.

This new technology would allow car computers to gather and give off information on everything from road conditions to the number of passengers in the vehicle. Private and public-sector groups have formed a Washington-based association, known as the Intelligent Vehicle Highway Society.

Among the association's long-term goals are the installation of computerised sensors on all federal highways to limit the number of stops a vehicle is forced to make. These sensors would aim to eliminate toll booths by debiting users' bank accounts as they passed through invisible borders. The sensors would also be equipped to weigh trucks in motion and offer computerised cargo inspection.

Once the system was in full operation, a truck could move across the country, petrol permitting, without making a single stop.

The new sensors would be useful, not only on highways, but on urban streets as well. In Los Angeles, a new IVHS project plans to install sensors at 4,000 intersections. The sensors would aim to minimise 'wasted green time' - the period of time a traffic light stays green without any vehicle passing through.

When the flow of cars slowed down, the sensors would tell the traffic light to turn red, giving other cars at the crossing a chance to move ahead. According to IVHS, over Dollars 200bn will be spent on these types of systems over the next 20 years. Some 80 per cent of that investment is set to come from the private sector and the remainder from federal and state governments.

'The US is the only country in the world with a 20-year plan for IVHS,' says Fred Tucker, head of the automotive division at Motorola. Private companies, hopeful that the US can take the lead in this area, have been moving ahead with IVHS tests, and related products, such as self-navigation systems, should be on the market later this year.

In Orlando, Florida, General Motors and Avis, the car rental group, have just completed a market test for self-navigating vehicles. Drivers using the Avis cars were amused by voices that spit out directions, such as 'Turn right at the next set of lights,' and 'You are three miles from Disneyland.'

General Motors specially produced 100 cars for the project, all equipped with 'talking' devices to give drivers directions and computer screens featuring maps of the area. Sensors on the cars let the computer know the exact location of the vehicle, enabling them to guide drivers. The experiment was so well-received that more comprehensive navigation tests are being organised in several regions of the country.

In a project in the Chicago suburbs, about 5,000 vehicles will be equipped with computers which will not only give directions but will also try to keep drivers away from traffic jams. The Chicago experiment, sponsored in part by Motorola, will not rely on specially made vehicles but, instead, on the installation of systems similar to those the group eventually hopes to sell on the mass market.

Motorola will collect information from the cars' computers about their movements and relay traffic reports to their drivers.

'We'll use the computers to tell drivers about road conditions, traffic congestion and other information,' said Joseph Ligar, who is heading the project.

Even the most sophisticated navigation systems, though, will not help much if the US does not move quickly to improve the condition of its roads.

A congressional report has warned that, in two years, 35 per cent of the country's interstate roads will have outlived their useful life. Rather than patch up the problems in piecemeal fashion, the government is investing in new technologies to improve the roads' durability.

'The price of concrete, cement and other building materials is very small compared with the overall cost of construction,' says Surendra Shah, a professor of engineering at Northwestern University and a leading researcher on innovative building materials. 'So it makes sense to use the best material available, even if it is a little more expensive.'

Construction groups are working with a slew of new materials to expand the lifespan of roads and bridges. Some new concretes, by using fibre and chemical additives, are attaining strengths 10 to 25 times higher than every-day concrete. One of the problems with concrete is that it is porous and thus sus-ceptible to moisture-produced cracks.

Many companies have begun to use microfine particles to fill in the holes and, thereby, to 'waterproof' roads. 'Micro-silica is extremely effective in eliminating the permeability of concrete,' says Kenneth Rear, technology manager at WR Grace, a big concrete maker. Concrete is also an extremely brittle material, highly suscept-ible to cracking. To improve bonding at an atomic level, some groups are experimenting with polymer additives such as carbon, steel, glass fibres and poly-propyline.

These additives improve the flexibility of concrete, enabling construction companies to use thinner layers of the material in road construction.

'This new product is just as cheap as asphalt to use and far more durable,' says Leet Denton, president of Denton Construction in Detroit. There are many other innovations to improve the quality of concrete.

One chemical group, Arco Chemical, is working on a chemical product which would pre-shrink concrete before it is laid down, reducing cracking later on.

And Denton Construction has championed fast-drying concrete which, through the use of high-grade stone and insulation blankets, can support traffic within four hours of being laid down.

Many of these products have come into use only recently in actual construction; others are still in the experimental phase.

However, most transportation authorities predict an avalanche of new innovations over the next few years. If they are right, US highways could soon leap from 1950s' technology into the 21st century.

US United States of America P1611 Highway and Street Construction P3272 Concrete Products, NEC P4785 Inspection and Fixed Facilities P3571 Electronic Computers P3812 Search and Navigation Equipment TECH Products & Product use P1611 P3272 P4785 P3571 P3812 The Financial Times London Page 17 1316
Technology: Packaging with flexibility - Worth Watching Publication 930521FT Processed by FT 930521 By DELLA BRADSHAW

Researchers at Cambridge Consultants have developed an alternative to vacuum-formed plastic trays which relies more on origami than traditional packaging. Vacuum-formed trays are widely used in the food industry - to separate the biscuits in a packet, for example.

The CCL method folds paper or paperboard on the production line from a single reel of paper. The technique enables companies to change their packaging quickly if a new product line is introduced. As plastic trays are rarely made on the packing site, stocks have to be held and separating the trays often has to be done manually. CCL: UK, 0223 420024.

Cambridge Consultants GB United Kingdom, EC P2671 Paper Coated and Laminated, Packaging TECH Products & Product use P2671 The Financial Times London Page 17 141
Technology: Cool recycling technique - Worth Watching Publication 930521FT Processed by FT 930521 By DELLA BRADSHAW

Freezing temperatures could provide an economical way of recycling used tyres. Aga has installed a recycling plant for the Swiss company Elude which uses a process called cryogenic fragmentation.

The tyres are shredded and fed into a tunnel where liquid and gaseous nitrogen cools the fragments to below -80`C. A hammer mill then pounds the chips which separate into their components: steel, textiles and rubber granules. The rubber granules can be used for athletics tracks and even rubberised asphalt for road surfaces. Aga: Switzerland, 61 821 7282;

UK, 0203 650 566.

Aga CN China, Asia P3069 Fabricated Rubber Products, NEC P3011 Tires and Inner Tubes TECH Products & Product use P3069 P3011 The Financial Times London Page 17 134
Technology: Coded message for lost property - Worth Watching Publication 930521FT Processed by FT 930521 By DELLA BRADSHAW

When disaster strikes - a fire or a bomb - it is difficult to match the items retrieved from the wreckage to its owner.

An asset management system using bar codes, developed by the Australian company Hardcat Systems, could make life easier.

Hardcat is a relational database which holds information relating to assets and cross refers them.

So floppy discs could be labelled with a bar code cross-referenced to the code of the PC on which they would be used. Hardcat: Australia, 03 696 0188;

UK, 0276 855555.

Hardcat Systems AU Australia P7375 Information Retrieval Services TECH Products & Product use P7375 The Financial Times London Page 17 126
Technology: Mixing up a time saver - Worth Watching Publication 930521FT Processed by FT 930521 By DELLA BRADSHAW

Builders and do-it-yourself enthusiasts could save both time and money with a collapsible cement mixer, designed by a former engineer from Watford.

David Gawron's patented Gizmix replaces the traditional mixer's steel drum with a synthetic rubber bag inside a web of telescopic tubular rods.

Packaged with the motor the mixer can be stored in a box in the corner of a workshop or garage.

Because it is light enough to carry, it can also be taken to the upper stories of a high-rise building without the need for a winch.

Once in production, the Gizmix should cost less than Pounds 100 to buy.

Gawron: UK, 0923 776 747.

Gawron GB United Kingdom, EC P3531 Construction Machinery TECH Products & Product use P3531 The Financial Times London Page 17 146
Technology: Making life easier for the tellers - Worth Watching Publication 930521FT Processed by FT 930521 By DELLA BRADSHAW

The latest object-oriented software has been adopted by computer maker Siemens Nixdorf Information Systems to make it easier for tellers in banks and building societies to carry out transactions and sell extra services to their customers.

Each customer becomes a single 'object' on the system, and attached to each are details of accounts, mortgages and other business with the bank.

Information on SN-teller can be displayed and entered using a mouse and operating in the Windows environment, or in a keyboard format running under Dos, OS/2 or Unix.

Siemens Nixdorf: UK, 0344 862222.

Siemens Nixdorf, AST and IBM have all announced the launch of PCs based on the latest, and most powerful, Intel microprocessor, the Pentium. IBM has also developed a means of upgrading older PS/2 machines with a Pentium processor.

AST: UK, 081 568 4350.

IBM: UK, 0705 321212.

Siemens Nixdorf Information Systems International Business Machines Corp AST Research GB United Kingdom, EC P7372 Prepackaged Software P3571 Electronic Computers TECH Products & Product use P7372 P3571 The Financial Times London Page 17 192
Management: Guiding lights - British companies are turning increasingly to mentoring Publication 930521FT Processed by FT 930521 By LUCY KELLAWAY

When Ulysses put his son in the care of his old friend Mentor while he began his epic journey, little did he know what he was starting.

Some three thousand years later mentoring has become one of the most fashionable areas in management development. According to a recent survey by the Industrial Society, 40 per cent of British companies have a mentoring scheme, and a further 20 per cent are thinking about creating one. The subject has spawned its own jargon, specialist consultancies, conferences and even a society with a database dedicated to mentoring.

But the idea could scarcely be simpler. A mentor is someone with experience who offers help and knowledge to someone junior. The mentor is not the boss, nor is he or she trying to teach anything specific. They are there to guide, listen and advise.

There is nothing special about that; most people on the rise have had their own career confidants, just as most senior people have had a protege or two. Mentoring, as conceived by the human resource experts makes the process formal and, by doing so, creates a fairer system, less subject to politics and back scratching.

Mentoring as a science became established in the US in the 1970s, when an article in the Harvard Business Review argued that being a mentor distinguished a leader from a mere manager. Other US research found that top executives who had had a mentor did better than those who had not.

In the 1980s mentoring caught on in the UK as a way of helping graduates settle down in big companies. Now there are mentors for managers at all levels, mentors for disadvantaged groups of employees and even mentors for mentors.

The idea accords well with the latest management thinking: people 'own' their development and in flat organisations, where people are no longer being told what to do by their immediate superiors, they need others to guide and help them.

Despite the popularity of mentoring schemes, not all have been successful. Many of the early US efforts went wrong because they were too formal and established so many rules for the behaviour of mentor and mentoree that the relationship was stifled. In the UK the problem has been the reverse. According to David Clutterbuck, director of the European Mentoring Centre, some companies simply said 'You are a mentor, go away and mate', and then were surprised when their schemes collapsed.

At a recent conference on mentoring organised by the Industrial Society, Clutterbuck said the most common sources of problems occur when companies failed to:

Prepare the mentors or mentorees properly

Set clear goals for the scheme

Set clear goals for each mentoring relationship

Provide support networks for mentors and mentorees.

BT, the telecoms group, has addressed many of these issues and has established a large mentoring programme for its graduate engineers. The aim, says Adam Scott, an enthusiastic mentor and a director of BT, is to avoid the 'rather muddled experience' he had when he qualified.

Scott, in common with every mentor, was selected as someone who not only had the necessary experience, but also had 'interpersonal skills.'

The loss of senior management time is the main cost of the scheme - Scott estimates the six annual meetings he holds with each mentoree cost about Pounds 1,000-Pounds 2,000. At the first meeting he sits with his mentoree at his Apple Mac computer and they agree the terms of their relationship, its confidentiality and the subjects to be discussed.

Scott, in common with other BT mentors has been trained in the art. So, too, have the mentorees and the line managers, who are left out of the relationship, but who need to understand and support what is happening. Every three months there are meetings for both sides to discuss shared concerns. Mentors prepare regular reports on the process and there are support staff to solve problems. So far some 80 graduates have taken part and about 60 per cent have asked for the relationship to be continued once the formal two-year programme is over.

Although graduate schemes still predominate, there are an increasing number of mentoring programmes aimed at other well-defined groups of employees. At the Prudential, a mentoring programme has been designed for pregnant women, to make it easier for them to return to work afterwards. Mentors are chosen among women with similar experiences and who can help with the problems of juggling jobs and babies, offer advice on childcare and keep the mentoree in touch with the company during maternity leave. The Pru says the scheme has helped retain staff in whom much has been invested and has made those who return immediately effective in their jobs.

The Pru has had little trouble finding women prepared to be mentors, but the same is not the case for companies establishing schemes for senior people. Indeed, those which want mentors for their top executives frequently end up seeking outside help.

One company that provides such a mentoring service is the consultancy GHN, which says it has mentored senior managers from around 200 companies. 'At the very top levels it is almost impossible to handle mentoring internally. There are so many hidden agendas,' says Susan Block of GHN. She denies that it matters if the mentor is ignorant of the ins and outs of the particular company. Instead, they must be good at probing, listening and questioning and may also need to deliver painful home truths. Such home truths do not come cheap - a year's programme of tailor-made personal development costs between Pounds 5,000 and Pounds 10,000.

Not every senior person wanting a mentor has to hire a professional. As Oxford Regional Health Authority has found out, some mentors are prepared to offer their services for free, even if they do not work for the same organisation. The authority has set up a nine-week programme for 100 chief executives and top health managers, which includes a confidential mentoring scheme. Each manager is responsible for finding their own mentor, who could come from another region or an academic institution.

There are limits, though, as Gary Hoyte, who helped to set up the scheme, admits. 'If everyone in the country needed a mentor, perhaps mentor overload would set in. There would be a backlash, with everyone resenting the amount of time they were spending. But we are a long way from that now.'

GB United Kingdom, EC P8741 Management Services MGMT Management & Marketing CMMT Comment & Analysis P8741 The Financial Times London Page 17 1105
Survey of London Docklands (7): Activists with a fresh spring in their step - Michael Cassell talks to some of the movers and shakers who are helping to make Docklands work Publication 930521FT Processed by FT 930521 By MICHAEL

DOCKLANDS is both a very old community and a very new one. Some of the people who live there have roots in the area which extend back for generations; others have been there only months or years.

But, together, they have a common interest in ensuring that one of Europe's largest development projects is a success.

For some people, the priority has been the completion and operation of vital elements of the area's commercial infrastructure; others have been concerned to ensure that the all-important, social aspects of a developing riverside community attract equal attention.

Most at least agree that Docklands is beyond the point where division and disagreement are useful. Despite inevitable, continuing friction, the emphasis is on working together as much as possible for the benefit of the entire community.

'We all fought with the development corporation but, if you can't beat them, join them', says RITA BENSLEY, a lifelong docklands resident and prime mover in the Docklands Business Initiative. It was formed last year principally to lobby government for a go-ahead to the Jubilee line underground extension.

Mrs Bensley, despite other community commitments, jumped in to help. Though she held many doubts about the way the area was being developed, she believes the underground extension is vital for dockland's future.

She helped organise a petition for the extension among the local community - which raised 2,500 signatures on the first day - and then accompanied it to Downing Street. The government, she says, has to show its support for the east end of London and docklands in particular, which 'many people think has closed down'.

Mrs Bensley is also chairwoman of the Association of Island Communities, a docklands umbrella group which has been fighting for local people for more than 50 years. She is administrator at a local community centre and also helps out at an old people's club room.

'The Jubilee line will bring in more employment, some of it for local people. If it goes ahead, it will be wonderful news. The people of docklands have been forced to live on a building site for ten years. We've had the coffee, now its time for the cream'.

Another high-profile activist is PAT WARD, a former Barclays Bank man who came to docklands in the mid-1980s to establish his bank's presence in the area. Made redundant, he joined the Isle of Dogs Community Trust, becoming its director in 1991.

The trust, which was set up in 1989, raises funds from the business community and distributes them within the local community. It has to date given about Pounds 200,000 to a variety of organisations. Bids for grants of up to Pounds 1,000 are considered and the trust also has other funds to help larger self-help projects. Mr Ward says:'We are helping to create permanent links between local business and community which are of benefit to everyone'.

LES WEBBER is chairman of the Docklands Business Club, which was started in 1984 by dockland's 'early settlers' when wellington boots were still the order of the day.

Mr Webber, the club's third chairman, says it has suffered in the last 18 months, given the recession and lack of confidence in docklands. But membership has again started to rise, with around 450 names now on the corporate register. They include Ogilvy & Mather, BT, Tate & Lyle and recent newcomers Texaco.

A prime role for the club, apart from lobbying everyone and everything from ministers to Commons select committees on behalf of the business community, is to encourage networking between local companies. He believes the club's future is now secure.

Mr Webber is also well-known locally as an executive of Builder Group, the trade press publishers, which has itself invested Pounds 8m in docklands premises.

'I believe in banging the drum for Docklands. Unless people already here get off their backsides and shout about the attractions, then our own investment in the area is being eroded,' he says.

One of the single biggest investments in Docklands is London City Airport, perched on the Royal Docks and run by WILLIAM CHARNOCK, managing director. Mr Charnock arrived in early 1988, the year after the airport opened for business. The controversy surrounding the airport was still in full swing and, as the complex has expanded, its impact on the local community has been the raw material of local newspaper headlines.

Mr Charnock charts the enormous changes at the airport which have taken place since his arrival, and is confident that, despite the turbulence surrounding its expansion, its future is now looking brighter. Speed of access to the airport, despite its proximity to the city, has been unreliable because of the weak transport links and the slim choice of destinations has inevitably restricted its popularity. No big airline operators have come in, and, as yet, there are no domestic, onward links.

But several new services are to be introduced in the coming months and there will be faster access from the City following the opening of the new docklands highway - 'from the City and on to your aircraft in 30 minutes. We are compact, quick and friendly,' he claims.

Last year the airport handled 187,000 passengers and he hopes 1993 will see up to 300,000 people passing through. The airport, however, is still loss-making, a position which is unlikely to change until between 450,000 and 500,000 opt for London City. Capacity is two million a year.

Mr Charnock, who has a staff of 90 (around 450 people, in all, work around the airport complex) is optimistic - 'the year has started very well, the airlines appear increasingly confident and things are looking up.' Construction group Mowlem has not, however, yet managed to find a partner to share its load.

Someone who has been involved in the development of docklands a great deal longer is PETER TURLIK, head of strategic affairs at the London Docklands Development Corporation. A town-planner by profession, he was involved in docklands before the LDDC was born, firstly via secondment to the Greater London Council's docklands joint committee and then to the Department of the Environment.

He joined the LDDC on its formation in 1981 as director of industrial development, with responsibility for vesting in the corporation local land, and for setting up the docklands enterprise zone - 'that first Christmas there were 12 of us in the old Fred Olsen shipping building and we kept getting lost every time we tried to get off the Isle of Dogs through the old timber yards.'

Mr Turlik later became director of business development and by 1988 was overseeing efforts to attract overseas investment. As head of strategic affairs, he oversees the LDDC corporate plan, which is submitted annually to the DoE.

He thinks the corporation has used the last two, difficult years well to retrench and prepare for the next phase of expansion - 'I sometimes have to pinch myself. Things have gone tremendously quickly. We had a lot of luck in the 1980s and we've also had our bad breaks. But we don't give ourselves enough credit for what has been achieved.'

Docklands is a new experience, however, for ROGER COLOMB, a managing director of Texaco, the energy group, which moved into Canary Wharf only weeks ago. As the man in charge of administration, he has been responsible for relocating 1,000 staff, the last arrivals moving in to Westferry Circus at the beginning of March.

Mr Colomb may be a new face and Texaco may be a new name locally but he is keen to make his company an integral part of the local community as soon as possible. He says Texaco has an opportunity to play an important role in the life of Docklands, financially as well as socially, and intends to do so.

The company, with a 1,000-year lease on 230,000 sq ft of office space, has already forged links with local organisations. Mr Colomb says there is 'a real opportunity for us to put down some real roots.' But his own, daily journey from Buckinghamshire takes him only ten minutes longer than to Knightsbridge so he does not intend to move in to live.

ERIC SORENSEN might be forgiven for thinking he has been chief executive of the LDDC for ten years, rather than just over two years. He arrived from the Department of the Environment as docklands faced its biggest crisis and readily admits that the going has been extremely tough - 'the recession, the collapse of Canary Wharf, uncertainty over the Jubilee line and the DoE's own decision not to relocate here gave the impression that the government had become bored with the whole process. It was not the case, but that's how it appeared.'

Mr Sorensen, 48, was at the DoE from 1967 until he arrived at the DoE and has wide experience of urban regeneration. He was private secretary to Mr Peter Shore when he was environment secretary and spent three years as head of the Merseyside task force, developing local regeneration projects.

By 1987 he was head of the urban policy unit in the cabinet office and became deputy secretary of the DoE's housing and construction command before joining the LDDC. Last year was, he says, the low point but he is optimistic that docklands will soon be back on course.

There is also a new spring in the step of MALCOLM HUTCHINSON, managing director of the Docklands Light Railway. After a rough start which made it something of a local laughing stock, the DLR is regaining its reputation as a modern, fast passenger service linking docklands and the City.

With Brown Root, the US engineering contractors, appointed to manage the system's expansion over the next three years, Mr Hutchinson says:'I am a great fan of Docklands. I am confident it has a bright future and I am determined, with the help of my staff, to play a full part in the area's regeneration'.

London Docklands Development Corp GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P4111 Local and Suburban Transit P4581 Airports, Flying Fields, and Services P9532 Urban and Community Development CMMT Comment & Analysis P6552 P4111 P4581 P9532 The Financial Times London Page 16 1733
Survey of London Docklands (8): Journey between polar extremes - Dining in Docklands Publication 930521FT Processed by FT 930521 By SIMON PARKES

A HUGE parcel arrived in the post, full of leaflets, magazines and a thick business directory about Docklands. All of them made more than a passing reference to The London Docklands Guide - Good Food Awards.

So, I thought, this cannot be the wilderness painted by other guides such as Michelin and the Good Food Guide. Apart from a little oasis around Butler's Wharf, they had virtually nothing to recommend in Docklands.

Thus, with two such polar extremes fixed in mind, I set off to find discover the latest facilities for dining in Docklands. And where better to begin than at that rallying point to a new business empire: Canary Wharf. But this turned out to be a rather fleeting visit. There's a pizzeria and - in Cabot Place - a capucchino bar and an open-plan concession for snacks ('just changed hands,' commented the security guard). I managed to find 'The Cat & Canary' - and a ship, The Lady Gwynfred - and that was my lot.

To raise morale, I felt that the Docklands Guide blue-riband award-winner, Manzi's seafood restaurant at Turnberry Quay, might do the trick. After all, the original in Leicester Street has been going strong since 1928.

This new rotunda-shaped building off Pepper Street looks fine from outside: good views across the quay - and warm brickwork. Inside, it is less convincing with the flourishes of modern Italian dining (sharp lighting, murals) offset by ersatz bistro furniture and tableware, even fake gingham.

Sadly, the food is a marked return to the bad old days. Breton fish soup was divvied up with provencale rouille; the colour and, come to think of it, the taste of Germolene and it did little to boost a dreary liquid. Chicken livers with bacon tasted satisfactory, but looked appalling - slung onto the plate with shrivelled lettuce.

Fish - their speciality - proved hugely disappointing. Some salmon was completely dried out; and a section of plain-grilled turbot, if more moist, arrived with a large blob of Hollandaise that tasted like rancid butter-icing. The sauce chef's night off? Let's hope so.

Image seems to be a prime consideration in Docklands. New roads that have yet to acquire buildings already have lush rows of trees and shrubs. Materials used in architecture - steel and glass - help to create an image of optimism and a bright future.

Even the occasional dockside Georgian dwelling has had its brickwork cleaned so that any glimpse of history now looks sharp and positive.

Commercial Road - the Limehouse section - at least has yet to receive such attention. It looks ripe for demolition. But it is here that you'll find one of the oldest gastronomic links with an earlier era.

'Old Friends' is the descendant of the original venue on West India Dock Road, established just after the war to provide Cantonese food for visiting Chinese sailors. With its tassled lanterns and flowery wallpaper, there's none of today's Soho-chic about it.

The food is acceptable rather than exceptional; standard Cantonese dishes without the balance or sharpness that you might find in London's Lisle Street.

Three doors up is Tai-Pan - more modern, lighter and airier and offering some spicier Szechuan dishes alongside more predictable items: soft shell crab with peppercorn salt, Mongolian lamb wrapped in lettuce leaves and wonderful chow nor lok, king prawns in their shells in a tomato sauce.

Heading east towards Silvertown, Beckton and London City Airport, I suddenly realised what a conundrum Docklands has become as I stood near Gallions Reach and looked back at the Isle of Dogs.

Here are still vast expanses of land and water virtually untouched with almost village-like communities tucked away that seem a million miles removed from the shimmering towers and wharves further west. Fine dining doesn't exist, but occasionally you will find an established neighbourhood restaurant doing well.

The Woolwich Tandoori in North Woolwich, next to a boarded-up pub and an empty Chinese take-away, represents the East End rather than Docklands, and is doing a rather more down-to-earth job than most of the eateries you will come across.

Here, tandooris and biyranis are fine, served pleasantly in a gold and mirrored cave.

This cosy air is in marked opposition to the colder, more brittle edge of the newer hotels in the area. The Britannia International has both Jenny's Carvery and Crompton's a la carte restaurant, neither of which manage to either comfort or challenge. Anywhere still cooking dishes (let alone describing them thus) such as Canard a l'Orange or Supreme de Volaille Kiev deserves a suspicious gaze.

My theory was born out by a very pedestrian dish called 'Surf & Turf' which not even king prawns and tarragon butter sauce could revive.

Across the river in Rotherhithe, the Three Crowns Restaurant in the Scandic Crown Hotel is barely an improvement. The centre piece is a smorgasbord for both lunch and dinner. It is unremarkable save only for the fact that the owners are Scandinavian - and you'd have thought they would know a thing or two about such buffets. (I bet you don't get rough-cut smoked mackerel, flavourless ordinary prawns and dreary wilting garnishes at the Oslo or Helsinki branches).

Thankfully, there is hope on the horizon and his name is Sir Terence Conran. Not content with Le Pont de Ia Tour and the Blueprint Cafe at the Design Museum, there's a new, more informal eatery, the Cantina del Ponte. And, as if that wasn't enough, a new chop-house in Butler's Wharf to be unveiled later this year.

I have no desire to inflate Sir Terence's reputation at the expense of anyone else's, but it should be said that this is one of the few places where you are virtually assured of being served something more than half way decent. And, the combined effect of this cluster of eateries seems to me to be in the true spirit of what Docklands is all about. A model of cool, well-designed business efficiency, reflecting the spirit of the age.

The new Cantina del Ponte majors well on fresh pizzas and calzone, simple grills and fresh salads. A risotto of tomatoes and baby spinach was heavenly; and a calzone with three cheeses, aubergine and basil had perfect texture and taste.

Just when you think you've had your fill, there's also a collection of shops to enable you to take the experience home with you in the shape of fine olive oils, basil plants and fresh breads. Conran has proved that you can take a site and bring in enough people to make it pay.

Others have not been so fortunate. With buildings filling (then emptying) on the Isle of Dogs, restaurateurs have seen their business ebb and flow.

The Waterfront on South Quay Plaza has recently closed and is now doing bar snacks, instead. And a ship, Le Passarelle, also moored on South Quay as a restaurant, was towed away earlier this month.

Facilities for dining in Docklands, it would seem, are unlikely to stabilise until there's a more firmly rooted population in place. Then, hopefully, restaurant entries in the London Docklands Guide might overlap more often with those in the Good Food Guide.

Local establishments include:

Manzi's Seafood Restaurant, Turnberry Quay, off Pepper Street, Glengall Bridge, E14. Tel: 071 538 9615.

Old Friends, 659 Commercial Road, E14. Tel: 071 790 5027.

Tai-Pan, 665, Commercial Road, E 14. Tel: 071 791 0118.

Woolwich Tandoori, Pier Road, North Woolwich, E16. Tel: 071 511 2818.

Britannia International Hotel, 163, Marsh Wall, E14. Tel: 071 515 1551.

Scandic Crown Hotel, 265, Rotherhithe Street, SE16. Tel: 071 231 1001.

Le Pont de la Tour, 36d Shad Thames, Butlers Wharf, SE1 Tel: 071 403 0267.

Cantina del Ponte, 36c Shad Thames, Butlers Wharf, SE1. Tel: 071 403 5403.

Blueprint Cafe, Design Museum, Shad Thames, Butlers Wharf, SEl, Tel: 071 378 7031.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P5812 Eating Places P5813 Drinking Places CMMT Comment & Analysis P6552 P5812 P5813 The Financial Times London Page 16 1356
Survey of London Docklands (6): Plenty of surprises - old and new - Leisure Facilities Publication 930521FT Processed by FT 930521 By MICHAEL SKAPINKER

I WAS on my way to the Surrey Docks Watersports Centre when I came across the story of the whale oil which lit the lamps of London.

At the Watersports Centre, you can sail, canoe or windsurf if you are over eight years old and are able to swim 50 metres in light clothes. The whale oil story, less bracing but more intriguing, is on a Docklands Heritage information panel near the water's edge at Greenland Dock.

It says: 'Two hundred years ago, you would have been unhappily aware of the awful stench of rotting whale blubber. Each spring, small ships left here for six-week dashes to the icy, storm-blown Arctic waters off Greenland. Half-rotten whale blubber was brought back in casks and boiled in huge coppers on this dockside to extract the oil. Much of it was used to light the streets of London.'

Two hundred years later, the lights are no longer lit with oil and whale hunting is frowned upon. The part of the dock on which the information panel appears is now called Rainbow Quay after 'the Greenpeace ship Rainbow Warrior which campaigned against whaling.'

In 200 years' time, visitors to Docklands may find the story of the twentieth century anti-whaling movement as interesting as the oil lamps of London. For the record, there are 11 watersports centres in London Docklands, a 200-metre artificial ski slope, three urban farms and dozens of pubs and restaurants, some of them very old. There is no leisure activity in Docklands, however, which beats wandering around.

Docklands has acquired an awful reputation in some quarters. Some of it comes from local activists who objected to the breakneck development of the 1980s. More of it comes from people who have never been there but have persuaded themselves, all the same, that it has been a disaster.

Many critics, in this newspaper as much as any other, have excoriated the architecture, the 'toy-town' Docklands Light Railway and much else. I cannot understand why. It is true that some of the office building is uninspiring. But some of the shopping areas in restored wharf buildings are excellent. And much of the residential development, low-rise and brick, is a distinct improvement on most of what was done all over London in the three preceding decades.

Some of the outlying buildings at Canary Wharf - with their transplanted, straight-out-of-the-box, North American look - do bear a startling resemblance to the hotels at the Euro Disney theme park outside Paris.

But the queues are shorter at Docklands than at Euro Disney and entertainment is available at a fraction of the price. The Docklands Light Railway swoops and veers like a fairground ride. It is easier on the stomach, however, than Disney's Big Thunder Mountain and you can get on and off as you like.

If the threat of IRA bombing had not ended plans to allow visitors to ride the lift to the top of the Canary Wharf tower, there would be no reason to visit the Paris theme park at all. Unlike Euro Disney, Docklands' surprises are uncontrived. They slip from the layers of the past that you unravel on each visit, rather than from the minds of the Disney imagineers.

So far-reaching were London's trading links, that there is hardly a foreign visitor who is not going to find some Docklands connection. There is, for example, the Norway Cut Swing Bridge, Finland Quay East and West India Quay. Did you know that the Mayflower, which took the Pilgrim Fathers to America in 1620, departed from the riverside quarter of Rotherhithe? Or that its captain, Christopher James, is buried in St Mary's churchyard, a short walk from the river?

Rotherhithe is a quiet, clean, settled-looking place. The residents could make much more of their American connection if they wanted to. Perhaps they don't. The restored 16th century pub, which was once called the Spread Eagle, is now called the Mayflower. But apart from a small plaque explaining this, it doesn't shout about it.

The parish church of St Mary, Rotherhithe, has been a site of Christian worship for nearly 1,000 years. The current church, splendid in the spring sunshine, replaced one built in the twelfth century. It was completed in 1715 and was designed by John James, an associate of Sir Christopher Wren. It beats Sleeping Beauty's Castle.

A little more care could certainly have been taken to ensure that transport links were developed along with the offices and homes of the new Docklands, rather than as an after-thought.

Some of the new transport facilities are already looking run-down. Island Gardens station, through which many tourists pass on their way to the Greenwich foot tunnel, was strewn with litter when I was there.

But all these moans to some extent miss the point. To travel through Docklands is to realise that it has often been a place of chaos, of failed dreams, of wild booms and busts, of perseverance against the odds.

German air raids in September 1940 destroyed all the timber in Surrey Docks - 350,000 tons in one night.

The flames were visible 30 miles away. On 57 consecutive nights from September to November 1940, 25,000 bombs rained down on Docklands, making them the most heavily bombed civilian target in the country. But they stayed open.

Once a gateway of world trade, Docklands' calm waters are now free for windsurfing. On dry land, others had new aspirations for the area. No longer the destination of the world's trading ships, some - such as Paul Reichmann, Canary Wharf's failed developer - believed London's docklands could be the electronic gateway to Europe, providing the offices from which business would be done at the tap of a computer key.

Those new developers have added another layer to the Docklands story. Future visitors might see the results as the high-water mark of a greedy time, whose nemesis was both inevitable and richly-deserved. Or they might regard the new buildings, homes and shops as a testament to a much-maligned decade, in which, for all the accompanying chicanery and rough manners, a somnolent nation awoke, however briefly, to the promise of the future. Both interpretations assume the failure of Docklands in its newest guise. But that failure is not inevitable; Docklands in its high-tech, electronic form, might rise again. What, after all, is a four or five-year property slump in a city as old as London?

In the Docklands Visitor Centre, a history of the area tells us that London's prosperity died out after 410 AD But the city boomed again, even if did take 300 years.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC P7941 Sports Clubs, Managers, and Promoters P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P7999 P7941 P6552 The Financial Times London Page 16 1155
Survey of London Docklands (4): New mood of realism as market stirs again - Housing Publication 930521FT Processed by FT 930521 By MICHAEL CASSELL

THE story of the rise and fall of docklands is neatly encapsulated in the experiences of its housing market.

In the late 1980s, the vision of glitzy, futuristic apartments, their yuppy inhabitants swilling chilled wine behind unwelcoming, electronic gates appeared to say it all - despite the fact that nearly two-thirds of all house sales went to local residents on more modest means.

Docklands was perceived as the front-edge of a brave new world, built on a booming financial services market in which the smart but inexperienced could make big bucks and buy a swanky home just a few minutes drive from the office in the Porsche Carrerra.

But the bubble burst and with it went the over-confident, over-mortgaged newcomers who had been ready to pay up to Pounds 600,000 for a new lifestyle and a private mooring. The values of homes built for trading, rather than for living in, collapsed and the story turned sour.

It was not a story exclusive to Docklands but, somehow, the calamity seemed all the worse, given the promise which had been held out by its creators and promoters.

A recent report from Ancer, the property consultants, showed just how bad things became. Last year, it says, only 230 new residential properties were sold in Docklands - well under a third of the total sold in 1990 and the lowest number recorded in more than a decade.

At the worst point, the London Docklands Development Corporation calculated that around 1,500 completed homes were looking for buyers, approaching 15 per cent of the the total number completed since the LDDC arrived.

Prices, on average, have fallen by between 30 and 35 per cent across the board, not only an indication of collapsing demand but of the absurd, temporary overheating which hit the market in the latter stages of the 1980s' boom.

A new mood of realism means that apartments like those at Clippers Quay, originally valued to be sold at Pounds 195,000, are being sold now for Pounds 120,000.

Now, after a prolonged period in which owners and developers have licked their wounds, there are some signs that the worst is over and that the local housing market is again stirring.

Caution, however, is now the overriding theme. Mr Mike Bignell, the LDDC's head of property marketing, says there was a surge in interest among buyers at the very start of the year but it tailed off in March - 'it's been up and down. We are still waiting to see if there has been any significant improvement again,' he says.

There is also some evidence that, once again, interest is beginning to rise among foreign investors, who played a role in the market during the late 1980s.

At the same time, it appears that sales of residential property for investment purposes are accounting for a growing proportion of those transactions which are taking place.

Investors can expect a gross rental return of up 12 per cent on their property, against a realistic return on more central London properties of up to 9 per cent, according to one local agent.

Some of the property experts are already proclaiming the Docklands revival is underway. Ancer reports a 'sudden surge' in sales, with clear signs of renewed strength after four years of weakness. But however optimistic the noises, there is little doubt that any increase in activity will take a considerable time to work through in terms of rising prices.

After the knocks of the late 1980s and early '90s, the LDDC is gearing up for renewed activity in its role as vendor of development land. Over the next year it plans the phased release of 13 development sites, a significant increase on the previous twelve months.

The return of private developers is seen as essential, given the ever-present dangers of housing estate 'ghettos' if development is left only to the public sector. A mixed community of housing remains the driving philosophy for the area.

The LDDC is negotiating land deals in several locations, including a key site at Beckton. It is also releasing a development site in the same area by organising a competition among builders.

Price alone will not be enough to win. A developer will be selected on the basis of the proposals submitted, with attention paid to the type of housing and the time-scale envisaged among other factors - 'we are not yet ready to consider tendering sites,' says Mr Bignell.

Builders are certainly renewing their interest in the area, albeit cautiously. Having sold nearly all the properties on its Hithe Point development, Barratt London has started work on Sovereign View, a former wharf on Surrey Docks, which will provide 275 homes and apartments. Prices will start as low as Pounds 65,000.

Fairview New Homes is also building in Docklands for the first time, developing 113 low-cost starter homes on a 2.4-acre waterside site at Timber Wharves, Isle of Dogs.

Prices on the development, which has yielded the first land deal of such a size for four years, will start as low as Pounds 39,000.

There are also some housing association schemes under way, a sector of the market which for a time has represented the only meaningful development in the area.

The LDDC is now, above all, looking for a period of equilibrium in local housing. It wants to place the emphasis, initially, on low-cost housing and will then release what it describes as higher quality locations as market conditions permit.

It is particularly excited about the prospects for developing an urban village to the south of Royal Victoria dock.

The LDDC envisages 300 housing units being built over the next two and half years and - in a rolling programme - wants to see 7,000 homes and a complete community in place within seven years. The infrastructure is already in place.

Such schemes point to the way ahead. There are few who believe that the return of super-luxury property developments is, once again, just around the corner.

A great many fingers have been burned in the last three or four years and Docklands realises that it will not be in its own interests if the local housing market is exposed to another damaging debacle. According to Mr Bignell, 'this time round, it is all going to be much more down-to-earth.'

London Docklands Development Corp GB United Kingdom, EC P9532 Urban and Community Development P1521 Single-Family Housing Construction P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P9532 P1521 P6552 The Financial Times London Page 15 1109
Survey of London Docklands (5): A return to favour - Industrial Sector Publication 930521FT Processed by FT 930521 By VANESSA HOULDER

FOR most of the 1980s, the industrial sector's role in regenerating London Docklands was eclipsed by the rapid growth of the office sector. But in the wake of the slump in the Docklands' office market, the sector's potential is being re-examined.

The London Docklands Development Corporation has commissioned Knight Frank & Rutley, chartered surveyors, to consider the prospects of attracting light industry to the area. Although the findings have not yet been published, they are likely to show that there is scope for putting more emphasis on industry property.

'The fact that the LDDC is now seriously considering industrial development in the Docklands is logical and sensible in view of the infrastructure and spending already accorded to the area and given the state of the office property market,' says Mr Stephen Mallen, head of property research at Knight Frank & Rutley.

A greater emphasis on industrial development would build on an established base. The docks traditionally had numerous industries related to the import and export of goods, even though it was rarely associated with heavy manufacturing. North Woolwich and Silvertown are still important areas for manufacturing and service industries. For instance, long-established companies include Pura Foods, refiners and bottlers of edible oil, in Leamouth and Tate & Lyle, sugar refiners and Charringtons, the brewers in Silvertown. That said, the past two decades saw a rapid decline in industrial activity. The closure of the Docks left many riverside industries with no long term prospect of survival.

Some critics of the LDDC think that it did not do enough to tackle the continued decline of the area's traditional industrial and manufacturing base - 'the LDDC has consistently encouraged and even accelerated this decline. Rather than use its power and resources to assist local industries, the Corporation tends to see them as a barrier to regeneration,' said the Docklands Consultative Committee, a group set up by the area's local authorities.

The LDDC did not accept this criticism. It pointed to the support it gave businesses through serviced industrial sites at Cody Road, north of Canning Town, Crescent Street in E16 and the Poplar Business Park, together with the London Industrial Park that Newnham set up in Beckton. Various government grants such as City Grant are also available.

The LDDC has earmarked 42 acres of land for light industry. The proposed sites are four acres at Quebec Way in Surrey Docks, seven acres at Cody Road, north of Leamouth, 11 acres on the south side of King George V Dock and 20 acres on the south side of Albert Basin.

SOME critics suggest that these sites may have problems attracting occupiers. Access may be too difficult and the high building and landscaping requirements too onerous to suit some potential users.

However, a change in policy which allowed industrial or distribution companies to use better sites might ultimately be considered a wasted opportunity. Having invested heavily in upgrading the area - some Pounds 500m has been spent on infrastructure in the Royal Docks - it holds out the hope of attracting prestigious occupiers, such as a business park or corporate headquarters.

A decision to encourage industrial development would, in some respects, be a break with the past. The architects of the dockland's regeneration had an ambivalent attitude to manufacturing industry. They did not want to 'condemn Docklands to its past,' as Mr Reg Ward, its first chief executive put it. The efforts made by local authorities in the 1970s to bring back manufacturing industry were considered to be futile. Moreover, the Docklands, they believed, had the potential to be more than a routine industrial development area.

The LDDC got the chance to prove this in 1982, when the Government set up an Enterprise Zone covering 460 acres on the Isle of Dogs and Lea Estuary. This gave a ten-year exemption from rates and allowed 100 per cent tax write-offs against the capital costs of non-residential buildings.

Although the government had expected the Enterprise Zone to encourage industrial expansion, the LDDC believed it could also be used by office users, who would be attracted by the ability to write-off their investment against tax.

'We used the EZ in an entirely different and somewhat 'maverick' way . . . to make the Isle of Dogs an office and commercial location rather than confirming it as an industrial one,' said Mr Ward.

Builders put up flexible 'business space,' which could be used for activities ranging from warehousing, production, research and development and offices. Although these were mostly successful, the emphasis increasingly switched to office developments in the 1980s as the service sector expanded and land values rose.

Nonetheless, the area had successes in bringing in high-tech industry, particularly in the case of the telecommunications industry. For instance, a teleport was opened at North Woolwich to handle satellite communications for financial business services.

National newspapers were also important investors. The printworks of the Daily Mail, Guardian, Daily Telegraph and the FT moved in to Surrey Quays, Millharbour, Isle of Dogs and Leamouth. They were attracted to Docklands by its enterprise zone status, its good communications, large sites and easy accessibility to Central London.

The tax breaks have now expired, although the other attractions remain. The effort to attract new users to the area is likely to focus on the limited number of manufacturing activities that benefit from proximity to central London.

Potential occupiers may include perishable food processors serving the Central London market or businesses associated with telecoms, data storage and transmission and computer centres. There may also be demand from warehouses for distributors serving the London market, although planners might be reluctant to give permission to buildings with relatively low aesthetic appeal or employment potential.

The difficulties of attracting industry to the inner cities means that more industrial development cannot play more than a partial role in the regeneration of the docklands. But the area's greatly improved infrastructure and its over-supply of offices makes a good case for putting a greater emphasis on industrial development.

London Docklands Development Corp GB United Kingdom, EC P1541 Industrial Buildings and Warehouses P6552 Subdividers and Developers, Ex Cemeteries P9532 Urban and Community Development CMMT Comment & Analysis P1541 P6552 P9532 The Financial Times London Page 15 1055
Survey of London Docklands (3): Dockland defenders remain hopeful - Office Property Publication 930521FT Processed by FT 930521 By VANESSA HOULDER

A YEAR after Canary Wharf's insolvency sent shockwaves through the Docklands office market, opinion remains sharply divided about the sector's prospects for recovery.

The sceptics doubt whether the area has a chance of ever living up to the ambitious plans that were hatched in the second half of the 1980s. They believe that the high-profile problems of Canary Wharf and other schemes have dealt a lasting blow to the Dockland's prestige. Moreover, the oversupply in the City and weak demand from the financial services sector will severely constrain take-up of offices. At the current rate of take-up, there is well over a decade's supply of available office space.

But its defenders believe that within the next five years, its fortunes could be transformed. They think it can still fulfil its potential of being London's third business centre, along with the City and West End.

The area's champions draw encouragement from improvements to the Docklands transport system and the arrival of large tenants such as Texaco at Canary Wharf.

Moreover, they contend that Canary Wharf's move into administration was less damaging to tenant demand than was generally assumed, notwithstanding the decision of some of the Wharf's tenants, such as American Express, to abandon their move.

Interest in the Docklands from potential tenants actually increased after the insolvency of Canary Wharf, according to Mr Roger Parsons of Knight Frank & Rutley, chartered surveyors - 'we had a lot of people come and have a look purely out of curiosity. It raised expectations that there were incredible deals because everyone assumed the Docklands was on its knees.'

Indeed, demand for office space in the Docklands showed slight signs of improvement last year. Take-up increased to 332,000 sq ft in 1992, compared to 192,500 sq ft in 1991, according to Knight Frank & Rutley.

The trend also improved in the first quarter of 1993, which saw the highest quarterly take-up rate of 213,503 sq ft, since the second quarter of 1990. However, it is unclear how sustainable this improvement will be. Some 90 per cent of the first quarter's take-up was the result of moves by three occupiers from in or immediately around the Docklands. The largest deal was struck by the London Borough of Tower Hamlets which in February announced that it would move its town hall to a 140,000 sq ft building in the East India Dock development owned by NCC, the Swedish development group and SPP, the Swedish insurance group. In addition, Northern and Shell, the publishers, bought the 54,000 sq ft Merchant House in City Harbour and East London Telecommunications let 27,000 sq ft at Limeharbour Court.

Another notable deal in the first quarter of 1993 was the LDDC's sale of three acres in March to the Lord Chancellor's Department, which announced plans to build a 150,000 sq ft courtroom complex in East India Dock. Other office tenants that have taken space in the past year include Endsleigh Insurance, which rented 24,000 sq ft in South Quay Plaza II in 1992, the Dept. of Transport, Sunrise TV and the National Therapeutic and Osteopathic Society.

THE Western International University of Phoenix, Arizona agreed last summer to open a London campus that would occupy 20,000 sq ft of Glengall Bridge, a scheme by London and Edinburgh Trust and BICC Development at Millharbour. Another educational establishment, the European Language School, also took space in the scheme.

The attraction of the Docklands for most incoming tenants is price. Typically, a new tenant would pay Pounds 10 per sq ft for a ten year lease, with 2 1/2 years rent free. Furthermore, the Uniform Business Rate of around Pounds 10-15 per sq ft for top specification space is cheaper than in the City and West End rates where it averages some Pounds 23 per sq ft. However, the 1995 revaluation, which is based on rental values in April 1993, will reduce this differential.

Although there has been a trickle of small and medium-sized deals in the past year, the Docklands will need to attract large office users before it has a realistic chance of recovery. Some 57 per cent of available space of available space in the Isle of Dogs (which totals 2.87m sq ft) is in buildings over 200,000 sq ft.

Unsurprisingly, Canary Wharf dominates the market. It accounts for half the available space in the Isle of Dogs, which in turn accounts for 84 per cent of the LDDC area.

Its prospects remain highly uncertain. Since the project moved into administration, it has attracted little interest from tenants. Even with an economic recovery and a resolution of the uncertainty surrounding the Jubilee Line extension, the prospects of filling up the 4.5m sq ft project are daunting.

Recovery in the Docklands property market is likely to lag the rest of the London office market. Agents blame the meagre level of interest from potential tenants on the intense price competition from other parts of London.

'The problem is that there hasn't been a good reason to come to the Docklands. The competition has been so strong,' says one agent.

The best hope of Docklands property owners is that once the large new office blocks in the City of London have been taken up, large occupiers will decide to move down the river to the docklands, rather than opt for second hand accommodation that lacks air-conditioning. Another faint source of comfort for Docklands' landlords is that the development pipeline has virtually dried up. Moreover, there is little likelihood that the large development projects that have already won planning permission will come to fruition.

With its modern office space and improving infrastructure, the Docklands should benefit from a pick-up in tenant demand as the economy recovers. But even the most optimism observer of the Docklands believes that pulling its property market out of its current position will be a long, slow haul.

A Small Business Ideas Day, sponsored by John Laing, the construction group, will be held on Wednesday, June 9 at the Skylines development. Details of the open day and exhibition are available on 071 497 9707.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P1542 Nonresidential Construction, NEC CMMT Comment & Analysis P6552 P1542 The Financial Times London Page 15 1057
Survey of London Docklands (2): Envy of the capital - Transport Investment Publication 930521FT Processed by FT 930521 By RICHARD TOMKINS

DOCKLANDS is caught in a trap when it comes to transport. On the one hand, it wants to secure investment in more and better links by stressing to government the inadequacy of the existing infrastructure. On the other, it seeks to lure investors by telling them how good its transport is now.

Amid the resulting confusion, the overriding impression is that the first of these two versions is correct: that the government has let docklands down by failing to provide better transport. Indeed, the developers of Canary Wharf have directly attributed that project's financial failure to the inadequacy of the links between central London and the Isle of Dogs. But are these criticisms founded on reality, or myth?

To answer the question, it is necessary to go back to the beginning of the docklands story. It is sometimes forgotten just how modest the government's ambitions for docklands were when it set up the London Docklands Development Corporation to regenerate the area in 1981. Then, all it foresaw was the construction of 8.5m sq ft of light industrial premises. Clearly, east London's transport needs had to be looked at afresh, but at that time it seemed enough to improve the roads and install the 'toy town' Docklands Light Railway on a shoestring budget of Pounds 77m.

That might have been the end of the story had it not been for the Reichmann brothers. But when they and their private property company, Olympia & York, arrived in 1987 with their grandiose scheme to turn the the Isle of Dogs into London's third business centre (the other two being the West End and the City), the transport plans were thrown into chaos.

Considering the scale of the demands being made on it, the government reacted with astonishing speed and generosity. Within months, it was carrying out detailed work on the options for improving docklands' transport infrastructure. The East London Rail Study was completed and published in January 1989, and in November that same year a Bill to authorise construction of the Jubilee Line extension went before parliament. More than Pounds 3.5bn was committed to roads, the Underground line and the upgrading of the Docklands Light Railway.

It is true that not all this transport investment went smoothly - but then, transport investment rarely does. Services on the Docklands Light Railway, for example, were continually disrupted by the upgrading programme.

Under pressure from Olympia & York to do something about the railway's poor performance, the government eventually stripped control of the line from London Transport and installed a new management team headed by Sir Peter Levene, the former procurement chief at the Ministry of Defence.

Worse, the Jubilee Line was never built. But that was not the government's fault. Since it was the Canary Wharf development that had given rise to the need for the line, and since Canary Wharf would be the main beneficiary of it, the government had secured an undertaking from Olympia & York that the company would make an up-front contribution of Pounds 100m towards the line's Pounds 1.8bn construction cost.

When Olympia & York collapsed, the company defaulted on its agreement, and construction of the line has been postponed ever since. In other respects, however, docklands is now looking well-served by transport. The main features of the infrastructure include:

Roads: the Pounds 1.65bn roads and river crossings programme is virtually complete, with many roads opening ahead of schedule.

The single most important road, the underground Limehouse Link, opened six months ahead of schedule this month greatly improving communications between docklands and the City. Barely a mile long and costing Pounds 255m to build, it is reputed to be pro rata one of the most expensive pieces of road in the world.

Docklands Light Railway: Initially built for Pounds 77m, the Docklands Light Railway is now approaching the end of an Pounds 800m programme of improvement and expansion. It has already been extended to Bank in the City; an eastwards extension to Beckton opens in October; and a southward extension across the river to Lewisham is planned.

The line is now performing reliably, with capacity greatly increased.

Jubilee Line Extension: the government has pledged that construction of the Jubilee Line extension from central London to docklands will begin as soon as the private sector produces its promised Pounds 100m contribution.

Last month the European Investment Bank said it was prepared to plug the gap by lending Pounds 100m to whoever took over Canary Wharf from the administrators, but the decision is likely to take some time to translate into action.

London City Airport: a Pounds 5m runway extension made it possible to introduce jet services at the privately-owned London City Airport in docklands last year, leading to an expansion of services.

The airport will also get a boost from the opening of the Limehouse Link, which it claims will put it within a 15-minute taxi ride of Tower Bridge in the City.

RiverBus: a fleet of RiverBuses provides a novel form of urban transport along the Thames between docklands and central London, operating at 15-minute during peak hours.

So where does that leave transport in docklands today?

Whatever else it may be, it is the envy of the rest of the capital - and indeed, the rest of the country - which has been starved of transport investment to pay for the Pounds 3.5bn being lavished in east London.

With Canary Wharf in administration and the rest of docklands blighted by the surpluses overhanging the property market, it could reasonably be argued that the real question is no longer whether the amount being spent on transport in the area is too little, but whether it is too much.

Office and industrial property; housing, page 3 A growing community: movers and shakers who are helping to make Docklands work, page 4 Amenities; leisure facilities; eating out, page 4

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P1611 Highway and Street Construction P4111 Local and Suburban Transit P4489 Water Passenger Transportation, NEC P4581 Airports, Flying Fields, and Services P1629 Heavy Construction, NEC P9532 Urban and Community Development CMMT Comment & Analysis TECH Services & Services use P6552 P1611 P4111 P4489 P4581 P1629 P9532 The Financial Times London Page 13 1059
Survey of London Docklands (1): May the best dream win - After serious setbacks for London Docklands - a Pounds 10bn, world-class experiment in urban regeneration - recent events seem to indicate that the worst may now be over Publication 930521FT Processed by FT 930521 By MICHAEL CASSELL

LONDON DOCKLANDS has always needed its visionaries and dreamers. The last three years, however, have been more likely to generate nightmares.

The 5,000-acre riverside sprawl to the east of the British capital, a world-class experiment in urban regeneration and a marble-clad totem to the forces of free enterprise, was born at the dawn of Britain's entrepreneurial renaissance.

The economic boom years of the 1980s gave it a flying start as it set about showing the sceptics and the small-minded how government and business could unite behind a Pounds 10bn budget to transform dereliction and decay into a 21st century, wealth-creating community.

But as the debate intensified over the logic of a strategy which built skyscrapers first and roads second, so the swift transition from economic boom to recession piled problem upon problem down in the docks.

The story of how golden promise turned to dark despair has been well catalogued. An upstart rival to the centuries-old City on its doorstep, dockland's ability to usurp the traditional role of the Square Mile was always in question. The collapse of the UK economy - and in financial services and the south-east, in particular, seemed to provide the answer.

Land which had doubled in value between 1986 and 1987 was now unsaleable, along with the apartments which had boasted jacuzzis and six noughts on the end of their asking prices. Companies which had been on the brink of moving in, pulled back; new development ground to a halt as the inventory of empty space rocketed,

The crisis of confidence seemed to spread to those with responsibility for docklands, both within the London Docklands Development Corporation and in Whitehall. The Department of the Environment, having raised expectations, decided against moving its own staff to the area.

The spectacular collapse of Canary Wharf, the most grandiose property scheme from the world's most ambitious property developer, also threw into doubt the future of the crucial, Pounds 1.8bn Jubilee line underground extension. The government expressed regret - from the sidelines.

'Last September was the low point,' recalls Mr Eric Sorensen, LDDC chief executive. 'There seemed to be very little more that could be added to our problems.

Beyond Docklands, the public impression was that the entire project had shut down, that the area was set to revert to a wilderness. Yet the doom and gloom about what was always going to be a long-term project, with its fair share of ups and downs, may always have been a bit overdone.

In Dockland's darkest hour, more than 61,000 people were living there, a similar number were employed there and 2,500 businesses were operating there. The economic fault lines could not detract, either, from the sheer physical achievements of some of the most enterprising developers and designers.

But the statistics were of little comfort in the immediate crisis. Mr Sorensen says, however, there was 'no point in whistling the wind.'

The best contribution was to press on with efforts to ensure that the all-important transport links were developed - 'it was not just about physical construction; it was psychologically important for the whole area that we should make progress,' he adds.

THE LDDC has worked hard in helping to get the Jubilee line extension back on track and, following agreement by the European Investment Bank to inject Pounds 98m into the project, believes an important corner has been turned. A final go-ahead, however, is still awaited.

Other, recent events have conspired to offer some hope that the worst really might be over. Canary Wharf could soon be out of the hands of administrators, while the ill-fated docklands light railway is improving its unreliable image and expanding its network.

The opening this month of the controversial docklands highway, a dual carriageway running from the city to the London City Airport, will transform access, although there are fears of serious congestion around Tower Hill.

The airport itself is set for a significant expansion of its continental services, though the complex remains a loss-making enterprise and operators, Mowlem, have failed to find a partner to help them bear the cost. Its claim of being a 15-minute taxi ride from the city should now, at least, be met.

There are also hopes that the end of recession will more generally stimulate economic activity and allow Docklands to put its worst period behind it. Caution prevails but there are some straws in the wind.

Local housing agents say that there has been an improvement in interest among potential buyers and the commercial property market - sagging under the weight of unwanted floorspace - is being encouraged by the arrival of some significant occupiers.

Texaco, the US-owned energy group has just moved 1,000 headquarters staff from London's west end into Canary Wharf while Credit Suisse First Boston has brought in another 1,500. Canary Wharf, the giant 'white elephant,' now has 6,500 people working in it. Other arrivals include Peat Marwick, Morgan Stanley and Tower Hamlets council, with its 800 staff. Mirror Group Newspapers is also said to be considering a move into Docklands.

The LDDC itself says it is no longer keeping its head down on the development front. As the authority vested with ownership of 550 acres of local land, it is again marketing some of its sites in a new air of optimism. It intends to release 25 small building sites this year and is brushing off previously aborted plans for an exhibition centre close to the Royal Docks. The corporation is also keen to pursue ambitious plans for an urban village on a 70-acre site in the same locality. It could ultimately be home for up to 5,000 people.

Housing developers are also back in business, with Barrett London and Fairview New Homes developing nearly 400 new homes between them. The emphasis, in contrast to the 1980s, is going to be on lower-cost housing, with prices on one of the developments starting at only Pounds 39,000.

Foreign investment interest is also perking up, with the Bank of China recently completing the purchase of a block of 48 apartments on the Isle of Dogs. New efforts to attract inward investors from overseas are being made by the LDDC.

The position of Docklands as a vital, commercial bridgehead to the east of London was recently endorsed by the government when it announced plans for a 'golden corridor' of development running along both sides of the Thames as far as Tilbury and Sheerness.

The proposals were immediately welcomed by the LDDC as evidence of the government's commitment to building up the economy to the east of the capital. Mr Michael Howard, the Environment Secretary, slapped down 'critics and doom mongers' to suggest that Docklands will resume its growth once the economy gets under steam.

He was announcing the creation of a task force to spearhead long-term economic development along the so-called East Thames Corridor. The intention is to have a planning framework in place by March 1994.

Already, however, there are critics of the proposals, who point out that such a strategy could suck development away from the west of London. They also stress that much of the relevant land to the east of the capital has been ravaged by years of industrial misuse.

Though Mr Howard spoke of docklands as a 'great success story,' his plans for further expansion to the east clearly revealed that lessons have been learned in high places.

A key to the plans will be in ensuring that the development of the corridor co-incides with an extensive infrastructure programme. A more flexible strategy will also mean less concentration on office developments and the provision of a broader range of integrated projects.

The minister envisaged 100,000 new homes and 100,000 extra jobs in a decade. Virtually the same targets are shared by Docklands itself. May the best dream win.

London Docklands Development Corp GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P4111 Local and Suburban Transit P4581 Airports, Flying Fields, and Services P9532 Urban and Community Development CMMT Comment & Analysis P6552 P4111 P4581 P9532 The Financial Times London Page 13 1390
The Property Market: The end of the Georgian reign - The exodus of companies from Edinburgh's traditional business district Publication 930521FT Processed by FT 930521 By JAMES BUXTON

Charlotte Square in Edinburgh, as the firms which operate there like to boast, is the best business address in Europe. Yet many of its occupants are deserting it.

In the past 18 months the whole of the south side of the square has become vacant, there are empty buildings on both the east and west sides, and a building on the north side is for sale. As the 'for let' signs proliferate, some people fear that parts of the square, designed by Robert Adam, may soon look tatty.

In one sense Charlotte Square is only the most spectacular victim of the downturn in the Edinburgh office property market which has left vacant about 200 Georgian houses used as offices throughout the city's New Town. In a normal market about 40 would be vacant, says Mr Andy Irvine of Jones Lang Wootton, the surveyors.

But Charlotte Square's plight is also the product of another trend which many people involved in the city's development regard positively: the expansion of the business district from the New Town out to Lothian Road to the south.

Edinburgh's prime office district has traditionally comprised the dumbbell formed by Charlotte Square to the west and St Andrew Square to the east, connected by George Street. Most firms in the New Town occupy Georgian houses.

In Charlotte Square the solicitors Dundas & Wilson until recently occupied five houses. The tightly enforced rules for grade A listed buildings meant that to install computer wiring meant getting planning permission to drill holes in thick walls. But the area was prestigious and there was virtually nowhere nearby with good open-plan accommodation.

The constraints on development in the New Town, the slow process of getting planning permission and the lack of office space elsewhere meant that when businesses expanded in the late-1980s rents for the best office accommodation trebled from Pounds 7 per square foot in 1985 to Pounds 21 in 1989.

It was not until late 1991 that alternative accommodation attractive to Charlotte Square occupants became available, when Saltire Court, a high quality stone-faced office building in Castle Terrace off Lothian Road was completed.

Saltire Court went ahead after Edinburgh district council reversed years of opposition to fostering the financial sector, and released the site. The first occupants were Martin Currie and KPMG Peat Marwick from Charlotte Square, followed by Dundas & Wilson.

But Scottish Metropolitan, the developer, was unlucky: by the time Saltire Court was finished the approaching recession made companies wary of moving, especially if they were unable to find tenants to take on their existing properties. (Some tenants of Saltire Court are still paying rent on their former properties, in addition to the headline rent of Pounds 22-Pounds 23 per sq ft in the new building).

Only now, after solicitors Shepherd & Wedderburn decided in March to move from Charlotte Square, is 92 per cent of Saltire Court's 175,000 sq ft of office space let.

But people working in Saltire Court and other developments near Lothian Road will still feel slightly out on a limb until a long-standing 10-acre site between the Caledonian Hotel and the Sheraton fills up. Progress there is at last being made, sufficient to allow Mr Jim McFarlane of Lothian and Edinburgh Enterprise (Leel), the local enterprise company, to claim that Edinburgh is 'bucking the recession'.

Work began in January on a Pounds 38m conference centre, designed by the post-modernist architect Terry Farrell and capable of holding 1,200 people, on a site on Morrison Street. The conference centre has long been considered the cornerstone to the development of the Lothian Road site.

The council and Leel set up a company to build and run the conference centre and to develop the rest of the site, after the original consortium of Sheraton Securities and Greycoat, which was to have developed the centre, collapsed.

That gave Standard Life, the Edinburgh-based life assurance company, the confidence to choose Lothian Road to accommodate its expansion. It should shortly get consent for a 270,000 sq ft office complex on a site which it will buy from the council and from Queens Moat, owner of the Caledonian Hotel.

Further south Scottish Widows is seeking planning permission for a new 800,000 sq ft headquarters on the 6.5-acre Port Hamilton site, which it would buy from the receivers of Ford Sellar Morris, another victim of the property collapse.

Meanwhile a joint venture between Cala and Morrison Group, both Scottish companies, says it will proceed with a 190,000 sq ft office building close to the conference centre. The consortium is confident of obtaining a pre-let before going ahead.

If all these schemes go ahead the central business district will have been extended southwards and the Lothian Road area will have become Edinburgh's main area for large city centre offices. But though Saltire Court has shown that Edinburgh firms can be tempted out of their Georgian splendour, some people doubt whether occupiers requiring up to 30,000 sq ft of space will rush to abandon the New Town.

Mr Peter Smolka of Hillier Parker points out that several offices with open-plan space are finished or under construction behind Georgian facades in the New Town.

'I'd say there are enough developments under construction to retain a lot of prospective tenants in the traditional core. Suddenly Edinburgh has become a city that offers a choice of accommodation,' he says. Rents have come back to Pounds 16.

So where does this leave Charlotte Square? Mr Smolka believes the council will have to allow more alterations behind the facades if the exodus is to be halted. Significantly, Mr David Murray, a Scottish tycoon, recently obtained consent to redevelop the Roxburghe Hotel on the corner of the square, mainly as offices.

Mr Roy Durie of chartered surveyors Ryden says there are a number of smaller occupiers - 'public relations companies, advertising agencies and professional firms' - which would dearly like a Charlotte Square address.

Jones Lang Wootton's Mr Irvine says: 'I am not at all gloomy about Charlotte Square.' Despite the attractions of open-plan offices, Georgian houses 'work very well for businesses with up to 25 people.'

But though sentiment in the market has begun improving, Mr Irvine says many businesses which would like to move are locked into long leases.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 12 1089
Parliament and Politics: Hearse leads taxis past parliament in protest Publication 930521FT Processed by FT 930521

A horse-drawn hearse leads a procession of London taxis past Parliament yesterday. The cabbies drove to the Department of Transport offices to protest at plans to license the capital's minicabs

GB United Kingdom, EC P4121 Taxicabs NEWS General News P4121 The Financial Times London Page 11 61
Parliament and Politics: Labour MPs split in Maastricht vote Publication 930521FT Processed by FT 930521 By IVOR OWEN and DAVID OWEN

MR JOHN MAJOR, the prime minister, was congratulated by cabinet colleagues in the Commons last night after the Maastricht bill secured its third reading in spite of a revolt by 41 Tory backbenchers.

The bill now goes to the House of Lords.

Mr John Smith, the Labour leader, saw his party split three ways - with the majority following the official party line by abstaining.

Former cabinet ministers Mr Tony Benn and Mr Peter Shore were among the 65 Labour backbenchers who went into the lobby against the bill while four Labour MPs voted for it.

Mr Kenneth Baker, the former Conservative party chairman and home secretary, was among five government backbenchers who abstained.

Closing the debate, Mr Norman Lamont, the chancellor, underlined the prime minister's recent declaration that sterling would not rejoin the European exchange rate mechanism for several years.

Stressing that it would be two or three years until the German economy adjusted fully to the massive strains of reunification, the chancellor said: 'Until it does, it would not be appropriate for us to contemplate rejoining the exchange rate mechanism'.

To government cheers, he insisted: 'It would not be in our economic interests - and the government will not do it.'

Opening the debate Mr Douglas Hurd, the foreign secretary, sought to win over Tory doubters with a further assurance that Maastricht was not a blueprint for a European superstate.

The foreign secretary used the 205th hour MPs have spent debating the measure in the past year to warn passionately of the dangers of eroding European competitiveness and to set out his vision of the Community's future.

In a confident and relaxed address he assured Euro-sceptics that their fears of a 'lurch' towards a superstate were 'misguided.' He concluded with a clarion call to MPs before the bill moves to the Lords to 'find again' the decisive will to act together in the 'great matters' where there was a common European interest.

On the eve of the first anniversary of the bill's second reading Mr Hurd devoted much of his speech to concerns that the costs imposed on employers by the social chapter could have serious consequences for European competitiveness.

'More and more people' were concerned about the high labour costs European companies were faced with compared with their international competitors.

The social chapter could 'place in jeopardy many of the achievements of the last 14 years in freeing our labour market from restrictions which destroy jobs'.

His views were rejected by Mr Jack Cunningham, shadow foreign secretary, who said the government's decision to exclude the social chapter was 'fundamentally unacceptable.'

Referring to the manoeuvring that had forced the government to remove the protocol containing Britain's social chapter opt-out, he said Labour had secured a 'valuable legal situation' that may yet allow British workers to use the European Court to gain access to the benefits of the chapter.

Mr Cunningham said Labour could not support the bill because of the government's decision to exclude the social chapter. But since the party's efforts had procured for MPs an opportunity to vote on the chapter's principle, it would be 'obtuse' for Labour to vote against it.

To do so would deny the social chapter to workers in Europe as well as Britain.

GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 11 579
Parliament and Politics: Rifkind pressed on Swan Hunter Publication 930521FT Processed by FT 930521 By Our Political Staff

ALL FIVE Tyne and Wear local authorities yesterday asked Mr Malcolm Rifkind, the defence secretary, for an assurance that the Swan Hunter shipyard would be allowed to complete work on three frigates.

The leaders of the councils said they would not enter into talks about the government's proposed enterprise zone if the shipyard closed with the loss of 2,200 jobs.

The yard's receivers are to meet union officials today and are expected to put forward a plan for redundancies.

The councils said Swan Hunter was 'at the heart of the north's economy and its loss would be simply devastating to the whole of the north-east'.

Completion work on the Type-23 frigates Westminster, Northumberland and Richmond would keep Swan Hunter going into next year and ensure continuing employment for a significant part of the workforce. It would also provide more time to find a new owner for the yard.

The only definite result so far from talks between the receivers and the Ministry of Defence is that the yard can continue working at least up to the end of next week.

Unions are poised to take a tough stance if the yard is forced to close after this and if attempts are made to complete the frigates elsewhere.

Union conveners from shipyards throughout the country are to meet in Carlisle tomorrow to discuss a call for Swan Hunter workers to resist efforts to move the frigates and for workers at other yards to refuse to complete them.

Mr Stephen Byers, the Labour MP whose Wallsend constituency takes in the shipyard, said he had been told Swan Hunter creditors and local banks had already lined up receivers to move into companies owed money.

He said the 'fall-out' from the Swan Hunter crisis would be devastating for the whole north-east England economy.

'Within the next two weeks we shall witness the spectacle of further companies going under in the wake of the collapse of Swan Hunter.'

Letters, Page 20

Swan Hunter GB United Kingdom, EC P3731 Ship Building and Repairing COMP Company News P3731 The Financial Times London Page 11 365
Parliament and Politics: Labour backs SIB on bank regulation Publication 930521FT Processed by FT 930521 By DAVID OWEN

RESPONSIBILITY FOR bank regulation should be taken away from the Bank of England and could eventually be given to the Securities and Investments Board, Labour said yesterday.

Mr Alistair Darling, the party's spokesman on City affairs, said the SIB should have overall responsibility for financial services regulation and should be given powers of enforcement.

'In time it might be appropriate to fuse the banking supervisory body with the SIB,' he said.

But he maintained he was not advocating the 'importation' of a US-style Securities and Exchange Commission. 'We need a solution designed for the UK.'

Mr Darling used an Edinburgh speech to the Scottish region of the London Stock Exchange to outline Labour's stance on a range of financial service issues and to call for an overhaul of the 1986 Financial Services Act.

He said Labour would support the establishment of the proposed Personal Investment Authority provided it met certain basic standards - 'not least a majority on a supervisory body should come from outside the industry'.

He called for the new law on insider dealing to be tightly defined and for offenders to be prosecuted with 'as much speed as the due process of law will allow.'

If the new law was satisfactory, Labour would favour dealing with misdemeanours which fell short of criminal conduct through the regulatory system.

But he said current government proposals lacked 'clarity and precision.' The committee of MPs scrutinising the proposed new insider dealing legislation will begin their deliberations shortly.

GB United Kingdom, EC P6011 Federal Reserve Banks P6231 Security and Commodity Exchanges NEWS General News P6011 P6231 The Financial Times London Page 11 287
Parliament and Politics: Nuclear transport by air studied Publication 930521FT Processed by FT 930521

TOUGHER controls on the air transport of radioactive material are being considered by the International Atomic Energy Authority, transport minister the Earl of Caithness said yesterday.

During the debate Labour's Lord Jenkins of Putney accused the government of seeking to conceal the existence of 13 separate shipments of British plutonium to Japan.

GB United Kingdom, EC P4953 Refuse Systems P4522 Air Transportation, Nonscheduled TECH Safety & Standards P4953 P4522 The Financial Times London Page 11 88
Parliament and Politics: Lords move on homes for elderly Publication 930521FT Processed by FT 930521

THE government last night accepted a Lords backbench move to allow councils to refuse to sell homes reserved for the elderly. At present applications by a sitting tenant to buy such a property are referred to the environment secretary.

But junior environment minister Lord Strathclyde accepted a change, moved by Tory peer Lord Monk Bretton during the Housing and Urban Development Bill's report stage, allowing town halls to decide, subject to any appeal by tenants.

GB United Kingdom, EC P9111 Executive Offices GOVT Government News P9111 The Financial Times London Page 11 106
Parliament and Politics: Naval reserve centres 'safe' Publication 930521FT Processed by FT 930521

THE government yesterday denied speculation that 23 sea training centres could close as part of its review of the Royal Naval Reserve.

Junior armed forces minister Viscount Cranborne told the Lords at question time that such rumours were 'very wide of the mark indeed'.

He stressed: 'We greatly value the sea-going role of the RNR and the value we place on it has certainly been taken into consideration in the review.'

GB United Kingdom, EC P9711 National Security GOVT Government News P9711 The Financial Times London Page 11 100
Parliament and Politics: Scottish water future uncertain Publication 930521FT Processed by FT 930521

THE PRIME minister yesterday again refused to say whether Scottish Water will be privatised.

Mr Major said during question time that the government was still considering the options set out in a consultation paper.

'When we have finished our consideration we will announce our results,' he told Mr George Foulkes, Labour MP for Carrick, Cumnock and Doon Valley.

Mr Foulkes urged him to end the 'uncertainty' and give a 'clear and unequivocal pledge that there will be no privatisation of water in Scotland'.

Scottish Water GB United Kingdom, EC P9611 Administration of General Economic Programs P4952 Sewerage Systems P4941 Water Supply NEWS General News P9611 P4952 P4941 The Financial Times London Page 11 126
Parliament and Politics: Major rejects criticism over ERM Publication 930521FT Processed by FT 930521 By IVOR OWEN

MR JOHN MAJOR, the prime minister, gave a further assurance in the Commons yesterday that there was nothing in the Maastricht treaty obliging Britain to rejoin the European exchange rate mechanism, Ivor Owen writes.

He rejected a suggestion by Sir Peter Tapsell (C East Lindsey), a prominent opponent of the treaty, that at an earlier stage he had been advised that the provision entitling Britain to opt out from monetary union did not extend to the exchange rate mechanism.

Stressing that he had not been given any fresh advice, the prime minister insisted that it had always been the case that the treaty did not require Britain to rejoin the exchange rate mechanism.

Mr Major said the treaty made clear that the UK government retained responsibility for monetary policy in stages two and three of economic and monetary union so long as it did not participate in a single monetary policy.

Mr Major said the government would not 'enter into a single currency unless and until this House has explicitly approved it'.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 11 208
Parliament and Politics: 'New agenda' on crime urged Publication 930521FT Processed by FT 930521 By ALAN PIKE, Social Affairs Correspondent

THE silent majority must speak up against crime, Mr Tony Blair, shadow home secretary, told the Police Federation conference in Blackpool yesterday.

He called for a new national consensus based on the principles of partnership and shared responsibility where 'police, public and politicians work together to construct a modern agenda for safer communities and to turn despair into hope.'

Mr Blair won a more enthusiastic reception from the conference than Mr Kenneth Clarke, home secretary, when he addressed it on Wednesday. Delegates cheered loudly at the end of a speech in which Mr Blair said an entirely new approach was needed in the fight against crime. Public morale on the issue was low, the Crown Prosecution Service was under pressure and court procedures were outdated. Parts of the criminal justice system were teetering on the brink of collapse.

'A country that prides itself on its standards and its civilisation is tolerating a dangerous and growing sickness that makes a mockery of those standards and undermines those civilised values.'

Mr Blair said that while only a fool would excuse the commission of crime on the grounds of an individual's upbringing, only a bigot would deny the impact of broken homes, poverty, unemployment, poor housing and lack of education. Attacking the government's record, he said there was no point in complaining about juvenile crime and then shutting down residential home places; or admitting that there was a relationship between the economy and crime and then cutting 300,000 training places since 1981.

The federation's first debate on freemasonry yesterday led to the defeat of a motion declaring that membership of the movement was not conducive to the independence of the police. Proposers of the motion had sought a compulsory registers of freemasons in the police service.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 11 332
Parliament and Politics: Hurd in passionate Maastricht defence Publication 930521FT Processed by FT 930521 By DAVID OWEN and IVOR OWEN

MAASTRICHT IS not a blueprint for a European superstate, Mr Douglas Hurd told MPs yesterday as the bill implementing the treaty moved towards its third Commons reading.

The foreign secretary used the 205th hour MPs have spent debating the measure in the past year to warn passionately of the dangers of eroding European competitiveness and to set out his vision of the Community's future.

In a confident and relaxed address he assured Euro-sceptics that their fears of a 'lurch' towards a superstate were 'misguided.' He concluded with a clarion call to MPs before the bill moves to the Lords to 'find again' the decisive will to act together in the 'great matters' where there was a common European interest.

On the eve of the first anniversary of the bill's second reading Mr Hurd devoted much of his speech to concerns that the costs which the social chapter would impose on employers could have serious consequences for European competitiveness.

'More and more people' were concerned about the high labour costs European companies were 'having to shoulder' compared with their international competitors.

The social chapter could 'place in jeopardy many of the achievements of the last 14 years in freeing our labour market from restrictions which destroy jobs.'

His views were rejected by Mr Jack Cunningham, shadow foreign secretary, who said the government's decision to exclude the social chapter was 'fundamentally unacceptable.'

Referring to the manoeuvring that had forced the government to remove the protocol containing Britain's social chapter opt-out, he said Labour had secured a 'valuable legal situation' that may yet allow British workers to use the European Court to gain access to the chapter's benefits.

Turning to the future, Mr Hurd referred to a need to build a more decentralised and diverse community that was both outward looking and 'free trading.'

The European Commission should be more accountable and the role of national parliaments built up. 'We are no longer heading for a community in which diversity will be smothered or smuggled away.'

But in one of numerous interventions from Tory and Labour Euro-sceptics the foreign secretary sidestepped a demand for assurances that control of foreign and defence policy would not in time move to the EC. 'I cannot say what will happen in 1996,' he said.

He also mocked Labour for its decision to abstain on last night's vote after so many hours devoted to detailed scrutiny of the Maastricht bill. Labour MPs had come to Westminster 'from all parts of the kingdom' to abstain in person, he said.

Mr Cunningham said Labour could not support the bill because of the government's decision to exclude the social chapter. But since the party's efforts had procured for MPs an opportunity to vote on the chapter's principle, it would be 'obtuse' for Labour to vote against it. To do so would deny the social chapter to workers in Europe as well as Britain.

Brandishing a copy of the bill with more than half of its wording highlighted in lime-green marker pen, he said Labour had had 'some considerable success' in amending the measure. The government had 'sidled away' from so many votes recently that 'we have lost count.'

XG Europe GB United Kingdom, EC P9721 International Affairs P9199 General Government, NEC GOVT Government News P9721 P9199 The Financial Times London Page 11 570
Competition brings confusion to gas: Strains over industrial fuel supplies Publication 930521FT Processed by FT 930521 By DEBORAH HARGREAVES

NEXT MONTH the Monopolies and Mergers Commission is likely to decide whether households will be able to choose their own gas supplier. But any move to open up the gas market further will have to be made cautiously.

The rapid growth of competition to industrial users in the past three years has caused embarrassing problems for British Gas and brought the threat of legal action from rival suppliers.

The commission has been investigating the gas industry since last August and its report will indicate whether British Gas's pipelines should be sold off and whether competitors can enter the household supply business.

Competitors now account for about 10 per cent of the gas flowing through British Gas's 162,000 miles of pipelines. In November 1991 competitors supplied 1,000 industrial sites. By last September that had grown to 5,000. Since then the market has been opened up further and rivals now serve 45,000 sites.

Competitors have captured a quarter of British Gas's industrial market and the company is expecting the number of sites supplied by its rivals to pass 100,000 by the end of this year.

But no-one predicted how rapidly competition would develop and there have been problems. British Gas is responsible for reading the meters at all industrial sites - whether the sites are supplied by British Gas or its competitors.

Once it has read the meters it bills the rival shippers for transport charges, telling them how much gas they have supplied. The shippers, which may supply several sites belonging to one company, must then invoice their own customers.

British Gas's computers have not been able to cope with the extra work, however. A backlog of invoices has built up meaning that some shippers have not been billed for gas since November. As a result the shippers have either been unable to invoice their own customers or have had to present them with estimated bills.

The changeover from British Gas to rivals has also been difficult for customers. One department store chain received bills from British Gas - with the threat of cutting off supply - long after it had moved to a competitor.

A group of shippers has written to British Gas to complain and several have threatened legal action for breach of their transport contracts. But Mr John Huggins, director of gas transportation at British Gas, said the situation was improving. The company is spending Pounds 10m on updating its computer in the next six months so that it will be able to deal with the increased workload.

Mr Cedric Brown, British Gas's chief executive, said yesterday: 'We're making very good progress and in a couple of months we should be up to date on the invoices.'

But the company's competitors still complain that the more business they capture, the more delays it brings in billing.

Mr Huggins said: 'It's a huge task. You can get as many as 10,000 pieces of information for the bigger shippers, and if one is missing, you can't send them a bill.'

Just monitoring the additional gas flows has proved a logistical headache.

'It's been an explosive growth and we just didn't have a system designed to cope with that quantity,' Mr Huggins said.

British Gas relies on its 47 competitors to tell it by fax or telex how much gas they are pushing through the network each day. But this information is given five days in arrears. There is no way of knowing to whom the gas belongs once it is in the pipelines.

At the moment, British Gas provides back-up gas if shippers are short. But if the commission recommends that pipelines be separated off - as has been suggested by the regulator - the transport arrangements will have to be more carefully policed.

British Gas GB United Kingdom, EC P9631 Regulation, Administration of Utilities P4923 Gas Transmission and Distribution TECH Services & Services use COMP Company News P9631 P4923 The Financial Times London Page 10 675
County pacts hit Tories Publication 930521FT Processed by FT 930521 By JOHN AUTHERS

CONSERVATIVES have been excluded from power in most of the 26 English counties where no party has overall control.

The pattern of control in the counties is uneven, and several councils are relying on informal arrangements between Labour and Liberal Democrats without electing a new council leader.

A survey by Municipal Journal found eight counties which were formerly under Conservative control now with either Liberal Democrats or Labour forming, or set to form, a minority administration. They are: Cambridgeshire, East Sussex, Hampshire, Hereford and Worcester, Lincolnshire, Suffolk, Warwickshire, and West Sussex.

Since Municipal Journal went to press Norfolk, where the Conservatives are still the largest party, has also announced that Labour will take the chairs of its committees. Labour was unable, however, to strike a deal with the Liberal Democrats, so progress will need to be made on an issue-by-issue basis and the council has no formal leader.

The most formal co-operation yet announced is in Berkshire, where Labour and the Liberal Democrats provide joint leaders. Municipal Journal adds that Liberal Democrats could run Devon and Dorset, where they narrowly missed overall control, with independent backing. Labour is continuing minority rule in Shropshire, following a suggestion of a three-way pact.

The one exception to the Conservative rout so far is Wiltshire, where the Conservatives have provided the chairperson and Labour the vice-chairperson, even though the Liberal Democrats were only two seats short of an overall majority.

Both parties have denied any formal Lab-Con pact, and administration will be on an 'issue-by-issue' basis.

Changes in policy have been sharp. In Cambridgeshire, which now has a Liberal Democrat chairperson and a Labour vice-chairperson, the council has announced plans to abolish a transport charge for sixth-form students introduced by the outgoing Conservative administration, and to provide a 'cash injection' for education and social services.

Counties which were hung before the election - Avon, Bedfordshire and Oxfordshire - are continuing the practice of not electing permanent committee chairpersons but allowing the jobs to rotate between the parties.

GB United Kingdom, EC P8651 Political Organizations P9199 General Government, NEC GOVT Government News P8651 P9199 The Financial Times London Page 10 367
Hackers due for sentencing today Publication 930521FT Processed by FT 930521

COMPUTER HACKERS broke into an international network belonging to SG Warburg, the investment bank, Southwark Crown Court was told yesterday.

Mr Neil Woods and Mr Karl Strickland broke into one of the systems operated by Warburgs and gained full system manager status.

The two had access to the bank's computers around the world, Mr James Richardson, prosecuting, told the court. Radio pager numbers and home telephone numbers of Warburg computer staff were found by police at Mr Woods' home.

The two men had swapped network user identifications and authorisation codes enabling them to dial into other systems belonging to other companies such as British Telecom, education establishments and the European Community, Mr Richardson said.

Mr Woods, of Oldham, Greater Manchester, and Mr Strickland, from Liverpool, pleaded guilty at an earlier hearing to conspiring to obtain telegraphic services dishonestly. They also admitted engaging in the unauthorised publication of computer information.

Mr Woods also admitted causing damage to a computer owned by Central London Polytechnic.

The two men are expected to be sentenced today.

In March this year Mr Paul Bedworth, a student from Ilkley, West Yorkshire who joined the two men in some of their hacking activities, was acquitted of offences under the Computer Misuse Act.

His trial was the first test of the legislation since it was passed in 1990.

SG Warburg Group GB United Kingdom, EC P9211 Courts P6029 Commercial Banks, NEC COMP Company News P9211 P6029 The Financial Times London Page 10 255
Labour is urged to boost training Publication 930521FT Processed by FT 930521 By LISA WOOD, Labour Staff

EDUCATION and training should go to the top of a future Labour government's spending priorities, Mr John Edmonds, general secretary of the GMB general union, said yesterday.

Mr Edmonds was speaking at a forum attended by representatives of Training and Enterprise Councils, which administer government-financed training programmes in England and Wales, and by young members of his union.

The GMB is among the small number of unions seeking to raise the issue of training among its own members and the trade union movement. Last year it and the TGWU general union proposed that all workers should have an entitlement to five days' training every year.

Mr Edmonds said no political party had grasped the importance of training and education, and he questioned some Labour policies, such as obliging companies to spend a certain amount on training.

He said the Labour party should be capable of switching its spending priorities in favour of education and training. 'In the short term it would mean taking money from other spending areas, but there would be a payback in the medium term,' he said.

Mr Michael Nixon, chief executive of North London Tec, said the agenda for Tecs was getting longer and broader. 'But we must not take our eye off youth training and training for unemployed adults,' he said.

Mr Nixon said Tecs had lobbied hard for more money for training - not always with success. Tecs were still aware that there was concern about the quality of programmes, but they had improved since Tecs were set up.

GB United Kingdom, EC P8651 Political Organizations P8331 Job Training and Related Services P9411 Administration of Educational Programs NEWS General News P8651 P8331 P9411 The Financial Times London Page 10 301
Smith applauds 'full and active' union role in party Publication 930521FT Processed by FT 930521 By ROBERT TAYLOR, Labour Correspondent

MR JOHN SMITH, the Labour leader, said yesterday he was 'proud' of the unions' links with his party and hoped they would continue to play a 'full and active' role in it.

He believed this autumn's party conference would approve the 'twin-track strategy' of one member, one vote for the selection of parliamentary candidates and the creation of a 'much larger participating membership'.

Mr Smith said at the launch of the political-fund ballot of the AEEU engineering union that he was convinced that the links between party and unions remained as valid and as strong as ever. 'The debate is about modernising our relationship, not ending it,' he said. 'I want to encourage the involvement of as many trade union members as possible in all the party's activities.'

The 900,000-strong AEEU is the first big union to hold its political-fund ballot. Under the 1984 Trade Union Act all unions with political funds separate from their general financial funds must win the approval of their members for the political funds by secret ballot at least once every 10 years.

Over the next 12 months all 31 unions with such funds will ballot their members on their continuation. In 1985-1986, when the first such ballots took place, 20 unions acquired political funds for the first time.

Not all unions with political funds are affiliated to the Labour party. Unaffiliated unions include the Nalgo local government union and the Civil and Public Services Association.

Any union that wishes to finance lobbies of parliament or campaigns against government policy is required by law to do so from a legally recognised political fund.

There are now 51 out of the total of 301 unions - covering just under 6m members - which have political funds totalling Pounds 18m. Only 29 of the 51 are affiliated to Labour, but they provided just over Pounds 4m of the party's Pounds 6m income in 1991.

AEEU leaders stressed yesterday that they had decided to hold an early political-fund ballot to ensure that the government met 75 per cent of the Pounds 200,000 cost to the union. Two months ago the Department of Employment decided to phase out state funding of such ballots by April 1996.

GB United Kingdom, EC P8651 Political Organizations P8631 Labor Organizations NEWS General News P8651 P8631 The Financial Times London Page 10 407
Friedrich makes record Pounds 2.3m Publication 930521FT Processed by FT 930521 By ANTONY THORNCROFT

A PAINTING by the greatest German romantic artist of the early 19th century, Caspar David Friedrich, sold for Pounds 2.3m at Christie's in London yesterday. The buyer was the J. Paul Getty Museum of Malibu, California.

'Spaziergang in der Abenddammerung' (A Walk at Dusk) depicts a lone figure, perhaps the artist, contemplating a megalithic tomb at twilight. The price, at the low end of the estimate, was a record for Friedrich.

This is the first 19th century German painting to be acquired by the Getty museum.

The sale of this small, academic work is more justification for Christie's gamble in presenting for the first time a large two-day auction of German and Austrian art in London. Christie's expected Pounds 9m and was on target for Pounds 18m.

In Christie's modern art section a painting of 'Sunflowers' by Emil Nolde was on target at Pounds 661,500, while among the Old Masters 'Lucretia' by the Renaissance artist Lucas Cranach I doubled its estimate at Pounds 309,500.

Christie's announced yesterday that on June 23 it will sell the first book printed in English. 'The Recuyell of the Histories of Troy' was printed by William Caxton in Bruges, Belgium in 1473, three years before he set up shop in the precincts of Westminster Abbey. It is expected to sell for up to Pounds 500,000.

The book is being sold by the Marquess of Bath, who has two copies. He is disposing of 18 other duplicate copies from his library and expects to make Pounds 1m.

GB United Kingdom, EC P5999 Miscellaneous Retail Stores, NEC P5199 Nondurable Goods, NEC MKTS Sales P5999 P5199 The Financial Times London Page 8 287
WH Smith pays PM libel damages Publication 930521FT Processed by FT 930521

WH Smith, the newsagent chain, has paid libel damages to the prime minister over the recent New Statesman and Society article which linked him with Westminster caterer Ms Clare Latimer, it was confirmed last night.

The out of court settlement of actions brought by Mr Major and Ms Latimer against the company as distributors and retailers of the magazine article was made six weeks ago, a spokesman for WH Smith said.

Ms Latimer has also been paid damages.

WH Smith Group GB United Kingdom, EC P9211 Courts COMP Company News P9211 The Financial Times London Page 8 109
Rise in jobless subsidies proposed Publication 930521FT Processed by FT 930521

INCREASED subsidies for companies willing to take on long-term unemployed people and for the jobless individuals themselves have been proposed by Mr Frank Field, chairman of the Commons social services committee, and Professor Dennis Snower, professor of economics at Birkbeck College, London.

Under the Workstart scheme, to be tested in four areas soon, companies will be given Pounds 60 a week in the first half year of employment and Pounds 30 in the second half.

Mr Field and Prof Snower view this subsidy as insufficient. They suggest:

Offering companies a voucher of Pounds 1.50 per week for each week beyond six months that an individual has been unemployed, up to a maximum of Pounds 150 per week.

Offering individuals who had been jobless for at least four years and who find jobs paying at least Pounds 60 a week, a subsidy up to the level of their welfare benefits, provided that the employer is able to show that the job amounts to a net increase in the size of the workforce.

GB United Kingdom, EC P6231 Security and Commodity Exchanges P8331 Job Training and Related Services NEWS General News ECON Employment & unemployment P6231 P8331 The Financial Times London Page 8 211
Banks 'may not meet loan demand' Publication 930521FT Processed by FT 930521 By ROBERT PESTON

UK BANKS are unlikely to be able to meet any significant increase in demand for loans over the coming few years, IBCA, Europe's leading credit rating agency, warned yesterday, Robert Peston writes.

An IBCA report on the seven biggest UK banks warns of a limited form of 'credit crunch' when the UK economy starts to grow, unless banks' profitability exceeds what most have achieved since 1985.

The report says banks need to earn annual post-tax profits equal to 12 per cent of equity if they are to make normal dividend payments and increase their assets, mostly loans, by 2 per cent a year after adjusting for inflation. A 2 per cent growth rate would be low by recent historical stan-dards.

The seven leading UK banks have earned only a 7 per cent annual return on equity over the past seven years. Only Lloyds and Bank of Scotland have consistently earned more than 12 per cent in the period.

UK Banks - The Good News and the Bad. IBCA, 071 247-5761.

GB United Kingdom, EC P6021 National Commercial Banks NEWS General News P6021 The Financial Times London Page 8 202
British Coal seeks leave to start mine closures Publication 930521FT Processed by FT 930521 By JOHN MASON, Law Courts Correspondent

BRITISH COAL yesterday asked two High Court judges for a declaration that it can lawfully shut the first 10 mines in its pit closure programme.

Lawyers for British Coal argued that correct review procedures had been adopted since the original High Court judgment last December, which ruled the closure proposals unlawful since no proper consultation had been carried out.

Mr Nicholas Underhill QC, for British Coal, said the Union of Democratic Mineworkers and Nacods, the pit deputies' union, had already agreed to the closure of Cotgrave and Silverhill pits in Nottinghamshire.

British Coal now wanted to shut the remaining eight pits scheduled for early closure, but this had been opposed by the National Union of Mineworkers and Nacods.

The pits are Grimethorpe, Houghton Main and Markham Main in the Yorkshire region, Trentham, Parkside, Betws and Taff Merthyr in Midlands and Wales and Vane Tempest in the north-east.

Mr Underhill said the unions were wrong in arguing that British Coal had failed to comply with the court's order that consultation procedures should be followed which were substantially the same as the modified colliery review procedure and included some form of independent scrutiny.

British Coal had consulted properly, he said. He asked the judges to rule that if closure of the pits went ahead there would be no breach of the order.

'Even if such closure would, as a matter of wording, constitute a breach of the order, British Coal has now complied with its substantive obligations and the order should be discharged,' he said.

Mr John Hendy QC, for the NUM, said he could not see on what basis there was jurisdiction for yesterday's application to be made. The hearing would, however, test whether proper consultations had taken place.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground PEOP Labour COMP Company News P1222 The Financial Times London Page 8 330
Average earnings rise by slowest rate for 25 years Publication 930521FT Processed by FT 930521 By EMMA TUCKER

AVERAGE EARNINGS grew an underlying 4 per cent in the year to March, the slowest rate of increase for 25 years and 0.5 percentage point lower than in February.

The Department of Employment said the March figure was affected by advance payments of bonuses and salaries in March last year ahead of the general election and anxiety about the Labour party's plans for higher tax rates.

This was especially relevant in the service sector, where average earnings slowed considerably. In the year to March underlying earnings rose by 3.75 per cent, the lowest figure since the statistical series began in 1985. It compared with 4.5 per cent in the year to February. Earnings were also driven lower by falling pay settlements, the department said. In March British footwear workers agreed a pay increase of 2.5 per cent compared with 3.75 per cent last year, while electrical contractors' employees agreed 3.1 per cent compared with 5.8 per cent a year ago.

In manufacturing the underlying increase in average weekly earnings in the year to March was 4.75 per cent, compared with 5 per cent in the year to February.

Average earnings have now fallen more than 6 percentage points since they peaked in July 1990 at 10.25 per cent.

Unit wage costs were 2.9 per cent lower in the three months to March than they were in the same period a year ago. This was the largest fall in such costs since the series began in 1970. Officials said unit wage costs were falling faster than in any other G7 country.

Manufacturing productivity, or output per head, was 2.7 per cent higher in the three months to March than it was in the three months ending December.

GB United Kingdom, EC P3999 Manufacturing Industries, NEC P6231 Security and Commodity Exchanges PEOP Labour P3999 P6231 The Financial Times London Page 8 326
Fall in unemployment fails to clarify trend Publication 930521FT Processed by FT 930521 By EMMA TUCKER, Economics Staff

THE SMALL fall in the jobless total last month did little to remove confusion about the trend in unemployment.

Although a third consecutive monthly decline makes the falls in February and March look less like 'freak' figures, other data released yesterday was not so encouraging, including a month-on-month fall in unfilled vacancies.

The government denied Labour party accusations that the figures were 'fiddled'. Mr Peter Stibbard, director of statistics at the Department of Employment, said: 'I have been assured by Mr Mike Fogden, chief executive of the Employment Service, that there has been no significant change in the way the administrative rules have been applied in recent months. They have been applied in the same way as in the second half of last year when the figures were rising fast.'

Many analysts, however, continued to express doubts about the trend in unemployment and said they expected to see the jobless total rise again in the months ahead.

The employment department said that although the April fall had taken the jobless total to its lowest level for five months, 'it was not easy to detect a consistent trend yet'.

Unfilled vacancies at Jobcentres fell a seasonally adjusted 1,600 last month to 124,600. Falls in such vacancies, which account for about a third of all vacancies, tend to precede rises in unemployment. More encouragingly, they rose on average by 6,600 in the three months to April and were up by 15,800 compared with a year ago.

Overtime hours worked in manufacturing industry were 9.11m per week in March, a decrease of 0.07m hours per week since February.

Manufacturing employment, however, rose in March and also rose in January and February following substantial revisions to the figures. It increased by 5,000 in March to 4.2m, for the third consecutive monthly rise.

In the regions the biggest falls in unemployment were in the south-east, the south-west, the east Midlands and Northern Ireland. The most substantial rises were in London, the north and the north-west.

The unadjusted count of people out of work and claiming benefit increased by 3,786 to push the figure back over the 3m mark. The new total of 3,000,511 represents 10.7 per cent of the workforce. The seasonally adjusted rate of unemployment was unchanged at 10.5 per cent.

More people joined the dole queue in April than in March, but the monthly unadjusted inflow of 364,800 was 1,600 fewer than a year ago. Outflows were 25,700 higher than in April a year ago.

The average monthly rate of increase in unemployment has eased considerably. In the six months to April, a better guide to underlying trends, the average increase was 11,900 compared with 29,700 in the previous six months.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs P7361 Employment Agencies ECON Employment & unemployment CMMT Comment & Analysis P9441 P7361 The Financial Times London Page 8 495
Signs of weak upturn reinforced Publication 930521FT Processed by FT 930521

SIGNS that any upturn may be weak were reinforced by news of a slower rate of growth of banknotes in circulation. The Bank of England said yesterday notes in circulation in the third week of this month were 3.2 per cent higher than the same period a year ago. For much of the year the rate has been above 4 per cent.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 8 92
Output of cars rises 4% on year Publication 930521FT Processed by FT 930521 By KEVIN DONE, Motor Industry Correspondent

CAR PRODUCTION in April was 4 per cent higher than in April last year, helped by higher output for export markets, but production of commercial vehicles fell heavily for the third month in succession.

Car production increased to 113,286 from 108,902 in the same month a year ago statistics released by the Society of Motor Manufacturers and Traders and the Government's Central Statistical Office show.

Car output in the first four months was 477,795. That was 5.7 per cent higher than in the corresponding period a year ago.

Production has been boosted by higher output for export markets in spite of the steep fall in new car sales in continental Europe.

Production in the UK is rising as a result of the increasing output of Nissan, Honda and Toyota, the three Japanese carmakers that have located their first European car plants in the UK.

Nissan is still planning to raise production at its Sunderland plant by 51 per cent this year to 270,000 from 179,000 last year, in spite of falling sales of its UK-built Primera large family car.

Honda, which started output at its Swindon plant last October, is due to produce 32,000 cars this year, while output at Toyota's Burnaston plant near Derby is expected to total 36,000.

Car output for export markets in April was 11.9 per cent higher than a year ago, while export production in the first four months increased by 8.2 per cent year on year.

Production of commercial vehicles in April plunged by 33.5 per cent year on year to 14,989, while output in the first four months at 74,188 was 17 per cent lower than in the corresponding period a year ago.

Production has been hit by the collapse into receivership of Leyland Daf in early February. Output has continued at both the Leyland Daf vans plant at Birmingham and at the truck plant at Leyland, Lancashire, but it has been at a much lower level than a year ago.

At the same time, van output by General Motors at its Vauxhall plant at Ellesmere Port, Cheshire and its IBC Vehicles plant at Luton has also seen a sharp fall.

GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies MKTS Production MKTS Foreign trade P3711 P3713 The Financial Times London Page 8 404
Rubbish burning urged to replace landfill Publication 930521FT Processed by FT 930521 By BRONWEN MADDOX, Environment Correspondent

INCINERATION is environmentally preferable to dumping waste in landfills, the Royal Commission on Environmental Pollution said yesterday.

The commission's report is likely to influence the environment department's thinking about a levy on landfills - licensed rubbish dumps - to encourage more recycling and incineration.

Sir John Houghton, commission chairman, said yesterday: 'Incineration under carefully controlled conditions is likely to represent the best practicable environmental option for such wastes'. He added, however, that some incinerators had been unsatisfactory.

About 90 per cent of UK waste now goes to landfill, a small amount to recycling, and less than 10 per cent to incineration. The cost of landfill has remained low in the UK compared with continental Europe. That is partly because the UK's excavation of aggregates has left many convenient holes while local residents' objections have curtailed the spread of incinerators.

The commission argues that poisons leach out from landfill sites into the water table, even with modern technology, and it regrets the department's recent postponement of tighter rules for landfill operators.

Mr Don Reeve, a leading member of the commission, said it would back a landfill levy to help shift the economic balance towards incineration. The commission has found that landfill costs now range from Pounds 5 to Pounds 30 a tonne compared with incineration costs of Pounds 15 to Pounds 30 a tonne. It predicts that landfill costs will rise by 2000 to between Pounds 10 and Pounds 45 a tonne because of a scarcity of suitable sites and tighter regulation.

Incineration costs will rise in the same period to between Pounds 30 and Pounds 35 a tonne, the commission predicts, excluding the non-fossil fuel obligation, a government subsidy which is due to end in 1998. The commission recommends extending some form of subsidy to encourage the development of technologies to extract energy from waste.

It also argues that landfill, which emits methane gas from the decomposition of organic material, could contribute at least three times as much to global warming than incineration per 1,000 tonnes of waste.

Mr David Riddle, managing director of Cory Environmental, a leading incinerator and landfill operator, said: 'I believe that the incineration arguments are best for large volumes of waste, although in remote places landfill may be best.'

Mr Malcolm Chilton, general manager of Mass Energy, a group specialising in converting waste to energy through incineration, said that councils anticipating rising landfill prices would be attracted by incineration schemes.

Incineration of Waste. HMSO. Pounds 18.60.

GB United Kingdom, EC P9511 Air, Water, and Solid Waste Management P4953 Refuse Systems RES Pollution COSTS Service costs & Service prices RES Energy use P9511 P4953 The Financial Times London Page 8 460
Charity chief backs moves for 'efficiency' standards Publication 930521FT Processed by FT 930521 By ALAN PIKE, Social Affairs Correspondent

BRITAIN'S VOLUNTARY sec-tor, with a turnover of Pounds 17bn, must develop high standards of efficiency and integrity to complement the Charity Commission's regulatory role, Mr Richard Fries, chief charity commissioner, said yesterday.

Increased competition in the voluntary sector, contract-based funding and changes in charity law are all contributing to pressures for greater efficiency. One of the issues under examination by the commission is whether recognised standards of efficiency could be established and applied across the sector.

Mr Fries, presenting the commission's annual report to an audience of voluntary-sector leaders in London, said the commission was going through changes as profound as any in its 140-year history. The 1992 Charities Act had strengthened its supervisory powers, but it was important for it to use them to support as well as supervise charities.

He said: 'The more we can use our powers and skills to help enhance the integrity and efficiency of charities, whether in legal or financial matters, the less it will be necessary to intervene to correct things which have gone wrong.'

Mr Fries said evidence showed that difficulties were 'overwhelmingly' the result of maladministration rather than abuse or fraud, and the commission would attempt to act in a preventative way.

The new charities legislation has increased trustees' responsibilities and will impose stricter accounting requirements. Computerisation of the commission's register of charities has, for the first time, equipped it to monitor charity accounts effectively.

Last year 4,681 new charities were registered in England and Wales but almost equal number of defunct ones - 4,546 - were removed from the register. There were 170,357 registered charities at the end of last year. The commission started 718 inquiries into possible maladministration and abuse last year, an increase of 29 per cent over 1991.

Issues under consideration by the commissioners include possible new guidance on the extent to which charities may take part in political activity, a sensitive area where there are few firm legal precedents. A consultation paper is likely to go out to charities soon. The commission is also putting out a warning that a growing practice among some organisations of recruiting collectors by random, unsolicited telephone calls does not meet the responsibility of trustees to main-tain control of fund-raising.

Mr Fries, a senior Home Office official who took charge of the Charity Commission last year, is keen to dispel its former remote, supervisory image and develop it into a body working in partnership with the voluntary sector. Value-for-money exercises on the lines of those conducted by the Audit Commission in local government and the National Health Service are a possible future development.

Voluntary organisations are in growing need of financial, legal, communications and other advice, a report by the National Council for Voluntary Organisations concluded yesterday. It called on the government, local authorities and other bodies funding the sector to include finance for the development of professional advice in their grants.

Charity Commissioners for England and Wales, annual report 1992. HMSO. Pounds 8.90

Voluntary Organisations - Their Size and Advice Needs. NCVO. Pounds 6.25

GB United Kingdom, EC P6732 Educational, Religious, etc Trusts NEWS General News P6732 The Financial Times London Page 8 541
CBI warning over Continental orders Publication 930521FT Processed by FT 930521 By IAN HAMILTON FAZEY, Northern Correspondent

ORDER BOOKS are continuing to fill gradually, but exports are being affected by the sharp economic slowdown on the Continent, especially in Germany, members of the Yorkshire and Humberside region of the Confederation of British Industry reported yesterday.

The CBI's regional council, meeting in Sheffield, said UK markets were still fragile for many companies, but that an upward trend in demand was emerging. The outlook for employment had improved but job losses were expected to continue in the short term, with uncertainty restraining consumer spending.

Mr Peter Barker, the council's chairman, said the construction industry was still finding the economy sluggish, but investment in plant and equipment in other sectors was picking up as confidence mounted.

Sheffield steel processing companies supplying niche markets have reported increasing export business in the wake of the devaluation of sterling last September, but worry is mounting about a slowdown in Germany.

Continental prices are also competitive in high-volume steelmaking sectors, so although Sheffield's output of steel products is at record levels, margins and profits are under increasing strain.

GB United Kingdom, EC P1521 Single-Family Housing Construction P1629 Heavy Construction, NEC P3313 Electrometallurgical Products P3315 Steel Wire and Related Products MKTS Foreign trade ECON Employment & unemployment P1521 P1629 P3313 P3315 The Financial Times London Page 8 228
Friedrich fetches record Pounds 2.3m Publication 930521FT Processed by FT 930521 By ANTONY THORNCROFT

A PAINTING by the greatest German romantic artist of the early 19th century, Caspar David Friedrich, sold for Pounds 2.3m at Christie's in London yesterday. The buyer was the J. Paul Getty Museum of Malibu, California.

'Spaziergang in der Abenddammerung' (A Walk at Dusk) depicts a lone figure, perhaps the artist, contemplating a megalithic tomb at twilight. The price, at the low end of the estimate, was a record for Friedrich.

This is the first 19th century German painting to be acquired by the Getty museum.

The sale of this small, academic work is more justification for Christie's gamble in presenting for the first time a large two-day auction of German and Austrian art in London. Christie's expected Pounds 9m and was on target for Pounds 18m.

On Wednesday an early 19th century scientific instrument - a precursor of the modern calculator - sold to the Swiss dealer Edgar Mannheimer for Pounds 7.7m. The price had been estimated at Pounds 15,000 to Pounds 20,000 and the sale was almost certainly the largest gap between an estimate and a selling price in auction-room history. It proves what can occasionally happen when two keen collectors are desperate for the same item.

In Christie's modern art section a painting of 'Sunflowers' by Emil Nolde was on target at Pounds 661,500, while among the Old Masters 'Lucretia' by the Renaissance artist Lucas Cranach I doubled its estimate at Pounds 309,500.

Christie's announced yesterday that on June 23 it will sell the first book printed in English . 'The Recuyell of the Histories of Troy' was printed by William Caxton in Bruges, Belgium in 1473, three years before he set up shop in the precincts of Westminster Abbey. It is expected to sell for up to Pounds 500,000.

The book is being sold by the Marquis of Bath, who has two copies. The Marquis is disposing of 18 other duplicate copies from his library and expects to make Pounds 1m. Also in the auction is 'Chroniques de France', printed in Paris in 1493 by Antoine Verard, estimated at up to Pounds 700,000.

GB United Kingdom, EC P5999 Miscellaneous Retail Stores, NEC P5199 Nondurable Goods, NEC MKTS Sales P5999 P5199 The Financial Times London Page 8 383
Statement soon on tourism chief Publication 930521FT Processed by FT 930521 By MICHAEL SKAPINKER, Leisure Industries Correspondent

THE GOVERNMENT is poised to announce a new head of the British Tourist Authority, amid criticism from industry leaders that there was insufficient consultation about suitable candidates and that ministers took too long to make the appointment.

Mr Peter Brooke, national heritage secretary, is believed to have sent the name of the new BTA chairman to Mr John Major, the prime minister, for approval.

An announcement is expected today or early next week. The new BTA head will also chair the English Tourist Board. The joint chairmanship is a two-day-a-week post with an annual salary of about Pounds 35,000.

Tourist industry executives yesterday criticised the government for not consulting them. BTA board members had not been told yesterday who their new chairman would be.

One leading tourist industry figure said: 'I find the whole thing disappointing. You'd think they'd come and talk to us to get a bit of advice on how the industry would feel and whether they've got the right sort of person.'

The government has known since last January that Mr William Davis, the previous chairman, would not be continuing when his three-year term finished at the end of March. Since his departure the BTA and ETB have been without permanent heads.

The authority has also been without a chief executive since Easter, when Mr Michael Medlicott left to join Delta Air Lines, the US car-rier.

The government appointed headhunters Tyzack Accord to find suitable candidates and they submitted a shortlist of three before the end of March. The delay in making a decision has left the tourist industry leaderless in the approach to the summer season.

Mr John Lewis, the authority's interim chairman, was considered a possible candidate for the permanent post, but is understood to have withdrawn his name.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page 6 329
Electricity cut Publication 930521FT Processed by FT 930521

SOUTH-EAST England regional electricity distributor Seeboard said it would cut its tariffs for domestic and most business customers by 3.3 per cent from June 1.

SEEBOARD GB United Kingdom, EC P4911 Electric Services TECH Services & Services use P4911 The Financial Times London Page 6 53
Ports' traffic tonnage stable Publication 930521FT Processed by FT 930521

TRAFFIC through Britain's ports was virtually unchanged at 495m tonnes last year, with foreign traffic up 2 per cent and domestic traffic down 4 per cent, the Department of Transport said yesterday.

London - comprising Tilbury and the Thames riverside wharves - remained the leading port, handling 49m tonnes.

GB United Kingdom, EC P4491 Marine Cargo Handling MKTS Shipments P4491 The Financial Times London Page 6 75
Holiday agency stops trading Publication 930521FT Processed by FT 930521

Holidaymaker Group of Brigstock Road, Thornton Heath, south London, has ceased trading and the Civil Aviation Authority has called in its bond of Pounds 17,250.

The group traded as Airtour Europe, Airtour France and Airtour Swiss, specialising in flights to European destinations. Its air-travel organiser's licence authorised it for up to 1,000 passengers. It has no connection with the Lancashire-based tour operator Airtours.

Passengers of Holidaymaker booked on flights with British Midland, Swissair, Lauda Air or Alitalia not in possession of tickets will not be able to travel but will be able to claim a full refund from the CAA's air travel organisers' licence section.

Holidaymaker Group Airtour Europe Airtour France Airtour Swiss GB United Kingdom, EC P4725 Tour Operators COMP Company News P4725 The Financial Times London Page 6 140
Settlement fees are reduced Publication 930521FT Processed by FT 930521

THE London Stock Exchange yesterday announced a reduction in its settlement charges to members amounting to about Pounds 7m per year.

The current basic charge on the exchange's Talisman settlement system for UK equities will be reduced by 20 per cent (from 50p to 40p per Pounds 1,000 lot) with effect from May 1.

Sir Andrew Hugh Smith, the exchange's chairman, described the reduction as 'an important first step in lowering the cost of settlement to the market'. He hoped to announce a further rebate in the coming months.

GB United Kingdom, EC P6231 Security and Commodity Exchanges NEWS General News P6231 The Financial Times London Page 6 117
Exchange warns companies on leaks Publication 930521FT Processed by FT 930521 By PETER MARTIN

COMPANIES listed on the London Stock Exchange should make public statements rather than leaking price-sensitive information, Mr Martin Hall, the exchange's head of public policy, said yesterday, Peter Martin writes.

On Friday the exchange censured London International Group for leaking news about lower-than-expected profits to a limited number of analysts and investors.

In a speech in Edinburgh, Mr Hall said the market did not like disagreeable shocks, and the best way of avoiding them was the immediate publication of price-sensitive material.

'Currently there is reluctance to make such formal statements, bred of fear that the market will over-react because they are relatively rare events,' he said. 'If they were more commonly used they would be received by the market with a better sense of proportion.'

There could also be useful regular dialogue between companies and the market. 'But such dialogue should not be the means of imparting selectively what all the world should be told,' he said.

GB United Kingdom, EC P6231 Security and Commodity Exchanges NEWS General News P6231 The Financial Times London Page 6 189
Vosper staff accept 7% pay deal Publication 930521FT Processed by FT 930521 By ROBERT TAYLOR, Labour Correspondent

VOSPER THORNEYCROFT, the shipbuilder, announced yesterday it had reached a two-year, 7 per cent pay agreement with its workforce of 2,000. The deal involves a 3 per cent basic wage increase this year with a further 4 per cent in 1994.

But the pay increase was conditional on the workforce accepting the introduction of a three-shift system of working and the introduction of individual worker certification of quality levels in prod-uction.

Two small improvements in benefits were included in the agreement.

Manual workers will be able to claim company sick pay from the first day of sickness absence and not the second, bringing them into line with white-collar staff. The rate of the sick pay will rise by 3 per cent this year and a further 4 per cent in 1994.

Mr Martin Jay, the company's managing director, said yesterday that the new deal would improve steel shipbuilding manufacture.

'Our order books are at a record high,' he said. 'There has been a 50 per cent improvement in productivity in steel shipbuilding over the past six years. The new deal will give us even greater flexibility than we already have.'

The Vosper Thorneycroft workforce voted 58 per cent in favour of the pay agreement, with 42 per cent against.

Vosper Thorneycroft Holdings GB United Kingdom, EC P3731 Ship Building and Repairing PEOP Labour P3731 The Financial Times London Page 6 247
BR freight to be split for sell-off: Rail businesses could pass into foreign ownership Publication 930521FT Processed by FT 930521 By RICHARD TOMKINS, Transport Correspondent

MOST OF British Rail's Pounds 700m-a-year freight business is to be split into three regional companies and sold to the private sector in 1995, the government announced yesterday.

One stock market analyst estimated that the three companies - mainly comprising BR's profitable coal, steel, iron ore and petroleum operations - could have a combined value of Pounds 500m in a trade sale or stock market flotation.

Mr John MacGregor, transport secretary, said he had already received inquiries from companies interested in buying the freight operations, and added that management buy-outs would be considered.

He also opened up the possibility that the freight businesses could pass into foreign ownership. 'We have had visits from overseas,' he said.

The freight operations are being sold as part of the government's plans for the privatisation of BR. The plans will start taking effect in April next year if the Railways Bill, currently before parliament, is passed.

Mr MacGregor said the government's aim was to create a 'thriving, competitive' railfreight business. He said: 'Our proposals offer the best hope of getting more freight back on to the railways.'

The plans envisage that BR's profitable bulk freight business, which made an operating profit of Pounds 67.5m on turnover of Pounds 505.5m in the year to March 1992, will be split into three geographical units next year in readiness for privatisation.

These units will include BR's contract services businesses, carrying goods such as china clay, chemicals, food and drink.

These are among the few profitable parts of the heavily lossmaking Railfreight Distribution business.

Existing bulk freight contracts will be evenly split between the three geographical units. But once in the private sector the companies will be free to compete against one another for existing and new business in all parts of the country.

They will also have to compete with any new companies wishing to enter the railfreight market, all of which will enjoy equal rights of access to the railway tracks once privatisation takes place.

Mr MacGregor said the freight operations were being split into three to promote competition.

'BR's customers very strongly agree with the idea of breaking up BR's monopoly,' he said.

One other part of BR's freight operations - Rail Express Systems, the BR business responsible for Royal Mail trains - is to be privatised as soon as possible, but the government has not yet decided what form the sale should take.

The lossmaking freight operations, including Freight-liner, the container business, will have to stay with whatever is left of BR after privatisation while the government looks for ways of getting the private sector involved in running them. These account for about 20 per cent of BR's freight business in revenue terms.

BR will also retain responsibility for Continental freight for the present so that it can see the launch of Channel tunnel services through their initial phase.

British Rail GB United Kingdom, EC P9611 Administration of General Economic Programs P4011 Railroads, Line-Haul Operating CMMT Comment & Analysis P9611 P4011 The Financial Times London Page 6 528
Lecturers warned against action Publication 930521FT Processed by FT 930521 By JOHN AUTHERS

FURTHER EDUCATION college employers yesterday threatened to remove lecturers from the payroll if they refused to mark college registers.

The move is an escalation of the dispute between the National Association of Teachers in Further and Higher Education and the College Employers Forum over the negotiation of new contracts following the transfer of the colleges from local education authority to government control last month.

Natfhe staged a national strike yesterday in protest at proposed new contracts, and claimed to have closed most of the colleges in Wales and northern England. It has requested its members to continue action by refusing to mark registers.

But Mr Roger Ward, the forum's chief negotiator, said lecturers who did not mark registers would be removed from the payroll. He said that about one third of the 360 college principals involved had already sent letters to staff containing the threat, while the rest would follow within a week.

He said: 'This is the regrettable and inevitable result of Natfhe's strong-arm tactics. We look forward to the dropping of industrial action and returning to the bargaining table.'

Mr Ward said refusing to mark registers was a 'serious breach of contract' and could leave employers liable under fire and safety regulations.

Meanwhile, Mr John Patten, the education secretary, yesterday published draft charters for further and higher education. The charters are meant to raise standards in colleges and universities as part of the Citizens' Charter initiative and mostly concern availability of information for both students and employers.

They also require technical alterations to the university admissions system and independent inspections for further education colleges.

Principals, lecturers' unions and the National Union of Students generally welcomed the documents. However, Professor Ray Cowell, vice-chancellor of Nottingham Trent University, criticised the omission of partnerships with industry from the charter and described its views on students as 'naive and dated'. University leaders yesterday called for at least Pounds 3.2bn to repair buildings and expand for the future. The Committee of Vice-Chancellors and Principals said Pounds 1.35bn was needed to clear a 10-year backlog of building maintenance work.

GB United Kingdom, EC P9411 Administration of Educational Programs P8221 Colleges and Universities PEOP Labour P9411 P8221 The Financial Times London Page 6 380
MacGregor fails to avert rebellion threat Publication 930521FT Processed by FT 930521 By RALPH ATKINS

THE GOVERNMENT was last night still facing a possible revolt next week over British Rail privatisation - in spite of attempts by Mr John MacGregor, transport secretary, to calm fears of potential rebel Tory MPs.

Sir Keith Speed, Tory MP for Ashford who is leading the protests, said after an hour-long meeting with Mr MacGregor that he may still vote against the government when the Railways bill is debated on Monday and Tuesday.

At least eight Tory MPs have signed amendments to the bill that would allow BR itself to compete for passenger service franchises. The MPs also want legal guarantees to ensure that concessionary fare schemes for pensioners and young people and London Travelcards continue under privatisation.

In theory, nine rebels would be enough to overturn the government's majority of 18, if all opposition parties attend in full strength and assuming the rebels' amendments are selected by the Speaker.

However, there were signs last night that Mr MacGregor may have offered sufficient assurances - particularly on concessionary travel cards - to bring some rebels into line. Government business managers will increase pressure over the weekend on others.

Sir Keith said the rebels would consider their position. As a last resort the government could probably rely on several of Northern Ireland's Unionist MPs being absent.

Mr MacGregor hinted that he would try to head off the rebellion by making clear that concessionary fare schemes and the London Travelcard were likely to remain commercially attractive after privatisation.

He remained strongly opposed, however, to any move towards allowing BR to bid for franchises - which he believes would undermine the main objective of the bill, the transfer of the operation of rail services from the public to private sector. Instead BR managers are being offered financial incentives to launch management buy-outs.

British Rail GB United Kingdom, EC P9611 Administration of General Economic Programs P4011 Railroads, Line-Haul Operating GOVT Government News COMP Company News P9611 P4011 The Financial Times London Page 6 344
MacGregor moves to placate Tory rebels Publication 930521FT Processed by FT 930521 By RALPH ATKINS

MR JOHN MacGregor, transport secretary, last night met Conservative MPs in an attempt to head off a threatened rebellion next Monday over the privatisation of British Rail.

Sir Keith Speed, Conservative MP for Ashford, said before the meeting that he was prepared to vote against the government if ministers did not back down. He could threaten the Conservative's 18-strong Commons majority if joined by more than a handful of colleagues.

At least eight Tory MPs have signed a series of amendments intended to guarantee the future of concessionary fare schemes for pensioners and young people, and of the London travelcard. The MPs also want BR itself to be able to compete for passenger service franchises.

Mr MacGregor last night hinted he would try to head off the rebellion by making clear that concessionary fare schemes and the London travelcard were likely to remain commercially attractive after privatisation.

He said on BBC radio: 'Just as it is happening at the moment and there is advantage in it, so there will be in the future.'

Mr MacGregor remained strongly opposed, however, to any move towards allowing BR to bid for franchises - which he believes would undermine the main objective of the bill, the transfer of the operation of rail services from the public to private sector.

Instead BR managers are being offered financial incentives to launch management buyouts.

Mr MacGregor's stance appeared unlikely to satisfy Sir Keith, who complained that private finance was unlikely to be forthcoming for management buyouts. Government business managers will be working hard during the weekend to persuade other Conservatives not to defy the government.

British Rail GB United Kingdom, EC P9611 Administration of General Economic Programs P4011 Railroads, Line-Haul Operating GOVT Government News COMP Company News P9611 P4011 The Financial Times London Page 6 313
Superdrug cuts prices of condoms Publication 930521FT Processed by FT 930521 By GARY MEAD

SUPERDRUG, the high street discount retailer, yesterday cut the price of condoms by up to a third at all 680 of its shops, signalling a fresh round of its continuing price-war with its main rival, Boots, the UK's largest chemist chain, Gary Mead writes.

This is the third significant price reduction by Superdrug in 18 months. Superdrug cut prices on fine perfumes by 30 per cent at 42 of its stores in the run-up to last Christmas.

At the end of April it took 25 per cent off the prices of branded suncare products, and Boots responded with reductions of 30 per cent.

Prices of 19 types of condom from the two leading brands - Durex and Mates - and Femidom, a newly launched female condom, will be cut immediately. The UK condom market - worth about Pounds 45m at retail prices - is the subject of a Monopolies and Mergers Commission inquiry.

Superdrug estimated yesterday that its price reductions would save a typical couple more than Pounds 30 annually.

Superdrug Stores Boots GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores COSTS Product costs & Product prices P5912 The Financial Times London Page 6 210
SE reduces members' charges Publication 930521FT Processed by FT 930521

THE London Stock Exchange yesterday announced a reduction in its settlement charges to members amounting to about Pounds 7m per year.

The current basic charge on the exchange's Talisman settlement system for UK equities will be reduced by 20 per cent (from 50p to 40p per Pounds 1,000 lot), with effect from May 1.

Sir Andrew Hugh Smith, the exchange's chairman, described the reduction as 'an important first step in lowering the cost of settlement to the market', adding that he hoped to announce a further rebate in the coming months.

GB United Kingdom, EC P6231 Security and Commodity Exchanges NEWS General News P6231 The Financial Times London Page 6 119
IRA blast injures 20 people in Belfast Publication 930521FT Processed by FT 930521 By TIM COONE and RALPH ATKINS DUBLIN, LONDON

A 1,000lb IRA bomb exploded in the centre of Belfast yesterday, injuring 20 people and badly damaging the headquarters of the Ulster Unionist party, as counting started for Northern Ireland's local elections.

The explosion came as early returns from the polls, held on Wednesday, suggested that the hardline parties on both sides of the sectarian divide had performed strongly, an outcome which would damage the prospects of renewed inter-party talks on the province's future.

The bomb, similar in size to the one which killed three people and badly damaged the Baltic Exchange in London last year, was placed in a skip lorry in a side street between the Europa Hotel and the Grand Opera House, yards from the UUP headquarters. It was near the spot where another powerful IRA bomb was detonated in December 1991.

The device went off during the morning rush-hour, as the Army attempted to disarm it by two controlled explosions. It badly damaged the Europa Hotel and surrounding offices and shops, blowing out windows over a wide area. None of the injured was seriously hurt. The IRA claimed responsibility for the blast.

The Belfast Opera House - repaired at a cost of Pounds 1m after being hit by the IRA bomb of late 1991 - took the full force of the explosion. A huge hole was blasted in the side of the 98-year-old building.

The bombers evaded an intensive security cordon which has been thrown around the city centre during the week leading up to the elections, in which 582 councillors are to be elected to 26 district councils in the province.

Mr Jim Wilson, general secretary of the UUP, said: 'I would suggest the IRA have identified their real enemy, the Ulster Unionist people of the province. They obviously know they didn't write us off at the ballot box and they won't do it with a bomb either.'

Dr Joe Hendron, Social Democratic and Labour party MP for the nationalist area of west Belfast, said: 'I look on the people who did this as gangsters. It is a dastardly act and I condemn all those associated with planning it and executing it.'

The final results of the elections are not expected until this afternoon, as the proportional representation system used in the province entails numerous counts of transferable votes.

Early returns suggest that the UUP vote has slipped from 31 per cent to 30 per cent, while the vote for the hardline Democratic Unionist party, and for Sinn Fein, the political wing of the IRA, has strengthened in the urban centres of Belfast and Derry.

If this trend is confirmed in the final result it will prove a bitter disappointment to Sir Patrick Mayhew, the Northern Ireland Secretary. He hoped that a strengthened vote for the UUP and the SDLP, the more moderate parties on either side of the sectarian divide, would facilitate his efforts to renew the inter-party talks on the province's political future, which were abandoned without agreement last November.

At Westminster yesterday Sir Patrick told MPs that proposals the government was drawing up for the province's future would 'give some direction and focus' to any renewed talks.

But he said that the government had no plans to publish its suggestions - expected to set a framework for devolved government in the province. The government wants to keep details of negotiations confidential, he said.

Sir Patrick is due to meet the leaders of Northern Ireland's main political parties, once the local elections are com-pleted.

Two Anglo-Irish conference meetings are expected before any round-table talks start, however, suggesting a resumption of negotiations is at least another month away.

There also seems to be only lukewarm support among local political leaders for such talks.

GB United Kingdom, EC P9721 International Affairs P9229 Public Order and Safety, NEC P8651 Political Organizations NEWS General News P9721 P9229 P8651 The Financial Times London Page 6 667
Nadir escape was 'ridiculously easy' Publication 930521FT Processed by FT 930521 By GILLIAN TETT

THE ESCAPE from the UK of Mr Asil Nadir, the fugitive Turkish Cypriot businessman, was 'ridiculously easy' to organise, in spite of police surveillance, according to the Hampshire businessman who helped him jump his Pounds 3m bail.

'Anyone in the street could have done what I did,' Mr Peter Dimond, a former aeroplane dealer, said. The two-plane journey had been planned in a matter of days. 'It was so simple it was unreal.'

Speaking from northern Cyprus, Mr Dimond said he had no regrets about his part in the affair. He said his role had been in arranging the flight from the Compton Abbas airfield in Dorset which took Mr Nadir to Beauvais near Paris.

Mr Dimond, a long-time family friend of Mr Nadir through his wife, Hope, says he became involved in the escape through frustration at the treatment of Mr Nadir by the Serious Fraud Office.

'We have watched very closely the way the situation has been handled,' he said. 'There was a time when it was time to go and so his friends said 'OK, let's do it'. It was just an act of friendship - like giving a friend a lift in a car.'

A regular user of Compton Abbas airfield, Mr Dimond approached the owner, Mr Clive Hughes, a friend of several years standing, a week before Mr Nadir's departure to book a plane for himself and a friend.

He said Mr Hughes had agreed to pilot the twin-engined Piper Seneca plane to Beauvais as a favour to him. 'The pilots did not know who they were carrying,' Mr Dimond said. 'My part of the operation was that. The owner and pilot knew me - they wouldn't just go off and take anybody.'

Early on the morning of May 4 Mr Nadir left his flat in London's Belgravia, arriving with Mr Dimond at Compton Abbas airfield in the late morning. Mr Hughes said yesterday that Mr Nadir, in dark glasses and a hat, was introduced to him as an 'aviation friend' of Mr Dimond.

'I did it as a private flight for a friend,' said Mr Hughes. He said the plane's intercom had been broken during the hour long flight and he had not spoken to Mr Nadir, who had sat, facing backwards, in the rear of the plane. The only payment he had received was Pounds 300 to cover the cost of petrol.

Mr Clive Vleiland-Boddy, owner of the Piper plane, registration number GBSPG, yesterday said he had not known who was using it.

Under new EC regulations, Mr Hughes says he had not been required to carry out any customs check, apart from handing out a leaflet explaining passport regulations for leaving England.

When the plane arrived in Beauvais, Mr Dimond and Mr Nadir had hurried across the airfield to join the second aircraft, a Citation Cessna, registration N-11HJ, which had flown from Hatfield to meet them.

'I left them at the aircraft side. Peter knew I had to get back in a hurry,' said Mr Hughes.

Mr Dimond yesterday denied that he had arranged the second aircraft which later took Mr Nadir and Mr Dimond from Beauvais to Cyprus, via Vienna and Istanbul.

Mr Hamlin, owner of Hamlin jets, which manages the Hatfield airfield where the Citation is based, yesterday confirmed the plane had travelled to Beauvais and then on to northern Cyprus, but he had no idea beforehand what the purpose of the flight was.

Mr Dimond said he had no intention of returning to England. If he was found aiding Mr Nadir to jump bail, he could face charges under British law, although, in practice, it would be impossible to extradite him without the co-operation of the north Cypriot authorities. 'I do not intend to become a fall guy for the frustration and anger of the people who were told to look for us,' he said.

A former car dealer, and licensed pilot, he set up Southcoast Aviation, an aircraft trading company, in 1987. After this folded at the end of the 1980s, Mr Dimond had, he admitted, been facing financial difficulties.

Mr Dimond denied that he had been paid for his role in the affair. 'I did it because I was sick of the system. I thought this man deserves to get out and have a right to free speech - there was no payment.'

GB United Kingdom, EC CY Cyprus, Middle East P9211 Courts NEWS General News P9211 The Financial Times London Page 6 759
Bentsen praises Kyrgyzstan Publication 930521FT Processed by FT 930521 By GEORGE GRAHAM WASHINGTON

Mr Lloyd Bentsen, US treasury secretary, yesterday praised Kyrgyzstan for 'a bold and courageous reform programme that should be a model for all states of the former Soviet Union', writes George Graham in Washington. Mr Bentsen spoke after meeting Kyrgyzstan's President Askar Akayev, who was in Washington for talks with the World Bank and International Monetary Fund.

Kyrgyzstan is the first country to qualify for the IMF's new financing facility to help the economies of eastern Europe and the former Soviet Union make the leap from communism to capitalism.

KG Kyrgyzstan, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 118
Li Peng's illness a boost for rival Publication 930521FT Processed by FT 930521 By TONY WALKER BEIJING

CONFIRMATION yesterday that Mr Li Peng, the ailing Chinese premier, would remain out of view for the moment has fuelled speculation about not only his physical recovery but also his political well-being.

Mr Li's continued absence has boosted the stocks of his chief rival, Mr Zhu Rongji, the reformist vice-premier and former mayor of Shanghai. Mr Zhu this week is making a high-profile visit to Canada and to Latin America.

China's foreign ministry may have inadvertently encouraged talk about Mr Li's future when it told reporters that the premier would not be meeting visiting dignitaries, including Mr Shimon Peres, the Israeli foreign minister.

The 65-year-old Mr Li has not been seen in public since the last week of April. He was photographed playing tennis with Mr Goh Chok Tong, the visiting Singapore prime minister, on April 20.

On April 26, Chinese officials announced that Mr Li would not be able to keep an appointment with Philippine President Fidel Ramos because he was suffering from a 'cold'. He was also obliged to cancel a 12-day visit to Central Asia.

One month later, no photographs have appeared of a recuperating Mr Li, nor has the Chinese press revealed that his condition required hospitalisation. In light of persistent reports that Mr Li is suffering heart problems, Chinese officials have long since given up trying to pretend that he has been laid low by the flu.

Mr Li's lingering health problems have now taken on a political dimension, in the view of Chinese and western observers. 'You've got to see Zhu Rongji as the big winner in all this,' said a long-serving Beijing diplomat. 'It certainly raises questions about Li Peng's political future.'

'Li had weathered so many political storms in the past that his survival skills were regarded as one of his assets,' the official added.

'But this illness has put a dent in the perception that he is indestructible.'

Adding to Mr Li's political difficulties may be the fact that he is not particularly popular in any case, and therefore his colleagues may be less inclined to indulge health problems. Speculation that his 'illness' may indeed be political and not physical has also been revived; although evidence suggests otherwise.

Mr Li was 're-elected' to a second five-year term as premier at the recent National People's Congress, but an unprecedented 10 per cent of the more than 2,000 delegates either voted against him or abstained. Mr Li, who is associated with leadership hardliners, is blamed by many Chinese for the bloody crackdown on the Tiananmen pro-democracy demonstrators in June 1989.

Mr Li's continued absence has reinforced perceptions that Mr Zhu, also 65, who was confirmed as senior vice premier at the NPC, is the 'strong man' in the government in any case. Added to responsibilities for the day-to-day work of the administration have been the 'high profile' meeting and greeting functions normally reserved for the premier.

Western officials who have seen Mr Zhu in action recently say that he has carried off his additional duties with conspicuous self-confidence. His performance at a meeting in Shanghai earlier this month at a meeting of former world leaders has been singled out for praise.

Western officials say that it is somewhat ironic that attention has been focusing on the health of Mr Li, who is a mere stripling by the normal standards of China's gerontocratic leadership. He is 23 years younger than paramount leader, Mr Deng Xiaoping.

Mr Jiang Zemin, China's Communist party boss, president, and chief of its Military Commission, may have also had his stocks boosted by the continued absence of Mr Li. An apparently vigorous Mr Jiang, 66, has also been much in evidence, receiving a whole range of visitors, including Mr Pierre Cardin, the fashion designer.

CN China, Asia P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 5 657
Sihanouk to return home for election Publication 930521FT Processed by FT 930521 By VICTOR MALLET PHNOM PENH

PRINCE Norodom Sihanouk, the Cambodian leader and former monarch who has been criticised for living abroad during the implementation of a United Nations-sponsored peace plan, announced yesterday that he would return to Cambodia from his home in Beijing for the general election due to begin on Sunday.

'I will be near my beloved and respected Cambodian people,' he said in a statement.

Among those who have urged him to return to Cambodia to support the election are Mr Boutros Boutros Ghali, the UN secretary general, and President Francois Mitterrand of France.

Prince Sihanouk's associates say he has remained in Beijing partly for medical treatment and partly because he wants to save his political ammunition for the period of confusion which is likely to follow the election.

He says he will do his best to reconcile Cambodia's warring factions in a coalition government; he, his family and his staff will not vote 'because we have to show our strict neutrality'.

Fighting continued in various parts of the country yesterday between the Cambodian government and the Khmer Rouge, which has vowed to disrupt the election after withdrawing from a 1991 peace agreement. A Cambodian working for the International Rice Research Institute was killed on the road from Phnom Penh to Kompong Cham when his vehicle was ambushed on Wednesday.

There were also renewed outbreaks of political violence ahead of next week's election. The UN Transitional Authority in Cambodia (Untac) said a member of the royalist party Funcinpec was allegedly shot dead in his house by government soldiers. Troops were also accused of killing two members of another political party called Molinaka.

Mr Yasushi Akashi, the Untac chief, yesterday described the election campaign as a 'great success'. He said that even if the highest standards of mature democracies were not met, the voting would 'certainly be the freest and fairest elections in Cambodia's recent history'.

Mr Akashi said he would declare on May 28, the last day of voting, whether he considered the conduct of the election to have been free and fair.

Ballot despite the bullets, Page 20

KH Kampuchea, Asia P9721 International Affairs P9199 General Government, NEC NEWS General News P9721 P9199 The Financial Times London Page 5 383
Egyptian round-up took months Publication 930521FT Processed by FT 930521 By REUTER CAIRO

Egyptian police spent three or four months rounding up more than 800 members of a militant Moslem group that organised secret cells in schools and colleges, security sources said yesterday, Reuter reports from Cairo. Earlier it was reported the arrests had taken place in a clampdown within the last 10 days.

EG Egypt, Africa P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 5 82
Hard line on Golan Heights Publication 930521FT Processed by FT 930521 By REUTER JERUSALEM

Only 17 per cent of Israelis would give up all or most of the Golan Heights in return for a peace agreement with Syria, according to an opinion poll published yesterday, Reuter reports from Jerusalem. The Smith Research Centre poll for Jerusalem Report magazine showed 62 per cent of 1,000 Jews surveyed opposed withdrawing from any part of the strategic plateau.

IL Israel, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 91
Arrests for Thai factory fire Publication 930521FT Processed by FT 930521 By REUTER BANGKOK

Thai police issued arrest warrants for four executives of the toy factory that burned to the ground last week killing about 200 workers, Reuter reports from Bangkok.

Police said Mr Pichet Laokasem, Mr Churin Unhaphoum, Mr Chang Ming Kuang and Mr Chung Yuk Ming - charged with negligence and illegal modification of a building - faced up to 10 years in jail and a fine if found guilty.

TH Thailand, Asia P9211 Courts P3944 Games, Toys, and Children's Vehicles PEOP People P9211 P3944 The Financial Times London Page 5 102
Tokyo dismisses rate speculation Publication 930521FT Processed by FT 930521 By REUTER TOKYO

Market speculation that the Bank of Japan may be permitting gradual rises in yen short-term interest rates is erroneous, according to a senior central bank official, Reuter reports from Tokyo. 'If the market believes the central bank is allowing the money rates to firm gradually, it is absolutely wrong,' he told reporters after a slight rise in key money market rates.

JP Japan, Asia P6011 Federal Reserve Banks P9311 Finance, Taxation, and Monetary Policy NEWS General News P6011 P9311 The Financial Times London Page 5 97
Seoul seeks N Korea meeting Publication 930521FT Processed by FT 930521 By REUTER SEOUL

South Korea sought to open a channel of communication with an increasingly isolated and intransigent North Korea yesterday to defuse the row over nuclear inspections before a June deadline, Reuter reports from Seoul. Mr Hwang In-sung, South Korean prime minister, in a letter to Mr Kang Song-san, his northern counterpart, proposed a high-level meeting next week 'for the sake of national well-being'.

KR South Korea, Asia KP North Korea, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 96
Malaysian plan to set up new airline Publication 930521FT Processed by FT 930521 By KIERAN COOKE KUALA LUMPUR

MALAYSIA says it intends to create an airline to operate on domestic and international routes, writes Kieran Cooke in Kuala Lumpur.

Dr Mahathir Mohamad, prime minister, said the new airline was necessary because Malaysia Airlines (MAS), the country's national carrier, was expanding so fast that it had become 'overstretched'. He said the new airline could be based on Pelangi Air, a small carrier which already operates on some domestic and regional routes.

The prime minister said the government would not take up a stake in the proposed new airline. 'We want the private sector to do business. We regulate the business', said Dr Mahathir.

Malaysian Airline System MY Malaysia, Asia P4512 Air Transportation, Scheduled TECH Services & Services use P4512 The Financial Times London Page 5 144
IMF watches as Kyrgyzstan fights the battle of the som Publication 930521FT Processed by FT 930521 By JOHN LLOYD BISHKEK

A REMARKABLE experiment is taking place in Kyrgyzstan, the poorest of the former Soviet republics. It has introduced a new currency with strong support from the west. On its success depends the future of the state itself, the viability of new currencies in the post-Soviet world and the reputation of the multilateral financial institutions.

Kyrgyzstan is a small, landlocked state on the Chinese border. It has an ethnically divided population - the Kyrgyz are a bare majority with a 25 per cent Russian-speaking minority which dominates production and forms the majority in the capital Bishkek.

The industrial sector of Kyrgyzstan is like that of all ex-Soviet states, but more so. The Frunze agricultural machinery plant made one type of machinery for the former Soviet trading bloc which is no longer in demand and for which it usually cannot get steel anyway. A sugar refinery got its raw material from Cuba, hauled across central Asia from the Black Sea. Both have all but stopped production.

This is a grim position in which to find oneself 'independent' - especially since its years as a Soviet state have left what Kyrgyzstan's foremost economist, Mr Turar Koichuyev, calls a 'psychology of dependence'.

But in introducing the som ('catfish' in Russian) in place of the rouble, it blazes a trail for the other members of the Commonwealth of Independent States - only one of which, Ukraine, has introduced its own currency, and that without an accompanying programme approved by the International Monetary Fund.

The effects of the introduction of the som have so far been both dramatically good and disturbingly bad. Its first trading session took place on Monday in the street outside the National Bank, where some Dollars 2m was exchanged for som issued the week before.

It held its introductory rate of 4 to the dollar, while on the black market the official rate of Rbs150 to a som doubled to around Rbs300. A government decree that, after a five-day transition period, the rouble may no longer be used seems to have been obeyed.

But it has caused an inflamed reaction in neighbouring Uzbekistan. The border between the two states has been closed, money transfers and trading of any kind stopped and gas supplies shut off. Uzbek President Islam Karimov, no friend of the pro-western leaders of Kyrgyzstan, accused the Kyrgyz of plotting to flood his republic with unwanted roubles. His action threatens to strain further the bad relations between the Kyrgyz and the ethnic Uzbeks who live in the border areas of Kyrgyzstan.

The currency's introduction was badly executed and badly advertised; the result has been that only Rbs7bn to Rbs10bn of the estimated stock of Rbs30bn in the country were exchanged for som in the five days. Residents of Bishkek grumble about the bright new currency - accusing the government of raising prices under its cover, and fearing that the government had given them an unconvertible currency.

The som is a test case in two ways. First, it poses a colossal challenge to the leadership of Kyrgyzstan: a leadership which, under the presidency of Mr Askar Akayev and the premiership of Mr Tursumbek Chyngyshev, attempts to chart a pro-market course.

Mr Chyngyshev says: 'We believe we had no choice but to introduce the som: it allows us to escape from the inflation of the rouble and to create our own economy.'

The chance is there, but the task is difficult.

The second test is of the IMF and, to a lesser extent, the other multilateral financial agencies. The IMF, some six months ago, switched its policy advice dramatically: having previously advised the former Soviet states to stay in the rouble zone, it concluded - after observing the actions of the central bank of Russia in supporting enterprises with a flood of credit - that the only way ex-Soviet states could fight inflation was to control their own currencies.

Says Mr Harry Trines, the resident man from the IMF: 'It became clear that in the present circumstances no one could reduce inflation while remaining tied to the rouble. And thus the IMF executive board decided that if the (ex-Soviet) countries wanted their own programmes with the IMF they must have their own currency.'

This decision. meant that the IMF, and through it the richer countries of the world who provide aid to the former Soviet Union, were implicitly offering to support the new currencies if the state could commit itself to an IMF programme with its familiar features of monetary stability, budget stringency and rapid privatisation.

Kyrgyzstan, uniquely - outside the Baltic states which are not part of the CIS - has done so, earlier this month signing on to a tough programme and receiving Dollars 23m as a first tranche of an Dollars 85m package of support. These funds form the reserves with which the National Bank has supported the currency.

In all, Kyrgyzstan should receive Dollars 400m in loans, including a Rbs75bn (about Dollars 100m) from Russia which is promised but the delivery of which must be in some doubt. The World Bank and the Japanese government are to put in about Dollars 110m in budget support - in the form of goods which will be sold in Kyrgyzstan.

For the foreign experts now in Bishkek, the future seems clear enough: a programme (barely begun) which pushes enterprises into the private sector - though there are signs that the state favours worker-ownership, with which the Fund would be unhappy. It will also trade on its few assets - wool; fruit and vegetables; hydro-electric power; natural beauty; minerals including gold; and a relatively well-educated population.

A final asset is the harsh realism of people and leaders alike. Says Mr Chyngyshev: 'We have things we can sell, but they are not yet of world quality. We haven't got the equipment or the experience, and we lack the money to buy the equipment. It's going to be very hard - it's inevitable.'

KG Kyrgyzstan, East Europe P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs CMMT Comment & Analysis P9311 P9611 The Financial Times London Page 5 1036
Business pulls Taiwan closer to mainland: Pressures to ease Taipei's curbs on links with Beijing Publication 930521FT Processed by FT 930521 By SIMON DAVIES

FIVE new Boeing 747-400s will line up later this year in Taipei's Chiang Kai Shek airport bearing the colours of the world's second-largest container shipping group, Evergreen. The jets will fly to a number of international destinations, but a domestic issue lies at the heart of the strategy: China.

During 1992, more than 1.5m Taiwanese visited China, via a third country. If prohibitions on direct transport were lifted, Eva Air's president, Mr Frank Hsu, estimates that the number of travellers to China could treble immediately.

The momentum of tourists and capital already flooding from the Republic of China back to its erstwhile Communist enemy is placing Taiwan's government under increasing pressure to relax these restrictions on direct links.

Economists provisionally estimate that the lifting of the prohibition on direct transport could add at least 1 percentage point to gross national product, from savings on trans-shipment of products via Hong Kong. But, it is gradually becoming apparent that the government is no longer prepared to budge.

The government's own game plan for relations with the People's Republic is unequivocally stated in its 1991 Guidelines for Unification. The current 'short-term' phase, is one of 'exchanges and reciprocity', as exemplified in 'practical' bilateral discussions that took place in Singapore last month.

The two countries can progress into the phase of 'mutual trust and co-operation' only if China renounces the use of violence to bring this 'renegade province' back to the bosom of the motherland and if it recognises Taiwan as a separate political entity.

China has refused to give ground on any of these but it has already started putting pressure on Taiwan to recommence the 'three links' - post, transport and commerce - which are clearly identified with the second phase.

Taiwanese President Lee Teng-hui in a press conference yesterday again emphasised the need for mutual trust and recognition before these links are put into effect.

With the build-up to the Singapore meeting - the first quasi-official talks to take place between the two sides since the Nationalists' defeat in 1949 - there had been a growing sense that this process could be accelerated.

The pro-business President Lee has recently consolidated his power-base through the appointment of an acolyte as premier, and brokers argued that he would be prepared to push towards direct links in order to attract support from the business community.

But the government has started to give the lie to this. Last week, the Securities and Exchange Commission was encouraged to put the brakes on listed companies' investment in China, prohibiting the raising of capital on the stock market for the purposes of funding projects in China.

In addition, a lobby of senior Taiwanese bankers were invited by Beijing to set up branches in the mainland, but this request was turned down by the Taiwanese government.

Mr Jason Hu, government spokesman, admitted that holding back on direct links was a political trump card, and China's insistence on direct links during the Singapore talks has made the value of this card even more apparent.

Mr Hu said the business community would have to be patient. 'Most business people understand that they gain nothing in these links, if they lose Taiwan,' he argued.

But patience appears to be a rare commodity. As the costs of land and labour continue to escalate in affluent Taiwan, there has been a flood of investment capital through Hong Kong and into China.

Taiwan is now the single largest source of visitors to the British colony, because despite the inefficiencies of investing indirectly, China relocation has become an economic imperative.

More than Dollars 7bn (Pounds 4.5bn) has been invested across the Taiwan Straits and the focus is beginning to progress beyond basic low-cost assembly plants, despite the continued aggressive stance of Beijing.

The Evergreen group is the most notable in preparing a massive transport network with which to cement direct links. Eva Air, which had its inaugural flight just two years ago, is buying 20 aircraft with options on a further eight.

Mr Hsu said: 'We would be able to start direct flights within three months of an announcement. We have made some studies and would want to fly to Beijing, Shanghai, Xiamen and Guangzhou.' He admitted that if the fare structure was attractive, Eva would take aircraft off international routes to help build up its China business.

Uniglory, another Evergreen group company, has recently purchased five small container ships in anticipation of feeder services running from the coast of Fujian province down to Evergreen's container terminal in Kaoshiung.

Ironically Mr Y F Chang, Evergreen's founder and chairman, is an avowed supporter of the opposition Democratic Progressive party, which endorses Taiwanese independence - an event which many still believe would trigger a Chinese invasion. Evergreen's corporate strategy, however, suggests that for the chairman, business comes before politics.

The same may be true for the ruling Kuomintang (KMT) party, which is trying to control a flood of investment into China, whilst its own companies take a more conciliatory stance.

China Development Corporation, a listed company whose largest single shareholder is the Kuomintang, is currently negotiating a stake in a mainland-controlled satellite project, Apstar-2.

A government-linked joint venture with China in regional telecommunications and television transmission - an area fraught with political sensitivities - could hardly be said to put out the right signals to other local businesses.

The investment flows continue to build up, despite officials's threats to tighten restrictions. By 1997, links with Hong Kong - which then reverts to China - will, in effect, breach the prohibition on the 'three directs', and Eva Air may have secured mainland routes by then. But in the meantime, the Kuomintang looks set to continue its lonely battle against excessive business links with the enemy.

Evergreen Marine Corp (Taiwan) Eva Airways CN China, Asia TW Taiwan, Asia P4512 Air Transportation, Scheduled P9311 Finance, Taxation, and Monetary Policy P7999 Amusement and Recreation, NEC P4449 Water Transportation of Freight, NEC MKTS Foreign trade ECON Economic Indicators CMMT Comment & Analysis P4512 P9311 P7999 P4449 The Financial Times London Page 5 1033
Signs of thaw for HK talks Publication 930521FT Processed by FT 930521 By TONY WALKER and SIMON DAVIES BEIJING, HONG KONG

SINO-BRITISH talks on the future of Hong Kong resume in Beijing today with the British side hoping that discussions can progress towards substantial negotiations.

China yesterday gave approval to three key Hong Kong franchises after an informal meeting in the colony of the Sino-British Joint Liaison Group, suggesting a further thawing in relations between the two sides.

The contracts had already been approved by the Hong Kong government, but were caught up in the political backlash that followed the announcement of Governor Chris Patten's political reform proposals. China said it would not recognise new franchises handed out by Hong Kong without Beijing approval.

Following the meeting, the Wharf group received approval for its HKDollars 5bn (Pounds 420m) cable television project, while Hong Kong Electric has a 15-year extension on its operating licence as monopoly supplier of electricity to Hong Kong island. The third contract was for a land-fill site.

Wharf had already spent HKDollars 600m on the cable project on the basis of unofficial assurances from China, while the Hong Kong Electric franchise was never considered at risk. The timing of the announcement, however, is considered auspicious.

Last week, the Sino-British land commission agreed on the current fiscal year's land disposal programme. However, the fate of the colony's Container Terminal 9 still hangs in the balance.

There are indications that a full Joint Liaison Group meeting may be agreed for June, when the terminal contract will be discussed. The agreements suggest China is prepared to move forward on pressing business matters concerning Hong Kong.

The two previous rounds of broader Beijing talks were dominated by a Chinese re-statement of 'guiding principles', which left little room for discussion of specific issues such as the shape of a possible compromise. Beijing charges that Mr Patten's plans to broaden the franchise for Legislative Council elections go beyond understandings reached in negotiations on Hong Kong's transition to Chinese rule in 1997.

Sir Robin McLaren, Britain's ambassador to Beijing and head of its negotiating team, told reporters in Hong Kong before leaving for China that his aim was to reach agreement on 'practical arrangements' for Legco elections due in 1994-95. Sir Robin had been visiting the colony for consultations.

A Chinese foreign ministry spokesman, meanwhile, said the Sino-British talks would produce 'positive results' if both sides were guided by previous agreements on the future of Hong Kong. Earlier this week, Sir Robin was carpeted by China over a meeting in London between Mr Douglas Hurd, Britain's foreign secretary, and the Dalai Lama, Tibet's exiled spiritual leader.

Xinhua, the official Chinese news agency, reported that Sir Robin had received a 'stern warning' from a foreign ministry official. It described the Dalai Lama as a 'political exile preaching so-called independence for Tibet and engaged in activities aimed at splitting China.'

Hong Kong Electric Wharf Holdings HK Hong Kong, Asia CN China, Asia GB United Kingdom, EC P9721 International Affairs P4911 Electric Services P4841 Cable and Other Pay Television Services MKTS Contracts P9721 P4911 P4841 The Financial Times London Page 5 524
Angola celebrates US recognition Publication 930521FT Processed by FT 930521 By REUTER LUANDA

Angola's formerly Marxist MPLA government yesterday celebrated its recognition on Wednesday by the US but Unita rebels said Washington's decision would complicate peace negotiations, Reuter reports from Luanda. Previous US administrations backed Unita during much of the country's 16-year civil war.

CN China, Asia IL Israel, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 73
Peres visits the Great Wall of China Publication 930521FT Processed by FT 930521

Shimon Peres, Israeli foreign minister, visits the Great Wall of China yesterday. The two countries established diplomatic relations in January 1992. Diplomats said Beijing promised Israel it would not sell missiles to Iran or Syria as it did not want to put obstacles in the way of Middle East peace. China sold Silkworm missiles to Iran during the 1980s, according to western military observers.

CN China, Asia IL Israel, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 96
Commerce nominee withdraws in US Publication 930521FT Processed by FT 930521 By GEORGE GRAHAM WASHINGTON

MR John Rollwagen, President Bill Clinton's choice to be deputy secretary of commerce, has withdrawn after his Senate confirmation hearings were delayed by investigation of possible insider trading at his former company.

The withdrawal is another setback in the administration's slow filling of the top positions in each department.

The Commerce department is notably short of Democratic appointees; Mr Ron Brown, the secretary, is the only nominee yet confirmed by the Senate. Lower-level nominees have been held up by the delay over Mr Rollwagen's confirmation.

He is a former chairman of Cray Research and said in a letter to Mr Brown that the Securities and Exchange Commission had requested 'background information' from him. The 'unplanned delay' in his Senate confirmation hearings had given him 'valuable time for personal reflection.'

The SEC investigation is understood to involve sales of shares in Cray Computer, a spin-off of Cray Research, shortly before the company announced that it had lost a big contract from its principal customer.

US United States of America P9199 General Government, NEC PEOP People P9199 The Financial Times London Page 4 195
Court votes to try Perez Publication 930521FT Processed by FT 930521 By JOSEPH MANN CARACAS

THE VENEZUELAN supreme court ruled yesterday that there is sufficient cause to try President Carlos Andres Perez for alleged mishandling of government money.

The court's decision, announced by Chief Justice Gonzalo Rodrguez Corro, is the first step in a process that may lead to the impeachment and removal from office of the 70-year-old president.

The ruling came after a long and nagging political crisis that began in February 1992, when dissident army officers staged an unsuccessful effort to topple the Perez government.

Announcing the court's decision, the chief justice said that nine of the 15 justices voted for an impeachment trial and six abstained.

Now the 46 members of the Venezuela senate must decide, by majority vote, whether the president should be impeached. If the vote - which may come today - goes against Mr Perez, as is expected, he would be suspended from office and tried by the supreme court. If found guilty, he could not only lose his job but go to jail.

If the president were to be suspended, his duties would devolve to the senate chairman, Senator Octavio Lepage.

Mr Perez was preparing last night to deliver a national television address. He has long maintained his innocence and his intention to fight the allegations.

His cabinet offered its resignation last night to give him or his successor a free hand in shaping the administration.

On March 11, Mr Ramon Escovar Salom, Venezuela's attorney-general, petitioned the supreme court for a decision on whether there was cause to try the president on charges of fraudulently handling the equivalent of Dollars 17m in funds from a secret government account used for security and defence.

Mr Escovar was fired as foreign minister during Mr Perez's first administration, of 1974-79.

After the court's decision yesterday, small crowds of people in the streets of Caracas, the capital, cheered and demanded that the president be sent to jail.

The government had stationed extra police and national guardsmen throughout the capital city to head off any disturbances.

VE Venezuela, South America P9199 General Government, NEC P9211 Courts GOVT Government News P9199 P9211 The Financial Times London Page 4 368
New face at unsteady helm: Christina Lamb weighs up the latest Brazilian minister of finance Publication 930521FT Processed by FT 930521 By CHRISTINA LAMB

THE frequent changes of faces at the helm of Brazil's economy continued yesterday when Mr Fernando Henrique Cardoso was named finance minister in a cabinet reshuffle.

He is the fourth person in eight months to try his hand at stabilising Latin America's largest economy and succeeds Mr Eliseu Resende, who lasted a mere 80 days. However, criticisms of President Itamar Franco's inability to retain ministers were drowned by the positive reaction to Mr Cardoso's appointment as the best choice in the circumstances.

Mr Mailson da Nobrega, a former finance minister, said: 'Fernando Henrique has all the qualities needed to improve the situation - he has support in Congress, is very respected by businessmen, economists and intellectuals, and he has international prestige.'

In his first interview after being nominated, Mr Cardoso, who is 63, a Social Democratic party senator and a leading sociologist, said the president had 'given me liberty to act as I choose, but obviously within the constraints of the government programme'.

He ruled out the possibility of shock plans to combat inflation: 'We have had enough of shocks. What we need is confidence and serious and honest hard work'.

He also said that he intended to reduce interest rates 'gradually and within market conditions'. He announced that Mr Pedro Malan will continue as chief debt negotiator and that foreign debt negotiations will not be altered.

Mr Cardoso had been foreign minister since September and won much praise for his performance. A former professor at the universities of Paris, Geneva, Mexico and Cambridge, he is the only figure in the Brazilian cabinet who carries real weight abroad and, despite his left-leaning tendencies, is thought to be the only person able to secure for Brazil a new accord with the International Monetary Fund.

The financial markets welcomed the news of Mr Cardoso's appointment, the main Sao Paulo index rising 4.7 per cent by the lunchtime close. His considerable influence in Congress will help to pass government legislation and he is seen as one of the few people who can handle Brazil's temperamental president. Three finance ministers, two planning ministers and two central bank governors have toppled during Mr Franco's eight months in office.

Some foreign investors were dismayed at the idea of yet another change. 'I have nothing printable to say about Brazil,' said one. Others saw it as more proof of Mr Franco's mercurial character and are already counting down the 18 remaining months of the Franco administration.

Mr Igor Cornelsen, director of Chartered West LB in Sao Paulo, said: 'The real problem is the president, not the ministers. I ask to what extent will Fernando Henrique be able to do anything, or even attract people to work with him.'

Mr Cardoso's nomination ended the uncertainty of the last fortnight over allegations that Mr Resende was favouring his former employers, the Odebrecht construction group, with cheap government finance. He has denied the allegations and said yesterday the scandal had reduced his ability to implement the government's economic plan, announced last month.

Mr Resende's departure was part of a wider reshuffle which included the sacking of the ministers of administration and of agriculture, as well as the dismissal of the head of Funai, the federal Indian protection agency. General Romildo Canhim is the new administration minister.

The new appointments are not expected to alter the government's strategy of stimulating growth through spending and interest rate reduction. Mr Cardoso was one of the authors of the government's economic plan and is a frequent adviser to the president.

Mr Cardoso now has to try to bring down inflation from 30 per cent a month and plug an estimated budget deficit equivalent to Dollars 13bn (Pounds 8.4bn).

Mr da Nobrega said: 'It's a very difficult situation. There is no sign that inflation will fall and the plan does not tackle the real issues. The most he can do in the short term is avoid a grave acceleration of inflation.'

In an interview on Wednesday, though, Mr Cardoso was more confident: 'Brazil is a viable country, the problems are well known and the solutions within reach.'

BR Brazil, South America P9199 General Government, NEC GOVT Government News ECON Inflation P9199 The Financial Times London Page 4 725
Ex-Drexel executives settle charges Publication 930521FT Processed by FT 930521 By PATRICK HARVERSON NEW YORK

TWO former senior executives of the defunct US investment bank Drexel Burnham Lambert settled with the Securities and Exchange Commission yesterday charges that they had failed to supervise properly Mr Michael Milken, former head of Drexel's high-yield bond department.

This year, he completed a jail term for securities fraud.

Mr Fred Joseph, Drexel's former chief executive, and Mr Edwin Kantor, former senior executive vice-president, were barred by the SEC from any supervisory role in a broking or dealing firm for three years. Both men neither admitted nor denied any wrongdoing.

Drexel Burnham Lambert US United States of America P6211 Security Brokers and Dealers PEOP People P6211 The Financial Times London Page 4 127
Ontario businesses irked by tax rises Publication 930521FT Processed by FT 930521 By BERNARD SIMON TORONTO

BUSINESS leaders in Ontario have expressed dismay at corporate and personal tax increases imposed by the province's social democrat government in a bid to reverse its soaring budget deficit.

The New Democratic party's latest provincial budget includes a new minimum corporate tax, a broadening of the provincial sales tax, and steep increases in personal tax rates focused on middle- and high-income earners. The top marginal personal tax rate, combining federal and provincial taxes, will climb from 49.8 per cent to 52.4 per cent.

The average family's tax burden will increase by CDollars 40-CDollars 80 (Pounds 20-Pounds 40) a month.

Ontario accounts for about 40 per cent of Canada's GDP. A steep rise in its budget deficit in recent years has made it the biggest non-sovereign borrower on international capital markets. The province borrowed CDollars 15bn last year, and expects to raise another CDollars 10bn-CDollars 11bn in the current fiscal year. This will bring total debt to CDollars 79bn.

Mr Floyd Laughren, provincial treasurer, said he aims to bring down the budget deficit to CDollars 9.2bn in the year to March 31 1994, from CDollars 12bn in 1992-93.

CA Canada P9199 General Government, NEC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes CMMT Comment & Analysis ECON Gross domestic product P9199 P9311 The Financial Times London Page 4 232
World Trade News: Car makers see 'win-win-win' in Nafta - Industry disputes the view that the trade pact will benefit Mexico at the expense of Canada and the US Publication 930521FT Processed by FT 930521 By BERNARD SIMON

NORTH American vehicle makers dispute the conventional wisdom that the North American Free Trade Agreement will bring a surge of investment in the Mexican automotive industry at the expense of US and Canadian plants.

Much more likely, they predict, is a rationalisation and integration of facilities in all three countries.

'Mexico will get its share of investment,' says Mr Mustafa Mohatarem, director of economics at General Motors. 'But to the extent that there's excess capacity in the US and Canada, you're not going to add on capacity in Mexico, especially in the short term.'

The Mexican car market is growing by about 7 per cent a year. But the domestic car industry is expected to focus increasingly on the smaller models most popular with first-time buyers. Mr Mohatarem compares Mexico to Spain, which, since its accession to the European Community, has become a hub for small-car production.

While growth in the US and Canadian markets is much slower and likely to remain so, the car companies are confident that Nafta will also benefit suppliers in those two countries.

If all goes to plan, Nafta will stimulate trade between Mexico and its two northern neighbours in much the same way as the 1965 US-Canada automotive agreement led to a surge in trade between those two countries. The trend which has seen vehicle and parts makers treat the US and Canada as a single market for the past three decades is expected to extend gradually to Mexico.

Nafta provides for duty-free trade among the US, Mexico and Canada within 10 years for parts and for vehicles which exceed 62.5 per cent North American origin. The threshold will rise from the 50 per cent level set by the 1965 US-Canada Autopact, to 56 per cent after five years and to 62.5 per cent. Nafta will have a tighter definition of North American content than the Autopact.

At the same time, the local-content and trade-balancing requirements of Mexico's Automotive Decree will be phased out. The present 1-to-1 'trade-balancing' ratio between exports and imports will drop to 0.55-to-1 after 10 years.

Mexico will cut its local-value-added content requirement immediately from 36 to 34 per cent, and by another one point a year after five years. The rule will be eliminated entirely after 10 years. The value-added threshold will only be 20 per cent for sales above those achieved just before the agreement is implemented.

The Auto Decree forces foreign carmakers to assemble a wide range of vehicles in Mexico. Although some export-oriented plants are as efficient as any elsewhere on the continent, those centred on the local market have relatively small production runs and high costs. Ford's factory in Mexico City, for instance, turns out eight different models.

Both GM and Ford intend to switch production of larger models now made in Mexico to under-used plants in the US or Canada. Ford, for instance, will probably move production of the 10,000 Thunderbirds now assembled each year in Mexico to an under-used plant in Ohio.

GM sold only 1,805 US-assembled cars in Mexico last year. But the manufacturers are confident that the new trade-balancing ratios will be sufficient for their northern plants to compete for virtually the entire growth in the Mexican market.

GM predicts that the US's automotive trade deficit with Mexico, now running at about Dollars 2bn (Pounds 1.2bn) a year, will swing to a 'significant' surplus.

Nafta's biggest boost to Mexican investment could come from manufacturers which do not yet have a presence there, but are keen to boost sales of economy-sized models in a fast-growing market. In particular, industry observers predict that Honda and Toyota will put up assembly plants in Mexico within the next few years to complement existing factories in the US and Canada.

But foreign companies with only one plant in North America are more likely to pick a site closer to the main US markets than Mexico. BMW recently announced plans to build a plant in South Carolina. Two other German carmakers - Mercedes Benz and Audi - are also expected to opt for a US site.

For the time being, transport costs will limit the appeal of investing in Mexico. Ford cites the example of its compact Escort and Tracer models. These cars are assembled at two plants in North America: Hermosillo in north-central Mexico and Wayne, Michigan, on the outskirts of Detroit.

The Mexican factory has a Dollars 30-an-hour advantage in labour costs, which translates to about Dollars 450 per vehicle. But the further north cars are shipped from Mexico, the more this advantage is eroded by freight costs.

Ford finds it economical to ship Mexican-assembled Escorts and Tracers within an arc covering only about one-third of the southern and south-west US. The Michigan plant continues to serve the big markets in the north-east US, as well as the whole of Canada. Its output remains about double that of Hermosillo.

But differences in transport costs could narrow as Mexico's infrastructure improves and border procedures are streamlined. Even now, some Canadian parts suppliers ship to Mexico and vice versa.

The Canadians are confident that - despite frequent complaints about high wages and taxes - they will continue to attract new investment under continental free trade. Chrysler, which produces about a third of its North American vehicles in Ontario, announced earlier this year that it was boosting capacity at its Bramalea plant outside Toronto.

A boost to US and Canadian parts makers could come from the increase in the rule-of-origin threshold from 50 per cent to 62.5 per cent. Japanese and German 'transplants', most of which only just meet the 50 per cent target, have already begun raising the North American content of their vehicles. 'This formalises a level they were heading for anyway,' says a Canadian trade negotiator.

The weakness of the US dollar against the yen gives foreign carmakers another incentive to lower their dependence on imports. But even with the 62.5 per cent threshold, they will be able to source almost all their high-value electronic, chassis and powertrain components abroad.

General Motors Corp Ford Motor US United States of America CA Canada MX Mexico P9721 International Affairs P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories P3713 Truck and Bus Bodies MKTS Foreign trade CMMT Comment & Analysis RES Facilities P9721 P3711 P3714 P3713 The Financial Times London Page 4 1096
Cuban mystery epidemic 'unique' says US expert Publication 930521FT Processed by FT 930521 By CANUTE JAMES

A US VIRUS expert helping Cuban doctors to track down the cause of a mystery nerve disease affecting thousands of Cubans said the epidemic was unique in his experience.

'After half a day here it's evident that this is a unique epidemic. It's not like anything that I've ever heard of or seen,' Dr Carleton Gajdusek, the winner of the 1976 Nobel prize for medicine, said in Havana late on Wednesday.

He is a specialist in neurological diseases from the US government's National Institutes of Health and has joined a team of international specialists helping investigate the epidemic, which has afflicted almost 30,000 people on the Caribbean island.

The Cuban government asked for foreign assistance to deal with the illness after local doctors had confessed to being baffled by the disease.

The Cubans had first said the disease was optic neuritis, which leads to a loss of vision and is caused by vitamin deficiency. However, when many of the victims were also found to be suffering from muscular disorders, the doctors said they thought the illness was a 'neuropathic epidemic'. Many victims are left bed-ridden and partly blind, according to Cuban doctors.

Cuban government officials have denied suggestions that the illness is the result of poor diet and inadequate medicines. Cuba's beleaguered economy has been suffering shortages of food and medicine. The island's problems have worsened since a storm in March destroyed many crops.

Health officials are hoping the foreign specialists can quickly determine the nature of the illness, so a cure can be applied. They said that their confusion about the nature of the attack is compounded by the fact that its symptoms are not recorded in medical literature, and that it attacks the young, old and healthy.

Last month, some officials suggested that the illness was the result of biological warfare by Cuba's enemies.

CU Cuba, Caribbean P9229 Public Order and Safety, NEC P8099 Health and Allied Services, NEC NEWS General News P9229 P8099 The Financial Times London Page 4 347
Argentine strike in prospect Publication 930521FT Processed by FT 930521 By REUTER BUENOS AIRES

ARGENTINA'S trade union congress has attacked the free market policies of President Carlos Menem and raised the prospect of a general strike, 'when and where it hurts the government the most,' Reuter reports from Buenos Aires.

An assembly of 187 union delegates voted late on Wednesday to authorise Mr Naldo Brunelli, secretary-general of the general labour confederation (CGT), to decide when the strike would take place.

Such a CGT stoppage would be its second national strike since Mr Menem took office in July 1989. The first was staged last November 9.

AR Argentina, South America P9199 General Government, NEC P8631 Labor Organizations GOVT Government News P9199 P8631 The Financial Times London Page 4 126
Businessmen in Ontario dismayed at tax increases Publication 930521FT Processed by FT 930521 By BERNARD SIMON TORONTO

BUSINESS leaders in Ontario have expressed dismay at corporate and personal tax increases imposed by the province's social democrat government in a bid to reverse its soaring budget deficit.

The New Democratic party's latest provincial budget includes a new minimum corporate tax, a broadening of the provincial sales tax, and steep increases in personal tax rates focused on middle and high income earners. The top marginal personal tax rate, combining federal and provincial taxes, will climb from 49.8 per cent to 52.4 per cent.

The average family's tax burden will increase by CDollars 40-CDollars 80 (Pounds 20-Pounds 40) a month.

Ontario accounts for about 40 per cent of Canada's GDP. A steep rise in its budget deficit in recent years has made it the biggest non-sovereign borrower on international capital markets. The province borrowed CDollars 15bn last year, and expects to raise another CDollars 10bn-CDollars 11bn in the current fiscal year. This will bring total debt to CDollars 79bn - double that four years ago.

Mr Floyd Laughren, provincial treasurer, said he aims to bring down the budget deficit to CDollars 9.2bn in the year to March 31 1994, from CDollars 12bn in 1992-93.

Besides the tax increases, he announced a 4.3 per cent cut in government operational spending. The government is also in the throes of acrimonious talks with public sector trade unions over a 'social contract' designed to cut CDollars 2bn a year from its wage bill.

Burns Fry, a Toronto-based securities firm, yesterday cut its forecast of Ontario's 1994 growth rate to 3.3 per cent from 4.2 per cent, to reflect the expected impact of the tax increases on consumer spending. It also warned that borrowing requirements may be higher than expected.

CA Canada P9199 General Government, NEC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes CMMT Comment & Analysis ECON Gross domestic product P9199 P9311 The Financial Times London Page 4 331
World Trade News: W Africans hurt by EC beef policy Publication 930521FT Processed by FT 930521 By LESLIE CRAWFORD

EC SUBSIDIES for beef exports to West Africa are destroying the livelihood of 4m pastoralists who rely wholly on cattle-rearing in the semi-arid Sahel region south of the Sahara, according to the British charity Christian Aid.

With other European aid agencies, Christian Aid has launched a campaign for the abolition of these subsidies.

Since 1984, EC beef exports to West Africa have increased seven-fold, subsidised to the tune of Pounds 280m by European tax-payers. Local beef prices have collapsed. The low-quality, subsidised EC beef sells at half the price of locally produced meat. Sahelian farmers are finding that no-one is prepared to buy their herds.

EC beef dumping is not only threatening the survival of Sahelian communities, it also undermines aid from the EC itself to support livestock production in the Sahel.

Hundreds of millions of Ecus from the European Development Fund have been spent on building refrigerated abattoirs in Burkina Faso, on improving cattle breeds in Mali, Gambia and Senegal, and on promoting disease control in the Ivory Coast and Ghana.

An EC council of ministers meeting is expected to discuss the issue at the end of the month.

Christian Aid argues that to stop the export of subsidised beef to West Africa would not seriously damage farmers in Europe. Less than 0.5 per cent of total EC beef production of 8.7m tonnes in 1991 was exported to the region.

QR European Economic Community (EC) EH Western Sahara, Africa P0212 Beef Cattle, Ex Feedlots P2011 Meat Packing Plants P9721 International Affairs MKTS Foreign trade P0212 P2011 P9721 The Financial Times London Page 4 282
Panamanian leader pleads not guilty Publication 930521FT Processed by FT 930521 By AP PANAMA CITY

Former President Manuel Sols Palma, Panama's figurehead leader while General Manuel Noriega called the shots as defence chief, has pleaded not guilty to charges of abusing his authority, AP reports from Panama City.

Mr Sols Palma fled to Venezuela and is not attending the trial. He is accused of using paramilitary groups to help suppress street protests.

He and three men already in jail - Arturo Marguines, Enrique Thompson and Benjamin Colamarco - are charged with attempting to undermine state security and Panama's standing in the world.

If convicted, each faces up to three years' imprisonment on the first count and three to six years' on the second.

VE Venezuela, South America P9211 Courts NEWS General News P9211 The Financial Times London Page 4 138
Troops on alert as decision looms on Perez Publication 930521FT Processed by FT 930521 By JOSEPH MANN and Agencies CARACAS

VENEZUELA'S government put thousands of extra police and national guards on the streets of Caracas yesterday in anticipation of possible violence as the supreme court debated whether to impeach President Carlos Andres Perez on corruption charges.

More than 5,000 police, double the usual contingent, were dispatched across the capital while National Guardsmen flanked the avenue leading up to the presidential palace.

Security was doubled around the supreme court and oil installations, and the number of troops at airports was increased. During the day city streets were virtually empty as many people stayed at home, fearing possible disturbances.

The supreme court was expected to issue its opinion later yesterday on whether impeachment procedures should begin against the President for allegedly mishandling Dollars 17m (Pounds 11m) in government funds.

It would be the first time in Venezuela's 35 years of democracy that a leader was forced from office. Mr Perez would be suspended from his post pending the verdict.

In his weekly radio address early yesterday, a confidentMr Perez again maintained his innocence, arguing that this was merely the latest attempt - politically motivated - to oust him.

'I know that they want to crush me,' he said. Declining to leave office until he is forced to, he said: 'Here I am and here I will stay. I await the decision serenely.'

If the supreme court decides in favour of impeachment, the case must then be reviewed by the senate, which will have to vote on whether the president should be tried.

Mr Perez first said he would resign if the supreme court decided against him, but later asserted he would name one of his government ministers to serve as acting president.

Mr Perez first held the presidency in 1974-79, a bonanza era when the country was the second-largest supplier of oil to the US.

But his second term, starting in 1988, has been marked by political and social unrest in an oil-rich but corrupt country where many live in poverty.

VE Venezuela, South America P9211 Courts P9111 Executive Offices PEOP People P9211 P9111 The Financial Times London Page 4 367
World Trade News: Clinton wins 'fast-track' Gatt backing Publication 930521FT Processed by FT 930521 By NANCY DUNNE WASHINGTON

US SENATORS on the powerful finance committee yesterday voiced broad support for a swift extension of President Bill Clinton's 'fast-track' negotiating authority in order to finish Uruguay Round negotiations by December 15.

Senator Patrick Moynihan, the committee chairman, promised to introduced the fast-track measure, unencumbered by conditions, on the Senate floor today.

Fast-track is seen as a necessity for any US administration in trade negotiations, because it allows a final package to go through the Congress without amendment.

Mr Mickey Kantor, the US trade representative, yesterday told committee members that he expects the trade ministers of the US, EC, Canada and Japan to agree on the broad outline of a tariff reduction package by the time of the leaders of the Group of Seven industrial powers meet in Tokyo on July.

Although completion of the round by the target date will be 'a tall order', he said, the four ministers who met in Toronto last week made significant progress in producing a market access package, particularly in two areas important to the US - semiconductors and wood products.

The Japanese are now 'engaged' in the process and aware that 'they will have to take a leadership role'.

By the time the trade ministers meet in Tokyo there will have been 12 ministerial meetings on tariff reduction, Mr Kantor said. 'I remain hopeful that as the host country for the G7 economic summit meeting, Japan will demonstrate its commitment to the success of these negotiations.'

He said he would meet the other trade ministers at least twice before the Tokyo meeting.

Once the four ministers negotiate a tariff package, they will return to the bargaining table in Geneva to complete two big tasks, Mr Kantor said. The market access negotiations will be broadened to include goods and services with the 115 Gatt members participating in the Uruguay Round.

The US will then seek to 'improve' the negotiating text produced by Mr Arthur Dunkel, the Gatt director-general.

The areas necessary for change include: anti-dumping, subsidies, trade-related intellectual property rights, environment-related issues on technical barriers to trade and sanitary measures, subsidies, textiles and institutional issues, including the establishment of a multilateral trade organisation.

Mr Kantor also said the Clinton administration would seek to use its generalised system of preferences, the tariff free programme, designed to help the developing countries gain markets in the US, as 'an important trade policy tool'.

Besides conditioning benefits on a government's record on worker rights, it would also be used it as 'leverage to foster reforms in areas such as intellectual property'.

The administration has asked for a short-term 15-month extension of the Dollars 17bn (Pounds 11bn) GSP programme, which expires next July 4. It will also seek elimination of the statutory ban on GSP for the former Soviet Union, which prevents Russian and other republics from being considered for GSP benefits.

'This proposal would allow us to implement President Clinton's commitment to Russian Federation President Yeltsin,' Mr Kantor said.

Mr Henry Parker III, of the coalition of US service industries, told the Senate committee that more work must be done to improve the services text.

He said a final agreement should include strong annexes for financial services and telecommunications and substantial liberalisation across a wide range of countries and a mechanism to prevent free riders benefiting.

US United States of America P9721 International Affairs P2499 Wood Products, NEC P3674 Semiconductors and Related Devices MKTS Foreign trade P9721 P2499 P3674 The Financial Times London Page 4 595
Danes' dismay over riots in Copenhagen: Sympathy for anti-Maastricht demonstrators is hard to find Publication 930521FT Processed by FT 930521 By HILARY BARNES COPENHAGEN

A SECOND night of riots in the Norrebro area of Copenhagen, following Denmark's endorsement of the Maastricht treaty on Tuesday, has left Danes wondering what has hit their peaceful society.

Further mayhem may be on the way; the demonstrators, associated with a militant anarchist squatter group known as the BZ'ers, are planning an official demonstration against the police tomorrow.

However, yesterday's media reports were notably lacking in sociological soul-searching on the causes of the riots. The Copenhagen popular newspaper Ekstra Bladet, with a strongly anti-Maastricht readership, described the riot as 'shameful', 'completely un-Danish', and ascribed the riots to 'louts'.

Copenhagen, one of only two areas in which there was a No majority on Tuesday, is a city dominated by civil servants and administrators, students, and the financial service sector. It also has more than its share of social welfare clients and pensioners.

It has above-average unemployment, about 16 per cent compared with the national average of 12 per cent. Youth unemployment, however, has been partly held in check by provision of more places in tertiary education, so that unemployment in the 16-24 age group is about the same as the national average.

There was a measure of understanding for the rioters from the June Movement, the most prominent of the anti-Maastricht campaign movements. One of its leaders, Ms Drude Dahlerup, declined to condemn Tuesday night's rioters until she had heard all the facts. But there is no evidence of popular support for the BZ'ers.

With the city full of journalists and camera crews, the chief worry of many Danes is the country's 'reputation abroad as a country where you can walk the streets in safety', as the national newspaper Berlingske Tidende put it.

The second riot was less vicious than the first, when police were under such severe pressure from the stone-throwing demonstrators that they opened fire and wounded 11 of them - none seriously. About 26 policemen were also injured.

Mrs Ebbe Strange, a left-wing member of parliament, has called for an inquiry into the riot.

On Wednesday night 100-200 demonstrators began smashing shop windows and were soon involved in a street battle with about 200 police, who used teargas but did not fire their handguns again. Four police were slightly injured and four demonstrators arrested, said police.

DK Denmark, EC P9229 Public Order and Safety, NEC P9721 International Affairs NEWS General News P9229 P9721 The Financial Times London Page 3 425
US sees progress in talks with Kozyrev on Bosnia Publication 930521FT Processed by FT 930521 By Our Foreign Staff

THE US and Russia are 'drawing closer together' on an approach to ending the ethnic conflict in Bosnia, according to Mr Warren Christopher, the US secretary of state.

Mr Christopher sounded hopeful after two meetings in Washington yesterday with Mr Andrei Kozyrev, the Russian foreign minister, who has been pursuing a Moscow peace initiative. 'We have agreed on a series of matters we might discuss with our counterparts from France and Britain over the next several days,' Mr Christopher said.

Mr Kozyrev, who earlier said he saw 'positive results' emerging from the latest round of talks, said the strategy under discussion was 'very concrete'. But neither disclosed any details.

Mr Christopher is to meet Mr Douglas Hurd, UK foreign secretary, in Washington today, and Mr Alain Juppe, French foreign minister, next week.

Ms Dee Dee Myers, White House press secretary, reaffirmed US support for deploying monitors on the Serbian-Bosnian border to ensure Serbia kept its promise to stop the flow of arms and other supplies to Bosnian Serbs.

It was thought that the plan to deploy about 500 monitors at dozens of checkpoints might be voted on by the United Nations Security Council last night, but the UN postponed a vote.

Ms Myers conceded that the US was not 'comfortable' with the proposal to set up safe havens for Bosnian Moslems. 'We believe that is a reward for ethnic cleansing,' she said. But she reiterated support for a war crimes tribunal, a proposal first advanced by the Bush administration.

Bosnian Croat troops meanwhile freed 1,800 Moslem civilians rounded up during recent heavy fighting in Mostar, a UN peacekeeping force spokesman said. But he said there were still some Moslems, apparently Bosnian government soldiers, detained outside Mostar.

Moslems and Serbs accused each other of launching fresh attacks yesterday in northern Bosnia and the capital, Sarajevo, a day after the Bosnian Serb leadership said it had halted military operations.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 352
Kravchuk in move for wider power Publication 930521FT Processed by FT 930521 By CHRYSTIA FREELAND KIEV

UKRAINE was plunged into a constitutional crisis yesterday when President Leonid Kravchuk asked parliament to make him head of government, a position currently held by the prime minister. In response Prime Minister Leonid Kuchma offered to resign.

The president's unexpected bid for greater power came as parliament considered the prime minister's own request, made earlier this week, for an extended remit in order to implement economic reform. The conservative parliament had looked set to meet Mr Kuchma's demands, thereby facilitating greater reform, but the president's proposal could now block that process.

Mr Kuchma this week called on parliament to extend his power to rule the economy by decree and asked for control over the central bank and state privatisation body.

Mr Kravchuk had been expected to back the prime minister's plea, but he surprised deputies yesterday with his request to amend the constitution to make the president the head of all executive structures in Ukraine. The presidential option is attractive to deputies because he has promised not to restrict their authority to pass economic legislation.

Deputies are expected to vote on both the president's and the prime minister's proposals today. If the president wins, as most predict, Ukraine's stalled economic reforms could face a further setback.

A senior cabinet minister, who said he would also offer to quit if the prime minister went, said that if the president took charge of the government he was likely to bring back the ex-Communist old guard forced out when Mr Kuchma took office last autumn.

In that event he forecast policies which would to push Ukraine into hyperinflation within the next six months.

Presidential advisers, however, deny this, saying Mr Kravchuk, who has carefully side-stepped economic issues during his first 18 months in office, will pursue radical reforms. 'Mr Kuchma's government said it was pro-reform,' said one, 'but actually its policies were conservative.'

After a week of rapid reversals, some deputies are advocating a third option. Mr Volodymyr Iavorivsky urged president and prime minister to work together, suggesting that Mr Kuchma accept the job of vice-president responsible for the economy.

However, the prime minister is understood to have rejected such an option.

The political uncertainty is likely to be a setback for the International Monetary Fund delegation currently in Kiev. It arrived earlier this week to begin what both sides hoped would be conclusive talks on granting Ukraine access to the IMF's newly created transitional lending facility.

UA Ukraine, East Europe P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 3 437
UN considers deploying Bosnia border monitors Publication 930521FT Processed by FT 930521 By MICHAEL LITTLEJOHNS, UN Correspondent and LAURA SILBER NEW YORK, BELGRADE

THE United Nations Security Council is considering a proposal to deploy some 500 international military observers at dozens of checkpoints on the Yugoslav-Bosnian border to monitor Belgrade's compliance with its promise to halt arms supplies to Bosnia.

The resolution, sponsored by Russia and EC members Britain, France and Spain, is also expected to win US backing, albeit unenthusiastic. The US rift with the Europeans on Balkan policy remains acute.

The secretary general's staff are already making contingency arrangements for deploying the observers at some 50 checkpoints, although the plan will have to be presented first to the Council.

Their main task would be to ensure that President Slobodan Milosevic fulfils his promise to put pressure on the Bosnian Serbs to accept the Vance-Owen peace plan by cutting off vital supplies.

Mr Milosevic has called for a similar international observer team on the Bosnian-Croatian border to halt arms shipments to the Bosnian Croats. The resolution asks for recommendations by the secretary general on this question.

Two other resolutions dealing with the Balkan crisis are also being considered. One, to establish formally an 11-member international war crimes tribunal, has run into juridical problems. These were still being ironed out last night.

The other is a proposal that would have Russian troops join the mainly western European international force in Bosnia under a plan that would add about 3,000 soldiers to that operation.

Laura Silber adds from Belgrade: Fresh clashes erupted yesterday in northern and central Bosnia, in spite of pledges of peace by Serb and Croat leaders.

At least two people were killed and nine wounded in sniper and mortar attacks on Sarajevo, reported Bosnian radio. Tanjug, the Belgrade-based news agency, said Grbavica, the Serb-held district of Sarajevo, came under a heavy mortar attack for the second straight day.

BH Bahrain, Middle East HR Croatia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 340
Competition cases jam eases Publication 930521FT Processed by FT 930521 By ANDREW HILL BRUSSELS

THE European Commission managed to cut its backlog of competition cases by nearly a third last year.

The Brussels authorities have been heavily criticised by lawyers and companies for the time it takes to examine routine deals under EC treaty rules which outlaw cartels and abuses of a dominant position.

The Commission's annual report on competition reveals that 1,562 such cases were still being examined on December 31 1992, compared with 2,287 a year earlier. Some 399 new cases were taken on during the year, compared with 388 in 1991. Since 1988, there has been a 55 per cent reduction in the backlog, as the Commission has tried to accelerate internal procedures.

Brussels already applies strict deadlines to merger cases, but the competition directorate says it is not yet possible to introduce internally binding deadlines for the bulk of general cases.

QR European Economic Community (EC) P9721 International Affairs P6231 Security and Commodity Exchanges NEWS General News P9721 P6231 The Financial Times London Page 3 178
Russia sets tough debt terms Publication 930521FT Processed by FT 930521 By JOHN LLOYD MOSCOW

RUSSIA is demanding repayment on harsh terms of the trillions of roubles it is owed by the other former Soviet republics. Members of the Commonwealth of Independent States, they are ostensibly committed to establishing a closer economic union.

In talks with the states, Russia has demanded:

that repayment must start from 1994;

that the interest rate on the debt must be paid at 2 per cent above the prevailing interbank rate;

that the repayments be denominated in dollars at a rate pegged to that prevailing in the middle of last year, when the rouble was much stronger against the dollar.

Western advisers following these negotiations say the terms are exceptionally tough - especially as Russia has benefited from a five-year postponement on payment of interest and capital on its Dollars 80bn-plus debt with the London and Paris clubs. However, they are also seen as an opening gambit, albeit one showing Russia is no longer willing or able to deal with its neighbours on any other than commercial terms.

Most of the debt is in the form of technical credits advanced over recent years which have allowed the republics to keep on buying Russian energy and manufactured goods. Russia's dominance as an energy producer has meant it is the creditor country in nearly all bilateral relationships with other CIS members.

However, the debtor countries are in most cases even more impoverished than Russia, with much less possibility than Russia of earning hard currency through energy or other sales. Their continuing need for Russian credits is illustrated by the intention of the Ukrainian government to seek a further Rbs1,000bn credit line with which to pay for Russian oil and gas this year.

Russia's potential to earn hard currency this year and next has been further damaged by the continuing fall in oil output.

RU Russia, East Europe XV Commonwealth of Independent States P9311 Finance, Taxation, and Monetary Policy P1311 Crude Petroleum and Natural Gas RES Natural resources NEWS General News P9311 P1311 The Financial Times London Page 3 350
Serbs confident they can end war and keep spoils: Why the world community is being defied Publication 930521FT Processed by FT 930521 By LAURA SILBER

BOSNIAN Serb leaders have triumphantly declared peace, presenting the outside world with the fait accompli of their self-styled state and challenging the west to come up with new peace proposals to replace the Vance-Owen plan, acceptable to the Bosnian Serbs.

Despite rifts between Mr Radovan Karadzic, the Bosnian Serb leader, and his Belgrade patrons, Serb leaders on both sides of the frontier appear to believe that the war is over. Their apparent differences are about tactics to achieve their objectives.

In the aftermath of the overwhelming rejection by Bosnian Serbs of the Vance-Owen plan in their referendum last week-end, it is significant that Belgrade has toned down its criticisms of Bosnian Serb leaders.

Mr Karadzic is now confident that the west will not intervene against Bosnian Serb targets. He is clearly buoyed by the rumblings of the rift between the US and its European allies over how to handle the crisis, and has even said the Clinton administration would soon publicly back Serbian 'rights' and the 'autonomy of our state'.

The Bosnian Serb assembly's announcement on Wednesday that Bosnian Serb forces would cease all military operations in Bosnia comes at a time when they already control 70 per cent of Bosnian territory, compared with the 43 per cent allocated to them under the Vance-Owen plan. The remark by a prominent Bosnian Serb intellectual that 'the remaining (Moslem) enclaves will fall like ripe fruit from the trees' is indicative of the widespread feeling of confidence among the Serbs of Bosnia.

In their efforts to carve out a Serbian state, Republika Srpska, Bosnian Serbs have expelled or killed hundreds of thousands of Moslems. 'The decision has been made. The Serbian people never again - not under any conditions - will give up Republika Srpska and the whole world must know this,' Mr Karadzic told the Bosnian Serb assembly.

Anxious to persuade the UN to ease sanctions against the remnants of Yugoslavia, Mr Slobodan Milosevic, Serbian president, has endorsed the international plan to divide Bosnia into ten provinces. But he is clearly aware that re-invention of multi-ethnic Bosnia will prove elusive for a fractious international community.

If Belgrade has backed the step-by-step implementation of the Vance-Owen peace plan, it has done so on the assumption that it would give time for 'necessary corrections' to be made. In practice, this can only mean territorial concessions to the Bosnian Serbs.

Mr Karadzic set out his thoughts on the subject with brutal clarity on Wednesday. A Bosnian Serb state would be willing to settle for a confederation with the Croats and Moslems in Bosnia-Hercegovina, 'if it makes the job of the international community easier, and if they want to preserve Bosnia-Hercegovina in some form.'

Serbian power-brokers have echoed Mr Karadzic's call for peace. Even more telling are the similar statements this week by President Franjo Tudjman of Croatia. Serb and Croat leaders have long sought to carve up Bosnia at the expense of the Moslems, the republic's biggest ethnic group.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 535
Spanish Elections: Parties set to pay homage to Catalonia - Catalan nationalist leader Jordi Pujol could hold the balance of power after June 6 Publication 930521FT Processed by FT 930521 By TOM BURNS BARCELONA

THE one political party that is wholly confident about Spain's June 6 general elections is Catalonia's nationalist grouping Convergencia i Unio, CiU. Its electoral slogan proclaims the poll date to be 'The Great Opportunity' and nobody disputes the relevance of the message.

The ruling Socialist party, PSOE, and the centre-right Partido Popular opposition, PP, are worried. The two Madrid-based parties are evenly matched and they both know that neither of them is likely to form a governing majority.

The prospect of a stand-off election and a hung parliament is tailor-made for CiU's ambition to consolidate its hold on the wealthy north-east corner of Spain.

CiU has consistently won Catalonia's regional elections - its leader, Mr Jordi Pujol, has run the autonomous government, the Generalitat, since 1980 - and it is now also poised to outstrip the Socialists in Catalonia in a general election.

Opinion polls indicate that CiU could gain up to three seats, to return 21 of the 47 members elected in Catalonia to the Madrid congress, that the PSOE's present 22 Catalan seats will be sharply reduced, possibly to as few as 15, and that the PP may double its Catalan representation to 10 seats.

On present evidence neither the Socialists nor the centre-right opposition are likely to gain much more than 150 seats in the 350-member Congress and the CiU's 20-odd members will hold the balance of power in the new legislature. Mr Pujol can accordingly negotiate an alliance with the PSOE and return it to power for a fourth term, or he could ally with the PP and usher in a new government. Mr Pujol, who clearly relishes the prospect of a power-broker role, says CiU can be counted on to assure the governability of Spain. But he is keeping understandably quiet about which of the two main parties he is willing to back.

The choice is not an easy one, for CiU is a middle-of-the- road party that seeks to be all things to all Catalans. It embraces diehard and lukewarm nationalists, big business, small shopkeepers and liberal-minded professionals.

An alliance with the PSOE would anger Mr Pujol's middle-class supporters but one with the PP would upset Catalan nationalist sentiment.

It is not, however, a choice that can be ducked. 'Since we have the responsibility of governing Catalonia, we are condemned to reaching an understanding with Madrid,' says Mr Joaquin Molins, a former member of Mr Pujol's Generalitat government who is now running for a CiU seat in Congress. Tipped for a cabinet post in the event of a coalition government, Mr Molins stresses that it is very much in Catalonia's self-interest for Spain to have a competent and stable government.

Catalonia resembles northern Italy in its sophisticated development. However, unlike regional political movements there, such as the Lombard League, which have little time for the rest of Italy, CiU cannot dissociate itself from its Spanish framework.

Catalonia is only geographically close to the core of Europe; its prosperity is to a large extent dependent on the purchasing power of the more backward areas of the domestic economy.

La Gran Oportunitat, as CiU's electoral posters proclaim, is the challenge to infuse the Spanish administration, as junior partners in a coalition led either by the PSOE or the PP, with all the values and virtues of modernity, efficiency and commercial acumen that are attributed to the Catalans. The slogan echoes a call to 'Catalanise Spain' made 60 years ago by the financier Mr Francesc Cambo, the father of modern Catalan nationalism.

But it is also an opportunity to increase the considerable self-rule powers that are already enjoyed by Barcelona's Generalitat. Mr Pujol will insist on the Generalitat's fiscal co-responsibility in Catalonia with the Madrid government as the price for CiU support in a national coalition government.

Eventually Mr Pujol wants the Generalitat to raises its own taxes and then pay a lump sum to Madrid for the services rendered by the central administration. The Basque country and Navarre, its adjoining autonomous community, already have this prerogative. 'All we want is the same deal,' says Mr Molins.

It is doubtful, given the electoral trends, whether either the PSOE or the PP will be in a position to reject such a deal after June 6.

MR JORDI PUJOL is fast and fluent, although not always understandable, in English, French, German and Italian as well as Spanish, writes Tom Burns in Barcelona. As a public speaker he is at his most impressive speaking Catalan, the language he considers his birthright and that of Catalonia's 6m-odd inhabitants.

Aged 63, Mr Pujol has been running the area that he resolutely calls a nacio since 1980 as chief minister of the Generalitat, the Barcelona-based autonomous government. As well as the most linguistically gifted of Spain's senior politicians, he is the longest serving in high elected office.

Mr Pujol has been a passionate Catalan patriot since his student days, when he was tortured and imprisoned for singing Catalonia's national anthem at a Barcelona concert attended by the top brass of General Franco's dictatorship.

ES Spain, EC P8651 Political Organizations P9199 General Government, NEC GOVT Government News P8651 P9199 The Financial Times London Page 2 894
Spanish Elections: Basques and Catalans plan own 'central' banks Publication 930521FT Processed by FT 930521 By PETER BRUCE MADRID

SPAIN'S TWO big governing regional parties, the Basque PNV and the Catalan CiU, have both issued a serious threat to the central authority of Madrid before the June 6 election by announcing plans to set up public banks which could increase the financial autonomy of the two regions.

The move, started by the Basques and quickly followed by the Catalans, is a taste of the complex political dilemma that could confront either of Spain's two main parties, the governing Socialists or the conservative Partido Popular (PP), after the election.

These parties are neck-and-neck in the polls, which predict a hung parliament in which any government would have to have the assistance of the Basque and Catalan parties. By launching their proposals now, the Basques and Catalans are making clear the price of such co-operation.

The PNV has said its planned public bank for the Basque country would enjoy the same powers as the Bank of Spain in obliging Basque financial institutions, mainly savings banks, to deposit with it a proportion of their deposits, interest free, to meet liquidity requirements.

A draft law publish by the Basque government says the new bank, the Euskadiko Banku Publikoa, would serve to 'obtain the maximum financial autonomy for Euskadi' (the Basque country).

The possibility of creating a Basque central bank has been raised before and it is believed that, ultimately, the PNV intends the new bank to be a central bank issuing its own currency. The Basque country already has a statute of autonomy, allowing the regional government the exclusive right to collect and distribute taxes.

Responding to publication of the Basque draft law, the CiU leader and Catalan premier, Mr Jordi Pujol, emerged from a cabinet meeting this week saying: 'We must do it too.' The Catalans, who do not yet collect their own taxes, want a public bank run by the regional government which would be used to help fund regional government projects.

It is taken for granted, however, that the Catalans, sooner or later, would also want this bank to take some control over Catalonia's financial sector, and that it would also begin to set liquidity requirements for local banking institutions.

ES Spain, EC P8651 Political Organizations P6011 Federal Reserve Banks NEWS General News P8651 P6011 The Financial Times London Page 2 399
Waigel suffers political setback at home Publication 930521FT Processed by FT 930521 By QUENTIN PEEL BONN

A CHASTENED Mr Theo Waigel, the German finance minister, is set to stay on in Bonn to wrestle with the budgetary headaches of German unification, after he failed in an attempt to take over as prime minister in his home state of Bavaria.

The man now regarded as odds-on favourite for the Bavarian job is Mr Edmund Stoiber, the conservative interior minister in the Bavarian government and a close confidant of the late Franz-Josef Strauss, the longest-serving post-war Bavarian premier.

The solution, to be presented to a meeting of the party leadership of the Bavaria-based Christian Social Union (CSU) today, is good news for Chancellor Helmut Kohl. He will not have to find a new man to fill the unpopular job of finance minister at a time of acute budget stringency, and in the run-up to a whole series of state and national elections.

It amounts to a serious setback, however, for the political ambitions of Mr Waigel, who had clearly set his heart on the state premier's job in Munich.

He now knows that in his home base, he cannot match the support of Mr Stoiber, the hard man of the CSU and now seen as a certain future party leader.

The planned compromise will leave Mr Waigel as party leader in the CSU, with his position ostensibly enhanced, provided he remains in Bonn. There he has always shown himself to be a loyal and likeable lieutenant to Mr Kohl in the ruling coalition. As far as Bavarians are concerned, he may have been too easy to accommodate, unlike the prickly Mr Strauss before him.

An important factor in the outcome is the decision of CSU party barons on who can best resist the advance of the far-right Republican party in next year's state, national and European elections. Mr Stoiber, who has taken a strong anti-immigration and tough law-and-order stance, is seen to be the obvious local leader. Mr Waigel's problem is that the Bonn Finance Ministry is a poisoned political chalice - above all at such a time of almost permanent budget cutting.

Only on Wednesday, Mr Kohl served notice that another ferocious round of savings was needed to keep the 1994 budget under control. Tax revenues are estimated to fall more than DM100bn (Pounds 40.6bn) short of the original forecast up to 1996, because of the current recession and rising unemployment.

DE Germany, EC P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 2 426
Italian interest rate cut to 10.5% Publication 930521FT Processed by FT 930521 By ROBERT GRAHAM

THE Bank of Italy yesterday cut the discount rate by half a percentage point to 10.5 per cent, the lowest level since 1978, Robert Graham writes.

The move followed the positive outcome of the second Danish referendum on the Maastricht treaty and is in response to calls from recession-hit industries to ease the still high cost of borrowing.

Commercial banks immediately began to bring their prime rates into line. On average the commercial banks looked set to cut their prime rates by half a percentage point to 11.75 per cent.

The fall in interest rates, reflected in the reduced cost of financing the budget deficit, brought some relief to the Ciampi government as the economic team finalised measures for a mini-budget.

This could be announced today with a mix of new taxes and spending cuts which are aimed at producing an extra L13,000bn (Pounds 5.5bn).

The bulk is expected to come from higher taxes, specially on petrol.

IT Italy, EC P9311 Finance, Taxation, and Monetary Policy P6081 Foreign Banking and Branches and Agencies GOVT Taxes NEWS General News P9311 P6081 The Financial Times London Page 2 200
Socialist party in peril as Benvenuto resigns Publication 930521FT Processed by FT 930521 By ROBERT GRAHAM ROME

ITALY'S 100-year-old Socialist party was in danger of disintegration last night after Mr Giorgio Benvenuto announced his resignation as leader after only 97 days.

His resignation, so close to municipal elections next month, is expected to accelerate the formation of new political alliances as the traditional parties struggle to find fresh identities untainted by the corruption scandals.

Mr Benvenuto made it clear he was quitting because the old guard in the party, faithful to Mr Bettino Craxi, the former leader, had undermined every attempt to introduce reforms. But the state of the party's finances, with accumulated debts close to L300bn (Pounds 128m), played a part.

On May 4, he had threatened to resign reforms were not adopted.

Yesterday he commented bitterly: 'Today the chances of me remaining as leader have vanished. I have realised that every residual effort to save the party is immediately blocked by counter-proposals from a sizeable section of those who until recently were in the leadership.'

Mr Benvenuto's decision is also linked to a special report prepared by a consulting firm on the state of the party's finances. This report revealed documented debts attributable directly to the party of L214bn. The figure is close to L300bn if the debts and losses of the party's daily newspaper, Avennire are included.

Previously Mr Benvenuto had suspected debts were about L160bn, but even that was double what he had been led to believe three months ago. Bank debts and interest charges are likely to force the party to make some quick sales of its large property portfolio. Mr Benvenuto has never received any pay for his job and the 240 staff in the Rome headquarters have not been paid for three months.

The parlous state of the party's finances, Mr Benvenuto claims, reflected very lax management. The Socialist party has been revealed by the corruption scandal as the party with the biggest appetite for money yet its debts are nearly triple those of any other political grouping.

At least six members of the Socialist executive decided to resign along with Mr Benvenuto, including Mr Gino Giugni, the party chairman.

Mr Benvenuto is the former leader of the UIL, the Socialist-controlled trade union confederation. He was brought in as a compromise candidate in February to replace Mr Craxi, disgraced in corruption scandals.

Despite being forced to step down, Mr Craxi still sought to control the party through his allies on the executive such as Mr Gianni De Michaelis, the former foreign minister. Mr Craxi himself retained offices in the party headquarters in Rome.

IT Italy, EC P8651 Political Organizations PEOP People P8651 The Financial Times London Page 2 454
Saarland steelworks 'victim of EC failure' Publication 930521FT Processed by FT 930521 By ARIANE GENILLARD VOLKLINGEN

AN ABANDONED steel plant, corroded by rust, lies next door to Saarstahl, the near-bankrupt steelmaker in depressed German Saarland.

Workers have nicknamed the sprawling structure, once the jewel of the now defunct steel group Rochling, the 'museum'. But as closure looms at Saarstahl itself, they say the whole area will soon be more like a mausoleum.

Saarstahl, the French-owned steel producer employing 7,500 workers, filed for protection from its creditors this week. Usinor-Sacilor, which owns 70 per cent of the holding, said it could no longer sustain losses of DM30m (Pounds 12m) a month.

For workers, trade union and Saarland state officials alike, Saarstahl is the victim of the European Community's inability to devise a coherent steel policy.

'Why is the plug being pulled on us when other steel groups in Europe get free doses of oxygen in the form of state subsidies?' Mr Werner Fries, an official at the plant's workers' council, asked angrily.

But other German steel makers, equally quick to accuse Brussels, have watched as Saarstahl and Klockner-Werke, a steel producer with its headquarters in the Ruhr valley, filed for protection from creditors. The steelmakers fear their rivals will be able to come back fit and trim and attractive to foreign buyers.

Klockner-Werke recently filed for a 'composition' procedure, a legal step short of outright bankruptcy. The move should allow the ailing steel maker to write-off DM1.4bn of its DM2.7bn net debt. For Saarstahl, the proceedings will allow it to suspend interest payments on its debt. Its payroll will be covered by funds from the federal labour office. Saarland state officials said the company's liquidity crisis would be at least temporarily resolved.

Thyssen, Germany's largest steel group, complained that susbsidies could not be pumped indefinitely into ailing steelmakers. Allowing both Saarstahl and Klockner-Werke to go on, freed from their debt burden, would lead to a 'a drastic distortion of competition in Germany and Europe, with negative consequences for the rest of the steel industry,' the company said.

The closure of Saarstahl, which produced 2.2m tonnes of long products in 1992, threatens 7,500 jobs. Long products, such as rods, wires and steel sections, have been hit hardest by cheaper imports from eastern Europe.

A total rescue mission for Saarstahl is now ruled out, however. But the company has four or five mills which operate competitively as a result of heavy investments made in the last decade, according to Mr Lothar Kramm, the official responsible for steel in Saarland's state government.

Already the most subsidised steel maker in Germany, it will not receive additional funds from the federal budget, however. Pointing to some DM3.7bn received in direct subsidies, soft loans and credit guarantees since 1978, when the company first ran into difficulties, the federal economic ministry has turned a deaf ear to calls for fresh money.

For the state Social Democratic government, keeping Saarstahl alive is vital. Its fate may indeed be tied to the ailing steel giant. Promises to keep it alive are on the top of the electoral agenda of Mr Oskar Lafontaine, the state premier, who in 1985 came to power after 25 years of conservative rule.

Saarstahl workers believe their state government will rescue the steelmaker from total collapse, as it did when the company was bought back from Arbed of Luxembourg for a notional DM2 in 1986.

They say the blame lies with Usinor-Sacilor, which, according to Mr Fries of the workers' union, refused pleas for a new capital injection made by the state government, which owns a 27.5 per cent stake.

'Steel is all politics,' said Mr Fries, suggesting that job losses mattered less to the French than to the Saarland government. The state already has the second-highest unemployment rate in western Germany after Bremen, home of the Klockner-Werke plants.

But then, Saarland's ambiguous relations with France are historical, Mr Fries added. Saarland voted twice, in 1935 and 1955, to be re-attached to Germany after falling under French administration at the end of both world wars.

'But maybe, if we were French steel workers, we would have kept our jobs,' said one of the plant's workers.

Saarstahl Klockner-Werke Thyssen AG vorm August Thyssen Huette DE Germany, EC P3313 Electrometallurgical Products P3325 Steel Foundries, NEC PEOP Labour MKTS Production P3313 P3325 The Financial Times London Page 2 729
Greece begins bugging probe Publication 930521FT Processed by FT 930521 By REUTER ATHENS

THE Greek parliament began setting up a powerful committee yesterday to investigate charges that leaders of the ruling conservative party illegally bugged their political opponents, Reuter reports from Athens.

Party leaders began selecting those who will sit on the 35-member committee to inquire into allegations that the ruling New Democracy party systematically eavesdropped on an array of rivals during a political crisis from 1988 to 1990. They also plan measures to control bugging.

GR Greece, EC P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 2 102
Yes means Nein for D-Mark: Danish vote raises fears over German currency Publication 930521FT Processed by FT 930521 By JAMES BLITZ

DENMARK'S vote in favour of the Maastricht treaty has given a boost to the project of European union. But dealers in financial markets wonder whether the Danish Yes has also signalled the start of a long-term decline for the mighty D-Mark on the foreign exchanges.

Over the last 12 months, the German currency benefited greatly from the turmoil in the European exchange rate mechanism, as currency and bond dealers sought a source of stability.

But as Maastricht gets back on track, there are signs that dealers are regaining confidence in currencies and bonds outside the D-Mark bloc. This process threatens to lift the veil on fundamental weaknesses in Germany's economy and its public finances.

'The poor fundamentals underpinning the German currency are becoming gradually exposed,' says Mr Avinash Persaud, of UBS. 'I anticipate the D-Mark will soon be one of the weakest of the major currencies.'

This week, the Danish vote has already triggered a sharp outflow of 'hot money' from the D-Mark into other European currencies and bonds.

In recent months, international investors had bought the D-Mark as a means of hedging against the possibility of further devaluations of currencies like the Danish krone, the peseta and the escudo.

But the last three days have witnessed a one-off flow of funds out of the D-Mark, lifting sterling, the Italian lira and the Iberian currencies, while weakening the D-Mark and German government bonds.

Simultaneously, there has been a surge of short-term investment in the dollar, following US consumer inflation figures that show a 3.7 per cent rise in the first three months of this year, from just 3 per cent in the previous quarter.

Some dollar investors believe the data may have given the Federal Reserve's open market committee, which met this week, a reason to raise short-term US interest rates - a move that would increase the premium on short-term dollar holdings.

Initially, the developments in Denmark and the US may only affect flows of hot money between the main currencies. But several longer-term factors are forcing institutional investors to ponder the weighting of D-Marks in their currency and bond portfolios.

The increase in Germany's current account and budget deficits, as a result of the reunification of East and West Germany, has raised fears about a build-up of D-Mark denominated paper on the world's bond markets. For 1993, the federal deficit forecast has risen from DM43bn (Pounds 17.4bn) to DM70bn. But this figure still appears implausible to many analysts.

Mr Jonathan Hoffman, an economist at Credit Suisse First Boston, says that the settlement of the IG Metall strike may worsen the budget deficit, as East German metalworkers were guaranteed that their wages would grow to 80 per cent of those for their western counterparts, in spite of their much lower productivity. 'That was a political settlement, and not the one the markets wanted to see,' he said.

With German GDP set to fall by about 2 per cent this year, the Bundesbank is also likely to reduce short-term interest rates further, thus reducing the premium for investors holding D-Marks.

It is also in the interest of the government and central banks to pull down short-term rates as quickly as possible in order to alleviate the funding burden and attract investment into longer-dated bonds.

Following the five realignments since last autumn, the D-Mark is the one currency in the ERM that remains significantly over-valued. It is thought to be 20 per cent over-valued on a purchasing power parity basis: this will have to be redressed if the country is to maintain its share of export markets. Amid all these factors, the near-term outlook for the D-Mark depends on how the Bundesbank responds.

Several Bundesbank council members have raised concern that a weakening D-Mark would raise the prospect of imported inflation.

But Mr Steve Hannah, a director of IBJ International, believes that it will be difficult for the Bundesbank to respond to this danger by tightening monetary policy.

'If the D-Mark falls independently of German interest rate cuts, the Bundesbank might have to slow its easing of monetary policy to keep the D-Mark strong, worsening the recession,' he said. The Bundesbank's hope must be that, as interest rates come down, there is an orderly depreciation in the D-Mark. But the long term outlook for the D-Mark remains far from certain.

The D-Mark remains an important reserve currency of European central banks and the proportion of foreign exchange turnover in D-Marks has increased in recent years.

But a parallel is often drawn these days between the D-Mark's current situation and the way in which the dollar's status as a reserve currency has been gently eroded in the last 30 years by the build up of America's trade and budget deficits.

'I wonder whether, two or three years after reunification, the same phenomenon is beginning to affect the D-Mark,' says Mr Hannah. 'The atmosphere is certainly changing, and the relative strength of the D-Mark will be a talking point for some time to come.'

DE Germany, EC DK Denmark, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs CMMT Comment & Analysis MKTS Market data P9311 P9721 The Financial Times London Page 2 881
Jobless fall boosts economic optimism Publication 930521FT Processed by FT 930521 By EMMA TUCKER, IVOR OWEN and JAMES BLITZ

ANOTHER unexpected drop in unemployment and a marked slowdown in earnings growth yesterday revived hopes that the UK economy is continuing to recover with inflation under control.

The figures prompted a strong rise in sterling, which closed in London 3/4 of a pfennig up on the day at DM2.51, a four-month high. It rose further in New York to DM2.5153.

The monthly fall in unemployment - the third in a row - helped offset doubts about the strength of the recovery that arose earlier this week when official figures showed falls in retail sales and manufacturing output.

The number of people out of work and claiming benefit shrank by 1,400 last month to 2,939,600, or 10.5 per cent of the workforce. The drop followed falls of 25,500 and 25,800 in February and March respectively and took the unemployment total to its lowest level for five months.

Optimism about the UK's economic prospects was boosted further by news that average earnings growth hit a 25-year low in the year to March, on the strength of lower pay settlements. The subdued earnings growth also reflected sharp pay increases in March 1992, when some bonuses and salaries were paid ahead of the general election to avoid higher taxes under a possible Labour government.

But a 45,000 rise in the number of people out of work for more than a year in the first quarter, acted as a reminder of the economy's fragility. At 1.07m, long-term unemployment was 234,000 higher than in the first quarter of 1992.

The latest figures from the Department of Employment did little to end the confusion over the trend in unemployment. Some City economists said a strong rise in manufacturing employment for the third consecutive month meant the drop in unemployment was more than just a statistical 'artefact'.

Manufacturing employment rose by 5,000 in March, the third consecutive monthly rise, following revisions for January and February.

But Mr Frank Dobson, the shadow employment secretary, reiterated his accusation that the figures had been 'fiddled'. He said the government had restricted eligibility for claiming unemployment benefit. Mrs Gillian Shephard, backed by officials from the Employment Service, said the accusation was 'fabricated' and said her department had used the same method of calculating the number of unemployed since 1981.

The unemployment figures diminished expectations of another cut in interest rates. The FT-SE 100 index of leading industrial shares closed down 2.9 points on the day at 2,816.8.

Jobless trend unclear, Page 8 Editorial Comment, Page 21 Lex, Page 22 Currencies, Page 33

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9441 Administration of Social and Manpower Programs ECON Employment & unemployment ECON Inflation P9311 P9441 The Financial Times London Page 1 469
World News in Brief: Arsenal snatch cup Publication 930521FT Processed by FT 930521

Andy Linighan clinched the FA Cup final replay for Arsenal with a dramatic goal only a minute before the end of extra time. Arsenal beat Sheffield Wednesday 2-1.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page 1 60
World News in Brief: Sextuplets 'healthy' Publication 930521FT Processed by FT 930521

Jean Vince, 29, of Grimsby, Humberside, gave birth to sextuplets. The babies, said to be 'healthy and stable', were born prematurely by Caesarian section.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 1 52
World News in Brief: Crashed aircraft found Publication 930521FT Processed by FT 930521

Colombian rescue helicopters found the wreckage of a Boeing 727-100 which crashed into a jungle-covered mountain killing all 132 people on board.

CO Colombia, South America P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 54
World News in Brief: Queen Mother in hospital Publication 930521FT Processed by FT 930521

The 92-year-old Queen Mother was spending last night in hospital after suffering from 'a slight tightening of the throat'. She was taken to Aberdeen Royal Infirmary from her holiday home near Balmoral.

GB United Kingdom, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 1 62
World News in Brief: Dow closes at new high Publication 930521FT Processed by FT 930521

The Dow Jones industrial average beat Wednesday's record New York finish by closing 23.25 points higher at 3,523.28.

Wall Street, Page 39

US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 56
World News in Brief: Croats free Moslems Publication 930521FT Processed by FT 930521

Bosnian Croat troops freed 1,800 Moslem civilians rounded up in recent fighting in Mostar.

Kozyrev optimistic, Page 3

BH Bahrain, Middle East HR Croatia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 51
Tory unease at scale of possible spending cuts: Parents may face university fees - Restrictions considered on benefits Publication 930521FT Processed by FT 930521 By ALISON SMITH

THE GOVERNMENT faced the threat of a backlash from its own supporters yesterday as it became increasingly clear that the scale of spending cuts under consideration could lead to significant inroads into the welfare state.

Among controversial moves being considered in the spending review now under way are understood to be the charging of parents for university tuition fees and restricting the availability of benefits which are not protected by election pledges.

A change to the existing system under which university tuition fees are automatically paid by the government would seriously hurt the pockets of middle-class parents. Typical tuition fees would be just less than Pounds 2,000 a year for arts subjects, and Pounds 2,770 for science.

Government spending on fees in higher education is expected to rise from just under Pounds 600m in 1990-91 to Pounds 1.6bn in 1993-94.

The scale of a possible backlash from Tory backbenchers already worried by the government's recent series of political setbacks will depend on how far the spending cuts affect key groups of Conservative supporters among the middle classes and pensioners.

The need for a by-election in Christchurch, which has been a rock solid Tory seat and which contains a large proportion of pensioners, will ensure that the impact of the spending review on the elderly remains a high-profile issue.

Mr John Major, prime minister, yesterday confirmed that the review would look at state benefits but promised that the government would honour its manifesto commitments, and that the 'most vulnerable' people would be protected.

Some Tory MPs, however, were quick to insist that pensioners and those just above income support levels should not suffer.

The prime minister's attempts to seize on the encouraging unemployment figures and the completion of the Maastricht bill by the House of Commons, were overshadowed at Westminster by the row over the prospect of ending free prescriptions for all but the poor.

In noisy scenes in the Commons yesterday afternoon, Mr Major emphasised that no decisions on next year's spending had been made and that none was imminent.

While there was support at a meeting last night of the 1922 committee of Tory backbenchers for Mr Major's insistence that nothing could be ruled out of the spending review, there was also concern among Conservative MPs that extending prescription charges would be just the first of many unpopular options to be canvassed in coming weeks. One MP suggested that the government appeared to have 'a death wish'.

The anxiety was reinforced by Mr Michael Portillo, the Treasury chief secretary, who said prescription charges were 'only one of 100 different things to look at'. The entire Pounds 80bn social security budget was 'a cuckoo in the nest', he said.

Targetting benefits, Mr Portillo added, must be one line of inquiry in the review. 'The whole point of this is to make sure that our public spending goes to the people who need it most, and produces the best possible benefit,' he said.

Against the prospect of difficult spending decisions, cabinet ministers held a special political discussion yesterday morning to discuss how they could present the government's case more compellingly.

Labour, however, is determined to press home its attack. Mr John Smith, the party leader, said he could not imagine 'a more gross betrayal' of the Tories' election commitments than cutting back free prescriptions. Mr Major accused him of 'scaremongering'.

The cabinet is expected to discuss public spending in June, but meetings between Mr Portillo and spending ministers have been going on for the past month or so.

Some ministers are already warning that the decision not to press ahead more vigorously with paying benefits through automated credit transfer rather than through post offices - a retreat earlier this week in response to Tory concern about rural sub-post offices - would mean that more savings would have to be made in the benefits themselves.

'You can't spend the same money twice. What you spend on administration you can't spend on benefits,' one minister said yesterday.

Editorial Comment, Page 21

GB United Kingdom, EC P9411 Administration of Educational Programs P9199 General Government, NEC P8399 Social Services, NEC GOVT Government News P9411 P9199 P8399 The Financial Times London Page 1 723
Stock and Currency Markets Publication 930521FT Processed by FT 930521

------------------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------------------ FT-SE 100: 2816.8 (-2.9) Yield 4.05 FT-SE Eurotrack 100 1156.03 (+8.06) FT-A All-Share 1393.64 (+0.0%) FT-A World Index 158.48 (+0.4%) Nikkei 20,330.39 (-50.40) New York: Dow Jones Ind Ave 3523.28 (+23.25) S&P Composite 450.59 (+3.02) ------------------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------------------ Federal Funds: 3% (2 7/8%) 3-mo Treas Bills: Yld 3.013% (3.024%) Long Bond 101 3/4 (101 29/32) Yield 6.991% (6.969%) ------------------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------------------ 3-mo Interbank 6 1/16% (same) Liffe long gilt future: Jun 104 5/16 (Jun 104 11/32) ------------------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------------------ Brent 15-day (July) Dollars 18.455 (18.31) ------------------------------------------------------------------------ Gold ------------------------------------------------------------------------ New York Comex (June) Dollars 374.7 (374.2) London Dollars 373.25 (377.15) ------------------------------------------------------------------------ STERLING ------------------------------------------------------------------------ New York: Dollars 1.55655 (1.5445) London: Dollars 1.556 (1.5415) DM 2.51 (2.5025) FFr 8.465 (8.44) SFr 2.28 (2.2725) Y 172 (170.25) Pound Index 80.9 (80.5) ------------------------------------------------------------------------ DOLLAR ------------------------------------------------------------------------ New York: DM 1.6155 (1.62305) FFr 5.444 (5.47) SFr 1.466 (1.4735) Y 110.605 (110.6) London: DM 1.6135 (1.6235) FFr 5.44 (5.475) SFr 1.465 (1.4745) Y 110.5 (111.5) Dollars Index 64.1 (64.3) Tokyo open Y 110.46 ------------------------------------------------------------------------

GB United Kingdom, EC US United States of America SE Sweden, West Europe FR France, EC DE Germany, EC JP Japan, Asia P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 The Financial Times London Page 1 239
Radical EC job creation plan close to conclusion Publication 930521FT Processed by FT 930521 By DAVID GARDNER BRUSSELS

THE European Commission is close to concluding radical plans to tackle Europe's growing unemployment crisis, including the possibility of member states adjusting tax and social security policies to create jobs.

The plan, expected to be agreed by the Commission next Wednesday, is likely to be the centrepiece of the European Community's increasingly urgent efforts to demonstrate their search for solutions to unemployment.

The central idea is to find ways of stimulating a more labour-intensive pattern of economic growth. According to senior officials, the plan, which is still being refined, will draw on experience in the US and Japan where much higher percentages of the workforce are employed.

Officials in Brussels say a recovery in growth will not be enough to deal with EC unemployment levels now at 17.4m, or 10.3 per cent, more than half of which is structural rather than cyclical, or to combat under-employment.

'If we don't come up with something on this we'll be in serious trouble,' one said, though he cautioned that 'we are not claiming to do more than we can deliver'. He said measures at national level would be decisive.

Following its expected approval on May 26, it will then be discussed by labour and social affairs ministers on June 1 in Luxembourg, with the intention of sending recommendations to the Copenhagen summit of EC heads of government on June 21-22.

Officials say the intention is to develop the strategy over the next 18 months, in collaboration with national governments, which would need to decide what measures to take. It is intended that all EC councils whose work affects jobs, ranging from finance to environment ministers, contribute to the strategy.

The focus of the strategy is likely to be on:

Tax and social security changes. 'We must see what can be done to shift charges away from employment costs,' one senior official says, adding that in many EC countries a heavy tax and social security burden for employers inhibits job creation.

Changes in working time designed to promote more sharing out of employment opportunities. Officials argue that in the US, where around 75 per cent of the potential workforce is employed against nearer 60 per cent in the EC, household incomes have risen through work-sharing, even though income per head has remained roughly static.

A review of national welfare and unemployment benefit systems to eliminate disincentives to work. Officials say the emphasis is likely to be on increasing and co-ordinating spending on 'active' manpower measures, like training, retraining and job counselling. At present, only 0.8 per cent of EC gross domestic product, out of a total unemployment benefits bill of nearly 2.3 per cent of GDP, is spent on active measures.

Already member states are saying they want to be closely involved in different parts of the strategy.

QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy P9441 Administration of Social and Manpower Programs ECON Employment & unemployment GOVT Taxes P9311 P9441 The Financial Times London Page 1 513
Maastricht mayhem ends as bill clears Commons Publication 930521FT Processed by FT 930521 By DAVID OWEN

BRITAIN last night took a big step towards ratifying Maastricht when MPs ended a year-long House of Commons battle and voted by a wide margin to give the bill implementing the treaty its decisive third reading.

In an atmosphere verging on anti-climax, MPs delivered their verdict after more than 200 hours of often rancorous debate spread over exactly a year.

After months of Commons' mayhem and manoeuvring, the bill now moves to the Lords where Lady Thatcher and Lord Tebbit lie in wait to spearhead fresh attempts to force a British referendum on the treaty.

The former prime minister and the former Tory chairman are expected to marshal a noisy and no-holds-barred campaign. But ministers are confident the bill will clear all its parliamentary hurdles by late July and be sent for Royal Assent shortly afterwards.

In a final act of defiance, a total of 41 Conservatives and 65 Labour Euro-sceptics last night voted against the bill, which was carried by a margin of 180 votes (292 to 112). A further five Tories joined Labour in abstaining.

After the vote, a gaggle of Tory Euro-sceptics were ironically among the few MPs to show any signs of elation, taking comfort from the number of Conservatives who had defied the whips. 'We are delighted with these figures - they will make the government approach other European bills as though they were walking on eggshells,' said one.

After this week's Danish Yes vote, Britain is likely to be the last of the member states to ratify the treaty. Mr Douglas Hurd, the foreign secretary, yesterday warned of 'lasting damage to British interests' if the UK now destroyed it.

The prevalent emotion throughout a strangely subdued day at Westminster was one of relief at finally seeing the back of the most minutely scrutinised piece of legislation in years.

The anti-climactic note was most apparent as chancellor Mr Norman Lamont delivered the final speech. But this stemmed less from the chancellor's remarks than the largely vacant opposition benches.

Though Labour MPs were under no obligation to attend after the front bench's decision to abstain, the suspicion was that the competing attraction of the FA Cup final replay played a part in the sparse attendance.

The foreign secretary had been in playful mood, mocking Labour for deciding to abstain in last night's vote after MPs had sifted 600 amendments.

He brought the House down with the claim, attributed to an unnamed EC foreign minister, that '40 per cent of the intellectual content of the Community today owed its origin to Lady Thatcher'.

The highlight of a speech by Mr Jack Cunningham, shadow foreign secretary, came when he brandished a scrap of paper more than half covered in lime-green marker pen. This turned out to be the text of the Maastricht bill. The bits in green were the parts included as a result of Labour proposals.

Sir Edward Heath, the former prime minister who took Britain into the EC in 1973, was in magisterial form, criticising Mr Hurd for being 'out of date' and Labour for being the only left-of-centre party in the EC not to have voted to support the treaty.

The Maastricht bill began its Commons passage a year ago when MPs gave it a second reading with a majority of 244. But within days the Danes voted narrowly No in their first referendum on the treaty.

The upshot at Westminster was a sustained period of backstage manoeuvring, with the Labour front bench trying to force Maastricht's social chapter on the government without derailing the treaty and Euro-sceptics on both sides of the House striving to destroy it.

GB United Kingdom, EC QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 640
World News in Brief: Man questioned about rape Publication 930521FT Processed by FT 930521

Police at Basildon, Essex, were questioning a man about the rape at knifepoint of a 13-year-old girl on Wednesday.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 52
World News in Brief: Police reject call Publication 930521FT Processed by FT 930521

The Police Federation annual conference narrowly rejected a call for officers to be obliged to declare if they are Freemasons.

GB United Kingdom, EC P9221 Police Protection NEWS General News P9221 The Financial Times London Page 1 49
World News in Brief: Rhone fish poisoned Publication 930521FT Processed by FT 930521

Up to 10 tonnes of dead fish were hauled from the river Rhone near Lyon in France as an inquiry opened into the cause of the pollution which killed them.

FR France, EC P9511 Air, Water, and Solid Waste Management P0912 Finfish RES Pollution P9511 P0912 The Financial Times London Page 1 64
World News in Brief: UK criticised over human rights Publication 930521FT Processed by FT 930521

Leading constitutional lawyer Anthony Lester, QC, attacked Britain's human rights record. He said no other European country had a record of so many different types of serious breaches of the European Convention on Human Rights.

GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 66
World News in Brief: Talks on Bosnia Publication 930521FT Processed by FT 930521

Russian foreign minister Andrei Kozyrev emerged optimistic from talks with US secretary of state Warren Christopher, saying he believed 'positive results' would flow from the new round of talks to end the fighting in Bosnia.

UN considers monitors, Page 3

BH Bahrain, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 69
Plan to seize BR assets abandoned Publication 930521FT Processed by FT 930521 By NORMA COHEN, Investments Correspondent

THE GOVERNMENT yesterday abandoned its controversial plan to seize a portion of British Rail's pension fund assets after privatisation in the face of opposition from trustees, employees and the Conservative party's own backbenchers.

Instead, the roughly Pounds 8.5bn in pension fund assets will be used to create a joint industry scheme in which all current employees may participate as long as they remain in the rail industry. A portion of those assets will be set aside in a separate pool to pay benefits to present and deferred pensioners.

Mr John MacGregor, transport secretary, insisted yesterday that the decision was not a U-turn. 'There can be no question of a U-turn as this is a decision being taken for the first time,' he said. The move should not be viewed as a blueprint for the future of the pension schemes of other soon-to-be-privatised industries, he added. 'This plan is particular to the railway industry.'

Trustees of the Rail Pension Scheme had been pressing hard for the government to back down on its 'Option Two' outlined in the white paper on rail privatisation. The government had proposed seizing a portion of the pension scheme's assets in exchange for a promise to pay index-linked pensions indefinitely. 'This is largely what the trustees were looking for, but there are still some safeguards we are seeking,' said one trustee. In particular, the trustees want assurances that ministerial powers over the pension scheme may not be used to weaken the benefit structure in future years nor to shift the cost-sharing in a way that forces members to increase their proportion of contributions.

Answering questions at a news conference, Mr MacGregor said the new owners of the privatised British Rail companies would have representation on the Joint Industry Scheme board of trustees but not have the power either to wind up the scheme nor to weaken its benefits without the consent of parliament.

It is envisaged that the JIS will have a trustee company consisting of employees and representatives of the new owners of British Rail.

The new employers also will be required to establish pension schemes for members with benefits as good as those now available to British Rail employees.

The government has promised that there will be no early-leaver penalties for involuntary breaks in employment - a move which should protect those who are made redundant by one company but re-employed by another.

In establishing the pool for current and deferred pensioners, of whom there are roughly 150,000, a period will be allowed for the scheme to sell much of its illiquid assets such as agricultural land, venture capital investments and artworks.

Railfreight plans, Page 6

British Rail GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds P4011 Railroads, Line-Haul Operating PEOP Labour P6371 P4011 The Financial Times London Page 1 484
UK Company News: Watts Blake shareholders fail to find buyer for 45.2% stake Publication 930520FT Processed by FT 930621 By ROLAND RUDD

WATTS BLAKE Bearne's fight to remain independent received a boost yesterday when three of its big shareholders said they had failed to find a buyer for their combined stake of 45.2 per cent.

The companies will continue to act as a concert party. Under takeover rules the sale to a single party would have led to an offer for the entire issued share capital of the ball clay producer.

The three investors, which had hoped to sell their shares by May 18, are Ceramics Holdings, controlled by the Lebanese Gargour family, Sibelco, a privately-owned Belgian-based producer of silica sand for the glass industry, and Quarzwerke, a private German producer of silica sand.

Mr John Pike, Watts Blake Bearne managing director, said: 'I am very pleased that their offer for sale terminated. However, the concert party remains in force. The sooner this thing is sorted out the better.'

The three shareholders are expected to try and sell their shares again, although they have not yet formally made a decision. J Henry Schroder Wagg, the merchant bank, is advising them.

Mr Pike is concerned that it could be difficult to mount a defence if the sale of a large block of shares triggered a bid at an unsatisfactory price. Watts Blake Bearne's shares fell 10p to 410p.

Watts Blake Bearne Co GB United Kingdom, EC P1455 Kaolin and Ball Clay COMP Shareholding P1455 The Financial Times London Page 22 258
International Company News in Brief: The Equitable seeks revaluation of DLJ arm Publication 930520FT Processed by FT 930609 By NIKKI TAIT

THE EQUITABLE, the US life insurance company which is 49 per cent owned by France's Axa group, told shareholders yesterday that it was looking at ways in which it might bolster its balance sheet by attaching a more accurate valuation on its Donaldson, Lufkin & Jenrette brokerage unit, writes Nikki Tait.

Mr Richard Jenrette, Equitable's chairman, told the annual meeting that options included floating shares in DLJ separately on the stock market, or selling an interest in the business to an outside investor. However, he stressed that no final decision had been taken.

DLJ is currently carried on Equitable's books for about Dollars 500m, but Mr Jenrette suspected that the market value could be 'about double' that.

Equitable Life Assurance Company of the United States Donaldson Lufkin and Jenrette US United States of America P6311 Life Insurance P6411 Insurance Agents, Brokers, and Service FIN Annual report P6311 P6411 The Financial Times London Page 27 175
Venables fights back over Spurs Publication 930520FT Processed by FT 930609 By JANE FULLER

MR TERRY Venables has counter-attacked against the attempt to oust him from Tottenham Hotspur football club by seeking to force Mr Alan Sugar, the chairman, to sell his 48 per cent stake in the company to Mr Venables or his backers.

Mr Venables, who borrowed most of the Pounds 3m he has invested in Tottenham, would have to put together a consortium of backers to buy out Mr Sugar, whose stake was valued at Pounds 7.73m at yesterday's closing price of 101p.

Mr Sugar, the electronics millionaire, last week tried to sack Mr Venables as chief executive. It emerged that Mr Sugar had offered to buy Mr Venables' 22 per cent stake at the price he paid for it - an average of about 85p a share.

Mr Venables' counter-attack forms part of a petition to be presented to the High Court. On Friday he obtained a court order reinstating him until a hearing next Tuesday.

A transcript of Friday's judgment by Mrs Justice Arden refers to the two main points of Mr Venables' petition: 'that Amshold (Mr Sugar's vehicle) may be ordered to sell its shares in the company to the petitioner, or as the petitioner may direct, at such price as the court may determine' and that the company should be prevented from terminating Mr Venables' contract.

The judge heard that Mr Venables ran the football-related activities of the company, that his appointment as chief executive - he was previously manager of the football team - was agreed with Mr Sugar, and that Mr Venables' removal would damage the company, which had 'made a major financial recovery while Mr Venables has been chief executive'.

Mr Venables had expressed concern about control of the company in December 1991, before a Pounds 7m rights issue underwritten by Mr Sugar which gave Mr Sugar, as chairman, a much larger stake. It was alleged that Mr Sugar said: 'Trust me - even if I pick up all the shares, we have a shareholders' agreement.'

Mr Nick Hewer, Mr Sugar's public relations representative, said last night there was no comment on the transcript. It had been impossible to present any evidence at Friday's hearing, which was held at very short notice, he said.

Tottenham Hotspur GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters PEOP People P7941 The Financial Times London Page 7 407
International Company News: Corporacion Banesto announces Pta147m first-quarter pre-tax profits Publication 930520FT Processed by FT 930608

Corporacion Banesto, the industrial holding owned by the Spain's Banesto banking group, reported first-quarter pre-tax profits of Pta147m (Dollars 1.8bn), against a Pta4.6bn loss in the same period of 1992.

The holding said turnover was down 30 per cent to Pta69.8bn and that the sharp turnaround was in part due to lowered debt servicing costs.

Corporacion Banesto ES Spain, EC P6719 Holding Companies, NEC FIN Interim results P6719 The Financial Times International Page 16 90
Water warning Publication 930520FT Processed by FT 930608

CUSTOMERS of South West Water, England's highest-charging water authority, will see their bills nearly double by the end of the decade unless there is government help to clean up beaches and bathing waters, Mr Bill Fraser, managing director, said yesterday.

South West Water GB United Kingdom, EC P4941 Water Supply COSTS Service costs & Service prices P4941 The Financial Times London Page 7 72
PowerGen poised to win east German energy contract Publication 930520FT Processed by FT 930608 By JUDY DEMPSEY BERLIN

A UTILITIES consortium headed by Britain's PowerGen and the US-based NRG is close to completing a contract which will give it a 44 per cent share in generating power at a plant in eastern Germany.

The deal, involving construction of a small regional plant at Schkopau, near Leipzig, could help to open up Germany's utilities to outside competition, officials from Vereinigte Energie AG (Veag), the east German utilities company, said yesterday.

The contract is for PowerGen and NRG to build a 400MW power station. Until recently, Veba Kraftwerke Ruhr had planned to build a 900MW station at Schkopau. VKR is a 100 per cent subsidiary of PreussenElektra, which undertakes the electricity operations of Veba, the German energy-based conglomerate.

The decision to allow PowerGen and NRG to negotiate a 44 per cent share at Schkopau follows lengthy negotiations between the Treuhand, the agency responsible for the privatisation of eastern German industry, Veag, which controls 70 per cent of the region's energy production, and VKR.

Veag is technically still under the Treuhand, but legally it is controlled by Germany's three giant utilities companies, and the five smaller ones, following a treaty signed in 1990. These include PreussenElektra, RWE Energie and Bayernwerk, western Germany's powerful utilities.

Under the terms of the treaty, the Stromvertrag, eastern Germany's regional utilities are obliged to buy 70 per cent of their power from Veag over the next 20 years as a means of underwriting large investments needed to modernise eastern Germany's energy sector. This treaty, however, has had the effect of making it difficult to introduce competition into the energy sector in the region.

The consortium had earlier tried to seek a stake in generating power at Lippendorf. But the negotiations collapsed because PowerGen and NRG could not seek guarantees to gain access to the high voltage grid in order to sell its energy.

The power generators at Schkopau will be fuelled by Mibrag, eastern Germany's giant lignite mining complex. PowerGen and NRG have the sole negotiating rights to buy Mibrag, which is under the Treuhand.

Modern methods in the pipeline, Page 16

PowerGen NRG Group Vereinigte Energiewerke Veba DE Germany, EC P4911 Electric Services P1629 Heavy Construction, NEC MKTS Contracts P4911 P1629 The Financial Times London Page 1 392
People: Financial Moves Publication 930520FT Processed by FT 930526

Lynn Dukes is promoted to chief executive operations and finance of BZW.

Barclays de Zoete Wedd GB United Kingdom, EC P6029 Commercial Banks, NEC PEOP Appointments P6029 The Financial Times London Page 16 41
International Company News: Kansallis-Osake-Pankki launches bond issue in domestic market Publication 930520FT Processed by FT 930521

Kansallis-Osake-Pankki, Finland's leading commercial bank, yesterday launched a FM300m (Dollars 54m) perpetual subordinated bond issue in the domestic market to help strengthen its capital base.

The move is part of a broader plan to raise FM2bn in Tier Two capital on the domestic and international markets in the next few years, following the bank's recent successful FM1bn rights issue. Like other Finnish banks, KOP has suffered heavy losses and its capital adequacy ratio has been badly eroded.

The subordinated bonds are the first perpetuals to be issued by KOP. The coupon is 1.4 per cent above 6-month Helibor for the first five years, 1.90 per cent above 6-month Helibor for the next five years, and 2.4 per cent above 6-month Helibor in subsequent years.

The issue price is 100 per cent and the subscription period runs from May 26 to June 24.

Kansallis-Osake-Pankki FI Finland, West Europe P6081 Foreign Banking and Branches and Agencies FIN Share issues P6081 The Financial Times International Page 16 180
The hole at Hungary's banking heart: Nicholas Denton reports on the need for a recapitalisation Publication 930520FT Processed by FT 930521 By NICHOLAS DENTON

Behind the World Bank and International Monetary Fund's belief that Hungary's big banks need rescuing are some compelling facts.

The capital of the two biggest banks - Magyar Hitel Bank and Kereskedelmi Bank - is wiped out when international accounting standards are applied to their bad loans. Economic output has fallen 18 per cent in the last three years. The disappearance of demand from former Comecon countries has worsened the recession, hitting hardest the socialist industrial giants like Ikarus, Taurus, Videoton and Borsodchem which make up the rotten core of Hitel Bank's clientele.

In 1991 parliament passed strict new laws: on bankruptcy, causing about a tenth of companies to go into liquidation or file for protection from creditors; and on financial institutions, giving banks the incentive to recognise bad debts.

The banking sector's loans classified as bad, doubtful or substandard rose to Ft262bn (Dollars 2.9bn) - 17 per cent of all loans and 10 per cent of GDP - in September 1992. Hitel Bank says its non-performing loans tripled from Ft25bn in December 1991 to Ft78bn at the peak last year.

The result has been a sharp credit crunch. Banks, faced with the need to make huge provisions, have charged high real interest rates to maintain margins and produce paper operating profits estimated at Ft39.7bn for the whole sector in 1992. The average interest rate on short-term corporate loans was 28.2 per cent at the end of 1992, compared with inflation of 21.6 per cent over the year.

The cost of borrowing has pushed bad risks to the wall and good risks abroad - or, like Nestle, McDonalds and other western investors in Hungary, directly to the capital markets.

Made cautious by defaults, banks slightly reduced their outstanding credit to enterprises in 1992, a sharp fall in real terms. 'A prudent policy today means extreme conservatism,' says Mr Gyorgy Ivanyi, president of Inter-Europa Bank. The World Bank study concludes that: 'The financial system is unable to finance the transformation to a market economy.'

A one-off recapitalisation is widely seen as essential. Economic recovery is still feeble and loan portfolios are deteriorating. Weaker banks are losing their better clients to stronger ones. Mr Szalkai admits that Hitel Bank is at a 'threshold,' from which it could spiral downwards.

Recapitalisation must also put the banking sector into condition for privatisation before more of the potential acquirers lose patience and set up local subsidiaries from scratch.

An injection of funds, however, would allow bank managers to escape the consequence of past errors. Magyar Hitel Bank, Kereskedelmi Bank and Budapest Bank inherited a portfolio of loans made under communist logic when hived off from the National Bank of Hungary in 1987. Since then, managers have been responsible for their own decisions - and some of them have proved painful.

Hitel Bank, for instance, has paid the price of a focus on lending to start-up businesses. The policy has won popularity, but the losses have been heavy. Mr Szalkai says that the default rate for new business is as high as on the old, communist-inspired loans.

Kontrax, one of Hungary's largest domestic private groups, only this month declared bankruptcy owing Ft4.2bn to Hitel Bank and other creditors. Hitel Bank has also been reluctant to reduce exposure to inherited shaky borrowers for fear of pushing them into bankruptcy. 'In creditors' meetings Hitel Bank is always there,' says a banker.

In contrast, Budapest Bank has pulled away from the other two commercial banks. Under Mr Lajos Bokros, managing director, Budapest Bank's capital has improved as a proportion of assets from -5.5 per cent in 1992 to +2.2 per cent this year.

In 1991, Mr Bokros anticipated the wave of client bankruptcies to come. He defied the finance ministry's hunger for taxable profits and provisioned furiously.

Mr Bokros has taken a pay cut, drives a second-hand Renault and flies economy class. He has refused to follow other banks in financing newspapers and political foundations.

This approach has won him the admiration of the Budapest financial community. But it has done him little good politically. The World Bank study calls for managment changes at the worse performing banks. Yet it is over Mr Bokros's future that the biggest political uncertainties hang.

Kereskedelmi Bank Magyar Hitel Bank Budapest Bank HU Hungary, East Europe P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times International Page 15 755
Italy's bribes scandal has multinational air Publication 930520FT Processed by FT 930521 By HAIG SIMONIAN MILAN

THE arrest of Mr Giorgio Scanavaca, managing director of the Italian subsidiary of Siemens, the German industrial group, casts a further shadow over the activities of foreign multinationals in Italy's widening political corruption scandal.

It is almost a year since ABB, the Swiss-Swedish engineering and electronics group, first appeared in the investigations, then still largely limited to Milan. The group was alleged to have paid about L16bn (Dollars 10.8m) in kickbacks to obtain orders for the city's underground railway line.

The foreign trail went relatively cold thereafter, bar a further bout for ABB, whose chief executive in Italy, Mr Umberto Di Capua, was arrested and briefly jailed on allegations believed to be linked to the metro orders. Mr Di Capua, who only joined the company after the completion of the new line, was released soon after.

However, in the past week, the foreigners have been making a comeback. Last week saw the arrests of senior executives from the Italian subsidiaries of both Sweden's Ericsson and GEC of the UK on allegations linked to contracts from ASST, the former state telephones agency.

The list has now been lengthened with the detention of Mr Scanavaca as Milan magistrates pursue their latest line of investigations into alleged bribes on orders for telecommunications equipment.

However, the German group is not a complete stranger to the corruption scandal. In May 1992, investigations into alleged corruption in a hospital south of Milan, triggered allegations that the company had handed over about L50m in kickbacks to win a contract.

The impact on the standing of foreign companies in Italy is still being digested and public reaction has been limited so far. Officials at Ericsson were unavailable for comment yesterday, while a Siemens official had 'no comment' to make on the arrest of Mr Scanavaca beyond pointing out that he had come forward to testify before magistrates voluntarily on Tuesday evening. The official also pointed out that Siemens Telecommunicazioni, the subsidiary chaired by Mr Scanavaca, was formerly owned by GTE, the US telecoms group, prior to its takeover by Siemens in 1987-88. The subsidiary specialises in public networks and transmission systems.

So far, only ABB appears to have taken its alleged involvement on board. Well before the inauguration of Fiat's new 'ethical code of business practice' last week, the company had already moved to tighten up its procedures. The group already had a chapter on ethics in its booklet on business values drawn up in 1988.

Following its brush with the Italian magistrates, procedures at its subsidiary were reinforced, with executives obliged to sign a letter committing themselves to respecting the national law in any dealing with public-sector employees.

Siemens IT Italy, EC P9211 Courts PEOP People P9211 The Financial Times International Page 3 472
Danish tax rates cut as reward for treaty vote: Fringe group blamed for riot; growth package to boost economy Publication 930520FT Processed by FT 930521 By HUGH CARNEGY and HILARY BARNES

THE DANISH government yesterday brushed aside violent demonstrations sparked by Tuesday's referendum result endorsing the European Community's Maastricht treaty, and as a reward for the Yes vote announced a programme to stimulate economic growth and employment.

The riots in an inner city district of Copenhagen left 11 demonstrators wounded by police gunfire and 26 policemen injured. They were said by officials to have been the worst peacetime disturbances in Denmark. The government blamed a small fringe group of militant squatters.

Yesterday, the area returned quickly to normal, but local residents were braced in case of further disturbances last night. The government insisted the attacks did not represent the feelings of the vast majority of No voters.

Mr Poul Nyrup Rasmussen, the Social Democratic prime minister, condemned the riots as an isolated incident and told parliament the government would slash marginal income tax rates to bring them closer into line with the rest of the EC. State investment plans to push up growth in gross domestic product from under 1 per cent this year to almost 3.5 per cent in 1994 would also be brought forward.

At the same time, Denmark's central bank cut the official discount rate to 8.25 per cent from 9.25 per cent and commercial banks announced similar reductions in their lending and deposit rates, which had been held artificially high because of uncertainty over the Maastricht vote.

Business reaction was positive. The Copenhagen stock market, which had risen strongly in expectation of a Yes vote, put on a further 2.30 points to close at 303.89.

The tax cuts are aimed at galvanising other EC member states to rally behind a beefed-up economic growth package ahead of next month's EC summit in Copenhagen.

The Danish presidency of the EC, working with the European Commission, wants member states to consider fresh measures to stimulate growth, mainly through shifting to capital spending, making the labour market more flexible, and other fiscal incentives to create jobs.

The growth package and the unemployment crisis in the EC are top of the agenda at a two-day meeting of EC finance ministers in Kolding, Denmark, which starts tomorrow.

In Brussels yesterday, Commission officials hailed the Danish endorsement of the Maastricht treaty in Tuesday's second referendum as giving a 'psychological lift' to the Community after several months of drift.

The positive vote has given new impetus to the Danish presidency. Danish officials vowed to press for agreement on issues such as a new trade liberalisation package for eastern Europe before Denmark hands over the presidency to Belgium on July 1.

The Danes approved Maastricht by a margin of 56.8 per cent in favour to 43.2 per cent against, on an 86.2 per cent turnout, reversing the rejection of the treaty in a poll last June.

Mr Rasmussen said the signal from Danish voters was that Europe's political leaders must close the gap that had opened between them and their electorates over Maastricht by adopting pragmatic policies which tackled problems such as unemployment. 'We have to be more engaged', he said.

He said the government's economic package would bring the jobless rate down from 12 per cent at present to about 11 per cent in 1994. Marginal income tax rates would be cut from next year to a band of 38 to 58 per cent, compared with 52 to 68 per cent at present.

The tax cuts will eventually be financed by 'green' taxes on petrol, electricity, heating, water consumption and, among other things, plastic bags.

PAGE 2

Rasmussen is quick to reward Danish voters

EC must now make Maastricht treaty work

Tensions ease in exchange rate mechanism

Editorial Comment Page 13

Major postpones ERM re-entry indefinitely Page 14

DE Germany, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Taxes P9311 P9611 The Financial Times International Page 1 668
Squatters see EC as capitalist conspiracy Publication 930520FT Processed by FT 930521 By HUGH CARNEGY COPENHAGEN

FINANCIAL journalists were not very welcome at the 'youth house' in Copenhagen's Norrebro district yesterday morning, after the violent clashes sparked by Denmark's Yes vote in the Maastricht referendum on Tuesday left 11 young demonstrators with gunshot wounds and 26 policemen injured by bricks.

'You and your businessmen, you are the ones that are pushing us down,' snarled a bearded man sitting on the doorstep of the collective meeting place, drinking from a bottle of beer. 'You are just like the police,' added an angry young woman seated close by.

The typically black-clad, unkempt and unemployed youths that make up the loose movement known in Denmark as BZers, or squatters, were said by the police to have instigated the post-referendum riot.

No longer simply homeless occupiers of empty inner-city buildings, they are better defined these days by their anti-business, anti-fascist and anti-establishment views that see the European Community at the pinnacle of a capitalist conspiracy to deny democracy to the masses.

The main target of the rioters - apart from the police - were a number of bank branches in Norrebro which had their windows smashed.

Hard-core BZers probably number no more than a few hundred, though they may have the sympathy of several thousand more disaffected youngsters in the capital. Between 300 and 500 demonstrators were said to have been involved in Tuesday night's disturbances.

The BZers have been a feature of life in inner city Copenhagen for the past 15 years. They periodically clash with police, sometimes smashing windows in commercial premises in the city centre, but had not previously been involved in violence on the scale of that which erupted on Tuesday.

Last winter they caused serious problems for Swedish police in Malmo, just across the Oresund from Copenhagen, when they staged a counter-protest against Swedish anti-immigrant demonstrators.

The government, led by the Social Democratic party, was appalled that its success in getting Maastricht approved at the second attempt on Tuesday was marred by what were for Denmark extremely rare scenes of vicious street violence. It said the rioters were an isolated fringe who deliberately set out to cause trouble.

'That is pure bullshit,' scoffed a third BZer, speaking inside the dingy 'youth house' under a huge mural saying 'Smash Racism and Fascism'. In common with his colleagues, he refused to give his name - and spoke fluent and richly profane English.

His friend insisted the riot was spontaneous. 'Everyone who voted No was very depressed and angry. We wanted to do something. We wanted to go crazy.'

The other inhabitants of Norrebro, a relatively poor but far from deprived area, tended to confirm the government's view that the BZers were a small group who do not represent a wide band of opinion.

An apartment block caretaker said: 'There used to be sympathy around here for them because they have no hope of jobs or homes. But when we helped them, with collections of money, they just screwed things up. We have no problems with the local police here. We respect them. I think the people last night came from outside.'

DK Denmark, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 1 548
Danes rewarded with stimulus package Publication 930520FT Processed by FT 930520 By HUGH CARNEGY and HILARY BARNES COPENHAGEN

THE DANISH government yesterday brushed aside violent demonstrations sparked by Tuesday's referendum result endorsing the European Community's Maastricht treaty, and as a reward for the Yes vote announced a programme to stimulate economic growth and employment.

The riots in an inner city district of Copenhagen left 11 demonstrators wounded by police gunfire and 26 policemen injured. They were said by officials to have been the worst peacetime disturbances in Denmark. The government blamed a small fringe group of militant squatters, know as BZers.

Little damage was done to property, the main targets being the windows of several bank branches and a few damaged cars. Yesterday the area returned quickly to normal, but local residents were braced in case of further disturbances last night. The government insisted the attacks did not represent the feelings of the vast majority of No voters.

Condemning the riots as an isolated incident, Mr Poul Nyrup Rasmussen, the Social Democratic prime minister, told parliament the government would slash marginal income tax rates to bring them closer into line with the rest of the EC and bring forward state investment plans to push up growth in gross domestic product from under 1 per cent this year to almost 3.5 per cent in 1994.

Mr Rasmussen said the signal from Danish voters was that Europe's political leaders must close the gap that had opened between them and their electorates over Maastricht by adopting pragmatic policies which tackled problems such as unemployment, which have a direct impact on the everyday lives of European citizens. 'We have to be more engaged', he said.

At the same time, Denmark's central bank cut the official discount rate to 8.25 per cent from 9.25 per cent and commercial banks announced similar reductions in their lending and deposit rates, which had been held artificially high because of uncertainty over the Maastricht vote.

Business reaction was positive. The Copenhagen stock market, which had risen strongly in expectation of a Yes vote, put on a further 2.30 points to close at 303.89.

The tax cuts aim to galvanise other EC member states to rally behind a beefed-up economic growth package ahead of next month's EC summit in Copenhagen.

The Danish presidency of the EC, working with the European Commission, wants member states to consider fresh measures to stimulate growth, mainly through shifting to capital spending, making the labour market more flexible, and other fiscal incentives to create jobs.

The 'growth package' and the unemployment crisis in the EC are top of the agenda at a two-day meeting of EC finance ministers in Kolding, Denmark, which starts tomorrow.

Mr Rasmussen said the government's economic package would 'break the curve of rising unemployment', bringing the jobless rate down from 12 per cent at present to about 11 per cent in 1994. Called 'New Course for Better Times', the package will reduce marginal income tax rates from next year to a band of 38-58 per cent, compared with 52-68 per cent at present.

The tax cuts will eventually be financed by 'green' taxes on petrol, electricity, heating, water consumption and, among other things, plastic bags. But there will be a strong stimulus to private spending next year because the full impact of the green taxes will not take effect immediately.

The boost from tax cuts in 1994 will be equal to about 0.5 per cent of GDP, or about DKr5bn (Pounds 526m), and should produce growth in real private consumption next year of 4.3 per cent. An accompanying upgrade of training programmes is designed to improve the skills of the workforce.

Rasmussen quick to reward voters, Page 2 Editorial Comment, Page 19

DE Germany, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Taxes P9311 P9611 The Financial Times London Page 1 645
London Stock Exchange: New highs and lows for 1993 Publication 930520FT Processed by FT 930520 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

NEW HIGHS (157).

CANADIANS (1) Gulf Can., BANKS (1) Anglo Irish, BLDG MATLS (7) Blockleys, Brit. Dredging, Hewetson, Lilleshall, Do 9pc Pf., Sheffield Instlns., Wolseley, BUSINESS SERVS (3) BET, Page (M), Securiguard, CHEMS (1) Hickson, CONGLOMERATES (1) Wassall, CONTG & CONSTRCN (7) Bryant, Gleeson, Hewden-Stuart, Persimmon, Prowting, Taylor Woodrow, Wescol, ELECTRICALS (5) BICC, BICC Fin. 10 3/4 pc Cv. '20, Motorola, Oxford Instrs., Unidare, ELECTRONICS (4) Acal, Control Techs., Hewlett-Packard, Logica, ENG GEN (5) Adwest, Clyde Blowers, Dobson Park, Hill & Smith, Vosper, FOOD MANUF (2) Acatos & Htchsn., Berisford, FOOD RETAILING (1) Greggs, HEALTH & HSEHOLD (1) Huntleigh Tech., HOTELS & LEIS (1) Fairline Boats, INSCE COMPOSITE (1) Domestic & Gen., INV TRUSTS (28) Aberforth Smllr. Co's, Candover, City Merchants High Yld., Drayton Asia Wts., Finsbury Smllr. Co's, First Pacific, For. & Col. Pacific, Do Wts., Fulcrum Cap., General Cons. Cap., Govett Oriental, Latin Amer. Wts., M & G Dual Cap., M & G Recovery Packg. Units, M & G 2nd Dual Cap., Martin Currie Pac., Do Wts., Nth. Amer. Gas Wts., Pacific Assets Wts., RIT Cap., Do 2 1/2 pc Cv. '00, Scot. Asian, Second Cons., Sphere Zero Pf., Templeton Emrg. Mkts., Do Wts., Turkey Tst. Wts., Yeoman Cap., MEDIA (7) Abbott Mead, Anglia TV, Lopex, Pearson, Taylor Nelson, Ulster TV, WPP, MERCHANT BANKS (3) Close Bros., Kleinwort Benson, Warburg 6pc Pf., MTL & MTL FORMING (2) Brit. Steel, Cooper (Fr), MISC (5) Copymore, Danka Bus. Systs., Gt. Southern, Heritage, Le Crueset, MOTORS (2) Gowrings, Henlys, OIL & GAS (1) Aminex, OTHER FINCL (2) Rathbone Bros., Smith New Court Pf., PACKG, PAPER & PRINTG (3) API, Capital Inds., Ferguson, PROP (10) Bradford, Brit. Land, Do. 8 5/8 pc Prf., Clayform, Derwent Valley, Greycoat, Helical Bar, Safeland, Scot. Metropolitan, Wood (JD), STORES (5) Ashley (L), French Cntcn., Next, Owen & Robinson, Wyevale, TEXTS (3) Albion, Lamont, Leeds, TRANSPORT (4) Cathay Pacific, Dawsongroup, Graig, P & O 5 1/2 pc Prfd., MINES (41).

NEW LOWS (32).

AMERICANS (1) Houston, BREWERS (6) Allied-Lyons, Bass, Grand Met., Greenalls, Matthew Clark, Wolv. & Dudley, BLDG MATLS (1) St Gobain, BUSINESS SERVS (1) RCO, CHEMS (2) Anglo Utd., Courtaulds, CONTG & CONSTRCN (1) Andrew Sykes, FOOD MANUF (7) BSN, Bols Wessanen, Booker, Cadbury Schweppes, Tate & Lyle, Do 7 1/4 pc Pf., Unilever, FOOD RETAILING (2) Argyll, Low (Wm), HEALTH & HSEHOLD (3) Brit. Bio-Tech., Haemocell, Reckitt & Colman 9 1/2 pc Cv. Bd., INSCE BROKERS (1) Bradstock, INV TRUSTS (1) Kleinwort Endowment Policy, MISC (3) BAT Inds., Pentland, Toye, PROP (1) Moorfield, Ests., TRANSPORT (1) Transport Dev., MINES (1) MIM.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 470
London Stock Exchange: Enterprise weakens Publication 930520FT Processed by FT 930520 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Enterprise Oil was the worst hit in a weak oil sector as dealers reacted to the re-emergence of rumours that a large block of shares in the company could soon be sold.

'It is an early start to the silly season in Enterprise,' said one oil specialist, referring to long-running stories that a 6.3m block of shares in Enterprise held by Lehman Brothers might be sold off shortly. Lehman acquired the Enterprise shares via its participation in the listing of Enterprise ADRs in the US last year.

Speculation started with news that Enterprise is updating the prospectus it prepared for the ADR listing. However, it was pointed out that Lehman had been free to sell its Enterprise stock since the second half of last year. The shares closed 16 lower at 459p.

The much-vaunted bond issue from Allied-Lyons knocked the shares in a drinks sector weakened by the Bass performance. Allied lost 12 to 531p. Results, an aquisition and a rights issue left Compass Group a penny better at 528p.

The fallout from the bearish statement by BSN, the French food manufacturer, on Tuesday continued to impact on its UK counterparts. Unilever bore the brunt yesterday, crumbling 22 to 1014p.

Pharmaceuticals group Medeva added 4 at 221p after announcing a strategic alliance with Matrix, of the US, to sell skin products in the US and Europe.

Portals gained 8 at 474p, with some analysts signalling the relative value in the shares. Williams de Broe was pointing out the specialist paper maker's modest price/earnings ratio in the sector.

A Pounds 73m rights issue from Saatchi & Saatchi was well received and after the initial knock-back the shares recovered to close only 2 off at 170p, after hitting a low of 161p.

Tobacco and insurance group BAT Industries dropped again under the pressure of a fall on Wall Street and cautious statements at BAT's annual meeting on Tuesday. A decline in Philip Morris shares in New York also affected BAT shares in London.

The stock failed to respond to positive advice from several UK analysts, including a buy note from Nikko Securities and research from NatWest Securities. The latter pointed out the 'good value on yield, dividend growth and discount-to-asset grounds' but the stock closed a net 21 1/2 lower at 822 1/2 p.

Hanson was another blue chip international trader failing to respond to buy recommendations, which were based on the conglomerate's solid yield. The shares receded 4 1/2 to 233 1/4 p.

Healthcare group Reckitt & Colman advanced 5 to 549p after announcing a performance in line with current growth targets.

Wellcome reacted belatedly to news that it has received UK approval to sell the cream version of its anti-herpes product Zovirax over the counter in chemist shops for treating cold sores. The approval, announced on Tuesday, was expected but the shares rose 15 to 764p yesterday.

International conglomerate BTR moved against the market trend, adding 4 at 585p in trade of 2.2m after SG Warburg reiterated its positive stance, ahead of today's agm.

English China Clays fell 15 to 433p after NatWest Securities downgraded profits expectations. The house reduced its current year estimate by Pounds 15m to Pounds 85m and the following year's figure by Pounds 18m to Pounds 114m.

Renewed weakness in crude oil prices as the market continued to fret about next month's Opec meeting upset the whole of the oil sector.

Lasmo, whose place in the FT-SE 100 Index is in jeopardy, fell in sympathy with Enterprise Oil and was additionally unsettled by some heavy selling in the traded options market, ending 8 weaker at 146p. This left the stock firmly at the bottom of the FT-SE 100 table.

BP was heavily sold, especially by US investors after talk that one of the leading Wall Street broking houses had taken the stock off its 'buy' list. It finished 7 1/2 cheaper at 307 1/2 p.

Poor sentiment at GKN's annual meeting led to another round of profits downgradings, causing further weakness in the stock. The chairman said the company's trading results during the first four months of the year were 'marginally' behind those of last year, with European markets weaker than anticipated.

Analysts who had reduced estimates only two weeks ago moved to make further cuts, and the range of current year forecasts is now between Pounds 125m and Pounds 145m. The stock fell 7 to 436p after higher than average trade of 5.6m shares.

The negative sentiment in GKN, coupled with worries about a dividend cut, depressed Lucas Industries, which dipped 3 to 134p.

British Aerospace reversed an initial decline to end a net 7 higher at 331p after Kleinwort Benson upgraded its 1994 profits forecast. Leaving its current year estimate at Pounds 125m, the securities house increased the following year's forecast by Pounds 20m to Pounds 200m, citing improvements in the defence sector and at Rover, BAe's car manufacturing subsidiary.

Enterprise Oil Portals Group BAT Industries BTR English China Clays British Petroleum GKN British Aerospace GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P2621 Paper Mills P2111 Cigarettes P6719 Holding Companies, NEC P1411 Dimension Stone P3714 Motor Vehicle Parts and Accessories P1459 Clay and Related Minerals, NEC P3721 Aircraft CMMT Comment & Analysis P1311 P2621 P2111 P6719 P1411 P3714 P1459 P3721 The Financial Times London Page 40 906
London Stock Exchange: Gold shares busy Publication 930520FT Processed by FT 930520 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

The latest upsurge in the gold price triggered further strength in South African gold shares and lifted the FT-Actuaries Gold Mines Index to its highest level since August 1991.

The bullion price reached a 29-month peak at one point but came under severe pressure later after rumours that Mr George Soros, the US investor, had begun to sell.

London trading in South African golds built up throughout the session, with the top quality producers such as Vaal Reefs touching Dollars 74 before retreating to trade around the Dollars 71 level. Driefontein peaked at Dollars 12 3/4 before slipping to Dollars 12 1/4 .

One leading trader said there was broad demand for golds, with South African institutions buying aggressively, closely followed by Continental and US investors. London buyers were more restrained.

The sudden strength in metal prices gave a further boost to Lonrho, the UK-based conglomerate with substantial interests in precious metals via big holdings in Ashanti, the Ghanaian gold mine, and Western Platinum, the South African platinum mine.

Lonrho rose 2 to 116 1/2 p, its best level for more than a year. Dealers said Lonrho's recent strength was in the face of some exceptionally heavy selling. Yesterday it was announced that the Malaysian-based Genting group of companies had reduced holdings in Lonrho by around 7m shares to 38.1m. 'There has been a subtle but positive shift in the London market's view of Lonrho since the arrival of Mr Dieter Bock at Lonrho last year,' said one dealer.

Vaal Reefs Driefontein Consolidated Lonrho ZA South Africa, Africa GB United Kingdom, EC P1041 Gold Ores P6719 Holding Companies, NEC CMMT Comment & Analysis P1041 P6719 The Financial Times London Page 40 303
London Stock Exchange: Bass out of market favour Publication 930520FT Processed by FT 930520 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

DISAPPOINTING results from Bass, Britain's largest brewer, sent the shares into freefall in their largest recorded daily trading volume. The stock ended at 483p, down 50, with turnover reaching 11m.

Every drinks specialist seemed to have a particular grouse with the Bass interim report, ranging from disappointment with Holiday Inns to astonishment at the level of cash outflow. The first-half outcome was a profits figure well below the most cautious City forecasts, prompting a welter of downgrades and negative comments.

Kleinwort Benson lowered its full year forecast by 10 per cent to Pounds 503m, while NatWest cut to Pounds 508m and SGST to Pounds 490m.

Analysts also reported a gloomy post-results meeting. Mr Geoff Collyer at NatWest said: 'There was nothing in the Bass explanation that indicated that their strategy is going to work.' SGST's Ms Alex Oldroyd added: 'Even if trading picks up, investors will take a lot of convincing to get back into the stock.'

Other sector specialists claimed that some disgruntled institutional investors were critical of the Bass management and there was speculation that pressure could be exerted for a splitting of the roles of chairman and chief executive.

Bass GB United Kingdom, EC P2082 Malt Beverages P7011 Hotels and Motels CMMT Comment & Analysis P2082 P7011 The Financial Times London Page 40 240
London Stock Exchange: Shares slide as sales news disappoints Publication 930520FT Processed by FT 930520 By TERRY BYLAND, UK Stock Market Editor

UNFAVOURABLE news from the UK consumer sector, together with receding hopes of lower interest rates, cut into share prices in London yesterday, taking the Footsie Index down towards the 2,800 mark. Trading volume increased again, but once again the second line stocks outperformed the blue chips. Denmark's voting approval for the Maastricht treaty had little effect.

Share prices opened lower and an attempted rally was quickly extinguished. The late recovery on Wall Street overnight did little to lift London's doubts on the outlook for the New York market.

UK stocks began to slide at mid-morning as sentiment was upset first on the domestic and then on the international front. Disclosure of a sharp rise in German money supply in April and the absence of any rate change at the Bundesbank meeting put UK interest rate hopes back on to the sidelines.

News that UK retail sales had fallen by 0.3 per cent last month served to increase the City's distaste for the interim results from Bass, one of the leading UK brewers, which shook the sector by indicating a continued decline in beer sales and profits.

The slide in the market quickened as London traders backed away ahead of the opening of the new Wall Street session. In the event the Dow Industrial Average was down only 7 points in UK hours, but London stocks remained around their day's lows, with the Footsie nearly 30 points off at 2,817.7 at worst.

The final reading of 2,819.7 gave a loss on the day of 27.6 points. Even those traders who had warned that the stock market was merely moving within an established trading range of 2,787 to 2,890 sounded surprised at the speed of its reaction over the past two days.

One reason is the return of the rights issue flow, although this is at reduced pressure for the moment. Three issues were brought forward yesterday for a total of more than Pounds 350m, suggesting that the rights issue queue is being speeded up because of the weight of issues in the pipeline.

Yesterday's cash calls included the Pounds 200m convertible rights from Allied-Lyons, which had been widely expected on Monday, and two smaller equity calls from Compass Securities and Saatchi & Saatchi. Some relief came from the satisfactory reception for the next Pounds 3bn auction of government bonds.

The FT-SE Mid 250 Index again outperformed the Footsie, losing only 2.2 points to 3,149 and remaining within a few points of its all-time high.

However, turnover in non-Footsie stocks remained relatively low at only about 59 per cent of the day's Seaq total of 647.5m shares, compared with 633.4m in the previous session. The official total of customer business, which tends to disclose the strength of institutional business, increased on Tuesday to return a worth of Pounds 1.25bn.

Some strategists perceive selling pressure from the big institutions, which are believed to be short of cash and fearful that equity rights calls and gilt-edged funding demands could catch them out over the next month.

The latest reports from UK industry have done little to sustain faith in an early recovery in business activity and this, coupled with inflationary signs in the US and in Europe, have discouraged fund managers in London.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 579
London Stock Exchange: Equity futures and options trading Publication 930520FT Processed by FT 930520 By JOEL KIBAZO

FADING hopes of a reduction in interest rates, together with poor economic data from both the US and the UK, led to aggressive selling of Footsie futures, writes Joel Kibazo.

The first trade in the June contract on the FT-SE 100 Index was struck at 2,859 and initially led to hopes of a strong buying session.

However, those hopes faded with the release of German money supply figures showing a sharp rise. Dealers took this as a signal of no cut in UK base rates and it triggered an aggressive wave of selling, led mainly by independent traders.

This increased with the release of worse than expected UK retail sales figures, and the continued fall led to the erosion of the premium by mid-session.

In the afternoon, dealers focused on the poor US budget deficit statistics, sending the contract lower in anticipation of a poor opening on Wall Street. Sporadic bargain hunting was seen in the late afternoon when New York opened firmer than anticipated.

June finished at 2,828, down 30 from its previous close and around 6 points ahead of its estimated fair value premium to cash of about 5.

Turnover was 11,201 at the official close.

Volume in the traded options was a hefty 41,096 lots, of which 13,017 contracts were in the FT-SE 100 option. Barclays was the busiest stock option with 1,445 lots.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 40 262
World Stock Markets (America): Dow surges to record high on program buying Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON NEW YORK

Wall Street

AFTER falling in early trading on futures-related activity, US stocks rebounded strongly on computer program buying to end at an all-time high, writes Patrick Harverson in New York.

The Dow Jones Industrial Average closed 55.64 ahead at 3,500.03, comfortably eclipsing the previous record of 3,482.31 set last week. The Standard & Poor's 500 gained 7.25 at 447.57, while the American SE composite rose 1.70 to a record 429.92 and the Nasdaq composite climbed 9.65 to 690.43.

New York SE trading volume jumped to 342.4m shares, the third highest of the year.

Share prices fell sharply in the first few hours of trading in the wake of another rise in bond yields, which on Tuesday broke through the 7 per cent barrier for the first time in more than a month. Although inflationary fears were again behind the fall in bond prices, news of stronger than expected imports in the April merchandise trade report also contributed to the selling of longer-dated Treasuries.

The decline in stock prices was exacerbated by activity in the futures market, where the S & P 500 stock index futures contract fell through a technical support level, triggering selling in both the futures and the underlying cash markets.

Stock and bond prices turned sharply around in the afternoon after gold prices, which had risen steeply in the morning, suddenly retreated. The recent surge in gold has undermined the attractiveness of bonds and stocks, so the drop in gold prices yesterday was welcomed by both debt and equity investors, and helped to trigger some late computer program buying which lifted stocks to new highs.

Gold shares lost some of their lustre as profit-takers moved in. Newmont Mining retreated Dollars 1 1/2 to Dollars 50 3/8 , Battle Mountain Gold Dollars 5/8 to Dollars 8 3/4 on 5.4m shares traded and Home-stake Mining Dollars 2 3/8 to Dollars 16 3/4 .

Motor issues also came under early selling pressure. Ford fell sharply for the second consecutive day, dropping Dollars 1 3/8 to Dollars 52 1/8 as it was further undermined by news that brokerage house Merrill Lynch had lowered its intermediate-term rating on the stock.

The two other big motor stocks, however, rebounded with the market. Chrysler ended Dollars 1 1/4 up at Dollars 43 3/4 and General Motors Dollars 1/2 firmer at Dollars 39 3/4 .

Hewlett-Packard, which posted surprisingly strong quarterly earnings on Tuesday, climbed a further Dollars 3 1/8 to Dollars 87 3/4 in volume of 2m shares.

On the Nasdaq market, Microsoft forged ahead Dollars 4 to Dollars 92 1/2 in volume of 5.6m shares after two broking firms upgraded the stock.

Canada

TORONTO finished mixed to lower in extremely active trading after a drop in gold shares. The TSE 300 index shed 15.6 to 3,811.3 and declines led rises by 348 to 346 after volume of 83.4m shares valued at CDollars 683.1m. The golds index fell 5.93 per cent as the New York spot gold bullion price lost USDollars 1.50 an ounce.

Details of the Ontario budget came after the market close.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 554
World Stock Markets (Europe): Bourses switch into reverse in late trading Publication 930520FT Processed by FT 930520 By Our Markets Staff

EARLY improvement on the Danish Maastricht vote was eroded yesterday as bourses reviewed unexpectedly high money supply growth in Germany, and the absence of interest rate cuts at the Bundesbank meeting.

The Eurotrack index produced an intraday switch into reverse, the trend apparently confirmed by a weak start on Wall Street, writes Our Markets Staff.

MILAN was in optimistic mood and a broadly-based rally took the Comit index up 14.30 or 2.6 per cent to a 21 month high of 558.49.

A half point fall in Italy's minimum repurchase rate to 10.50 per cent, the lowest since November 1991, was seen as setting the stage for a discount rate cut of at least half a percentage point, possibly after the government approves a L13 trillion package of deficit cuts in the next few days.

Mr Marco Ortelli of Akros Sim in Milan noted strong foreign demand, particularly for the telecommunications sector. At the same time, domestic funds were reluctant to sell since the Comit's breach of the 550 level opened the way for a technical rally to around 580, he said.

Fiat remained volatile, fixing L373 or 5.9 per cent higher at L6,700 but easing to L6,600. Generali added L1,155 or 3 per cent to L38,650 before L38,550 after-hours and Mediobanca was L799 or 4.8 per cent higher at L17,199 as foreign funds increased their weighting of the Italian market.

Olivetti rose L61 or 4.5 per cent to L1,410 before L1,420 on the kerb in continued response to Monday's rights issue, while Parmalat added L676 or 4.3 per cent to L16,437 on further consideration of its rights issue terms.

ZURICH edged forward to a third consecutive record close, ahead of today's Ascension Day holiday which marks the start of a long weekend away for many investors. The SMI index added 0.1 to 2,227.0, continuing to take a lead from the strong dollar.

The market began firmly, as positions were squared ahead of tomorrow's expiry of futures and options on Soffex, but prices eased back from their best levels later.

Holderbank bearers added SFr17 to SFr656 in active trade ahead of presentations to analysts next Monday and amid optimism at the outlook for first quarter results.

Winterthur certificates shed SFr7 to SFr614 on further consideration of plans to swap its certificates into registered shares after splitting registered shares and bearers on a five for one basis. The registered shares shed SFr40 to SFr3,060.

FRANKFURT's financials reflected its fiscal disappointments, Allianz falling DM23 to DM2,099, Deutsche Bank by DM5.50 to DM691 and Dresdner DM5 to DM369 as the DAX index closed 11.07 lower at 1,617.41.

Turnover declined from DM5.7bn to DM5.1bn. Deutsche Bank lost ground although it reported full group operating profits up about 20 per cent in the first four months of 1993, compared to one third of last year's total, and mooted a higher dividend this year.

Elsewhere there was activity, mostly bearish, in consumer stocks where Douglas, the upmarket retailer of perfumes and toiletries, fell DM17.50 to DM480 and Escada, the fashion group, dropped DM18 to DM220 after reporting a first half loss.

Mr Adrian Hopkinson of NatWest Securities thought that Douglas might reflect difficulties reported in luxury products at Wella yesterday. Ironically, Wella rose DM17 to DM719 as it forecast another drop in raw material costs this year, after a fall of 7 per cent helped margins in 1992.

AMSTERDAM fell back sharply in reaction to the German M3 data, a weak opening on Wall Street and options activity. The CBS Tendency index lost 2.1 or 2 per cent to 104.2.

Unilever and Heineken were among the day's biggest losers, both falling Fl 2.60 to Fl 190.60 and Fl 178.80 respectively. Heineken has been falling recently partly on speculation about possible losses at the Spanish brewer in which it holds a 50 per cent stake.

PARIS, on the last day of the account, saw high turnover which was swelled by a number of block trades crossing the market during the session. The CAC-40 index, which had earlier seen a day's high of 1,853, finished down 9.62 at 1,836.78 in turnover of some FFr4.8bn.

One of the day's biggest losers was Michelin, down FFr5.60 or 3.8 per cent at FFr141.50, while BSN managed a modest FFr1 rise to FFr864 following Tuesday's fall after it announced plans to cut prices on some of its products.

MADRID hit another downgrade in its erratic, post-devaluation career, the general index closing 1.70 lower at 255.19.

STOCKHOLM added options-related selling in Astra A, down SKr12 to SKr730 after an initial jump of of SKr18 to SKr760, as the Affarsvarlden General index fell 6.7 to 1,076.5. COPENHAGEN lost much of its early gains as the detail of tax reform plans took over from the Maastricht vote. The KFX index closed 0.22 up at 87.09 in turnover of DKr1.1bn. HELSINKI was stronger after a threatened strike in the country's export sector was called off. The HEX index gained 32.5 or 2.7 per cent to 1,217.2 in turnover of FM230m.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ May 19 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1154.22 1154.27 1154.36 1152.91 FT-SE Eurotrack 200 1220.09 1218.68 1217.84 1216.45 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1152.28 1149.55 1148.78 1147.97 FT-SE Eurotrack 200 1215.91 1211.61 1213.10 1212.27 ------------------------------------------------------------------------ May 18 May 17 May 14 May 13 May 12 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1152.98 1146.07 1148.21 1155.16 1148.06 FT-SE Eurotrack 200 1217.75 1214.06 1212.97 1219.59 1215.04 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1155.65; 200 - 1221.05 Low/day: 100 - 1147.60 200 - 1211.59. ------------------------------------------------------------------------

IT Italy, EC CH Switzerland, West Europe DE Germany, EC NL Netherlands, EC FR France, EC ES Spain, EC SE Sweden, West Europe DK Denmark, EC FI Finland, West Europe P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 1001
World Stock Markets: South Africa Publication 930520FT Processed by FT 930520

JOHANNESBURG'S gold share market racked up one of its biggest ever daily gains, the sector index ending 213, or 13.3 per cent, higher at 1,817 after an intraday peak of 1,938 as bullion broke through the Dollars 370 and Dollars 380 an ounce resistance levels on speculative and investment fund buying.

The overall index finished 11 ahead at 3,984 and industrials 24 better at 4,494. Marginal gold mines showed the sharpest rises, with Doorns jumping 140 cents, or 37 per cent, to R5.20 before closing 130 cents up at R5.10.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 119
World Stock Markets: Economic worries take their toll - European equity turnover fell back in April Publication 930520FT Processed by FT 930520 By MICHAEL MORGAN

The high levels of equity trading seen throughout Europe during the first three months of the year lost impetus in April as a raft of political and economic worries began to take their toll.

Turnover in the eight leading European markets fell by 25.3 per cent in April, reversing a 22.8 per cent March rise. April's decline reflected a fall in market indices, with the FT-A Europe index losing 1.9 per cent over the month.

Mr James Cornish of NatWest Securities says lower turnover was particularly noticeable in the second half of the month as investors took profits: 'In contrast to March when turnover swelled on a flat market, selling in April seems to have led to prices falling and volumes declining, in the absence of ready buyers.'

He adds that while turnover was also lower overall on Seaq International, the London screen-based dealing system for foreign shares, the fall was less pronounced than on domestic exchanges. Seaq turnover as a percentage of the domestic market rose to record levels for both French shares, at 53.1 per cent compared with 44.2 per cent in March, and German shares, 15.4 per cent after March's 11.5 per cent.

Mr Marcus Grubb of Salomon Brothers notes in his latest European equity strategy review that bourses had rallied strongly during the first three months, helped by strong US economic recovery and an appreciating dollar, and hopes of lower interest rates. At their peak in March and early April, the markets had risen by an average of 5 to 6 per cent since the start of the year and had outperformed bond markets.

Since late-March, however, deepening economic recession in continental Europe, a slower pace of recovery in the US, fears of intervention in Bosnia and turmoil in the Confederation of Independent States had all weighed heavily on European equities, offsetting the benefits of the Bundesbank's easing of monetary policy.

German domestic turnover saw the biggest fall of the month, 32.5 per cent from March's unusually high levels as worries about the economy grew. Spain came a close second, down 30.1 per cent as investors became uneasy about the peseta's outlook, and elections on June 6 which could produce a hung parliament.

French turnover dipped by 26.2 per cent as bourse indices fell on concern about the new budget, while Switzerland contracted by 25.9 per cent as the market underperformed on the weak dollar and impatience over the delay in bringing down Swiss interest rates.

Italy eased 0.8 per cent from March's four-year record. The market index rose 10.8 per cent as the political climate looked brighter and investors refused to be put off by the ever-widening corruption scandal.

------------------------------------------------------------------------ EUROPEAN EQUITIES TURNOVER Monthly total in local currencies (bn) ------------------------------------------------------------------------ Bourse Jan Feb Mar Apr US 1993 1993 1993 1993 Dlrs bn ------------------------------------------------------------------------ Belgium 62.75 57.35 70.30 58.18 1.78 France 106.66 127.98 159.17 117.45 21.95 Germany 91.67 133.88 168.06 113.50 71.47 Italy 25,143.20 28,045.20 31,337.60 31,098.40 20.84 Netherlands 14.60 16.80 21.80 16.80 9.41 Spain 653.20 664.91 856.96 598.87 5.13 Switzerland 22.30 17.60 18.90 14.00 9.76 UK 42.86 43.58 51.82 38.79 60.92 ------------------------------------------------------------------------ Volumes represent purchases and sales. Italian data adjusted to include off-market trading. Some figures may be revised. Source: NatWest Securities ------------------------------------------------------------------------

XG Europe P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 579
World Stock Markets (Asia Pacific): Nikkei shows mild recovery amid bargain hunting Publication 930520FT Processed by FT 930520 By WAYNE APONTE TOKYO

INDEX futures sales were outweighed by bargain hunting, government buy orders and short-covering, and the Nikkei average closed at its intraday high in light trading, writes Wayne Aponte in Tokyo.

The Nikkei ended 151.40 firmer at 20,380.79, after a session low of 20,128.70. The Topix index of all first section stocks appreciated 8.68 to 1,597.96. In London the ISE/Nikkei 50 index eased 0.56 to 1,229.16.

Volume on the first section of the Tokyo Stock Exchange was 380m shares, barely changed from the previous day. Advances outnumbered declines by 595 to 423, with 167 issues unchanged.

Brokers said investors had been waiting for a possible retreat below the 20,000 level. But once the 225-issue average maintained its ground, buyers entered the market at the lower end of its range.

An analyst at a Japanese brokerage said domestic institutional investors dominated the day's activity, with international investors taking light profits. Equity prices, he added, are expected to trade within a narrow range until market participants have digested recent company results and forecasts.

Investors focused on issues with good earnings for the financial year to March 1993. JGC, the engineering company, rose Y100 to Y2,330 following its better than expected results.

Takuma, the boilermaker, advanced Y70 to Y1,400 as market participants speculated that its earnings will reach peak levels.

The non-ferrous metals sector rose in tandem with gold prices in overnight trading in New York. Sumitomo Metal Mining, the day's most active issue, climbed Y50 to Y1,160, Mitsubishi Mining and Smelting Y13 to Y558 and Mitsubishi Material Y3 to Y525.

Some real estate issues advanced after the Japan High Rise Condominiums Association estimated that condominium sales would increase by more than 50 per cent this current fiscal year. Daikyo put on Y40 at Y1,320 and Nichimo Y2 at Y557.

However, Honda, which announced a 32 per cent decline in pre-tax profits, retreated Y50 to Y1,380. Suzuki declined Y14 to Y966.

Profit-taking pushed some shipbuilding issues down following Tuesday's advance. Ishikawajima-Harima Heavy Industries slipped Y4 to Y517, while Hitachi Zosen relinquished Y8 to Y575.

In Osaka, the OSE average ended 72.11 higher at 22,625.09 in volume of 21.2m shares.

Roundup

PROFIT-TAKING was much in evidence yesterday.

HONG KONG slipped back following record highs earlier this week. The Hang Seng index eased 55.42 to 7,093.88. Turnover fell to HKDollars 5.2bn from Tuesday's HKDollars 8.3bn.

Some analysts commented that the market was likely to consolidate after its recent rallies, while switching among major stocks and to second and third liners was also noted.

HSBC Holdings and Cheung Kong were sold, down a respective 50 cents and 10 cents to HKDollars 71.50 and HKDollars 27.10. However, Jardine Matheson went against the trend, rising HKDollars 1 to HKDollars 58.50.

SINGAPORE was also easier, although the Straits Times Industrial index recovered from an intraday low of 1,866 to finish only a net 1.40 off at 1,876.61. Volume was estimated at 403.2m shares.

Fraser & Neave and Sembawang Shipyard receded 40 cents apiece to SDollars 12.60 and SDollars 12.40 respectively.

SEOUL, however, went higher for the third consecutive session, with securities houses giving good performances. Daewoo Securities moved forward Won300 to Won23,200 and Lucky Securities Won300 to Won20,200.

The composite stock index closed 2.15 firmer at 724.76 in turnover of Won759.6bn.

TAIWAN fell back as turnover shrank from TDollars 23bn to TDollars 18.5bn, its lowest level since February. The weighted index lost 48.85 at 4,446.54.

Activity was dampened by concern over investigations into alleged trading irregularities which are being investigated by the authorities.

MANILA lost ground for the second day running on a combination of disappointing economic data and a severe power shortage. The composite index declined 21.78 to 1,574.36 in turnover of 408.6m pesos.

KUALA LUMPUR was firmer, with activity concentrated in blue chips. The composite index rose 3.97 to 729.43 in turnover of MDollars 1.7bn.

Sime Darby, however, fell 22 cents to MDollars 4.88 in volume of 2.35m shares.

AUSTRALIA rose in line with an improvement in the gold price. The All Ordinaries index put on 4.7 at 1,682.6, with the gold shares index advancing 82.0 to 1,798.3, its highest level since March 1990. Turnover came to ADollars 351m.

NEW ZEALAND was driven higher by Telecom, up 16 cents at NZDollars 2.95, as investors responded to Tuesday's annual results, which included an increase in the dividend. The NZSE-40 index gained 27.57 at 1,615.91 in turnover of NZDollars 67m.

JP Japan, Asia HK Hong Kong, Asia SG Singapore, Asia KR South Korea, Asia TW Taiwan, Asia PH Philippines, Asia MY Malaysia, Asia AU Australia NZ New Zealand P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 37 794
Foreign Exchanges: Questions raised on D-Mark Publication 930520FT Processed by FT 930520 By JAMES BLITZ

THE D-MARK'S weakness in the wake of Denmark's ratification of the Maastricht treaty was the dominant issue in foreign exchange markets yesterday, raising speculation that the German currency is on the verge of a sharp move downwards, writes James Blitz.

Dealers continued to unwind long D-Mark positions in the wake of the Yes vote in Denmark, pushing the German currency to an historic low against the Japanese yen, and helping sterling to break through the DM2.50 barrier for only the second time this year.

Newfound confidence in European monetary union was always bound to weaken the German currency, which investors had used as a vehicle for hedging against another crisis in the exchange rate mechanism.

But the surprising aspect of the German currency's weakness yesterday was that it came on a day when the Bundesbank left interest rates unchanged. This was contrary to the expectations of many dealers, who had priced a cut of 1/4 percentage point in the discount rate into their operations.

The yen closed at Y68.04 against the D-Mark from a previous Y68.65, while sterling appreciated 1 1/2 pfennigs to DM2.5025 in spite of retail sales figures which raised speculation about a cut in UK base rates this autumn.

There were other hints that the D-Mark's role in fund managers' portfolios was being reassessed.

A rise in German bond yields to 6.85 per cent implied that there were sharp flows out of the German currency. Some analysts suggested that zero spreads between French and German bonds were not inconceivable.

The dollar managed to hold steady against the German currency, in spite of a day which brought the worst US trade data in four years. The March trade deficit ballooned by 29 per cent to Dollars 10.2bn, and the deficit with Japan leaped to a five-year peak. However, the dollar ended in London little changed at DM1.6235. In New York it closed at DM1.6230.

The German currency gained no strength against the Dutch guilder, in spite of a 10 basis-point cut in the Dutch central bank's advances rate. At the close of trading in the exchange rate mechanism, the guilder was 48 basis points above the D-Mark in the currency grid, almost at the self-imposed limit of 50 basis points set by the Dutch authorities.

Worse than expected figures for German M3 money supply growth were a strong factor behind bearishness towards the currency. On an annualised basis, Germany's M3 money supply grew 7.3 per cent in April, compared to a 3.4 per cent rise in March.

Mr Steve Hannah of IBJ International in London said there was a clear message in yesterday's events that the D-Mark was weakening: 'We may be beginning to see an acceleration of a malaise that will characterise the D-Mark for the rest of this year.'

DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 31 495
Money Markets: Euromarks fall back Publication 930520FT Processed by FT 930520 By JAMES BLITZ

GERMAN interest rate futures fell sharply yesterday after Germany's latest money supply figures appeared to be a good deal worse than expected and the Bundesbank decided not to cut its short-term interest rates, writes James Blitz.

It was announced first thing yesterday morning that, on an annualised basis, Germany's M3 money supply had grown by 7.3 per cent in April compared to 3.4 per cent in March.

The headline figure was worse than dealers had expected, leapfrogging over the Bundesbank's target band of 4.5 to 6.5 per cent annualised monetary growth.

Some analysts suggested that the underlying monetary growth may not have been as bad as the headline figure indicated. The higher growth did not reflect increased private sector or bank lending, but lower long term savings and increased lending to public authorities, both of which are said to be rather erratic variables.

Miss Alison Cottrell, an analyst at Midland Global Markets in London, comm-ented: 'This figure would actually encourage an interest rate cut, not postpone one.'

In interest rate markets, however, the clear view was that the M3 figure was the precursor to a more cautious attitude to easing monetary policy by the Bundesbank.

In the early morning, the June and September Euromark contracts retreated by 10 and 11 basis points respectively, bottoming out at 92.77 and 93.54.

The Bundesbank later decided to keep its Lombard and discount rates unchanged, in spite of expectations earlier in the week of a modest cut in the official interest rate floor. Both contracts remained at these low levels at the close.

Sterling futures markets were a good deal more bullish about a rate reduction, following another good performance by the pound on the foreign exchanges and a poorer than expected retail sales figure, which implied that the UK authorities may still need to stimulate the economy.

The June short sterling contract rose 2 basis points on the day, while the September contract finished 11 basis points higher at 94.05.

In the cash market, three-month money softened to around 6 per cent from a previous 6 1/16 per cent. There was a large shortage of Pounds 1.65bn forecast at the start of the day but it was swiftly despatched.

DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 31 397
World Commodities Prices: Wool Publication 930520FT Processed by FT 930520

After last week's price surge in Australia, taking the market indicator up by 20pc from its low point only two weeks previously, the market there has given a steadier impression this week. Competition is still good with China, Taiwan and Japan active as well as the EEC. Prices for most merino fleece have, however, slipped a little, bringing the market indicator down to 449c/kg on May 19, from 455c/kg at the end of last week. In consuming countries covering pressure also appears to have subsided somewhat. There is, nevertheless, confidence that the lowest point of the season has been passed.

AU Australia P0214 Sheep and Goats COSTS Commodity prices P0214 The Financial Times London Page 30 125
Commodities and Agriculture: Reconciling economics and ecology in New England - An area that could benefit from environmental pressures elsewhere Publication 930520FT Processed by FT 930520 By DAVID BLACKWELL

DRY STONE walls running through mature hardwood forest in New England evoke a powerful picture of the sheer effort needed by the colonists to clear their new land of both trees and rocks in order to plant crops.

The ruins of a farmstead, complete with rusting implements, overshadowed by towering red and sugar maple, black cherry, ash, beech, pine and hemlock also bear witness to the regenerative power of nature. The remains of barbed wire fences, once wrapped round a sapling, run straight through the centre of a 14-inch diameter oak.

'There is no virgin forest here. This is all land cut over and used,' says forester Bruce Jacobs, president of New Hampshire-based Fountain Forestry, which looks after 150,000 acres of US forest land, mostly in New England. He reckons that the potential of the second-growth north-eastern forests of the US as a source of hardwood has been overlooked at a time when US timber exports are booming and environmental concerns are reducing supplies.

The most visible example of environmental pressures has been the battle over the endangered spotted owl, which last month took up several hours of President Clinton's time in Portland, Oregon.

'We'll get some of the action because of the spotted owl,' says Mr Jacobs, who says that protecting the species will locks up 12 to 14 per cent of the Pacific north-west's timber, and will have a big impact on the US domestic market. Already timber from the north-east is being sold in Chicago, which used to take all its construction timber from the west coast.

The abandonment of the farms in New England followed the Civil War and the opening up of the American west. A century and a half ago 70 to 80 per cent of Vermont was open, but now between 80 and 85 per cent is wooded again.

A time-travelling Indian would find the mix of species in the forest exactly the same as it was several hundred years ago. But he would wonder what had happened to the giant white pine, which was relentlessly cut down to supply masts for the battling navies of Europe. While the white pine is readily found, none have been around the 200 years or so necessary to reach 150 feet high and 3 feet in diameter.

That is not surprising considering the region's first saw mill started to operate in Maine early in the 17th century. Timber harvesting has not stopped since - and a white pine reaches its maximum commercial value after only 80 years.

In upper New York state about 40 per cent of the Adirondack mountains is now managed by the state as wilderness. Apart from the maintenance of trails, the forest is left alone, and presumably some white pines will once again reach 200 years of age. But most of the rest of the land is in private hands and the owners want to make it pay.

Mr Jacobs argues that it is possible both to make a profit from timber and to conserve the forest for hunting and leisure purposes. About 25 per cent of the entire US population is within a day's drive of the north-eastern forests.

The most profitable hardwood in the New England forests is black cherry, which produces beautiful timber for furniture manufacture. If left alone the black cherry reaches maturity in 80 years, although management of the forest can shorten the time to 65 years. It is fetching Dollars 250 to Dollars 350 per 1,000 board feet at present, although a tree suitable for producing veneer can fetch up to Dollars 2,000 per 1,000 board feet.

But the difference in price between the top value trees and those that can be used only for pulp is considerable. Pulped hardwood, which is needed for top quality paper such as that used in glossy magazines, fetches Dollars 3 to Dollars 5 a cord (a cord is a stack 4ft by 4ft by 8ft). It takes about 25 6-inch diameter trees to make a cord - valuing each tree at only a few cents.

In surveying for good prospective forest land, Mr Jacobs will look for timber that is at the pulpwood stage, but on the verge of reaching saw log stage. 'You can buy at 20 cents a tree, and 30 years later you have potentially a tree worth Dollars 200 to Dollars 300,' he says. 'You also still have the land.'

However, this means taking a long-term view. Many owners succumb to the temptation to take out all the best timber in one go, leaving the next harvest 60 to 70 years away. As Mr Jacobs points out: 'It's very difficult to really hurt the forest from a biological view, but very easy to hurt in terms of economic value'.

Fountain Forestry US United States of America P0811 Timber Tracts P0831 Forest Products P0851 Forestry Services CMMT Comment & Analysis P0811 P0831 P0851 The Financial Times London Page 30 852
World Commodities Prices: Market Report Publication 930520FT Processed by FT 930520 By REUTER

New York raw SUGAR prices remained broadly lower at midday after a steep late morning drop, but the emergence of trade buying and an easing of technical selling allowed prices to move well off their two-week lows, traders said. Analysts said fundamentals remained bullish. That was underscored by the International Sugar Organisation's estimate for the 1992-93 world production deficit at 1.61m tonnes. New York arabica COFFEE prices erased moderate morning losses to stand slightly firmer at midday. The early sell-off came as profit taking emerged after Tuesday's rise of 3.45 cents a lb. Sales were also prompted by news that the Green Coffee Association had revised downwards by more than 50 per cent the decrease in US coffee warehouse stocks in April. On the LME COPPER ended the afternoon kerb little changed, with the mood indecisive and many traders looking to buy dips and sell rallies. There appeared to be solid resistance around Dollars 1,820-Dollars 1,830 a tonne for three-month metal and support below Dollars 1,800. Other metals were little changed - many appeared to be entering consolidation phases, dealers said.

Compiled from Reuters

US United States of America P6231 Security and Commodity Exchanges P0179 Fruits and Tree Nuts, NEC P0133 Sugarcane and Sugar Beets P1021 Copper Ores COSTS Commodity prices P6231 P0179 P0133 P1021 The Financial Times London Page 30 233
Commodities and Agriculture: Trinidad's fertiliser output down 4% Publication 930520FT Processed by FT 930520 By CANUTE JAMES KINGSTON, JAMAICA

TRINIDAD AND Tobago's nitrogenous fertiliser output slipped 4 per cent last year to 2.36m tonnes, mainly because of plant closures for maintenance, the country's central bank has reported. Exports by the Caribbean state, a major supplier to the US and western Europe, were 2.08m tonnes, marginally less than in 1991.

Government officials say the country is now among the world's largest producers of nitrogenous fertilisers with installed capacity of 2.5m tonnes per year.

Last month the government sold its wholly owned urea plant and its 51 per cent stake in an ammonia plant to Arcadian Partners of Tennessee, a major producer of fertilisers, for USDollars 175m.

TT Trinidad and Tobago, Caribbean P2873 Nitrogenous Fertilizers MKTS Production P2873 The Financial Times London Page 30 141
Commodities and Agriculture: Passions run high over Canadian forest - An increasingly bitter battle between fellers and conservationists Publication 930520FT Processed by FT 930520 By BERNARD SIMON

THE BATTLE for British Columbia's majestic cedar, hemlock and Douglas fir trees is being waged with especial ferocity over a scenic web of forests and waterways on the west coast of Vancouver Island, known as Clayoquot Sound.

The passions were evident last weekend when police arrested three people suspected of setting fire to a bridge leading to the forests. Environmental activists have been blamed for several other acts of violence. Another bridge was destroyed by arson two years ago and on the night that the town council of Tofino, the community closest to the sound, voted to support logging in the area earlier this year a fishing boat on the local beach was set on fire.

Fearing another outbreak of violence, the Vancouver police were out in force last month at the hotel where MacMillan Bloedel, one of two companies at the centre of the Clayoquot Sound storm, held its annual meeting.

Radical environmental groups have already threatened to 'spike' trees in the Clayoquot Sound forests with metal stakes this summer. The spikes pose a serious hazard to loggers and diminish a tree's commercial value.

British Columbia's social-democrat government tried to defuse the tensions in mid-April by spelling out a compromise which met some, but not all, the demands of logging companies and their workers on the one hand, and conservationists on the other.

But the battle for Clayoquot Sound is far from over.

MacMillan Bloedel expects to be bogged down for at least a year in negotiating the details of how it will cut down the trees that the government has agreed to set aside for commercial logging. Mr Dan Miller, British Columbia's forests minister, concurs that 'it will take some time for the companies to design these plans and to submit them to us for approval'.

The conservationists, for their part, plan to fight MacMillan Bloedel and International Forest, the other company whose cutting licence includes Clayoquot Sound, every step of the way. 'We will watch everything and challenge everything,' says Ms Vicki Husband, director of the Sierra Club of Western Canada and one of the sharpest thorns in the side of the British Columbian forestry industry.

The province's government last monthasked a senior judge to examine allegations that it created a conflict of interest by buying a sizeable block of MacMillan Bloedel shares at the same time as it was coming to a decision on Clayoquot Sound.

The forests of the 262,000-hectare sound are not only important in themselves to both sides but also epitomise the wider questions in the debate on forestry and the environment: to what extent should trees be cut down to maintain jobs and investments in forests and saw-mills? Or should the forests be preserved entirely for wildlife, environmentalists and tourists?

MacMillan Bloedel says the sound would provide about 10 per cent of the annual feedstock required by its mills at nearby Port Alberni. The company already faces reductions of up to 14 per cent in tree-cutting licences for other provincially-owned forests supplying the Alberni mills.

The timber industry also worries that the wrangle at Clayoquot Sound is part of a developing pattern of endless negotiation, harassment and, increasingly, violence which have come to bedevil logging operations across the west coast of North America.

More than two years ago, the provincial government divided the nearby - and equally picturesque - Carmanah Valley between working forests and wilderness areas. But operations there remain suspended as the authorities and the companies haggle over detailed working plans.

Environmental activists see it differently. Ms Husband describes Clayoquot Sound as 'a very rare and valuable eco-system', which is one of the biggest original temperate rain forests remaining along the west coast.

Armed with detailed maps, she demonstrates how logging has denuded old-growth forests on Vancouver Island. 'They've raped and pillaged, to put it mildly,' Ms Husband says.

Under the government's mid-April decision, about a third of the sound would be permanently off-limits to commercial forestry. Some 45 per cent would be available for logging, while 17 per cent would be 'special management areas' where especially strict tree-cutting rules would apply to protect scenic corridors, wildlife habitats and recreation areas.

The government has promised to ensure that harvesting is carried out 'sustainably'. It plans, for instance, to restrict the size of clear-cuts, insist on greater use of helicopters to carry out felled logs and to set aside substantial buffer zones between tourist areas and logging activity.

The cost of cutting trees in Clayoquot Sound is thus likely to be high. The companies warn that this may encourage such undesirable practices as 'high-grading', in which only the most valuable trees are removed. None the less, MacMillan Bloedel is satisfied that the government's decision is the best it could realistically hope for.

Mr Patrick Armstrong, a consultant whose clients include several British Columbian forestry companies, says that it 'is a win for the forest sector if you put it in the context of the times, the issues and the pressures that were being applied'.

But the government has promised to double the area of land set aside for parks and wildlife refuges to 12 per cent of the province. Mr Armstrong echoes the industry's concern that the tug-of-war over Clayoquot could be the forerunner of a multitude of similar battles.

MacMillan Bloedel International Forest Products CA Canada P0811 Timber Tracts P0851 Forestry Services P0831 Forest Products P2411 Logging RES Natural resources CMMT Comment & Analysis P0811 P0851 P0831 P2411 The Financial Times London Page 30 941
Commodities and Agriculture: Fresh surge takes gold to highest since Gulf War Publication 930520FT Processed by FT 930520 By KENNETH GOODING, Mining Correspondent

ANOTHER FRENZIED day in the gold market yesterday saw the US dollar price rise at one point in the morning to Dollars 384.50 a troy ounce, its highest level since the panic buying just after the start of the Gulf War in January, 1991.

Traders said profit-taking by investment funds after the New York market opened pulled back the price in the afternoon and it closed in London at Dollars 377.15, up Dollars 6.90 an ounce or by nearly 2 per cent from Tuesday's close.

Gold's price slumped to a seven-year low of Dollars 327 an ounce in London on the first trading day of 1993. The rise during the past four weeks, inspired by high-profile investors Sir James Goldsmith and Mr George Soros, has taken the price up by 15 per cent.

Dealers warned that the frantic conditions might re-appear today because many countries observe Ascension Day - including Germany, Switzerland and South Africa - and that could create a thin and volatile market.

Analysts' reaction to gold's sudden upward surge was predictably mixed yesterday. Enthusiastic bulls suggested the price still had a long way to go and that the upward momentum would continue to be reflected in gold company share prices. 'Don't let the grass grow under your feet while you are pondering your next move in gold shares,' said Mr Nick Moore, analyst at Ord Minnett, part of the Westpac banking group. 'Gold's pauses for breath are turning out to be very short indeed - more akin to the urgency of a Grand Prix pit stop than a lazy afternoon siesta.'

But an official at Anglo American Corporation of South Africa, the world's biggest gold producer, told Reuter that the demand which had boosted prices recently appeared to have come from a fairly small speculative community which could be unable to sustain prices at present levels.

US United States of America GB United Kingdom, EC P1041 Gold Ores COSTS Commodity prices CMMT Comment & Analysis P1041 The Financial Times London Page 30 357
Commodities and Agriculture: Review cuts cost estimate for Papua New Guinea mine project Publication 930520FT Processed by FT 930520 By KENNETH GOODING

AN URGENT review of the capital costs needed to bring the Lihir Island gold project in Papua New Guinea into production has resulted in 'a sizeable reduction' from the USDollars 767m previously expected and improved the economics, said Mr Geoff Loudon, chairman of Niugini Mining, one of the partners in the project, yesterday.

However, Mr Loudon said he had no idea whether the improvement would encourage RTZ Corporation, the world's biggest mining group, which has a majority stake in Lihir, to go ahead. All RTZ would say is: 'We are continuing studies to improve the economics'.

Lihir, in the crater of a dead volcano nearly full of very hot water, is the world's biggest undeveloped gold deposit with resources of about 42m troy ounces of gold. It is expected that it will produce 628,000 ounces annually in its first 13 years. The PNG government, which will take 30 per cent of the project, reducing RTZ's stake to 56 per cent and Niugini's to 14 per cent, is keen for mining to go ahead quickly and has been putting pressure on RTZ for a decision.

RTZ wants to reduce its exposure to the project on which USDollars 135m has been spent so far - Mr Loudon described that group's attitude as 'somewhat lacking in enthusiasm' - and has been seeking another partner to take a 20 per cent stake. The PNG government has given RTZ until today to complete the search or it will temporarily take 50 per cent of the project so as to speed up the funding process.

Mr Loudon, in London yesterday, pointed out that the PNG government had no intention of keeping the extra 20 per cent because the country would find it difficult to finance half the project. Its ultimatum to RTZ should be seen as part of a broader negotiating process.

He admitted it was a matter of concern to him than some big gold groups had apparently looked at the project 'and not grabbed the 20 per cent'. He was personally in favour of Niugini Mining taking the extra 20 per cent offered by RTZ but had not been able to persuade his board to take the opportunity. Niugini is 55 per cent owned by Battle Mountain Gold of the US.

A 1990 study put the capital cost of the Lihir project at USDollars 1.1bn but in 1991 this was revised in a way that not only cut capital costs but also increased cash flow in the early years of production. However, gold output would be cut considerably in later years.

Mr Loudon yesterday would not give precise details but said the latest cost review, which would be completed within a week, looked at the possibility of employing a mining contractor and saving the USDollars 60m in the Lihir budget for mining equipment. At present the cost of hiring contractors was very low.

Also the Dollars 68m 'cost escalation' figure in the budget gave room for manoeuvre as it originally assumed annual inflation of 4 per cent over the 33 months to bring the mine into production. Inflation was now expected to be below that level and much of the equipment was to be acquired in Australia, so the fall of the Australian dollar against the US currency was also cutting projected costs.

Mr Loudon revealed that the PNG government had agreed that the Lihir project would pay no duty on fuel while the gold price was below USDollars 380 a troy ounce (a level that was exceeded yesterday for the first time in two years). The partners were also asking for concessions on import duties on equipment but the government was insisting it could not afford to lose the revenue.

Niugini Mining RTZ Corp PG Papua and New Guinea, Oceania P1041 Gold Ores RES Facilities CMMT Comment & Analysis P1041 The Financial Times London Page 30 665
Government Bonds: Gilts strengthen after a stream of favourable data Publication 930520FT Processed by FT 930520 By JANE FULLER and PATRICK HARVERSON LONDON, NEW YORK

A confluence of favourable factors drove up the UK government bond market, with gilts in the next auction area performing particularly strongly.

The welcome given to Tuesday's Bank of England announcement on the Pounds 3bn auction carried over into yesterday morning's trade. Then weak retail sales figures for April, a monthly PSBR total at the low end of expectations and the strengthening pound all fuelled further advances.

More bullish factors for the market are expected in today's labour market data - a resumed rise in unemployment is forecast - and in tomorrow's release of the retail prices index.

The consensus forecasts on the RPI are for an historically low 'headline' rate of 1.5 per cent and just over 3 per cent for underlying annual growth.

This chimes with sanguine comments on inflation in the Bank of England's quarterly survey.

Gilts responded with a half-point rise at the longer end, notably the 8 1/2 per cent due 2007.

The 'when issued' price of the auction stock - 7 3/4 per cent due 2006 - gained just over 3/8 of a point to close at 30 3/16 partly paid (95 3/16 all in).

BY contrast, it was a bad day for the German government bond market.

The Yes vote in the Danish referendum set the background for further weakening of Germany's safe-haven image and continued outflows of cash to the high yielders.

However, the body blow to bunds came with the April M3 money supply figures, which leapt 7.3 per cent - well beyond expectations and the Bundesbank's 6.5 per cent target ceiling.

After this shock, a little comfort was drawn from the central bank's decision not to lower either of its key interest rates.

This was seen as giving some support for the sagging D-Mark.

Another problem was the string of recent issues in the 10-year area.

The latest, this week's ERP, was reported to be difficult to sell. One economist commented that investors were waiting for the yield on 10-year stock to rise to 7 per cent.

NOT surprisingly, one of the main beneficiaries of bund weakness was Denmark, where there was also a 1 point cut in the discount and repo rates to 8.25 per cent and 8.75 per cent respectively.

The uplift in government bonds saw the yield spread of Danish 10-year bonds over bunds fall to 61 basis points. It has come down from 85 basis points little more than a fortnight ago.

The Italian market made further gains, still buoyed by news of rapid withholding tax rebates and budget deficit cuts.

With the yield spread over bunds still higher than at the time of the Danish No vote last June, further gains were seen as a possibility.

US Treasury prices rallied strongly at the long end of the market yesterday

In late trading, the benchmark 30-year government bond was up 17/32 at 101 7/8 , yielding 6.971 per cent. At the short end of the market, the two-year note was up 3/32 at 99 25/32 , to yield 3.975 per cent.

After two days of yields holding steady at the short end but rising significantly at the long end, the strong performance of the long bond yesterday reversed the steepening in the yield curve.

Initially, prices at the long end eased slightly, primarily in reaction to an unexpected jump in imports revealed in the March merchandise trade report. The rise in imports raised fears that domestic demand might be rising sharply although analysts later attributed much of the rise to stronger demand for petroleum products.

Later in the day, a sudden drop in gold prices cheered bond investors, as did the absence of any sign from the Federal Reserve of a shift in the emphasis of monetary policy.

AFTER Tuesday's torrid selling of Japanese government bonds, the market had a much calmer day.

However, buyers continued to sit on their hands in Tokyo trading, leaving the September futures contract to weaken to 106.08 from 106.24 and giving little support to the No 145 10-year cash benchmark, which closed at 4.665 per cent.

In London trading there was some recovery as the yen strengthened against the dollar.

GB United Kingdom, EC DE Germany, EC DK Denmark, EC US United States of America JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 29 748
International Capital Markets: Russian Treasury bill to ease budget deficit Publication 930520FT Processed by FT 930520 By LEYLA BOULTON MOSCOW

THE Russian authorities yesterday hailed their first Treasury bill issue as a first step to helping finance the budget deficit by means other than printing money.

Mr Dimitry Tulin, deputy governor of the central bank, said the sale of Rbs885.4m marked 'the birth of a new market in our country for credit instruments'.

The first issue, which is small in contrast to Russia's budget deficit, is to be followed by monthly auctions of bigger amounts.

The three-month bills were sold at around 84.7 per cent of their par value, with an average annual yield of 103 per cent. This is far below inflation, which exceeds 1,000 per cent a year, but still attractive to commercial banks which have to keep vast amounts of idle funds to make up for a slow banking payments system.

The central bank payments system can also hold on for weeks to rapidly-depreciating roubles owed to exporters who may therefore also be attracted by the liquidity of the bills.

Mr Tulin said commercial banks had Rbs3,000bn in idle funds and that half that amount might be invested in Treasury bills if the new instrument was proved to be reliable.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 29 233
International Capital Markets: Bank opts for a conciliatory tone on derivatives Publication 930520FT Processed by FT 930520 By TRACY CORRIGAN

THE Bank of England's internal report on derivatives, published yesterday, adopted a broadly conciliatory tone towards the derivatives industry, in contrast to the forcefully expressed concerns of some other regulators.

The internal working group was chaired by Mr Richard Farrant, a deputy head of banking supervision, and included a representative of the Securities and Futures Authority (SFA).

The report recommended that at least two members of the board (including the finance director) of any institution should be sufficiently knowledgeable to ensure that the business was controlled effectively.

This policy would be adopted by the Bank, an official said. Concern about the lack of understanding of derivatives at board level echoed the Promisel report by the Bank for International Settlements, published in October 1992, which prompted the Bank of England to set up the internal working group.

The Bank of England report recommended further research on the relative price volatility and liquidity of cash and derivatives markets, exploring the links between financial markets, and the level of systemic risk.

The Bank, the SFA and the Securities and Investment Board are discussing ways of pursuing this research.

The Bank pointed to a need for more data on derivatives markets, and is considering establishing a survey of the derivatives markets comparable to that already conducted for forex activity.

On the issue of market risk, the Bank warned that the limitations of models needed to be understood by supervisors.

Another area of concern was that some large unregulated institutions operated in the derivatives market, as a result of regulatory gaps.

Meanwhile, a wide-ranging study of the risks associated with derivative products is expected to be released in the next month or so by the Group of Thirty, the Washington-based think-tank. Sir Dennis Weatherstone, chairman of JP Morgan, is heading the G30 study group.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy TECH Safety & Standards P9311 The Financial Times London Page 29 339
International Bonds: Denmark three-year issue struggles in spite of Yes vote Publication 930520FT Processed by FT 930520 By TRACY CORRIGAN

DENMARK'S hopes of catching a wave of enthusiasm following Tuesday's Yes vote on the Maastricht treaty were dashed, due to the widespread perception that the Kingdom's Ecu250m three-year issue was priced too tightly.

The deal, arranged by Morgan Stanley, offered a yield of seven or eight basis points below the yield of the UK's three-year Ecu notes.

Given that the UK is a AAA credit, while Denmark's debt is a notch lower at AA1/AA+, the issue was considered over-aggressive, even though the target audience of European retail investors often focus on coupon rather than yield spread.

However, Morgan Stanley pointed out that the UK notes were trading at a premium of several points to their par value, which for three-year paper represented several basis points in yield.

However, the pricing was not the only problem: the Ecu bond market, instead of rallying on the news of the referendum result, appeared to have fully discounted the event, and was hit by a brief spell of profit-taking.

A number of banks turned down invitations to underwrite the issue. They described the deal as 'far too tight' and 'the last thing the market needed'.

However, Mr Michael Dee, head of debt syndicate at Morgan Stanley, defended the decision to launch the issue.

'The Ecu market continues to be technically in good shape, and we are confident in doing a deal that others consider aggressive,' he said.

He added that he expected the deal to be placed with continental European retail investors.

Denmark is using the proceeds of the offering to refinance an existing Ecu250m issue of 7 5/8 per cent bonds due 1996, which are now callable.

In the sterling convertible bond market, Allied Lyons' Dollars 200m issue of subordinated convertible bonds met reasonable demand from continental European investors, who have been the mainstay of the recent increase of activity in the market.

The conversion price, set at 622p, 17.8 per cent above the current share price, was in line with other recent offerings.

However, dealers said that the wave of supply in the sector had eroded some of the initial enthusiasm, which had been fuelled by positive sentiment on sterling, as well as the outlook for UK equities.

In the asset-backed sector, a further Pounds 108m of bonds backed by vehicle hire purchase receivables of Chartered Trust was issued by CARS 2, a special purpose vehicle.

ABN AMRO Holding is planning to issue its first deal in the Yankee bond market, a Dollars 250m, 30-year subordinated issue.

DK Denmark, EC GB United Kingdom, EC US United States of America P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 29 462
International Company News: Yamaha plunges 58.7% to Y2.8bn Publication 930520FT Processed by FT 930520 By ROBERT THOMSON TOKYO

YAMAHA, the world's largest maker of musical instruments, yesterday reported a 58.7 per cent plunge to Y2.8bn (Dollars 25m) in pre-tax profits, prompting the victors in a recent boardroom coup to intensify a restructuring programme.

Sales during the year ending in March fell 14 per cent to Y330bn. However, the company estimated that the fall was only 3.9 per cent if the transfer of its housing equipment division to a subsidiary was taken into account.

However, sales of most mainstream products, including pianos, electronic instruments, and sports equipment, were lower, and the company said the fall in interest rates during the period reduced financial income.

Three generations of family rule at Yamaha ended in March when Mr Hiroshi Kawakami, the grandson of the founder, was removed from the board after the company's union demanded that executives took responsibility for deteriorating profits.

Profits have slipped for three successive years, and the company is expecting the fall to continue this year, forecasting a pre-tax profit of Y2.5bn, down 10 per cent, on sales of Y336bn, a slim 1.6 per cent higher.

The company's labour union may have played an important role in ending the reign of the Kawakami family, but one of the new leadership's most pressing tasks is to cut the workforce.

Aiwa, the audio equipment maker, reported a 33 per cent fall in pre-tax profit to Y2.9bn, in spite of an 11 per cent increase in operating profit, with the difference due to exchange rate losses and reduced financial income.

Sales rose 6.8 per cent to Y161.6bn, including a 3.5 per cent increase in audio equipment and a 25 per cent rise in video equipment, which accounted for about 17 per cent of total sales.

Domestic sales fell by almost 5 per cent, but exports were 10 per cent higher, due to strong demand from east Asian countries.

For the current year, Aiwa forecast a pre-tax profit almost unchanged at Y3bn on sales of Y170bn, a 5 per cent increase on last year.

Yamaha Corp Aiwa JP Japan, Asia P3931 Musical Instruments P3651 Household Audio and Video Equipment FIN Annual report P3931 P3651 The Financial Times London Page 28 377
International Company News: Two KIO Swiss bank accounts frozen Publication 930520FT Processed by FT 930520 By PETER BRUCE MADRID

TWO SWISS BANK accounts belonging to the Kuwait Investment Office (KIO), the overseas investment arm of the Kuwaiti finance ministry, have been frozen by a Geneva judge following a petition by the Italian cardboard producer, Sarrio.

The attachment of the accounts is a significant victory for Sarrio, which is suing the KIO in Spain for non-payment of part of the price of assets sold to the KIO's Spanish subsidiary, Grupo Torras (GT), in 1991.

The Italians accepted shares in Torras Papel, a GT subsidiary, as partial payment for their Spanish paper interests, with the agreement that these shares could be 'put' back to GT in three instalments.

The Kuwaitis paid the first instalment but new managers, who took over the KIO last May, have not, says Sarrio, made the second and third payments. The value of the shares held by Sarrio has since collapsed. GT is in receivership.

Sarrio applied for, and won, an attachment order in Switzerland on May 11. The accounts affected are at Lombard Odier, the private bank, and the Swiss Kuwaiti Bank.

It is not known how much money is now in the accounts.

Sarrio is trying to retrieve SFr112m (Dollars 76.7m) and the KIO is likely to ask that at least one of the accounts be unfrozen in the meantime.

The move by Sarrio could pose a serious threat to the Kuwaitis, however. If Sarrio is allowed to retrieve the money it wants from one or other of the accounts it might create a judicial precedent and allow other GT creditors to make claims directly from the KIO.

The KIO's lawyers are understood to feel the retrieval attempt will fail, however. The KIO claims it is merely a shareholder, and not the owner, of GT.

Kuwait Investment Office Sarrio CH Switzerland, West Europe IT Italy, EC P6719 Holding Companies, NEC P2675 Die-Cut Paper and Board COMP Company News P6719 P2675 The Financial Times London Page 28 340
International Company News: Product recalls drive Matsushita unit into loss Publication 930520FT Processed by FT 930520 By ROBERT THOMSON

MATSUSHITA Refrigeration, the home refrigerator subsidiary of the Matsushita group, yesterday reported a net loss of Y28.9bn (Dollars 259m), after having been forced to book extraordinary losses for the recall of defective products, writes Robert Thomson.

The loss, after a Y4bn profit a year ago, was the first since its listing in 1955, and was cited as one of the causes for the recent boardroom reshuffle in the parent company.

Sales for the year slipped 13 per cent to Y176bn as domestic demand for consumer goods was unusually weak.

But the most important reason for the red ink in the year to March was a special charge of Y31.4bn linked to the recall of about 420,000 refrigerators with flawed compressors. As a result, executive bonuses are to be cut by 30 per cent this year.

The company, which also makes vending machines and air conditioners, managed a pre-tax profit of Y145m, but there was an operating loss of Y4.6bn.

Makita, the leading Japanese maker of electric tools, said pre-tax profit fell 6 per cent to Y12.6bn in the year to March, while sales fell 4.5 per cent, the first fall in 30 years.

The company blamed the appreciation of the yen and the slowing of the domestic economy for the downturn in sales, which totalled Y123bn, while it has also been troubled by a US anti-dumping action on Japanese hand tools.

Demand is strongest from the rapid-growth countries of south-east Asia, but the company expects that sales this year will fall 12 per cent to Y108bn, while pre-tax profit is forecast to fall 35 per cent to Y8.2bn.

Consolidated sales were 0.8 per cent higher at Y178.9bn, and pre-tax profit was down 5.7 per cent at Y20.2bn.

Matsushita Refigeration Makita Electric Works JP Japan, Asia P3546 Power-Driven Handtools P3632 Household Refrigerators and Freezers FIN Annual report P3546 P3632 The Financial Times London Page 28 333
International Company News: Woolworths aims for ADollars 2.45bn Publication 930520FT Processed by FT 930520 By BRUCE JACQUES SYDNEY

WOOLWORTHS, the Austra-lian retailing group, will go public next month in the country's biggest corporate flotation, seeking up to ADollars 2.45bn (USDollars 1.69bn)without an underwriter.

The chairman of Woolworths, Mr Paul Simons, launched the long-awaited flotation yesterday, with forecasts of continued strong earnings and sales growth, against the national retailing trend.

Mr Simons ended months of speculation, revealing that the flotation would offer 1bn shares at a price between ADollars 2.15 and ADollars 2.45, to be determined by an institutional tendering process.

The flotation will be in four parts, with the biggest proportion of nearly 49 per cent offered on a non-renounceable basis to shareholders in Woolworths' parent companies, Adelaide Steamship, David Jones, and Tooth and Co. These companies were all formerly part of the corporate empire run by Mr John Spalvins.

A further 30 per cent of the shares will be offered to institutional investors, 1 per cent will be reserved for staff, and the rest will go to individuals.

Shares not taken up in either the entitlement or employee offers will be available to institutions or the public. Mr Simons said the public offer would begin on June 9 and remain open for one month.

Trading in Woolworths shares is expected to begin on July 12 on a deferred delivery basis, representing the first time the Australian Stock Exchange has allowed trading to begin before scrip delivery.

Despite strong publicity surrounding the flotation, some observers were surprised at the lack of both an underwriter and rights trading, especially as the vendors were forced to delay the flotation in 1992 after share markets weakened.

The prospectus states that if applications, bids and indications of interest are not received for all of the shares offered, 'the vendor has resolved that the sale of shares will not proceed'.

Mr Simons said yesterday that the board predicted a 14 per cent advance in Woolworths' earnings before interest and tax to ADollars 278.9m for the current year and a further 11 per cent rise to ADollars 310.2m for next year.

After-tax earnings were forecast at ADollars 166.3m in the current year, rising to ADollars 188.5m next year, representing a prospective price-earnings multiple of just over 13 at the highest possible flotation price of ADollars 2.45 a share.

The prospectus forecasts a final dividend of 6 cents a share this year and an annual dividend of 12 cents a share next year, representing a yield of just under 5 per cent at the maximum flotation price.

A forecast pro-forma balance sheet estimates core debt of the floated entity at ADollars 258m, rising to ADollars 333m by mid-1994. Bank credit facilities totalling ADollars 420m have been arranged.

Woolworths AU Australia P5331 Variety Stores P5411 Grocery Stores FIN Share issues CMMT Comment & Analysis P5331 P5411 The Financial Times London Page 28 484
International Company News: Troubled Honda seeks a mass market formula - Moves to escape a niche Publication 930520FT Processed by FT 930520 By MICHIYO NAKAMOTO

WHEN officials of Honda assemble today at the company's headquarters in Tokyo's fashionable Aoyama district to unveil a new passenger car, they will be investing more hope than usual in their latest offering to help reverse the company's sagging fortunes.

Honda has just announced a 32 per cent decline in pre-tax profits and a 61 per cent fall in net income for the year to March, and warned that trading in the current year was likely to be at least as bad.

The Japanese motor manufacturer, which began production at a new factory in the UK last autumn, expects demand to remain weak in its main markets and the yen's sharp appreciation to result in a 40 per cent decline in consolidated net income this year.

Honda officials do not see light at the end of the tunnel yet, and are battening down for a tumultuous year ahead.

Capital investment is being kept at about half the level of its 1990 peak, profit-related bonuses for board members are being cut by 10 per cent, and recruitment of graduates will be nearly halved next April.

These steps come in addition to a restructuring programme introduced three years ago which has already streamlined operations and cut costs significantly. But these defensive measures, while effective in getting the company into better shape to meet the challenges of a severely depressed and increasingly competitive motor industry, have failed to solve Honda's overriding problem -its inability to make sufficient profits on cars.

Operating income from car production last year declined by 62 per cent to Y49.2bn (Dollars 443m) and the outlook for improvement does not look promising. Income from cars is now only slightly more than that from motorcycles.

Honda, once a symbol of Japanese innovation and a company that built America's most popular car for the three years until the last, increasingly seems to have everything going against it.

In the US, where it has had spectacular success with its mass-market Accord, the prospects remain uncertain for all car manufacturers and for Honda in particular.

It has been losing market share in the US where it estimates its slice has fallen from 9.8 per cent in 1991 to 9.3 per cent last year and 7.5 per cent in the first four months of 1993.

Competition from a revitalised and much stronger 'big three', as well as from its Japanese competitors, has intensified. Last year, Honda's Accord lost the title of best-selling car to Ford's Taurus.

The Accord, its main profit-earner, is due for a model change later this year and, like any car coming to the end of its model cycle, has been selling less well than in the past.

At the same time, the company, which is 67 per cent dependent on exports for revenues, is being battered by the sharp appreciation of the yen.

The yen's rise in the year to March shaved Y70bn off its revenues. While unit sales of cars in North America declined nearly 17 per cent, in value terms they were 47 per cent down at Y1,542bn, after falling 52 per cent in 1991-92.

In the domestic market, where car sales fell nearly 8 per cent, Honda faces the same problem with its Accord, which saw sales fall by about 29 per cent last year.

Honda's problems lie largely from its dependence on the US market and a narrow product range that stems from its origins as a niche market manufacturer.

These qualities served it well when demand in the US market was firm and the huge popularity of the Accord made up for its relative lack of other offerings with mass appeal.

But they have been a big stumbling block as changes in the US market, the high yen and increased competition have eroded what advantages it had as a focused company with a head-start over other Japanese manufacturers.

Honda is hoping that the launch of new models, such as the mid-range Integra which is being unveiled today, and a new Accord later this year, will help stimulate demand.

It believes it has a formula for success in cost-cutting measures which have helped it to add value to products without adding to the price.

Honda is also confident the restructuring will begin to show results ahead of others in the industry. The motorcycle division, for example, has doubled operating income to Y45.3bn since it was made a separate business division.

But that cannot make up for the fall in car revenues as the unit price of motorcycles is so much smaller, says Mr Koji Endo, an analyst at SG Warburg. 'Honda is not a full-line maker, but neither is it a niche manufacturer any longer,' Mr Endo says. Its current size means that 'it probably can't go back to being a niche player'.

If so, Honda's chances of making a comeback depend largely on whether it can hold its own against its big rivals.

That, Mr Endo believes, depends to a large degree on whether the new Accord, its most popular mass market car and main profit earner, can attract enough demand after it is launched this autumn to offset what is expected to be a very slow period until then.

Honda Motor JP Japan, Asia P3711 Motor Vehicles and Car Bodies MKTS Production CMMT Comment & Analysis RES Capital expenditures P3711 The Financial Times London Page 28 916
International Company News: Japanese textile groups under pressure Publication 930520FT Processed by FT 930520 By ROBERT THOMSON

KURABO Industries, a leading Japanese textile company, reported an 87.5 per cent fall in pre-tax profit to Y230m (Dollars 2.1m) for the year to March, reflecting the harsh times facing the industry, which is under assault from imports from China and other Asian countries. Sales fell 9.6 per cent to Y130.5bn.

The company is hoping profits will increase to Y500m this year, butadmits that sales will be flat. A rationalisation programme will continue.

The company is attempting to diversify into areas such as information systems and chemicals, but the slowing of the Japanese economy has put these businesses under extreme pressure.

Meanwhile Shikibo, a cotton spinner, reported a pre-tax loss of Y4.4bn, less than the previous period's loss of Y5.4bn, but another sign of the distress in the industry, which is pressing the government to impose controls on imports.

Six members of the Shikibo board have resigned and new heads appointed for its property, textile, industrial material, and business development divisions. The board was cut from 14 to 10 members.

Sales were down 11.8 per cent to Y68.4bn, and are forecast to fall further to Y64bn this year. A pre-tax loss of Y3bn is expected.

Kurabo Industries Shikibo JP Japan, Asia P2299 Textile Goods, NEC P2211 Broadwoven Fabric Mills, Cotton FIN Annual report P2299 P2211 The Financial Times London Page 28 238
International Company News: Power Corp studies US investments Publication 930520FT Processed by FT 930520 By ROBERT GIBBENS

POWER Corp of Canada, with nearly CDollars 1bn (USDollars 700m) of cash and short-term investments, is considering several new projects in the US, says Mr Paul Desmarais, chairman.

In all, Power Corp and Pargesa, the jointly-owned European holding company, have cash resources totalling CDollars 2.5bn and very low debt, Mr Desmarais said.

'We're making satisfactory progress reinvesting these liquid resources, and areas of interest also take in Europe, Asia and Latin America.'

Power Corp plans a joint-venture industrial park in China and later may enter the life insurance business there.

Its first-quarter net profit fell to CDollars 29.6m, or 23 cents a share, from CDollars 39.2m, or 30 cents, a year earlier. The decline was mainly due to reduced special gains on Pargesa asset sales.

Power Corp of Canada CA Canada P6719 Holding Companies, NEC FIN Interim results P6719 The Financial Times London Page 27 162
International Company News: GTE sells telecoms lines to utilities group for Dollars 1bn Publication 930520FT Processed by FT 930520 By NIKKI TAIT NEW YORK

GTE, the largest local US telephone company, yesterday announced plans to sell approximately 500,000 access lines in a total of nine states, to Citizens Utilities, a diversified utilities group based in Connecticut, for Dollars 1.1bn in cash.

The deal is part of GTE's previously-announced strategy of trading or selling domestic local-exchange properties. Last December, the telephone company said that, 'as a logical step following the merger with Contel', it planned to discard a small percentage of these properties, allowing it to concentrate on core markets.

At that stage, GTE said it planned to sell less than 5 per cent of its domestic access-line base, which then comprised more than 16m lines.

The deal announced yesterday involves all of GTE's local-exchange properties in Arizona, Montana, New York, Tennessee, Utah and West Virginia.

It also includes a portion of GTE's interests in California (less than 1 per cent of the access lines there), Idaho (about 14 per cent) and Oregon (less than 2 per cent). It is subject to various regulatory approvals, and the transaction is unlikely to be fully completed until 1994.

GTE shares closed up Dollars 1/2 at Dollars 35 1/8 yesterday, while Citizens Utilities 'B' shares were unchanged at Dollars 36.

Citizens, which like GTE is based in Stamford, supplies electric, gas, water, and telecommunications services to customers in 13 states. Telecoms have accounted for about one-third of the group's revenues to date, and the utility currently operates all-digital local-exchange carriers in Arizona, California and Pennsylvania.

'Two-and-a-half years ago, we told Citizens' shareholders that we planned to double the size of the company by 1996,' said Mr Leonard Tow, Citizens' chairman. 'This transaction goes a long way to meeting that goal.'

GTE Corp Citizens Utilities Co Inc US United States of America P4813 Telephone Communications, Ex Radio RES Facilities CMMT Comment & Analysis P4813 The Financial Times London Page 27 335
International Company News: Golden opportunities go begging - Minorco's plans for expansion are thwarted Publication 930520FT Processed by FT 930520 By KENNETH GOODING

MR Hank Slack does not try to hide his disappointment. As chief executive of Minorco, he was ready to spend about Dollars 1bn cash on two acquisitions aimed at turning his businesses into one of the world's biggest mining groups.

But both prospects slipped from Minorco's grasp.

Mr Slack's goal was to transform Minorco, until 1988 a sleepy offshore investment arm of the Anglo American Corporation-De Beers group of South Africa, by reorganising its portfolio, shaking-up or turfing out existing operations and buying new ones.

Many analysts suggest, however, that until recently the process has been painfully slow and not particularly impressive. Minorco's market rating said it all: its share price has languished at a 30 to 40 per cent discount to asset values.

The two big opportunities would certainly have changed market perceptions. Minorco was offered the chance to join the world-class copper producers when British Petroleum agreed to sell it 49 per cent of the Olympic Dam mine in South Australia for Dollars 240m, plus Dollars 190m to repay loans.

But Western Mining, the Australian group which had the majority stake in Olympic Dam, had pre-emptive rights to the BP stake. It kept Minorco in suspense for four months before deciding to exercise those rights.

All might not be lost, however. Mr Hugh Morgan, managing director of Western, has invited the Minorco chief to bring a team to look over Olympic Dam. Analysts suggest this could mean an invitation to a piece of the action.

Minorco's other disappointment involved Gold Fields Mining Corporation which the group hoped to buy from Hanson, the Anglo-American conglomerate.

GFMC would have been merged with Minorco's Independence Mining subsidiary to become one of North America's top 10 gold producers.

Hanson opted instead for an asset swap, handing over GFMC to Santa Fe Pacific in exchange for the US group's coal and aggregate operations.

Mr Slack says Minorco is still looking for more gold opportunities, but that 'the prices being asked are still very fancy'.

Most analysts suggest Minorco paid a 'fancy' price indeed for Independence Mining, which it bought for Dollars 705m from Freeport McMoRan of the US in 1990. There was, however, an important reason.

Minorco started down its new strategic road in 1988 by making a Dollars 3.5bn hostile bid for Consolidated Gold Fields of the UK. Minorco owned 29.9 per cent of Gold Fields and acceptances took its holding to more than 50 per cent.

However, a New York judge blocked the takeover, citing Minorco's South African ownership and Anglo's liking for cartels. Minorco gave up the Gold Fields battle, leaving the way clear for Hanson.

Minorco collected Dollars 1.6bn cash for its Gold Fields shares. However, because of the New York ruling, it appeared to have no way of spending it in the US. But Minorco was eventually given the go-ahead to buy Independence.

Mr Slack admits Independence's financial performance has been disappointing, but cost-cutting is under way. This includes dismantling the Independence board and the consequent streamlining of Minorco's cumbersome US management structure.

There has also been a wider management shake-up at Minorco, which effectively had three managing directors: the original 'Young Turks' who persuaded Anglo that Minorco should change its style and mount the offensive against Gold Fields. Now Mr Tony Lea is being recalled to Anglo's headquarters in Johannesburg and Mr Roger Phillimore resigned because he lost the contest for the chief executive's job.

The changes, however, have not diminished Minorco's appetite for acquisitions. In the past seven months it has spent about Dollars 337m on four deals: jointly with Anglo it paid Dollars 190m for one third of the Collahuasi copper project in Chile; it paid Dollars 66m for a half-share in the Lisheen zinc deposit in Ireland; it paid Pounds 55m (Dollars 84.7m) to buy Steetley Iberia from Redland, and Dollars 90.6m to swap an indirect interest in Johnson Matthey, the UK platinum marketing group, for a 10 per cent direct stake.

Minorco's (and Anglo's) main interest was always Johnson Matthey. Now that Minorco has a direct shareholding in JM, it has no reason to retain its stake in Charter Consolidated.

Minorco will also eventually sell Terra, a non-core US unit producing and distributing agricultural products.

Minorco now has direct interests in two of the world's three big platinum marketing companies. Apart from 10 per cent of Johnson Matthey it owns 30 per cent of Engelhard in the US.

Minorco LU Luxembourg, EC P6719 Holding Companies, NEC P1099 Metal Ores, NEC CMMT Comment & Analysis PEOP People P6719 P1099 The Financial Times London Page 27 784
International Company News: Horrigan joins Liggett Group Publication 930520FT Processed by FT 930520 By NIKKI TAIT

MR EDWARD Horrigan, who headed the large tobacco business at RJR Nabisco and was vice-chairman of the parent company ahead of the Dollars 25bn leveraged buy-out of the company in 1989, is re-entering the cigarette business.

The Liggett Group, now the smallest of the leading US cigarette manufacturers, whose brands include Chesterfield, Lark and Eve, announced yesterday that Mr Horrigan had been appointed chairman and chief executive, with effect from May 24.

Mr Horrigan - whose board positions include a directorship at USAir - quit RJR shortly after the Kolhberg, Kravis Roberts-led leveraged bid won control of RJR Nabisco.

According to Barbarians at the Gate, the best-selling book on the bid tussle, Mr Horrigan demanded to either be chief executive of the company, or part company. He reportedly left with a Dollars 45.7m golden handshake, and acquired a candy business in Atlanta.

Liggett, part of Brooke Group, has faced troubled times recently, with declining profits and falling market share. It announced the departure of its chief executive and chief financial officer in January.

At that stage, the company created an interim three-person 'office of the chief executive'. The team included Mr Bennett LeBow, chairman of Brooke.

Most recently, Liggett has stirred the already troubled waters of the US cigarette market by introducing a new discount brand, Eagle, which is stylishly-packaged and undercuts rival products on price.

The introduction of Eagle came after Philip Morris, the largest US cigarette company, announced large price cuts in its full-priced brands, and both Philip Morris and RJR attempted to edge up prices of their discount brands, narrowing the price differential between the two segments of the market.

Liggett Group US United States of America P2111 Cigarettes PEOP Appointments P2111 The Financial Times London Page 27 307
International Company News: Molson declines to CDollars 113.7m Publication 930520FT Processed by FT 930520 By ROBERT GIBBENS MONTREAL

MOLSON, the Canadian brewing and retailing group, recorded net profit of CDollars 113.7m (USDollars 89.3m), or CDollars 1.90 a share, in the year ended March, against CDollars 126.2m, or CDollars 2.25, in fiscal 1992. Sales and other revenues rose 6 per cent to CDollars 3.1bn, from CDollars 2.9bn.

Including a special gain of CDollars 51m after tax from the sale of 20 per cent of its brewing subsidiary to Miller Brewing of the US, total profit for the year was CDollars 164.7m, or CDollars 2.76 a share.

Molson's share of brewing profits rose 3.8 per cent to CDollars 167.6m.

The recession and a poor summer season were offset by higher prices and more efficient production.

Molson Breweries is now 40 per cent owned by Molson, 40 per cent by Foster's of Australia and 20 per cent by Miller.

The link with Miller would raise sales of Molson brands significantly in the US, said Mr Marshall Cohen, president.

Operating profit from Diversey, Molson's special chemical business, was up 39 per cent, but North American operations were affected by the recession and problems with absorbing an acquisition.

Sales were flat at CDollars 1.3bn and operating profit fell 9 per cent to CDollars 70m.

Hardware retailing was restructured and took a special CDollars 83m charge.

The new Aikenhead warehouse store subsidiary reported a CDollars 9.9m operating loss, but should be profitable this year.

Sports and entertainment had a CDollars 2.9m operating profit, against CDollars 8.3m.

Molson Companies CA Canada P2082 Malt Beverages P5813 Drinking Places FIN Annual report P2082 P5813 The Financial Times London Page 27 281
International Company News in Brief: Fiat Publication 930520FT Processed by FT 930520 By REUTER

Fiat said its automotive division Fiat Auto had taken 100 per cent control of troubled luxury carmaker Maserati, Reuter reports. Fiat, which previously owned 49 per cent of Maserati's share capital, took control of the rest of the company 'on the request of the De Tomaso family,' a Fiat statement said, referring to Maserati's founders.

Fiat Auto Maserati IT Italy, EC P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories COMP Mergers & acquisitions P3711 P3714 The Financial Times London Page 27 99
International Company News in Brief: General Motors Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON

General Motors said yesterday it had reached agreements with more than 100 banks on about Dollars 21bn of syndicated credit lines that together make up about half of the group's total worldwide bank credit facilities, writes Patrick Harverson. GM added that it was renegotiating about Dollars 4bn of additional credit lines with banks in Europe, Canada and Australia.

The newly-negotiated syndications, which replace various individual bank facilities extended to GM and GMAC, the group's financial services subsidiary, represented a 'significant increase in the amount of committed, long-term credit available to the corporation,' said GM.

General Motors Corp US United States of America P3711 Motor Vehicles and Car Bodies COMP Company News P3711 The Financial Times London Page 27 134
International Company News: US airline broadens European talks Publication 930520FT Processed by FT 930520 By NIKKI TAIT

MR Bob Crandall, chairman of American Airlines, said yesterday the US carrier had held talks over possible partnerships with a number of European carriers, including Lufthansa, British Midland, Air France, SAS, and KLM Royal Dutch Airlines.

Speaking after his company's annual meeting in Texas, Mr Crandall said: 'We haven't been able to structure a deal that makes sense for us and a European partner.' However, talks were continuing.

Although talks in the past had covered equity investments, discussions under way now were more about marketing relationships, he said.

Mr Crandall's comments come in the wake of a number of tie-ups between US and European carriers - including British Airways' purchase of a minority interest in USAir, KLM's integration with Northwest Airlines, and the partnership between Air Canada and Continental.

American Airlines Lufthansa British Midland Airways Air France Scandinavian Airlines System KLM Royal Dutch Airlines DE Germany, EC GB United Kingdom, EC NL Netherlands, EC US United States of America FR France, EC P4512 Air Transportation, Scheduled COMP Strategic links & Joint venture P4512 The Financial Times London Page 27 196
International Company News: Chemical wins debt trade approval Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON NEW YORK

CHEMICAL Banking has received permission from the Federal Reserve to underwrite and sell corporate bonds through its securities arm.

It is the fifth leading US commercial bank to be granted debt underwriting powers, after JP Morgan, Citicorp, Bankers Trust and Chase Manhattan. Several big foreign banks have also been allowed into the business, including Union Bank of Switzerland and Industrial Bank of Japan.

Traditionally, the commercial banking and securities businesses have been kept apart in the US. In recent years, however, the Fed has exploited loopholes in the Glass Steagal Act, the depression-era legislation that enshrined the separateness of banking and securities business, to allow a few well-capitalised banks to operate in the corporate debt markets.

However, the banks are not allowed to derive more than 10 per cent of gross revenues from underwriting and dealing in certain corporate debt securities for two years.

Chemical hopes to build a presence in the corporate debt market to go alongside its dominant presence in the bank loan market. It has already arranged Dollars 33bn of loans this year, making it by far the biggest lender among US banks.

Initially, the bank, through its Chemical Securities subsidiary, will concentrate on selling high-yield debt, where the underwriting fees are higher than on investment-grade debt. Because of its dominant share of the bank loan market, Chemical believes it has a large client base among likely issuers of junk bonds.

The Fed's decision was not unexpected. After last year's merger with Manufacturers Hanover, Chemical became the third-largest US bank, with consolidated assets of Dollars 147.5bn, and has one of the strongest capital bases in the industry.

Although Chemical had begun to hire staff with experience in the debt markets in anticipation of Fed approval, the bank is expected to hire some traders and bankers who specialise in junk bonds. The main task facing the bank is to assemble a sales force to distribute the corporate bonds it underwrites to institutional investors.

Chemical Banking Corp Chemical Securities US United States of America P6081 Foreign Banking and Branches and Agencies P6211 Security Brokers and Dealers TECH Services & Services use P6081 P6211 The Financial Times London Page 27 379
International Company News: Mitel posts best profit for quarter in 11 years Publication 930520FT Processed by FT 930520 By BERNARD SIMON TORONTO

MITEL, the Canadian tele-phone equipment maker, has posted its best quarterly profit in 11 years. The result raises a question mark over the timing of British Telecom's sale last June of its controlling stake in the Ottawa-based company.

Mitel's improved performance is also reflected in a surging share price. Its stock was trading at CDollars 3.40 on the Toronto exchange before the close yesterday, more than double the maximum of CDollars 1.64 per share which BT realised from the sale of its 51 per cent stake.

Net earnings for the fiscal year to March 26 were CDollars 2.6m (USDollars 2.06m), equal to a loss of 1 cent per common share, compared with a loss of CDollars 5.7m, or 12 cents, the previous year. Sales rose by 4 per cent to CDollars 423.4m.

Fourth-quarter earnings, however, were CDollars 11.9m. The improvement was partly due to favourable exchange rate movements and a CDollars 3.5m research grant from the Canadian government.

Mr John Millard, president, cautioned that the fourth-quarter performance was unlikely to be repeated in the first half of this year.

However, the company said that US sales of office switchboards had picked up, and that its semi-conductor revenues had also risen sharply.

A recent CDollars 52m share issue has strengthened its balance sheet, leaving it with long-term debt of only CDollars 26m.

BT suffered a loss of at least CDollars 256m on its seven-year investment in Mitel.

Mitel Corp CA Canada P3661 Telephone and Telegraph Apparatus FIN Interim results P3661 The Financial Times London Page 27 277
International Company News: ITT Financial to raise Dollars 3bn Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON

ITT Financial, the financial services arm of the US conglomerate ITT Corp, unveiled plans yesterday to raise up to Dollars 3bn through a debt offering, writes Patrick Harverson.

In a shelf filing with the Securities and Exchange Commission, the company said it would use the proceeds from the issue of debt securities and warrants to purchase debt securities for general corporate purposes, including repaying existing debt and funding investments.

ITT Financial Corp US United States of America P6141 Personal Credit Institutions FIN Share issues P6141 The Financial Times London Page 27 109
International Company News: Golden opportunities go begging - Minorco's plans for expansion are thwarted Publication 930520FT Processed by FT 930520 By KENNETH GOODING

MR Hank Slack does not try to hide his disappointment. As chief executive of Minorco, he was ready to spend about Dollars 1bn cash on two acquisitions aimed at turning his businesses into one of the world's biggest mining groups.

But both tantalising prospects slipped from Minorco's grasp.

Mr Slack's goal was to transform Minorco, until 1988 a sleepy offshore investment arm of the Anglo American Corporation-De Beers group of South Africa, by reorganising its portfolio, shaking-up or turfing out existing operations and buying new ones.

Many analysts suggest, however, that until recently the process has been painfully slow and not particularly impressive. Minorco's market rating said it all: its share price has languished at a 30 to 40 per cent discount to asset values.

The two big opportunities would certainly have changed market perceptions. Minorco was offered the chance to join the world-class copper producers when British Petroleum agreed to sell it 49 per cent of the Olympic Dam mine in South Australia for Dollars 240m, plus Dollars 190m to repay loans.

But Western Mining, the Australian group which had the majority stake in Olympic Dam, had pre-emptive rights to the BP stake. It kept Minorco in suspense for four months before deciding to exercise those rights.

All might not be lost, however. Mr Hugh Morgan, managing director of Western, has invited the Minorco chief to bring a team to look over Olympic Dam.

Although Mr Slack says he does not know what Mr Morgan has in mind, analysts jump to the obvious conclusion: that Western might offer Minorco some of the action at Olympic Dam.

Minorco's other disappointment was never made public. The group hoped to buy Gold Fields Mining Corporation, which has two gold mines - Chimney Creek in Nevada and Mesquite in California - from Hanson, the Anglo-American conglomerate.

GFMC would have been merged with Minorco's Independence Mining subsidiary, which also operates in Nevada, to become one of North America's top 10 gold producers.

Hanson opted instead for an asset swap, handing over GFMC to Santa Fe Pacific in exchange for the US group's coal and aggregate operations. Each set of assets were estimated to be worth about Dollars 500m.

Mr Slack says Minorco is still looking for more gold opportunities, but that 'the prices being asked are still very fancy'.

Most analysts suggest Minorco paid a 'fancy' price indeed for Independence Mining, which it bought for Dollars 705m from Freeport McMoRan of the US in 1990. There was, however, an important reason.

Minorco started down its new strategic road in 1988 by making a Dollars 3.5bn hostile bid for Consolidated Gold Fields of the UK. Minorco owned 29.9 per cent of Gold Fields and acceptances took its holding to more than 50 per cent.

However, a New York judge blocked the takeover, citing Minorco's South African ownership and Anglo's liking for cartels. Minorco gave up the Gold Fields battle, leaving the way clear for Hanson.

Minorco collected Dollars 1.6bn cash for its Gold Fields shares. However, because of the New York ruling, it apparently had no way of spending it in the US.

This proved not to be the case when Minorco was given the go-ahead to buy Independence.

Mr Slack admits Independence's financial performance has been disappointing, but cost-cutting is under way. This includes dismantling the Independence board and the consequent streamlining of Minorco's cumbersome US management structure.

There has also been a wider management shake-up at Minorco, which effectively had three managing directors: the original 'Young Turks' who persuaded Anglo that Minorco should change its style and mount the offensive against Gold Fields. Now Mr Tony Lea is being recalled to Anglo's headquarters in Johannesburg and Mr Roger Phillimore resigned because he lost the contest for the chief executive's job.

These changes, however, have not diminished Minorco's appetite for acquisitions. In the past seven months it has spent about Dollars 337m on four deals: jointly with Anglo it paid Dollars 190m for one-third of the Collahuasi copper project in Chile; on its own account it paid Dollars 66m for a half-share in the Lisheen zinc deposit in Ireland; it paid Pounds 55m (Dollars 84.7m) to buy Steetley Iberia from Redland, and Dollars 90.6m to swap an indirect interest in Johnson Matthey, the UK platinum marketing group, for a 10 per cent direct stake.

Steetley, which operates 14 quarries and gravel pits as well as 21 ready-mixed concrete plants in Spain, is being absorbed into Minorco's industrial minerals division, built up in the past two years entirely by Dollars 340m-worth of acquisitions.

Minorco bought the Johnson Matthey shareholding from Charter Consolidated, the UK industrial group over which Minorco - and therefore Anglo - has considerable influence via a 36 per cent shareholding.

Minorco's (and Anglo's) main interest was always Johnson Matthey. Now that Minorco has a direct shareholding in JM, it has no reason to retain the Charter stake.

Some analysts expect Charter to buy its own shares back from Minorco and thus break free from the Anglo-Minorco influence. Mr Slack says it is up to Mr Jeff Herbert, Charter's managing director, to make the running.

Minorco will sell Terra, a non-core US subsidiary which produces and distributes agricultural products, but not while today's depressed market persists.

Terra, along with the Hudson Bay Mining and Smelting company in Canada, was part of the inaptly-named Inspiration Resources, and already in Minorco's pre-1988 portfolio. The Hudbay copper-zinc-nickel business is not world-class and Minorco is having trouble getting it into shape.

Minorco now has direct interests in two of the world's three big platinum marketing companies. Apart from 10 per cent of Johnson Matthey it owns 30 per cent of Engelhard in the US. Mr Slack says an important aspect of the deal with Charter is that Minorco now has more flexibility if at any time it wanted to increase its interest in either of these groups.

He says Anglo-De Beers still wants to reduce its combined 60 per cent holding in Minorco to more like 50 per cent in the longer term. But not while Minorco's shares are at such a substantial discount to its assets.

Minorco LU Luxembourg, EC P6719 Holding Companies, NEC P1099 Metal Ores, NEC CMMT Comment & Analysis PEOP People P6719 P1099 The Financial Times London Page 27 1069
International Company News: Parker & Parsley sues bid rival Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON

PARKER & Parsley, the US energy group which last week agreed to pay Dollars 448m for Prudential Securities' troubled energy investment partnerships, is suing Louis Dreyfus Natural Gas, a rival US energy company which has submitted a higher bid for the partnerships, for attempting to interfere in the transaction.

Graham Royalty, which was a general partner in the lossmaking partnerships with Prudential, is also named as a defendant in the lawsuit.

Parker claims Dreyfus 'maliciously interfered' with the merger agreement between Parker and Prudential and that Graham Royalty breached the merger agreement and committed conspiracy and fraud by negotiating with Dreyfus.

On Monday, Prudential agreed to sell its partnerships to Parker for Dollars 448m but a few days later, under pressure from investors in the partnerships, it was forced to reveal that a counter-offer worth Dollars 510m had already been made by Dreyfus.

At the time, Prudential said it did not accept the higher offer because there was not enough information in the bid. Prudential has since said it would consider the bid once Dreyfus had provided a full financing commitment for its offer, which Dreyfus said it would provide in the next week.

The affair is being watched closely by investors in the Prudential energy partnerships. After the partnerships racked up big losses in the late 1980s, the investors sued Prudential for allegedly misleading them over the risks involved in buying into the partnerships.

Parker and Parsley Petroleum Louis Dreyfus Graham Royalty US United States of America P1311 Crude Petroleum and Natural Gas COMP Company News P1311 The Financial Times London Page 27 282
International Company News: Campbell advances to Dollars 108.5m Publication 930520FT Processed by FT 930520 By NIKKI TAIT

CAMPBELL SOUP, the US food group, yesterday reported a rise in after-tax profits to Dollars 108.5m in the third quarter to May 2, from Dollars 91.5m a year earlier.

Sales during the three months rose by 6 per cent, to Dollars 1.63bn, mostly due to the first-time consolidation of Campbell's ownership interest in Arnotts, the Australian biscuit company in which the US group has a 58 per cent stake.

At the earnings per share level, the profits advance translated into a 19 per cent rise, to 43 cents.

On a divisional basis, Campbell said operating profits in its North and South American divisions rose by 10 per cent, to Dollars 172.6m. In Europe and Asia, there was a 14 per cent advance, to Dollars 9m.

In the biscuit and bakery division, the inclusion of the Arnotts' results lifted profits by 47 per cent to Dollars 23.9m - but Campbell said that, without Arnotts', there would have been a 6 per cent decline due to certain start-up and new product costs.

Campbell increased its stake in Arnotts to 58 per cent earlier this year after a bitterly-contested takeover battle, although it still lacks board control.

The third-quarter figures bring after-tax profits for the first nine months to Dollars 149.2m, compared with Dollars 381.3m a year earlier, or 59 cents a share compared with Dollars 1.51.

However, the current-year figures are struck after significant restructuring charges taken in the second quarter; Campbell said that without these items, net earnings for the first nine months were up by 18 per cent.

Campbell announced in the second quarter that it was closing two domestic frozen food plants and selling a number of unspecified businesses. These moves resulted in the Dollars 300m after-tax charge.

Campbell Soup US United States of America P2032 Canned Specialties P2052 Cookies and Crackers FIN Interim results P2032 P2052 The Financial Times London Page 27 331
International Company News: Speculation over Upjohn succession Publication 930520FT Processed by FT 930520 By KAREN ZAGOR NEW YORK

UPJOHN, the US pharma-ceuticals group, has announced a series of organisational changes which provoked speculation about who would take charge of the company following the recent death of its chairman and chief executive, Mr Theodore Cooper.

The company made a number of senior appointments, but did not name a chief executive or chairman.

Mr Ley Smith, president and chief operating officer, presided over Upjohn's annual shareholders meeting.

Mr Smith was named acting chief executive in April. He will continue in that office until the board appoints a successor to Mr Cooper.

Mr Smith said Upjohn would strive to have 1994 earnings at the same level as in 1993, but did not expect real earnings and sales growth before 1995 when 'the first real revenue impact from our new breakthrough products should begin to occur.'

Upjohn US United States of America P2834 Pharmaceutical Preparations PEOP Appointments P2834 The Financial Times London Page 27 170
International Company News: Deutsche Bank opens year firmly Publication 930520FT Processed by FT 930520 By DAVID WALLER FRANKFURT

TOTAL operating profits at the Deutsche Bank group rose by 'a good 20 per cent' in the first four months of the year against the comparable period for 1992, the chief executive of Germany's biggest bank told shareholders yesterday.

Mr Hilmar Kopper said at the bank's annual meeting that it was unrealistic to expect this level of growth to be maintained throughout the year as a whole. Last year, total operating profits rose 7 per cent to DM6.39bn (Dollars 3.96bn).

But he said that the result for the year would be satisfactory, given the sharp recession in the German economy. He warned that provisions for bad and doubtful debts would have to be on the same scale as last year, when they reached DM2.6bn.

Deutsche gave no figures, but the percentage increases are calculated with reference to a third of the total figure last year, rather than the actual profits made in the the first four months of last year. Thus total operating in the first four months of the current year were in the region of DM2.55bn, up about 16 per cent from the actual figure for the first third of 1992.

Deutsche is the third of Germany's big three banks to report excellent growth in operating profits in the early months of the current year. Commerzbank improved profits by more than a quarter in January to March and Dresdner Bank by 15 per cent in the first four months.

These profit increases provide a slightly unrealistic picture of German banks' prosperity as they are calculated before provisions which are set to rise steeply over the course of the current year, reflecting deteriorating credit risks in recession-struck Germany.

As at other large German banks which have reported strong growth in profits for the early months of the current year, the bulk of the gain at Deutsche Bank came from own-account trading activities, stimulated by buoyant conditions in bund and equity markets earlier in the year.

Growth in net interest income was more subdued.

Own-account trading profits rose by 32 per cent, Mr Kopper said, and commission income climbed by 13 per cent, while net interest income rose 6 per cent.

Deutsche Bank DE Germany, EC P6081 Foreign Banking and Branches and Agencies FIN Interim results FIN Annual report P6081 The Financial Times London Page 26 404
International Company News: Santander faces fresh tax inquiry Publication 930520FT Processed by FT 930520 By TOM BURNS MADRID

BANCO SANTANDER, the Spanish banking group, faces renewed investigations over a tax avoidance scheme it allegedly pioneered, and has been ordered to put up Pta3.5bn (Dollars 28.6m) as surety against possible fraud charges by the senior judge of Madrid's monetary court.

The fresh embarrassment for Santander coincides with its launch of Dollars 195m preferential shares issue in the US. This is the fourth such issue in 18 months and completes a programme which will have raised a total of Dollars 750m for the group.

The ruling by a senior judge of Madrid's monetary court reverses a decision in January when the court revoked a Pta8bn bond order against the bank in connection with the same charges. Santander said yesterday it would deposit the bond but would appeal against the new ruling.

In January, the court accepted Santander's appeal that the bank could not be investigated over possible irregularities unless prior charges were brought against persons who had sought to avoid taxes by using the bank's services.

Banco Santander ES Spain, EC P6081 Foreign Banking and Branches and Agencies FIN Share issues COMP Company News P6081 The Financial Times London Page 26 209
International Company News: Ahold acquires Portuguese store chain Publication 930520FT Processed by FT 930520 By RONALD VAN DE KROL AMSTERDAM

AHOLD, the Dutch super-market group, yesterday bolstered its position in Portugal through the planned acquisition of a 45-store supermarket chain with its Portuguese joint-venture partner, Jeronimo Martins, writes Ronald van de Krol in Amsterdam.

The supermarkets, which operate under the names Modelo and Saco Cheio and which will be acquired from Sonae Distribuicao, have annual sales equivalent to Fl 330m (Dollars 183m).

They will be integrated with Jeronimo Martins' main existing supermarket chain, Pingo Doce, which currently has 40 stores.

Koninklijke Ahold Jeronimo Martins Sonae Distribuicao NL Netherlands, EC PT Portugal, EC P5411 Grocery Stores COMP Mergers & acquisitions COMP Disposals P5411 The Financial Times London Page 26 128
International Company News: EniChem's big losses hit Snam results Publication 930520FT Processed by FT 930520 By HAIG SIMONIAN MILAN

SNAM, the gas distribution subsidiary of Italy's Eni energy and chemicals holding company, suffered a steep drop in net profits to L139bn (Dollars 90.79m) last year from L636bn in 1991.

As with Agip, the Eni-controlled upstream oil and gas group which reported a sharp earnings decline last week, Snam's profits were pulled down by impact of the steep losses at EniChem, Eni's chemicals subsidiary.

EniChem, in which Snam and Agip have substantial stakes through the Sci holding company, recently reported losses of L1,560bn for 1992, more than double the amount lost the previous year.

Snam, which is on the Italian government's privatisation list, also blamed its profits drop on continuing losses in the mining and metalurgy businesses.

Group turnover fell slightly to L10,807bn from L11,244bn in 1991, with a slight decline in sales of natural gas to 48.1bn cu metres.

Operating profits rose by 8.9 per cent to L2,200bn

Snam IT Italy, EC P4923 Gas Transmission and Distribution FIN Annual report P4923 The Financial Times London Page 26 187
International Company News: Two groups to compete for stake in Belgian bank Publication 930520FT Processed by FT 930520 By ANDREW HILL BRUSSELS

FORTIS, the Dutch-Belgian financial services group, and Generale de Banque, Belgium's largest bank, are to fight it out for a stake in the Belgian state-owned savings bank, ASLK-CGER, in the first round of a four-year, BFr70bn (Dollars 2.1bn) Belgian privatisation programme.

The sale of up to 49 per cent of ASLK-CGER, which has a network of bank and insurance branches, could raise as much as BFr33bn and help reduce Belgium's budget deficit.

Mr Philippe Maystadt, the Belgian finance minister, has also indicated that a bid for a majority stake in ASLK-CGER would be considered, although Belgian legislation would have to be altered to allow the state to give up control.

The deadline for submitting 'indicative non-binding' offers for ASLK-CGER closed yesterday afternoon. Both Fortis - which groups the activities of the Belgian insurer AG and the Dutch group Amev - and Generale de Banque confirmed they had put in bids. They refused to give further details or to indicate whether they had bid for a majority or minority stake.

Internationale Nederlanden Groep, the Dutch financial services group which last year considered bidding for Banque Bruxelles Lambert, another leading Belgian bank, will not be making an offer for ASLK-CGER. ING paid the required BFr2.5m to examine the ASLK-CGER prospectus but decided the group would not fit into its strategy.

Until recently Generale de Banque and Fortis were considering linking to develop 'bancassurance' activities in Belgium, but fell out over the terms of co-operation. Fortis sold most of its 14.7 per cent stake in the bank a month ago.

It was not clear yesterday if other bids had been submitted. There had been rumours that French group Caisse des Depots et Consignations and the German bank WestLB were interested, but CDC is understood not to have made a bid.

ASLK-CGER, which is being advised by Petercam, the Belgian broker, will now consider the bids and submit its decision for approval by the government before the summer. Fortis said it hoped the whole sale could be concluded before the end of the year.

Fortis Generale de Banque ASL CGER Bank NL Netherlands, EC BE Belgium, EC P6331 Fire, Marine, and Casualty Insurance P6081 Foreign Banking and Branches and Agencies COMP Shareholding P6331 P6081 The Financial Times London Page 26 398
International Company News: Uni Storebrand in the black Publication 930520FT Processed by FT 930520 By KAREN FOSSLI OSLO

UNI STOREBRAND, Norway's biggest insurer, yesterday reported a first-quarter profit, before allocations, of NKr150m (Dollars 21.8m), compared with a pro-forma loss of NKr151m in the same period last year.

The group, which is producing quarterly results for the first time, says its expects a good result for 1993 as a whole.

The figures reflect consolidated results of Uni Storebrand, which is under public administration, and Uni Storebrand New, which was established following Uni's collapse last August.

Mr Per Terje Vold, chief executive, attributed the improved performance mainly to substantial gains on securities and lower interest rates.

First-quarter net operating income for Uni Storebrand New was NKr5.88bn. No comparative pro-forma Uni New figures were given. Uni New posted a profit, before allocations, of NKr209m.

Uni did, however, give comparative pro-forma 1992 figures for individual business units.

Life insurance business doubled profit to NKr1.04bn from a pro-forma NKr512m, despite a fall in market share of 1.9 percentage points to 32.8 per cent. Premium income fell to NKr1.48bn from a pro-forma NKr1.83bn.

Non-life business posted a profit of NKr87m against a pro-forma loss of NKr110m. Uni said this year's figure included a charge of NKr121m related to claims. Premium income rose to NKr1.78bn from NKr1.67bn.

The stronger result is mostly due to a transfer of NKr105.7m in surplus reserves.

International business lifted profit to NKr31m from a pro-forma NKr21m. Premium income remained at last year's level of NKr1bn.

Mr Vold said the international unit was undergoing a restructuring in which the scope of business would focus on reinsurance.

Uni Storebrand Uni Storebrand New NO Norway, West Europe P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance FIN Interim results P6331 P6311 The Financial Times London Page 26 302
International Company News: Chinese group buys HK stake Publication 930520FT Processed by FT 930520 By SIMON DAVIES HONG KONG

CHINESE steel company Shougang has taken a 74 per cent stake in a fourth Hong Kong listed company, Kader Investment, for HKDollars 582m (USDollars 75.3m), despite last week's tougher stance on back-door listings by Hong Kong's regulators.

Following the acquisition, Mr Deng Zhifang, son of Chinese paramount leader Deng Xiaoping, will join the Hong Kong company's board of directors, underlining the high profile role China is now taking in its future sovereign territory. Since the October announcement that Beijing would list nine mainland-registered companies on the Hong Kong stock market, there has been an explosion in the number of Chinese companies taking an easier route, through back-door listings.

In the eight months these nine mainland companies have struggled to resolve legal and corporate obstacles to their Hong Kong flotations, Chinese entities have taken stakes of more than 25 per cent in 12 listed companies.

The stock exchange said last week it was clamping down on companies circumventing listing regulations by purchasing shell companies and injecting in privately-held assets.

Shougang said that it would neither sell any 'material' assets to Kader, nor change its focus from property investment.

Only days before the stock exchange decision, Shougang had announced a HKDollars 1.8bn rights issue by another newly-acquired subsidiary, Tung Wing Steel.

The Kader stake was purchased from the Ting family and the family's toy manufacturing company Kader Holdings.

Shougang Corp Kader Investment CN China, Asia HK Hong Kong, Asia P3312 Blast Furnaces and Steel Mills P6552 Subdividers and Developers, Ex Cemeteries COMP Mergers & acquisitions PEOP People P3312 P6552 The Financial Times London Page 26 282
International Company News: Singer in China hire-purchase venture Publication 930520FT Processed by FT 930520 By SIMON DAVIES

ALMOST a century and a half after it pioneered the hire purchase system in the US, the Singer sewing machine group is to try the same idea in China's booming retail market.

Singer Credit, a company jointly owned by Singer and its Hong Kong-listed parent Semi-Tech (Global), has formed a hire-purchase joint venture company with China's largest savings bank, the Industrial & Commercial Bank of China (ICBC).

The primary focus of Singer Trust & Credit (Shanghai) will be to develop sales for Singer's growing retail network in China, rather than to become a profitable business in itself. Singer will have opened 12 retail outlets in China by the end of this year.

Mr Shen Ruo Lei, president of the Shanghai Branch of ICBC, who attended yesterday's signing ceremony, said: 'This joint venture company is the first of this type (in China) and will become the forerunner of the hire purchase business in China.'

Consumer spending in China has been rising steeply, with retail sales up 25.4 per cent year-on-year in April.

Singer Credit Industrial and Commercial Bank of China Singer Trust and Credit (Shanghai) US United States of America HK Hong Kong, Asia CN China, Asia P6141 Personal Credit Institutions P6081 Foreign Banking and Branches and Agencies COMP Strategic links & Joint venture P6141 P6081 The Financial Times London Page 26 238
International Company News: Exchanges study services merger Publication 930520FT Processed by FT 930520 By RONALD VAN DE KROL AMSTERDAM

THE AMSTERDAM Stock Exchange and the European Options Exchange (EOE) in Amsterdam plan to ask a consultancy firm to investigate a merger of their off-floor support services.

Coopers and Lybrand Management Consultants will report on the findings in the autumn. The support services to be investigated will include legal advice, financial administration and accounting.

The exchanges, which are eager to cut costs to remain competitive within Europe, established a joint executive committee in 1991 to look into closer links. Reports appeared in the Dutch press recently saying that the bourse and the options exchange might be planning a full merger. Spokesmen for both sides, however, have played downed the suggestion, saying it was premature.

Both exchanges are preparing for changes prompted by the dual necessity of reducing costs and bolstering competitiveness with rival exchanges in Europe.

The EOE plans to alter its trading system to combine traditional open-outcry floor trading with a new computer screen option. The stock exchange plans to split the wholesale and retail segments of the market.

The stock exchange in particular is concerned about the loss of business to London.

NL Netherlands, EC P6231 Security and Commodity Exchanges P6221 Commodity Contracts Brokers, Dealers TECH Services & Services use P6231 P6221 The Financial Times London Page 26 228
UK Company News: Chamberlin & Hill 11% ahead at Pounds 1.6m Publication 930520FT Processed by FT 930520

CHAMBERLIN & Hill slowed down in the second half with only a marginal improvement in pre-tax profits.

Accordingly, the increase over the year ended March 31 1993 was restricted to 11 per cent, with profits of Pounds 1.59m compared with Pounds 1.43m.

Turnover for the group, which makes iron castings, electrical conduit fittings and switchgear, improved from Pounds 19m to Pounds 20.3m. That advance was wholly attributable to exports, the directors said, the prospects for which were good.

There was yet to be seen clear cut evidence of significant growth in UK demand, they added.

Earnings per share came to 16.07p (15.28p). The proposed final distribution amounts to 4.5p (4.25p), which lifts the total payable for the year to 6.25p, against a previous 6p.

Chamberlin and Hill GB United Kingdom, EC P3321 Gray and Ductile Iron Foundries FIN Annual report P3321 The Financial Times London Page 24 164
UK Company News: Medeva in US dermatology alliance Publication 930520FT Processed by FT 930520

Medeva and Matrix of the US have formed a major alliance in the field of dermatology to commercialise the novel Therapeutic Implant products being developed by Matrix for the US and European markets.

Medeva is to invest Dollars 10m (Pounds 6.4m) in new Matrix common stock at Dollars 15 per share and provide up to Dollars 12m development and milestone payments. Under the terms of the agreement, Medeva will purchase Matrix stock during the first year of collaboration.

Medeva Matrix Pharmaceutical GB United Kingdom, EC US United States of America P2834 Pharmaceutical Preparations COMP Strategic links & Joint venture FIN Share issues P2834 The Financial Times London Page 24 123
UK Company News: NZ Investment net asset value ahead Publication 930520FT Processed by FT 930520

The New Zealand Investment Trust had a net asset value of 144.6p per share at April 30 against 101.7p a year earlier.

Net revenue for the half year fell slightly to Pounds 128,939 (Pounds 131,692), equivalent to earnings per share of 1.29p (1.32p). The interim dividend is held at 0.5p.

New Zealand Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 24 87
UK Company News: Frank G Gates better than expected Publication 930520FT Processed by FT 930520

Frank G Gates, motor traders, vehicle distributors and contract hire concern, reported a pre-tax profit of Pounds 886,000 for 1992, against Pounds 1.32m, a fall of 32.6 per cent.

Turnover for the year was virtually unchanged at Pounds 56.7m against Pounds 56.4m.

Mr Edward Gates, chairman, said that the second half of the year turned out to be better than he had anticipated at the interim stage. He added that the first quarter of the current period had shown a considerable improvement over 1992.

Mr Gates said it was sufficient to justify a maintained dividend of 2.25p. Earnings for the past year fell from 4.85p to 3.65p.

Frank G Gates GB United Kingdom, EC P5511 New and Used Car Dealers FIN Annual report P5511 The Financial Times London Page 24 145
UK Company News: Highbury screen contract for Avesco Publication 930520FT Processed by FT 930520

Avesco, through its giant screen rental company Screenco, has been awarded a five-year exclusive contract to manage Arsenal Football Club's two new Sony Jumbotron video displays.

The installation of the screens at each end of the Highbury ground to show pre and post match entertainment is planned for the autumn. Arsenal has invested Pounds 2.5m and will be the first soccer club in the UK to introduce them on a permanent basis.

Apart from 30 match days, Avesco will have access to remove the screens for use at other events.

Avesco GB United Kingdom, EC P3663 Radio and TV Communications Equipment MKTS Contracts P3663 The Financial Times London Page 24 124
UK Company News: Gartmore American net assets growth Publication 930520FT Processed by FT 930520

Gartmore American Securities, a split capital investment trust which invests predominately in higher yielding North American securities, reported a higher net asset value of 52.4p at the year ended March 31 compared with 35.2p previously.

Earnings per share rose from 4.26p to 4.39p and the dividend total is maintained at 4p with a same again fourth interim of 1p.

Net revenue came through at Pounds 1.5m (Pounds 1.45m). Asset value of the zero dividend preference shares was 78.3p against 69.3p.

Gartmore American Securities GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 24 115
UK Company News: Spanish closure holds back Baris Publication 930520FT Processed by FT 930520

Baris Holdings, which installs passive fire protection and drying systems, reduced its pre-tax loss from Pounds 948,000 to Pounds 351,000 in the year ended February 28 1993.

UK operations continued to perform well, but the year was affected by the closure of the unprofitable Spanish operation in the second half. Total losses incurred there, including closure costs, were Pounds 721,000, less a net tax credit of Pounds 363,000.

There were earnings per share of 0.2p (losses 13.3p) but no dividend is being paid (2p interim last time).

Mr Robert Smith, chairman, said price competition remained fierce and led to a reduction in margins on continuing activities from 17.4 per cent to 18.3 per cent.

He did not envisage a reversal of that trend over the next year and, with the reduced amount of work available, it was likely to effect the gross profit in the current year.

Current order book was Pounds 9m, against Pounds 14m last year, while inquiry levels were down from Pounds 64m to Pounds 48m.

A German subsidiary has been formed to exploit a market where margins were currently higher than in the UK and which should provide a stable work load over the medium term. A substantial contract had recently been won.

Baris Holdings GB United Kingdom, EC P1799 Special Trade Contractors, NEC FIN Annual report P1799 The Financial Times London Page 24 242
UK Company News: Golden Vale stake in Danish company Publication 930520FT Processed by FT 930520

Golden Vale, the Irish dairy group, has agreed to acquire 33 per cent of Danish company A/S Vejle Margarinefabrik, margarine manufacturer, for DKr25m (Pounds 2.6m), payable in cash on completion.

Golden Vale has an option to acquire a further 33 per cent by December 31 1993 for a similar amount.

In the year to September 30 1992 the Danish company made pre-tax profits of DKr5.8m on sales of DKr102.2m. Net asset amounted to DKr23.1m.

In April the Irish dairy group reported a 13.5 per cent increase to IPounds 16.7m in 1992 pre-tax profits.

Net borrowings fell to IPounds 7.5m (IPounds 20.6m), and gearing to 8.8 per cent (27.9 per cent). The company said this allowed it to spend 'another IPounds 30m to IPounds 40m on acquisitions without having to go to the market.'

Shortly after it completed the acquisition of Leckpatrick Holdings, a private dairy processor based in Northern Ireland.

The consideration consisted of 10-year loan notes, redeemable after one year, valuing each Leckpatrick share at 332p. There was a partial cash alternative up to a total of IPounds 4.34m.

Golden Vale A/S Vejle Margarinefabrik IE Ireland, EC DK Denmark, EC P2079 Edible Fats and Oils, NEC P202 Dairy Products COMP Shareholding P2079 P202 The Financial Times London Page 24 225
UK Company News: 16% asset rise for Dunedin Worldwide Publication 930520FT Processed by FT 930520

At the end of the half year to April 30, net asset value of Dunedin Worldwide Investment Trust stood at 702.5p, a 16.4 per cent increase over the 603.3p at the end of the preceding six months.

The increase beat the Morgan Stanley Capital International World Index rise of 14.9 per cent in sterling. At the end of April 1992 Dunedin's asset value was 569.7p.

In January funds were switched out of overseas markets and into the UK, as the managers felt the latter had yet to discount the full extent of the eventual recovery in company profits.

Total revenue in the half year came to Pounds 4.33m (Pounds 3.16m) and net revenue to Pounds 1.65m (Pounds 955,000), for earnings per share of 4.84p (2.78p). The interim dividend is held at 2.4p.

The 1992 net revenue has been reduced by Pounds 279,000 in reflection of the change in accounting policy on the recognition of income receivable in respect of fixed interest securities

Dunedin Worldwide Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Interim results P6726 The Financial Times London Page 24 199
UK Company News: Group Development assets increase Publication 930520FT Processed by FT 930520

At March 31 1993 net asset value of Group Development Capital Trust stood at 51.3p, an increase of 24.8 per cent since end- September and of 30.1 per cent since March 1992.

Gross revenue for the half year came to Pounds 138,000 (Pounds 136,000) and net loss was Pounds 12,000 (profit Pounds 5,000), equal to losses of 0.05p (0.02p profit) per share.

The losses per share were wereprimarily the result of the increase in expenses occasioned by the management fee calculated on net assets.

However, the directors expressed confidence that the year's dividend would be maintained at 0.3p.

Group Development Capital Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Interim results P6726 The Financial Times London Page 24 133
UK Company News: 50% profit decline at Baggeridge Brick Publication 930520FT Processed by FT 930520

Baggeridge Brick suffered from reducing production in the winter, turning in a pre-tax profit some 50 per cent lower in the six months ended March 31 1993.

Mr Peter Ward, chairman, explained that production was cut in order to help contain the national over-capacity that was evident at the time. In the event there was 'some satisfaction' with the results.

In the period turnover rose from Pounds 11.9m to Pounds 13.1m. Operating profit came to Pounds 905,000 (Pounds 1.41m) with building materials accounting for Pounds 438,000 (Pounds 864,000) and landsource Pounds 467,000 (Pounds 546,000). Pre-tax profit worked through at Pounds 383,000 (Pounds 761,000).

Sales prices continued under pressure but the group's sales volumes and market share increased. Stocks were reduced considerably at March 31.

Mr Ward said demand was stronger for social and private housing, and brick and paving schemes were also on the increase. However, it would be some time before the commercial and industrial sectors of construction showed much improvement.

Earnings per share fell to 0.65p (1.29p) but the interim dividend is unchanged at 0.75p.

Baggeridge Brick GB United Kingdom, EC P3251 Brick and Structural Clay Tile FIN Interim results P3251 The Financial Times London Page 24 214
UK Company News: Tharsis applies for listing cancellation Publication 930520FT Processed by FT 930520

Tharsis, the Glasgow-based group mainly involved in property development in Spain, has applied to the Stock Exchange for a cancellation of its listing and permission to deal in its shares under Rule 535.2.

The rules of the Exchange require that at least 25 per cent of a company's shares must remain in the hands of the public.

Tharsis said that Inpec had recently acquired a further 462,190 shares in the company, bringing its holding to 1.26m or 48.36 per cent. Following that purchase, some 83.7 per cent of the company's shares are held by five shareholders.

It said that the recent low number of transactions in its shares was a further indication that the company's listing was no longer appropriate or cost effective.

Dealings under Rule 535.2 are expected to begin on May 24. Allied Provincial Securities are the company's broker.

Tharsis GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries COMP Shareholding P6552 The Financial Times London Page 24 175
UK Company News: Anglo Irish Bankcorp rises 36% Publication 930520FT Processed by FT 930520

PRE-TAX profits of the Anglo Irish Bank Corporation improved by 36 per cent to IPounds 4.44m (Pounds 4.33m) against IPounds 3.25m in the six months to March 31.

Mr AG Murphy, the chairman, said the bank had continued to move ahead strongly in the treasury deposits area, building its deposit base up to IPounds 860m.

Mr Murphy particularly noted that during the six months the bank gained market share in the personal and corporate deposit sector where the customer base had increased by 23 per cent.

He added that in March the International Banking Credit Agency had affirmed the bank's strong credit rating.

A maintained interim dividend of 1.36p has been declared out of earnings of 2.74p (2.69p).

Anglo Irish Bank IE Ireland, EC P6081 Foreign Banking and Branches and Agencies FIN Interim results P6081 The Financial Times London Page 24 155
UK Company News: Engineers still wait to uncork champagne - The sector faces a slow recovery, according to the survey of the FT Six Publication 930520FT Processed by FT 930520 By ANDREW BAXTER

THE recession may officially be over, but the champagne is being kept on ice in Britain's battered engineering sector, which faces a slow, spasmodic recovery to 'normal' levels of business.

The six engineering companies whose progress out of the recession is being tracked in the FT's occasional survey of the sector say conditions are improving - but not by much - and confidence within the customer base is picking up gradually.

The good news is that further job cuts are mostly off the agenda, as long as the gradual upturn does not grind to a halt.

At JCB, the construction equipment group, employees are even working a modest amount of overtime.

But, significantly perhaps, those ubiquitous phrases of the past few months - 'We've definitely bottomed out' and 'It's not getting worse' - have not yet been laid to rest.

The previous survey in the series, published on December 30, found faint signs of confidence returning to the customers of the FT Six. Since then, interest rates have been cut by another 1 percentage point.

But the first four months of this year have shown that the engineers were right to be cautious in December about the pace of the recovery - recognising that it would take time for customers to feel confident about the stability of the interest rate and currency environment.

This is how things are looking for the FT Six:

Fenner, the power transmission and industrial conveyor belting group, announced its half-year results on Tuesday.

Pre-tax profits dropped from Pounds 2.28m to Pounds 105,000, but Mr Peter Barker, chairman, said customer confidence was rising.

With UK manufacturing output set to rise this year and next, the company was 'well placed to derive maximum advantage from the recovery that now appears to be underway.'

At Senior Engineering Group, the tubing, boilers and ductwork company, volumes have improved in some consumer-related businesses, although not in more investment-related sectors where the lead times are longer.

Mr John Bell, chief executive, says there is more confidence within industry, and speaks of 'a will to see things improve.'

Overall, he had seen a gentle improvement in UK business conditions, but a normal level of activity was probably some months away, perhaps in the autumn.

One hopeful sign comes in Senior's contract heat treatment business, which takes in metal components from a wide range of manufacturers and heats them for extra strength.

Here, there has been a good improvement in volumes, says Mr Bell: 'This is a true indicator of the economy. It takes in business on a day-to-day basis, and there is nothing more instant than that.'

Mr Peter Burton, chief executive of Bloxwich Engineering, says: 'I feel in my bones that perhaps the recession is over,' but he warns that there will be no sudden revival of activity for the Walsall-based car and truck parts company.

The car side of Bloxwich's parts business has picked up, he says, due partly to continuing and forthcoming business from the Japanese transplants. But the truck parts business has yet to revive, and has not been helped by the receivership of Leyland-DAF, an important customer.

Another 'chink' which Mr Burton points to is Bloxwich's tool-making business, where press tool activity has increased. 'To make cars, you need tools first,' says Mr Burton, 'and customers are now optimistic enough to release work.'

Overseas markets, and particularly Germany, offer mixed prospects.

On the one hand, Mr Burton says, 'We think the German economy is in a hell of a mess.' But he hopes Bloxwich can benefit from the more international sourcing policy at Volkswagen under the new purchasing director, Mr Jose Ignacio Lopez de Arriortua.

The 600 Group, the producer and distributor of machine tools and materials handling equipment, has also been hit, at least in the short term, by the Leyland-DAF collapse.

The engineering company has 50 per cent of the market for truck-mounted cranes, and one-third of its products in this sector went on Leyland-DAF Trucks, says Mr Colin Gaskell, managing director.

Overall, Mr Gaskell is unable to report any 'vast upturn' in the UK market, but there are a lot more inquiries around, he says. 'Our sales guys are much more optimistic than they have been.' The rate of purchase by end-users of machine tools, as opposed to dealers, has picked up.

As at Bloxwich, Mr Gaskell is concerned about economic conditions on the Continent, which look 'pretty sick.'

But he thinks that the devaluation of sterling has created an opportunity to sell machine tools in Germany, where customers might refuse to pay the customary premium for domestically-produced equipment if it becomes excessive.

At JCB, the period from April-June is a traditional stage of increased buying by plant-hirers and other users of earthmoving equipment, so gauging any upturn is difficult. But Mr Gilbert Johnston, deputy chairman, feels that the UK market 'just has to be past the worst.

'Things are better, but it's not something we're jumping up and down about,' he says. In broad terms, activity could still rise by between 25 and 30 per cent to reach normal levels for the domestic market.

Mr Johnston says the improvement will be gradual. Indeed he hopes this is the case, as that would produce a more stable and sustainable recovery.

Mr Johnston is not expecting any immediate help from the all-important UK construction market, where activity was described recently as still at dangerously low levels. Taking a five-year view, however, he says it looks good for improvement.

Finally, Mr Reg Bricknell, managing director of Posiva, the gears and drives producer, does not think that the recession is over, but there are pockets of industry producing more orders.

Although German-owned Posiva has had to adjust to the effect of the sterling devaluation on the products it brings in from Germany, it is also benefiting from increased activity among customers exporting from the UK.

The order intake in the first three months of the year was 36 per cent higher than the comparable period of 1992. 'This is not just green shoots,' Mr Bricknell says. 'It's due to the efforts from our salesmen.'

The increase in business has been helped by equipment that Posiva is supplying to the big UK builders of power stations and water treatment plants in Asia.

In the home market, though, Mr Bricknell does not yet see sufficient stability to prompt confidence that activity will continue upwards. He would like to see a few more months of the same growth trend before declaring the recession over.

Fenner Senior Engineering Group Bloxwich Engineering JC Bamford 600 Group Posiva GB United Kingdom, EC P3568 Power Transmission Equipment, NEC P3495 Wire Springs P3433 Heating Equipment, Ex Electric P3714 Motor Vehicle Parts and Accessories P3713 Truck and Bus Bodies P3541 Machine Tools, Metal Cutting Types P3542 Machine Tools, Metal Forming Types P3531 Construction Machinery P3462 Iron and Steel Forgings CMMT Comment & Analysis P3568 P3495 P3433 P3714 P3713 P3541 P3542 P3531 P3462 The Financial Times London Page 24 1195
UK Company News: Weak demand trims Maple Leaf to CDollars 10m Publication 930520FT Processed by FT 930520 By BERNARD SIMON TORONTO

FIRST-quarter earnings of Maple Leaf Foods, the Canadian food processor which is 56 per cent owned by Hillsdown Holdings, dipped by almost 5 per cent as a result of weak demand and fierce competition.

Net earnings were CDollars 10.2m (Pounds 5.2m) or 13 cents a share, down from CDollars 12m, or 15 cents a share, a year earlier.

Last year's figures exclude a CDollars 3.3m contribution from the discontinued edible oils business.

Sales dropped slightly, from CDollars 638m to CDollars 632m, but operating profits tumbled by 24 per cent to CDollars 13.2m. The directors explained that results were cushioned by higher interest income and lower tax provisions.

Large tax payments made during the quarter have reduced cash reserves to CDollars 172m compared with CDollars 205m at the end of 1992. Long-term debt has grown from CDollars 12.5m to CDollars 43.6m in the past year.

The company said that many sectors of the retail food business had been hit by lower demand, competitive pricing and 'trading-down' by consumers to lower margin products.

On the other hand, agribusiness earnings improved sharply, partly because of a rationalisation of facilities. Mr Charles Bowen, chief executive, forecast an improvement in earnings over the rest of the year thanks to lower costs and new products.

Maple Leaf Foods CA Canada P2099 Food Preparations, NEC FIN Interim results P2099 The Financial Times London Page 24 249
UK Company News: Dividend prospects boost shares - A look at the forthcoming electricity results season Publication 930520FT Processed by FT 930520 By DAVID LASCELLES

DIVIDEND increases of over 10 per cent in real terms are expected to loom large in the electricity industry results season which gets under way today. This has provided some fizz to the shares in the last few days.

Scottish Power will be the first of the 17 companies to unveil its performance for the year ended March 31. The remainder will be strung out over the next seven weeks, making the power industry something of a results marathon for investors and stock analysts.

The focus on dividends is a touchy issue for the regional electricity companies (RECs) and the generators because of the fuss that earlier generous pay-outs have caused. There is also the reaction of Professor Stephen Littlechild, the electricity regulator to be considered. He has embarked on a wide-ranging review of electricity pricing practices.

Previous results seasons have shown that the later a company reports the larger its dividend increase tends to be, as if boldness grows with time. The RECs deny that this is the case.

But it is a fact that the three regional companies tipped to make the biggest increases, Yorkshire, Seeboard and Southern, do not report until late June and early July.

Among the generating companies, National Power will also be a high payer.

PowerGen has already paid its second dividend, showing an overall increase of 14 per cent.

The electricity companies will justify their high dividends by pointing to their financial strength and the high level of dividend cover. Analysts at Barclays de Zoete Wedd are estimating average cover for the RECs of 2.8 times, with Manweb as high as 3.5.

The background to the results is fairly straightforward. Despite the incipient recovery, overall electricity sales are unlikely to show much change. But this does not mean that the RECs will return a uniform performance.

Actual profit growth will be mixed, with increases in single as well as double figures expected. The variations will reflect RECs' success, or lack of it, in the highly competitive non-franchise market, and other variables like bad debts and cost control. They will also report the fortunes of sideline activities such as appliance retailing, which have caused trouble in the past.

The big event that occurred in the second half of the industry's financial year was the settlement of the coal crisis. The uncertainty over the volumes and price of electricity to be generated from the new long-term coal contracts between the generators and British Coal has been removed.

This creates a framework for a significant part of the industry's long-term business. However, there is still the question of how much additional coal the generators will take from British Coal under the government's recently agreed programme to subsidise more pits. It seems unlikely, though, that either National Power or PowerGen will be willing to make firm commitments quite yet, though the comments of all the electricity companies will be keenly picked over by British Coal.

Prof Littlechild is currently engaged on a review of the pricing formula in the electricity supply industry, and he is expected to announce the results in July.

But analysts say he is unlikely to tighten the formula because he seems to want to encourage more entrants into this market.

More crucial will be the review of the distribution business which he will then embark upon.

This accounts for the bulk of the RECs' revenues, and any tightening of the regulatory regime would be reflected in REC profits and, therefore, in the dividends which provide the strongest underpinning to the sector.

------------------------------------------------------------------------ ESTIMATES OF PROFITS AND DIVIDENDS ------------------------------------------------------------------------ Company Results Pre-tax* Change Dividend Change due Pds m % total p % ------------------------------------------------------------------------ Scottish Power May 20 290 8.8 11.2 10.1 National Power May 27 575 15 10.4 14.3 PowerGen June 7 400 14 10.5 13.5 Hydro-Electric June 10 143 4.4 11.3 11.2 East Midlands June 14 155 3.6 19.2 12.3 Manweb June 15 113 22.2 20.4 11.8 South Wales June 17 88 20.7 22 13.4 Norweb June 23 158 25.8 19.8 11.9 South Western June 24 100 21.5 19.7 13.2 Yorkshire June 25 152 9.3 20.4 14.9 Northern June 28 111 12.6 21 13.2 Seeboard June 29 112 14.7 19.7 14.2 Eastern June 30 184 28.8 18.9 13.2 Southern July 1 185 9.1 19 14.1 LEB July 2 143 3.6 18.9 12.5 Midlands July 6 168 16.2 19.4 12.5 ------------------------------------------------------------------------ * Year to March 31, 1993 Source: Estimates from SG Warburg Securities. ------------------------------------------------------------------------

GB United Kingdom, EC P4911 Electric Services CMMT Comment & Analysis P4911 The Financial Times London Page 23 782
UK Company News: Willis Corroon expands by 12% Publication 930520FT Processed by FT 930520

FIRST-quarter results from Willis Corroon, the largest insurance broker in the UK, improved nearly 12 per cent but the directors are sticking to their dividend cut.

They had forecast a reduction of up to 50 per cent in the year's total in March when they halved the first interim to 1.65p. Now they are taking the same action with the second interim.

In the 1992 year group profits were pulled back by substantial provisions in its UK insurance subsidiary. In the opening quarter of 1993 further provisions were included in losses of Pounds 2.9m incurred by the discontinued operations.

Using a constant exchange rate of Dollars 1.50 to the pound in the quarter, pre-tax profit came to Pounds 47.1m (Pounds 42.1m). The operating profit of Pounds 47.2m (Pounds 39.9m) comprised broking Pounds 42.6m (Pounds 36.5m) and underwriting Pounds 4.6m (Pounds 3.4m).

Geographically, that was split as to UK Pounds 34.9m (Pounds 36.8m), the US Pounds 10.4m (Pounds 3.1m) and rest of the world Pounds 1.9m (nil).

Earnings per share were 7.1p (6.7p).

Profitability of the broking and consulting businesses improved as a result of actions taken over the last two years. On an underlying basis brokerage and fee revenue grew by 2 per cent while operating expenses fell by 2 per cent.

Insurance companies in North America made another solid contribution. Results of the discontinued UK underwriting operations were again disappointing, caused by deterioration in the final three underwriting years and further provisions.

Willis Corroon Group GB United Kingdom, EC US United States of America P6411 Insurance Agents, Brokers, and Service FIN Interim results P6411 The Financial Times London Page 23 285
UK Company News: Market disappointed with CU first quarter Publication 930520FT Processed by FT 930520 By RICHARD LAPPER

COMMERCIAL Union, the most successful UK composite insurer in recent years, yesterday disappointed the markets with poorer first quarter figures than had been expected.

Pre-tax profits of Pounds 16.2m for the first three months of 1993 compared with a loss of Pounds 19.2m, providing further evidence of the recovery in the UK general insurance market. However, the market was disappointed at the scale of the improvement, clipping the shares 6p to 594p.

'It is a good result but the improvement is not as marked as the rest of the sector,' commented Mr Stephen Bird, analyst with Smith New Court, the securities house. Mr Bird pointed to a deterioration in the group's London market operations - where underwriting losses rose from Pounds 18.9m to Pounds 23.5m - - as a cause for concern.

CU stressed the improvement in the UK where, like its rivals General Accident and Royal Insurance, it had been helped by increased premium rates and lower expenses. UK underwriting losses fell from Pounds 54.1m to Pounds 34.7m.

With its solvency strengthened by the Pounds 428m rights issue in February, CU has also continued to increase premium income, especially in UK motor, home and life markets, although the pace of growth declined compared with the fourth quarter of last year.

Overall life premium income rose to Pounds 518.5m (Pounds 454.4m) and general insurance premiums to Pounds 1.09bn (Pounds 830.3m). Investment income of Pounds 84.1m (Pounds 64.3m) was offset by an underwriting loss of Pounds 99.8m (Pounds 113.6m).

Earnings from associated undertakings amounted to Pounds 2.1m (Pounds 3.1m).

A non-life operating loss of Pounds 13.6m (Pounds 46.2m) was offset by life profits of Pounds 29.8m (Pounds 27m).

Mr Tony Brend, chief executive, said that losses from the Bishopsgate bomb last month would feed through into the group's figures in the second quarter.

'Information on possible losses is still incomplete but current indications are that the effect, after reinsurance, is unlikely to exceed Pounds 25m,' said Mr Brend.

Commercial Union GB United Kingdom, EC P6331 Fire, Marine, and Casualty Insurance FIN Interim results P6331 The Financial Times London Page 23 367
UK Company News: Focus on the luxury look - Time Products' US expansion Publication 930520FT Processed by FT 930520 By ANDREW BOLGER

A US manufacturer of luxury handbags might seem an unlikely diversification for a UK watch and jewellery distribution group, but Time Products is convinced that the recent acquisition offers immense opportunities.

The UK company paid Dollars 17m (Pounds 11m) in March for the business of Judith Leiber, an American who designs handbags which can sell for several thousand dollars each.

Mr Marcus Margulies, chairman of Time Products, said of the acquired company: 'Its products have not been actively marketed outside North America and I am confident that there is a substantial potential for developing the brand on a worldwide basis.

Mr Margulies is excited about the opportunities for the group - particularly in North America, where leading department stores are keen to stock Judith Leiber's handbags. 'The day just hasn't got enough hours in it at the moment.'

Time Products owns Sekonda watches, one of the UK's biggest mass-market brands, but it is increasingly focusing on luxury goods.

Mr Margulies said that three years ago the balance of the group would have been 80 per cent mass-market and 20 per cent luxury products, and by next year the proportion would be reversed.

In March the company paid Pounds 2m for 5 per cent of Audemars Piguet, the Swiss watchmaker which specialises in technical and luxurious pieces.

These most recent investments came together when Time Products was awarded the North American agency for Audemars - having distributed its watches in the UK for a number of years. A showroom for the luxury watches is now being developed at Judith Leiber's New York premises.

Time Products also claims to be the UK's leading distributor of branded simulated pearls following the bolt-on acquisition of Rosita and Samuel Jones. In spite of recent heavy spending on acquisitions, the group has about Pounds 10m of net cash.

Time Products reported a 22 per cent increase in pre-tax profits to Pounds 9.3m for the year to January 31, on overall sales down from Pounds 51.1m to Pounds 49.6m.

The group's shares have risen from 101p at the end of 1990 to their present level of 208p, giving it a market value of Pounds 110m.

Mr Margulies gives much of the credit for Time Product's new strategic stance to Mr Richard Langdon, the City company doctor who took over from him as chairman from 1984, after difficulties in Hong Kong had pushed the group into the red.

Although Time Products makes watchstraps and now handbags, manufacturing will never again play a big role in group thinking.

Mr Langdon, who retires from the board soon, handed the chairmanship back last year to Mr Margulies, whose family controls 20 per cent of the company. Mr Margulies said: 'Richard forced us to put blinkers on - we now know we have to concentrate on brands and marketing.'

Time Products Judith Leiber GB United Kingdom, EC US United States of America P3171 Women's Handbags and Purses P3873 Watches, Clocks, Watchcases and Parts CMMT Comment & Analysis P3171 P3873 The Financial Times London Page 23 525
UK Company News: British Gas in joint venture with Tenneco Publication 930520FT Processed by FT 930520 By DEBORAH HARGREAVES

BRITISH GAS has agreed with Tenneco Gas, the gas arm of the US industrial company, to develop joint gas transport projects in South America, writes Deborah Hargreaves.

The agreement follows the company's move last week to set up a new subsidiary, British Gas Sudamerica, to provide services to the gas, water, telecommunications and electricity companies in South America.

Mr Mike Fulwood, British Gas general manager for the US and Latin America, said the companies were looking at a number of opportunities.

Last December a consortium headed by British Gas won a controlling share in MetroGas, the distribution company in Argentina. The company is hoping to use its experience in MetroGas as a base for moving into other gas projects.

British Gas said it would drill its first well in the Black Sea in July after it won licences to explore for oil and gas in Bulgaria.

British Gas Tenneco Gas ZA South Africa, Africa GB United Kingdom, EC US United States of America P4923 Gas Transmission and Distribution P1311 Crude Petroleum and Natural Gas COMP Strategic links & Joint venture P4923 P1311 The Financial Times London Page 23 207
UK Company News: Break for the Border premium Publication 930520FT Processed by FT 930520

Dealings started yesterday in the 10p ordinary shares of Break for the Border Group, whose business is that of restaurateur, live music venue and nightclub from two sites in the West End of London.

The shares, 4.81m of which were placed by Fiske and Company at 48p each, opened at 56p and closed at 55p. is offering 4.81m shares in a placing at 48p.

Break for the Border Group GB United Kingdom, EC P5812 Eating Places FIN Share issues P5812 The Financial Times London Page 22 100
UK Company News: Municipal Mutual Spanish sale Publication 930520FT Processed by FT 930520

Municipal Mutual Insurance has agreed to sell its Spanish life assurance company, Prosperity SA De Seguros y Reasuguros, to Standard Life. The consideration was not disclosed.

Prosperity began trading in 1991 as a subsidiary of Municipal Mutual and had a premium income in 1992 of Pta925m.

Municipal Mutual Insurance Prosperity SA De Seguros y Reasuguros Standard Life Assurance GB United Kingdom, EC ES Spain, EC P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance COMP Disposals COMP Mergers & acquisitions P6331 P6311 The Financial Times London Page 22 101
UK Company News: M&G Income assets improve 12% Publication 930520FT Processed by FT 930520

M&G Income Investment Trust, a split capital investment trust, saw a 12 per cent increase to 64.16p in the net asset value of its capital shares at April 30, over the 57.24p of a year earlier.

Net asset value of the zero dividend preference shares was 40.3p, compared with 36.15p.

The first quarter results show net revenue to end April at Pounds 3.36m, against Pounds 3.62m.

Earnings per income share were 1.36p (1.47p) and the interim dividend is 1p (1.3875p). The board has already announced its intention of paying three interim dividends of 1p and a final dividend of not less than 1.9125p for the year to end January 1994.

M and G Income Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Interim results P6726 The Financial Times London Page 22 148
UK Company News: Reuters pays Pounds 7m for Effix Holdings Publication 930520FT Processed by FT 930520

Reuters has paid FFr58.8m (Pounds 7m) cash for Effix Holdings, a supplier of software for its dealing room information management systems.

Vendor was Banque Internationale de Gestion et de Tresorerie.

Last year Reuters took a 35 per cent capital stake in Effix Systemes, the software marketing subsidiary of Effix, for FFr23.8m (Pounds 3m).

Effix said the move was a natural step in the development of its four-year relationship with Reuters.

Reuters Holdings Effix Holdings Banque Internationale de Gestion et de Tresorerie GB United Kingdom, EC FR France, EC P7383 News Syndicates P7372 Prepackaged Software P6081 Foreign Banking and Branches and Agencies COMP Mergers & acquisitions COMP Disposals P7383 P7372 P6081 The Financial Times London Page 22 132
UK Company News: Fulcrum Investment asset value 48.11p Publication 930520FT Processed by FT 930520

The net asset value per capital share of Fulcrum Investment Trust stood at 48.11p at April 30 against 12.65p six months earlier.

Net revenue for the 18-month period amounted to Pounds 1.11m for earnings of 13.49p per income share. In the previous 12 months net revenue was Pounds 291,368 for earnings of 9.08p.

A 2.92p fourth interim dividend in lieu of a final is declared, making 13.07p (9.2p) for the period.

Fulcrum Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Interim results P6726 The Financial Times London Page 22 106
UK Company News: German Trust income down Publication 930520FT Processed by FT 930520

Net asset value of the German Investment Trust rose by 7.7 per cent, from 87.5p to 94.2p, over the year ended March 31 1993.

The managers said that costs of unification had overridden the longer term potential for growth, and had tarnished the performance of the equity market in Germany.

However, interest rates there were falling allowing others in Europe to follow suit.

Revenue in the year totalled Pounds 757,000 (Pounds 792,000) and the net outcome was Pounds 165,000 (Pounds 235,000) because of a fall in other income and an increase in the effective tax rate.

Earnings per share were down to 0.42p (0.6p) and the dividend follows that trend at 0.4p (0.6p).

German Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 22 147
UK Company News: Enskilda Ventures sells fund Publication 930520FT Processed by FT 930520

ENSKILDA Ventures, the London-based venture capital arm of the Skandinaviska Enskilda Banken Group, has sold its Scandinavian management buy-out fund, Scandinavian Acquisition Capital, to the fund's management.

SAC, a SKr764m (Pounds 67.5m) fund, has been acquired by a new company called Industri Kapital, majority owned by Mr Bjorn Saven, former director of SAC.

SAC, which has invested 70 per cent of its money, will be better placed to raise new funds if it is an independent company, Enskilda said.

SAC's funds have all been provided by Scandinavian investors and all but one of its eight investments have been in Scandinavian companies, but it will retain its headquarters in London.

SE-Banken said its fund management operation would remain an investor in SAC.

Enskilda will retain control of European Acquisition Capital (EAC), an Ecu83m (Pounds 65.3m) fund raised last year to back buy-outs in the UK and continental Europe outside Scandinavia. EAC's first investment, of Pounds 6.5m, was in Tom Cobleigh, a Mansfield-based pub chain.

Enskilda Ventures Scandinavian Acquisition Capital Industri Kapital GB United Kingdom, EC P6799 Investors, NEC P6722 Management Investment, Open-End COMP Disposals COMP Buy-in & Buy-out P6799 P6722 The Financial Times London Page 22 208
UK Company News: Leeds reaps Pounds 2.9m and buys into Continent Publication 930520FT Processed by FT 930520 By PETER PEARSE

LEEDS Group, the West Yorkshire-based textile dyer and printer described by Mr Robert Wade, its chairman as 'tortoise, not a hare', lifted pre-tax profit 16 per cent from Pounds 2.51m to Pounds 2.92m in the six months to March 31. This steady progress was 'no more or less than is expected of us.'

Turnover grew 4.5 per cent to Pounds 21.7m (Pounds 20.8m). However Mr Wade pointed out that, although this gave the impression of a climb in margins, they had in fact remained either constant or had slipped a little, though volume production had risen more than the turnover advance indicated.

He said that the financial value of sales had been adversely affected by two factors.

First, the fire at the Walsden factory, which accounts for a little less than 20 per cent of the group's output, had hit production - a 'conservative' Pounds 385,000 exceptional credit was taken above the line to account for any business interruption insurance. Second, there was a 31 per cent fall in wool prices during the last year, though Mr Wade added that they had risen in the past few weeks.

Since the period-end, Leeds made its first non-UK acquisition in the Netherlands. For an initial Pounds 2.49m and a maximum further payment of Pounds 1.03m, it has bought TIM Beheer and Itex Brummen, which specialise in transfer printing of textiles and merchanting dyed and printed fabrics, as a 'springboard' for the rest of Europe.

The non-apparel business continued to grow, though it still represented less than 25 per cent of the group.

Mr Wade said Leeds liked to do 'difficult things where the margins are high' - the camouflage, printed furniture fabrics and curtains operations performed well, he said.

The difference between Leeds and other textiles groups, he said, was that it did not spin, weave or make clothing; it was simply concerned with colour and design, converting a commodity to what the market wanted very quickly.

On the non-textile side, Mr Wade said that Leeds Leasing had started to write an increased level of business after two years of restricted activity.

Earnings per share rose to 10.8p (9.5p) and the interim dividend is lifted to 2.75p (2.33p).

Leeds Group GB United Kingdom, EC P2269 Finishing Plants, NEC FIN Interim results P2269 The Financial Times London Page 22 406
UK Company News: Allied Lyons' Pounds 200m bond issue launched Publication 930520FT Processed by FT 930520 By PHILIP RAWSTORNE

ALLIED-LYONS, the drinks, food and retailing group, yesterday launched its Pounds 200m convertible bonds issue.

News of this was leaked last weekend and led to three days of see-sawing share prices.

The company said yesterday that its financial advisers were discussing the leakage with the stock exchange and decisions about possible action would be made after the talks.

'We are very concerned about the leakage, which certainly was not in our interests,' Allied said.

The timing of the convertible issue, which came a day after the group reported a Pounds 10m increase in full year profits to Pounds 620m, had not been affected by the leakage, it added.

Allied said the proceeds of the issue would be used for 'general corporate purposes.' Some will replace short - term bank borrowings used to finance its free - trade pubs' loan book.

None of the cash is intended for acquisitions, such as the purchase for an estimated Pounds 40m from Seagram of Perrier - Jouet/Barton & Guestier, the French distribution company.

Allied repeated its long-standing pledge yesterday to launch a rights issue only to fund a major acquisition.

The 15-year bonds will be converted into Allied ordinary shares at a premium between 17 per cent and 20 per cent above the company's share price. A coupon of 6 3/4 per cent will be paid twice a year.

Credit Suisse First Boston is leading the issue and Cazenove and SG Warburg Securities will be co-lead managers. There will also be a group of international co-managers.

See Lex and Capital Markets

Allied-Lyons GB United Kingdom, EC P2082 Malt Beverages FIN Share issues P2082 The Financial Times London Page 22 294
UK Company News: Acatos rises to Pounds 5.14m despite static sales Publication 930520FT Processed by FT 930520 By CATHERINE MILTON

ACATOS & Hutcheson, the manufacturer and supplier of edible vegetable oils, lifted pre-tax profits from Pounds 4.23m to Pounds 5.14m in the half year to March 28.

The new FRS 3 accounting standard meant the improvement for the six months was flattened by an exceptional credit of Pounds 600,000 shown for the comparable period. Last time it was recorded as an extraordinary item.

Turnover was static in the first half at Pounds 104.9m (Pounds 104.6m) and trading remained difficult in the current half, said Mr Ian Hutcheson, chairman.

'Prices in the retail sector remain under pressure while some easing in the bakery market will not benefit us significantly in the current year.' More than 50 per cent of turnover goes to catering and retail customers.

He said performance gains at the company's Orchard Place factory, which contributed to the improved profits, would not be repeated on the same scale and there would be less scope for further interest savings.

Net interest charges fell to Pounds 387,000 (Pounds 826,000) because of lower interest rates and the company said gearing was further reduced. Mr Ian Caunt, finance director, said gearing figures fluctuated with purchases of raw materials.

Mr Hutcheson said his confidence in future prospects was increasing: 'Volumes were maintained in all our principle markets despite continued strong competition.'

The company said the continuing decline in the total market for edible oils concealed a switch away from non-refined oils based on animal fats in favour of vegetable fats. Mr Caunt said: 'Animal fats are a minor part of our business and have been for a number of years.

'We have progressively shifted into vegetable oils and in addition produce some more sophisticated products like low-fat spreads.'

The board has declared an interim dividend of 3p (2.5p) on earnings per share of 10.4p (9p).

Acatos and Hutcheson GB United Kingdom, EC P2076 Vegetable Oil Mills, NEC FIN Interim results P2076 The Financial Times London Page 22 343
UK Company News: Compass route raises eyebrows Publication 930520FT Processed by FT 930520 By RICHARD GOURLAY

FOR 18 months Compass has said it wanted to move into Europe to establish a contract catering business in the fragmented market.

It was therefore only the route that raised eyebrows yesterday when Compass group bought the SAS airport catering and contract catering business for Pounds 71.9m, financed through a rights issue.

While the market greeted the deal favourably, the choice of Scandinavia, does require some explaining. As one analyst said, 'It is good deal but it could have made a better move into Europe.'

First of all, the majority of the contract catering business is in Scandinavia - about 40 per cent of that is in Norway's offshore sector. And half the airports are in Norway or Sweden, with 20 per cent in the UK.

It is not entirely clear why these northern reaches provide a better platform for growing in the Benelux, France and Germany - the key European markets - than does the UK.

Secondly, Compass is increasing the risk profile of its business. Catering for workplaces or health services may be cut - throat but having won the contract the income line is at least nailed down. With airports, tomorrow's sales cannot be known for certain.

Thirdly it is not clear that the Compass style of squeezing suppliers to improve margins will necessarily travel to the Continent or that it will be easy to implement across eight countries.

Compass is confident, however, that it can deliver improved margins. Mr Roger Matthews, finance director says the SAS businesses will give the group experience of managing in Europe and the chance to grow organically from a modest base in Germany, one of its strategic target markets.

By moving into airports, Compass has also gained exposure to a market segment that will recover earlier in the economic cycle than its existing businesses. Contract catering in the UK may now be bumping along the bottom but it could be a relatively late beneficiary of economic recovery while the push into hospital and educational catering will also take a while to bear fruit.

Compass has also bought from SAS the option to introduce Burger King hamburger outlets at European airports outside France. This will give it a useful comparator for the Casey Jones hamburger and Upper Crust sandwiches, two much smaller brands it bought last year.

Financially, the deal has done Compass no harm. Deferred payment and a rights issue slightly larger than the purchase price will reduce gearing from the 200 per cent that would have prevailed at the end of 1993. Gearing should now be about 77 per cent on debt of Pounds 39m. More importantly in this business, Compass's interest cover rises from about seven times to over 14 times.

Following the deal some analysts have lifted forecasts of earnings to 38.9p for the first full year, which gives a prospective multiple of 13.6, a modest premium to the market.

Compass Group Scandinavian Airlines System SAS Service Partners GB United Kingdom, EC SE Sweden, West Europe COMP Mergers & acquisitions COMP Disposals CMMT Comment & Analysis The Financial Times London Page 22 529
UK Company News: Young & Co slips 7.5% to Pounds 5.17m as operating margins decline Publication 930520FT Processed by FT 930520 By CATHERINE MILTON

HIGHER interest costs helped depress pre-tax profits at Young & Co's Brewery, the south London-based real ale brewer, by 7.5 per cent from Pounds 5.59m to Pounds 5.17m for the year to March 27.

Stripping out last time's exceptional profit of Pounds 244,223 on the sale of assets, the decline was 3 per cent.

Turnover was Pounds 72.9m (Pounds 68.1m). Operating profits rose to Pounds 8.19m (Pounds 8.03m).

Interest charges rose to Pounds 3.02m (Pounds 2.68m) mainly because of increased borrowings for the August 1991 acquisition of HH Finch, the owner of 22 pubs and six wine bars, and fluctuations in interest rates.

The company said gearing at the year-end was unchanged at about 30 per cent. In April, Young raised Pounds 15m from a debenture issue partly to repay bank loans.

Operating margins slipped to 11.23 per cent (11.79 per cent). Mr John Young, chairman, said: 'We offer lower prices. In the light of events we probably should have put them up but we try to offer better prices than our competitors.

'Recovery is slow and gradual. In the south and south-east, the recession is still biting quite hard.'

He said the company's four hotels, opened on existing pub sites, were repaying their investment.

The company is opening another on Monday in south London and has planning permission for two more. Mr Young said he thought the company would ultimately run seven or eight hotels.

The board proposes a same-again final dividend of 7.5p giving a maintained total for the year of 14.5p. Earnings per share fell to 26.4p (27.51p).

Young and Co's Brewery GB United Kingdom, EC P2082 Malt Beverages FIN Annual report P2082 The Financial Times London Page 22 306
UK Company News: RJB goes to market valued at Pounds 103m Publication 930520FT Processed by FT 930520 By DAVID LASCELLES, Resources Editor

RJB MINING, the privately owned coal company which aims to take advantage of the restructuring of the British coal industry, is being floated on the stock market with a value of Pounds 103m.

The shares were priced yesterday at 250p.

This represents a multiple of 11 times earnings for 1992, excluding interest on the finance raised to buy the company out the year before.

The price also reflects a notional gross dividend yield of 5.75 per cent.

Just under half the company's shares, or 20m, are being offered for sale, and 13.3m of these have been firmly placed.

Of the Pounds 50m proceeds, Pounds 24.3m net will go to the company to repay bank borrowings and provide additional working capital. Existing shareholders will receive Pounds 23.5m of cash.

After the sale the principal shareholders will be Schroder Ventures with 28 per cent, Charterhouse with nine per cent and Mr Richard Budge, the chief executive, with 10 per cent.

Deadline for applications is 10am on May 27. Dealings start on June 7.

The Union of Democratic Miners took the unusual step yesterday of backing the flotation, with a call for British Coal to speed up negotiations to sell unwanted pits to companies like RJB.

Mr Neil Greatrex, UDM President, said: 'Budge are convinced that they have the markets for coal and we support them. But unless a decision is made soon, this will be yet another lost opportunity for the industry.'

COMMENT

With no obvious point of comparison in the market, the pricing of RJB presents something of a problem. But the indications are that underwriters BZW are erring on the side of caution. The Pounds 103m price tag is at the low end of the Pounds 100m-Pounds 120m range being bandied about. The earnings multiple is also below the average for the industrial materials sector, and the yield is slightly higher. This reflects partly the heavy demands currently being placed on the market, and also the uncertainty in RJB's prospects. If it fails to capitalise on the changes in the coal industry it will be left to the mercy of British Coal. But if it succeeds it could emerge as the country's leading low cost producer. The flotation is an opportunity to take a bet on the outcome.

RJB Mining GB United Kingdom, EC P1221 Bituminous Coal and Lignite-Surface FIN Share issues CMMT Comment & Analysis P1221 The Financial Times London Page 22 425
Companies in this issue Publication 930520FT Processed by FT 930520

------------------------------------------------ UK ------------------------------------------------ Allied-Lyons 40 Bass 40, 21 Compass 21 Dobson Park Ind 21 Driefontein 40 Enterprise Oil 40 Holiday Inns 21 Lonrho 40 Saatchi & Saatchi 21 Vaal Reefs 40 ------------------------------------------------ Overseas ------------------------------------------------ AMR 27 Ahold 26 Aiwa 28 Atlas Copco 21 Avon 15 Banco Santander 26 Campbell Soup 27 Chemical Banking 27 Deutsche Bank 26 Fortis 26 GTE 27 Generale Banque 26 Honda 28 ITT Financial 27 KIO 28 Kader Investment 26 Kango 21 Liggett Group 27 Makita 28 Matsushita Refrig. 28 Migros 15 Minorco 27 Mitel 27 Power Corp 27 SAS 21 Semi-Tech 26 The Equitable 27 Uni Storebrand 26 Woolworths 28 Yamaha 28 ------------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 21 132
Equipment group sells Kango to Atlas Copco Publication 930520FT Processed by FT 930520 By PEGGY HOLLINGER

DOBSON Park Industries, the UK mining equipment and industrial group, is withdrawing from the highly competitive power tool industry with the sale of its loss-making demolition hammer operation, Kango, for Pounds 7.8m.

Atlas Copco, the Swedish tools manufacturer, is to buy the Kango name and business, while High Speed Production, a private UK company, has agreed to purchase the division's machining and assembly operations. High Speed will then manufacture Kango product for Atlas.

Mr Alan Kaye, Dobson's chairman, said Dobson had decided it could not compete against international giants such as Bosch of Germany. 'The scale of the people we were trying to compete with makes it difficult to keep up with the technology,' he said. 'Kango's potential will best be realised as part of a larger group within the power tools business.'

Kango, which just four years ago returned pre-interest profits of Pounds 2.5m, has suffered from the sharp downturn in the global construction industry. Last year it incurred losses of Pounds 600,000. Dobson has been under pressure in other areas of its business and recently agreed to put its mining equipment division into a joint venture with a main rival to weather the UK coal crisis.

For Atlas Copco, Europe's largest air compressor manufacturer, Kango represents another step towards its goal of increasing its presence in electric tools.

Dobson will receive Pounds 6.5m in cash upon completion, with the remaining Pounds 1.3m payable within one year.

Dobson Park Industries Kango Atlas Copco High Speed Production GB United Kingdom, EC SE Sweden, West Europe P3532 Mining Machinery P3423 Hand and Edge Tools, NEC COMP Mergers & acquisitions COMP Disposals P3532 P3423 The Financial Times London Page 21 294
Compass to acquire catering from SAS Publication 930520FT Processed by FT 930520 By RICHARD GOURLAY

COMPASS GROUP, the health-care and catering company, is to move into continental Europe through the acquisition of the airport restaurant and contract catering business of SAS Service Partner, the subsidiary of the Swedish airline.

The Pounds 71.9m purchase price is to be funded through a six for 19 rights issue at 420p, 20 per cent below Tuesday's close. The rights issue will raise Pounds 86.8m.

The acquisition will give Compass a presence in eight mainly northern European countries, and 34 airports. It will also provide an entry into the fragmented continental contract catering business, although most of the SAS contracts are in Scandinavia or in the off-shore sector where growth prospects are limited in the short term.

UK analysts have recently been concerned that Compass has been better at improving margins through tight purchasing than increasing sales.

But the market reacted enthusiastically yesterday. The shares rose 1p to 528p as the City digested the company's statement that the acquisition and rights issue will be modestly earnings enhancing in its first full year.

Compass also reported an increase in pre-tax profits from Pounds 17m to Pounds 18.2m for the six months to end March on sales up 18.6 per cent at Pounds 209.4m. Earnings per share rose from 16.8p to 18p and the group is to pay a 4.44p interim dividend, up 6 per cent.

The board forecast a final dividend of not less than 8.56p which, if paid, would mean a 5.7 per cent increase over 1992.

Mr Francis Mackay, chief executive, said the catering division had performed well with operating profits rising 8 per cent to Pounds 14.6m.

The group has also implemented a reorganisation into seven divisions which it hopes will provide a better structure to pursue contracts.

Profits in the healthcare division grew 6.7 per cent to Pounds 6.7m.

Acquisitions during the period pushed borrowings from Pounds 38m at the start of the year to Pounds 67.2m, but interest cover was at least seven times.

Morgan Grenfell, the merchant bank, brought the SAS deal to Compass and underwrote the rights issue with Lazards.

Background, Page 22 Lex, Page 20

Compass Group SAS Service Partners Scandinavian Airlines System GB United Kingdom, EC SE Sweden, West Europe P5812 Eating Places P4512 Air Transportation, Scheduled COMP Mergers & acquisitions COMP Disposals FIN Interim results P5812 P4512 The Financial Times London Page 21 407
Saatchi surprises City with rights issue to raise Pounds 73m Publication 930520FT Processed by FT 930520 By GARY MEAD, Marketing Correspondent

SAATCHI and Saatchi, the world's fourth largest advertising group, yesterday sprang a Pounds 73m rights issue on the City.

Shareholders are asked to pay 130p, a 24 per cent discount to Tuesday's closing price of 172p, on the basis of 10 new shares for every 27 held.

About Pounds 36.5m of the cash will be used to reduce bank debt (average net debt was Pounds 194m in December 1992), Pounds 19m will be used to acquire minority interests in European advertising subsidiaries, Pounds 10.5m will be used to strengthen media buying businesses and to develop businesses in growing markets in Asia, Latin America and east Europe, Pounds 7m will be used to acquire new information technology.

The targeted minority interests are 50 per cent of SSAW Italy; 20 per cent of Grupo BSB Spain; and 37 per cent of Scholz & Friends Germany.

Mr Charles Scott, chief executive, said yesterday the group's 20-bank syndicate fully approved the rights issue. He was confident that institutional investors would support the call for additional cash. For Mr Scott, the rights issue continues the process of putting the group back on a sound financial footing.

The rights issue is fully underwritten by SG Warburg and UBS Ltd. The largest institutional investor is the State of Wisconsin Investment Board with 8.99 per cent. Currently, 50 per cent of the group's shareholders are in the US, 40 per cent in the UK. Of that number, half are private individuals.

Since 1990 the group has sold seven non-core businesses and is now concentrating, Mr Scott said, on organic growth of its main business, global advertising. However, there are some doubts about future trading in the US, where an important clients, Mars, has consolidated its media buying outside the group.

In March 1991 Saatchi achieved a recapitalisation, which removed the threat of having to redeem Pounds 211m of Euro-preference shares. Saatchi's share price has moved from the equivalent of more than Pounds 60 in 1986, to 95p in December 1991, touching 245p in May 1992. Saatchi's share price yesterday dropped to 161p but finished the day down just 2p at 170p.

Lex, Page 20

Saatchi and Saatchi GB United Kingdom, EC P7311 Advertising Agencies FIN Share issues P7311 The Financial Times London Page 21 397
Bass hit by UK recession and more bad debts: Chairman expects slow recovery - City responds by taking 50p off share price Publication 930520FT Processed by FT 930520 By PHILIP RAWSTORNE

BASS, the brewing and hotels group, reported a 14 per cent decline in first half pre-tax profits as Holiday Inns in continental Europe were affected by growing recession and the UK brewing business increased provisions for bad debts.

Profits for the six months to April 10 fell from Pounds 266m to Pounds 228m - and the market responded by taking 50p from the shares which closed at 483p.

Mr Ian Prosser, chairman and chief executive, said UK sales trends in the past few weeks suggested that the economy was finally stirring. 'But we do not expect any recovery will be fast, and so expect limited benefit from it in the second half of our trading year.'

Group operating profits slipped from Pounds 285m to Pounds 268m on turnover 2 per cent higher at Pounds 2.3bn.

Brewing profits were 5.2 per cent lower at Pounds 73m, after bad debt provisions were increased from Pounds 10m to Pounds 19m. Beer volumes were marginally higher, despite the group's disposal of 872 pubs. Overall market share rose 0.2 percentage points, with beer supplies to free trade pubs ahead 7 per cent.

Rationalisation savings helped ease the pressure from competitive discounting but, after the bad debt provisions, margins declined from 9.3 per cent to 8.7 per cent. 'We are not leading the discounting in the industry but responding to it where necessary,' Mr Prosser said.

Pub profits, reflecting the reduction in outlets, fell 11 per cent to Pounds 98m on turnover 2 per cent lower at Pounds 568m. Capital spending of Pounds 48m was slightly lower.

Holiday Inn profits dropped from Pounds 54m to Pounds 50m on turnover which increased 13 per cent to Pounds 289m. Improvement in North America was more than offset by an Pounds 8m fall in profits from the European operations. In the half year, 70 hotels joined the Holiday Inn system worldwide, and a further 200 hotels are due to join in the next 18 months.

Leisure business profits were up 11.8 per cent to Pounds 38m, with good performances from Coral betting shops and Gala bingo halls.

Profits from Britvic soft drinks declined 28 per cent to Pounds 5m, largely due to increased costs as a result of sterling's devaluation.

The strengthening of the dollar also added Pounds 150m to the group's net borrowings which, in total, rose Pounds 400m. Gearing increased from 19 per cent to 31 per cent; and interest charges moved from Pounds 27m to Pounds 39m. Earnings per share declined from 20.9p to 17.4p but the interim dividend is raised 3.8 per cent to 5.45p.

Lex, Page 20 London Stock Exchange, Page 40

Bass GB United Kingdom, EC P2082 Malt Beverages P7011 Hotels and Motels FIN Interim results P2082 P7011 The Financial Times London Page 21 492
Two Hungarian banks said to be technically insolvent Publication 930520FT Processed by FT 930520 By NICHOLAS DENTON BUDAPEST

HUNGARY'S two largest commercial banks are technically insolvent and require big injections of capital, according to a World Bank paper.

The two banks, both state-owned, are Magyar Hitel Bank, heavily exposed to Hungary's troubled engineering industry, and Kereskedelmi Bank, main lender to the country's drought-stricken farms.

Some of their problems stem from debts inherited from the communist period, but others are more recent.

Both banks have suffered from bad debts caused by the three-year Hungarian recession and a collapse in industry's sales to former Comecon countries.

Magyar Hitel Bank has Ft34.6bn (Pounds 253.2m) of loans classified as bad, doubtful or substandard, according to the study. Taking these loans into account, the bank has negative capital of Ft19bn, equivalent to 7.9 per cent of its risk-weighted assets.

Kereskedelmi Bank has Ft26.3bn in classified loans, with negative capital of Ft13.7bn, 8.5 per cent of assets.

The report, a World Bank internal aide-memoire obtained by the Financial Times, says: 'At present, most of the banks are technically insolvent according to internationally accepted accounting standards.'

An infusion of Ft100bn of new capital is required to bring the banking sector's capital up to 4 per cent of lending, the target the World Bank recommends. Half of the new capital is needed for the two big banks.

The plight of the banks came as little surprise to Budapest's close-knit financial community, which believes the two banks are 'too big to fail' and will therefore be rescued by the authorities. 'A bank which enjoys the umbrella of the state cannot fail,' said Mr Gyorgy Suranyi, managing director of Central-European International Bank.

Mr Istvan Szalkai, president of Hitel Bank, expected little market reaction.

'The market has taken into consideration the bad results,' he said. Interbank money market facilities available to the bank had shrunk by about 10 per cent, he said, reflecting lenders' unease.

Central bankers at the National Bank of Hungary professed confidence that depositors, knowing the banks were liquid and would be recapitalised, would not panic.

Bankers and officials also stressed that Credit Suisse First Boston, leader of the task force on bank privatisation and source of much of the data in the report, used conservative international accounting standards.

Hungarian rules are more flattering. Under Hungarian accounting principles, the two banks still have positive capital.

Hitel Bank said its 1992 results would be substantially better than CSFB estimates.

Magyar Hitel Bank Kereskedelmi Bank HU Hungary, East Europe P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times London Page 21 437
Troubles behind the red ink Publication 930520FT Processed by FT 930520

BEHIND the World Bank and International Monetary Fund's belief that Hungary's big banks need rescuing are some compelling facts.

The capital of the two biggest banks - Magyar Hitel Bank and Kereskedelmi Bank - is wiped out when international accounting standards are applied to their bad loans. Economic output has fallen 18 per cent in the last three years. The disappearance of demand from former Comecon countries has worsened the recession.

In 1991 parliament passed strict new laws: on bankruptcy, causing about a tenth of companies to go into liquidation or file for protection from creditors; and on financial institutions, giving banks the incentive to recognise bad debts.

Hitel Bank says its non-performing loans tripled.

The result has been a sharp credit crunch. Banks, faced with the need to make huge provisions, have charged high real interest rates to maintain margins and produce paper operating profits, estimated at Ft39.7bn (Pounds 293m) for the whole sector in 1992.

The average interest rate on short-term corporate loans was 28.2 per cent at the end of 1992, compared with inflation of 21.6 per cent over the year.

The World Bank study concludes that 'the financial system is unable to finance the transformation to a market economy'.

A one-off recapitalisation is widely seen as essential. Economic recovery is still feeble and loan portfolios are deteriorating. Weaker banks are losing their better clients to stronger ones.

Recapitalisation must also put the banking sector into condition for privatisation before more of the potential acquirers lose patience and set up local subsidiaries from scratch.

An injection of funds, however, would allow bank managers to escape the consequence of past errors.

Magyar Hitel Bank Kereskedelmi Bank HU Hungary, East Europe P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times London Page 21 311
German steel chiefs attack EC Publication 930520FT Processed by FT 930520 By ARIANE GENILLARD, QUENTIN PEEL and DAVID BUCHAN SAARBRUCKEN, BONN, PARIS

LEADERS of the German steel industry expressed indignation and bitterness yesterday at the failure of European steel restructuring policies in the wake of the collapse of Saarstahl, the French-owned steelmaker in the depressed German Saarland.

Thyssen, Germany's largest steel manufacturer, condemned the policy of allowing continuing state subsidies to ailing producers, and said the rest of the industry would be threatened if they were allowed to restructure their debts.

The steel manufacturers' federation lashed out at the failure of the European Community to curb production at Italy's state-owned Ilva and at CSI in Spain, where the companies' debt burdens far exceed those of Germany's private-sector producers. The industry condemned the policy of interfering in free market competition to protect the weakest manufacturers.

The anger of industry leaders was matched by the bitterness of workers at the Saarstahl plant, who blamed Brussels, above all, for the loss of their jobs.

Saarstahl filed for bankruptcy on Tuesday night after France's Usinor-Sacilor, which owns 70 per cent of the holding company, decided it could no longer transfer funds to cover estimated monthly losses of DM30m (Pounds 12m).

Hopes for an immediate rescue faded as both federal and Saarland authorities said no new subsidies were available. Since Saarstahl first ran into difficulties in 1978, it has received some DM3.7bn in direct subsidies, soft loans and credit guarantees.

'We are the victims of the European Community's inability to devise a coherent steel policy,' said Mr Werner Fries, an official of the works council at the plant.

The statement by Thyssen underlined the deep concern at the heart of the German industry over the crisis.

The company warned that if both Saarstahl and Klockner-Werke, the other German steelmaker currently seeking a debt write-off with its main creditors, are kept going artificially, it would have 'negative consequences on the rest of theindustry'.

Thyssen employs 13,000 just in the manufacture of long products, like steel sections, rods and wire, where EC overcapacity is greatest.

David Buchan adds from Paris: Usinor-Sacilor said it would have to take a FFr1.4bn loss in its 1993 accounts, representing its loans to the subsidiary, which would not now be repaid.

Japanese puts EC steel plan to the sword, Page 3

Saarstahl Usinor Sacilor Thyssen AG vorm August Thyssen Huette DE Germany, EC FR France, EC P3312 Blast Furnaces and Steel Mills COMP Company News P3312 The Financial Times London Page 20 420
Smith rejects electoral reform: Party leader backs manifesto commitment to referendum Publication 930520FT Processed by FT 930520 By ALISON SMITH

MR JOHN SMITH, the Labour leader, yesterday rejected a change in the way MPs are elected, but said a referendum on elections to the House of Commons should be a Labour manifesto commitment at the next general election.

In a separate move, he reduced the prospect of a damaging, perhaps unsuccessful, confrontation with the trade unions at the autumn conference over their links with the party, by proposing that individual union members should receive full party membership at a reduced rate.

Another change would allow new members to take part in the selection of candidates. This would enable Mr Smith to present the plans both as one-member, one-vote for the selection of parliamentary candidates and as involving union members in the process. He also urged a substantial reduction in ordinary subscriptions as part of the campaign to increase membership.

The statements came at a meeting of Labour's ruling national executive committee, which discussed the Plant committee report on constitutional changes.

The report recommends that elections to the House of Commons should be on the basis of a supplementary vote system, through which second preference votes can be brought into play if no candidate achieves more than half the first preferences.

Mr Smith's comments contained comfort both for reformers, who believe the referendum will keep up momentum for change, and for those who want to keep the first-past-the-post system.

Almost all on both sides of the argument can agree that a possible change in the voting system should be decided by the electors rather than the elected.

Sir Norman Fowler, the Tory party chairman, accused Mr Smith of fudging the question of union links, and passing the buck on electoral change.

Mr Paddy Ashdown, the Liberal Democrat leader, said that his admission that democratic change was on the agenda was 'a small step forward'.

Labour's electoral reformers such as Mr Robin Cook, the shadow trade and industry secretary, said that it was now up to them to persuade Mr Smith and others, but the party leader's words suggested that his opinion was firm. 'As the Plant Committee acknowledges, there is no intrinsically superior electoral system and I see no reason why we should make a change unless the alternative is clearly preferable,' he said. He emphasised his resistance to any system more likely to produce coalition government.

Mr Smith's plans for internal reforms appeared to be succeeding in their aim of assembling a consensus in support of the principle of one-member, one-vote in candidate selection.

Mr John Prescott, a shadow cabinet member and a critic of the original plans, said yesterday's proposals endorsed the more active involvement of the unions in the party's decision-making.

GB United Kingdom, EC P9199 General Government, NEC P8651 Political Organizations GOVT Government News P9199 P8651 The Financial Times London Page 20 484
Danes are rewarded for Yes vote with tax cuts Publication 930520FT Processed by FT 930520 By HUGH CARNEGY and HILARY BARNES COPENHAGEN

THE DANISH government yesterday brushed aside violent demonstrations sparked by Tuesday's referendum result endorsing Maastricht, and as a reward for the Yes vote announced a programme to stimulate economic growth and employment.

Riots briefly flared up again last night, when police fired tear gas at about 200 stone-throwing protestors who had lit fires and smashed windows in central Copenhagen.

Clashes on the previous night, described as the worst in Denmark's peacetime history, had left 11 demonstrators wounded by police gunfire and 26 policemen injured.

The government blamed a small fringe group of militant squatters, known as the BZers. Many of them are anarchists and other far-left militants who see the plans for further EC integration as meaning tighter control of Europe by conservative political and business interests.

Little damage was done to property, the main targets being the windows of several bank branches and a few cars. The government insisted the attacks did not represent the feelings of the vast majority of No voters.

In parliament, Mr Poul Nyrup Rasmussen, the Social Democratic prime minister, condemned Tuesday night's riots.

The prime minister went on to announce that the government would slash marginal income tax rates to bring them closer into line with the rest of the EC.

It would also bring forward state investment plans to push up growth in gross domestic product from under 1 per cent this year to almost 3.5 per cent in 1994.

Mr Rasmussen said the signal from Danish voters was that Europe's political leaders must close the gap that had opened between them and their electorates over Maastricht.

They could achieve this by adopting pragmatic policies that tackled problems such as unemployment, which had a direct impact on the everyday lives of Europeans. 'We have to be more engaged,' he said.

Denmark's central bank cut the official discount rate to 8.25 per cent from 9.25 per cent and commercial banks made similar cuts in lending and deposit rates, which had been held artificially high because of uncertainty over the Maastricht vote.

The Copenhagen stock market, which had risen strongly in expectation of a Yes vote, put on a further 2.3 points to close at 303.89.

Tax cuts aim to galvanise other EC member states to rally behind a beefed-up economic growth package ahead of next month's summit in Copenhagen.

Rasmussen quick to reward voters, Page 2 Editorial Comment, Page 19

DK Denmark, EC P9311 Finance, Taxation, and Monetary Policy P9229 Public Order and Safety, NEC GOVT Taxes P9311 P9229 The Financial Times London Page 20 442
Sharp rise in US trade gap threatens tension with Japan Publication 930520FT Processed by FT 930520 By MICHAEL PROWSE WASHINGTON

FEARS of increased trade tension between the US and Japan rose yesterday after an unexpectedly sharp rise in the US trade deficit to Dollars 10.2bn (Pounds 6.6bn) in March, the biggest shortfall for nearly four years. More than half the deficit was with Japan.

The overall deficit was up nearly 30 per cent from the shortfall of Dollars 7.9bn in February, mainly reflecting a surge in imports.

The deterioration is likely to prompt a sharp downward revision of growth in the first quarter to an annual rate of 1.0 per cent to 1.5 per cent, compared with an initial estimate of 1.8 per cent.

The bilateral deficit with Japan rose to Dollars 5.3bn before seasonal adjustment. The next-largest imbalance was a Dollars 1.5bn deficit with China.

Mr Ron Brown, commerce secretary, said the poor figures showed the importance of pursuing 'expanded markets for our exports on all fronts'. The US would press for 'prompt fiscal stimulus in Japan, market-driven exchange rate corrections, and negotiations that remove the structural barriers to improved trade between our nations.' On Tuesday, Mr Lawrence Summers, Treasury undersecretary for international affairs, urged Japan to do more to stimulate its economy.

The trade figures were the latest in a series of economic setbacks for the Clinton administration. Reports last week of a jump in consumer and wholesale prices rekindled fears of higher inflation. Speculation this week that the Federal Reserve might soon begin to tighten monetary policy sent long bond yields back above 7 per cent. Imports rose 9.7 per cent between February and March to Dollars 49.2bn, a record in cash terms. For the first three months, imports were 11 per cent higher than in the same period last year.

As consumer demand was weaker than expected in the first quarter, many of the imports were stockpiled by companies. Mr Brown said that indicated import growth would probably decelerate in the current quarter.

But the underlying trends are not encouraging. Exports did better than expected in March, rising 5.6 per cent to Dollars 39bn. But in the first quarter exports rose only 2.4 per cent relative to the same period last year.

Most analysts expect the trade deficit to widen this year, reflecting faster growth in the US than elsewhere. In last month's budget, the trade deficit was projected to rise to Dollars 110bn-Dollars 140bn next fiscal year, against Dollars 84bn in calendar 1992.

Mr Brown's remarks prompted speculation that the US was again seeking to curb the deficit by talking the yen up against the dollar. By close of trading in New York the dollar had fallen to Y110.6 from the previous day's close of Y111.47.

US United States of America P9311 Finance, Taxation, and Monetary Policy ECON Balance of trade ECON Economic Indicators P9311 The Financial Times London Page 20 485
The Lex Column: Allied-Lyons Publication 930520FT Processed by FT 930520

Allied-Lyons must be distressed beyond measure at the publicity surrounding its Pounds 200m convertible bond issue. The share price had already fallen before the news inexplicably found its way into the weekend press. It jumped over 2 per cent when no bond emerged with the results on Tuesday morning, though the enthusiasm wore off during the day as the market began to suspect that the issue was looming after all. The price fell sharply again yesterday when it was finally launched. That sort of confusion occurs in a market forced to rely on hint and innuendo. It would have been prevented if Allied had come clean with a formal statement about its intentions. It would have lost nothing by doing so once they had been leaked.

Allied-Lyons GB United Kingdom, EC P2082 Malt Beverages FIN Share issues CMMT Comment & Analysis P2082 The Financial Times London Page 20 158
The Lex Column: Compass Publication 930520FT Processed by FT 930520

It is difficult to avoid the conclusion that, in stock market terms at least, Compass is a business whose moment has gone. The Pounds 72m acquisition of SAS's catering arm is an attractive enough deal and will enhance earnings. The trouble is that at this point in the cycle contract catering looks a trifle dull. Likely earnings growth in single figures and a sub-market yield represent meagre attractions.

Compass must hope that disillusion with the financial constraints facing many recovery stocks will encourage investors to return to its steadier virtues. Such concerns will not be lost on Gardner Merchant as it contemplates its eventual market debut.

Compass Group GB United Kingdom, EC P5812 Eating Places CMMT Comment & Analysis COMP Mergers & acquisitions FIN Interim results P5812 The Financial Times London Page 20 143
The Lex Column: Saatchi & Saatchi Publication 930520FT Processed by FT 930520

It is an odd state of affairs when tax considerations provide one of the principal justifications for a rights issue. Yet oddity is something of a speciality for Saatchi & Saatchi and the group's accumulated tax losses represent one of its few financial strengths. The Pounds 73m rights issue allows it to exploit them neatly to enhance earnings. Half the proceeds will be used to reduce debt resulting in a smaller interest charge and lower tax rate. About Pounds 19m will be spent buying out minority interests in mainland European agencies. This, too, helps tax efficiency. Saatchi will spend the rest improving service levels, upgrading its information technology and expanding its international coverage. Expertise in the Chinese market is all the rage, it seems.

So far, so useful. Sadly, though, Saatchi still has a poor trading story to tell. Theoretically, advertising should be an early beneficiary of recovery but there is not much sign of it yet. An additional worry is that the Marlboro mayhem seems to have caused brand managers to reassess promotional strategies, creating something of a hiatus in advertising spend. Saatchi's wafer-thin margins provide little leeway should events again turn nasty. Future profits will be drained by Pounds 25m of earn-out payments. That provides all the more reason to seek value elsewhere. Gold Greenlees Trott and WPP seem better poised.

Saatchi and Saatchi GB United Kingdom, EC P7311 Advertising Agencies CMMT Comment & Analysis FIN Share issues P7311 The Financial Times London Page 20 259
The Lex Column: UK takeovers Publication 930520FT Processed by FT 930520

Nervous poorly-performing companies may be surprised but relieved by the deathly quiet on the UK takeover scene. There is, however, little prey of obvious value in the market. Since devaluation the FT-A All-Share index has risen by 25 per cent. That figure masks an even stronger performance from recovery shares: the FT-SE Mid 250 index has risen by some 46 per cent.

Such increases run well ahead of any likely improvement in corporate earnings over the next 18 months. Economic growth may be sluggish, and much of the easy cost cutting has already been forced on even the weakest managements by the three-year recession. Under the circumstances, it is hard for predators to justify paying hefty premiums for control.

Management psychology has also turned against bids after some scarring experiences in the late 1980s. Many friendly bidders find that vendors are still asking unrealistically high prices. Hostile bids, however, offer little opportunity for due diligence examination of the target's finances, increasing the risks at a time when buyers lack confidence. Bank finance is hard to come by for cash bids - indeed some predators have risked losing existing banking lines if they considered acquisitions. Paper bids are a good deal harder to sell to sceptical institutions.

In any event, takeovers often feature much later in the economic cycle. Bid activity last hit bottom in 1983 - some two years after the recession had ended. But bids have not fallen permanently from fashion. Some institutions regard a bid as the cleanest and most effective way to shake up a poorly performing company. And doubtless a few situations still remain overlooked by all but the sharpest eyes.

GB United Kingdom, EC P6231 Security and Commodity Exchanges COMP Mergers & acquisitions CMMT Comment & Analysis P6231 The Financial Times London Page 20 309
The Lex Column: Off note from Bass Publication 930520FT Processed by FT 930520

Bass has a disingenuous way of describing the beer market as subject to increased aggression rather than a price war. But there is no mistaking the gauntlet it threw down yesterday. With its existing market share of around 23 per cent, economies of scale from brewery closures and a balance sheet strong enough to support more free trade loans, the chances are that it will succeed in raising market share where others fail. The real question concerns the cost. Some of that is coming through already.

Bass claims its underlying beer margins rose in the first half, but that is before the Pounds 9m increase in the provision for bad debts. After the provision, which must reflect its efforts to win new business, margins fell to 8.7 per cent from 9.3 per cent. That sacrifice has, however, produced a gain in market share of only 0.2 per cent.

Yesterday's 9 per cent fall in the shares may be a step adjustment to a situation where Bass can expect little increase in earnings over the next couple of years while other companies enjoy the recovery. But there are other niggling worries which prevent the shares seeming much of a bargain. These include the sudden need for a further Pounds 4.9m restructuring charge in brewing, the downturn in European hotels, and - an issue the company glossed over yesterday - the weakness in US hotel profits despite higher occupancy and room rates. Since it is on such tricky ground, Bass might do well to reconsider its refusal to split the roles of chairman and chief executive.

Bass GB United Kingdom, EC P2082 Malt Beverages P7011 Hotels and Motels FIN Interim results CMMT Comment & Analysis P2082 P7011 The Financial Times London Page 20 304
Observer: Noah let up Publication 930520FT Processed by FT 930520

Many thanks to all those readers who pointed out that there was a happy ending to yesterday's tale about Noah and the two snakes who said they couldn't go forth and multiply because they were adders.

Shortly after being let loose in the forest, they found a set of log tables and from that day forward had no difficulty multiplying.

XA World P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 19 84
Observer: Mounting up Publication 930520FT Processed by FT 930520

It sounds as if some of Argentina's overseas ambassadors may be an even worse credit risk than the country they have been chosen to represent.

Buenos Aires' newspapers have been filled with reports that some of Argentina's departing ambassadors have left behind hundreds of thousands of dollars in unpaid debts.

Admittedly, part of the explanation has to do with confusion over ambassadors' private and official expenses. Even so, the list of ambassadorial debtors has set tongues wagging.

Ambassador Carlos Mandry, former ambassador to Bonn, is alleged to have left Deutsche Bank with a Dollars 300,000 overdraft after he was recalled last year. Ruben Cardozo left Paraguay and Dollars 230,000 in IOUs and the former ambassador to The Hague, Julian William Kent, owed banks Dollars 100,000.

The Foreign Ministry is investigating but says that 'where spending was for official functions, the debts were checked and paid by the ministry. But in the case of personal debts, that's each ambassador's problem.'

Or, rather, each ambassador's creditor's problem.

AR Argentina, South America P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 19 190
Observer: Share drive Publication 930520FT Processed by FT 930520

Shares in golf clubs have long been traded in Japan - but the very idea provokes splutterings of disapproval at most British 19th holes. That could well change, though, if Simon Hampel (nephew of ICI's Ronnie) has his way.

The young Hampel has just set up a stock broker, Mercator International, which aims to match buyers and sellers of shares in the Wisley golf club south of London.

Built by British Aerospace's Arlington property subsidiary and the Middle East-backed Mannai Corporation, Wisley has 480 shareholders. They have stumped up Pounds 15m of equity over the last three years, at between Pounds 26,000 and Pounds 40,000 per head.

Under the rules of the club, a free market came into effect in January, allowing the odd speculator and, it is rumoured, a few distressed Lloyd's Names, to bail out.

The developers currently offer new shares at Pounds 35,000, but, if recent transactions are anything to go by, Mercator may be able to do a better deal.

With a few other clubs joining in, perhaps there is room for a European version of the Nikkei Golf index, which is a recognised lead indicator for the Japanese economy.

Mercator International Wisley Golf Club GB United Kingdom, EC P6211 Security Brokers and Dealers P7997 Membership Sports and Recreation Clubs COMP Company News P6211 P7997 The Financial Times London Page 19 234
Observer: Summed up Publication 930520FT Processed by FT 930520

Mark Boleat has been an extremely effective point man for Britain's building societies and he stands as good a chance as anyone of making a success of his new job as director general of the much larger Association of British Insurers.

But one little known rule for this year's annual conference of the Building Societies Association suggests that Boleat and his troops may not be quite as concerned about the freedom of the press, which they have so carefully cultivated over the years.

When the BSA got wind of the news that the Cheltenham & Gloucester, Britain's sixth biggest society, had invited four journalists to join its table of eight at next month's annual dinner in Brighton, the balloon went up at Boleat's Savile Row headquarters.

C&G, which was paying for its guests, was ordered to withdraw the invites. The official reason was that the 'seating plan may seem a little unbalanced if so many journalists are concentrated on one table'.

Observer can't wait to hear the reaction of Mick Newmarch of the Pru if Boleat's officials try to vet his seating plan.

GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents P8611 Business Associations NEWS General News P6162 P8611 The Financial Times London Page 19 214
Observer: Candybar Issues Publication 930520FT Processed by FT 930520

If Saatchi & Saatchi, one of the world's biggest advertising agencies, can get away with a Pounds 73m rights issue, it surely must be on the mend.

But it still can't afford to lose big name clients such as Mars, the highly private confectionery and pet food giant which is fighting to stem the slide in its share of many of its main markets. Indeed, Observer hears that chairman Maurice Saatchi has been spending so much of his expensive time buttering up multi-billioniare Forrest Mars that a number of Maurice's colleagues have rechristened him Snickers Saatchi, after one of Mars' more famous chocolate bars.

Better than Whiskas Saatchi, perhaps.

Saatchi and Saatchi GB United Kingdom, EC P7311 Advertising Agencies NEWS General News P7311 The Financial Times London Page 19 138
Observer: Full weight of the law Publication 930520FT Processed by FT 930520

Officially, the Serious Fraud Office is doing everything in its power to recapture fugitive entrepreneur Asil Nadir now holed up in northern Cyprus. Secretly, however, the SFO may be less than heartbroken if Nadir does not return. There may be nowhere to hold his trial.

The former Polly Peck chairman was due to stand trial in September in one of the two courtrooms built specially to cater for the peculiar requirements of long and complex fraud cases. The courtrooms used for the year-long Blue Arrow trial and the Barlow Clowes prosecution, are in Chichester Rents in London's Chancery Lane. But now it seems the building may be structurally unsound.

The Department of Environment is concerned that the floor loadings may not be up to building specifications. Investigatory work will start soon and the hope is that any repairs can be done by September - if possible.

Just goes to show what can happen when the full weight of the law is brought to bear.

GB United Kingdom, EC P9211 Courts NEWS General News P9211 The Financial Times London Page 19 191
Leading Article: Major mumbles Publication 930520FT Processed by FT 930520

GOOD NEWS, a positive message, a sympathetic audience: an after dinner speaker could hardly ask for more. Yet the prime minister's speech to the CBI dinner on Tuesday night came out like a damp souffle. Concocted from cliche and assertion rather than reasoning, it failed to satisfy either by force of oratory or strength of argument.

Mr Major is at his best in small gatherings, when his courtesy and decency win friends. At the big set piece, he can be strangely uninspiring. His CBI performance began with scars of recession, then waded through ripples of recovery and tides of manufacturing output before gasping into a jungle of enterprises choked by weeds, where he said industrialists were digging away to cut red tape.

The poverty of expression obscures the fact that the prime minister has a story to tell, especially before a group of industrialists. He shares most of their views about free trade and deregulation, and - with the agony of Maastricht nearly over - about Europe as well. The relevant government departments are eager to talk constructively to business. And he no longer has to feel embarrassed about economic prospects.

All that is needed is a sense of phrasing, a couple of good jokes and the ability to pull the different strands of policymaking together into a coherent and practical whole. Sir Ronald Millar made music for Mrs Thatcher, not herself the most gifted of orators. Peggy Noonan did the same for President Reagan. If Mr Major cannot discover a latter-day version, then a sharp-eyed sub-editor and a dictionary of cliches would be better than nothing. At least the dinner guests would then have longer to chat over the coffee.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON Economic Indicators CMMT Comment & Analysis P9311 The Financial Times London Page 19 314
Personal View: The bureaucracy that stifles Europe Publication 930520FT Processed by FT 930520 By MICHAEL ANGUS

Today, Britain's position in Europe is being damaged by a sense of false nationalism which is out of place in a changing world. This needs to be replaced by a sense of vision that certainly does not involve any real sacrifice of our national identity.

Many people, including me, are old enough to remember the original visionaries of the new Europe: Monnet, Schuman and, yes, Sir Winston Churchill too. Of course they saw the considerable economic advantages of closer association. But equally they saw a Europe unlikely to be riven by conflict. A Europe with Germany as a central and involved member. A Europe of independent nation states but with citizens with a broader and richer understanding of each other, less likely to become hypnotised by old nationalistic slogans.

There are few who would not subscribe to this vision. Yet today there are many who feel an increasing hostility to the whole European concept. Why should this be? The answer is one word - Brussels. Something has to be done about Brussels.

Many people in business have a list of pettifogging regulations that have emanated from that great bureaucracy. But these are just symptoms of the general approach of the European Commission. Some of its members really do want to interfere as deeply as possible in local national affairs. There is a dirigiste philosophy that sometimes reminds one of Napoleonic edicts. There is an arrogance that is totally out of place, particularly in a group that has no elected status.

I would hazard a guess that many of them have lost touch with the citizens whose interests they purport to serve, and especially with young people. Brussels contains too many of yesterday's people with yesterday's ideas and methods. Their motto seems to be: 'If it moves - regulate it; if it doesn't move - regulate it.'

Industry is not well-served by Brussels. We seem to spend too much of our time fending off new forms of centralised social or industrial legislation and regulation. And while this is going on there seems to be studied indifference in the Community to the problem of European industrial competitiveness, as indicated by Europe's loss of share of world exports of manufactured goods from 22 per cent in 1980 to 18 per cent in 1992. And even when this point is addressed, some of the proposed solutions seem strangely like protectionism. I sometimes fear that Brussels would ideally like to organise European industry as well as it has organised European agriculture.

This is no reason to abandon the single market as the so-called Euro-sceptics would wish. Rather it is a challenge to modify the Brussels approach so as to give primary emphasis to European industrial competitiveness.

The principle of subsidiarity, with its genesis in the Maastricht treaty, is precious and needs to be refined and extended. It is clearly in harmony with the mood of Europe's people. Brussels must not be allowed to water it down or lose it under a load of bureaucracy. It is not the function of Brussels to trample over considerations of national tradition and working practices.

Nothing would be more welcome to CBI members than a simultaneous announcement that parliament had ratified the Maastricht treaty and that a General Agreement on Tariffs and Trade accord had been concluded.

But the point about worldwide free and open trade is that it has a positive effect on competition. So we have a vital need to be competitive. And we need to be aware of this need as a community.

The CBI's message to European governments and to the Commission is that there is serious work to be done on identifying the sources of Europe's overall loss of competitiveness and eliminating them. That is why we have persuaded our sister federations in Unice, the European employers' federation, to undertake a study of declining European competitiveness, focusing particularly on the impact of high social costs and emphasising the importance of avoiding further 'own goals' through the social chapter, or other related legislation.

It is clearly in the interests of British business that the Maastricht treaty is ratified. Britain needs its government to be at the heart of the negotiations, ensuring that its concerns are taken into consideration, constantly improving and updating the single market and making it work fairly. And, I would add, curbing the power of the Brussels bureaucrats.

This article is based on an extract from the speech by Sir Michael Angus, president of the Confederation of British Industry, at the CBI's annual dinner on Tuesday

GB United Kingdom, EC QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page 19 791
Last stand before sell-off junction: The concerns underlying a possible Tory backbench revolt over rail privatisation Publication 930520FT Processed by FT 930520 By RICHARD TOMKINS

The British have an attachment to their railways out of all proportion to their willingness to use them. Leaving aside the 426,000 season ticket holders who commute daily into central London, most people who own cars (and many who do not) hardly take a train from one year to the next. Yet they regard railways in much the same way as people with private medical insurance regard the National Health Service - they want them to be there, just in case.

It is a rash government, then, that dares to tinker with the trains, as Mr John Major is finding to his discomfort. Even before the heavy Conservative defeat at the Newbury by-election and county council polls a fortnight ago, the planned privatisation of British Rail had been dogged by concerns about the possible implications for fares and services. Now, with Conservative backbenchers in no mood for measures that could further reduce party support, the government is facing the possibility of a revolt when the Railways Bill reaches report stage in the Commons next week.

On the face of it, this is an avoidable crisis. The rebellious backbenchers say that are not seeking to wreck the legislation; they simply wish to make it more palatable by building in safeguards to protect rail users' interests. But the backbenchers' move raises at least two questions. First, are their fears about the possible consequences of privatisation justified? And if they are, can the legislation be amended without involving the government in an embarrassing climbdown?

Underlying the widespread concern about the government's plans for the railways is the fact that this privatisation is unlike those that have gone before. The gas, electricity, water and telecommunications industries were profitable and expanding when they came to the market, so their privatisation was not accompanied by fears of reductions in services. Rail, by contrast, is a heavily loss-making industry in long-term decline, and most of its services exist only because they are propped up by the state. People understandably fear that, if exposed to the full force of commercial reality, the railways would have a very short future.

The government has attempted to address these concerns by adopting a hybrid approach to rail privatisation. Only the freight train operations are to be sold outright. The infrastructure - the tracks and signalling - will be hived off to a new state company called Railtrack, while the operation of British Rail's passenger services will be contracted out to whichever private sector operator bids the highest sum for the franchise (or, more likely, bids for the lowest subsidy).

It follows that what is going on is not a privatisation in the accepted sense. Freight aside, virtually no assets are to be sold. In terms of day-to-day operations, the railways will be more highly regulated than ever because of the need to supervise private-sector participation through two new bodies, the rail regulator and the franchising director. And since nearly everyone involved in running the passenger railway will remain beholden to the government for subsidy, ministers will retain the right to go on meddling in the railways' affairs at every level.

The implication is that the new structure will make little difference. Yet it will bring at least one fundamental change - in the way government subsidy is paid. Under the present system, British Rail is paid block grants each year to cover the costs of operating its loss-making Network SouthEast and Regional Railways divisions, without anyone being aware of exactly where the money is being lost. After privatisation, the profits and losses of each individual route will have to be identified so that would-be franchisees know how much to bid for them. The result could be to show that some lines are losing so much money that the case for closing them becomes irresistible.

There is another aspect to the subsidies issue. As long as British Rail is running the railways, the costs imposed by the loss-making lines are partially relieved by the surpluses produced by the profitable routes. Under the new system, the surpluses generated by the profitable services will be pocketed by the companies that win the franchises to operate them, but the public sector will still be paying subsidies to the franchisees running the loss-makers. Perversely, the result is likely to be that privatisation increases rather than decreases the net cost of the railways to the exchequer.

How will the government respond to these pressures? The answer is that nobody knows. In theory, the upward pressure on subsidies should be counterbalanced by cost savings resulting from efficiency gains. But the government has given no indication of how great it expects those cost savings to be, nor how it will react if they are insufficient to stop subsidies rising. Is the Treasury going to write a blank cheque guaranteeing that all services will continue to run and that fares will stay unchanged? Since the answer to that question is no, then what?

It is this chasm of uncertainty that has given rise to the fears being articulated by Conservative backbenchers. In order to bridge it, they are seeking guarantees that passengers will be protected from line closures, fare increases and the abolition of the London Travelcard scheme. They also want an amendment to the Railways Bill allowing British Rail to bid against the private sector for the passenger service franchises.

Mr John MacGregor, the transport secretary, seems unlikely to yield on any of these issues. Where line closures are concerned, no transport minister would promise to keep all railway lines open forever, with or without a blank cheque from the Treasury. As for fares and Travelcards, the amount of regulation facing train operators is already in danger of deterring would-be entrants to the market, and any further inroads into companies' commercial freedom could be in danger of turning rail privatisation into a dead letter.

Instead, Mr MacGregor might attempt to defuse backbenchers' concerns through reassurance. Successful private-sector train operators will be those providing services that people want to use, he is likely to argue, so they will have a commercial incentive to offer more and better trains at attractive fares. The purpose of privatisation is the expansion of the railway, he could say, not its contraction.

It sounds convincing. It may even be true. But it is not the same as saying that railway privatisation will be painless. By introducing transparency to the allocation of subsidies, privatisation will confront politicians with awkward decisions about the future of unprofitable services. The bureaucracy needed to administer the Travelcard, student railcard and other schemes requiring revenue to be split between several different companies would be costly to run and is unlikely to appear unless someone volunteers to pick up the bill. Some train services will improve, others will disappear; some fares will go up, and others will come down. There would be no point in privatising the railways if nothing changed.

It is this point that explains why the backbench amendment least likely to be accepted by the government is the one proposing that British Rail should be allowed to bid for franchises. Conservatives supporting the idea say it is absurd that the people who know more than anyone about running the railways should be prevented from throwing their hat into the ring. The government counters that the point about privatising the railways is to get the running of the trains out of the public sector, but emphasises that existing rail staff will be strongly encouraged to take part in the process through management/ employee buy-outs.

In fact, there is another aspect to the British Rail argument. Experience in Sweden has shown how nationalised railways tend to win nearly every time when competing with the private sector for contracts to operate train services. The suspicion is that they do so because they are able to cross-subsidise the contracted-out services with revenues from their other operations. It is not hard to imagine how such a process in Britain could result in the majority of contracts going to British Rail, so reducing the privatisation process to a paper exercise that resulted in everything staying the same. For nervous Conservative backbenchers with an eye on the next election, that might be no bad thing.

GB United Kingdom, EC P9611 Administration of General Economic Programs P4011 Railroads, Line-Haul Operating CMMT Comment & Analysis TECH Services & Services use TECH Safety & Standards P9611 P4011 The Financial Times London Page 19 1428
Leading Article: China's landing Publication 930520FT Processed by FT 930520

RISING CHINESE inflation and discreet expressions of concern by officials are reminders that Deng Xiaoping's economic miracle remains vulnerable to familiar constraints. Since Mr Deng began to dismantle state control of the economy in 1979, there have been three spectacular booms, of which the first two were followed by busts. The question to be answered in coming months is whether reforms have progressed sufficiently for the economy to escape the roller-coaster and make a soft landing.

After Mr Deng's call for faster growth and reform was trumpeted last year as Communist party policy, the economy grew 12.8 per cent. Fixed asset investment grew 38 per cent, and banks' new loans were more than double the government's target. Latest figures show distinct signs of overheating. Urban prices in April were rising at an annualised 17 per cent rate and retail sales at 25 per cent. Surging domestic demand pushed the trade balance into a Dollars 1.7bn deficit in the first four months of the year, and the currency has weakened on the unofficial market.

In 1988 the cycle led to urban inflation of over 30 per cent, panic buying and hoarding. The brakes were slammed on with tight controls on credit, prices and imports. There is no sign yet of such a crisis, or of a heavy hand from government to deal with the problem. Officials have indicated that they want to direct credit to areas such as transport and energy in such a way as to avoid inflationary bottlenecks, and a repeat of the late 1980s.

Several factors point to a greater chance of a soft landing than was previously possible. Inflation is partly due to the one-off effect of price deregulation for some 600 commodities. Until the most recent figures, consumption growth has not appeared too rapid. The development of the market economy reduces fears of shortages of basic goods, and increases the available investment options. Price decontrol and trade liberalisation have made the economy much less rigid. Foreign debt is not excessive and foreign exchange reserves are strong.

However, the difficulties of moving from communism to the market are underlined by weaknesses in fiscal and monetary policy. Though the inefficient state sector now accounts for only about half of industrial output, it still contributes to a large budget deficit and a big dollop of monetary creation. The tax system needs reform to reflect the growth of the non-state economy. The central bank has only blunt instruments to control credit, with interest rates playing virtually no role. Planned deregulation of financial markets, with the monetary authorities setting base interest rates, may come too late to help in this economic cycle.

The ability to manage the economy is therefore severely limited. Macro-economic control is made harder by the devolution of power to provincial governments anxious to join in the development race. China's leaders face huge challenges in continuing to guide the economy towards the market while keeping in check the social problems thrown up by reform. Foreign investors need to keep in mind the limitations of economics, and also those of politics - the fundamental priority of China's leaders is to remain in power.

CN China, Asia P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Economic Indicators CMMT Comment & Analysis P9311 P9611 The Financial Times London Page 19 563
Leading Article: Get Europe to work Publication 930520FT Processed by FT 930520

FOR MANY months the European Community has been paralysed by the long struggle over the Maastricht Treaty of European Union. When it ends, with ratification in the British parliament, the governments must put aside all those sterile doctrinaire arguments about the long-term destination of the Community. Their top priority is to turn their attention to a pragmatic programme of action, which will make it work more effectively now, in economic and in political terms.

The most urgent need is to make the Community work in ways which seek and secure the consent of the people of Europe. The first referendum in Denmark, the debates in the French and British parliaments, the opinion polls in Germany, have all shown that there are deep popular misgivings in many European countries about the Community and its policies.

These misgivings have been stirred up in part by the fact that some governments, and the Maastricht treaty itself, may have seemed to imply, incautiously and quite prematurely, that Europe was necessarily bound for a federal future. But there are two other more immediate reasons for popular disquiet which are also much more practical: on the economic front, it has not always been clear that the Community's policies were delivering the advantages claimed for them; on the political front, governments have failed to develop appropriate policies of transparency and accountability to ensure that they carry the voters and their elected representatives with them.

The most immediate problem arising from the Maastricht treaty concerns the future of the programme for economic and monetary union. The experts have declared that there is nothing inherently wrong with the exchange rate mechanism, despite last autumn's upheavals in the currency markets, which forced two Community currencies out of the system. The fact remains that it is now impossible to believe that the Maastricht programme for EMU will be implemented as prescribed within the periods laid down. Moreover, it is probable that some Community currencies will stay outside a monetary union for a long time, and some may stay outside the ERM for a long time as well.

It is conceivable that an inner core group of countries may move ahead by themselves towards closer monetary integration. But it cannot be a matter of indifference to France or Germany that the British pound and the Italian lira are floating independently, or that the peseta and the escudo have been devalued. The urgent practical problem for the Community as a whole is to review the monetary arrangements for Europe, so as to deal with the probability of a variable geometry monetary Europe, and not simply dismiss the outsiders as failures who should be disregarded.

One of the reasons for the unpopularity of the Community is that the programme for the single European market has come to be identified with industrial restructuring and thus with unemployment, while the convergence criteria of the programme for economic and monetary union have been identified with deflation and more unemployment. These criticisms may not be fair, and they are certainly over-simplifications. The political fact is, however, that high and rising unemployment is now the biggest problem facing all European governments, and their most urgent need is growth and job creation.

In the end, the only reliable basis for growth and job creation is improved economic competitiveness. It is clear that the Community will not last long if it comes to be seen as a vast machine for creating unemployment. But there is no room for reckless indulgence in measures of social protection which would jeopardise that competitiveness.

QR European Economic Community (EC) P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9721 P9311 The Financial Times London Page 19 626
Letter: S African authorities must change rules of corporate governance Publication 930520FT Processed by FT 930520 From Mr GEORGE R J GUISE and Prof ALAN WALTERS

Sir, In our Personal View article of August 19, 1992 ('Feather beds in South Africa's boardrooms'), we argued that shareholding arrangements, particularly pyramiding and the ubiquity of de facto voteless shares, should be changed so that the great South African conglomerates were subject to the discipline of takeover bids, and that this would be likely to lead to the unbundling of many a bloated corporate structure.

Now we have the first big unbundling of Gencor which is rightly welcomed in your editorial, 'Unbundling' (May 12), as a first step in releasing South Africa's economy from the stranglehold of the few who control the large holding companies. The shareholders of Gencor are the immediate beneficiaries, but the ensuing improvements in efficiency will benefit both workers and customers as well.

But Gencor's unbundling, probably encouraged by a newly enlightened tax regime, occurred in spite of a structure of securities law (and exchange control) which still allows, even encourages, concentration of management control in few well-sheltered hands. The remaining conglomerate managements can still lie snugly in their feather beds safe behind the barriers to intruders. Indeed, Anglo American has announced that it intended to do precisely that. The Gencor components will still be largely free from threat of takeovers both domestic and foreign.

The South African government and the stock exchange authorities should change the rules of corporate governance and open all South African industry to domestic, and eventually, through abolition of exchange controls, foreign takeover bids.

Only then will a free competitive South African industry thrive in an open environment and provide the prosperity on which its political as well as its economic future depends.

George R J Guise,

Alan Walters,

vice chairman,

AIG Trading Corporation,

1200 19th Street NW,

Suite 605,

Washington DC 20036

ZA South Africa, Africa P8741 Management Services P6231 Security and Commodity Exchanges COMP Shareholding P8741 P6231 The Financial Times London Page 18 340
Letter: UK industry in jeopardy from regulators Publication 930520FT Processed by FT 930520 From Sir IAN WRIGGLESWORTH

Sir, In 1975, 35 per cent of Britain's northern manufacturing employment was in shipbuilding, steel and coal. Today it is less than 3 per cent, and if Swan Hunter and the final round of pit closures go ahead, it will be even less. But the north is still a premier manufacturing region and exports 45 per cent of its GDP. It has world-class businesses in new areas such as semi-conductors, automotive products, pharmaceuticals and service industries and has combined traditional strengths with new and sophisticated uses of modern technology in industries such as engineering, steel and chemicals.

One of these world-class businesses - BNFL - is being prevented from contributing to the wealth, employment and exports of the region because it cannot begin to undertake the Pounds 9bn of export orders in the Thorp reprocessing plant in Cumbria.

The plant, completed at the end of last year, has still not been authorised to operate - a situation you rightly described as 'a nightmare' ('Nuclear scheme that became a 16-year Whitehall nightmare', May 8).

Most industrial plants require authorisations from regulatory bodies such as HMIP, MAFF and the NRA which are set after they have been built, but before they can start operation.

If, as has been suggested, these bodies should now also consider the 'need' for new plants once they have been constructed, we are on the route to industrial disaster. What responsible board would authorise expenditure on a big new industrial plant if it is to be subject to the double jeopardy - after obtaining planning permission - of facing the possibility of a decision by a whole series of regulators as to whether there is a 'need' for it before it can start to operate.

Regulators need to work more closely with industry, not against it. If current laws are stifling business in this way, it is incumbent on the government to change them quickly.

Ian Wrigglesworth,

chairman,

northern region,

CBI,

15 Grey Street,

Newcastle upon Tyne NE1 6EE

GB United Kingdom, EC P9631 Regulation, Administration of Utilities NEWS General News P9631 The Financial Times London Page 18 366
Book Review: Flops at the top of corporate Germany Publication 930520FT Processed by FT 930520 By DAVID WALLER

NIETEN IN NADELSTREIFEN Deutschlands Manager in Zwielicht By Gunter Ogger Droemer Knaur, DM38, 272 pages

The typical west German senior manager is male, aged 40 to 65, ambitious, incapable of real teamwork, insecure to the point of paranoia, incompetent and probably corrupt. So, at least, argues Gunter Ogger in a book which seeks to prove with a wealth of anecdote that virtually all top German managers are Nieten - 'flops'. The title translates roughly 'Flops in pin-stripe suits: the twilight of Germany's managers.'

It is managerial failure, Ogger claims, rather than broader macroeconomic trends, which lies at the root of Germany's current economic malaise. This irreverent argument challenges the self-esteem of German business leaders who, until the present downturn, basked in the belief that they, more than any other class in German society, were responsible for the prosperity of the federal republic.

As that prosperity has started to look fragile, and Germany finds itself in its worst recession since the second world war, Ogger's book has captured the mood of the times. It has become a best seller, appealing to the German habit of self-excoriation and providing a 'rogues' gallery' of failed business leaders.

His argument accords with the views expressed by a small but vociferous band of shareholder activists who have been trying to start in Germany the kind of debate over 'corporate governance' which has taken place in the UK and the US.

Whereas the mechanism of the hostile takeover serves to punish UK and US managers if they are slow to deliver short-term financial performance, their German counterparts are insulated from stock-market pressure by networks of cross-holdings and other devices designed to remove the threat of unfriendly take-overs.

Only very rarely do these protection mechanisms fail - such as last year when Hoesch found itself being taken over by the rival steel company Krupp. But most big companies enjoy shareholder 'stability' which leaves managers free to treat private and institutional shareholders as little more than an occasional fund-raising source.

The system also leaves managers free to pursue ambitious expansion plans without taking into account such pedestrian short-term considerations as profitability.

Ogger cites the example of Daimler-Benz, Germany's biggest industrial company, where annual sales have expanded to nearly DM100bn since Edzard Reuter took over as chief executive in 1987 - but profits have dwindled to an expected DM1bn this year.

'Until 1985, it was the most solid, most profitable and best managed company in the whole of the Federal Republic of Germany,' he writes, 'but now Daimler is battling with enormous structural problems and must lay off staff for the first time since the war.'

Another example is Mannesmann, the engineering group, where annual turnover has doubled to DM24bn under chief executive Werner Dieter, but profits have fallen to less than half their former levels.

Such companies provide classic examples of how German capitalism has worked. Managers are appointed and their performance monitored by supervisory boards. The two-tier board system - which divides responsibility between the management board, on one hand, and the supervisory board, on the other - is often cited as an important reason for Germany's post-war economic success, worthy of imitation in the UK and the US.

But Ogger contends that the supervisory board system has degenerated into a clique of some 200 ageing men working together to perpetuate each others' power and perks - a 'you vote for me and I'll vote for you' influence cartel which has failed to prevent poor management decisions.

One consequence is the misallocation of financial resources - one reason why the German economy is heavily weighted towards moribund sectors such as cars and capital goods. The successes which the German economy can claim, Ogger says, are due not to managers but to well-educated technicians, craftsmen and engineers who build good products in spite of management.

Drawing almost exclusively on secondary sources, Ogger's analysis makes no pretence of being fair. It is an entertaining harangue which might have been balanced by greater attention to the failings of the Anglo-Saxon system - for example, the questionable efficiency of takeovers as a way of dealing with managerial ineptitude.

It does not tackle the anomaly that, although the shareholders are not the first priority of management, the German system can still produce superb returns for them. Allianz, the giant insurance company, pursued a questionable expansion policy throughout the 1980s and, until recently, put little emphasis on explaining itself to institutional shareholders. Despite this strategy, it was the best-performing German share over the past decade.

Nor does the book offer any compelling solutions to the management problems which it identifies, beyond citing a few truisms imported from US management gurus. It suggests, somewhat forlornly, that German companies should try to become leaner and fitter and German managers more honourable and less bureaucratic.

Sheer commercial and economic pressure, however, is forcing German companies to find their own solutions. Rationalisation has become the order of the day, as witnessed by Ferdinand Piech's tough regime at Volkswagen. Daimler's recent decision to abandon the holding company structure which served as its chief anti-takeover device and seek a listing on the New York Stock Exchange shows that managers will have to come out from behind the barricades if they are to have access to the world's largest capital pool.

DE Germany, EC P2731 Book Publishing TECH Products & Product use P2731 The Financial Times London Page 18 916
Letter: 'Best guess' of profits better than analysts' estimates Publication 930520FT Processed by FT 930520 From Mr JOHN GALLINI

Sir, Following the public censure by the stock exchange of London International Group ('Crackdown on private briefings for analysts', May 15), is there any overwhelming reason why companies should not publish a 'best guess' profits and earnings per share estimate for the coming year at the time of their preliminary results statement, updated if necessary at their AGM and on publication of their interim results? Only if the company considered that the actual results were likely to differ by more than a given amount (say 10 per cent) from their latest estimate, would they be required to make a statement to the stock exchange. More frequent information would not only help reduce the number of profit warnings made, with the associated stigma and often devastating effect on share price, but would also ensure that the playing field was seen to be level.

Far from diminishing the role of the analysts, who are after all at liberty to publish their estimates, it would perhaps free them a little from number gazing and allow them to concentrate more fully on areas of concern to investors about which the company itself cannot be expected to be entirely impartial, for example its strategy, competitive position and management quality.

It would also help in placing a realistic value on the shares of the many small companies not covered by analysts' research, perhaps even enhancing the market for them. John Gallini,

11 North Street,

St Leonards-on-Sea,

East Sussex TN38 0EY

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P6211 Security Brokers and Dealers NEWS General News P9651 P6211 The Financial Times London Page 18 288
Letter: Way to avoid surprises Publication 930520FT Processed by FT 930520 From Mr STANLEY GALE

Sir, The leaking of price sensitive information by companies seeking to avoid surprises by giving guidance to analysts can be avoided by issuing profit statements and relevant comment on a quarterly basis.

The practice, followed by the great majority of UK companies, of reporting twice yearly creates an information gap of some eight months between the announcement of half-year figures and the issue of the preliminary profit statement for the full year. Quarterly reports, issued about mid-way through the following quarter and containing comment on current trading and the outlook, in practical terms virtually eliminate information gaps.

Stanley Gale,

Shareholder Relations,

Lawrence House,

238 City Road, London EC1

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P6211 Security Brokers and Dealers NEWS General News P9651 P6211 The Financial Times London Page 18 148
Letter: Limit to tax retaliation Publication 930520FT Processed by FT 930520 From Mr JOHN L WOSNER

Sir, You report that the British government is expected to announce retaliation against US companies by cancelling their right to refunds of part of the tax credits attaching to dividends paid by UK subsidiaries ('UK poised to retaliate against California tax rules', May 13).

It is worth noting, however, that the UK legislation only applies to those companies based in a state which operates a unitary taxation system or has companies in its group which operate from such states. Those US companies with UK subsidiaries which do not operate in unitary states such as California would not be affected by the proposed retaliation.

John L. Wosner,

managing partner,

Pannell Kerr Foster,

New Garden House,

78 Hatton Garden, London EC1

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 18 153
Economic Viewpoint: 'Socialism' and human nature Publication 930520FT Processed by FT 930520 By SAMUEL BRITTAN

As no worthwhile comment on the course of the British economy can be made before today's unemployment figures, I am leaping in to fill this space with a more fundamental argument: namely why 'socialism' - in the original sense of comprehensive state ownership and direction of the economy - has proved a delusion.

The most popular argument, especially among businessmen, is some version of the incentive argument. Socialism would be wonderful, it is said, but people do not work for idealist motives and require something more tangible. The whole avuncular approach is encapsulated in the awful saying: 'Anyone who is not a socialist before 21 has no heart. Anyone who is still a socialist after 21 has no head.'

This kind of critique must have been heard by generations of students; and it makes little appeal. It generalises too freely about human nature and ignores many humdrum types of unpaid work, such as routine charitable and social work, regularly and competently performed by thousands.

The basic argument against full-blooded socialism has little to do with selfishness. It is that without a functioning 'capitalist' market even the most noble-minded would lack the information to go about their jobs effectively.

The reason can be put into a few sentences. Efficiency is not just a technical concept. There is an unlimited number of ways of producing anything: skilled workers with complicated machines can be employed, or unskilled workers with simple machines. Should word processors or typewriters be used, and which type? Should desks be of wood or steel? Is a head office a good idea, or can managers link up from their homes? There is no end to such questions.

But without a pricing system, which tells us about the relative scarcity of these different inputs, a manager cannot begin to act rationally. Nor are the resulting losses trivial. The capital intensive, but wildly unsuitable and heavily polluting, industrial plants dotted about the landscape of eastern Europe are testament to the costs of an inadequate pricing system.

Although the above critique is sometimes called the 'problem of socialist calculation', it is not a dry accounting matter. The price system - by which is meant not the rate of inflation but relative prices - incorporates the dispersed knowledge of millions of people, which is fed into the economic system in terms of the prices they are prepared to pay for different resources - or charge for their own inputs. A command economy throws this data away.

The main originator of this informational critique of socialism was Ludwig von Mises, an Austrian-born economist who lived from 1881 to 1973. But after enjoying a vogue in the 1920s and 1930s Von Mises faded out of the view of mainstream economists who wrongly believed he had been answered.

A new book makes a comparison with Karl Marx. Both thinkers 'combined erudition with a combative, frequently vituperative style of presentation, displaying in their writings little patience with critics. They each attracted a small, industrious band of dedicated disciples prepared to brave - and reciprocate - the disdain of conventional thinkers.'

This is a passage in From Marx to Mises by David Ramsay Steele (Open Court, La Salle, Illinois). Steele was a British Marxist in the 1960s, then became a Mises disciple. He is now a Chicago publisher and more sceptical of both teachers but still impressed by the 'socialist calculation' critique. He is thus well qualified to summarise the debate and put it into perspective.

The Mises critique does not apply to many who call themselves socialist but really believe in welfare capitalism. Although Mises was opposed to this as well, his critique, as Steele rightly says, fails to demolish it. But for most of his lifetime, fashionable ideas went much further. They included the view that factor markets and financial markets could be replaced by conscious planning, as in war, and that intervention could be made at will, for example, by fixing any and all prices at any level the government chooses

The easy rejoinder to Mises is that full-blooded socialism could not be impossible in view of the Soviet Union's 74 years of existence. A sympathetic reading of Mises is that he meant that rational calculation was impossible under socialism. What he really tried to disprove was the claim of socialism in its heyday that it would not only be more just, but would also provide at least as high a level of welfare.

Indeed Mises conceded that socialism might work in a very static society, where techniques changed little, so that the discovery function of the price system was unimportant. It might also work for ascetics not too worried by material prosperity. As for the Soviet economy: it could function as well as it did because it made use of the prices established in western markets. Indeed there was a late book by Stalin urging the comrades to follow the commodity markets more closely.

Eventually, however, revisionist socialists in the west and reform communists in the east embraced prices and markets. In recent decades most students of political economy have been taught not to refute the Mises critique, but to say that socialist economies both need and can have functioning markets and that ownership is irrelevant. The approved answer in a multiple choice question for students devised in the early 1970s in relation to Soviet bloc reform was: 'A freely-operating market system can perform efficiently the function of allocating scarce resources to satisfy competing wants under socialism as well as under capitalism.' This glib approach still governs most of the debate on privatisation.

Why then were the reform communists of the 1970s and 1980s mistaken and why could not effective markets be created among largely state-owned industries?

Mises' most convincing answer was the absence of financial markets - including a market in ownership - to determine who should control existing assets and to what uses new savings should be put. It was the absence of any mechanisms for placing ownership and control with those who could make most effective use of the assets at their command, which was probably the fatal blow to reform communism. Hence the present emphasis on privatisation. As Steele says: 'Human kind doesn't yet know of any feasible way to elicit, transmit and to bring to bear this information in a technologically-advanced society other than by substantially free financial markets in the milieu of substantially private ownership of the means of production.'

From Marx to Mises is not a perfect book. Its main fault emerges in the preface where Steele writes: 'In all essentials this book would be the same if the Soviet debacle had been complete in 1921; or if it had been delayed for another 20 years after 1989.' The length of time the USSR existed and the nature of its collapse matter for assessing the importance of the fundamental weaknesses, which no amount of general argument can replace.

By far the best section is that in chapter 10, summarising the modern analysis of property ownership as bundles of rights which may change their composition. Ownership is a matter of degree. Just as restrictions in capitalist countries (for example rent control) may dilute the content of ownership, so de facto property rights can emerge in a nominally socialist country, as the managers of enterprises acquire more and more rights, whether legally or otherwise. If Steele had followed up this line of thought he might have reached interesting conclusions on whether, for instance, 'nomenklatura capitalism' is better than slow privatisation in the former communist world.

The author's own ending is quite different. It is a call for more rather than less utopian speculation. Although socialism has ineradicable flaws, there may be better conceived alternatives to capitalism. If Marx and his followers had not arrogantly dismissed as 'unscientific' all speculation - other than their own asides - about the society of the future, we could have been spared some misery.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs CMMT Comment & Analysis ECON Economic Indicators P9311 P9611 The Financial Times London Page 18 1364
Arts: The Makropoulos Case - Opera Publication 930520FT Processed by FT 930520 By ANDREW CLEMENTS

David Pountney's staging of The Makropoulos Case seems to have been in the repertory of one or other of the British companies ever since it was first seen in Glasgow 12 years ago. It has come back to Scottish Opera now to end the company's season. Sally May has directed the revival, John Mauceri conducts his last show as music director. A production that was for so long dominated by Josephine Barstow's Emilia Marty now has Kathryn Harries in the central role, and it is she who finally makes the evening a truly memorable one.

Certainly the early indications were not auspicious. There is something rather tired-looking now about Maria Bjornson's designs, which conceptually seem already to have been consigned to a departed age of opera production, though whether that feeling is fuelled by nostalgia or hard-headed realism is difficult to determine. In the opening scenes too the show itself seemed rather over extended, as if this were one revival too far; it took a while for the direction to establish itself, for the playing to cohere and for what turned out eventually to be some very well observed characterisations to make themselves felt.

Most surprising was Mauceri's lack of assertiveness in the first act. The orchestral playing sounded tentative, only hanging on to Janacek's exposed lines by the skin of their teeth. It was not until the conductor began to relish the tendrils of Straussian lyricism which buoy up the confrontation between Emilia and Prus at the climax of the second act that his part in the performance began to matter; from there to the end of the opera he provided a surging, vivid orchestral canvas.

Ms Harries too only gradually took charge. She certainly needed to pace herself for the challenge of the last act, but nevertheless seemed rather reticent through much of the first, often masked by the orchestra (which, a sign of insecurity perhaps, was consistently too loud) and swallowing her words. Thereafter she was transformed, wonderfully vivid in the sharpfire exchanges of the second, mingling flashes of fierce temper with glimmers of the vulnerability that would make the final scene deeply affecting.

Instead of the Barstow hauteur, Harries offers a feckless disregard and an absolute lack of moral centre. That is tempered by a sweetly turned sense of comedy - wonderful drunk acting] - which seems a new element in her stage persona. All the while the vocal lines gradually gain steadily in power and authority, the tone colour deliciously varied, and the cruel extremes of the last act were all handsomely negotiated.

The gallery assembled around this fascinating portrayal had their own individual strengths. Nigel Robson's bumbling Gregor suffered most from the over strenuous orchestral playing early on but gradually established the character in rich detail, Donald Maxwell's Prus was authoritatively grasping and manipulative from the start, with exemplary diction. Nigel Douglas contributed a typical Hauk-Sendorf, Stephen Bennett a convincingly uptight Kolenaty; there was a nicely turned Dresser from Margaret Izatt, a usefully gormless Janek from Iain Paton. Any Makropoulos production, though, finally stands or falls by the strength of its Emilia Marty, and in this case there is no doubt of its success.

Theatre Royal, Glasgow; further performances May 22, 25, 27; then on tour to Aberdeen, Edinburgh and Newcastle

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 17 580
Arts: A cut in the wrong direction - Cinema Publication 930520FT Processed by FT 930520 By STEPHEN AMIDON

THE ABYSS: SPECIAL EDITION (12) James Cameron NOWHERE TO RUN (15) Robert Harmon PASSENGER 57 (15) Kevin Hooks I WAS ON MARS (15) Dani Levy

When it was first released in 1989, The Abyss was a half hour away from being a very strong movie indeed. Its writer and director, James Cameron, seems to have realised something was amiss and has now used the clout he has garnered from making Terminator 2 to have the movie released in a special edition, or director's cut. The idea is that the decision of his studio's marketing people to alter the film to make it more audience friendly is thereby reversed. Unfortunately, Cameron's final version is a half hour longer than the original, when what the film always needed was to be a half hour shorter.

For those who missed it in its first incarnation, The Abyss portrays a group of likeable redneck divers whose underwater oil rig is commandeered by the US navy to rescue a sunken nuclear sub. Matters are complicated by the fraught marital relationship between the chief divers (Ed Harris and Mary Elizabeth Mastrantonio), the insanity of the navy commander (Michael Biehn), a looming hurricane, encroaching Russians and, finally, a colony of underwater aliens. It was the last ingredient that ruined the recipe the first time around, transforming what might have been a taut, sweaty adventure flick into a ludicrous fantasy feature.

Unfortunately, Cameron's new version expands on this very aspect of the film, further padding out his picture with a tendentious morality play in which world war III is averted by these squishy ETs when they unleash giant tsunamis on the superpowers to make them put their nuclear weapons away. The resulting blend of dated and simplistic cold war politics, overwhelming special effects and sentimentality thoroughly undermines the two hours of skillful action and suspense that preceded it, forcing one into the rather alarming conclusion that those chop-happy studio executives might not be so purblind after all.

Cameron's special edition also calls into question the whole recent trend of director's cuts, which, with the exception of last year's restored Blade Runner, seems to be little more than yet another way Hollywood is trying to have its cake and eat it too. After all, film-making is a collaborative process. What does the future hold - actor's cuts? cinematographer's cuts? The only thing you can be sure of is that the studios and the producers will certainly be getting their cuts, both times around.

If there were such a thing as an audience cut, Nowhere to Run would be five minutes long. One minute for the amount of time Rosanna Arquette spends naked, the other four devoted to Jean-Claude Van Damme as he ruptures the spleens and deviates the septums of various baddies with his vaunted martial arts. As for the remainder of the film, it is hard to see who the makers had in mind as potential viewers when they consigned it to celluloid.

The plot, such as it is, has Van Damme playing an escaped con who holes up on the farm belonging to a noble widow (Arquette) being threatened by greedy real estate developers. After the obligatory rocky start to their relationship, Van Damme and Arquette soon fall into the sack and then join forces to see off the bad guys.

Nowhere to Run is the latest step in the effort to domesticate the Belgian bruiser. As such, it is a resounding failure. Unlike Schwarzenegger or Willis, Van Damme is utterly lacking in charisma, his bland stoicism failing to suggest anything other than, well, bland stoicism. He is unable to humanise his macho antics with the sort of self-deprecating wit needed to break free of the straight-to-video category. To makes matters worse, his toned down and surprisingly lacklustre fighting here should prove a disappointment to his regular core of fans. And as for Arquette, it is sad to see this once promising actress reduced to playing little more than bearnaise sauce to Van Damme's slab of beef.

It is easy to see why a video star wants to go upmarket. What is harder to figure out is why the fine film actor Wesley Snipes wants to travel in the opposite direction. After a series of roles that put him well on the way to becoming one of the most popular black leading men of all time, Snipes finds himself up in the air in Passenger 57, a hackneyed action movie that might have given even Van Damme pause.

The story has Snipes playing a former cop turned airline security consultant who locks horns with a 'sophisticated British aristocrat' (Bruce Payne) who also happens to be a lunatic with a penchant for blowing up 747s. What results is so laughably ill-conceived that you keep on expecting Snipes's agent to burst out of one of the hijacked plane's toilets and force the whole thing to make an emergency landing. Unfortunately, it keeps on going right up to the bloody finale, in which, ironically, Snipes fights with far more aplomb that the new model Van Damme.

I Was on Mars is the story of Silva (Maria Schrader), a young Polish woman who arrives in New York with plenty of dollars but apparently little in the way of motivation or common sense. She wanders aimlessly about the city for a few days, only to be relieved of her cash by Alio (Dani Levy), a slick con man with a line of patter only someone fresh off the boat could buy. Not one to take this sort of thing lying down, Silva decides to pursue Alio, soon involving herself in his bizarre existence and exacting a subtle yet telling revenge.

Fans of Stranger Than Paradise and Johnny Suede will find themselves on familiar turf here, though the film lacks the bizarre sublimity of those two efforts. Director Levy has a wonderful eye for detail - Silva carries an iron in her briefcase but only one change of clothes, while Alio garnishes his cocktails with Twinkies. And Schrader's Silva is a memorable creation, a woman who uses passivity as a weapon more effective than anything the men she finds herself among can employ. But the film fails to establish a consistent comic pitch, undermining its fine observation and characterisation with an unevenness worsened by a tendency to indulge in weirdness for its own sake.

GB United Kingdom, EC P7812 Motion Picture and Video Production NEWS General News P7812 The Financial Times London Page 17 1098
Arts: Von Otter and Tan - Recital Publication 930520FT Processed by FT 930520 By DAVID MURRAY

In the Wigmore Hall on Tuesday, Anne Sofie von Otter sang Haydn, Mozart and Schubert to Melvyn Tan's 'fortepiano' (a modern copy, I think). The hall was packed, of course; this young mezzo is nowadays a universal favourite, and Tan is the man to persuade us that period Lieder - from, say, Schumann and Loewe back - are best accompanied on a period piano. At the end, nevertheless, when Miss von Otter was cheerfully guying both her Haydn encores, the recital seemed to have been less than the sum of its parts.

She was in lustrous form. There are voices that sound best in the Wigmore simply because they do not carry as well in larger halls, and other, grand-opera ones that need to be kept on a tight leash. Von Otter's is one of the lucky few that can sound unstintedly vital and vibrant there, and still listener-friendly. Her programme culminated with Haydn's 'Ariadne on Naxos' cantata, which she delivered as a towering dramatic scena: certainly it bounced off the back wall, and yet it left no bruises on the ear.

Earlier she had delivered Schubert's 'Erlkonig' with comparable force and intensity - though the tiny, wheedling voice she adopted for the erl-king himself was too much of a conscious trick. The real revelation of that performance was owed to Tan: viz. that a 'fortepiano' can do its brilliant utmost with Schubert's desperately taxing accompaniment, where a pianist with a modern grand can never afford to let rip for fear of drowning out the singer. What that illustrated was no quaint, trivial advantage for the old-style instrument (such as every great song-composer until Wolf and Debussy had in his mind's ear), but a serious modern challenge.

If fearsome problems of balance in many Lieder simply evaporate when the right kind of piano is in play, why should we go on assuming that for general purposes there is no alternative to the 20th-century grand? Pianists will say: with the big hi-tech instrument, we get subtler note-by-note control of the sounds we make. But before Wolf and Debussy, do they need such hyper-refined control?

Von Otter's other best Schubert was the little 'Romance' from Rosamunde, delivered with lovely simplicity, along with the Gothic narrative of 'Der Zwerg' (a newly popular rediscovery). Though never far below her best, technically she slipped more often than she needed to - as did Tan. In Mozart she scored several near-misses on quick springs to high notes, just as Tan let his fluent fingers skitter over too many of Mozart's notes, and even sometimes the basic beat.

His solo offering, Haydn's A-flat Sonata (no. 31, by the Robbins Landon count), was too bonelessly pretty and unstructured to make its proper mark, and his rhythmically wayward reading of Schubert's 'An die Musik' was less pointful than just fitful. Though most of his accompaniments were brighter than that, one had expected more sober penetration, and was therefore just a little disappointed.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 17 527
Arts: Mounted in the Garden - Cabaret theatre Publication 930520FT Processed by FT 930520 By ANTONY THORNCROFT

'Mounted in the Garden' could only mean that Kit and the Widow, that most scurrilous of double acts, have re-tied their bow ties, ironed their tails, and assembled a melange of songs, old and new, to subvert the nation. It is the perfect late night entertainment at the Donmar Warehouse and places a substantial whoopie cushion under the worthy Covent Garden Festival.

Over the years the relationship between the two has shifted. Kit (Hesketh-Harvey) is still the masterful head prefect, but marriage has exposed a softer side, adding to the repertoire not only a double-edged love song, but also a nursery lullaby, an ABC of African animals. The Widow (Richard Sisson) still looks like a Victorian curate with flatulence but he now occasionally leaves the piano stool to tell, with studied diffidence, risque jokes.

The basics stay the same - mordantly witty songs, performed with camp bitchiness. Thankfully some of the old faithfuls are retained - the old queens having a furious row on the way to Glyndebourne; the hundreds of Norwegians doomed to travel for ever on the Bakerloo Line with Peer Gynt; Kit resolutely refusing to get into bed with Madonna.

But the poisoned pen has moved with the times. Let's hope the Queen never gets to hear 'Cheer Up, Marm'; it could convince her to call the whole thing off. There is also one of those cabaret songs that harks back to Duggie Byng and pre-war supper club days, 'Geoffrey Porlock the Warlock', whose Wednesday evenings at Datchett near Slough sound decidedly messy.

What is remarkable about Kit and the Widow is that they manage to insult all the totems of their fans and leave them desperate for more abuse. The City types bay loudest at the pastiche of the Eton Boating Song which finds them dangling in the Old Bailey on fraud charges; the Sondheim freaks accept the total demolition of their god with well controlled hysterics. Kit is so much one of us, when he forgets to be one of them, that he provides the perfect escape for subversive thoughts. It may well be forgotten in the cool night air but for an hour or so we have smashed the establishment and had a smashing time, too.

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 17 407
Arts: Music for the thinking man - London Jazz Festival Publication 930520FT Processed by FT 930520 By GARRY BOOTH

There was a time when jazz music was easily identified by its instrumentation, syncopation or its nervy improvisation. But contemporary music has become harder to label and today's venn diagram of jazz contains a perplexing number and diversity of sets. From hiphop to hardcore and new music to world music, everybody wants a piece of jazz and jazz wants a bit of everybody else. But if the argument over whether the interchange dilutes or strengthens the jazz tradition is as long and circular as an Evan Parker soprano solo, what is certain is that festival programmers have an ever widening spectrum of possibilities from which to choose.

The London Jazz Festival, which winds down this weekend, has ranged from scientific abstraction to the loping riddim of reggae via explosive fusion and the effing and blinding of rap. Yet one of the highpoints of the week has been provided by the (rare) appearance of jazz music's master of understatement, US guitarist Jim Hall. Ever the thinking musician's guitarist, Hall has achieved a modest cult following for his quiet communion with pianist Bill Evans, clarinettist Paul Desmond and the swaying reeds of Jimmy Giuffre.

Joined on the altar of Islington's Union Chapel by the choice chords of pianist Larry Goldings, Hall unfolded a succession of exquisitely fragile arrangements that bound together beautifully with the minimum volume. 'This next one,' he said to the sound of pins dropping, 'is a stretched out blues with some funny notes in it.' So subdued and spacious was Hall's delivery that applause for delicacies like 'Some Day' and 'My Funny Valentine' seemed intrusive. His more swinging originals featured devastating technique and razor rhythm delivered with similar nonchalance.

In stark contrast to Jim Hall's effortless enchantment of his audience, pouting Brazilian salsa queen Tania Maria put a great deal of energy into dissipating the electricity generated by an excitable crowd at The Forum in Kentish Town the following night. Somewhat exposed at the keyboards (electric and acoustic) in a trio alongside bassist Eddie Gomez and percussionist Don Alias, Maria's hamfisted attempts at crowd control were enervating. An early attempt to enjoin the party crowd in a clapalong session failed when it became clear that Maria herself was unsure of the time signature. Poor Gomez and Alias stuck doggedly to their groove as Maria splintered chords and wailed hideously into the wraparound mike. At the controls of a large and fast moving band, Maria's fiery fusion of Brazilian dance music and jazz can be exhilarating; uncut it is more like salsa hell.

The four trombones (one a bass), three trumpets and various reeds of John Surman's Brass Project provide the perfect antidote to this sort of nonsense. Kicked along by a feisty rhythm section and all overseen by director John Warren, Surman's swooping bass and alto clarinets, soprano and baritone saxophones front a uniquely English and folky form of big band jazz. But Warren's compositions, most of them new and premiered at the Lilian Baylis Theatre, packed in well-sprung Ellingtonian themes, choral and classical sentiment rounded off with an extraordinary arrangement based on the music hall refrain 'My old man said follow the van . . '. Surman's own soloing goes from strength to strength. His spiralling soprano helped by a delay button was hypnotic, the dancing baritone set against ostinato brass uplifting. The concert will be broadcast on Radio 3 on June 5.

Sponsors: The London Boroughs of Camden, Islington and Hackney; The London Arts Board; London Boroughs Grant Committee; City and inner London north training and enterprise council.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 17 628
Arts: Today's Television Publication 930520FT Processed by FT 930520 By GARY MEAD

ITV's interpretation of 'current affairs' is neatly defined by 3D (ITV, 7.30pm) which returns tonight and includes the story of three sisters fighting a 'dieting battle' against their collective weight of 60 stone. And these are the people that won the franchises. But at least 3D can plead that it is trying to be weighty.

Thursday nights are often a desert for television and tonight is no exception. Does anyone actually find Ruby Wax (The Full Wax: BBC1, 10.30pm) amusing as opposed to embarrassing? She substitutes innuendo for wit and hopes we won't notice.

One hour earlier there is a chance to see another one-line joker. Rik Mayall Presents (ITV, 9pm) gives Mayall his own showcase for three weeks, an hour of 'comedy-drama' which tonight features a TV show and presenter facing problems.

But two documentaries look promising. Under The Sun (BBC2, 9.30pm) examines a Cambodian ballet teacher's efforts to resurrect her Phnom Penh school . And Death of a Wagon Train (Channel 4, 9.35pm) digs into the misery of an 1846 US wagon train.

GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations TECH Services & Services use P4833 P4832 The Financial Times London Page 17 211
Technology: Modern methods in the pipeline - British Gas engineers are revolutionising east German home energy provision Publication 930520FT Processed by FT 930520 By DEBORAH HARGREAVES

Graham Moore started working on converting Leipzig in east Germany from manufactured, dirty town gas to natural gas 25 years to the day after he began the process in Burton-on-Trent in the UK.

While it took four years to convert Britain to North Sea gas, Moore hopes that, by next year, he and teams of British Gas engineers working with west German energy companies will have finished converting east Germany to natural gas from Russia.

'We had more information about our customers when we started the conversion in the UK than we have here now,' says Moore, who is a director of two regional distribution companies in east Germany: Gasversorgung Sachsen-Anhalt (GSA) and Gasversorgung Leipzig (GvL). 'We need to do 10 years' worth of improvements here in two years.'

British Gas engineers are helping to extend the east German gas grid into rural outposts, while marketing colleagues try to convince east German distribution companies to adopt a friendlier approach to customers.

British Gas has won 25 new contracts to revamp the east German gas business this year following its acquisition of stakes in the two distribution companies two years ago. Along with west German energy partners, British Gas has run the two distributors since they were privatised by the Treuhand agency.

British Gas has invested DM70m (Pounds 28.4m) developing the two gas companies and plans a further DM30m until 1997. Its German subsidiary expects a turnover of DM30m this year - double last year's level of DM12.5m - and wants 50 per cent growth next year.

A priority for the distribution companies is to update the local gas grid so that natural gas from Russia and elsewhere can be carried to replace the manufactured town gas. British Gas has also taken a strategic 5 per cent stake in Verbundnetzgas, the east German gas transit company which carries Russian gas to local distribution companies.

Moore's experience of converting the UK to natural gas is vital in setting targets and priorities for the east German companies. British Gas has introduced computer technology that helps with the planning of gas networks and pipeline routes. This helps estimate the costs for a specific project.

One of the main tasks of western managers in the east German gas companies is to establish priorities. 'We've got to decide where we're going and how to get there. We agree that conversion from town gas comes first, and then we work on extending the network,' Moore says.

The company plans to complete conversion to natural gas by the middle of next year. Initially, the utilities expected the conversion process to take until 1996, but the better organisation and focus that has come with western planning methods has meant it can be completed two years earlier.

A system of cost-accounting - highlighting for managers where they are spending money and where they need to cut costs - has helped east German companies target their investment. Once projects get under way, British Gas can offer the cost-saving technology it has used on similar work in the UK. The company is also using its swage-lining process for plugging leaks in the cast-iron old pipes - lining the old ones with a plastic skin without taking the pipes out of the ground.

UK contracting companies, such as Steve Vick, are moving into Germany to carry out work for British Gas. Steve Vick is using a rotamole system of boring underground to lay gas pipes, which is cheaper and quicker than digging up roads and causes less upheaval.

British Gas has also developed technical improvements to the way it digs trenches for laying pipe. With equipment such as a rock-wheel, mole-plough and chain trencher, the company has speeded up its trenching operations. The rock wheel, which has teeth that dig into the road surface, can lay pipes at up to 200 metres in an hour.

The company's efforts to link new parts of east Germany to the gas grid are being rapidly outstripped by demand. Moore explains how British Gas is able to tap into a vast unsatisfied demand for gas supply, adding around 15,000 new customers a year and converting 125,000 customers to natural gas last year.

'The inquiry level is unprecedented, especially compared with the UK, where we have to give up market share.' British Gas is being forced by its regulators to shed part of its market in the UK to encourage the development of competition.

The company has tried to win new customers by overhauling the east German approach to customer service. One of the hardest tasks has been to convince their east German colleagues that customers have a right to know what the companies are planning to do and when.

'Part of our marketing drive has been to create a positive image for natural gas by stressing its environmental advantages over town gas and brown coal,' says Paul Roberton, planning manager of distribution and transmission at GSA.

Natural gas is cheaper for customers who use it for heating, but slightly more expensive for those using it just for cooking. But there is a high degree of awareness about the environment in east Germany and a lot of interest in environmentally friendly products.

'Before, all the east Germans could do was to fend off demand for gas - you could only get a supply by queueing at the energy ministry for hours and proving you had special needs, such as lots of children, or worked shifts,' says Moore. 'Customers are amazed to see us coming to their villages with a mobile office and information packs about what we're going to do and when.'

British Gas Gasversorgung Sachsen Anhalt Gasversorgung Leipzig DE Germany, EC GB United Kingdom, EC P1623 Water, Sewer and Utility Lines P4923 Gas Transmission and Distribution CMMT Comment & Analysis TECH Technology P1623 P4923 The Financial Times London Page 16 999
People: South Wales Electricity Publication 930520FT Processed by FT 930520

David Gibbard, previously commercial director of SOUTH WALES ELECTRICTY, is to become operations director. He will be succeeded by Michael Mackey, who was power supplies manager.

Byron Samuel, the current operations director, is retiring at the end of July.

South Wales Electricity GB United Kingdom, EC P4911 Electric Services PEOP Appointments P4911 The Financial Times London Page 16 68
People: International Business Communications Publication 930520FT Processed by FT 930520

Lord Rees-Mogg, editor of The Times between 1967-1981 and recently making his own headlines with his critique of prime minister John Major's performance, is going onto the board of International Business Communications as a non-executive director.

IBC, which runs conferences and publishes newsletters, saw its shares dive to 1.6p at the end of 1990. 'We are quite pleased that the price has now climbed to 8 1/2 p' says chief executive Peter Rigby.

But why should Lord Rees-Mogg, who sits on the board of GEC, be interested? 'He runs his own newsletter (Strategic Investment)' Rigby replies 'and he takes an interest in newsletter subscription publishing'.

IBC's chairman was Sir Roy Watts, the former chairman of Thames Water who died suddenly last month. The company says it is looking for a new chairman, but that Rigby will assume the position temporarily.

International Business Communications (Holdings) GB United Kingdom, EC P2711 Newspapers PEOP Appointments P2711 The Financial Times London Page 16 169
People: The Body Shop Publication 930520FT Processed by FT 930520

John Jackson, operations director of the Body Shop, the natural toiletries and cosmetics group, has left the company after five years.

The company said yesterday there was 'no drama and curiosity' in his resignation, which did not result from any disagreement. It said Jackson felt he had achieved all he could with the company, and was looking for new challenges, perhaps in the shape of a chief executive's position - a post that is not vacant at Body Shop. Jackson was not available for comment.

Jackson joined Body Shop from Chesebrough Pond's, the cosmetics subsidiary of Unilever, in 1988. He has been closely involved with the reorganisation of the Body Shop into seven distinct divisions - comprising UK, US and worldwide retailing, and the company's production and warehouse operations, soapworks, make-up and cosmetics divisions - which was completed last autumn. Body Shop said Jackson would continue to work with chairman Gordon Roddick on the Big Issue, the magazine whose proceeds go towards helping the homeless.

Body Shop International GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores PEOP People P5912 The Financial Times London Page 16 197
Technology: A different angle on an old problem - A look at an Australian company which may have a solution to a three-dimensional challenge Publication 930520FT Processed by FT 930520 By KEVIN BROWN

In the arcane world of imaging techniques, there is no shortage of researchers trying to crack the problem of producing three-dimensional images which can be seen on a flat screen without the aid of special glasses or visors.

Most of the big electronics companies have investigated the problem and several techniques are being developed. All share a crucial problem, however - the image disappears or is impaired if the observer changes position.

The 'sweet spot' problem restricts the potential of such systems to single-user applications such as computer-aided design, in which the screen is viewed from a consistent angle by an operator who does not move around.

So far, the challenge of developing a three-dimensional system which can be viewed from any angle in front of the screen and, therefore, by large numbers of people watching from different angles, has defeated all comers. However, a small Australian company called Trutan has produced a potential solution which is regarded as promising by imaging experts at IBM, the US computer company.

Trutan is an unlikely source of technological innovation. The company is a joint venture between Arnotts, an Australian biscuit company, and Biceku, a family company controlled by Donald Martin, a Sydney businessman.

In true inventor style, most of the development work has been carried out in a couple of cramped rooms on an industrial estate in suburban Sydney by Martin and Bjorn Olsson, a Swedish-born film technician.

Neither has a background in imaging technology, although Martin stresses that some of the technical work was carried out by academic researchers at universities in Cambridge, Melbourne and Brisbane.

Martin says he stumbled across the three-dimensional imagery system almost by accident while trying to develop a large-scale projection system for use by Arnotts in the kind of entertainment simulators now appearing in suburban shopping malls.

So far, only one prototype has been constructed and that suffers from technical defects - principally a lack of brightness - which make the image appear dull and slightly fuzzy. Yet imaging experts who have seen the prototype have been impressed by its potential. James Lipscombe, an IBM researcher who specialises in stereoscopic imaging, says its defects are minor and easily solved.

Martin says his research into visorless, three-dimensional suggests that most researchers since the war have concluded that the idea was 'about as feasible as perpetual motion'. But a post-war French researcher called Francois Savoie invented a mechanical contraption called a cyclostereoscope which produced partial three-dimensional images over a small angle of view.

Savoie's machine consists of a vertical axle with a wheel at each end and a series of vertical strips fixed to the rims of the wheel. A small screen is placed inside the ring of strips, on to which a pair of slide projectors project separate left and right images. The photographs have to be taken with a double lens camera - not in itself a technical problem.

When the machine is rotated, the vertical strips form a moving grid in front of the screen which separates the image into alternate left and right images, replicating normal stereoscopic vision. Martin's 'improved' version of the cyclostereoscope produces a three-dimensional image with a near 180-degree angle of view. However, the image is weak, and is distorted by the moving grid, which remains visible in front of the screen.

This problem is reduced when the image is viewed on a flat-screen computer monitor situated behind a liquid crystal display screen - effectively an electronic version of the cyclostereoscope. The computer is programmed to display left and right views of slides in segments which are viewed through a series of oscillating parallel bars on the LCD screen which match the segments on the computer monitor.

The LCD grid oscillates at a rate which makes it invisible to the observer while directing the left and right images to the correct eyes, producing the three-dimensional illusion. It does work, at least with static images. Martin claims the system could be adapted for use in broadcasting.

However, the company says the technical limitations of the present video standard impose problems that are impossible to overcome - chiefly, a noticeable flicker caused by the frame rate (the speed at which image frames succeed each other on screen). This happens because of difficulties in blending the left and right images and the oscillating grid when the image changes. Research indicates that even high-definition television systems, which use a higher frame rate than existing broadcasting systems, would suffer from some degree of flicker.

Two possible solutions have been identified: restricting the system to specialised, custom-made units with frame rates at least double the existing standard; and developing a special monitor incorporating the LCD grid in the screen.

In the meantime, the company claims several Australian companies are investigating possible industrial applications for the system, such as remote control of mining vehicles in dangerous areas.

However, Martin says the shortage of development capital in Australia means the technology is likely to be sold to an overseas company for further development.

Trutan AU Australia P7373 Computer Integrated Systems Design P3571 Electronic Computers P3679 Electronic Components, NEC TECH Technology TECH Products & Product use CMMT Comment & Analysis P7373 P3571 P3679 The Financial Times London Page 16 902
People: Boleat's pro-active stance for the insurers Publication 930520FT Processed by FT 930520

Mark Boleat, who has won plaudits throughout the industry during his seven years as director-general of The Building Societies Association, will be lending his voice, from August, to an entirely different industry as director general of the Association of British Insurers.

He says that after 20 years at the BSA he felt it was time to move on, the attraction of the ABI being that it represented an opportunity to speak for 'a more complex industry' and to wield a budget six times as large.

'I didn't want to be stuck being known as someone who can do one thing only' remarks Boleat, who has in the past been assumed to harbour national political ambitions.

Indicating that it wanted a fresh approach to try and put behind it a string of public relations disasters, the ABI engaged headhunters to find its first director general. Boleat explains 'they want a much more pro-active stance, with the ability to anticipate developments a bit more, rather than just being responsive'.

Mike Jones, who joined the Life Officers' Association in 1968 and who has been chief executive of the ABI since 1987, says he is leaving, 'looking for fresh woods and pastures new.'

Boleat, 44, reckons his biggest achievement at the BSA and the Council of Mortgage Lenders, of which he has been director general since 1989, has been 'to help make it the most effective trade body in the financial services industry'. 'We have helped to create the right regulatory and prudential framework for building societies. It is remarkable that despite (the problems in the housing market) the societies have come through a bit battered, but intact.' Analysts said that, while he could appear arrogant, he had 'worked like a dog for the industry'.

'There are a huge number of regulatory issues, many of which will be identical at the ABI, notably the establishment of the Personal Investment Authority' Boleat adds. At the same time, he acknowledges that the interests of the 450 members are much more diverse, with general and life companies often having directly contradictory agendas.

In his new role he may also find himself doing public battle - where the interests of insurers and building societies diverge - with his former colleague Adrian Coles (right) who steps up from the position of head of external relations to succeed him at both the BSA and the CML. Coles has already won himself plenty of friends - 'quieter but with an intellectual credibility second to none' was the comment of John Wriglesworth, housing analyst at UBS.

GB United Kingdom, EC P8611 Business Associations PEOP Appointments P8611 The Financial Times London Page 16 452
People: Financial Moves Publication 930520FT Processed by FT 930520

Michael Clarke has been appointed joint general manager with responsibility for international finance and syndications at FUJI BANK in London. He was previously assistant general manager.

Fuji Bank GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 16 57
People: Financial Moves Publication 930520FT Processed by FT 930520

Michael Sweeney, director of the capital markets division, has been appointed head of treasury in London for BANK OF IRELAND.

Bank of Ireland IE Ireland, EC P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 16 51
People: Financial Moves Publication 930520FT Processed by FT 930520

Tim Barker, deputy group chief executive, has been appointed a vice-chairman of KLEINWORT BENSON GROUP; Rab Harley, head of operations, is appointed to the board.

Kleinwort Benson Group GB United Kingdom, EC P6029 Commercial Banks, NEC PEOP Appointments P6029 The Financial Times London Page 16 54
People: Financial Moves Publication 930520FT Processed by FT 930520

Heinrich Gattineau has been appointed an md of TRINKAUS MONTAGU, the joint venture between Trinkaus & Burkhardt and Samuel Montagu.

Trinkaus Montagu GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 16 49
People: Financial Moves Publication 930520FT Processed by FT 930520

Javier Salaverri has been appointed a director of J HENRY SCHRODER WAGG & Co; he moves from Banco Central Hispano.

J Henry Schroder Wagg GB United Kingdom, EC P6029 Commercial Banks, NEC PEOP Appointments P6029 The Financial Times London Page 16 50
People: Financial Moves Publication 930520FT Processed by FT 930520

Luke Ponsonby, Robert Pickering and Charles Bishop have been appointed partners of CAZENOVE & Co.

Cazenove and Co GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 16 45
People: Financial Moves Publication 930520FT Processed by FT 930520

Toshio Morikawa, formerly deputy president, is to become president of SUMITOMO BANK Ltd; Sotoo Tatsumi, formerly president, becomes chairman and director.

Sumitomo Bank JP Japan, Asia P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 16 51
People: Financial Moves Publication 930520FT Processed by FT 930520

Gustav-Friedrich Prinz zu Salm-Horstmar, a former md of Chase Investment Bank, has been appointed executive director and head of the London branch of BANK von ERNST & Co.

Bank von Ernst and Co GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 16 62
People: Financial Moves Publication 930520FT Processed by FT 930520

Steve Caines, Bill Stoops, Andre Marini and Geoffrey Barker have been appointed directors of BARING SECURITIES GROUP.

Baring Securities Group JP Japan, Asia P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 16 46
People: Financial Moves Publication 930520FT Processed by FT 930520

Tamaki Tsuchiya, formerly head of capital markets trading in Tokyo, has been appointed chief executive of SANWA INTERNATIONAL in succession to Shuzo Arai who is returning to Tokyo.

Sanwa International JP Japan, Asia P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 16 56
People: Financial Moves Publication 930520FT Processed by FT 930520

Brian Pearse, chief executive of Midland Bank, yesterday became the President of the Chartered Institute of Bankers. Pearse succeeds Sir Jeremy Morse, who recently retired as chairman of Lloyds Bank.

Pearse has spent most of his 43-year banking career at Barclays, before moving to Midland in March 1991. He has overseen Midland's merger last year with HSBC Holdings, parent of Hongkong Bank.

The Chartered Institute is in the process of merging with the Chartered Building Societies Institute.

GB United Kingdom, EC P8611 Business Associations PEOP Appointments P8611 The Financial Times London Page 16 101
Management (Marketing and Advertising): Power of private labels Publication 930520FT Processed by FT 930520 By GUY DE JONQUIERES

In public, many manufacturers of branded products still treat retailers' private-label rivals with disdain. Yet, in the UK at least, private-label production has become so big a business that few companies can afford to turn up their noses.

A recent survey* by Conzept International, a branding consultancy, of 200 UK-based consumer goods producers - half of them in the food and drink industry - finds that fewer than a fifth derive less than 10 per cent of their total revenues from private-label manufacturing.

Forty-four per cent of the companies said the business provided at least 40 per cent of their revenues. Fifty-eight per cent said it was a bigger share of their total sales than five years ago. The main reason for private-label manufacturing, mentioned by 30 per cent of companies, is to provide greater security for continuing sales revenue, while 27 per cent cited the opportunity to cover fixed costs.

The companies divided almost equally between those for which private-label business consisted of producing cheaper copies of branded products or basic products at the lowest possible price and those which aimed to make unique products.

The survey underlines how far private-label business gives retailers the whip hand in marketing decisions which manufacturers of branded products have traditionally controlled. It finds retailers are more important than manufacturers in controlling retail prices, advertising and promotion, packaging and design and the size of product ranges. Manufacturers still wield more control than retailers in the areas of distribution, delivery and product programming.

Three-quarters of private-label manufacturers said their most important market was the UK. But 18 per cent said it was western Europe - which 48 per cent named as their second most important market.

* Conzept International, Riverview House, London W6 9AR. Tel: 081-748 7874

GB United Kingdom, EC P5999 Miscellaneous Retail Stores, NEC P2671 Paper Coated and Laminated, Packaging MGMT Management & Marketing P5999 P2671 The Financial Times London Page 15 337
Management (Marketing and Advertising): River-to-river saleswomen - Avon is selling its cosmetics in the Amazon Publication 930520FT Processed by FT 930520 By CHRISTINA LAMB

Sending bands of women in kayaks down the tributaries of the Amazon to sell lipstick and face creams to remote communities would seem to be taking the concept of direct sales to the extreme. Particularly if the communities do not use money and can pay only with barter goods such as fruits, eggs, wood or nuggets of gold.

Yet this is one of the creative methods used by the Brazilian subsidiary of Avon, the US cosmetics giant, to make its products available throughout the country's vast hinterlands and to maintain sales over the past three years of recession.

As a result, Avon has become one of the few Brazilian companies to see sales rocket as per capita income has dropped 10 per cent.

Ademar Serodio, president of Avon Brazil, explains: 'Research showed us that, even in a crisis, there is always consumption.

'Our problem was to make people who had less money consume more.'

His plan to widen the sales net did not convince his head office, nor, indeed, some of his employees. They believed cosmetics sales would be among the first products to suffer in a deep recession and the company should adjust to a smaller market.

After a six-month struggle, Serodio's masters caved in, agreeing in March 1991 to boost the sales force by 50 per cent and launch a series of new products. The decision was a success, turning the Brazil operation into one of the company's most profitable worldwide and the largest cosmetics company in Latin America.

Sales rose from 180m units in 1990 to 220m last year. This year, revenues are expected to reach Dollars 480m (Pounds 317.8m), against Dollars 350m in 1990. The workforce has increased 10 per cent and the factory is operating at full steam, compared with an idle capacity average for Brazilian industry of 30 per cent.

To achieve this, and increase the sales force, Serodio boosted the number of sales catalogues to 1.2m, which he estimates are seen by 30m people.

This is a costly operation in Brazil, where high inflation means the catalogues must be reprinted every 19 days, while the estimated inflation rate is factored into the sales price to cover the grace period for payment. Simply issuing new price lists did not work, says Serodio, explaining: 'The catalogues are an essential tool of our salesforce in creating trust.'

Serodio also radically changed the system of incentives for sales people, who work on 30 per cent commission. Rather than, as in the past, reward the people who sell most, prizes now go to those who most improve their own performance. Serodio explains: 'Under the old scheme, it was always the same people who won, so it ended up not being an effective incentive.'

The Amazon sales are a result of a new flexibility to adaptation to local conditions and the logistics problems of door-to-door sales in a country larger than western Europe.

Serodio admits he is not sufficiently familiar with the currency of the Amazon to judge how many breadfruit one needs to buy a lipstick or how many blushers to a nugget of gold. But, having paddled back to Amazonian towns, his sales women exchange the barter products for money and then pay Avon.

As a result, today in Brazil the Avon name may be known in places where even the usually ubiquitous Coke has not penetrated.

Serodio explains: 'There is a cosmetics market everywhere, however peripheral the place. Cosmetics are not superfluous products, but a necessary part of a woman feeling good and being accepted by society.'

He points out that, when Avon opened a sales office in the poor north-eastern state of Bahia in 1970, analysts claimed that the local per capita income was too low for the purchase of cosmetics.

Yet the Sao Paulo factory was soon filling truck loads of products bound for the interior of the state - one of the poorest parts of the continent.

Serodio says: 'I didn't believe it. It countered all my training as an economist. So I went there and I found all these really poor people living in mud shacks yet buying cologne in crystal bottles.

'It turned out that they saw them as a status symbol.'

Avon Brazil BR Brazil, South America P2844 Toilet Preparations P5963 Direct Selling Establishments MGMT Management & Marketing CMMT Comment & Analysis P2844 P5963 The Financial Times London Page 15 754
Management (Marketing and Advertising): Sticking to the border - A look at the European expansion of Swiss retailer Migros Publication 930520FT Processed by FT 930520 By NEIL BUCKLEY and IAN RODGER

Crossing borders has become second nature for many businesses, but not for retailers. Companies that have exported a successful retailing formula are few, while the list of failures, including the UK's Marks & Spencer in Canada and France's Printemps in Japan, is depressingly long.

Now, a new generation of retailers is trying again. Last December, Tesco of the UK bought the 92-store Catteau chain of supermarkets in northern France. Two months later, Kingfisher, the UK retailing group, acquired Darty, France's largest electrical retailer. Ahold of the Netherlands, Aldi and Tengelmann of Germany, and Promodes and Carrefour of France are among those which have built up the proportion of their sales in other European markets to more than 30 per cent.

The latest to join this trend is Migros, one of Europe's most powerful retailers, but up to now active only in Switzerland. A federation of 12 co-operative societies, the company is building supermarkets in France and Germany and is committed to taking a leading position in the Austrian grocery market.

Its progress will be watched closely by other European retailers, after its large success in Switzerland, where it has 23 per cent of the food market. It buys more than 20 per cent of Switzerland's annual agricultural production and, in line with its founder Gottlieb Duttweiler's policy of reducing prices by cutting out the middleman, it manufactures about a third of what it sells in its own factories.

Moreover, its method of expansion may prove a model. Having carefully studied the failures of others, Migros believes the key to success, in food retailing at least, is to stick at first to the regions around one's home base. It also decided not to open its own stores in Austria, but rather to form joint ventures with existing local retailers.

Eugen Hunziker, president of the Migros federation, acknowledges the biggest mistake most retailers have made in cross-border ventures has been underestimating the differences from their home market. Successful retailing involves delivering the right goods and services to the local customer. But differing tastes, cultures and climate mean the demands of customers vary considerably in different parts of Europe. Moreover, different legislation in areas, such as opening hours, planning restrictions, VAT and minimum wages, can make operating conditions very different in foreign markets.

Even within the US where there are no significant linguistic or cultural borders, national retailers, such as Safeway and A&P, have been unable to keep pace with regional specialists, argues Hunziker.

The challenge, he says, is defining which regions belong together. Switzerland, for example, has three cultures clearly separated from one another. Yet Migros succeeds in all, by carefully targeting its products and offering them at aggressive prices.

Migros management knows its supermarkets are appreciated beyond Switzerland's borders. German, Italian, French and Austrian consumers regularly cross the border to shop in its stores.

Besides awareness of the potential pitfalls, Migros' cumbersome democratic decision-making process within the co-operatives had previously acted as a brake on cross border expansion.

But the pressure has now become irresistible. The group has limited potential for growth at home and needs more outlets for its manufactured products, including confectionery, pasta and hygiene products, if it is to remain competitive.

With the creation of a single market in the European Community it looked as if expansion into neighbouring countries could be approached gradually and painlessly. Migros first dipped its toe in the water last year, launching two supermarket projects in the French suburbs of Geneva and another in a German suburb of Basle.

Then in December a majority of Swiss voted against joining the European Economic Area (EEA), an expanded free-trade zone with the EC. That meant that exporting from Switzerland would continue to be difficult and the group would need a secure base somewhere within the EEA. The obvious solution was to go to Austria. Austria will be a member of the EEA as well as having easy trade relations with Switzerland through the European Free Trade Association.

In March, Migros made a series of deals that would give it access to about a quarter of the Austrian grocery market at a cost estimated by outside analysts at more than SFr200m (Pounds 88.4m). It acquired the chain of 112 Familia supermarkets based mainly in the western Austrian province of Vorarlberg from the Zumtobel group. It then formed two joint ventures with Konsum, Austria's largest supermarket chain.

One venture, in which Migros will have a 75 per cent controlling interest, will manage the Familia supermarkets and Konsum supermarkets in Vorarlberg. It will have estimated sales of SFr200m and employ around 1,500 people. The other, in which Migros has only a 25 per cent stake, brings together 78 Konsum supermarkets throughout Austria and the Familia shops outside of Vorarlberg. It would have annual sales of Sch12bn (Pounds 690m) and employ around 4,000 people.

Even expanding reasonably close to home, though, can lead to complications. News of the joint ventures provoked an outcry from Austrian trade unions, which claimed Migros' policy of manufacturing so much of its own goods would mean the loss of thousands of jobs in Austrian manufacturing.

Hunziker dismisses the idea that Migros is going to divert Konsum and Familia's existing supply and distribution networks to its Swiss sources, although it is analysing the Austrian stores in detail to see which of its own products it can sell, and how it can best take advantage of its international procurement potential.

'We didn't go into Austria on our own, but looked for co-operation. We can't transfer Migros philosophy and policy wholesale. The Austrians will tell us what we can and cannot do,' he says. With that type of attitude, Migros may stand a better chance than some of its precursors of making a success of its cross-border ventures.

Migros Genossenschafts-Bund CH Switzerland, West Europe P5411 Grocery Stores MGMT Management & Marketing CMMT Comment & Analysis P5411 The Financial Times London Page 15 1016
Accountancy Column: Time to ask who should audit the government's auditors - The case for independent scrutiny of the UK's two public watchdogs Publication 930520FT Processed by FT 930520 By MARY BOWERMAN

A DECADE after the creation of the Audit Commission and the National Audit Office, the UK's two public audit watchdogs have clearly proved their worth. But the time has come to question who audits the auditors themselves.

The National Audit Office and the Audit Commission audit the majority of public bodies, with a remit to report on value for money and the figures in the accounts. They are sometimes the taxpayer's only 'foot in the door' of non-elected bodies such as the regional health authorities. Their contribution to improving public sector management is widely acknowledged, while the savings they identify more than cover their costs.

The Audit Commission was established in 1983 and is responsible for co-ordinating the audits of and promoting value for money in local authorities. In 1990 its duties were extended to include the National Health Service, bringing the total level of expenditure under its scrutiny to around Pounds 90bn. Some 70 per cent of its audits are undertaken by the commission's own staff and the remainder by selected private sector accounting firms it appoints.

The National Audit Office was established in 1984. It audits the accounts of central government departments and many other public agencies. It also has the power to carry out value for money audits of these and other public bodies, such as universities. The total amount under scrutiny is Pounds 450bn.

The Audit Commission has been instrumental in causing change in the way local government and latterly the NHS use their resources. It uses a comparative approach to identify best practice which forms the basis of its recommendations to all authorities. A recent report showed that Pounds 15m could be saved if hospitals mended leaking pipes and used water more efficiently. Another on public libraries showed the cost of issuing a book is Pounds 6 at the most inefficient libraries.

The National Audit Office also has an impressive record in raising issues ranging from how the Ministry of Defence could save Pounds 30m by better utilisation of its housing stock, through to questioning the effectiveness of cervical and breast screening. A timely report issued just after the Windsor Castle fire revealed that inadequate fire safety standards in government buildings had already resulted in losses of Pounds 8m and has caused the Houses of Parliament to be refused a fire certificate since 1979.

Most of the National Audit Office reports are presented to parliament through the Public Accounts Committee and are used to call to account the senior civil servants responsible. Occasional television glimpses of these officials squirming under interrogation can give a curious satisfaction and sense of retribution. Real sadists can read the full transcripts published a few months later.

But who audits the auditor? Are our auditors performing their role effectively? Amid the hundreds of value for money reports published over the last 10 years, covering thousands of public sector activities, not one is an independent review of the performance of the public sector auditors.

While they have been expanding the scope and improving the standards of public audit practice, the auditors themselves are still audited to only a rudimentary, traditional level. The National Audit Office is auditor to the Audit Commission and has the right to undertake a value for money audit, but has never done so.

The two bodies need to liaise closely in some areas of their work. This appears a rather incestuous relationship. A close scrutiny of the Audit Commission by the National Audit Office would be likely to cause some embarrassment on both sides.

The National Audit Office's own affairs are subject to more stringent scrutiny. Its annual budget must be approved on behalf of parliament by the Public Accounts Commission - a committee of MPs.

The Public Accounts Committee also questions the head of the National Audit Office about planned expenditure and activities. Minutes of these discussions are published but some of the more sensitive issues, such as proposed pay levels and problems with office relocation, are censored.

A private firm of accountants - currently Clark Whitehill - audits the National Audit Office and has undertaken some value for money reviews on topics such as recruitment, training and accommodation. The results are passed on to the Public Accounts Commission. But they have never been made available to the public.

An open and independent appraisal might allay the concerns of critics over a range of important issues.

Is the mix of staff appropriate? Auditors, mainly with a background in professional accounting, are examining issues ranging from medical procedures to road building. The US government auditors, by contrast, are drawn from a wide range of professions.

Is productivity sufficiently high? The number of Audit Commission reports on value for money in local government fell from 19 to 12 between 1990 and 1991. In 1991 it managed to deliver just 49 per cent of audit opinions on local authority financial statements within two months of publication deadlines, while its fee rates rose by 6.7 per cent - compared with inflation of 4.1 per cent. In the same year, the National Audit Office spent only 50 per cent of its budget on direct work on investigations. The rest went on overheads.

Should more audit and value for money projects be contracted out? While the rest of the public sector has been exposed to competition, the National Audit Office spends just 5 per cent of its expenditure on contracted services. The Audit Commission has always placed 30 per cent of audits with private sector firms. This proportion has been static since 1983.

Is more attention paid to efficiency than effectiveness? Both sets of auditors are constrained in the extent to which they can question policy. This means that some of the really interesting questions are never posed. Is audit coverage sufficiently integrated in programmes run through different agencies? For example, how well do the auditors work together to assess the impact of policies such as the development of a national curriculum imposed by central government but implemented by local government and grant-maintained schools?

The two audit bodies are, of course, experts in giving advice on the use of resources, and they apply much of this knowledge to their own organisations. The National Audit Office has a comprehensive resource management system that feeds into a five-year corporate plan. This is published annually and discussed by the Public Accounts Committee.

The Audit Commission has given its own - mainly glowing - assessment of the impact of each of its publications since 1983 in 'How effective is the Audit Commission?' It has recently invited comment on its new strategy document 'Adding Value'.

Both bodies have well-established quality-control procedures and both publish annual reports which include performance indicators such as cost, the number of accounts audited, the number of recommendations agreed to, and an estimate of the value of savings identified.

This record of accountability is impressive compared with many other public bodies. But it is internally driven. While the National Audit Office and the Audit Commission have carte blanche to review and report on most of the public sector, it does seem anomalous that they alone should escape independent public scrutiny.

An independent body with an overview of both organisations would be the ideal remedy. But there is no obvious candidate and this would require a change in legislation. At a minimum the auditors should be subject to periodic performance audits, with the results in the public domain.

Mary Bowerman is lecturer in public sector accounting at the University of Hull.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services CMMT Comment & Analysis P8721 The Financial Times London Page 10 1299
Parliament and Politics: MPs attack intervention in brewing industry Publication 930520FT Processed by FT 930520 By PHILIP RAWSTORNE

AN ALL-PARTY committee of MPs yesterday slammed the government for meddling in the brewing industry.

Intervention had caused 'unnecessary expense and turbulence' for brewing companies and 'distress and uncertainty' for pub tenants, the agriculture committee said.

In a critical report on government action following the Monopolies and Mergers Commission 1989 inquiry into the industry, the committee said consumers had gained little benefit.

A 17 per cent real increase in the price of beer since 1989 was 'a clear indictment' of the effects of orders which forced national brewers to free a third of their pubs from exclusive beer supplies.

'Far from increasing consumer choice within some regions, the effect has been to increase the strength of some local and regional monopolies which are just as pernicious, if not more so, as the complex monopoly allegedly existing in the national market,' the MPs said.

Closures of rural pubs and the decline in the numbers of beers available nationally were further signs of the failure of the policy.

The only 'unarguable success' had been the introduction of guest beers which pub tenants were allowed to buy from brewers other than their landlords.

Questioning the need for the government's forceful intervention, which cost the industry Pounds 500m in restructuring, the committee said: 'We consider that reform of the licensing laws could have gone much of the way to introducing greater competition with far less traumatic results,' adding that such action should now be taken quickly. Much of the confusion within the industry over the past four years could have been avoided if a clear strategic path had been established from the outset, the report said.

But there was evidence that both the MMC and the government had failed to understand the mechanics of competition in the supply of beer. The MMC's strategy, directed towards brand availability and price, was bound to miss its target; and there was no clear rationale for the government's course of action.

The committee said competition and consumer choice should now be encouraged without further intrusive and burdensome regulation.

The committee recommended a reduction in duties on alcoholic drinks to bring them closer to EC rates and said it would be sensible to tax drinks on alcoholic content.

The Brewers' Society welcomed the report which, it said, confirmed its view that the MMC investigation and subsequent government orders 'reflected poorly on the administration of competition policy.'

Effects of the beer orders on the brewing industry and consumers, House of Commons Paper 402, HMSO Pounds 24.40).

GB United Kingdom, EC P2082 Malt Beverages P5813 Drinking Places COSTS Product costs & Product prices GOVT Taxes P2082 P5813 The Financial Times London Page 9 459
Parliament and Politics: Jostling around Major's cabinet table - Political Notebook Publication 930520FT Processed by FT 930520 By PHILIP STEPHENS

LIFE AFTER Maastricht. Denmark's endorsement of the treaty has provided the occasion for predictably jubilant talk among ministers about lines now drawn under a dismal past, the promise of new beginnings. They half believe it. They will be more convinced when they can see also life after the reshuffle.

With the bulk of the Labour party abstaining, the government is promised a comfortable majority when the Maastricht bill's third reading wraps up its tortuous progress through the Commons today.

In spite of the promised thunder in the House of Lords from Lady Thatcher and Lord Tebbit, the finishing post is now in clear view. The court cases threatened by the Euro-sceptics may prove more of a nuisance than the government will admit. So too might action in the European Court to challenge the validity of Britain's opt-out from the social chapter.

But barring unexpected accidents - an essential caveat when writing about the present government - by the end of July Britain should have caught up once again with its European partners and ratified the treaty.

In spite of the venom of his attack on Mr Major, even Lord Tebbit sounded yesterday as if he knew in his heart that the game was up.

The split in the Tory party over Europe will not go away. The arch-Eurosceptics - Mr Major's very own Militant tendency - have detached themselves from the Conservative mainstream. Sterling's exile from the European exchange rate mechanism means that the destructive choice between the slow and fast lanes of European integration has been deferred, not removed.

The DM/Franc link has survived everything the speculators have thrown at it. It provides the basis for a monetary union among the Community's core countries. Mr Major underlined yesterday that there was no prospect in the medium term of the pound's return to the system. Those in Whitehall who remember the sterling crises which punctuated life before the ERM understand the risks of remaining outside.

The prime minister has more immediate problems. His own authority has been much diminished. His cabinet is deeply unsettled. His supporters on the backbenches are ready to be tipped into panic again by the threat - albeit at this stage slim - of defeat in the Christchurch by-election. He is also being pressed to move quickly to remake his government.

The official line - that Mr Major is determined not be pushed into a reshuffle by the media - is either understandably disengenuous or deeply misguided.

It is true that some Fleet Street editors would be happy to claim the scalp of Mr Norman Lamont. The chancellor's sometimes aloof manner and his habit of writing nasty letters of complaint have left him few friends in the press.

But this time the pressure from the media understates the manouevering in the cabinet. If Mr Major decides against changes he will be ignoring the advice of a majority of his colleagues. It must be assumed that Mr Norman Fowler, the party chairman, and Mr Richard Ryder, the chief whip, have told him so.

It is not a question of malice. Mr Lamont has been a shrewder, braver chancellor than his public image allows. But in the words of a colleague, he has been at the scene of too many accidents.

Mr Lamont does not want to go. He sees no reason why he should be the scapegoat for the recession or for Maastricht. There are dark - unsubstantiated - rumours that Mr Major's role in the ERM debacle would not bear the scrutiny of Mr Lamont's memoirs.

The uncertainty is damaging the cabinet. Ministers are jostling for position in case Mr Major opts for wholesale changes. Resentments are building up.

Mr Kenneth Clarke has emerged alongside Mr Douglas Hurd as an independent force in the government. But the home secretary's habit of re-interpreting economic policy during early morning chatshows has enraged Mr Lamont.

Mr Hurd is accused - unfairly - in the bars of Westminster of plotting against the chancellor while his protege Mr Clarke bids for his job on television.

Other relationships risk being soured by constant speculation about who is on the way up and who might be on the way out. Mrs Virginia Bottomley's trouble-free year at the health department has caused resentment among less fortunate colleagues.

The right is asserting Mr Michael Howard's candidacy for No 11. Others, such as Mr John Patten or Mr Tony Newton, have been unsettled by the inclusion of their names alongside that of Mr Lamont on reshuffle 'hit-lists'. Discord ripples through the middle and junior ranks of the party.

It cannot make for good government. One way or the other, Mr Major will have to end the uncertainty soon.

GB United Kingdom, EC P9199 General Government, NEC P9721 International Affairs GOVT Government News P9199 P9721 The Financial Times London Page 9 823
Parliament and Politics: Tory cash disclosure plea Publication 930520FT Processed by FT 930520 By DAVID OWEN

THE 'CHARTER' group of Conservative activists is calling for a formal policy on donations to the party as part of its campaign to remove the secrecy surrounding Tory finances.

In its seventh annual report on the party's income and expenditure Charter says there should be limits to donations from any one source and sources from which 'no donations at all are acceptable.'

It calls for 'a formal policy on this' approved by the party's central council. 'The Conservative party . . . should not be financed by those who have no vote in United Kingdom elections' or by 'excessively large donations or loans from those who are not prepared to be publicly identified'.

The report comes as the party is showing some signs of greater openness in its accounting. It decided earlier this week that it would publish a balance sheet for the first time with its 1992-93 accounts in July.

However, current proposals stop short of advocating a breakdown of individual donations to the party.

The report dismisses the party's new board of management - which met for the first time this week and has been likened to a company's board of directors - as 'a sham'.

'The chairman of the board (Sir Norman Fowler - of course) is in no way beholden to the board,' it says. 'The board's members are there at his invitation and are wholly dependent upon his goodwill for the board to function at all.'

Sir Norman owed constituencies 'a proper account for the damage that has been done to the party's image by Central Office's spendthrift ways and the carelessness with which they have accepted money from seemingly any source at all in order to feed their addiction to profligacy'.

Called to Account - a report on Conservative party central funds. Charter Movement, 2 Devon Cottages, West Common, Gerrards Cross, Buckinghamshire SL9 7RG.

GB United Kingdom, EC P8651 Political Organizations NEWS General News P8651 The Financial Times London Page 9 342
Parliament and Politics: ECGD review Publication 930520FT Processed by FT 930520

THE GOVERNMENT is reviewing staffing levels within the Export Credits Guarantee Department. Mr Michael Heseltine, trade and industry secretary, told MPs yesterday he was concerned at the level of the body's overheads.

GB United Kingdom, EC P6111 Federal and Federally-Sponsored Credit Agencies PEOP Labour P6111 The Financial Times London Page 9 61
Parliament and Politics: Revenue rapped over heritage Publication 930520FT Processed by FT 930520

THE INLAND Revenue was criticised by MPs yesterday for failing to help provide access for the public to land and artefacts of national heritage exempt from inheritance tax.

During consideration of a National Audit Office report on inheritance tax, members of the Commons public accounts committee said the Revenue should do more to ensure people were aware of their rights to inspect countryside and chattels such as historic paintings which are considered important enough national treasures to gain exemption.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 9 111
Parliament and Politics: Rail sale rebels step up pressure Publication 930520FT Processed by FT 930520 By DAVID OWEN

PRESSURE ON the government to consider changes to its rail privatisation proposals mounted significantly last night when potential Tory rebels tabled amendments they said would help make the measure more popular, David Owen writes.

Eight Tories signed the amendments which will be debated next week when the bill returns to the Commons for its report stage. Rebel leaders are expected to meet Mr John MacGregor, transport secretary, today to press their case.

The MPs' demands fall under three main headings: safeguarding concessionary railcards, allowing British Rail to compete to run services, and formulating a national plan for the railway network.

Ministers are determined not to give way over BR's ability to compete for franchises.

In a letter to MPs, Sir Keith Speed - a former minister and rebel leader - said: 'We have all seen in recent times what can happen to Conservative party support if policies are embarked upon in an insensitive and ill-thought-through manner.'

Sell-off junction, Page 19

British Rail GB United Kingdom, EC P9611 Administration of General Economic Programs P4011 Railroads, Line-Haul Operating NEWS General News P9611 P4011 The Financial Times London Page 9 205
Parliament and Politics: Iraq inquiry told of cabinet disunity Publication 930520FT Processed by FT 930520 By JIMMY BURNS

FORMER Trade Secretary Mr Paul Channon indicated yesterday that he may have been unable to influence key decisions within government affecting the sale of defence equipment to Iraq and Iran for which his department had statutory responsibility.

Mr Channon told the Scott arms-for-Iraq inquiry that during his period as secretary of state, from 1986-87, the Foreign Office and the Ministry of Defence were interpreting government guidelines in a way he had not envisaged.

The guidelines agreed to in December 1984 were intended to restrict defence exports which could significantly enhance military capabilities and prolong or exacerbate the Iran-Iraq war.

But Mr Channon commented on one case in which the export of hovercrafts to Iran had been blocked not, in his view, on the basis of military criteria, but because Mrs Margaret (now Lady) Thatcher, then prime minister, had not wanted either to alienate the opinion of other arab countries or become embroiled in the Irangate controversy which had surfaced in the United States.

'I think (the MOD and the Foreign Office) were changing the rules as they went along . . Although it was government policy, it was jolly irritating,' he said.

Documents made available to Lord Justice Scott's inquiry team confirm that by 1986 Mr Alan Clark, then serving under Mr Channon as trade minister, and other DTI officials were arguing strongly for a relaxation of the guidelines.

But Mr Channon said he had no record of some documents being circulated to him. One which he could not recall seeing before yesterday was a minute written by Mr Clark to Mrs Thatcher on November 24 1986 urging a relaxation of the guidelines. The public hearings continue on Monday.

GB United Kingdom, EC IQ Iraq, Middle East IR Iran, Middle East P9199 General Government, NEC P9721 International Affairs NEWS General News P9199 P9721 The Financial Times London Page 9 326
Parliament and Politics: Lilley denies closure threat to rural post offices Publication 930520FT Processed by FT 930520 By IVOR OWEN, Parliamentary Correspondent

AN expanded range of benefits available for payment by automated credit transfer was outlined by Mr Peter Lilley, social security secretary, in the Commons last night when he denied that large numbers of post offices, particularly in rural areas, faced closure.

He accused Labour MPs of mounting a 'scare campaign' about the threat that the wider use of automated credit transfer for the payment of benefits into banks and building societies posed to the post office network.

His renewal of earlier assurances that the government would maintain a nationwide network of post offices failed to satisfy Mr Donald Dewar, Labour's shadow social security secretary, and other opposition MPs.

Mr Lilley explained that all small post offices - in the region of 3,000 - received a fixed sum regardless of the volume of benefit business, so their remuneration would not be affected by more people switching to automated credit transfer.

Girobank last night welcomed Mr Lilley's 'assurance that the government needs the post office network to deliver benefits and that many millions would still prefer payment across the counter'.

During the debate Mr Lilley said pensions, child benefit and disability allowances were already available for payment by automated credit transfer, and a start had been made in phasing in unemployment, income support, invalidity and severe disability allowance.

He emphasised that the delivering of benefits was the biggest single item in his department's operating costs (Pounds 650m a year).

Mr Jim Cousins, in the final speech from the Labour front bench, angered Tory MPs by claiming that the government had 'chosen to make war upon the sub-post offices'.

Mr Edward Leigh, junior trade and industry minister, said sub-post offices were an integral part of rural and urban life, and the government intended to keep them, but the network should be flexible.

He added: 'That does not and cannot mean that no post office will ever close - that would be absurd.'

He reaffirmed that the government's commitment to a nationwide network would apply whether the future of the post office lay in the public or the private sector.

The government won a majority of 36 (311-275) to defeat a Labour motion condemning the uncertainty caused by encouraging the use of automated credit transfers for the payment of benefits.

GB United Kingdom, EC P4311 U S Postal Service P9441 Administration of Social and Manpower Programs NEWS General News P4311 P9441 The Financial Times London Page 9 423
Parliament and Politics: Labour highlights trade deficit Publication 930520FT Processed by FT 930520 By DAVID OWEN

BRITAIN HAS been running a deficit on its trade in manufactured goods for more than a decade, Labour claimed yesterday, as it launched a concerted attack on the government's manufacturing record.

The opposition used trade and industry questions to taunt a succession of ministers over this deficit.

Labour's attack came within 24 hours of a pledge by Mr John Major, the prime minister, to direct all of Whitehall's energy towards broadening the economic recovery and strengthening the country's manufacturing base.

Opening the assault, Mr Robin Cook, the shadow trade and industry secretary, invited ministers to rebuke chancellor Norman Lamont for forecasting in his March Budget that the manufacturing deficit would double this year.

Britain has had a deficit on its trade in manufactured goods every year since 1982, Mr Cook said. He inquired how long it would be until the country got back to the surplus which existed every year before the Conservatives were elected.

He was supported by Mr Nicholas Winterton, Tory MP for Macclesfield, who asked when Britain would start to reduce the deficit.

Challenged over last year's Pounds 2bn balance of payments deficit on cars, Mr Tim Sainsbury, industry minister, said the country could look forward to 'a steady increase in the number of cars sold in Britain that are produced in Britain.'

He said it was important for Britain to avoid 'saddling' manufacturers with the effects of the Maastricht treaty's social chapter.

Mr John Butcher, a former Conservative industry minister, urged the government to abolish capital taxation 'within the lifetime of this parliament.' Manufacturing was more capital-intensive than the service sector, he said.

GB United Kingdom, EC P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy ECON Industrial production P9611 P9311 The Financial Times London Page 9 309
Directors deny greed over pay Publication 930520FT Processed by FT 930520 By LUCY KELLAWAY

HIGHLY PAID British bosses took cover yesterday after BTR chairman Sir Owen Green attacked them for the size of their pay packets.

In an article entitled 'Greed: the curse that is corrupting Britain's bosses', published in yesterday's Daily Mail, Sir Owen complained that top people were awarding themselves rises irrespective of the performance of their companies.

Speaking later he accused his peers of cowardice in their response. 'People have been saying to me 'you are absolutely right' but they are not putting their heads above the parapet,' he said.

Sir David Plastow, chairman of the remuneration committee at Guinness which was recently criticised for awarding a 25 per cent pay rise to company chairman Sir Anthony Tennant, was one of the few to mount a public defence.

'I am totally unapologetic,' he said. 'When Sir Owen says that chairmen are paying themselves too much, he doesn't understand.'

Sir David described Sir Anthony as an 'entrepreneurial and marketing genius', and said that his departing salary of Pounds 777,000 was determined by an independent committee and reflected the exceptional performance of the company.

'He (Sir Owen) also talks about chief executives being ordinary chaps. In fact it is an enormously demanding and stressful job,' said Sir David, who agreed in general that pay and performance should be more closely related.

Sir Owen, who is paid Pounds 217,616 by BTR, said the maximum salary for a British chief executive should be 'around Pounds 500,000 for the top 10 companies in the country. It certainly shouldn't be Pounds 1m.'

Prudential and Tesco, whose highest-paid directors received Pounds 769,000 and nearly Pounds 1m respectively last year, were among the companies that refused to comment yesterday.

ICI pointed out that the 25 per cent salary increase for Mr Ronnie Hampel, who will be chief executive of the reorganised ICI, reflected his promotion to a more responsible job.

Some executives said BTR should not criticise others as it had failed to disclose in its 1992 accounts the Pounds 460,000 pay packet of chief executive Mr Alan Jackson. Sir Owen said this was an oversight that would be rectified next year.

But the Institute of Directors said yesterday: 'The fact that (Sir Owen) takes a public stance is totally to be applauded.'

Mr Paddy Linaker, managing director of M&G, the fund management group, complained that very large pay rises 'create a bad image'.

BTR GB United Kingdom, EC P8741 Management Services PEOP People P8741 The Financial Times London Page 8 426
Clarke firm on police reforms Publication 930520FT Processed by FT 930520 By ALAN PIKE, Social Affairs Correspondent

MR KENNETH CLARKE, the home secretary, yesterday sought to reassure police officers that he shared their concerns while yielding nothing over his plans for radical change in the service.

Speaking at the Police Federation conference in Blackpool, he emphasised that it was the structure of the service that needed reform and 'not the policemen and policewomen who work within it'.

But Mr Alan Eastwood, federation chairman, warned of deep anxieties and sinking morale.' I have never known a time when the service, at every level, has been so demoralised,' he said.

Mr Clarke has started restructuring police authorities to turn them into smaller, more businesslike bodies and wants to streamline disciplinary procedures making it easier to dismiss under-performing officers.

In addition, the results of the Sheehy inquiry into police structure and reward due next month are likely to lead to the abolition of some senior ranks and the introduction of performance-related pay.

Facing brief outbursts of jeers and heckles, Mr Clarke dismissed the view that his proposals would increase central control of the service. He said: 'I intend to abolish many of the controls now applied by the Home Office and let police managers get on with doing their jobs.' Chief constables would be encouraged to delegate responsibility from their headquarters.

But Mr Eastwood said some people saw 'something positively dangerous' in the home secretary's plans to reduce local authority representatives, replacing them with government nominees and a Home Office-appointed chairman.

The new arrangements could be used 'in a dictatorial fashion', he said, and there was a danger that chief constables who challenged government policies might find themselves 'brought into line'. Mr Eastwood said police authorities risked being 'reduced to a walk-on part' and Mr Clarke's proposals resembled a Home Office takeover or a forced merger where all the voting shares were held by the home secretary.

'I really do beg you not to press on regardless, impervious of local opinion, dismissive of professional advice, lumping all criticism of your grand design as the inevitable voice of special pleading. If ever there was a time for a minister to listen it is now,' Mr Eastwood said.

Ministers are increasingly determined to take a tough stand on crime and Mr Clarke said that in addition to amendments to the Criminal Justice Act announced last week he would legislate soon to give the police powers of immediate arrest when bail was breached and to bring squatting clearly within the criminal law.

He also announced an independent examination of the amount of paperwork imposed on the police by the criminal justice process.

GB United Kingdom, EC P9221 Police Protection NEWS General News P9221 The Financial Times London Page 8 462
CBI urges fresh growth strategy Publication 930520FT Processed by FT 930520 By MICHAEL CASSELL, Business Correspondent

THE CONFEDERATION of British Industry is to urge the government to construct an industrial strategy based on strengthening the supply side of the economy to achieve sustainable economic growth.

The CBI has been encouraged by recent ministerial language which is more supportive of manufacturing industry, but it believes the government has still failed to articulate a clear industrial strategy.

The employers' organisation has started work on a policy document intended to define its view of the government's proper role in improving Britain's competitiveness. It will also set out what the CBI believes to be the acceptable limits of state involvement in supporting industry.

The CBI is anxious to discourage any suggestion of old-style state intervention, but believes the government must make its central objective the adoption of policies intended to help UK companies compete more successfully. Business leaders complain that competitors in other European countries receive far more assistance from government in winning vital orders.

Mr Howard Davies, CBI director-general, yesterday made a preliminary report on the issue to his ruling council, which will discuss it again later this year after more detailed work has been done.

Mr Davies told a London press conference: 'We are trying to work towards a definition of what government's responsibilities are towards industry.'

He said the government's prime responsibility was to provide a stable economic framework for business. But beyond that it had to implement policies which would raise the trend growth rate.

The CBI is to examine a series of policy areas in which it believes government action should be taken to help improve national competitiveness. They include public expenditure and taxation, education and training, transport infrastructure and planning and business support services.

The European Community has lost one fifth of its share of world trade since 1980 and will lose more unless productivity improves and social costs on employers are contained, the CBI council warned yesterday.

Members called on the EC to 'rethink its commitment to the social chapter and to avoid directives which will further reduce competitiveness'.

GB United Kingdom, EC QR European Economic Community (EC) P9611 Administration of General Economic Programs P9721 International Affairs NEWS General News P9611 P9721 The Financial Times London Page 8 380
UK Economic Indicators Publication 930520FT Processed by FT 930520

------------------------------------------------------------------------ ECONOMIC ACTIVITY - Indices of industrial production, manufacturing output (1985=100); engineering orders (Pounds billion); retail sales volume and retail sales value (1985=100); registered unemployment (excluding school leavers) and unfilled vacancies (000s) ------------------------------------------------------------------------ Indl. Mfg. Eng. Retail Retail Unem- prod. output order* vol. value* ployed Vacs. ------------------------------------------------------------------------ 1991 4th qtr. 106.2 110.8 29.9 98.8 119.4 2,515 114.1 1992 1st qtr. 105.4 111.1 30.8 98.7 99.5 2,635 119.8 2nd qtr. 105.0 111.6 31.0 99.3 104.5 2,712 115.2 3rd qtr. 105.9 111.5 30.4 99.5 104.8 2,805 107.0 4th qtr. 106.8 111.2 31.2 100.4 123.5 2,918 102.7 March 105.2 111.6 30.8 98.3 100.5 2,648 120.2 April 105.7 111.8 31.1 99.4 105.7 2,690 117.8 May 104.6 111.3 31.0 99.0 104.0 2,712 115.2 June 104.7 111.8 31.0 99.5 103.9 2,723 112.5 July 105.8 111.8 31.4 98.6 105.1 2,758 112.6 August 105.7 111.5 31.2 99.6 104.5 2,816 108.4 September 106.1 111.2 30.4 100.4 104.8 2,841 100.1 October 107.4 111.5 31.2 100.7 109.4 2,868 98.2 November 106.6 111.1 31.4 100.6 118.0 2,913 100.8 December 106.5 111.1 31.2 99.8 143.1 2,972 109.1 1993 1st qtr. 107.2 113.5 102.0 117.0 2,967 117.7 January 106.4 112.6 31.5 101.7 104.1 2,992 104.7 February 108.2 114.1 31.4 102.0 104.4 2,967 122.3 March 106.8 113.8 102.2 106.6 2,941 126.2 April 101.9 111.0 ------------------------------------------------------------------------

OUTPUT - By market sector; consumer goods, investment goods, intermediate goods (materials and fuels), engineering output, metal manufacture, textiles, clothing and footwear (1985=100); housing starts (000s, monthly average) ------------------------------------------------------------------------ Cnsmer. Invest. Intmd. Eng. Metal Textiles Housg. goods goods goods output mnfg. etc. starts* ------------------------------------------------------------------------ 1991 4th qtr. 108.5 111.8 103.2 108.2 109.4 86.4 11.8 1992 1st qtr. 110.3 110.6 101.5 108.0 107.4 86.4 14.0 2nd qtr. 111.4 111.1 100.1 108.4 108.0 87.5 14.5 3rd qtr. 111.1 112.0 101.5 108.5 105.6 88.1 13.1 4th qtr. 110.9 112.6 103.1 108.6 98.5 88.2 10.8 March 111.0 111.0 100.8 109.0 107.0 87.0 14.8 April 111.0 111.6 101.4 109.0 108.0 87.0 14.0 May 111.3 110.4 99.7 108.0 110.0 88.0 14.1 June 112.0 111.3 99.2 109.0 105.0 88.0 15.5 July 111.4 112.0 101.3 109.0 107.0 87.0 14.2 August 110.6 112.2 101.4 108.0 109.0 88.0 12.5 September 111.2 111.8 102.0 108.0 101.0 89.0 12.6 October 110.8 113.3 103.9 109.0 102.0 89.0 11.8 November 109.8 112.3 103.3 108.0 101.0 88.0 11.0 December 112.1 112.2 102.1 108.0 92.0 88.0 9.5 1993 1st qtr. 111.8 116.7 101.9 111.4 105.0 89.0 14.6 January 110.9 116.1 101.2 111.0 108.0 89.0 14.1 February 111.9 118.1 103.2 112.0 105.0 89.0 13.9 March 112.5 116.0 101.2 111.0 102.0 88.0 16.0 April ------------------------------------------------------------------------

EXTERNAL TRADE - Indices of export and import volume (1985=100); visible balance (Pds m); current balance (Pds m); oil balance (Pds m); terms of trade (1985=100); official reserves ------------------------------------------------------------------------ Export Import Visible Current Oil Terms of Reserves volume volume balance balance balance trade* USDlrs bn ------------------------------------------------------------------------ 1991 4th qtr. 128.8 139.2 -2,631 -1,784 +453 97.5 44.13 1992 1st qtr. 127.1 143.1 -3,046 -2,860 +422 99.4 44.31 2nd qtr. 129.4 147.9 -3,181 -3,081 +355 100.9 45.70 3rd qtr. 130.5 148.2 -3,238 -2,172 +367 101.7 42.68 4th qtr. 132.2 146.2 -4,306 -3,706 +340 96.6 41.65 March 129.9 145.1 -888 -826 +168 99.4 44.31 April 128.0 150.8 -1,381 -1,348 +117 100.2 45.77 May 133.2 146.9 -854 -820 +167 101.1 45.80 June 127.1 146.0 -946 -913 +71 101.5 45.70 July 129.2 149.1 -1,113 -758 +43 101.6 45.75 August 132.4 149.8 -1,140 -784 +246 102.5 44.45 September 129.9 145.7 -985 -630 +78 101.1 42.68 October 134.3 144.9 -1,152 -952 +168 97.2 42.14 November 133.3 145.7 -1,413 -1,213 +87 96.4 42.09 December 129.0 147.9 -1,741 -1,541 +85 96.2 41.65 1993 1st qtr. 40.90 January 42.56 February 43.45 March 40.90 April 41.66 ------------------------------------------------------------------------

FINANCIAL - Money supply M0, M2 and M4 (annual percentage change);bank sterling lending to private sector; building societies' net inflow; consumer credit**; Clearing Bank base rate (end period) ------------------------------------------------------------------------ Bank BS Cnsmer. Base MO M2 M4 lending inflow* credit** rate % % % Pds m Pds m Pds m % ------------------------------------------------------------------------ 1991 4th qtr. 2.8 9.2 6.0 +8,099 426 -104 10.50 1992 1st qtr. 1.9 7.6 6.0 +4,861 266 +142 10.50 2nd qtr. 2.2 5.9 5.3 +9,702 77 +5 10.00 3rd qtr. 2.4 5.3 5.2 +5,873 -262 -11 9.00 4th qtr. 2.7 5.0 4.4 +4,808 214 +226 7.00 March 2.3 7.1 5.9 +988 -172 -27 10.50 April 2.4 6.2 5.6 +4,195 212 +16 10.50 May 2.7 5.9 5.1 +2,665 179 +45 10.00 June 1.5 5.6 5.2 +2,842 -314 -56 10.00 July 2.6 5.6 5.6 +2,876 -325 +83 10.00 August 2.5 5.7 5.4 +2,315 327 -69 10.00 September 2.2 4.7 4.7 +682 -264 -25 9.00 October 2.4 5.1 5.1 +3,588 281 +72 8.00 November 3.0 4.6 4.3 +82 -184 +17 7.00 December 2.8 5.2 3.7 +1,138 117 +137 7.00 1993 1st qtr. 4.4 4.8 3.3 +2,267 820 +436 6.00 January 3.9 4.6 3.1 +2,909 363 +150 6.00 February 4.5 5.1 3.3 +647 208 +54 6.00 March 4.9 4.8 3.6 -1,289 249 +232 6.00 April 4.8 6.00 ------------------------------------------------------------------------

INFLATION - Indices of earnings (1988=100); basic materials and fuels; wholesale prices of manufactured products (1985=100); retail prices and food prices (Jan 1987=100); Reuters commodity index (Sept 18th 1931 =100); trade weighted value of sterling (1985=100) ------------------------------------------------------------------------ Earn- Basic Whsale. Reuters ings matls.* mnfg.* RPI* Foods* cmdty.* Sterling* 1991 4th qtr. 132.4 102.5 134.6 135.5 126.5 1,625 90.9 1992 1st qtr. 135.8 102.9 136.5 136.2 129.0 1,599 90.6 2nd qtr. 136.1 102.2 137.9 139.1 129.1 1,598 92.3 3rd qtr. 137.5 100.7 138.5 139.0 127.3 1,542 90.9 4th qtr. 139.3 106.6 139.1 139.6 127.7 1,648 79.8 March 137.6 102.2 137.3 136.7 129.4 1,615 90.1 April 135.5 102.7 137.8 138.8 128.9 1,614 91.4 May 136.6 102.2 137.9 139.3 129.5 1,593 92.8 June 136.3 101.6 138.1 139.3 129.0 1,586 92.9 July 136.4 101.0 138.4 138.8 127.2 1,555 92.5 August 138.0 100.0 138.5 138.9 127.5 1,530 92.0 September 138.2 101.0 138.6 139.4 127.1 1,540 88.2 October 140.1 103.7 138.7 139.9 127.4 1,610 80.8 November 139.0 107.0 139.2 139.7 127.3 1,656 78.3 December 138.9 109.1 139.5 139.2 128.4 1,675 80.0 1993 1st qtr. 110.4 141.5 138.7 130.1 1,740 78.5 January 140.1 109.8 140.7 137.9 128.8 1,703 80.6 February 141.4 110.5 141.4 138.8 130.2 1,759 76.8 March 110.8 142.4 139.3 131.3 1,758 78.2 April 110.1 143.0 1,672 80.5 ------------------------------------------------------------------------ * Not seasonally adjusted ** Net changes in amounts outstanding, excluding bank loans. ------------------------------------------------------------------------

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs ECON Industrial production ECON Inflation ECON Balance of trade ECON Employment & unemployment ECON National income MKTS Production P9311 P9611 The Financial Times London Page 8 1096
Government borrowing rises by 34% Publication 930520FT Processed by FT 930520 By PETER MARSH, Economics Correspondent

THE GOVERNMENT needed to borrow Pounds 4.69bn last month to finance public spending. This highlights the prospect of high deficits later in the year as a result of the economic slowdown.

The high level of borrowing for April - which was up 34 per cent from the Pounds 3.49bn figure for the corresponding month last year - came about after allowing for higher-than-expected privatisation proceeds of Pounds 1.4bn.

Of the total borrowing requirement, central government needed to find Pounds 3.25bn last month to cover the gap between spending and revenues. Local authorities borrowed Pounds 963m while public corporations took on an extra Pounds 396m of debt.

In the three months to the end of April the total government deficit was more than Pounds 19bn, indicating how the recession has eaten into tax income.

Government and private-sector economists expect a deficit of about Pounds 50bn for the financial year ending next March, up from a revised Pounds 36.7bn for the 1992-93 financial year.

Central government receipts in April came to Pounds 17.88bn, with spending totalling Pounds 21.22bn. In the corresponding month last year the figures were Pounds 16.82bn and Pounds 19.66bn respectively.

Without the contribution from privatisation proceeds the deficit for last month would have come to Pounds 6.06bn, after corresponding figures of Pounds 10.94bn in March and Pounds 5.90bn in February.

About half of the Pounds 1.4bn privatisation proceeds in April came from the third call in the sale of shares in Scottish electricity companies.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON National income P9311 The Financial Times London Page 8 280
Measures which obscured the extent of joblessness Publication 930520FT Processed by FT 930520

NOVEMBER 1981: New rate of supplementary benefit introduced for men over 60 who had been on supplementary benefit for more than a year. No longer required to sign on as available for work in order to receive the benefit. Estimated to have removed 37,000 men from the claimant count over the ensuing year.

October 1982: Registration at Jobcentres becomes voluntary. Count at Jobcentres no longer provided a meaningful measure of unemployment so basis of unemployment statistics switched to count of claimants at unemployment benefit offices. This cut the count by 190,000 as a result of more up-to-date record-keeping (-78,000), the exclusion of registrants not claiming benefit (-135,000), and inclusion of the severely disabled (+23,000).

Budget 1983: About 162,000 men, mainly over 60, allowed to receive national insurance credits or the higher long-term rate of supplementary benefit without needing to attend an unemployment benefit office.

September 1988: The Social Security Act changed the benefit entitlements of under-18s, removing an estimated 90,000 from the headline total.

July 1989: Redundant Mineworkers Payment Scheme changed so that people covered by the scheme no longer need to sign on as unemployed and available for work in order to receive scheme benefits - 15,500 estimated to have left the count as a result.

October 1989: Social Security Act makes receipt of benefit conditional on claimants proving they are actively seeking work. It also provided that after a permitted period the level of remuneration will not be good cause for claimants turning down or failing to take advantage of an employment opportunity. Unemployment Unit calculates this led to a fall of 50,000 on the monthly count.

December 1989: Changes in the way earnings affect unemployment benefit. Part-time or casual workers earning enough to pay national insurance contributions in any week denied unemployment benefit for the week. Unemployment Unit estimates this led to fall of 30,000 in count.

Source: Department of Employment and Unemployment Unit

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs ECON Employment & unemployment P9441 The Financial Times London Page 8 351
The mystery of a shrinking dole queue in a sluggish market: How the official unemployment count has defied contradictory evidence Publication 930520FT Processed by FT 930520 By EMMA TUCKER

FOR TWO consecutive months the official count of unemployment in the UK has fallen. The trouble is, however, no one really believes the figures.

Even the government greeted the news for February and March with caution, while Department of Employment statisticians confessed to being perplexed by the sudden change in the trend.

Unless today's figures for April show another fall in the jobless total - the consensus forecast is for a small rise - there will be claims that the figures for February and March were 'fiddled'.

The Unemployment Unit, a research and lobbying organisation, has put forward the theory that in order to meet performance targets for job placement and reduce new claims, the Employment Service made an exceptional effort towards the end of the financial year to shift people off the official count.

The Employment Service has been operating under performance targets for several years. In the last financial year, in the face of a very weak jobs market, it was asked to place 1.42m people from the register into jobs - compared with a target of 1.23m in 1991-92 - and to reject more than 500,000 applications for benefit - about 10 per cent of the total.

Commenting on the performance Mr Peter Warburton, economist at the Robert Fleming merchant bank, said: 'It appears that the Department of Employment found itself well short of its targets at the end of December and was forced to make a special effort in the final quarter to catch up.'

Potential entrants to the register faced a stiffer test and existing claimants were given priority in job placement over other job-seekers.

The Department of Employment says it has found no evidence of a sudden switch of activity at Jobcentres. But changes to the claimant count in the past decade have made it much easier to shift people off the unemployment register.

The Labour party has pointed out a big increase in the numbers on sickness and invalidity benefit since the mid 1980s. In a Commons written answer this month the government said that while unemployment fell a seasonally adjusted 51,500 in February and March, those on sickness benefit increased by 13,000, and on invalidity benefit by 26,000.

Mr Frank Dobson, shadow employment secretary, has produced letters from people saying that, although they are not ill, they have been encouraged by the employment department to sign on for sickness benefit on the grounds that they will get benefit more quickly.

Mr Dobson said: 'We have also received letters saying that Jobcentres are reserving large numbers of vacancies for those who are registered unemployed. This means that groups such as married women who may be unemployed but aren't counted in the figures are stopped from applying for jobs.'

Some economists have argued that the falls in unemployment simply reflect a rise in economic activity - the efficiency of the labour market means that Instead of lagging behind the recovery, it reacts more swiftly to changes in the economy.

Few are happy with this view. There is a good deal of evidence to suggest that, far from falling in February and March, unemployment was still on the increase. The evidence includes:

No significant change in the stock of unfilled vacancies.

Continued falls in manufacturing employment.

Continued falls in average weekly hours worked, albeit marginal.

Industrial-sector predictions. The Engineering Employers' Federation has forecast that a further 99,000 jobs will be lost in its sector this year while the construction industry is forecasting a further 50,000 job losses.

No increase in overtime - overtime hours worked fell in February.

It is highly unusual for unemployment to start falling so early in a recovery.

Mr Paul Gregg of the National Institute of Economic and Social Research said there could be little doubt that there was 'a bit of reclassification going on'.

But he added it might also be the case that, while the total amount of employment was not actually increasing, the employment service had become more efficient at placing people.

Little can be done to check the validity of the official figures until June, when the first-quarter labour-force survey - which asks people whether they have looked for a job at any time in the previous four weeks - is published.

If people have been pushed off the register even though they are still unemployed, they will show up in the labour-force survey.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs ECON Employment & unemployment P9441 The Financial Times London Page 8 777
Bristol plan Publication 930520FT Processed by FT 930520

HANSON, the UK-US conglomerate, has announced plans to build a Pounds 30m leisure and retail complex on the site of a former tobacco factory in Bristol. The company expects to start work next year it wins planning permission.

Hanson GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries RES Facilities P6552 The Financial Times London Page 8 66
'Going concern' guidelines issued Publication 930520FT Processed by FT 930520

DIRECTORS should provide more details in the annual report of whether their company is a 'going concern' for the next year, under draft guidelines issued yesterday by a working party of accountants and accounts preparers.

They should disclose any critical assumptions on the future of the company, including the need for financing arrangements to be in place 'for the foreseeable future'.

The guidelines from the working group on going concern fleshes out details of a statement on this area recommended by the Cadbury committee on the financial aspects of corporate governance. Quoted companies will have to make a statement of compliance with the code for year-ends after June 30.

The working group suggested that the directors' statement would ideally be placed in the new operating and financial review section in annual reports recently recommended by the Accounting Standards Board.

It has invited comments on its draft by July 16 and hopes a revised version will then be approved by the Cadbury committee and be ready by the end of September.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services FIN Annual report P8721 The Financial Times London Page 8 199
Stability in house market reported Publication 930520FT Processed by FT 930520

STABILITY HAS returned to the housing market, the Royal Institution of Chartered Surveyors said yesterday, although it warned that sellers should ask 'sensible' prices.

The RICS said: 'The market has been taking increasingly confident steps out of recession for nearly six months, but only now can the RICS conclude that stability has returned.'

More than 80 per cent of chartered surveyors reported for the second consecutive month that prices were steady.

But the institution warned that the recovery was not a signal to raise prices. 'There have been many reports of homeowners reading of recovery and increasing their prices only to find that their property has become a market pariah,' it said.

GB United Kingdom, EC P6531 Real Estate Agents and Managers P6514 Dwelling Operators, Ex Apartments NEWS General News P6531 P6514 The Financial Times London Page 8 148
Substitute workforce 'trained' Publication 930520FT Processed by FT 930520 By ROBERT TAYLOR, Labour Correspondent

A SUBSTITUTE labour force has been trained to take over at Southampton Container Terminals, Britain's second-largest cargo-handling company, in the event of a strike over the second cost-cutting plan in a month, according to the TGWU general union.

The company has told the union that it intends to make a third of its 500-strong workforce redundant and introduce contract casual labour.

The union said up to 80 substitute workers had been trained by Drake International, the employment training agency, and were being paid Pounds 175 a week on three-month contracts to stand by in the Southampton area.

Mr Denis Harryman, TGWU district secretary in Southampton, said Mr Bruce Dawes, Southampton Terminal Containers' managing director, had told him the substitute workforce was an 'insurance' for the company, the main shareholders of which are Associated British Ports and Peninsular & Oriental.

The company yesterday refused to comment on the allegations but said in a statement that overcapacity and the need for cost savings required 'more flexible working and increased productivity but at significantly lower cost'.

Two days ago Mr Dawes wrote to Mr Harryman to announce that the company needed 97 redundancies - 76 from among its terminal operators - because it seemed likely at best to break even this year and make a loss next year. Voluntary redundancies would be sought in the first instance.

Mr Dawes said it was 'necessary to take action in order to restore profitability'. Last year Southampton Container Terminals made a Pounds 5m after-tax profit on a Pounds 29m turnover.

The company has told the TGWU it means to contract out gatehouse jobs, container lashing and bus driving to 'suitable suppliers' and possibly other tasks later, which could involve up to a further 112 redundancies.

Last week all but 32 of the workforce accepted, after legal advice, a sweeping reform of terms and conditions of employment. This includes a wage freeze until December 31 1994, more flexible manning arrangements to cover 24 hours a day, a cut in holidays and the end of set meal breaks.

The workers were informed in writing by Mr Dawes on April 14 that they would be dismissed if they did not agree to terminate their present employment agreement by April 30 and accept the new terms and conditions.

Southampton Container Terminals Drake International GB United Kingdom, EC P4491 Marine Cargo Handling P8331 Job Training and Related Services PEOP Labour P4491 P8331 The Financial Times London Page 8 421
Modest growth in spending forecast Publication 930520FT Processed by FT 930520 By EMMA TUCKER, Economics Staff

CONSUMER SPENDING will grow only modestly in the next three years, reflecting sluggish increases in real incomes and only slim declines in the savings ratio.

The Society of Business Economists, which represents many leading private-sector financial analysts, says in its latest assesment of the economy that a modest upturn has started and will slowly gather momentum next year.

Mr David Kern, chairman of the society's forecasting group, said: 'We believe there is little prospect that growth will accelerate to 3 per cent or more over the next three years and expect GDP to rise to 1.5 per cent in 1993, 2.5 per cent in 1994 and 2.3 per cent in 1995.'

The society believes that the debt overhang, job insecurity and tighter fiscal policy will limit the recovery.

The forecasts are based on the view that the UK's ability to sustain recovery depends on a rise in investment and exports. recovery.

GB United Kingdom, EC P9611 Administration of General Economic Programs P9311 Finance, Taxation, and Monetary Policy ECON Gross domestic product ECON Economic Indicators CMMT Comment & Analysis P9611 P9311 The Financial Times London Page 8 201
Dutch engineering beats British Publication 930520FT Processed by FT 930520 By ROBERT TAYLOR, Labour Correspondent

LABOUR productivity in British engineering companies is 25 per cent to 30 per cent lower than in their Dutch counterparts although proportionately more initial and continuing training is now carried out in British companies.

This is the main finding of a study published today by the National Institute of Economic and Social Research of the differences between productivity, machinery and skills in British and Dutch engineering companies.

The report says the main reason for the continuing productivity gap is widespread provision of full-time vocational education and training in the Netherlands, which allows companies to carry out subsequent training among employees to craft and technician standards much faster and more cost effectively than is possible in Britain.

The study also points to the slower investment in capital equipment such as advan-ced computer numerically-controlled machinery in British companies compared with Dutch companies as well as 'lower average levels of workforce skills and knowledge' to explain the productivity gap.

It says the relatively high standards of students from the age of 13 onwards at junior and intermediate technical schools in Holland give Dutch employers a considerable head start over their British counterparts.

The study says British engineering employers are no longer 'complacent' in the face of international competitive pressures.

The research is based on visits to 12 British and nine Dutch engineering plants in 1991-92.

Productivity, Machinery and Skills in Engineering: an Anglo-Dutch Comparison, Geoff Mason and Bart van Ark. NIESR, 2 Dean Tench St, Smith Square, London SWIP. Pounds 3

NL Netherlands, EC GB United Kingdom, EC P8711 Engineering Services PEOP Labour ECON Gross national product P8711 The Financial Times London Page 8 285
Small businesses cut travel costs Publication 930520FT Processed by FT 930520

THE RECESSION has forced two-thirds of small UK businesses to cut the cost of employee travel to Germany, according to research by Equator, a market research subsidiary of Saatchi & Saatchi.

Mr John Boulding, managing director of GTF Tours, the UK-based company which commissioned the research, said 80 of the 100 businesses surveyed now used three-star hotels.

DE Germany, EC P4512 Air Transportation, Scheduled P7011 Hotels and Motels P9611 Administration of General Economic Programs NEWS General News P4512 P7011 P9611 The Financial Times London Page 8 96
Defence cuts 'causing damage' Publication 930520FT Processed by FT 930520 By DANIEL GREEN

CUTS IN government spending on defence research and development are damaging Britain's international competitiveness in civil and military aerospace, the Commons Trade and Industry Committee heard yesterday, Daniel Green writes.

Mr Alan Jones, chief executive of Somerset helicopter-maker Westland, warned that the Department of Trade and Industry's Pounds 25m programme for civil aircraft research and development was just 25 per cent of what was needed to compensate for defence spending cuts.

Funding for improvement of helicopter gearboxes, an essential part of helicopter upgrades, had been cut from Pounds 3m a year to Pounds 500,000 since the mid-1980s.

In what he described as a 'sad situation', US companies were asking Westland to do subsidiary work on their own 'well-funded gearbox programmes'. He said: 'We are not getting as much assistance as our (overseas) competitors.'

Westland Group GB United Kingdom, EC P3724 Aircraft Engines and Engine Parts P3721 Aircraft RES R&D spending P3724 P3721 The Financial Times London Page 8 171
Pension break-up sought in divorces Publication 930520FT Processed by FT 930520 By NORMA COHEN, Investments Correspondent

ENGLISH LAWS should be reformed so that occupational and personal pension rights can be divided following a divorce, says an industry working party report.

The Pensions Management Institute and the Law Society have called for sweeping legal changes to clarify the ownership of pension rights, now largely ignored in divorce cases. The failure to consider pension assets leaves many divorced women in poverty in their old age.

The unveiling of the report, which has taken 18 months to complete, comes hard on the heels of the first decision by an English court to give a divorced woman a share of her former husband's pension from his small-company scheme.

Although Scottish law provides for the distribution of pension rights on divorce, there are no comparable laws in England, Wales or Northern Ireland.

But the courts have increasingly taken the view that a pension is deferred pay, and the industry has sought to clarify how it should be distributed in a divorce.

The government has been waiting for the institute's report and the findings of the Department of Social Security's Goode committee before planning legislation.

Among the working party's chief recommendations are that the courts should have power to share out pension benefits and give orders to trustees and others running pension schemes.

In determining how much pension to allocate to the divorced spouse the normal measure of value should be the so-called statutory cash equivalent, which is currently used as the normal basis of individual transfer values payable when an employee switches from one pension scheme to another.

The working party suggested four options for splitting pension rights when partners divorce.

First, they could continue undisturbed for the main breadwinner but other assets of equal value could be given to the spouse.

Second, pension rights could continue undisturbed but a specified portion of the benefit could be earmarked, and eventually become payable to the former partner, when the breadwinner retired.

Third, pension rights could be transferred to another scheme just as rights are transferred when workers change employers.

And, fourth, the rights could be split within the scheme to offer a separate package of benefits.

Pensions and Divorce. Pensions Management Institute, PMI House 4-10 Artillery Lane, London E1 7LS. Pounds 15.

GB United Kingdom, EC P9211 Courts P6371 Pension, Health, and Welfare Funds NEWS General News P9211 P6371 The Financial Times London Page 7 408
Premier League clubs count the cost of their breakaway: End-of-season concerns where pounds matter as much as points Publication 930520FT Processed by FT 930520 By GILLIAN TETT

WHEN referee Keren Barratt blows his whistle tonight, ending the 1993 Cup Final replay between Arsenal and Sheffield Wednesday, it will mark the end of a significant season for English soccer.

The 22 clubs which broke away last summer to form the Football Association's Premier League will now be working out the financial winners or losers from the split with the 105-year-old English Football League.

Pounds matter as much as points to hard-pressed clubs faced with expensive ground rebuilding programmes. Financial expertise is as important as soccer coaching skills - as Mr Terry Venables, Tottenham Hotspur's threatened chief executive, may yet dis-cover.

Under the the Pounds 304m sponsorship deal with BSkyB each of the 22 clubs received Pounds 750,000 plus an equal share of separate Pounds 12m sponsorship deal with Bass, the brewers.

In addition, clubs were paid Pounds 69,335 each time they appeared on television. The remaining 25 per cent of the BSkyB money was allocated according each team's final position in the league, with the top club, Manchester United, receiving about Pounds 850,000 - or 22 times more than the bottom club, Nottingham Forest.

United, in spite of winning the championship, says it is not that much better off than it would have been under the old Football League.

The financial attraction remains strong for the so-called English super clubs, such as Manchester United, Liverpool, Tottenham Hotspur and Arsenal, to promote a new European league of top soccer clubs joined by such clubs as Real Madrid of Spain, AC Milan of Italy, Benfica of Portugal and Ajax of Holland.

So which clubs did gain from the new English Premier League? Most fees, under previous television deals, went to the handful of big clubs attracting the biggest gates.

Under the new system every club is guaranteed several television appearances, to the delight of small clubs such as Wimbledon, which ended half-way down the league and in the previous 1991-92 season had a Pounds 4m turnover.

Mr Reg Davis, commercial director of Wimbledon, said: 'Last season we didn't have any live TV appearances - this year we were featured three times.' He calculates that the club has emerged about Pounds 1m to Pounds 2m richer. It plans to pass this to fans by freezing season ticket prices next year.

'In the past we have had to sell a player a year to survive. This year we don't - we might even buy one,' Mr Davis said.

For Manchester United, a quoted company which had a Pounds 17m turnover last year, the rise in income - even with its championship win - has been less impressive.

Mr Robin Launders, finance director, said the club was 'relatively worse off' in television terms.

Its games appeared fewer times on terrestrial television, which had an indirect effect on shirt sponsorship.

'The Premier League has had a levelling effect. We are better off from the league, but relatively speaking other clubs are even better off,' said Mr Launders.

The place where the sums and the match points have become crucial, however, is on the cusp between the Premier League and the new Barclay's First Division, as the former second division is now known.

In spite of pessimistic predictions that the appearance of the Premier League would lead to the decline of the other 70 football clubs, the three divisions of the Barclay's league seem relatively unscathed.

According to Mr Ian Cotton, Football League spokesman, the three divisions have seen their seventh successive rise in attendances this year. Total attendance was 10.9m, 800,000 more than the Premier League.

Mr Cotton said ITV's decision to feature more Football League First Division games had helped shirt sponsorship for all the clubs.

ITV's Pounds 5.25m deal, however, does little to close the gap between Premier League and First Division clubs, which, following the Taylor report in the wake of the Hillsborough disaster, are required to convert to all-seater stadiums by August 1994.

According to the Football League the report has al-ready prompted Pounds 73.9m worth of development work at First Division clubs, with another Pounds 215m planned.

Mr Desmond McBain, club secretary of Bolton, just promoted into the First Division, said: 'Every club has got to fight to get into the Premier League now - it's a question of self preservation.'

Although gate attendances rose by almost 50 per cent last year, the club still has little idea where finance for rebuilding will come from.

Over the next two years the league will be reduced from 22 to 20 clubs. Mr Rick Parry, the Premier League's chief executive, denies that he will bow to pressure from the big clubs to make it even smaller and more exclusive. He insists that 'you cannot have a league with only five clubs'.

But the pressure to make the league more exclusive seems likely to fuel the competition even further.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters CMMT Comment & Analysis MGMT Management & Marketing P7941 The Financial Times London Page 7 858
Midlands health appointment Publication 930520FT Processed by FT 930520

MR Bryan Baker, chairman of the West Midlands Industrial Development Board and a former deputy chairman of Tarmac, has been appointed chairman of the West Midlands Regional Health Authority.

A National Audit Office report in October found serious shortcomings in financial control in the authority.

GB United Kingdom, EC P9431 Administration of Public Health Programs PEOP Appointments P9431 The Financial Times London Page 7 72
Boots withdraws suncare injunction Publication 930520FT Processed by FT 930520

BOOTS, the chemist chain, withdrew its application for an interim injunction preventing its rival Superdrug selling a range of private-label products called Solait, which Boots claimed could be confused with its own Soltan brand.

Boots said it had withdrawn the application because it did not have time to respond to evidence introduced by Superdrug shortly before yesterday's court hearing.

Boots said it still intended to proceed to a full trial.

Boots Superdrug Stores GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores COMP Company News P5912 The Financial Times London Page 7 103
Equality body faces staff protest Publication 930520FT Processed by FT 930520

EQUAL Opportunities Com-mission staff are to stage a protest today over staffing levels.

The demonstration outside the commission's Manchester headquarters has been timed to coincide with the first visit by Ms Kamlesh Bahl, the commission's new chair.

The NUCPS and CPSA Civil Service unions are objecting to the loss of some low-paid support jobs at the same time as the creation of what are claimed to be new jobs at senior management level.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs PEOP Labour P9441 The Financial Times London Page 7 103
Buy-out team bids for Daf parts unit Publication 930520FT Processed by FT 930520

A FIRM offer to take over the Leyland Daf parts operation from receivership has been made by a management buy-out team led by Mr David Little, operations director.

The Chorley, Lancashire, parts operation, is the most profitable part of Leyland Daf, the commercial vehicle maker which collapsed in February.

Leyland DAF GB United Kingdom, EC NL Netherlands, EC P3714 Motor Vehicle Parts and Accessories COMP Buy-in & Buy-out P3714 The Financial Times London Page 7 88
Satellite television violence criticised Publication 930520FT Processed by FT 930520 By GARY MEAD

THE LEVEL of violence in satellite television films was attacked yesterday by the Broadcasting Standards Council, the government television watchdog, Gary Mead writes.

Lord Rees-Mogg, the council's chairman, said satellite channels such as BSkyB - in which Pearson, owner of the Financial Times, has a significant stake - are showing too many violent films.

Six hundred viewers were asked to register the number of occasions when they saw what they considered to be 'unjustifiable' levels of sex, violence and bad language, before and after 9pm. Six per cent to 7 per cent of the sample thought that the level was 'unjustifiable' on satellite TV after 9pm compared with 2 per cent for BBC and ITV.

Mr David Elstein, BSkyB's head of programming, said: 'The viewers sampled were clearly unrepresentative, with some findings based on fewer than 50 responses.'

British Sky Broadcasting GB United Kingdom, EC P4841 Cable and Other Pay Television Services TECH Safety & Standards P4841 The Financial Times London Page 7 176
Redundancies at Swan Hunter imminent Publication 930520FT Processed by FT 930520 By CHRIS TIGHE

REDUNDANCIES AT Swan Hunter, the Tyneside shipbuilder, are likely to be announced tomorrow, receiver Price Waterhouse has indicated.

In a day of confusion about how soon some of the 2,200 employees may lose their jobs, Mr Gordon Horsfield, one of the Price Waterhouse team, said yesterday that there might be redundancies at the end of this week. He would not speculate on how many.

Price Waterhouse, reacting to an angry union response, later confirmed that no one would leave the company tomorrow. However, redundancies might be announced.

Union leaders will meet the receivers at Swan's Wallsend headquarters tomorrow morning to discuss job losses.

The unions say jobs may go next Friday, the last date for which the Ministry of Defence has so far given consent for outfitting work to continue on three Type 23 frigates, the company's main current workload.

Completing the frigates is Swans' best chance of retaining a core workforce, clinching new orders and finding a buyer to continue shipbuilding.

At a meeting in Carlisle on Saturday shop stewards from all UK shipbuilders will vote on a motion from Mr Jim McFall, chairman of the shipyard negotiating committee of the Confederation of Shipbuilding and Engineering Unions, which urges any shipyard to which the frigates might be moved to refuse to work on them.

The motion warns that any attempt to remove the frigates from Tyneside will be resisted by Swan Hunter workers.

Swans went into receivership a week ago after failing to win a helicopter carrier order from the MoD. Mr Horsfield said that between 10 and 20 inquiries about buying the company had since been received 'from companies of substance', as well as some 'from people sitting at home with not a lot to do'.

Mr Jonathan Aitken, minister for defence procurement, told the Commons last night that the successful tender for the Royal Navy's new helicopter carrier was 'around' the fair and proper price estimated by the ministry of defence.

He ridiculed suggestions by Labour MPs that a 'conspiracy' had resulted in the contract being awarded to the consortium of Cumbrian-based VSEL and the Kvaerner Govan merchant ship yard in Glasgow instead of to Swan Hunter.

Mr Aitken said the ministry was surprised by the 'extraordinary gap' - more than Pounds 50m - between the two bids and insisted that it could not be accounted for by changes to the original specification.

He promised that the full details of the two bids would be provided, on the basis of commercial confidentiality, for the inquiry to be conducted by the National Audit Office.

Asked if Swan Hunter would be allowed to complete the three frigates still under construction, he said it was a matter for 'ongoing discussions' between with the receiver.

Mr David Clark, shadow defence secretary, acknowledged that the government had no alternative but to award the contract to VSEL, but said that mysteries surrounding the bidding process left several questions to be answered.

A Labour motion citing the government's attitude to Swan Hunter as evidence of its 'callous and cavalier' treatment of workers in defence industries was defeated by 41 votes (304-263).

Cuts in government spending on defence research and development are damaging Britain's international competitiveness in both civil and military aerospace, the Commons Trade and Industry Committee heard yesterday.

Mr Alan Jones, chief executive of Somerset helicopter-maker Westland, warned that the Department of Trade and Industry's Pounds 25m programme for civil aircraft research and development was 25 per cent of what was needed to compensate for spending cuts.

Swan Hunter Shipbuilding and Engineering Group GB United Kingdom, EC P3731 Ship Building and Repairing PEOP Labour P3731 The Financial Times London Page 7 622
Strikebreakers 'on standby' as dock row looms Publication 930520FT Processed by FT 930520 By ROBERT TAYLOR, Labour Correspondent

A SUBSTITUTE labour force has been trained to take over at Southampton Container Terminals, Britain's second-largest cargo-handling company, in the event of a strike over the second cost-cutting plan in a month, according to the TGWU general union.

The company has told the union that it intends to make a third of its 500-strong workforce redundant and introduce contract casual labour.

The union said that up to 80 substitute workers had been trained by Drake International, the employment training agency, and were being paid Pounds 175 a week on three-month contracts to remain on standby in the Southampton area.

Mr Denis Harryman, TGWU district secretary in Southampton, said Mr Bruce Dawes, Southampton Terminal Containers' managing director, had told him the substitute workforce was an 'insurance' for the company, the main shareholders of which are Associated British Ports and Peninsular & Oriental.

The company yesterday refused to comment on the allegations but said in a statement that overcapacity and the need for cost savings required 'more flexible working and increased productivity but at significantly lower cost'.

Two days ago Mr Dawes wrote to Mr Harryman to announce that the company needed 97 redundancies - 76 from among its terminal operators - because it seemed likely at best to break even this year and make a loss next year. Voluntary redundancies would be sought in the first instance.

Mr Dawes said it was 'necessary to take action in order to restore profitability'.

Last year Southampton Container Terminals made a Pounds 5m after-tax profit on a Pounds 29m turnover.

The company has told the TGWU it means to contract out gatehouse jobs, container lashing and bus driving to 'suitable suppliers' and possibly other tasks later, which could involve up to a further 112 redundancies.

The contracts of employment of those concerned will be terminated when their functions have been contracted out, says Mr Dawes.

Last week all but 32 of the workforce accepted, after legal advice, a sweeping reform of terms and conditions of employment. This includes a wage freeze until December 31 next year, more flexible staffing arrangements to cover 24 hours a day, a cut in holidays and the end of set meal breaks.

Southampton Container Terminals Drake International GB United Kingdom, EC P4491 Marine Cargo Handling P8331 Job Training and Related Services PEOP Labour P4491 P8331 The Financial Times London Page 7 410
Ford losses force cuts in R&D restructuring plan Publication 930520FT Processed by FT 930520 By KEVIN DONE, Motor Industry Correspondent

FORD's continuing losses in Europe have forced the US-based vehicle maker to scale back its ambitious plan for restructuring its European research and development operations.

It is reducing the number of jobs to be transferred from the UK to Germany and is to keep open its Aveley engineering site in Essex, which had been earmarked for closure.

Ford announced a year ago that it planned to consolidate its UK and German design and production engineering operations at two sites - Dunton, Essex, and Merkenich, near Cologne.

The company said yesterday, however, that it had reviewed the plan 'to ensure that every element of proposed expenditure is absolutely justified in the light of our present business situation'.

Ford's European automotive operations, including Jaguar, made a record loss last year of Dollars 1.3bn (Pounds 840m) compared with a loss of Dollars 1.079bn in 1991.

The European operations are being drastically restructured, with about 10,000 job losses in Ford of Europe (excluding Jaguar) announced last year.

In spite of earlier optimism about returning to break-even this year Ford this week admitted that 'as economic conditions have developed, it is increasingly unlikely that the company's European operations will return to profitability in 1993'.

Aveley will keep its pilot plant and manufacturing and process-engineering workshop facilities.

The 'likely benefits' of consolidating the operation at Dunton were 'outweighed by the substantial costs involved', the company said.

Under the revised plan for reorganising research and development the number of jobs to be transferred from the UK to Germany has been reduced to 226 from 309 a year ago. The jobs are in chassis engineering, body engineering and transmission operations.

The number of jobs being moved from Germany to the UK, in instrument panel engineering, has been cut to 22 from 26.

Ford said yesterday that 776 jobs would now be moved to the Dunton technical centre. Of these 346 would come from Aveley, 172 from Dagenham and 258 from Basildon. About 400 jobs will remain at Aveley.

Ford said the scaling back of the plan had not compromised its aim of locating its design and manufacturing engineering staffs at only two locations in the UK and Germany.

The moves were aimed at improving the efficiency of the operations through increasing use of simultaneous engineering - involving both design and manufacturing engineers in project teams.

The company will remain at a disadvantage against its rivals in Europe by having these functions divided.

Ford Motor GB United Kingdom, EC DE Germany, EC P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories RES R&D spending PEOP Labour P3711 P3714 The Financial Times London Page 7 458
FT reporters win awards Publication 930520FT Processed by FT 930520

FINANCIAL TIMES journalists yesterday won two of the top honours in the annual British Press Awards. Reporting Team of the Year went to the Maxwell investigation team of Bronwen Maddox, Jimmy Burns, Raymond Snoddy, Andrew Jack, Norma Cohen, Hugh Carnegy, Ian Rodger, Leyla Boulton, Alan Friedman, Richard Gourlay and Robert Peston.

The judges said the newspaper's reporting of the Maxwell story was 'a blistering worldwide effort which will remain the definitive newspaper investigation'. Raymond Snoddy, the FT's media correspondent, also received a special Chairman's Award. The citation described Mr Snoddy as 'a consummate professional who you cannot miss if you want to know not just what happened but what is going to happen. His stories move share prices and shatter boardrooms'.

Other winners included: Journalist of the Year: Maggie O'Kane, The Guardian; Reporter of the Year: David Hencke, The Guardian; David Holder International Reporter Award: Ed Vulliamy and Maggie O'Kane, The Guardian; David Blundy Award: Allister Sparks, The Observer; Provincial Journalist of the Year: Steve Davies, Southampton Advertiser; Columnist of the Year: Simon Jenkins, The Times; Critic of the Year: Allison Pearson, The Independent on Sunday; Magazine Writer of the Year: Russell Miller, The Sunday Times; Sports Journalist of the Year: Hugh McIlvanney, The Observer; Cecil King Young Journalist Award: Andrew Malone, Scotland on Sunday; Feature Writer of the Year: Lynda Lee-Potter, The Daily Mail; Specialist Writer of the Year: Anatole Kaletsky, The Times; Chairman's Award (as well as Raymond Snoddy): Andrew Morton.

GB United Kingdom, EC P2711 Newspapers NEWS General News P2711 The Financial Times London Page 7 268
'Dirty matters' denial by Nissan Publication 930520FT Processed by FT 930520 By JOHN MASON, Law Courts Correspondent

A SENIOR executive of Nissan, the Japanese carmaker, yesterday denied that his company was behind the alleged tax fraud involving Nissan UK, the former car importer.

Mr Masayuki Sakagami, managing director of Nissan Motor Corporation Carriers, the Japanese company's freight subsidiary, was giving evidence at the Old Bailey trial of Mr Michael Hunt, the Nissan UK director who denies conspiring to cheat the Inland Revenue of Pounds 97m in corporation tax.

Mr Sakagami denied knowing of the role in the alleged fraud of Mr Friedrich Pannosch, an Austrian rail consultant accused of being party to it by opening a Swiss account into which about Dollars 200m in charges allegedly diverted from Nissan UK were paid.

When Mr Sakagami and two other senior Nissan executives met Mr Pannosch in Vienna for a weekend in early 1990 their purpose was simply to be taken for a sightseeing tour - not to 'check out' Mr Pannosch because they knew he had opened the account, he told Mr Michael Sherrard QC, for Mr Hunt.

He denied evidence given earlier in the trial by Mr Pannosch that the Nissan executives' trip had not been a cultural tour of the city and that they had spent 20 hours a day pumping Mr Pannosch with endless questions about his business.

Mr Sakagami said that throughout the weekend the Nissan executives had only asked questions about Austrian history and painting.

Mr Sakagami said that he was shocked when he eventually learnt of the role played in the alleged fraud by Mr Pannosch. 'We have absolutely nothing to do with dirty matters,' he said.

The trial continues today.

Nissan Motor Corp Nissan UK GB United Kingdom, EC P9211 Courts COMP Company News P9211 The Financial Times London Page 7 307
Guildford Four police acquittal Publication 930520FT Processed by FT 930520 By ROBERT RICE

THREE FORMER Surrey detectives accused of manufacturing notes of interviews with one of the Guildford Four were yesterday acquitted of conspiracy to pervert the course of justice, Robert Rice writes.

Ex-Detective Chief Inspector Thomas Style, 59, ex-Detective Sergeant John Donaldson, 57, and former Detective Constable Vernon Attwell, 52, were accused of lying on oath that notes of interviews with Patrick Armstrong were contemporaneous when they had been compiled later from rough notes.

In the interviews Mr Armstrong confessed to planting a bomb in the Horse and Groom pub, Guildford in October 1974.

Mr Armstrong, Mr Gerard Conlon, Mr Paul Hill and Ms Carole Richardson received life sentences in 1975 for the bombings of the Horse and Groom and Seven Stars pubs in Guildford. Their convictions were quashed by the Appeal Court in October 1989 after it had heard how investigating police officers had altered notes of interviews, suppressed significant material and given false evidence.

GB United Kingdom, EC P9211 Courts NEWS General News P9211 The Financial Times London Page 7 182
Judge to meet Names' solicitors Publication 930520FT Processed by FT 930520

HIGH COURT judge Mr Justice Saville is to meet solicitors representing Lloyd's Names next week in an attempt to simplify legal actions at the insurance market.

More than two dozen groups of Names - individuals whose assets support Lloyd's - and 30 individual Names are taking or planning to take separate actions against their agents or Lloyd's itself in efforts to obtain compensation for losses.

Lloyd's of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service COMP Company News P6411 The Financial Times London Page 7 99
Gas customers 'seek competition' Publication 930520FT Processed by FT 930520

ABOUT a third of British Gas's customers would be likely to switch to a rival gas supplier if the government allowed competitors to enter the household market, a Mori poll commissioned by the Gas Consumers' Council shows.

The poll found 62 per cent support for freedom of choice, and just over a third expecting gas prices to fall if there were more than one supplier.

British Gas GB United Kingdom, EC P4923 Gas Transmission and Distribution TECH Services & Services use P4923 The Financial Times London Page 7 98
Equality body faces staff protest Publication 930520FT Processed by FT 930520 By DIANE SUMMERS

EQUAL Opportunities Com-mission staff are to stage a protest today over staffing levels, Diane Summers writes.

The demonstration outside the commission's Manchester headquarters has been timed to coincide with the first visit by Ms Kamlesh Bahl, the commission's new chair.

The NUCPS and CPSA Civil Service unions are objecting to the loss of some low-paid support jobs, at the same time as the creation of what are claimed to be new jobs at senior management level.

Ms Valerie Amos, EOC chief executive, yesterday denied that the number of senior posts had been increased - the management structure had been revised and functions divided differently.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs PEOP Labour P9441 The Financial Times London Page 7 137
Fresh twist in suncare row Publication 930520FT Processed by FT 930520 By GUY DE JONQUIERES

THE HIGH street battle over suncare products took a fresh turn yesterday when Boots, Britain's largest chemists chain, withdrew its application for an interim injunction against Superdrug, its smaller discount rival, Guy de Jonquieres writes.

Boots sought the injunction last month to prevent Superdrug selling a range of private-label products called Solait, which Boots claimed could be confused with its own Soltan brand.

Boots said it had withdrawn the application because it did not have time to respond to evidence introduced by Superdrug shortly before yesterday's court hearing.

Superdrug claimed the application had been dropped because its evidence refuted market research submitted to the court by Boots. Superdrug also said Boots' lawyers had sought to have the research withdrawn.

The two companies agreed that Boots would pay its own legal costs to date, regardless of the outcome of a full trial.

Boots said it still intended to proceed to a full trial.

Boots Superdrug Stores GB United Kingdom, EC P5912 Drug Stores and Proprietary Stores P2844 Toilet Preparations TECH Products & Product use COMP Company News P5912 P2844 The Financial Times London Page 7 199
Satellite TV film violence criticised Publication 930520FT Processed by FT 930520 By GARY MEAD, Marketing Correspondent

THE LEVEL of violence on satellite television films was attacked yesterday by the Broadcasting Standards Council, the government watchdog which monitors sex and violence on television.

Lord Rees-Mogg, the council's chairman, said satellite channels such as BSkyB - in which Pearson, owner of the Financial Times, has a significant stake - are showing too many violent films.

The report was based on a survey of the viewing habits and responses of 600 people during 1991 and 1992. They were asked to register the number of occasions when they saw what they considered to be 'unjustifiable' levels of sex, violence and bad language, both before and after 9pm.

The definition of 'unjustifiable' was left to the discretion of the viewers, who were asked to register on a scale of 0-5 the degree of offence it caused them.

According to the survey less than 1 per cent of viewing is described as having any 'significant' levels of 'unjustifiable' sex, violence or bad language. That doubled to 2 per cent on the BBC and ITV after 9pm, when programming with more adult content is permissible.

However, that post-9pm 'unjustifiable' figure grew to 6 per cent to 7 per cent in the case of satellite television.

Dramas, drama series and films accounted for 70 per cent of all reported excesses in the post 9pm period. Viewers favoured warnings of strong language after 9pm.

British Sky Broadcasting GB United Kingdom, EC P4841 Cable and Other Pay Television Services TECH Safety & Standards P4841 The Financial Times London Page 7 270
Pacific neighbours try to patch quarrels: 'Down-under' diplomacy as Keating visits New Zealand for talks Publication 930520FT Processed by FT 930520 By KEVIN BROWN

THE SYDNEY Morning Herald's main story yesterday, headlined 'PM sends Kiwis Dollars 500m welfare bill' was accompanied by a cartoon showing a New Zealander lying on an Australian beach and saying he had emigrated because job opportunities were better there.

Almost all Australia's daily newspapers carried front-page reports of a briefing by one of Mr Paul Keating's senior aides on the agenda for the prime minister's four-day visit to New Zealand, which starts in Wellington today.

The media coverage reflects Australian prejudices about New Zealanders, who are widely believed to have taken an unfair advantage of reciprocal immigration and social security arrangements between the two countries. However, the story was regarded with puzzlement in Wellington, where Mr Keating's visit is regarded as an opportunity to ease recent strains in the bilateral relationship.

In particular, Mr Keating was thought to want to soothe resentment caused by Labor's occasionally vitriolic criticism of New Zealand's free market economic policies in the run-up to the Australian federal election in March.

Ironically, the growing Australian resentment about New Zealand immigrants has been accompanied by rapid progress towards economic integration following the 1983 Closer Economic Relations (CER) agreement. Studies show that both CER and the parallel Trans Tasman Travel agreement, which guarantees free movement of Australian and New Zealand citizens, have delivered net benefits to both countries.

Free trade in manufactured goods was established in 1990, and bilateral trade is growing at 12 per cent a year. However, the greatest benefits have accrued to New Zealand, which now sends 19 per cent of its exports to Australia.

As a result, the relationship with Australia has become a high priority for New Zealand, which virtually ignored its larger neighbour until the 1980s, in spite of their shared history as former British colonies. Mr Jim Bolger, the conservative New Zealand prime minister, would also like a successful round of talks to improve his image in the approach to a difficult election later this year. However, there are a number of areas in which agreement may be difficult:

New Zealand wants to see rapid progress on 'second generation' CER issues such as harmonisation of standards, corporate taxation law, business law and investment rules. It also wants greater access to markets such as telecommunications, coastal shipping and insurance.

Some progress has been made, partly as a result of the inclusion of New Zealand ministers in most of Australia's ministerial councils, which co-ordinate federal and state government approaches to such issues. But Mr Bolger will be seeking an indication that harmonisation remains a priority for Australia, and that the speed of reform will be increased by the re-elected Labor government.

In particular, New Zealand would like to tie up an agreement on pre-clearance for airline passengers, which has been held up by Australian concerns about New Zealand's visa requirements for third countries.

Mr Bolger will try to defuse the welfare row by agreeing to a review of reciprocal social security arrangements, especially for pensioners, but he will resist any attempt to weaken the free travel agreement. The Australian government has been under pressure from its trade union allies to restrict access for some workers, especially sheep shearers, who are accused of undercutting established wage rates.

Canberra has been perturbed by New Zealand's support of the North American Free Trade Agreement, which Australia sees as a potential threat to Japan, its biggest trading partner.

New Zealand has worked hard behind the scenes to allay Australian fears, but Mr Keating will be seeking assurances that Wellington remains committed to the integration of both Australasian economies into the Asia Pacific region.

Mr Bolger, who returned on Tuesday from a trip to Japan, China and South Korea, said last week that he was 'comfortable' with Wellington's increasingly close relationship with Asia.

New Zealand's trade is more geographically diversified than Australia's, and Wellington is less enthusiastic than Canberra about the prospects for regional trading organisations such as the Australian-inspired Asia Pacific Economic Co-operation process.

New Zealand's nine-year-old anti-nuclear legislation, which bars visits by nuclear armed or powered ships, has reduced the effectiveness of the Anzus defence pact, which links Australia, New Zealand and the US. Mr Bolger would like to repeal the legislation, but is unable to do so because it is strongly supported by voters of all parties. As a result, the US has suspended exercises with the New Zealand armed forces, restricting its access to intelligence and military equipment.

Canberra has continued bilateral defence links with New Zealand, which include a joint frigate programme, but Australian ministers have recently made clear that they will not support a return to three-way exercises until the nuclear ban is abandoned. Mr Keating may also express concern about the falling level of New Zealand defence spending, which has been capped for three years because of budget constraints.

There is one area in which the two leaders will be in complete agreement: both want to see a rapid conclusion to the Uruguay Round talks on the General Agreement on Tariffs and Trade.

Both countries would gain substantially from liberalisation of agricultural trade, and the talks are likely to conclude with a joint appeal to the US and the European Community to stop bickering over the details.

AU Australia NZ New Zealand P9721 International Affairs P9441 Administration of Social and Manpower Programs CMMT Comment & Analysis P9721 P9441 The Financial Times London Page 6 917
Land prices fall in Japan's biggest cities Publication 930520FT Processed by FT 930520 By ROBERT THOMSON TOKYO

LAND PRICES in Tokyo and Osaka, Japan's two largest cities, continued to fall in the first quarter this year, putting added pressure on financial institutions exposed to the property market.

The National Land Agency said the greater Tokyo residential price index fell an annualised 5 per cent during the period, compared to 8.2 per cent in the previous quarter, while commercial prices fell 5.9 per cent, against 9.2 per cent.

Officials at the agency said the slowing of the fall suggested that the market was close to touching bottom, but most Japanese banks and other property-related lenders had hoped the downward trend would be reversed in the first quarter.

The falls are undermining the value of property collateral held by financial institutions, which fuelled speculative investment in the market during the late 1980s, when it was predicted that Japanese land prices would never fall.

Commercial prices in Osaka fell 5.2 per cent during the quarter, while the residential index fell 4.2 per cent in that city. It was a particularly popular location for building 'investment apartments', many of which remain empty.

The 'bubble era's' most famous stock speculator, Mr Mitsuhiro Kotani, was yesterday given an 18-month suspended jail sentence for what the Tokyo District Court described as the 'naked manipulation' of stock prices.

Mr Kotani, 56, had pleaded guilty to manipulating the stock price of Fujita Kanko, a tourism company, but the court also condemned banks and brokers which assisted his speculator group during its reign over Japanese markets in the late 1980s.

The group, Koshin, bought shares in companies ranging from Janome, a leading maker of sewing machines, to Kokusai Kogyo, an aerial survey company, which it first attempted to greenmail and then took over when the management was unwilling to buy back the Koshin stake.

Mr Kotani admits that his group earned about Y31bn (Pounds 181m) through manipulating Fujita Kanko's price, which rose 40 per cent during one week in April 1990. The money was needed to complete the purchase of Kokusai Kogyo.

While Mr Kotani admitted the charge, he suggested that he did not intend to deceive other investors into buying the stock, while his lawyers argued that Fujita itself and Tobishima, a formerly conservative construction company, had played an important role in the manipulation.

In the late 1980s Mr Kotani, became one of the brightest stars of the 'bubble era'.

His downfall, which came with the collapse of stock prices, has left a range of politicians and bankers open to criticism.

JP Japan, Asia P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 6 451
UN Cambodia chief's gloom dismays staff Publication 930520FT Processed by FT 930520 By VICTOR MALLET PHNOM PENH

UNITED NATIONS staff in Cambodia were aghast yesterday when their chief attempted to ease fears about possible Khmer Rouge artillery attacks during next week's election by saying that the guerrillas often missed their targets or used ammunition which failed to explode.

Mr Yasushi Akashi, head of the UN Transitional Authority in Cambodia (Untac), summoned staff at Untac headquarters in Phnom Penh and told them it was 'more than likely' that the Khmer Rouge would try to disrupt the election by mining roads leading to polling stations and harassing voters.

'There may even be some bombardments and rocket attacks aimed at some of the polling stations,' he said as the official campaign period drew to a close. 'In most cases they will miss the targets but we have to be prepared. . . We cannot afford too many more sacrifices among our colleagues.'

Many UN officials expressed their dismay at Mr Akashi's remarks. In contrast to his previously optimistic assessments of the UN's Dollars 2bn (Pounds 1.2bn) peacekeeping mission in Cambodia, he has gone out of his way this week to paint a gloomy picture of the election, possibly so that the reality will not seem so bad. Twelve Untac staff have been killed by landmines or gunmen.

Mr Hun Sen, the prime minister of the Phnom Penh government - which has not been recognised internationally and is regarded by the UN as one of the four main Cambodian factions - yesterday sought to reassure his critics by insisting that his administration would hand over power if it lost the election.

Asiawatch, the US-based human rights group, yesterday accused the United Nations Transitional Authority in Cambodia (Untac) of failing to deal effectively with human rights abuses and said it had thereby left the way open for further abuses in the future.

'Hundreds of serious abuses have been documented by Untac, but few have been publicly exposed or redressed,' Asiawatch said in a report. Untac's failure was serious because its mandate emphasised measures to assure human rights in view of Cambodia's tragic history, the report said.

Abuses had been committed by all the main factions: the UN had continued to court the Khmer Rouge after the guerrillas had slaughtered Vietnamese and Cambodian civilians, and it had failed to dismiss or prosecute government officials who condoned the murder and intimidation of opponents.

Asiawatch urged Untac to appoint an independent tribunal to ensure that suspects in Untac investigations were properly tried, and suggested the government to emerge from next week's election should give priority to creating an independent judiciary.

Cambodia: human rights before and after the elections. Asiawatch, 485 Fifth Avenue, New York, NY 10017-6104, USA.

KH Kampuchea, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 474
Clinton reverses US Angola policy and ditches Savimbi Publication 930520FT Processed by FT 930520 By JUREK MARTIN WASHINGTON

THE US yesterday accorded full diplomatic recognition to the former Marxist government of Angola headed by President Jose Eduardo dos Santos.

Speaking before a meeting with Archbishop Desmond Tutu of South Africa, President Bill Clinton made it clear he had acted because Mr Jonas Savimbi's Unita movement had refused to accept the latest peace plans designed to end the civil war in Angola.

'The Angola government,' Mr Clinton said, 'has by contrast agreed to sign that peace agreement, has sworn in a democratically elected national assembly and has offered participation by Unita at all levels of government. Today we recognise those achievements by recognising the government and republic of Angola.'

He said he had tried to use the leverage of recognition as a means to end the civil war. He also wanted to reaffirm 'the high priority that our administration places on democracy.'

He did not say if he thought an end to the carnage in Angola was now in sight.

The decision to isolate Unita internationally appears to mark the end of a long relationship between the US and Mr Savimbi, regarded for much of the Reagan and Bush administrations as a bulwark against the ambitions of the former Soviet Union and Cuba in Angola.

US financial and materiel support for Unita ended in 1991, before the peace agreement which also saw the withdrawal of Soviet aid and Cuban troops. However Mr Savimbi has remained a popular figure in US right-wing political circles, frequently escorted around Washington by the likes of Senator Jesse Helms of North Carolina.

However, his refusal to accept the results of elections last year, narrowly won by Mr dos Santos and his party, and his resumption of the civil war angered the Bush administration in its final weeks and has increasingly frustrated Mr Clinton's government.

The last straws were continuing reports of Unita's territorial gains and atrocities on the ground in Angola and its rejection last week of the latest peace proposals put forward by international mediators in Abidjan, capital of Ivory Coast.

Mr Clinton had also been subject to increasing domestic pressure to recognise the dos Santos government. This has been most evident from influential black leaders such as the Rev Jesse Jackson and Congressman Kweisi Mfume of Maryland and also, if more discreetly, from US oil companies with interests in Angola.

Some external influence was also brought to bear. Bishop Tutu said he was 'thrilled' by Mr Clinton's action, which would help improve human rights in Africa.

The emerging Clinton approach to Africa involves the promotion of democracy and market-oriented reforms, debt relief, an activist approach to 'disasters in the making', such as Somalia, and attempts to resolve a number of conflicts such as Zaire, Liberia, Sudan and Togo.

US United States of America ZA South Africa, Africa P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 495
Inside South Africa's atomic laager Publication 930520FT Processed by FT 930520

South Africa on Tuesday proposed to ban the manufacture of nuclear and biological weapons.

This followed an announcement earlier this year by President F W de Klerk that Pretoria had dismantled six nuclear weapons built between 1974 and 1990.

The proposed law aims to ensure compliance with international treaties and conventions governing nuclear and biological weapons, including monitoring dual-use equipment. A United Nations embargo prevents the sale to South

Africa of arms as well as other items including supercomputers, which have military potential.

Mr Derek Keys, minister of finance, trade and industry, told parliament: 'The object of the bill is further to promote and ensure free trade with the international community.'

Senior South African officials participated in a recent conference on nuclear non-proliferation in Africa held in Harare in association with the University of Zimbabwe. John Simpson, Darryl Howlett and Jeremy Ginifer of the Programme for Promoting Nuclear Non-Proliferation examine what is known about South Africa's nuclear programme.

SOUTH African officials told PPNN that their nuclear capability was not intended for use against Soviet-backed Cuban or African forces as had been previously suspected. Instead, it is claimed this capability was designed to secure western intervention, in particular from the US, in the event of an imminent threat of attack by Soviet-backed forces.

It would then have conducted a nuclear test to demonstrate its possession of nuclear devices. By signalling that further devices existed, South Africa thus expected to secure western intervention to halt the conflict and neutralise Soviet nuclear capabilities.

Pretoria's nuclear doctrine, which might be termed catalytic deterrence, was never disclosed and has no direct historical parallel in nuclear strategy. Nuclear weapons states have tended to regard their unilateral readiness to use nuclear weapons as central to credible deterrence.

South Africa's strategy was driven by its perceived vulnerability to a Soviet-inspired attack through neighbouring African states, backed by the threat posed by Soviet nuclear weapon capabilities. It was felt that this threat could be neutralised only by directly linking South Africa to the west's nuclear deterrence umbrella.

The nuclear strategy had three stages, PPNN was told. The first was a deliberate policy of ambiguity. Pretoria would 'neither confirm nor deny' the possession of nuclear explosive devices. It was thought that this stance would persuade western states to pressure the Soviet Union into exercising restraint in the region.

If this policy failed, and a substantial military threat emerged, a second stage would be implemented. This was the detonation of a nuclear device. It was assumed that this would lead to frantic western diplomatic activity both to prevent any nuclear devices actually being used and to constrain the Soviet Union and its allies from further military action. The South Africans may thus have hoped to obtain western nuclear security guarantees in return for their non-use of nuclear weapons and for nuclear disarmament.

If this did not produce the desired results, the third stage would be initiated by revealing to the west the existence of a stockpile of devices.

The strategy was conceived during the mid-1970s, when South Africa felt territorially threatened and diplomatically isolated. The first nuclear device was completed in 1980 but, after problems with the uranium enrichment plant, only six of a planned stockpile of seven devices had been manufactured by 1989 when the programme was terminated.

The limited stockpile resulted from the catalytic deterrent strategy. Of the seven devices, three were for use at the Vastrop test site. The remainder were intended as back-ups in the event of a test failure and for demonstrating the existence of a stockpile.

Three shafts, drilled to a depth of 180 to 200 metres, were planned for the test site, but one shaft had to be abandoned because of geological difficulties. The other two were completed by 1977 and, although equipped with some instrumentation, were never used.

The nuclear devices also appear to have been less advanced than previously assumed. In view of the catalytic strategy, it was decided to develop a nuclear explosive device, not a deliverable weapon of the type currently deployed by the nuclear weapon states.

The device chosen - a gun assembly design - was similar in concept to the 'laboratory weapon' dropped by the US on Hiroshima in 1945. It had a yield of 12-15kt and used uranium 235, which could be mined and enriched within South Africa.

Light can also be shed on other mysteries surrounding the South African nuclear programme.

Intense speculation has surrounded the detection of an unusual double flash in the South Atlantic by a US satellite in 1979, which some considered evidence of a South African nuclear test. According to Pretoria no test occurred and no radioactive fallout was recorded in the vicinity. This may add substance to the claim that the flash was induced by a micro meteorite hitting the satellite. Claims that South Africa's nuclear deterrent programme benefited from co-operation with Israel or any other state were also denied.

South Africa's explanation of its deterrent strategy raises additional questions which remain unanswered. One is whether this account is a rationalisation after the event. Only hard evidence that the devices were not produced in weapon form and that there were no aspirations to advance to more sophisticated fission can dispel this possibility.

The second is whether the catalytic deterrence strategy would actually have worked if it had been implemented in the manner described. The end of the cold war may have eliminated the specific circumstances, although the idea of using nuclear proliferation as a bargaining tool to exert leverage over the nuclear weapons states probably persists.

Is this strategy also the rationale underpinning the activities of other states with ambiguous nuclear programmes, such as Israel, Pakistan, India and North Korea?

Programme for Promoting Nuclear Non-Proliferation, Mountbatten Centre for International Studies, University of Southampton, UK.

ZA South Africa, Africa P3761 Guided Missiles and Space Vehicles NEWS General News P3761 The Financial Times London Page 6 993
US verdict disappoints Ramos Publication 930520FT Processed by FT 930520 By AP MANILA

PHILIPPINE President Fidel Ramos yesterday expressed disappointment over a US federal jury verdict clearing Westinghouse Electric of bribery. An elated Mrs Imelda Marcos said the decision vindicated her late husband, AP reports from Manila.

The jury on Tuesday found that Westinghouse and a New Jersey engineering company paid no bribes to the then President Ferdinand Marcos to win a nuclear power contract, an allegation made by the government of President Corazon Aquino, his successor.

Mr Jess Sison, presidential spokesman, said the Philippines would continue to pay back a loan from Westinghouse for the Dollars 2.3bn (Pounds 1.5bn) the plant cost in 1976. Daily interest alone costs Dollars 300,000 and the principal is the biggest single portion of the country's foreign debt burden of Dollars 30bn.

Mr Francisco Villa, state prosecutor, said the government would appeal against the verdict.

The 620MW nuclear plant on the Bataan peninsula, the country's only nuclear power plant, was completed in 1985 but never started up by the Aquino administration.

The Marcos family faces more than 80 criminal and civil charges in the Philippines in connection with alleged corruption, but none of the trials has been completed.

Westinghouse Electric Corp US United States of America P9211 Courts COMP Company News P9211 The Financial Times London Page 6 224
Egyptian clampdown nets 800 Publication 930520FT Processed by FT 930520 By ROGER MATTHEWS, Middle East Editor

THE EGYPTIAN authorities have stepped up their battle with Islamic extremists, arresting more than 800 people in the past 10 days.

According to members of the security forces quoted by Reuter, the latest arrests are an attempt to smash a hitherto unknown group called the Vanguards of the New Holy Struggle.

The group is said to have been recruiting members in schools and universities, and advocates the full application of Islamic law.

President Hosni Mubarak has blamed Iran for sponsoring the wave of extremist attacks, which have badly damaged the tourism industry, and last month ruled out any possibility of a dialogue with radical Islamic factions.

Mr Mohammed Abdel-Moneim, the president's spokesman, said at the time: 'The strategy is steady - to get rid of these people.'

US officials have cast doubts on the extent of external involvement in Egyptian terrorism, while liberal, secular organisations in Cairo have warned Mr Mubarak against the dangers of pursuing a confrontational policy with groups in large part motivated by poor social and economic conditions.

EG Egypt, Africa P9221 Police Protection NEWS General News P9221 The Financial Times London Page 6 202
Untac under fire over human rights failure Publication 930520FT Processed by FT 930520 By VICTOR MALLET

ASIAWATCH, the US-based human rights group, yesterday accused the United Nations Transitional Authority in Cambodia (Untac) of failing to deal effectively with human rights abuses and said it had thereby left the way open for further abuses in the future.

'Hundreds of serious abuses have been documented by Untac, but few have been publicly exposed or redressed,' Asiawatch said in a report. Untac's failure was serious because its mandate emphasised measures to assure human rights in view of Cambodia's tragic history, the report said.

Abuses had been committed by all the main factions: the UN had continued to court the Khmer Rouge after the guerrillas had slaughtered Vietnamese and Cambodian civilians, and it had failed to dismiss or prosecute government officials who condoned the murder and intimidation of opponents.

Asiawatch urged Untac to appoint an independent tribunal to ensure that suspects in Untac investigations were properly tried, and suggested the government to emerge from next week's election should give priority to creating an independent judiciary.

Asiawatch also said Thailand should be pressed to arrest Pol Pot, the extreme left-wing Khmer Rouge leader, for crimes committed during the organisation's reign of terror in Cambodia from 1975 to 1978, 'rather than providing him shelter and protection'.

Pol Pot and his associates are blamed for the deaths of an estimated 1m Cambodians. He now has a house in eastern Thailand near to the Cambodian border and has close relations with Thai military officers.

The report recommended that the UN should improve its monitoring of the border to ensure that timber and gems do not go into Thailand in violation of sanctions and provide foreign exchange for the Khmer Rouge. Consumers and traders - including those from Japan, Vietnam and Thailand - should be punished if they broke the embargoes.

Cambodia: human rights before and after the elections. Asiawatch, 485 Fifth Avenue, New York, NY 10017-6104, USA.

KH Kampuchea, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 344
Kotani given suspended sentence Publication 930520FT Processed by FT 930520 By ROBERT THOMSON

THE MOST famed stock speculator of the 'bubble era' in Japan, Mr Mitsuhiro Kotani, was yesterday given an 18-month suspended jail sentence for what the Tokyo District Court described as the 'naked manipulation' of stock prices.

Mr Kotani, 56, had pleaded guilty to manipulating the stock price of Fujita Kanko, a tourism company, but the court also condemned banks and brokers which assisted Mr Kotani's speculator group during its reign over Japanese markets in the late 1980s.

The group, Koshin, bought shares in companies ranging from Janome, a leading making of sewing machines, to Kokusai Kogyo, an aerial survey company, which it first attempted to greenmail and then took over when the management was unwilling to buy back the Koshin stake.

Mr Kotani admits that his group earned about Y31bn (Pounds 181m) through manipulating Fujita Kanko's price, which rose 40 per cent during one week in April 1990. The money was needed to complete the purchase of Kokusai Kogyo.

While Mr Kotani admitted the charge, he suggested that he did not intend to deceive other investors into buying the stock, while his lawyers argued that Fujita itself and Tobishima, a formerly conservative construction company, had played an important role in the manipulation.

In the late 1980s Mr Kotani, became one of the brightest stars of the 'bubble era'.

His downfall, which came with the collapse of stock prices, has left a range of politicians and bankers open to criticism. A former environment minister was charged with tax evasion on profits allegedly made through Kotani stock tips, while the deputy head of Sumitomo Bank's domestic business division resigned to take responsibility for the bank's dealings with him.

The court said yesterday that the securities companies which assisted Mr Kotani in his share raids and price manipulation were 'partly responsible' for the affair, and the Tokyo market had been 'far from fair and just'. Mr Kotani still faces a separate charge of extorting Y30bn from Janome, the sewing machine company.

Koshin Group JP Japan, Asia P9211 Courts PEOP People P9211 The Financial Times London Page 6 357
World Trade News: Uruguay sees regional trend for Americas - Stephen Fidler interviews the president Publication 930520FT Processed by FT 930520 By STEPHEN FIDLER

A FREE trade zone made up of the entire American continent is too ambitious an objective, and governments in the western hemisphere should concentrate instead on developing their own regional groupings, according to President Luis Alberto Lacalle of Uruguay.

'We should approach this step-by-step. I think the integration movement mustn't go to the top at the beginning, from Alaska to Tierra del Fuego. No, nonsense,' he said in an interview.

Instead, the first stage should be groups of countries getting together, as Uruguay is doing with its partners in Mercosur - Argentina, Brazil and Paraguay. Making Mercosur work was 'very difficult, so the idea for this generation, and perhaps for another one, is to try to make these things work.'

Mr Lacalle's remarks were in response to a question about the possibility of Argentina being able to join the North American Free Trade Agreement of Mexico, Canada and the US. Washington has said that three South American countries - Chile, Argentina and Venezuela - would be candidates for accession to Nafta. But Mr Lacalle pointed out: 'Nafta is not a reality yet - and that's a big if.'

He said an important part of Bolivia looked to the Atlantic so it made sense for the land-locked country to join Mercosur. However, Bolivia is prevented by the Mercosur treaty from joining because it is a member of another trade organisation, the Andean Pact. Mr Lacalle said: 'We are trying to provide the possibility. It needs the agreement of the four (member) countries.'

The president conceded that, when Mercosur's common external tariff comes into effect on January 1 1995, 'perhaps we won't have a perfect common market' and there would be 'some exceptions to the common external tariff'. However, for most goods, the common external tariff would be about 20 per cent and there would be no internal tariffs.

UY Uruguay, South America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 347
World Trade News: US steelmakers call energy tax unfair Publication 930520FT Processed by FT 930520 By JEREMY BENNALLACK-HART NEW YORK

THE US steel industry warned yesterday that implemention of the proposed BTU tax on energy in the US would hit producers hard, putting them at a disadvantage against imports.

Speaking at the general meeting of the American Iron and Steel Institute in New York, Mr Thomas Usher, president of US Steel Group, said: 'It would place new costs on US-produced goods that our foreign competitors would not have to bear.'

He said the industry would face direct annual costs increases of as much as several hundred million dollars - money urgently needed for modernisation.

The industry had approached Congress with alternatives, he said, which included a flat fee per ton, which could apply to domestic production as well as imports, and at a rate equal to the proposed BTU tax.

The industry's hard line on imports and trade was held at the meeting. Last year, US steel producers petitioned the International Trade Commission over alleged dumping in the US by foreign producers at unfair prices, and government subsidies to overseas groups.

US United States of America P3313 Electrometallurgical Products GOVT Taxes MKTS Foreign trade P3313 The Financial Times London Page 5 210
World Trade News: Clinton's Dollars 7bn dilemma on China - Linking human rights to trade could backfire Publication 930520FT Processed by FT 930520 By NANCY DUNNE

DEMOCRATS in the US Congress used to enjoy watching former President George Bush squirm during his annual veto of legislation which linked US tariff levels on Chinese imports with the country's human rights behaviour.

Now it is President Bill Clinton's turn to feel the heat. As a candidate he indicated support for the Democrats in Congress. As president he must worry that even conditional China trade linkage, under which the administration is required to certify annually that China has improved its human rights and arms sales record, would jeopardise up to Dollars 7.5bn (Pounds 4.9bn) in US exports this year.

This policy of non-discrimination in trade policy, the Most Favoured Nation treatment, provides to all trading partners the same customs and tariff arrangements.

The president has until June 3 to notify Congress whether he will renew China's MFN status. He could at the same time unilaterally impose some conditions on next year's renewal to head off legislation in Congress to impose even steeper requirements. Mr Warren Christopher, secretary of state, said China's reportedly coercive family planning programme and its alleged missile sales to Pakistan could be cited as a necessary improvement.

In the business community, the overwhelming sentiment is that morality is a luxury the US can rarely indulge in these days of persistently high unemployment - particularly when the price of linking US tariff rates with China's human rights record gets higher every year.

The voluntary Levi Strauss withdrawal from China is not seen as the beginning of a trend. In fact, a new report by the International Business and Economic Research Corporation, which is funded by business, frets that removal of MFN or conditionality would provoke Chinese retaliation and risk up to 171,000 US jobs in 1993.

Hardest hit immediately would be US exports of aircraft, fertiliser, wheat and telecommunications.

In the report's worst case scenario Boeing, McDonnell Douglas and their suppliers would suffer the greatest harm. They have 76 per cent of China's aerospace market. Boeing could lose Dollars 5bn in sales. McDonnell Douglas has been selected for co-production of a 'trunk aircraft' which calls for firm orders for 40 aircraft, valued at about Dollars 1bn, and it is discussing assembly of 105-seater aircraft in Shanghai.

China is the largest market for US fertiliser - exports last year were Dollars 629m - and it is usually the largest or second largest importer of US wheat. Billions of dollars will be at stake as China modernises its telecommunications market, where AT&T is already a leading participant.

Former senator Adlai Stevenson, an Illinois Democrat and son of the country's late United Nation's ambassador, is one of many in business hoping conditional MFN can be avoided. As head of a US-Chinese joint venture to design, build and operate commercial telecommunications systems in China, Mr Stevenson is all too aware of what is at risk.

The joint venture - the China America Telecommunication Company - has a contract to build a Dollars 20m prototype. US sanctions ultimately could cost the group participation in China's Dollars 20bn telecommunications equipment market.

Yet projects like these which link the Chinese people with the outside world are important to improvement of human rights, Mr Stevenson argues. 'Political liberalisation is happening already, although it is hard to quantify, and it will continue to happen as ideas and information cross borders.'

US investment in China has been limited until recently to production ventures. But investment has expanded in services, with US accounting, computer software, consulting, financial insurance and marketing firms establishing a toehold from which the newcomers are expecting to leap into the China market.

Since August 1992 the following investments are among the dozens which have been announced: American International Group, forming a wholly-owned insurance company in Shanghai; Connor Peripherals to manufacture hard disk drives; Coopers & Lybrand, a joint venture to provide auditing, accounting, tax and consulting services; Gallup Group, a joint venture to conduct market research; General Electric, with Chinese partners and others to build a communications satellite; Singer, construction of a sewing machine company with annual production of 400,000 units; and Westinghouse Electronics and Digital Equipment, an agreement with Shanghai No 1 Iron and Steel Plant to develop automation techniques.

MFN legislation, introduced by the Senate majority leader George Mitchell, would differentiate between products produced by private enterprises (now about half US imports from China) and those made in state ventures, which would be subject to the same high tariffs as Afghanistan, Cambodia, Cuba, Laos, Montenegro, North Korea, Serbia and Vietnam.

Under the legislation, China would be required to step up releases of political prisoners and improve its record on religious persecutions, unfair trade practices, and exports of missiles and other arms exports to regimes that have not signed up to multilateral controls.

The Dollars 17bn US trade deficit with China is less of an issue in the MFN debate this year. Congressman Lee Hamilton, chairman of the House foreign affairs committee, recently acknowledged that 'fair minded people recognise that increased imports from China reflect the relocation of production from other Asian exporters, including Taiwan and Hong Kong'.

Furthermore, China's imports are likely to mushroom to supply a growing demand for raw materials, capital equipment and technology.

Mr Winston Lord, the assistant US secretary of state, last week apparently made little headway in urging China to make new commitments on human rights and weapons proliferation.

The administration is expected to wait as long as possible before the June 3 deadline, in the hope that the pressure will produce Chinese concessions.

US United States of America CN China, Asia P9721 International Affairs P3721 Aircraft P3661 Telephone and Telegraph Apparatus P2875 Fertilizers, Mixing Only P0111 Wheat MKTS Shipments MKTS Foreign trade P9721 P3721 P3661 P2875 P0111 The Financial Times London Page 5 982
World Trade News: Coface hit by strong franc Publication 930520FT Processed by FT 930520 By DAVID BUCHAN PARIS

ECONOMIC recession and currency devaluations against the franc have made an increasing number of French exporters' clients unable to pay their bills, France's export credit agency, Coface, has warned.

In an interview in Le Figaro yesterday, Mr Alain Paupert the Coface director responsible for short-term risk cover, said the premiums his agency charge French exporters for insuring payment of their goods 'will no longer' cover the bad debt claims on it.

Coface paid out FFr400m (Pounds 48m) in 1992, a year which saw 210,000 European companies go bust, with the bankruptcy rate rising by 50 per cent over two years. In normal times, bad debt claims on Coface amount to about 1 per cent of the total export business it insures, but this rose to 1.8 per cent in the second half of last year.

Spain has apparently become the riskiest destination for French exports, with bad debt claims amounting to 3.8 per cent of Coface-insured business there. But Mr Paupert said that

French companies pay an average of 0.43 per cent of total export turnover to get Coface cover, with the range of charges varying between 0.3 and 0.9 per cent. The agency says it may raise the top level on a case by case basis but is urging French exporters to redouble the care with which they choose clients.

Prime Minister Edouard Balladur will brief the Commission in Brussels on June 3 on France's views about the need to broaden the Uruguay Round negotiations to take in all issues with all Gatt participants, not just focus on agricultural trade with the US.

The EC executive does not usually expose itself to direct lobbying from a single EC leader, and the move underlines the determination of Brussels and Paris to bring the Gatt issue to a head.

Compagnie Francaise d'Assurance pour le Commerce Exterieur FR France, EC P6111 Federal and Federally-Sponsored Credit Agencies P9721 International Affairs PEOP People P6111 P9721 The Financial Times London Page 5 345
World Trade News: Uruguay sees regional trend for Americas - Stephen Fidler interviews the president Publication 930520FT Processed by FT 930520 By STEPHEN FIDLER

A FREE trade zone made up of the entire American continent is too ambitious an objective, and governments in the western hemisphere should concentrate instead on developing their own regional groupings, according to President Luis Alberto Lacalle of Uruguay.

'We should approach this step-by-step. I think the integration movement mustn't go to the top at the beginning, from Alaska to Tierra del Fuego. No, nonsense,' he said in an interview.

Instead, the first stage should be groups of countries getting together, as Uruguay is doing with its partners in Mercosur - Argentina, Brazil and Paraguay. 'Mercosur is made real by geography. It is like a tree whose trunk is the River Plate and whose roots are in the Atlantic Ocean.

'That's why Mercosur makes sense and why the accession of Bolivia is reasonable. We are a mass of countries bound together. It's the same for Mexico, Canada and the US,' he said.

Making Mercosur work was 'very difficult, so the idea for this generation, and perhaps for another one, is to try to make these things work.'

Mr Lacalle's remarks were in response to a question about the possibility of Argentina being able to join the North American Free Trade Agreement of Mexico, Canada and the US. Washington has said that three South American countries - Chile, Argentina and Venezuela - would be candidates for accession to Nafta. But Mr Lacalle pointed out: 'Nafta is not a reality yet - and that's a big if.'

He said an important part of Bolivia looked to the Atlantic so it made sense for the land-locked country to join Mercosur. However, Bolivia is prevented by the Mercosur treaty from joining because it is a member of another trade organisation, the Andean Pact. Mr Lacalle said: 'We are trying to provide the possibility. It needs the agreement of the four (member) countries.'

The president conceded that, when the common external tariff comes into effect on January 1 1995, 'perhaps we won't have a perfect common market' and there would be 'some exceptions to the common external tariff'. However, for most goods, the common external tariff would be about 20 per cent and there would be no internal tariffs.

He said he hoped Montevideo, the Uruguayan capital, would become the permanent home for Mercosur's administrative secretariat.

UY Uruguay, South America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 5 421
Nikko pays Dollars 1m SEC penalty Publication 930520FT Processed by FT 930520 By PATRICK HARVERSON NEW YORK

THE US subsidiary of the Japanese brokerage house Nikko Securities agreed yesterday to pay a Dollars 1m (Pounds 654,000) fine to settle charges brought by the Securities and Exchange Commission, related to the concealment of an Dollars 18m foreign exchange trading loss incurred by the firm in 1991.

Nikko also agreed to conduct a compliance review at its US unit.

The three senior executives involved in the case - former chairman Tsuneo Iida, former chief financial officer Masanori Ishikawa, and former head of accounting Susumu Okada - were barred from working in the US securities industry for various periods. The three men no longer work at the firm.

The settlement, which Nikko and the three executives agreed to accept without admitting or denying any wrongdoing, concerned an Dollars 18m loss incurred by a Nikko trader on speculative foreign exchange trading in 1991. The SEC said that the firm's US management failed to disclose the loss for several months, hiding it in the company's books and wrongly reporting a profit for the 1991 fiscal year.

The Dollars 1m penalty is the largest paid by a non-US securities firm and the fourth biggest fine paid by Japanese securities houses this year. In February, three firms - Daiwa, Nomura and Yamaichi - paid fines from Dollars 50,000 to Dollars 200,000 for various book-keeping irregularities. Daiwa was also fined for its part in the 1991 Salomon bond auction scandal.

Nikko refused then to settle with the SEC, claiming the penalties demanded by the agency were too high. The firm described the settlement yesterday as 'reasonable'.

The SEC said the Nikko fine, being five times larger than any paid by the other Japanese firms, 'reflects the degree of seriousness the SEC attaches to the misconduct by Nikko'.

Nikko Securities US United States of America P6211 Security Brokers and Dealers COMP Company News P6211 The Financial Times London Page 4 331
Clinton acts to head off revolt over cuts Publication 930520FT Processed by FT 930520 By GEORGE GRAHAM WASHINGTON

PRESIDENT Bill Clinton met his party members in Congress yesterday in an effort to consolidate support for his economic programme and head off a brewing revolt among conservative and centrist Democrats looking for more spending cuts and fewer tax increases.

Mr Clinton has appeared rejuvenated by trips to Ohio, Illinois, New Mexico and California over the last 10 days to seek support for his economic package from the public. The latter, however, must wait three and a half years before they can vote for Mr Clinton again, while members of Congress have a more immediate opportunity to pass judgment.

The Democratic leadership appears unwilling to jeopardise the president's economic package by allowing party members to tinker with its components, but they also want to avoid provoking an all-out rebellion by choking off dissent too fiercely.

Mr Clinton has so far succeeded in keeping his plan more or less intact, making some concessions on the proposed energy tax and abandoning his efforts for an investment tax credit, but preserving the main elements he sought, such as higher taxes on the rich and cuts in many spending programmes.

The work of the House of Representatives Ways and Means Committee on the tax measures will be married today with that of 12 other committees on the plan's spending components into a single reconciliation bill, but some conservative Democrats want to amend the plan when it is debated by the full House.

Perhaps 20 Democrats are thought unlikely to vote for any tax bill; it would only take another 20 opposed specifically to the energy tax, allied to the Republicans, to break the Democrats' 80-seat majority in the House.

'We need all the factions of the Democratic party to unite,' said Mr Tom Foley, the Speaker of the House.

If the plan cannot be preserved in the House, it would have little chance of surviving in the Senate, where the Democrats have a much slimmer and less disciplined majority.

Leaders of the conservative and centrist Democrats, such as Congressman Dave McCurdy of Oklahoma and Congressman Tim Penny of Minnesota, are pushing for a measure to place ceilings on all entitlement spending, which includes medical and social security programmes.

They argue that this is essential if overall government spending is to be controlled, since entitlements now make up half the federal budget.

Critics complain, however, that across the board entitlement cuts would hurt the poor and needy. They also warn that the ceiling could pre-empt any savings from the reform of the health care system now being prepared by the White House, since medical entitlement programmes such as Medicare and Medicaid are the fastest growing elements in the budget.

Mr Clinton said after his meeting with the congressional Democrats that he was optimistic that his economic plan would pass, and would achieve much of the deficit reduction the conservatives want.

Mr McCurdy, however, said the president would have to compromise because there were not at the moment enough votes to pass the bill.

But other Democrats said the conservative rebels were seeking to cover their flanks with voters in their constituencies and would, in the end, fall in line.

US United States of America P9199 General Government, NEC GOVT Taxes P9199 The Financial Times London Page 4 559
Brazil awards pay rises to military Publication 930520FT Processed by FT 930520 By CHRISTINA LAMB and REUTER RIO DE JANEIRO, BRASLIA

BRAZILIAN President Itamar Franco and the country's military chiefs issued a joint communique yesterday, warning that 'democracy cannot be allowed to commit suicide'.

This arose from a four-hour meeting to discuss dissatisfaction in the military over pay and conditions, as well as the country's worsening social problems and a recent surge of regional separatist threats.

The chiefs of the three armed services repeated demands for the military to be put on the same pay scale as the legislature and the judiciary.

They claim that Brazil's military spending amounts to the equivalent of Dollars 3 per head, compared to Dollars 27 in Bolivia and Dollars 17 in Argentina. The air force commander says that his service cannot even afford fuel.

Worried by increasing talk of agitation among the military, which prompted the meeting, Mr Franco had little choice but to accede, at least in part, to their demands. He seems to have promised a 97 per cent wage increase (Brazil's inflation is about 30 per cent a month) and funds to modernise equipment. The communique explained: 'Democracy is a delicate plant requiring careful attention if it is not to wither.'

It also stressed the role of the Brazilian armed forces: 'Ethnic conflicts in Europe, disputes for control of strategic areas, and the formation of economic blocs mean that large countries such as Brazil, rich in natural resources, must make greater efforts to defend their territorial and political sovereignty.'

Reuter adds from Braslia: A left-wing member of Brazil's cabinet said last night she had been fired by President Franco. Ms Luiza Erundina, administration secretary, is a former mayor of Sao Paulo.

BR Brazil, South America P9711 National Security NEWS General News P9711 The Financial Times London Page 4 306
Riot police clash with students in Guatemala City Publication 930520FT Processed by FT 930520

Riot police in Guatemala City clashed yesterday with students protesting against alleged official harassment while, in London, Amnesty International reported that political killings were continuing in Guatemala despite the government's pledge to end them. Opponents of the government of President Jorge Serrano also have been tortured and some simply 'disappear,' Amnesty said.

GT Guatemala, Central America P9229 Public Order and Safety, NEC P9721 International Affairs NEWS General News P9229 P9721 The Financial Times London Page 4 89
White House sends its travel office packing Publication 930520FT Processed by FT 930520 By GEORGE GRAHAM

US Vice-president Al Gore's efforts to 're-invent government' have come quickly home to roost with the sacking of the entire White House travel department.

The White House said it had found in the department gross mismanagement, shoddy accounting, four-day work weeks and serious overbilling of the press who travel in the president's wake. The FBI, it said, would probably be called in.

To the evident surprise of Ms Dee Dee Myers, White House press secretary, the press corps reacted coolly to the sackings, charging her with tarnishing the reputations of loyal employees. Worse still, they complained, the new head of the travel department is a cousin - distant, according to Ms Myers - of President Bill Clinton.

Fighting off charges of creeping nepotism, Ms Myers said the White House press corps had itself complained of the exorbitant cost of the chartered aircraft that accompany the president on his travels. 'I know this isn't your personal money, so it perhaps isn't as troubling to you,' she said.

Some reporters even suggested that instead of firing the travel department, Mr Gore should make them a model for his review of government performance; after all, they managed to make money, albeit at the expense of the press corps.

One reporter asked: 'Are you saying that the White House, which is going to run a trillion dollar deficit over four years, is firing half a dozen people. . . who have ended up with a big cash surplus?'

US United States of America P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 4 278
Guatemala 'political killings go on' Publication 930520FT Processed by FT 930520 By AP LONDON

POLITICAL killings are continuing in Guatemala despite the civilian government's pledge to end them, Amnesty International said yesterday, AP reports from London.

Opponents of the government of President Jorge Serrano Elias also have been tortured and some simply 'disappear,' the London-based human rights group said in a report. 'The government may have changed, but the violations go on.'

Mr Serrano, who pledged to protect human rights when he took office in January 1991, 'has singularly failed to do so,' it said.

Amnesty has documented 'tens of thousands' of human rights violations in Guatemala during the past 20 years. It said the number of political killings by government forces has dropped - 'but we have yet to see whether this will be a lasting improvement.

'The odds are against it. Harassment, intimidation and death threats are on the increase, violators from the past are still walking free and the repressive structures are still in place.'

A few human rights violators have been convicted, Amnesty said, and a presidential commission has been set up to co-ordinate human rights policy.

Victims include street children, human rights workers, journalists, indigenous peasants, academics and trade unionists, Amnesty said. Some have been killed by members of the security forces in uniform, others were murdered by 'death squads' - military personnel in plain clothes so as to 'disguise their guilt'.

Yet others have been killed by civil patrols - civilian groups said to be volunteers but under military control.

Amnesty said the government has tried to cover its responsibility by claiming that victims were part of armed opposition groups. 'These allegations are often made, with little or no evidence, against whole communities of indigenous peasants, for example, or against human rights workers.'

GT Guatemala, Central America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 4 315
Sale of Latin American art disappoints Publication 930520FT Processed by FT 930520 By ANTONY THORNCROFT

LATIN American art has suddenly gone off the boil. After three years of rapidly increasing prices, the auctions in New York this week were disappointing. On Tuesday, Sotheby's raised Dollars 4.5m (Pounds 2.9m) from 79 lots but the auction was only 52 per cent sold by value.

There was one significant record, for a colonial painting. It depicts the Christmas Eve festivities in Mexico City in 1720 and is signed Arellano. It had been discovered recently in a house in England and more than doubled its estimate, selling for Dollars 497,500.

A painting depicting cafe society in Bogota, 'Cuatro Mujeres' by the Colombian artist Fernando Botero, was at the bottom of its estimate, realising Dollars 717,500.

Sotheby's had more luck with its New York sale of the Alexander S. Honig collection of African art. It totalled Dollars 646,715 and was 92 per cent sold. A Fang male reliquary from Gabon fetched Dollars 206,000.

Christie's tribal art sale on the same day fared less well, totalling Dollars 825,212 but only 57 per cent sold. A Benin rectangular bronze plaque of about the year 1600 went below estimate for Dollars 112,500.

US United States of America P7389 Business Services, NEC NEWS General News P7389 The Financial Times London Page 4 222
Attali to sue over plagiarism claim Publication 930520FT Processed by FT 930520 By DAVID BUCHAN

MR Jacques Attali, president of the European Bank for Reconstruction and Development (EBRD), said yesterday he would sue for libel over accusations of plagiarism and inaccuracy in his new book about the early Mitterrand years.

Mr Attali said yesterday he would sue the weekly magazine, Le Nouvel Observateur, for alleging that his new 960-page book, Verbatim, recording Mr Francois Mitterrand's time at the Elysee between 1981 and 1986, had plagiarised conversations which the president had had with Mr Elie Wiesel, the Nobel Peace prize-winning American author.

Mr Attali told a radio station that 'at my initiative, the president had some conversations with Elie Wiesel which were broken off and were never the subject of a contract with any publisher or of any written work'.

'The two men are no longer under any obligation to each other. The president authorised me to use what he had said in my book, and Elie Wiesel told me he intended to do the same in his own memoirs,' Mr Attali, who was President Mitterrand's closest aide during the 1980s, said yesterday.

Le Nouvel Observateur said last night it had not yet received any legal writ from Mr Attali or his lawyer. Mrs Odile Jacob, a leading French publisher, had intended to publish the conversations as a book later this year. Mr Attali said the president had proof-read Verbatim line by line.

Mr Attali has been under fire recently over the amount spent on fitting out the EBRD headquarters in London. The international governors' board of the EBRD has ordered an audit into the spending.

FR France, EC P2732 Book Printing NEWS General News P2732 The Financial Times London Page 3 290
Russia offers troops for Bosnia's borders Publication 930520FT Processed by FT 930520 By ROBERT MAUTHNER, Diplomatic Editor

RUSSIA has given a pledge to the international mediators on the Yugoslav crisis that it will provide troops to monitor Bosnia's borders, officials close to the peace conference said in Geneva yesterday.

The officials said the undertaking was given over the telephone by Mr Andrei Kozyrev, the Russian foreign minister, in Rome to meet European foreign and defence ministers attending a meeting of the Western European Union.

The number of troops to be provided by Russia has not been specified but is understood to be relatively small. The mediators, Lord Owen and Mr Thorvald Stoltenberg, were due to fly from Naples to Ukraine and Belarus yesterday to ask for similar pledges from these two countries.

Lord Owen and Mr Stoltenberg, who want to start implementing their peace plan for Bosnia, in spite of its rejection by the Bosnian Serbs, are pressing members of the UN Security Council to commit troops for this purpose.

Both Mr Kozyrev and Lord Owen said Tuesday's truce agreement between the warring Bosnian Moslems and Croats, formerly allies in the struggle against Serb domination, was a first sign that the peace plan could start to be implemented at least partially. The US, however, has made it clear that it does not consider it realistic to implement the plan as long as it has not been accepted by all parties.

The continuing disagreement between the major powers on what action to take following the rejection of the Vance-Owen plan by the Bosnian Serbs led to Washington's refusal to attend a special Security Council meeting at foreign minister level, which Mr Kozyrev proposed for Friday to discuss Bosnian policy.

However, both Mr Kozyrev and Mr Warren Christopher, US secretary of state, have played down reports of a serious rift between their two countries or between the US and its European allies. Mr Kozyrev, as well as Mr Douglas Hurd, British foreign secretary, and their French opposite number, Mr Alain Juppe, are due to meet Mr Christopher in Washington at the end of this week.

Mr Christopher said yesterday he was sure he would find some common ground on Bosnia in his talks with the three foreign ministers.

Bosnian Serbs voted by 96 per cent to reject the Vance-Owen peace plan for Bosnia in a referendum last weekend.

After the result, Mr Radovan Karadzic, Bosnian Serb leader, said his people would never give up their self-proclaimed Bosnian Serb republic, though they would be ready to accept a confederation with separate Croat and Moslem states within Bosnia-Hercegovina.

A declaration adopted by the Bosnian Serbs' assembly last night said that the Bosnian Serb armed forces had been ordered to halt all military operations, in keeping with ceasefire agreements signed with the other parties in the conflict.

However, given the breakdown of innumerable ceasefire agreements since the beginning of the conflict more than a year ago, it was not immediately evident what value should be attached to the latest declaration, adopted shortly after the publication of the referendum results.

BH Bahrain, Middle East RU Russia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 534
Head of Siemens in Italy joins list in scandal Publication 930520FT Processed by FT 930520 By ROBERT GRAHAM and HAIG SIMONIAN ROME, MILAN

MR Giorgio Scanavaca, chairman and chief executive of the Italian subsidiary of Germany's electronics giant Siemens, was arrested by Milan magistrates yesterday on corruption charges.

The arrest is understood to be in connection with magistrates' broadening inquiry into the payment of bribes to obtain telecommunications contracts.

It casts a further shadow over the activities of foreign multinationals in Italy's widening political corruption scandal. The Italian subsidiary of Siemens now joins that of GEC Marconi and Sweden's Ericsson which last week became involved in the same investigation. The chief executives of these two subsidiaries were arrested on May 12 on similar charges.

It is the first time in Italy's 15-month-old corruption scandal, concerning the illicit funding of political parties in return for contracts, that so many foreign companies have been linked in a single line of inquiry. The big contracts in the telecommunications sector have been one of the main areas where foreign companies have bid for business in Italy in recent years.

It is almost a year since ABB, the Swiss-Swedish engineering and electronics group, first appeared in the investigations, then still largely limited to Milan. The group was alleged to have paid about L16bn (Pounds 6.8m) in kickbacks to obtain orders for the city's underground railway.

The foreign trail went relatively cold thereafter, bar a further embarrassment for ABB, whose chief executive in Italy, Mr Umberto Di Capua, was arrested and briefly jailed on allegations believed to be linked to the metro orders. Mr Di Capua, who only joined the company after the completion of the new line, was released soon after from Milan's San Vittore prison. However, in the past week the foreigners have been making a comeback.

Siemens is not a complete stranger to the corruption scandal. In May 1992 investigations into alleged corruption in a local hospital in Pavia, south of Milan, triggered allegations that the company had handed over about L50m in bribes to win a contract.

The impact on the standing of foreign companies in Italy is still being digested and public reaction has been limited so far. Officials at Ericsson were unavailable for comment yesterday, while a Siemens official had 'no comment' to make on the arrest of Mr Scanavaca. So far, only ABB appears to have taken its alleged involvement on board. Well before the inauguration of Fiat's new 'ethical code of business practice' last week, the company had moved to tighten up its procedures.

Siemens IT Italy, EC P9211 Courts PEOP People P9211 The Financial Times London Page 3 441
Balladur leads in presidency poll Publication 930520FT Processed by FT 930520 By REUTER PARIS

MR EDOUARD Balladur, the French prime minister, has suddenly become the most favoured candidate to succeed President Francois Mitterrand if an election were held now, the second opinion poll in a week showed on yesterday, Reuter reports from Paris.

The polls are potentially worrying for Gaullist leader Jacques Chirac, the right's long-standing frontrunner, although Mr Balladur has said he has no intention of running against his longtime mentor.

A poll by IFOP for the news magazine L'Express said Mr Balladur would score 37.5 per cent if he stood as Gaullist candidate in the first round of a presidential election pitting him against six other likely contenders. Runner-up was Socialist Michel Rocard with 23.5 per cent.

Mr Balladur would beat Mr Rocard 62.5 per cent to 37.5 per cent in a run-off second round, the poll showed.

Mr Chirac is the official presidential candidate of the Rally for the Republic (RPR) party in 1995 when Mr Mitterrand's term ends. Mr Balladur is an RPR member.

The Express poll showed Mr Chirac would score less than Mr Balladur if he stood as Gaullist candidate, though he too would beat Mr Rocard by 57.5 per cent to 42.5 per cent in a run-off.

Mr Chirac picked Mr Balladur, his finance minister from 1986-88, for the premiership, saying he did not want to serve under Mr Mitterrand again.

L'Express said his calculation was that his protege's popularity honeymoon would inevitably end by 1995 because of difficult international economic conditions. By staying in the background, Mr Chirac felt he could keep control over Mr Balladur and the government's action while maintaining his popularity.

FR France, EC P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 3 298
Vance-Owen Bosnian partition plan has accelerated ethnic cleansing Publication 930520FT Processed by FT 930520 By REUTER GENEVA

United Nations human rights investigator, Mr Tadeusz Mazowiecki, said yesterday that the Vance-Owen plan to partition Bosnia had accelerated ethnic cleansing, Reuter reports from Geneva.

The former Polish prime minister said the west's failure to halt human rights violations by Bosnian Serbs had created a 'precedent of impunity' that had encouraged Bosnian Croats to commit similar crimes. He criticised 'the lack of an international response' to counter the policy of ethnic cleansing.

BH Bahrain, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 105
French police to get wider powers Publication 930520FT Processed by FT 930520 By DAVID BUCHAN PARIS

FRENCH police will have a freer hand to make spot security checks under a draft law which the cabinet of Prime Minister Edouard Balladur approved yesterday for submission to parliament.

The measure will relieve police of their current need to prove that an individual was behaving suspiciously before checking his identity card, and forms part of the centre-right government's electoral pledge to improve law and order in French cities.

Mr Nicolas Sarkozy, the government spokesman, denied this constituted any threat to civil liberties which, he said, in reality came from 'insecurity on the streets'. President Francois Mitterrand who, under the bizarre cohabitation system presides over the formal cabinet meetings of his political opponents, was said to have acquiesced because the draft law provides for possible judicial review of such street searches.

Nonetheless, civil rights groups have complained that young people and immigrants will inevitably be the target of freer police checks.

Last week the National Assembly endorsed a move - which had started in the Senate when the Socialists were still in power - to make the offer of French nationality to immigrants less generous. The new nationality law removes the automatic right of children born in France of immigrant parents to acquire a French passport.

FR France, EC P9221 Police Protection NEWS General News P9221 The Financial Times London Page 3 237
Japanese puts EC steel plan to the sword: Mr Hayao Nakamura, the chief of Ilva, talks to Haig Simonian Publication 930520FT Processed by FT 930520 By HAIG SIMONIAN

MR Hayao Nakamura, the former Nippon Steel executive now managing Italy's loss-making Ilva state steel group, yesterday questioned the authority of the European Commission to dictate future capacity cuts.

'If competition policy means fair trade, that's fine. But if by competition they mean acting as judges, then that's not acceptable,' he said. 'We have to establish what are the rules of the game.'

Mr Nakamura called for a 'gentleman's agreement' between European steel producers to combat the industry's crisis by raising prices and agreeing production cuts, in line with Japanese practice, rather than have the Commission impose plant closures.

'Everyone knows there's overcapacity of airline seats across the Atlantic and Lufthansa is losing more money than any other airline. But no one has called on the Germans to scrap half their jumbo jets. It's the same thing with steel,' he argued.

Mr Nakamura, in his first newspaper interview since taking over at Ilva, was reacting to a letter earlier this week from Mr Karel Van Miert, the EC competition commissioner, to Mr Paolo Savona, the Italian industry minister, outlining problems with Ilva's latest restructuring plan.

The plan, presented to the Commission last month, involves the creation of a new Italian state steel producer, based on Ilva's big Taranto integrated steelworks, and the transfer of other plant and about L2,500bn (Pounds 1.1bn) in debt to Iri, the state holding company which controls Ilva.

In his letter to Mr Savona, Mr Van Miert argued that the Ilva plan involves substantial state aid and might have to be accompanied by up to 3m tonnes of capacity cuts if it were to go along with the EC steel plan.

Mr Nakamura questions both the Commission's interpretation of state aid and its right to intervene.

'Iri is no longer a state entity but a joint stock company. If Van Miert says it's aid, we're starting off at odds and there is no point in carrying on,' said Mr Nakamura.

The comments illustrate the Italians' belief that the Commission's attitude towards Ilva is one-sided and based on pressure from leading north European steel producers, principally the Germans.

'I want to be a good partner to other European steelmakers. But they are our colleagues, not our controllers,' he said.

Mr Nakamura, who took over the top job at Ilva in January, claimed it could not be accused of overcapacity or of dumping. Ilva exported only 16 per cent of its output and exports were widely diffused rather than concentrated in just a handful of markets, he argued.

He implied that the Commission's approach reflected the desire of some big north European steelmakers to eliminate capacity from southern competitors to gain market share. 'They want to send advisers into our plant to supervise capacity but I won't let them in,' he said.

Ilva, which made a net loss of more than L2,300bn last year, has only 43 per cent of the Italian steel market, which is Europe's second biggest.

'We could sell 100 per cent of our production in Italy, so why should we cut output? For the sake of the Italian public, or for the sake of the German public? What harm do we do to other producers?'

Mr Nakamura said that Ilva would be prepared to make production cuts to its current output of about 8m tonnes, but only in return for aid from the government.

As the Italian government has refused to provide funds, large cuts were out of the question, he implied.

He said that the company, which he forecast would make a net loss of about L1,700bn this year, would close the remaining steel facilities at its Bagnoli plant in Naples independently of any Community agreement.

Ilva QR European Economic Community (EC) IT Italy, EC P3312 Blast Furnaces and Steel Mills MKTS Production PEOP People P3312 The Financial Times London Page 3 667
Kohl demands tough public spending cuts Publication 930520FT Processed by FT 930520 By CHRISTOPHER PARKES and QUENTIN PEEL FRANKFURT, BONN

CHANCELLOR Helmut Kohl yesterday demanded harsh cuts in public spending as the Bundesbank warned that his government's policies were partly to blame for an unexpected surge in money supply growth last month.

Mr Kohl told a cabinet meeting that every department had to make economies. They had to be found and negotiated within a few weeks, in time for inclusion in the 1994 draft budget, to be finalised on July 13.

His warning coincided with the release of central bank figures showing growth in the M3 measure of money supply had shot though the bank's upper target level of 6.5 per cent during April, despite a significant slowdown in bank lending.

M3, regarded as a key indicator of future inflation, expanded at an annualised adjusted rate of 7.3 per cent, after trailing well below the lower target level of 4.5 per cent during the previous three months.

In a pointed commentary on the figures, the Bundesbank said a large proportion of its DM13bn (Pounds 5.2bn) profits for 1992 - credited to Bonn during the month - had already gone into circulation. 'As a result public sector cash transactions have given monetary developments a renewed push'.

The provisional figures, released during a meeting of the Bundesbank's policy-making council which elected to leave key discount and lombard interest rates unchanged, underline the government's difficulties in meeting Bundesbank demands for spending restraint.

Recession is biting into state revenues and forcing up welfare and unemployment payments. The need for renewed efforts to prune public sector spending stems from a forecast shortfall in tax revenues of DM25.8bn next year and a total of more than DM100bn for the period up to 1996.

One encouraging sign in the figures was a marked deceleration in the rate of bank credit growth, a major influence on M3. Lending to enterprises and individuals in April rose DM13.3bn after an increase of DM30bn in March.

Credit expansion in the six months to the end of April had grown at an annualised rate of just over 8 per cent compared with almost 9 per cent in the period to the end of March.

Meanwhile, monetary capital formation, the transfer of funds into longer-term deposits and instruments not included in M3, had weakened and rose only DM2.9bn after a DM13bn increase in March.

DE Germany, EC P9311 Finance, Taxation, and Monetary Policy ECON National income P9311 The Financial Times London Page 2 419
Rasmussen is quick to reward voters: The Danish government's rapid attempt to demonstrate benefit of EC membership Publication 930520FT Processed by FT 930520 By HUGH CARNEGY and HILARY BARNES

THE VIOLENT riots which erupted in Copenhagen after Tuesday's vote in favour of the Maastricht treaty came as a profound shock to the government, which had hoped the result would allow political life to return to its normal calm.

The shock was all the greater because such explosions are rare in Denmark, where the political culture is based on consensus and the distance between extremes is small. Mr Poul Nyrup Rasmussen, prime minister and leader of the Social Democratic party, was yesterday at pains to emphasise that the rioters represented a tiny minority.

Nevertheless, the riots reflect a society which has experienced an unusually divisive debate over the past 18 months, with the electorate being cajoled into reversing its June rejection of the treaty.

This was acknowledged yesterday by Mr Rasmussen, who moved quickly to deliver tangible benefits to the people in the form of an economic policy programme for growth and employment which was presented as having been made possible by the Yes vote.

Throughout the referendum campaign Mr Rasmussen recognised that a gap had grown up between politicians and electorate and said that Community membership had to be seen to deliver benefits to people in their daily lives.

He described the economic measures as 'an offensive against unemployment', currently running at 12 per cent. The government predicted they would lower the level to about 11 per cent next year. 'We are going to break the curve of rising unemployment,' he said.

The core of the programme is a reform of the income tax system, which will reduce marginal rates from next year to a band of 38-58 per cent, compared with 52-68 per cent at present. The reductions will be financed by 'green' taxes on petrol, electricity, heat and water consumption.

The boost from tax cuts next year will be equal to about 0.5 per cent of gross domestic product, or about DKr5bn (Pounds 526m), and should produce growth in real private consumption next year of 4.3 per cent. An accompanying upgrade of training programmes is designed to improve workforce skills.

Forecasts by the Finance Ministry point to a surge in the GDP growth rate from about 1 per cent this year to 3.1 per cent in 1994, with private consumption next year rising by 4.3 per cent in real terms.

According to Mr Rasmussen, Denmark's large surplus on the current account of the balance of payments, low inflation rate and relatively strong government finances mean that the country can afford these measures. However, the Danish government, which currently holds the EC presidency, is calling for a co-ordinated pragmatic policy for economic recovery. It will be pushing hard for this at next month's Copenhagen summit.

But when it comes to the Community's more ambitious long-term plans for economic and political union, enshrined in Maastricht, Denmark's approach will be severely constrained by the painful experience of the two referendums. Future government's will not be allowed to depart from the provisions of the Edinburgh opt-outs agreement, which exempted Denmark from participation in the common currency, defence co-operation, legal and police co-operation and common citizenship.

Denmark's strong economy makes it a natural candidate for participating in the third and final stage of European monetary union, a move which is supported by the business community. But Mr Rasmussen said this week that the government would stick by the Edinburgh opt-out on the common currency: 'That is the position of this government,' he said.

The right-wing Liberal party, led by Mr Uffe Ellemann-Jensen, foreign minister for more than 10 years until last January, has already espoused the cause of dropping the Edinburgh opt-outs at a later date. Like all the other political parties, though, it has promised to submit any changes in the Edinburgh deal to further plebiscites.

The provocative Mr Ellemann-Jensen's cause has found few supporters. After a long and divisive debate on the Maastricht issue, most politicians want to see a restoration of national consensus on the European issue.

This may not be as difficult as might be imagined. Tuesday night's riots notwithstanding, the debate has generally been conducted in a friendly spirit.

The riots, said Mr Niels Helveg Petersen, foreign minister, 'are in no way an expression of what the majority of No voters feel. We are not a deeply divided society. We have had a referendum and therefore there have been differences of opinion, but the differences will disappear again from today.'

DK Denmark, EC P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy P9199 General Government, NEC GOVT Taxes ECON Employment & unemployment ECON Gross domestic product P9721 P9311 P9199 The Financial Times London Page 2 796
Green light for expansion talks: The prospects for a Community of 16 Publication 930520FT Processed by FT 930520 By DAVID GARDNER

DENMARK'S Yes to Maastricht means talks will go ahead on EC membership by 1995 for Sweden, Finland and Norway and Austria. However, it is by no means a foregone conclusion that the citizens of all four applicants will want to join.

Opinion polls indicate that probably none of them could muster a majority for entry at present - and all of them will hold a referendum before deciding.

The four governments are looking to the Danish outcome to lift waning enthusiasm about membership. As Mrs Gro Harlem Brundtland, Norway's prime minister, underlined last month, 'the Danish No (of last June) broke an upward trend for unification all over Europe'. A Yes now, she said, was a vital precondition to turn that trend around.

All applicants except Finland need big turnarounds, and all need perceived victories for often uncompromising demands. Moreover, it has been made clear that they must accept not only existing EC legislation, but the full Maastricht treaty. Opt-outs of the type conceded to Denmark and Britain are only for existing members of the club.

As Mr Hans van den Broek, commissioner in charge of the negotiations, made clear on Tuesday night as the Danish results came in: 'If the outcome. . . . had been No, there would have been no Maastricht treaty and no basis on which to conduct the enlargement negotiations.' This rigid posture is the official policy of all 12 existing member states; not even the UK has demurred.

Getting the negotiations started before ratification of Maastricht was a feat in itself. The original, federalist-minded six member states suspected that semi-detached late-joiners such as Britain and Denmark wished to dilute European political and monetary union by taking in their own former colleagues in the European Free Trade Association (Efta). Southern member states such as Spain worry about a shift northwards in the EC's centre of political gravity. The caricature of both views is that the British and the Danes want simply a loose free trade area with a few indispensable political frills.

However, the new entrants say they want to participate in the monetary union, and the common foreign and security policy laid down by Maastricht. Though all except Norway are militarily neutral, they are cautiously receptive to an eventual European defence arrangement in the post-cold war era. Moreover, they favour a 'deepening' in areas such as environment and social policy, with more of the majority voting which Britain sees as eroding sovereignty.

With negotiations at an early stage, it is not clear whether the applicants can get satisfaction. Even less clear is whether federalists like the Benelux countries will insist that decision-making procedures designed for six members, already creaking with 12, must be reformed before the EC expands to 16 and more.

QR European Economic Community (EC) SE Sweden, West Europe FI Finland, West Europe AT Austria, West Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 508
E Germans begin return to work Publication 930520FT Processed by FT 930520 By JUDY DEMPSEY BERLIN

STRIKING east German metal and electrical workers began returning to work yesterday after accepting last Friday's so-called Saxony compromise postponing by two years equalisation of wages in the two parts of the country.

However, IG Metall, the powerful engineering union, is insisting the strikes will continue unless wages for the steel sector match those in the metal and electrical industries.

Union officials in Berlin-Brandenburg, where most of the steel sector is located, said the agreement widens the income differentials between steel and metal workers. Over 7,000 steel workers have been on strike for the past 16 days.

DE Germany, EC P8711 Engineering Services P3312 Blast Furnaces and Steel Mills P8631 Labor Organizations PEOP Labour P8711 P3312 P8631 The Financial Times London Page 2 138
SPD urges jail terms for insider dealing in shares Publication 930520FT Processed by FT 930520 By QUENTIN PEEL and DAVID WALLER BONN, FRANKFURT

GERMANY'S opposition Social Democrats yesterday called for statutory jail sentences to deter insider dealing in shares, as Mr Franz Steinkuhler, leader of the country's most powerful union, struggled to contain calls for his resignation from his own rank and file.

The leader of the IG Metall engineering union has denied insider dealing, but admits speculating in almost DM1m (Pounds 400,000) worth of shares in MAH, a Daimler-Benz holding company.

He is on the Daimler supervisory board, which decided to dissolve MAH and exchange its shares for full Daimler shares on April 2 - causing a 20 per cent jump in the MAH share price. Mr Steinkuhler admits to making a profit of DM64,000.

The affair threatened further ramifications yesterday when Mr Hilmar Kopper, chief executive of Deutsche Bank and chairman of the Daimler supervisory board, came under strong attack from shareholders at his bank's annual meeting for the way the decision to dissolve MAH was announced.

Daimler made the announcement at 4 pm on April 2, well after the close of floor trading on German stock exchanges. However, it prompted a sharp rise in the MAH share price in trading conducted over the IBIS electronic dealing system.

Meanwhile, BfG Bank, the former trade union bank that carried out Mr Steinkuhler's share purchases, is investigating how information had been leaked to the press.

Pressure for legislation to control insider dealing - not an offence in Germany - was fuelled by Mr Uwe Jens, SPD economics spokesman. He called for a law based on US legislation, which provides for up to two years in prison. 'It needs a jail sentence to provide an adequate deterrent.'

Although he refused to comment on the Steinkuhler case, other members of the SPD have joined calls for him to quit, as have rank-and-file members of IG Metall.

Daimler-Benz Deutsche Bank DE Germany, EC P6211 Security Brokers and Dealers P6231 Security and Commodity Exchanges P3711 Motor Vehicles and Car Bodies P6081 Foreign Banking and Branches and Agencies COMP Company News P6211 P6231 P3711 P6081 The Financial Times London Page 2 366
EC must now make the treaty work: Denmark's approval of Maastricht presents dual challenge for Community Publication 930520FT Processed by FT 930520 By LIONEL BARBER BRUSSELS

NOW comes the hard part. After the decisive Danish Yes to the Maastricht treaty, the EC faces a dual challenge: to recapture public support for European integration and to make the much-abused treaty work.

Ever since Danish voters rejected the Maastricht treaty last June, the EC has been trapped in what Mr Jacques Delors, European Commission president, calls a period of depression and inaction - a reflection of his own state of mind as much as the mood in the Brussels bureaucracy.

But on Tuesday night, as the first exit polls showed a resounding Yes, European commissioners came bounding into the underground press room in the Bredel headquarters. For the first time in months the made-for-TV smiles looked genuine. 'We can breathe again,' said one EC ambassador.

The Danish endorsement of Maastricht will most likely hasten ratification in the UK, the lone treaty hold-out; more important, it builds on the Edinburgh summit last December when the UK presidency engineered a series of deals on the EC budget and enlargement which gave the Community a more secure framework for its development to the year 2000.

The billion Ecu question is whether this framework will be of the loose variety favoured by Britain and the Danes, or whether federalist forces in Belgium, the Netherlands and the Commission will try to force the pace toward closer political and monetary integration.

The Danish vote does not provide an answer, because it does not represent a true test of public support for European union. The version of Maastricht which Denmark approved on Tuesday contains legally-binding opt-outs on core elements of the treaty, including the single European currency, EC citizenship, and defence policy.

Yet in the short-run, the special Danish deal may not matter. The battle to ratify Maastricht has come to resemble a religious war; now is the time, says one senior EC official, to focus on 'real' issues such as rising unemployment, low investment, monetary stability as well as the political and economic integration of eastern Europe.

The first test of whether the Community has put an end to its introspection will be the EC summit in Copenhagen on June 21-22. Leaders will be asked to approve a bolder-than-expected Commission paper proposing accelerated trade liberalisation with Poland, Hungary, the Czech and Slovak republics, Bulgaria and Romania.

Failure to reach agreement would not only be a slap in the face for the emerging democracies in eastern Europe; it would signal growing support for protectionism in France, Spain and Portugal and would bode ill for efforts to reach agreement on a far-reaching market access package in the Gatt Uruguay Round talks at the Group of Seven summit in Tokyo in July.

The second summit test is whether member states can restore growth to their economies, reversing the rise in unemployment which will top 17.5m in the EC this year.

The Danish presidency and Mr Delors are pushing hard for a strengthened growth package, with member states shifting more resources into capital spending. But severe constraints remain, because of the Maastricht 'convergence criteria' covering targets for inflation, budget deficits and government debt which member states must meet in order to qualify for monetary union.

At present, only Luxembourg qualifies on all three grounds. But when Mr Philippe Maystadt, Belgian finance minister, said last weekend that member states should soften the convergence targets if recession continued into next year, he received no audible support.

In Brussels yesterday, Mr Wilfried Martens, former Belgian prime minister and president of the powerful Christian Democrat group of parties in Europe, disowned his Belgian colleague. 'If we modify the criteria we would be taking a large political and economic risk,' he said.

For the UK, which was forced out of the European exchange rate mechanism (ERM) along with Italy last September, these divisions appear to confirm what ministers concluded at the 1991 Maastricht summit: that the third phase of monetary union was not, and never would be, feasible.

Mr Douglas Hurd, UK foreign secretary, went a step further recently. 'With the Community bound together by shared interests,' he said, 'there must be room for flexibility provided the core remains intact. I am not talking here about a two-speed Europe, but of a Community which responds more flexibly to the increased diversity of its members.'

This comes close to a Europe a la carte; but as a recent Royal Institute of International Affairs paper points out, the EC is already moving towards 'an uncertain pattern of co-operation in different groups on particular policy areas'.

QR European Economic Community (EC) DK Denmark, EC P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy NEWS General News P9721 P9311 The Financial Times London Page 2 803
Tensions ease in exchange rate mechanism Publication 930520FT Processed by FT 930520 By JAMES BLITZ, Economics Staff

DENMARK'S ratification of the Maastricht treaty continued to ease tensions inside the European exchange rate mechanism (ERM) yesterday, allowing several countries to cut interest rates and leading to more investment in currencies and bonds outside the D-Mark bloc.

The central banks of Denmark, Portugal and Sweden, all of which had followed tight monetary policy to maintain their exchange rates against the D-Mark, cut their official short-term interest rates yesterday.

Inside the ERM, Denmark reduced its discount rate by 1 percentage point to 8.25 per cent, while Portugal took 2 points off its 'mop up' rate, reducing it to 13 per cent.

Sweden's central bank reduced its overnight lending rate by 1/4 of a percentage point to 8.75 per cent, its fourth successive cut of a quarter point in the past month.

The Danish vote also compounded the outflow of funds from the D-Mark into the dollar and European currencies, as dealers took the view that monetary union was back on track.

Sterling and the Italian lira both appreciated against the German currency yesterday, despite the Bundesbank's decision not to reduce its official interest rates at its fortnightly council meeting.

The German currency also fell to an historic low against the Japanese yen, hitting Y68.05.

The yields on Italian, Swedish and Norwegian government bonds have also fallen recently at the expense of German bonds.

Their yields were yesterday about 20 to 30 basis points lower than a week ago.

DK Denmark, EC QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 2 279
Stock and Currency Markets Publication 930520FT Processed by FT 930520

------------------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------------------ FT-SE 100: 2819.7 (-27.6) Yield 4.04 FT-SE Eurotrack 100 1147.97 (-5.01) FT-A All-Share 1393.51 (-0.7%) FT-A World Index 157.80 (+1.1%) Nikkei 20,380.79 (+151.40) New York: Dow Jones Ind Ave 3500.03 (+55.64) S&P Composite 447.54 (+7.22) ------------------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------------------ Federal Funds: 2 7/8% (2 7/8%) 3-mo Treas Bills: Yld 3.024% (3.065%) Long Bond 101 29/32 (101 9/32) Yield 6.969% (7.018%) ------------------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------------------ 3-mo Interbank 6 1/16% (6 1/8%) Liffe long gilt future: Jun 104 11/32 (Jun 103 13/16) ------------------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------------------ Brent 15-day (July) Dollars 18.31 (18.35) ------------------------------------------------------------------------ Gold ------------------------------------------------------------------------ New York Comex (June) Dollars 374.2 (376.0) London Dollars 377.15 (370.25) ------------------------------------------------------------------------ STERLING ------------------------------------------------------------------------ New York: Dollars 1.5445 (1.53535) London: Dollars 1.5415 (1.5315) DM 2.5025 (2.4875) FFr 8.44 (8.3925) SFr 2.2725 (2.265) Y 170.25 (170.75) Pound Index 80.5 (80.2) ------------------------------------------------------------------------ DOLLAR ------------------------------------------------------------------------ New York: DM 1.62305 (1.62465) FFr 5.47 (5.4785) SFr 1.4735 (1.48015) Y 110.60 (111.475) London: DM 1.6235 (1.624) FFr 5.475 (5.48) SFr 1.4745 (1.479) Y 111.5 (111.55) Dollars Index 64.3 (64.5) Tokyo open Y 110.60 ------------------------------------------------------------------------

GB United Kingdom, EC US United States of America P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas P9311 Finance, Taxation, and Monetary Policy COSTS Commodity prices COSTS Equity prices P6231 P1311 P9311 The Financial Times London Page 1 229
Retail sales drop points to fragile recovery Publication 930520FT Processed by FT 930520 By EMMA TUCKER, Economics Staff

THE FRAGILE STATE of Britain's economic upturn was yesterday exposed by an unexpected decline in retail sales, which last month fell for the first time since the beginning of the year.

The figures follow poor manufacturing output figures earlier this week, and, although analysts warned not to read too much into one month's figures, they are the first sign that the UK recovery might not be on an uninterrupted upward path.

The Central Statistical Office said yesterday that retail sales volumes fell a seasonally adjusted 0.3 per cent last month, compared with March. However, sales were up strongly in the latest three months, a measure which the government and independent economists take as a better guide to recent trends.

In the three months to April, sales volumes rose by 1.4 per cent and were 3.2 per cent higher than in the same period a year earlier. Compared with the same month a year ago, sales in April were 2.4 per cent higher compared with growth of 4 per cent in the year to March.

Economists expect the recovery in the UK to be bumpy, following the experience of the US, which is suffering from similar private sector debt problems and where recent economic indicators have painted a conflicting picture.

Concern over the economy was raised further when it emerged that the government needed to borrow Pounds 4.69bn last month to finance public spending, 34 per cent up from the figure for the same period last year. This highlights the prospect of high deficits later in the year as a result of the economic slowdown.

The weakness of April's retail sales figures was concentrated in food retailers and mixed businesses, mainly department stores. Sales in both sectors fell, while non-food retailers' sales were flat.

Over the three months to April growth was concentrated in the non-food sector. Sales rose by 2.7 per cent compared with the previous three months.

Food retailers, whose sales held up relatively well during the recession, have not fared so well since the beginning of the year. Sales volumes rose by 0.5 per cent in the last three months. Sales for mixed business retailers rose by only 0.1 per cent over the three months to April.

One reason for caution about the growth of sales is that heavy discounting, which helped to underpin retail sales, appears to be coming to an end.

The Society of Business Economists also warns today that sluggish growth of real incomes is likely to hold-back consumer spending. The Treasury stressed that it was dangerous to read too much into one month's figures.

GB United Kingdom, EC P5999 Miscellaneous Retail Stores, NEC ECON Economic Indicators CMMT Comment & Analysis P5999 The Financial Times London Page 1 470
Major says UK still not ready for ERM move Publication 930520FT Processed by FT 930520 By RALPH ATKINS and LIONEL BARBER LONDON, BRUSSELS

MR JOHN MAJOR yesterday put off indefinitely sterling's re-entry into the European exchange rate mechanism and made clear that Danish approval of Maastricht would not change Britain's stand against European monetary union.

Ahead of a large-scale revolt expected by Tory MPs over the Maastricht treaty today, the prime minister said the right conditions for considering ERM re-entry 'simply do not apply at the moment and, in my judgment, are unlikely to apply for some time in the future.'

At least 30 Conservative MPs are expected to vote against the government tonight when the Commons gives the Maastricht treaty its third reading. Similar numbers of Labour MPs will also vote against.

But the Labour leadership's decision to abstain means the government should secure passage of the bill with ease. It then goes to the House of Lords.

Mr Major said the prospects of a rapid move towards European economic and monetary union had 'drifted away very substantially'. He said the timetable for Emu envisaged by other EC leaders at Maastricht had been 'unrealistic'. However, he did not rule out the possibility of other countries moving to a single currency without Britain.

His refusal to contemplate Britain's rejoining the ERM cheered Conservative Euro-sceptics and came close to endorsing a prediction by Mr Kenneth Clarke, home secretary, that Britain would not re-enter until after the next general election. In practice, any early move would split the cabinet.

The Danes approved Maastricht by a margin of 56.8 per cent in favour to 43.2 per cent against, on an 86.2 per cent turnout, reversing the narrow rejection of the treaty in a poll last June. The positive vote has also given new impetus to the Danish presidency.

Denmark now intends to press for agreement on issues such as a new trade liberalisation package for eastern Europe before Denmark hands over the presidency to Belgium on July 1. In Brussels yesterday, Commission officials hailed the Danish endorsement of the Maastricht treaty in Tuesday's second referendum as giving a 'psychological lift' to the Community.

Despite euphoria among many European Community leaders at the Danish referendum result, Mr Major's believes that there is support throughout the EC, including Germany, for wholesale reform of the ERM.

'The ERM, as it was when we left it, is an inadequate instrument that we could not re-enter,' Mr Major said on BBC radio. Downing Street rejected suggestions that the prime minister was implying Britain might never rejoin but said there remained 'big problems' with the ERM - although at least it was no longer regarded as a quasi fixed rate system.

Officially, re-entry depends on conditions set by the Treasury on correcting 'faultlines' in the ERM and on bringing UK and Germany monetary polices into line. One Euro-sceptic Tory MP said that 'the day we rejoin the ERM is the day the Conservative party splits. There would be mass resignation from government.'

With his comments on the ERM, however, Mr Major has risked upsetting the pro-European Conservative wing, including Sir Edward Heath, former prime minister. Mr Major said the Danish result should put British ratification of the treaty back on track.

After the Yes vote, Page 2 Jostling around Major's cabinet table, Page 9 Editorial Comment, Page 19

QR European Economic Community (EC) GB United Kingdom, EC DK Denmark, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs NEWS General News P9311 P9721 The Financial Times London Page 1 590
Treasury seeks tough NHS curbs: Portillo warns of hard decisions on public spending Publication 930520FT Processed by FT 930520 By PHILIP STEPHENS and PETER NORMAN

THE TREASURY is pressing for effective withdrawal of the National Health Service from dental care and the scrapping of free prescriptions for all but the poor in its fundamental review of public spending.

The proposals - under consideration by a Whitehall committee set up by Mrs Virginia Bottomley, the health secretary - foreshadow a fierce Whitehall battle during coming months as ministers prepare the government's spending plans for 1994-95 and after.

The proposals emerged as Mr Michael Portillo, the chief secretary to the Treasury, pledged to keep public spending within its preset ceilings in the next two financial years even though this risked 'courting unpopularity'.

In a speech last night to the Association of Investment Trust Companies, he warned that the fundamental reviews being conducted by the Treasury of spending by the health, social security and education departments and the Home Office would 'throw up difficult decisions'.

Mr Portillo said the government could not and should not reduce its public sector borrowing requirement solely by raising taxes. Higher taxes would blunt incentives, erode competitiveness and create upward pressure on interest rates, he warned.

However, in comments to Independent Television News, Mr Portillo appeared to downplay the idea of limiting free prescriptions. 'I don't think it is one of the leading options,' he said.

With Mr Portillo also demanding radical cuts in some social security benefits, the Treasury proposals will add to concern among Conservative MPs that the government's spending squeeze is pushing it towards an onslaught on the welfare state.

The health committee is examining options to reduce the number of services provided by the NHS and at the same time increase its revenue base. Ministers believe some suggestions, such as the introduction of 'hotel charges' for hospital stays, will be dropped.

And despite Mr Portillo's insistence that spending ministers must be ready to take hard decisions, the government's slim 18-seat majority may persuade Mr John Major, the prime minister, that such cuts would prove politically damaging. Mr Major made much in last year's general election campaign of his determination to maintain the NHS as a free service at the point of delivery.

The Treasury argues the NHS will not be able to meet demand for healthcare without the proposed changes for prescriptions and dental care.

Only 20 per cent of people pay the Pounds 4.25 prescription charge. The Treasury wants to increase this proportion to 80 per cent by limiting exemptions to people on income support and thus cut the Pounds 3bn NHS drugs bill. It also wants to take up a British Dental Association proposal that the NHS should pay only for dental treatment for children and the poor.

Last night, Mr David Blunkett, Labour's health spokesman, said the government was preparing the ground for a major extension of NHS charges. 'Mrs Bottomley is clearly losing her battle with the Treasury. This is an outrageous attack on the sick, both old and young, and should be stopped in its tracks.'

The cabinet is expected to meet in June to set the framework for talks on public spending before November's first unified Budget. The Treasury's aim will be to secure unanimous agreement that spending in the next three years should be tightly controlled.

Mr Portillo has been meeting spending ministers in recent weeks to stress the need to hold the government's 'control total' for public spending within the planned Pounds 253.6bn in 1994-95 and Pounds 263.3bn in 1995-96.

In his speech yesterday, Mr Portillo said public spending was expected to have risen nearly three times faster than tax revenues in the five years to April 1994. Estimated tax revenues would rise by Pounds 38bn while public spending would go up by Pounds 101bn. Spending had risen 17 per cent in real terms since 1988 while output had not grown at all.

Government borrowing, Page 8

GB United Kingdom, EC P9431 Administration of Public Health Programs P8021 Offices and Clinics of Dentists P8011 Offices and Clinics of Medical Doctors NEWS General News P9431 P8021 P8011 The Financial Times London Page 1 695
World News in Brief: Cricket Publication 930520FT Processed by FT 930520

Australia beat England by four runs in the Texaco Trophy one-day international at Old Trafford. England were all out for 254.

AU Australia GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page 1 53
World News in Brief: Calculator sold for almost Pounds 8m Publication 930520FT Processed by FT 930520

A rare 19th century mechanical calculator with an estimated sale price of Pounds 15,000 to Pounds 20,000 was sold for almost Pounds 8m at Christie's, London, setting an auction record for scientific instruments.

GB United Kingdom, EC P7389 Business Services, NEC NEWS General News P7389 The Financial Times London Page 1 66
World News in Brief: US recognises Angola Publication 930520FT Processed by FT 930520

President Clinton extended US recognition to formerly Marxist Angola. He urged Unita, the rebel group armed by the US, to negotiate peace with the government of President Jose Eduardo dos Santos.

AO Angola, Africa P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 59
World News in Brief: Wall Street record Publication 930520FT Processed by FT 930520

US stocks jumped to record highs after an unexpected rally in bond prices triggered heavy buying in the equity markets. The Dow Jones industrial average ended up 55.64 at 3,500.03, beating the previous record of 3,482.31, set on May 12.

World stocks, Page 37

US United States of America P9311 Finance, Taxation, and Monetary Policy P6231 Security and Commodity Exchanges NEWS General News P9311 P6231 The Financial Times London Page 1 83
World News in Brief: Colombian aircraft crashes Publication 930520FT Processed by FT 930520

A Colombian aircraft carrying 134 people crashed in mountains east of Medellin, a civil aviation official said. The Boeing 727-200 belonging to Colombia's SAM airline, was flying from Panama to Bogota.

CO Colombia, South America P9229 Public Order and Safety, NEC TECH Safety & Standards P9229 The Financial Times London Page 1 64
World News in Brief: Former detectives cleared over pub bomb investigation Publication 930520FT Processed by FT 930520

Three former Surrey detectives accused of manufacturing notes of interviews with Patrick Armstrong, one of the Guildford Four, were acquitted at the Old Bailey of conspiracy to pervert the course of justice. The four's convictions for the 1974 Guildford pub bombings were quashed by the Court of Appeal in 1989.

GB United Kingdom, EC P9211 Courts P9221 Police Protection NEWS General News P9211 P9221 The Financial Times London Page 1 86
Violence flares again in Denmark Publication 930520FT Processed by FT 930520

STREET violence in Copenhagen flared up again last night in the wake of the Danes' endorsement of the Maastricht treaty. On Tuesday, 11 demonstrators were wounded and 26 police injured when armed police (above) confronted rioters. Last night, police fired tear gas and sealed off streets in response to the protests. Meanwhile, the government announced a package of tax cuts and Denmark's central bank cut the official discount rate to 8.25 per cent from 9.25 per cent.

Report, Page 20

DK Denmark, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 106
World News in Brief: Attali to sue for libel Publication 930520FT Processed by FT 930520

Jacques Attali, president of the European Bank for Reconstruction and Development, said he would sue for libel over accusations of plagiarism and inaccuracy in his new book about President Mitterrand.

FR France, EC P2732 Book Printing NEWS General News P2732 The Financial Times London Page 1 60
London Stock Exchange: TV stocks firm Publication 930519FT Processed by FT 930701 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Television stocks perked up on the implications of the sale by WH Smith of its 14 per cent stake in Yorkshire Tele-vision.

Smith sold its 7m shares at 200p apiece to LWT Holdings, which subsequently announced that it was taking over Yorkshire's crumbling advertising sales section. The stake sale had been anticipated for some time and had prompted a certain amount of bid speculation.

The appearance of LWT removes the potential bid value but replaces it with a more comforting shareholder fit and a much-needed advertising boost, analysts said. The shares rose 13 on the news before closing a net 6 ahead at 178p.

The focus on advertising also encompassed Anglia TV, 7 up at 286p, and Scottish TV, 6 better at 569p. WH Smith 'A' slipped 2 to 438p.

Switching from Lloyds Bank into Barclays saw the latter advance 7 to 446p on hefty turnover of 4.9m shares and the former slip 3 to 542p on 4.1m traded.

First-quarter figures from Sedgwick, the insurance broker, were Pounds 1.5m below most expectations. Sedgwick shares receded 3 to 167p on above-average turnover of 3.2m.

Fisons shed 7 to 165p as the sale of its North American horticulture business for Dollars 60m failed to reassure.

Gases and healthcare group BOC fell 17 to 681p as the company reported improved first-half profits but said that the outlook was sluggish.

GEC was among the market's most heavily traded stocks, closing 2 harder at 319p, with at least two leading broking houses said to be keenly supporting the shares.

Linx Printing Technologies lost 36 at 139p, after 121p, following a profits warning.

The market appreciated the terms of the well signposted rights issue from British Airways. The Pounds 442m cash call was announced with year-end results of Pounds 185m, at the bottom end of market expectations. However, analysts were encouraged by the fact that one-off items had played a significant part in the profits decline and future prospects looked good. The shares finished just a halfpenny softer at 296 1/2 p after trade of 3.3m.

Securiguard, the business services group, jumped 104 to 289p after environmental services company Rentokil surprised the market by launching a hostile Pounds 59.2m bid to help its move into security services in the UK and US.

The company urged investors not to accept the 270p a share offer and analysts predicted a long battle. The shares are tightly held and turnover was thin. Rentokil relinquished 4 to 193p.

Fears of stiffer US competition for TI Group prompted the shares to dip 4 to 326p. The fears surround TI's landing gear manufacturing business following the takeover of a US rival.

The 95 per cent drop in interim profits at Fenner left the shares 6 lighter at 77p.

Results from Allied-Lyons came in line with market forecasts and the shares marked time at 543p.

Leading textiles groups were boosted by the Marks and Spencer figures, which hinted at improved volumes. SG Warburg's textiles analyst said there were relative merits for the suppliers. Coats Viyella put on 3 at 237p ahead of a presentation by Carr Kitcat & Aitken on Friday. Courtaulds Textiles rose 10 to 544p.

Yorkshire-Tyne Tees Television Holdings LWT (Holdings) Coats Viyella Courtaulds Textiles GB United Kingdom, EC P4833 Television Broadcasting Stations P2339 Women's and Misses' Outerwear, NEC P2211 Broadwoven Fabric Mills, Cotton P2221 Broadwoven Fabric Mills, Manmade CMMT Comment & Analysis P4833 P2339 P2211 P2221 The Financial Times London Page 52 594
International Company News: Leading US store chains turn in contrasting results Publication 930519FT Processed by FT 930610 By NIKKI TAIT NEW YORK

CONTRASTING fortunes in the US retail sector were evident yesterday, when Dayton Hudson and JC Penney, two of the nation's largest store chains, unveiled first-quarter results.

JC Penney, the Texas-based department store group, enjoyed a fairly strong three-month period to May 1. Total sales rose by 4.5 per cent, to Dollars 3.96bn, and with selling costs remaining static and interest charges falling slightly, net profits before extraordinary items and accounting-related items, stood at Dollars 172m, compared with Dollars 136m a year earlier.

JC Penney said its gross margin fell from 34.1 per cent to 33.9 per cent, as a result of its lower pricing strategy. But selling, general and administrative expenses also fell, to 30 per cent of retail sales, against 31.5 per cent a year earlier.

After extraordinary items and the accounting related changes, net profits reached Dollars 206m. Earnings per share, on the same basis, stood at 78 cents, against 52 cents. JC Penney shares edged 1/8 higher to Dollars 46 on the news.

The company attributed the first-quarter results to its pricing strategies, and said that it was still looking to strengthen stock management and supplier relationships. Mr William Howell, chairman, also indicated that the group was exploring possibilities in the 'private brand' area.

Dayton Hudson, by contrast, saw after-tax profits dip to Dollars 30m in the same three-month period, after a one-off Dollars 3m charge, compared with Dollars 35m profits last time. Sales reached Dollars 4.04bn, compared with Dollars 3.72bn.

'We have been disappointed by our sales results since the middle of February,' commented Mr Kenneth Macke, chairman. 'Consumers are very cautious. Part of that is due to pervasive economic concerns, such as uncertainties about job security, tax increases and the cost of health care reform.'

He added that the problems had been particularly noticeable at Mervyn's, the middle-market department store chain. Operating profits fell in this division due to lower-than-expected sales - in turn, blamed partly on insufficient promotional activity. Gross margins at the department store division, which takes in Marshall Field's, were flat.

However, the Target discount store chain, did record a small increase in operating profits, although gross margins were adversely affected by the continued 'value pricing' strategy and weak seasonal sales.

Dayton Hudson Corp JC Penney Co Inc US United States of America P5311 Department Stores FIN Interim results P5311 The Financial Times London Page 34 416
UK Company News In Brief: Celestion Publication 930519FT Processed by FT 930609

CELESTION Industries has changed its name to Magellan Industries.

Celestion Industries Magellan Industries GB United Kingdom, EC P2311 Men's and Boys' Suits and Coats P2335 Women's, Juniors', and Misses' Dresses P2329 Men's and Boys' Clothing, NEC COMP Company News P2311 P2335 P2329 The Financial Times London Page 31 60
International Bonds: Toyota Motor priced to ensure strong demand Publication 930519FT Processed by FT 930609 By TRACY CORRIGAN

YESTERDAY'S Dollars 250m three-year deal from Toyota Motor Finance, which was arranged by Credit Suisse First Boston, was priced attractively to ensure strong demand, according to dealers.

The pricing of the deal was said to have been influenced by the disappointing performance of General Electric Capital Corporation's Dollars 200m three-year deal, which was launched at 16 basis points over the comparable US Treasury yield last week.

This level was considered too aggressive. Yesterday, the deal traded as wide as 23 basis points, according to several traders.

By comparison, the Toyota Motor Finance deal appeared attractively priced at 33 basis points over the three-year US Treasury yield.

Although Toyota Motor would typically need to be priced at a wider spread than GECC, even though both have triple-A ratings, the 10 basis point differential favoured the Toyota deal, according to traders.

By the end of the day, the Toyota spread had tightened by a basis point or two.

In the floating-rate note market, Credito Italiano launched a Dollars 75m issue, increased to Dollars 100m, using the popular collared structure, incorporating minimum and maximum coupon levels.

The minimum coupon of 6 per cent, the highest seen on a collared floater, encouraged strong retail demand, even though the debt is subordinated.

Two UK building societies, the Nationwide and the National & Provincial, had their AA3-rated long-term debt placed under review for possible downgrade by Moody's yesterday. A downgrade would take both borrower's debt below the AA threshold applied by a number of investment managers, and could increase their funding costs.

Moody's cited concerns about asset quality and core earnings in the current competitive environment.

Mr Alastair Lyons, N&P's finance director, said the building society has no requirement to access the medium-term market this year, and will concentrate on the short-term market.

Mr Richard Lassen, treasury director of Nationwide, which had its debt placed under review lat year, but was not downgraded, said that the society will be a net repayer of debt this year.

Both had their Prime-1 commercial paper ratings confirmed.

Nationwide Building Society National and Provincial Building Society JP Japan, Asia US United States of America GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis MKTS Market data P6162 P9311 The Financial Times London Page 36 402
International Company News: Siam Cement first-quarter profits almost halved Publication 930519FT Processed by FT 930609 By WILLIAM BARNES BANGKOK

SIAM CEMENT, Thailand's leading industrial group, reported a 49 per cent fall in consolidated net profits for the first quarter of 1993 to Bt694.54m (Dollars 27.51m).

Sales of cement, approximately half the group's output, held up well but earnings were hit by fierce price competition, a sharp increase in capacity and higher depreciation and interest charges.

Mr Francis Middlehurst, an analyst with Crosby Research said domestic demand for cement had increased but export markets proved more difficult than expected because of the high transport costs.

First Asia Securities' analyst Colleen Duggan said the problems of the whole group - from building materials to car parts to pulp and paper - mirrored that of the economy.

'Siam Cement is practically everywhere dealing with producers expanding in the midst of oversupply. This is depressing a lot of industrial earnings and almost the entire construction sector,' she said. First Asia recently halved its group net profits forecast for Siam Cement this year to Bt2bn.

Post Publishing, publisher of the Bangkok Post, and just under 15 per cent owned by Mr Rupert Murdoch's News Corp, reported first-quarter net profits of Bt44.831m, down from Bt55.157m. Earnings were cut by the one-off expense of moving into a new headquarters and the launch last summer of a Thai language paper, the Siam Post, which is not expected to generate profits until 1994.

Siam Cement TH Thailand, Asia P3241 Cement, Hydraulic P2711 Newspapers FIN Interim results P3241 P2711 The Financial Times London Page 35 265
International Company News: Results contrast at store chains Publication 930519FT Processed by FT 930609 By NIKKI TAIT NEW YORK

CONTRASTING fortunes in the US retail sector were evident yesterday, when Dayton Hudson and JC Penney, two of the nation's largest store chains, unveiled first-quarter results.

JC Penney, the Texas-based department store group, enjoyed a fairly strong three-month period to May 1. Total sales rose by 4.5 per cent, to Dollars 3.96bn, and with selling costs remaining static and interest charges falling slightly, net profits before extraordinary items and accounting-related items, stood at Dollars 172m, compared with Dollars 136m a year earlier.

JC Penney said its gross margin fell from 34.1 per cent to 33.9 per cent, as a result of its lower pricing strategy. But selling, general and administrative expenses also fell, to 30 per cent of retail sales, against 31.5 per cent a year earlier.

After extraordinary items and the accounting related changes, net profits reached Dollars 206m. Earnings per share, on the same basis, stood at 78 cents, against 52 cents.

The company attributed the first-quarter results to its pricing strategies, and said that it was still looking to strengthen stock management and supplier relationships. Mr William Howell, chairman, also indicated that the group was exploring possibilities in the 'private brand' area.

Dayton Hudson, by contrast, saw after-tax profits dip to Dollars 30m in the same three-month period, after a one-off Dollars 3m charge, compared with Dollars 35m profits last time. Sales reached Dollars 4.04bn, compared with Dollars 3.72bn.

'We have been disappointed by our sales results since the middle of February,' commented Mr Kenneth Macke, chairman. 'Consumers are very cautious. Part of that is due to pervasive economic concerns, such as uncertainties about job security, tax increases and the cost of health care reform.'

He added that the problems had been particularly noticeable at Mervyn's, the middle-market department store chain. Operating profits fell in this division due to lower-than-expected sales - in turn, blamed partly on insufficient promotional activity. Gross margins at the department store division, which takes in Marshall Field's, were flat.

Dayton Hudson JC Penney and Company Inc US United States of America P5311 Department Stores FIN Interim results P5311 The Financial Times London Page 34 371
UK Company News: Drew Scientific placing gives Pounds 25.2m valuation Publication 930519FT Processed by FT 930609 By RICHARD GOURLAY

SHARES IN Drew Scientific, maker of diagnostic medical equipment, have been placed at 105p, valuing the company, which will begin trading next Monday, at Pounds 25.2m.

Close Brothers placed 6.99m shares - 29.1 per cent of the shares now in issue - raising Pounds 3.4m net for the company and Pounds 3.08m for existing shareholders.

Directors and their related interests hold 47.7 per cent of the enlarged capital after the issue.

Drew's main product is the Glycomat, which uses consumable micro-column liquid chromatography packs in the management and control of diabetes, one of the world's most common diseases.

The company says the technology could be adopted to help tests for kidney failure and to screen cancer.

Drew is not making a profits forecast. However, based on current production of about 40 machines a month, and the sales of the high margin consumables packs, some brokers say that at 105p, Drew is on a prospective earnings multiple of about 17.

Drew Scientific Group GB United Kingdom, EC P3841 Surgical and Medical Instruments FIN Share issues CMMT Comment & Analysis P3841 The Financial Times London Page 30 203
UK Company News: Venables ally comes under threat Publication 930519FT Processed by FT 930609 By JANE FULLER

MR ALAN Sugar's attempt to undermine the powerbase of Mr Terry Venables at Tottenham Hotspur, the north London football club which the pair rescued in 1991, has turned to Mr Venables' one supporter on the board.

It is understood that Mr Jonathan Crystal, a barrister who joined the board in August 1991, is to be asked to resign. Mr Sugar, who owns 48 per cent of Tottenham's shares, has made it clear that he resents Mr Crystal's influence over Mr Venables.

Another of Mr Venables' associates, Mr Eddie Ashby, who has acted as a consultant at Tottenham, had his services terminated by the board on Monday. The same meeting discussed Mr Crystal's directorship - in his absence - including the possibility of holding an EGM to consider his removal.

On Friday, Mr Crystal was the only board member to vote against Mr Sugar's move to sack Mr Venables as chief executive. He was later reinstated, by a High Court order, until a hearing on May 25.

Tottenham Hotspur GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters MGMT Management & Marketing P7941 The Financial Times London Page 28 206
Dowty sheds jobs Publication 930519FT Processed by FT 930609

DOWTY AEROSPACE, part of the TI Group, yesterday announced that it was cutting 214 jobs - about a fifth of the workforce - at its landing-gear plant in Staverton near Gloucester. It blamed depressed markets.

Dowty Aerospace GB United Kingdom, EC P3728 Aircraft Parts and Equipment, NEC PEOP Labour P3728 The Financial Times London Page 10 66
Street riots erupt Publication 930519FT Processed by FT 930519

One demonstrator was reported to have been shot, three hospitalised and 20 riot police injured in clashes that broke out in Copenhagen shortly after the Yes result was announced, according to news agencies.

Riot police fired warning shots and tear gas at around 300 anti-treaty anarchists who tore up pavement slabs in the city's Noerrebro district, and hung up a banner saying: 'EC-free zone.'

DK Denmark, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 91
UK Company News: H Young improves to Pounds 532,000 Publication 930519FT Processed by FT 930519

H YOUNG Holdings lifted first half 1992-93 pre-tax profit from Pounds 427,000 to Pounds 532,000.

After a slow start the automotive and electronics distribution group showed the beginning of an improvement in December.

This had continued to date with sales from continuing businesses 2 per cent ahead of budget and 8 per cent up on last year. All divisions were ahead.

Mr John Wilson, chairman, said the increases were mainly attributable to the introduction of new products, although the 'patchy improvement' in the economy was showing in higher sales and orders in the last three months, mainly in electronics.

Overall turnover in the six months ended March 31 1993 came to Pounds 16.3m (Pounds 15.6m) and the operating profit to Pounds 749,000 (Pounds 638,000) with continuing businesses accounting for Pounds 766,000 (Pounds 689,000).

Earnings per share worked through at 2.15p (1.72p) and the interim dividend is held at 2p.

H Young Holdings GB United Kingdom, EC P5065 Electronic Parts and Equipment P5162 Plastic Materials and Basic Shapes P5083 Farm and Garden Machinery FIN Interim results P5065 P5162 P5083 The Financial Times London Page 31 200
UK Company News In Brief: Martin Currie Pacific Trust Publication 930519FT Processed by FT 930519

MARTIN CURRIE Pacific Trust is proposing a 2-for-1 scrip and a warrant issue. They are to take effect on the same day, which means that shareholders will have one warrant for every five ordinary shares.

Martin Currie Pacific Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Share issues P6726 The Financial Times London Page 31 72
UK Company News In Brief: Headland Group Publication 930519FT Processed by FT 930519

HEADLAND Group rights taken up by 97 per cent. Balance placed at 136.6p per share.

Headland Group GB United Kingdom, EC P7372 Prepackaged Software P7374 Data Processing and Preparation FIN Share issues P7372 P7374 The Financial Times London Page 31 53
UK Company News In Brief: EIS Group Publication 930519FT Processed by FT 930519

EIS GROUP rights issue has been taken up as to 91.4 per cent.

EIS Group GB United Kingdom, EC P3494 Valves and Pipe Fittings, NEC P3728 Aircraft Parts and Equipment, NEC FIN Share issues P3494 P3728 The Financial Times London Page 31 55
UK Company News In Brief: Cairn Energy Publication 930519FT Processed by FT 930519

CAIRN ENERGY has declared its offer for Teredo Petroleum unconditional. Acceptances totalled some 57.5 per cent of the capital.

Cairn Energy Teredo Petroleum GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas COMP Mergers & acquisitions P1311 The Financial Times London Page 31 57
UK Company News In Brief: Buckingham International Publication 930519FT Processed by FT 930519

BUCKINGHAM INTERNATIONAL: Acceptances by the fourth closing date in respect of the offer from Purlieus amounted to 71.99m shares (59.7 per cent) and Pounds 17.2m in respect of Buckingham loan stock (52 per cent). The ordinary offer has already been declared unconditional and Purlieus said neither the ordinary nor loan stock offers would be extended.

Buckingham International Purlieus GB United Kingdom, EC P7011 Hotels and Motels P4724 Travel Agencies COMP Mergers & acquisitions P7011 P4724 The Financial Times London Page 31 94
UK Company News In Brief: Brown Shipley Publication 930519FT Processed by FT 930519

BROWN SHIPLEY: GPG has received valid acceptances in respect of 86.3 per cent of the voting capital. The offer remains open.

Brown Shipley Holdings Guinness Peat Group GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service P6011 Federal Reserve Banks COMP Mergers & acquisitions P6411 P6011 The Financial Times London Page 31 66
UK Company News In Brief: Bridport-Gundry Publication 930519FT Processed by FT 930519

BRIDPORT-GUNDRY, the medical, aviation and defence products company, is selling certain assets and trade of J&W Stuart to its management for Pounds 300,000 cash. Further consideration up to Pounds 150,000 relates to debtors and stock. Stuart, which makes and sells fishing trawls and supplies fishing gear, made pre-tax profits of Pounds 50,000 in the year to July 31 1992.

Bridport-Gundry J and W Stuart GB United Kingdom, EC P2299 Textile Goods, NEC P2298 Cordage and Twine COMP Buy-in & Buy-out P2299 P2298 The Financial Times London Page 31 100
UK Company News In Brief: Bondgrowth Publication 930519FT Processed by FT 930519

BONDGROWTH has declared its offer for Bexbuild Developments unconditional after receiving valid acceptances for 99.05 per cent of the voting rights.

Bondgrowth Bexbuild Developments GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries COMP Mergers & acquisitions P6552 The Financial Times London Page 31 57
UK Company News In Brief: Aminex Publication 930519FT Processed by FT 930519

AMINEX has raised Pounds 69,000 from a placing for cash of 1.19m shares at 5.85p per share. They were placed with East West Oil and that company will have an interest of 9.1 per cent in the Aminex.

Aminex East West Oil GB United Kingdom, EC IE Ireland, EC P1311 Crude Petroleum and Natural Gas COMP Shareholding P1311 The Financial Times London Page 31 76
International Company News: Incentive to sell US hydraulics business Publication 930519FT Processed by FT 930520 By CHRISTOPHER BROWN-HUMES STOCKHOLM

INCENTIVE, the Swedish industrial group dominated by the Wallenberg family, is selling its US hydraulics group, Hagglunds Denison Hydraulics, as part of an increased focus on core engineering operations.

The buyer is Denison International, a new company formed specifically for the purchase by a group of Swedish, American and UK investors. Terms have not been disclosed.

Hagglunds Denison Hydraulics is based in Ohio, and has production units in the US, France and Germany.

It has annual sales of around Dollars 100m and 800 employees.

Incentive has sold six companies, with annual revenues of Dollars 400m, in the last 18 months to concentrate on its main engineering businesses.

Incentive Hagglunds Denison Hydraulics Denison International SE Sweden, West Europe US United States of America P6719 Holding Companies, NEC P3531 Construction Machinery COMP Disposals COMP Mergers & acquisitions P6719 P3531 The Financial Times International Page 22 162
International Company News: Winterthur to limit rights Publication 930519FT Processed by FT 930520 By AGENCIES

WINTERTHUR, Switzerland's third largest insurance company, yesterday reported reduced profits for 1992 and announced plans to limit shareholder voting rights, Agencies report.

The company said it would limit all shareholders or groupings to a maximum 5 per cent of total voting rights. It said the restriction would be laid down under a revision of its statutes. Winterthur could not say what limit had previously been set on voting rights.

Net profits for last year fell 6 per cent to SFr247m (Dollars 168m), compared to 1991. The dividend is being held at SFr70 a share. Gross premiums improved by 6 per cent, rising to SFr15.5bn, against SFr14.6bn.

Last November the company declared itself to be cautiously optimistic for 1992.

Winterthur CH Switzerland, West Europe P6331 Fire, Marine, and Casualty Insurance FIN Annual report P6331 The Financial Times International Page 22 154
Bosnia plan championed by Kozyrev Publication 930519FT Processed by FT 930520 By LAURA SILBER BELGRADE

MR Andrei Kozyrev, Russian foreign minister, yesterday met Serbian, Croatian and Bosnian leaders in an attempt to promote Moscow's proposal for a step-by-step implementation of the Vance-Owen peace plan for Bosnia-Hercegovina.

In an apparent reference to US criticism and Washington's refusal to attend a proposed UN Security Council session, Mr Kozyrev went out of his way to defend the plan to divide Bosnia into 10 provinces along ethnic lines.

'A better alternative to the Vance-Owen plan simply doesn't exist. . . it would be a continuation of bloodshed,' he said.

On arriving in Belgrade for talks with Serbian President Slobodan Milosevic and his Yugoslav and Montenegrin counterparts, Mr Kozyrev described their support for the plan as more important than its rejection by Bosnian Serbs in their weekend referendum.

The foreign minister tried to play down a rift with the US over the plan, saying that he and Mr Warren Christopher, US secretary of state, were in close contact and that it was no more than 'a difference in timing' over when the Security Council should meet to discuss the latest Russian proposals.

Earlier yesterday Mr Kozyrev met Mr Alija Izetbegovic, the Moslem president of Bosnia, and Mr Franjo Tudjman, the Croatian president, in Split on the Adriatic coast. Talks centred on ways to broker a lasting ceasefire between the Croats and Moslems, formerly allies, in Mostar, south-western Bosnia.

The Russian delegation said it had gained the approval of Mr Tudjman for the deployment of international monitors along the frontier between Croatia and Bosnia.

Mr Kozyrev said he was unsure when Mr Milosevic would decide on deployment of monitors on the Serbian-Bosnian border. The Serbian president had previously insisted that this depended on deployment on Croatia's borders with Bosnia.

Lord Owen and Mr Thorvald Stoltenberg, the international mediators, also held talks with the Croatian and Bosnian presidents in Split in an attempt to win their commitment to a lasting ceasefire between Bosnian Croats and Moslems and a reaffirmation of their endorsement of the peace plan. As the rival presidents traded accusations about who was responsible for the fighting, Lord Owen said: 'I am sick and tired of agreements being signed like confetti.'

He said the former Yugoslav republic could become a Lebanon in Europe and that fighting would spread beyond its frontiers if Bosnia crumbled into separate ethnic state-lets.

'If Croats and Moslems cannot live together, side by side, there will not be a Bosnia-Hercegovina. There are enough obstacles from the Serb side already,' Lord Owen said.

'There is no way I can imagine the Moslem population will allow the partition of the country. They will fight. It will be like Lebanon.

'They will go on fighting and fighting and fighting and that contagion will spread to Serbia and Croatia.'

BA Bosnia-Hercegovina, East Europe RU Russia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times International Page 3 494
Liberals shake up Austrian politics Publication 930519FT Processed by FT 930520 By ERIC FREY VIENNA

THE surprise showing by a new liberal party in Austria's regional elections has altered the political landscape. The Liberal Forum, which split from the right-wing Freedom Party (FPOe) early this year, gained 5.1 per cent of the vote and three seats in the province of Lower Austria in its first try at the polls.

The result reinforced the erosion of support for the two largest parties, the conservative People's Party (OeVP) and the Social Democratic Party (SPOe). The OeVP won 44.1 per cent of the vote, down 3.4 percentage points, which cost it the absolute majority in the regional parliament it had held for 48 years. The SPOe, at 34 per cent, was down by a similar margin.

The result was a personal triumph for Ms Heide Schmidt, founder of the Liberal Forum, who, with four other members of parliament, left the FPOe in protest against the rightward tilt engineered by its populist chairman, Mr Jorg Haider.

The FPOe also gained in Lower Austria but because of the competition its 12 per cent share fell well short of recent results in other regions. Operating with little money, no grass-roots organisation and with few prominent names other than Ms Schmidt, the Liberal Forum also surpassed the more established Greens, who fell short of the 4 per cent needed to gain a seat.

The fledgling party is now in a strong position to benefit from growing disillusionment with the SPOe and the OeVP, which have dominated Austrian politics since the second world war and are currently governing in a grand coalition.

The appearance of the party has also added to the fragmentation of political life, making the country harder to govern than in the stable two-party system of the past. Ms Schmidt has not presented a detailed party programme, but in public statements she has supported membership of the European Community and more radical free-market policies.

Ever since Ms Schmidt left the FPOe following its controversial anti-foreigner drive, Mr Haider's popularity has declined. He has become increasingly isolated. The Liberal International has effectively expelled the FPOe and is now poised to accept the Liberal Forum as a member.

AT Austria, West Europe P8651 Political Organizations NEWS General News P8651 The Financial Times International Page 2 387
World News In Brief: Saarstahl files for bankruptcy Publication 930519FT Processed by FT 930520

Saarstahl, the lossmaking German steel group controlled by Usinor-Sacilor of France, filed for bankruptcy after deciding it could no longer sustain continuing heavy losses running at DM30m (Dollars 18.6m) a month. The company employs 7,200.

Saarstahl DE Germany, EC P3313 Electrometallurgical Products COMP Company News P3313 The Financial Times International Page 1 66
World Commodities Prices: Jute and cotton Publication 930519FT Processed by FT 930519

JUTE

June/July c and f Dundee BTC Dollars 330, BWC N/A, BTD Dollars 305, BWD Dollars 320; c and f Antwerp BTC Dollars 315, BWC Dollars 325, BTD Dollars 295, BWD Dollars 295.

COTTON

Liverpool- Spot and shipment sales amounted to 248 tonnes for the week ended May 14, against 220 tonnes in the previous week. Improved demand brought moderate purchases, mainly in west African descriptions. Pakistani and CIS growths made some headway.

XA World P0131 Cotton P0139 Field Crops Ex Cash Grains, NEC COSTS Commodity prices P0131 P0139 The Financial Times London Page 42 106
UK Company News: FT Ordinary Index Publication 930519FT Processed by FT 930519

ON June 1 1993, when the demerger of ICI and Zeneca comes into effect, ICI wil remain a constituent of the Financial Times Ordinary Share Index (the '30 Share').

FT Fixed Interest Index

On May 18 1993 there will be a number of constituent changes to the FT Fixed Interest:

GEC 7 3/4 % Uns Loan Stk 1988/93, Unilever 5 1/2 % Uns Loan Stk 1991/96 and BAT 5 % Cum Pref will be replaced by Allied Lyons 9 3/4 % Deb Stk 2019, Forte 10 % Deb Stk 2018 and General Accident 8 7/8 % Cum Pref shares.

GB United Kingdom, EC P6289 Security and Commodity Services, NEC TECH Services & Services use P6289 The Financial Times London Page 29 132
BSN warning hits food shares Publication 930519FT Processed by FT 930519 By GUY DE JONQUIERES, Consumer Industries Editor

SHARE prices of leading European food companies fell yesterday after Mr Antoine Riboud, chairman of BSN, France's largest food manufacturer, said it was ready to cut prices to defend market share.

He said the company was operating 'in an unprecedented economic crisis', while retailers were demanding larger discounts and providing stiffer competition with cheap private-label ranges.

Mr Riboud's remarks added to investors' recent fears that international recession and the growing power of food retailers would intensify price competition.

His comments follow cautious forecasts by other large food and consumer groups in the US and Europe, and what were widely considered disappointing first quarter results from Unilever, the Anglo-Dutch manufacturer.

Many branded international manufacturers of consumer products have been jolted by last month's decision by Philip Morris to cut the US price of Marlboro cigarettes.

Shares in BSN, which on Monday reported a 5.7 per cent drop in first-quarter sales, fell FFr11 to close at FFr863 yesterday. In London, Mr Riboud's comments added to anxiety about the impact of sterling's recent recovery on food groups with a large international exposure.

Cadbury Schweppes fell 9p to 447p and United Biscuits by 9p to 412p, while Unilever fell 22p to 1036p in London and Fl 1.80 to Fl 193.20 in Amsterdam. In Zurich, however, Nestle registered shares rose SFr15 to SFr1130.

Mr Riboud said BSN aimed to offset the impact on profit margins of any price reductions by cutting costs. The company might also have to weed out weaker brands which were squeezed between market leaders and private label products.

Analysts believe BSN is most vulnerable to price competition in mineral water, of which it is the world's second largest producer.

BSN FR France, EC P2099 Food Preparations, NEC P5411 Grocery Stores CMMT Comment & Analysis COSTS Product costs & Product prices P2099 P5411 The Financial Times London Page 27 325
London Stock Exchange: New highs and lows for 1993 Publication 930519FT Processed by FT 930519

NEW HIGHS (157).

AMERICANS (1) Allegheny & Wstn., CANADIANS (1) Gulf Can., BANKS (1) Mitsui T & B, BREWERS (1) Wetherspoon, BLDG MATLS (7) BMSS, Blockleys, Gibbs Dandy, Lilleshall, RMC, Sharpe & Fisher, Sheffield Instlns., BUSINESS SERVS (3) Dart, Page, Securiguard, CONGLOMERATES (4) AGA, Trafalgar Hse., Do A, Wassall, CONTG & CONSTRCN (12) Bryant, CALA, Countryside, Gleeson, McCarthy & Stone, Maunders, Mowlem, Persimmon, Prowting, Taylor Woodrow, Ward Hldgs., Wescol, ELECTRICALS (4) BICC 10 3/4 pc Cv '20, Emess 6 1/4 pc Pf., Ericsson, Oxford Instrs., ELECTRONICS (5) Acal, Borland, Diploma, Logica, Lynx, ENG GEN (7) Clyde Blowers, Hall, Hopkinsons, Syltone, VSEL, Vosper, Wilkes, FOOD MANUF (2) Acatos & Htchsn., Berisford, FOOD RETAILING (1) Greggs, HEALTH & HSEHOLD (2) Kynoch, Regina, INSCE COMPOSITE (1) Domestic & Gen., INV TRUSTS (29) Aberforth Smllr. Co's, Aberforth Split Level Cap., Anglo & O'seas., Brazilian Wts., Candover, Drayton Asia Wts., Elect. & Gen., Fidelity Japan OTC Wts., General Cons. Cap., Govett Oriental, JF Pacific Wrt., Japan OTC Wts., Oriental Smllr. Co's, M & G Recovery Pckg. Units, Do Zero Pf., M & G 2nd Cap., Multitrust, Murray Enterprise, Nth. Amer. Gas, Pacific Assets, RIT Cap., Do 2 1/2 pc Cv. '00, River & Merc., Smllr. Co., Scot. Asian, Sphere Zero Pf., St David's Cap., Throgmorton, Turkey Tst. Wts., MEDIA (10) Abbott Mead V, Anglia TV, Border TV, Central ITV, Headline, Pearson, Sterling Publg., Telegraph, Yorks.- Tyne Tees TV, Do Wts., MERCHANT BANKS (1) Schroders N/V, MTL & MTL FORMING (2) Brit. Steel, Cooper (Fr), MISC (4) Bluebird Toys, Gt. Southern, Holders Tech., Portmeirion Potts., MOTORS (3) Gowrings, Henlys, Perry, OIL & GAS (2) Aminex, Hardy Oil, OTHER FINCL (6) BWD, East German Inv., King Shaxson, Provident Fincl., Smith New Court Cv. Pf., Swire Pacific, PACKG, PAPER & PRINTG (5) Brit. Polythene 7 1/2 pc Pf., Elswick, Ferguson, Jarvis Porter, NMC, PROP (15) Bradford, Brit. Land, Do. Cap. 8 5/8 pc Pf., Cardiff, Chesterfield, Gt. Portland, Land Sec., MEPC, Molyneux Ests., Town Centre, Whinney Mackay-Lewis, Mountview Ests., Town Centre, Wates City of Lon., Wood (JD), STORES (5) Ashley (L), French Cnctn., Marks & Spencer, Next, Partridge, TEXTS (8) Albion, Dewhirst, Gabicci, Ingham, Leeds, Readicut, Rexmore, Stirling, TRANSPORT (2) Brit. Airways 9 3/4 pc Cv., Sea Cntrs., SOUTH AFRICANS (1) Gold Fields, MINES (12).

NEW LOWS (28).

BRITISH FUNDS (3) Treas. 12 1/2 pc '93, Exch. 13 1/2 pc '94, Exch. 15pc '97, BREWERS (1) Greenalls, BLDG MATLS (1) Chieftain, BUSINESS SERVS (2) Holmes Prctn., Rentokil, CHEMS (1) Allied Colloids, CONTG & CONSTRCN (1) Donelon Tyson, ELECTRONICS (2) Linx, Molynx, ENG GEN (1) APV, FOOD MANUF (4) BSN, Booker, Unilever, Yorks., FOOD RETAILING (2) Appleby Westward, Argyll, HEALTH & HSEHOLD (6) Bespak, Brit. Bio-Tech., London Intl., Reckitt & Colman, Do 9 1/2 pc Cv. Bd., Smith & Nephew, INV TRUSTS (1) Henderson Highland Wts., MISC (1) Pentland, PROP (1) Micklegate, MINES (1) MIM.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 52 509
London Stock Exchange: M and S easier Publication 930519FT Processed by FT 930519 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Up-market retailer Marks and Spencer saw its shares roller coaster through a 20-point turnround as it reported full year results.

The figures came in at the top end of expectations and the shares surged on the news. However, a seemingly downbeat analysts meeting, followed by further inspection of the results, saw the stock marked back sharply. It finished 9 1/2 down at 345 1/2 p after turnover of 12m. Kleinwort Benson was one of a number of brokers said to have moved the stock off its buy list to a hold.

Stores specialists said that while the figures confirmed M and S's premium market rating, the prospective earnings growth was around half the average forecast for the FT-Actuaries All-Share Index in the next year. 'Investors are looking for more dynamic recovery stocks than M and S,' was the comment from one stores analyst.

One of the issues to unsettle the market and compound the uncertainties over earnings growth was the size of the company's proposed wage award. Rumours late in the day that M and S might be considering a fund-raising exercise to tie into low interest rates were dismissed by analysts.

Marks and Spencer GB United Kingdom, EC P5311 Department Stores P6231 Security and Commodity Exchanges CMMT Comment & Analysis P5311 P6231 The Financial Times London Page 52 242
London Stock Exchange: Blue chip caution Publication 930519FT Processed by FT 930519 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

International conglomerate BAT Industries and Hanson failed to inspire the market with their respective trading statements and results.

BAT, which has suffered heavily over US cigarette price war worries, was particularly hit as a cautious annual statement highlighted the sluggish world economy and the continuing US concerns. The shares weakened 24 to 844p.

Hanson's half-year profits of Pounds 507m were at the top end of forecasts but the company said most of its markets remained gripped by recession and it would see little, if any, boost in 1993 from the tentative evidence of an upturn. Investors saw a chance to take profits and sold the shares down 5 1/4 to 237 3/4 p on hefty 10m turnover.

Mr Paul Beaufrere of agency broker James Capel favours Hanson more than BAT but argues that both companies were now offering a solid yield above 6 per cent and should be bought by long term investors.

BAT Industries Hanson GB United Kingdom, EC P6719 Holding Companies, NEC P2111 Cigarettes P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6719 P2111 P6231 The Financial Times London Page 52 206
London Stock Exchange: Food issues weaken Publication 930519FT Processed by FT 930519 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

Reports of aggressive views from the chairman of French food manufacturer BSN weakened related stocks in the London market.

Mr Antoine Riboud said BSN was being pressured by retailers to lower prices. While resisting this, he said the group would respond aggressively on price to protect its market share. Food specialists also took fright at comments on the downturn in trading in Europe as recession took its toll.

United Biscuits fell 9 to 412p. BSN is the top biscuit producer in Europe. Unilever, which competes with BSN on some frozen products, lost 22 to 1036p. Cadbury Schweppes relinquished 9 to 447p.

United Biscuits (Holdings) Unilever Northern Foods Cadbury Schweppes GB United Kingdom, EC P6231 Security and Commodity Exchanges P2099 Food Preparations, NEC MKTS Market data P6231 P2099 The Financial Times London Page 52 155
London Stock Exchange: Positive stance on generators Publication 930519FT Processed by FT 930519 By CHRISTOPHER PRICE, STEVE THOMPSON, PETER JOHN and JOEL KIBAZO

A CHANGE of stance by one of the market's leading securities houses saw the two English power generators substantially outperform the utilities areas and the wider market.

SG Warburg Securities was said by dealers to have shifted its recommendation on National Power and PowerGen from 'add' to 'buy'. Warburg was said to have emphasised the two companies' 'extremely encouraging' dividend growth prospects, and to have told its clients that it was not unduly concerned by the supposed regulatory threat to the two stocks.

National Power raced up to end 9 higher at 333p on turnover of 2.6m shares, while PowerGen settled the same amount to the good at 343p after trade of 3.4m.

Along with other brokers, Warburg expects the generators to achieve dividend increases of 15 per cent or more over the next few years. The regional electricity companies are scheduled to report preliminary results starting next month and are expected to post dividend rises of up to 15 per cent.

Scottish Power, expected to announce a 10 per cent increase in the dividend total when it announces its full year results tomorrow, moved up 4 to 311p.

The strength of the generators' shares powered the electricity sub-sector of the FT- Actuaries Indices to a 1.1 per cent rise, compared with a 0.3 per cent gain in the water sub-sector and a 0.4 per cent decline in the FT-SE 100 Index.

National Power PowerGen Scottish Power GB United Kingdom, EC P4911 Electric Services P6231 Security and Commodity Exchanges CMMT Comment & Analysis P4911 P6231 The Financial Times London Page 52 284
London Stock Exchange: Equity Futures and Options Trading Publication 930519FT Processed by FT 930519 By JOEL KIBAZO

A BOUT of nerves concerning interest rates in both the US and Germany, worries over the outcome of yesterday's referendum in Denmark on the Maastricht treaty, and poor economic UK data combined to bring a retreat in stock index futures, writes Joel Kibazo.

The June contract on the FT-SE 100 opened at 2,864, around the level of the previous night's close, but drifted down on concern about the progress of polling in Denmark and on whether the Bundesbank will reduce interest rates today.

The release at 11.30am of UK industrial output figures showing a 1.3 per cent fall served to increase the downward pressure on the contract.

Worries about US interest rates and the poor performance of Wall Street brought a further decline and June fell to the day's low of 2,854, although bargain hunting saw it come off the bottom to close at 2,858, around 7 points ahead of its fair value premium to cash. Turnover remained light, totalling 7,527 lots.

In traded options, volume improved to reach 29,395 contracts, of which 7,163 were dealt in the FT-SE 100 option and 1,995 in the Euro FT-SE 100 option. Hanson, which reported figures yesterday, was the busiest stock option at 4,055 lots. It was followed by Marks and Spencer, which also reported figures, at 2,038. Glaxo, BT and BTR were other active stock options.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 52 259
London Stock Exchange: US worries hit London share prices Publication 930519FT Processed by FT 930519 By TERRY BYLAND, UK Stock Market Editor

A FRISSON of nervousness over US interest rates ran through the London stock market yesterday afternoon, helping to undermine confidence which had been boosted at first by favourable reports on retail sales from the Confederation of British Industry.

An early gain of 11 points on the Footsie was cut back after official statistics for March showed a fall of 0.3 per cent in domestic manufacturing output and of 1.3 per cent in industrial production. This cast a shadow over the progress of the economic recovery implied by the CBI report.

Equities had also been helped at the opening of trading by favourable corporate trading reports. Results from British Airways were overshadowed by the expected rights issue which, at Pounds 442m, was a shade smaller than the market had been expecting. Profits and dividend from Marks and Spencer, the premium high street retailer, were well received and, although the shares turned down later, traders rejected market gossip of a possible rights issue.

The UK economic data unsettled equities, which were soon given further downward impetus from the stock index futures, where the June Footsie contract dipped to a discount to fair value for much of the session.

With the institutions clearly taking a reserved attitude - retail business only just cleared the Pounds 1bn mark on Monday - shares extended their losses.

However, the more significant blow to the market came when London traders caught the hint of New York worries that the revived concern over inflation may prompt the Federal Reserve to raise interest rates. With hopes of a rate cut at today's Bundesbank meeting also fading fast, the UK market fell more than 12 points to a day's low of 2,845.9. London's unhappiness was pressed home by an early decline of 16 points in New York's Dow Industrial Average.

At the close the FT-SE 100 Index, sustained by a rally in stock index futures, was down 10.8 on the day at 2,847.3. Although Seaq volume increased to 633.4m shares from the previous day's 533.8m, traders stressed that genuine customer business remained relatively poor.

Continued activity among the second line issues brought a gain of 5.2 to 3,151.2 in the FT-SE Mid 250 Index, which earlier mounted another challenge to its previous peak of 3,154.7. Non-Footsie trades made up only about 56 per cent of the day's total, however, reflecting the concentration on a heavy list of blue chip profits announcements.

London strategists put the best face possible on yesterday's market performance, but admitted that uncertainty over the pace of the economic recovery in the UK has been joined by worries over the outlook in continental Europe and in the US.

Warnings of competitive strains in the food industry from BSN, of France, unsettled Unilever and some other food industry issues - although these factors were counterbalanced by renewed hints of impending acquisition moves.

Nor did confirmation of British Airways' funding move, and firm rejection of any such plans by Allied-Lyons, remove the market's fears that it could be hit by further rights issues on top of the BT III sale and a heavy funding programme in the gilt-edged market.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 52 560
World Stock Markets (America): Dow shows resilience to interest rate fears Publication 930519FT Processed by FT 930519 By PATRICK HARVERSON NEW YORK

Wall Street

ANOTHER rise in bond yields, combined with worries about inflation and interest rate prospects, pushed the Dow Jones Industrial Average blue chip indicator down initially yesterday, but by the close most of the fall had been recovered, writes Patrick Harverson in New York.

The Dow Average was finally just 5.54 easier at 3,444.39 after a day's low of 3,422.52. The Standard & Poor's 500 was 0.05 off at 440.32, while the Nasdaq composite gained 2.82 at 680.78. Trading volume on the New York SE was 264.3m shares.

The dominant concern of the markets remained inflation and interest rates. Since last week's poor consumer and producer prices data, long-term bond yields have risen from 6.8 per cent to almost 7 per cent.

This rise in yields has unnerved equity investors, who fear that higher interest rates may be around the corner, primarily because the Federal Reserve may react to rising inflation by tightening monetary policy. Higher rates would hinder corporate profitability, and make equities considerably less attractive relative to other financial assets.

Although this concern kept many share prices in check yesterday, secondary stocks traded on the electronic Nasdaq market managed to post some solid gains.

The day's only economic news - a 6.7 per cent increase in April housing starts - was in line with expectations and had little effect on the market.

A bright feature on the NYSE was Hewlett-Packard, which jumped Dollars 5 to Dollars 84 5/8 in volume of 3.3m shares after announcing stronger than expected net income of Dollars 1.38 a share for the fiscal second quarter. At the same stage a year earlier the company earned Dollars 1.27 a share.

The news from Hewlett-Packard buoyed other computer stocks. Compaq advanced Dollars 2 to Dollars 55 3/8 , IBM Dollars 1 3/8 to Dollars 49, Motorola Dollars 2 1/8 to Dollars 78 and Digital Equipment Dollars 1 to Dollars 47 1/4 .

The main indices would have been higher but for sizeable losses in selected big stocks, including Ford, down Dollars 1 3/8 at Dollars 53 1/2 , and Caterpillar, Dollars 1 cheaper at Dollars 68.

Home Depot was another stock lifted by good earnings news. The retailer rose Dollars 1 1/2 to Dollars 44 1/8 in volume of 2.6m shares on reporting first-quarter profits of 24 cents a share, against the 18 cents earned a year ago.

Cummins Engine dropped Dollars 5 3/8 to Dollars 86 3/4 after brokerage house Prudential Securities lowered its rating on the stock from 'buy' to 'hold' following the recent release of disappointing truck orders figures.

Canada

TORONTO advanced in heavy trading, boosted by a renewed surge in gold shares. The TSE 300 index ended 34.3 stronger at 3,826.8 and rises outpaced declines by 372 to 318. Volume reached 75.6m shares and the trading value was CDollars 716.3m.

Ten of the 14 stock group indices ended higher, led by the golds sector, which jumped 5.75 per cent.

Golds had retreated somewhat over the previous two sessions, following a six-day winning streak fuelled by sharp increases in the price of the precious metal. The New York spot gold price yesterday climbed USDollars 7.90 an ounce on a slide in the US bond market.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 49 577
World Stock Markets (Europe): Zurich registers second consecutive record Publication 930519FT Processed by FT 930519 By Our Markets Staff

THE Danish Maastricht vote was given credit yesterday for buoyancy in a number of bourses which, on examination, seemed to be climbing for reasons of their own, writes Our Markets Staff.

ZURICH reported institutional and options-related buying which took the SMI index up 21.7 to a second consecutive record close of 2,226.7.

Foreign investors were also active buyers on the view that the market is currently undervalued. The firmer dollar encouraged demand for chemicals issues while lower interest rates helped financials.

Roche certificates were the most activley traded issue, gaining SFr40 to SFr4,630. Sandoz registered shares found renewed demand adding SFr70 to SFr3,070.

Among financials, UBS bearers rose SFr14 to SFr967 while Zurich Insurance, expected to benefit strongly from a US economic pick-up, added SFr40 to SFr2,290. Winterthur Insurance registered shares rose SFr20 to SFr3,260 as it announced plans to convert non-voting participation certificates into registered shares and to split its resistered and bearer shares.

MADRID returned to the upgrade, the general index closing 3.93, or 1.6 per cent higher at 256.89. Turnover rose from Pta20.2bn to an estimated Pta30bn.

Interest rate sensitive stocks did well, BBV rising Pta75 to Pta3,145 among rising banks and Iberdrola by Pta23 to Pta748 in a relatively more buoyant utilities sector.

Among builders and electricals, Huarte, the subject of takeover speculation, put on Pta85 at Pta557 with more than 1/2 m shares traded. Cristaleria gained 5.1 per cent, and Agroman 3.5 per cent.

PARIS regained some ground in technical trading after recent weakness, but interest remained subdued ahead of the Ascension day holiday. The CAC-40 index improved 10.68 to 1,846.40 after a day's high of 1,861. Turnover was strong at FFr3.8bn.

BSN went against the rising trend on plans to cut prices in an effort to retain market share for its products in Europe, where it ranks third behind Nestle and Unilever. Some analysts commented that the group, with relatively negligible dollar exposure, was finding it very difficult to squeeze volume growth out of any of its divisions. The shares finished FFr11 weaker at FFr863.

Elf Sanofi roseFFr41 or 4.6 per cent to FFr935 as shareholders finally approved the acquisition of YSL, thereby creating the world's third largest beauty products group.

MILAN staged a broad advance as the strength of the lira again prompted hopes that the Bank of Italy would act soon to cut interest rates. The Comit index rose 4.64 to 544.19.

The market began weak but picked up later. Fiat shed L224 to fix at L6,327 before rebounding to L6,644 after hours with investors expecting the board to cut the dividend at the end of the month.

Foreign demand help Credito Italiano and BCI to extend Monday's gains. Mr Romano Prodi, appointed chairman of Iri at the weekend, is expected to expedite privatisations. Credito added L166 or 5.6 per cent to L3,093 while BCI put on L219 or 4.2 per cent L5,427.

Among telecoms, which are seeing strong foreign demand, Sip rose L19 to fix at L1,956 before L1,974 after hours while Stet, its parent company, dipped L39 to L2,960 but picked up to L3,060 on the kerb.

FRANKFURT saw a continued downward drift in bond prices as the repo rate stayed at 7.60 per cent and the DAX index ended flat, closing 0.60 higher at 1,628.48 after an opening rally to 1,636.09.

Turnover recovered from DM4.7bn to DM5.7bn. Company news included a 10 per cent drop in first quarter sales at the tyremaker, Continental, but the company said that it would try to pay a dividend in 1993 and the shares rose DM2.80 to DM198.80.

A drop in profits at Degussa, the chemicals, metals and pharmaceuticals group, left it DM4.50 lower at DM329.50. Meanwhile, the threat of a dividend cut at Altana, the chemicals and pharmaceuticals group, left the shares DM5 lower at DM535.

AMSTERDAM saw falls in Unilever, off Fl 1.80 at Fl 193.20, which reflected the BSN news and Pakhoed, down Fl 1.40 to Fl 36.60, after it forecast a sharp fall in first half 1993 profits. The CBS Tendency index closed 0.2 lower at 106.3.

STOCKHOLM was active in Volvo, which lost SKr8 to SKr400 following bigger than expected first quarter losses. However, a strong performance from Ericsson, up SKr7 to SKr313, supported the overall market as the Affarsvarlden general index ended unchanged at 1,083.2. Turnover rose to SKr1.4bn from Monday's SKr1.3bn.

HELSINKI rose by 3 per cent on hopes that the threatened strike in the country's export sector would not start today. The HEX index jumped 34.00 to 1,184.7 after a 1.2 per cent fall on Monday.

WARSAW resumed its climb after a drop on Monday, the WIG index soaring by 237.2, or 8.2 per cent to 2,748.8 in turnover of 261.7bn zloty.

ISTANBUL's slide continued with a further loss of 2.5 per cent in the 75-share index, down 205.25 at 8,024.66.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ May 18 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1154.22 1154.45 1154.13 1154.30 FT-SE Eurotrack 200 1222.87 1222.94 1221.14 1219.86 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1154.13 1153.36 1152.98 1152.98 FT-SE Eurotrack 200 1218.64 1218.11 1219.03 1217.75 ------------------------------------------------------------------------ May 17 May 14 May 13 May 12 May 11 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1146.07 1148.21 1155.16 1148.06 1140.44 FT-SE Eurotrack 200 1214.06 1212.97 1219.59 1215.04 1206.03 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1154.88; 200 - 1223.73 Low/day: 100 - 1152.77 200 - 1217.20. ------------------------------------------------------------------------

CH Switzerland, West Europe ES Spain, EC FR France, EC IT Italy, EC DE Germany, EC NL Netherlands, EC SE Sweden, West Europe FI Finland, West Europe PL Poland, East Europe TR Turkey, Middle East P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 49 977
World Stock Markets (Asia Pacific): Tokyo dips 1.6 per cent on futures-led activity Publication 930519FT Processed by FT 930519 By WAYNE APONTE TOKYO

PERSISTENT futures sales sparked unwinding of arbitrage positions in the cash market, leaving equities 1.6 per cent lower in light trading, writes Wayne Aponte in Tokyo.

The Nikkei average was down 336.12 at 20,229.39, after moving between a low of 20,155.10 and high of 20,502.46. The Topix index of all first section stocks lost 21.97 at 1,589.28, but in London the ISE/Nikkei 50 index was 0.35 firmer at 1,223.69.

First section volume came to 370m shares, up from Monday's 328m, while declines overwhelmed advances by 907 to 163, with 106 issues unchanged.

Brokers said that, from the outset of trading, no major buyers were present in the market. Without buy orders from government-managed public funds, known to serve normally as a cushion for the Nikkei average on dips, equity prices might have declined further, brokers added.

Increased futures activity is expected as investors attempt to protect themselves against further Nikkei declines in a market which provides scant incentives for inward investment.

However, said brokers, many institutional investors, including life insurance companies, brokerages and Japanese corporations, were likely to enter the stock market more aggressively if the Nikkei trades below 20,000.

An analyst at a UK stockbroker commented that investors are reacting favourably to any positive developments in sectors or individual issues.

In spite of the day's declines, shipbuilding shares rose on a report about a major conference among Asian countries concerning tanker safety, which implied that new ships might be bought in the future. Equally, news of an increase in the percentage of dollar denominated contracts, which will help domestic operators in international bids, aided the sector.

Mitsui Engineering and Shipbuilding rose Y4 to Y452, Hitachi Zosen Y10 to Y583 and Sasebo Heavy Y10 to Y558.

Profit-taking cut the gains of Nippon Telegraph and Telephone, which relinquished Y22,000 to Y975,000. The weakness of that telecommunication group spread to electrical wire and cable issues. Sumitomo Electric Industries declined Y50 to Y1,130, Fujikura Y23 to Y997 and Furukawa Electric Y24 to Y687.

Consumer electrical issues lost ground, Pioneer Electronic weakening Y160 to Y2,400, Sony Y70 to Y4,650 and TDK Y60 to Y3,840.

The brokerage sector declined by about 2 per cent, Nomura slipping Y50 to Y2,110, Daiwa Y50 to Y1,260 and Nikko Y20 to Y1,040.

In Osaka, the OSE average ended 275.76 lower at 22,552.98 in volume of 17m shares.

Roundup

THERE WERE fresh record highs in Hong Kong and Singapore. New Zealand was closed owing to technical problems.

HONG KONG hit its new peak on optimism over Sino-British talks; negotiators from both sides are due to meet in Beijing on Friday for a further round of consultations. The Hang Seng index closed 25.18 higher at 7,149.30. Turnover was also a record - HKDollars 8.1bn against Monday's HKDollars 7.7bn.

Performance of blue chips varied, brokers said. Cheung Kong was targeted by profit-takers and shed 40 cents to HKDollars 27.20. The most active stock, Hutchison Whampoa, dipped 10 cents to HKDollars 19.90.

Market laggards such as China Light benefited from bargain hunting and the stock improved 50 cents to HKDollars 39.

SINGAPORE rebounded strongly from Monday's profit-taking as the Straits Times Industrial index peaked 31.74 higher at 1,878.01 in volume of 365.6m shares.

Brokers said demand for speculative Malaysian and second and third line Singapore stocks was strong.

TAIWAN recovered from Monday's losses, with strong performances noted from Formosa Plastics, up TDollars 1.10 at TDollars 44.20, and China Steel, which appreciated 80 cents to TDollars 21.90. The weighted index improved 35.28 to 4,495.39. Turnover amounted to TDollars 23bn, against a previous TDollars 23.9bn.

MANILA lost ground after opening higher with the aid of firm mining issues. The composite index dipped 19.90 to 1,596.14 in turnover down to 398m pesos from 555m.

Philippine Long Distance Telephone receded 20 pesos to 970 pesos.

AUSTRALIA fell at the close as investors reacted to weakness in the Australian dollar against the US currency. The All Ordinaries index shed 9.0 to 1,677.9 in turnover of ADollars 307.3m.

In the banking sector, ANZ was steady at ADollars 3.55 after selling its 7 per cent stake in Challenge Bank for ADollars 2.48 a share.

BANGKOK was lower following heavy losses among building materials companies. The SET index fell 8.62 to 872.96 in moderate turnover of Bt3.1bn.

JP Japan, Asia HK Hong Kong, Asia SG Singapore, Asia TW Taiwan, Asia PH Philippines, Asia AU Australia TH Thailand, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 49 764
World Stock Markets: Gold bugs throw caution to the winds - North American expression of the gold price phenomenon Publication 930519FT Processed by FT 930519 By BERNARD SIMON

Before the latest spurt in the gold price, many North American analysts were urging investors in gold mining shares to be cautious. Handsome profits could already be taken, and the value of most companies' ore reserves less production costs did not appear to justify the heady level of share prices.

That advice has gone unheeded in the past week. The surge in the gold price to almost Dollars 370 an ounce has uncorked yet another buying binge in the stock market.

The climb in North American gold shares has far outstripped the bullion price. The Toronto Stock Exchange's gold and silver index spurted ahead by 11.5 per cent last week. At its closing level of 8,234 on Monday, the index had risen by 57 per cent so far this year, and by 67 per cent since the start of 1992.

The most popular shares have been those with the highest sensitivity to changes in the bullion price. Echo Bay Mines, whose earnings stand to climb by 50 per cent for each 10 per cent rise in the gold price, jumped CDollars 4.25 last week to CDollars 14.25 in exceptionally heavy trading. Homestake Mining, which has only a slightly lower leverage, has forged ahead in less than a year from USDollars 9.63 to USDollars 17.88 on the New York Stock Exchange.

Gold bugs have latched on to a spate of positive signals to justify their bullishness. Mr George Soros, the heavyweight New York investment fund manager, appeared to demonstrate his faith in the yellow metal last month by buying a stake in Newmont Mining from Sir James Goldsmith. The fire was then stoked by Sir James buying a big chunk of gold call options.

The bullion price has been propelled further by early signs of an upward blip in the US inflation rate, and by reports that demand for high carat gold jewellery has risen sharply in China and India over the past 18 months.

Mr Warren Myers, an analyst at Merrill Lynch in New York, has yet to be convinced that higher inflation - the engine of four of the gold sector's five past bull markets - is imminent. But he has little doubt that technical indicators are pointing to a 'genuine turnround' in the gold market.

'There must be something new brewing which, stupidly, I have not yet seen,' he says. Although caution remains his watchword, Mr Myers is advising clients to hang on to such gold blue chips as American Barrick and Placer Dome.

Thanks to the industry's most extensive hedging programme, Barrick is guaranteed a price of at least Dollars 400 an ounce for its entire 1993 and 1994 output. It realised an average price of Dollars 410 an ounce in the first quarter of this year, compared to the Comex average of Dollars 330. Earnings are thus well protected against a possible reversal in the bullion price.

Other analysts see little value in current share prices. Mr Barry Allan, at Barclays de Zoete Wedd in Toronto, says it may be 'a couple of years' before the bullion price reaches the levels of Dollars 400 an ounce and above now being discounted by the stock market. If the gold price does keep rising, Mr Allan worries that investors may be tempted to switch from equities to the commodity markets.

Few would be bold enough to assert that shares have reached a ceiling for the time being. But recent buyers of North American gold mining stocks will probably need a sharp eye, a hard stomach and nimble footwork to ensure a decent return on their investment.

Trading on Monday this week demonstrated that the relatively small market in gold mining shares, estimated by one analyst at Dollars 40bn to Dollars 50bn worldwide, can be as volatile coming down as going up. Although the Comex June contract lost only 30 cents to Dollars 368, Toronto's gold and silver index slipped by 1.5 per cent.

CA Canada P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P6231 The Financial Times London Page 49 703
World Stock Markets: South Africa Publication 930519FT Processed by FT 930519

GOLDS drifted lower as bullion prices held steady, showing no inclination to test the Dollars 370 an ounce level. The golds index retreated 46 to 1,604 but industrials rose 27 to 4,470. The overall index was 19 down at 3,873.

ZA South Africa, Africa P6231 Security and Commodity Exchanges P3339 Primary Nonferrous Metals, NEC MKTS Market data P6231 P3339 The Financial Times London Page 49 75
Foreign Exchanges: DM weaker as Danes vote Publication 930519FT Processed by FT 930519 By JAMES BLITZ

BOTH the D-Mark and the Swiss franc continued to weaken in European trading yesterday as dealers took the view that there would be a strong Yes vote in Denmark's referendum on the Maastricht treaty, writes James Blitz.

The first exit polls following the referendum indicated last night that there had been a comfortable victory for the Yes camp, although final confirmation of the result was being awaited.

Nevertheless, the exit polls were clearly in line with the market's expectations and suggested that tensions in the European exchange rate mechanism were about to ease.

As on previous days, the expectation that the treaty would be ratified led to unwinding of positions in both the D-Mark and the Swiss franc, both of which have been viewed as safe haven currencies in the event of a No vote.

The dollar gained significantly from the D-Mark's weakness, rising more than a pfennig to peak at DM1.6272 in Europe, and reaching a seven-week high. It closed in London at DM1.6240, and later ended New York trading at DM1.6246.

Again, a factor pushing the dollar up against the German currency was speculation that the Federal Reserve's Federal Open Market Committee would lean towards tightening monetary policy following last week's higher than expected figures for US inflation.

The results of the meeting, which took place yesterday and continues today, will not be known for some weeks.

In Europe, expectations of a Yes vote led dealers to go long of several currencies outside the D-Mark bloc and to short the Swiss franc, which closed at SFr0.910 to the D-Mark from a previous SFr0.909.

The Italian lira was the best performer on the Continent, ending at L909.2 per D-Mark from a previous L914.9. The lira's rise partly reflected strong buying of Italian bonds, with the five-year BTP future moving up more than 40 basis points on the day.

Sterling also enjoyed a strong performance, again driven by the same factors. It finished at DM2.4875, a full pfennig higher on the day.

The clearest sign that the market was expecting a Yes vote was, of course, the Danish krone's performance. Denmark's currency peaked at DKr3.8250 to the D-Mark, and then weakened on profit-taking to end at around DKr3.8425. Its divergence indicator against its Ecu central rate fell to around minus 37 basis points at the close of London trading, some 3 basis points higher than at Monday's close.

An important question facing the market today is whether the D-Mark's performance has been sufficiently bad in recent days to make the Bundesbank think twice about cutting the discount rate at its council meeting today.

A 25 basis-point easing in the discount rate has been anticipated, but several Bundesbank officials have recently expressed concern about the dangers of imported inflation.

XG Europe P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 43 491
Money Markets: UK data awaited Publication 930519FT Processed by FT 930519 By JAMES BLITZ

DEALERS IN the sterling futures market yesterday pondered the possibility that the UK might lower base rates again this year, as they awaited the Bank of England's inflation report and a raft of economic indicators due later in the week, writes James Blitz.

Both the June and September sterling interest rate contracts were pushed higher, as dealers took the view that the unemployment data, scheduled for release tomorrow, and the inflation data, expected on Friday, would point to another cut in base rates later this year.

Weekend newspaper reports said the Bank would take a hard line on inflation in its quarterly report, and this had pushed sterling futures down on Monday.

However, dealers yesterday anticipated that the report, which was issued at 5pm last night, would reflect only mild concern about the prospects for inflation. And they were right to do so.

In a chart printed at the end of the report, the Bank projected the inflation rate as remaining within the target band of 1 to 4 per cent outlined by the government for the next two years. 'The changes since the last Inflation Report have lowered slightly both the expected inflation rate and the probability of breaching the 4 per cent limit during the course of this year,' the Bank said.

The June short sterling contract finished 4 basis points higher at 93.94 and the September contract closed 7 basis points ahead at the same level.

The sterling cash market was more or less unmoved yesterday. Three-month money ended unchanged at 6 1/16 per cent. The overnight rate dropped to about 5 per cent but the market had some difficulty removing a tiny daily shortage of Pounds 350m.

In Germany, the Bundesbank left its repo rate unchanged at 7.60 per cent, compared to some expectations of a rise in the rate.

Short-dated Euromark contracts reflected this move. The June Euromark contract rose 3 basis points on the day, closing at 92.88. Dealers anticipated a cut of at least 25 basis points in the discount rate at today's Bundesbank council meeting.

German call money also eased marginally, to 7.90 per cent, after the Bundesbank added a net DM6.7bn at its weekly repo operation.

GB United Kingdom, EC DE Germany, EC P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 43 401
Commodities and Agriculture: Dutch mount assault on manure mountain Publication 930519FT Processed by FT 930519 By RONALD VAN DE KROL AMSTERDAM

THE DUTCH government has reached agreement with the country's highly productive livestock farmers on reducing pollution-causing manure surpluses by the year 2000, averting the threat of forced cuts in the size of the Dutch pig, cattle and poultry herds.

Under an accord reached last week after long and difficult negotiations, pig and poultry producers will be required by 1995 to cut the amount of harmful phosphorous in manure produced on their farms by 30 per cent compared with with the level in 1986.

The government and farmers' organisations are confident that the phosphorus reductions can be achieved entirely by changes in the diets of their pigs and poultry, meaning that the actual number of animals does not need to be reduced.

The Netherlands has 115m head of livestock, compared with human population of 15m. Modern animal husbandry techniques have left the country with more manure than can be safely absorbed by farmland, causing stubborn problems such as air and water pollution.

A central element in the new system for controlling manure surpluses will be a 'mineral ledger' to be kept by livestock farmers starting in 1995. The ledgers will keep track of the amount of phosphorus and nitrogen arriving at farms in the form of animal feed and artificial fertiliser, the amount effectively absorbed by the animals and the amount left as residue in manure.

From 1996, livestock farmers who exceed the mineral quotas will be subject to a 'super levy' designed to discourage surplus manure production.

Pollution caused by excessive manure production will also be curbed by stricter controls on the amount of manure that farmers can spread on their land.

From 1995, farmers will be allowed only 150 kg of phosphorus a year to each hectare of grassland, down from 175 kg at present. By the year 2000 the phosphorus limit will gradually be cut to 65 kg a ha.

This is meant to encourage livestock farmers to deliver surplus manure to processing plants for conversion into manure pellets destined for export markets. Other options open to farmers are large-scale conversions of existing barns and sheds to prevent the seepage of manure into the air and waterways.

NL Netherlands, EC P0219 General Livestock, NEC P9641 Regulation of Agricultural Marketing RES Pollution GOVT Government News P0219 P9641 The Financial Times London Page 42 404
Commodities and Agriculture: Gold price hits 23-month high Publication 930519FT Processed by FT 930519 By KENNETH GOODING, Mining Correspondent

THE GOLD market frothed up again yesterday and in late trading the dollar price in London broke through another pychologically-important barrier to close at Dollars 370.25 a troy ounce, its highest for 23 months.

Traders suggested the price was being driven up by the momentum of options activity which created extreme volatility at key price levels. 'The higher it goes, the higher it will go,' said one.

More investment fund money poured in yesterday, dealers said. 'There are too many fund managers around the world with no gold in their portfolios and now gold looks like being the best-performing asset in the second quarter (of 1993) they must get some,' said one observer. Another comments: 'Gold is on the fringe of the financial markets and it is a market where serious money goes a long way'.

Mr Wiktor Bielski, analyst at Bain Securities, part of the Deutsche Bank group, said chart watchers believed that once gold's price broke through resistance at Dollars 371-Dollars 372 an ounce there was nothing much to stop it going to Dollars 380 and then Dollars 400. 'It is difficult to find anything that might stop it. We could see Dollars 425 much more quickly than some people expect.'

He pointed out that two gold producers had announced they had unwound some forward sales and more might follow. He estimated that producers had sold forward 90 to 100 tonnes of gold at receivable prices below the present spot price. If spot prices rose to between Dollars 380 and Dollars 400 an ounce, forward sales totalling 300 to 400 tonnes would be in that situation.

GB United Kingdom, EC P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices CMMT Comment & Analysis P3339 P6231 The Financial Times London Page 42 315
Commodities and Agriculture: NZ apple growers hail Japanese breakthrough Publication 930519FT Processed by FT 930519 By TERRY HALL WELLINGTON

NEW ZEALAND apple growers are licking their lips at the prospect of becoming the only foreign suppliers, apart from the Koreans, to bite into the lucrative Japanese market.

Mr Jim Bolger, the prime minister, announced in Tokyo this last week that he had been told by Japanese prime minister Mr Kiichi Miyazawa to expect the ban to be lifted within a few weeks.

New Zealand has been pressing the Japanese to open their market for New Zealand fruit for 20 years, and over the past year considerable progress has been made on a protocol to cover trade in apples between the two countries. Japanese growers have been battling against New Zealand access.

Many other countries, including the US and Australia have been pressing Japan to relax its ban, but it is believed that New Zealand, having signed the complex protocols agreed by both countries, has a considerable time advantage over its rivals.

Under the agreement New Zealand will also import Japanese apples. The first are not expected to be sent till early next year, but it is expected the trade could reach 10,000 tonnes in five years.

Hitherto the Japanese have resisted imports of all apples, apart from Korea, because of the perceived risk that the apples will carry the codlin moth pest. Under the proposed joint venture scientists from both countries have been working on testing procedures.

Brian Aitken, group general manager fresh fruit exports for the Apple and Pear Board said that the agreement was a real breathrough into a market that had been closed for many years. However he said he expected the trade would initially be small, worth possibly NZDollars 5m in the first year.

He said that under the agreed protocol New Zealand would have to meet stringent standards. Orchards sending fruit to Japan would have to be isolated by a 500 metre 'zone', there would be strict fumigation requirements and cool stores and packing plants would be strictly controlled. 'We also have a lot to learn about the Japanese market.'

Mr Aitken said he expected other countries, including the USt and Australia would now put pressure on the Japanese to open their market to them as well. 'However having pioneered this protocol, we won't be rushing to let our rivals know all the details,' he said.

Mr Aitken said that New Zealand had just made another breakthrough by signing a deal to supply 15,000 cases of apples to China. A similar deal had also been signed with Mexico, another new market.

NZ New Zealand JP Japan, Asia P0175 Deciduous Tree Fruits MKTS Foreign trade P0175 The Financial Times London Page 42 455
World Commodities Prices: Market Report Publication 930519FT Processed by FT 930519 By REUTER

New York arabica COFFEE prices were sharply higher at midday on what traders said was renewed speculative buying, stirred by news of declines in US warehouse stocks. After Monday's close the Green Coffee Association said total US stocks in April fell by 518,000 bags to 9.59m bags (60 kgs each). New York's move helped London robusta prices to break through Dollars 900 a tonne. New York raw SUGAR was broadly lower and on the defensive at midday on what traders said was heavy technically induced commission house selling. Analysts were at a loss for any fundamental reason for the move, which followed Monday's three-year high of 13.26 cents a lb in the July contract. COPPER staged a brief rally in the afternoon on the LME but the move was showing signs of running out of steam by the end of kerb trading as the bearish sentiment on fundamentals reasserted itself. Dealers said news of a 6.7 per cent rise in April US housing starts contributed to the firmer tone, helping to spark some profit taking. However, the overall bearish mood was strengthened by a rise of 4,425 tonnes in LME stocks to a nine-year high of 411,550 tonnes.

Compiled from Reuters

US United States of America P0179 Fruits and Tree Nuts, NEC P0133 Sugarcane and Sugar Beets P3331 Primary Copper P6231 Security and Commodity Exchanges COSTS Commodity prices P0179 P0133 P3331 P6231 The Financial Times London Page 42 250
Commodities and Agriculture: Minor metals prices Publication 930519FT Processed by FT 930519

Prices from Metal Bulletin (last week's in brackets).

ANTIMONY: European free market 99.6 per cent, Dollars per tonne, in warehouse, 1,610-1,655 (1,635-1,690).

BISMUTH: European free market, min. 99.99 per cent, Dollars per lb, tonne lots in warehouse, 2.25-2.45 (2.30-2.40).

CADMIUM: European free market, min. 99.5 per cent, Dollars per lb, in warehouse, 0.35-0.45 (same).

COBALT: European free market, 99.5 per cent, Dollars per lb, in warehouse, 14.40-14.90 (14.60-15.15).

MERCURY: European free market, min. 99.99 per cent, Dollars per 76 lb flask, in warehouse, 115-140 (120-140).

MOLYBDENUM: European free market, drummed molybdic oxide, Dollars per lb Mo, in warehouse, 2.20-2.25 (same).

SELENIUM: European free market, min 99.5 per cent, Dollars per lb, in warehouse, 4.70-5.40.

TUNGSTEN ORE: European free market, standard min. 65 per cent, Dollars per tonne unit (10 kg) WO, cif, 28-41 (same).

VANADIUM: European free market, min. 98 per cent, Dollars a lb VO, cif, 1.40-1.50 (same).

URANIUM: Nuexco exchange value, Dollars per lb, UO, 7.10 (same).

--------------------------------------------------------- LME WAREHOUSE STOCKS (As at Monday's close) tonnes --------------------------------------------------------- Aluminium +1,175 to 1,792,350 Copper +4,425 to 411,550 Lead -775 to 250,850 Nickel +228 to 92,502 Zinc +2,325 to 648,500 Tin +45 to 20,485 ---------------------------------------------------------

US United States of America GB United Kingdom, EC P3339 Primary Nonferrous Metals, NEC P3331 Primary Copper P3334 Primary Aluminum COSTS Commodity prices MKTS Market data P3339 P3331 P3334 The Financial Times London Page 42 240
Commodities and Agriculture: Green shoots appear on Colombia's arid savannahs - A rice pasture experiment that is yielding dramatic results Publication 930519FT Processed by FT 930519 By JOHN MADELEY

THE FARMER looked bemused as he looked out on rice growing on flat savannah land in eastern Colombia. 'It's too good to be true,' he said.

Crops are a rare sight in the infertile and acid soils of South America's huge savannah lands, which cover almost half the continent's agricultural area and are particularly extensive in Brazil, Colombia and Venezuela. Although traditionally used for cattle ranching, the native savannah make poor pasture.

But ten years of research at the International Centre for Tropical Agriculture, in Cali, western Colombia has led to the development of a rice variety that grows in savannah soils. This could open the way for a substantial increase in both crop and livestock production on savannah lands, one of the last areas in the world not exploited by farmers.

The centre's researchers now believe that the savannahs can sustain rice-pasture farming and that crops can be grown for the first time on up to 240m hectares (600m ha) of savannah land - larger than the area of sub-Saharan Africa under food crops.

'The savannahs represents most of the area in the world that can be expanded for agriculture,' says scientist Mr Richard Thomas.

With rice-pasture agriculture, farmers plant their rice and pasture at the same time. After preparing and fertilising the land, they plant the rice in rows and scatter the pasture seeds, a mixture of improved grasses and legumes. Farmers harvest the rice after three to four months and then graze cattle on pasture.

'The legumes pull nitrogen from the air, thus acting as a free nitrogen fertiliser,' explains Mr Thomas. He estimates that they effectively provide between 40 and 80 kg of nitrogen per hectare a year.

For the first farmers in Colombia who tried the new system in 1992, results were dramatic. In all, some 4,000 hectares of savannah were planted with the improved grasses, legumes and rice. The unirrigated rice - adequate rainfall makes irrigation unnecessary - yielded an average of 3.1 tonnes a hectare.

In turn the quality of the pasture has been improved both by the new grasses and legumes and by the fertiliser that remains after producing rice; this means that farmers are able to increase the numbers of cattle on their land. Where they might have previously stocked one cow to every 10 ha, they can now start to think in terms of two animals a hectare - a 20-fold increase.

The cattle also gain weight faster on rice-pasture land. Whereas farmers previously waited two years before taking their cattle to market, the centre's scientists are hopeful that they will now be able to sell within 15 or 16 months. Although there are large farms on the savannah lands, there are also many smallholders with between 100 and 200 ha who make only a meagre living on the poor soils. By changing to rice-pasture they can grow a crop, which they have not done before, keep substantially more cattle and make their farms profitable.

There are also environmental benefits. Many savannah pastures are over-grazed and the system could help to recover these lands and help to ensure they are farmed on a sustainable basis. Mr Thomas believes that it could also be used in some Amazonian forest lands that have been badly damaged by indiscriminate logging.

The centre's scientists stress that savannah soils are poor and that rice should not be planted continuously - 'for no more than three or four years', says agronomist Jose Ignatio Sanz. Farmers should then leave the land purely for pasture for several years before growing rice again.

Nor should rice be planted on its own on savannah land. If the new rice variety is grown in monocropping fashion on the savannahs, it may produce well in the first year, but yields will be down to almost nothing by the third.

'We want farmers to understand that the system is fragile,' says plant breeder Mr Elcio Guimaraes.

CO Colombia, South America P0112 Rice P8733 Noncommercial Research Organizations TECH Products & Product use CMMT Comment & Analysis P0112 P8733 The Financial Times London Page 42 708
Commodities and Agriculture: EC seeks bigger set-aside Publication 930519FT Processed by FT 930519 By REUTER BRUSSELS

A EUROPEAN Commission proposal to fix a 20 per cent rate for arable land permanently taken out of production must be approved by farm ministers by July 31, Commission officials said, Reuter reports from Brussels.

Officials hope this can be done at the next farm council on May 24, allowing time to prepare for the implementation of the new rules.

Governments and farmers, notably Danish, favour permanent set-aside, which is seen as simpler, easier to control, better for the environment and more acceptable to taxpayers.

Ministers are expected to give guidelines rather than take quick decisions on a commission paper, approved yesterday, discussing the controversial set-aside scheme - a key element in last year's reforms to curb farm output.

The commission paper was drafted in response to criticism from member states and farmer groups about the complexity of the scheme and desire to make it more beneficial to the environment.

If farmers are allowed to combine permanent and rotational set-aside on the same farm the higher 20 per cent rate should apply, according to the commission paper.

Farmers must set aside 15 per cent of arable land under a six-year rotational scheme adopted in last year's reforms.

QR European Economic Community (EC) P0191 General Farms, Primarily Crop P9641 Regulation of Agricultural Marketing RES Natural resources P0191 P9641 The Financial Times London Page 42 238
Commodities and Agriculture: EC urges renewal of pact talks Publication 930519FT Processed by FT 930519 By REUTER BRUSSELS

THE EUROPEAN Community and developing countries in the African, Caribbean and Pacific (ACP) group have jointly called for the reopening of stalled negotiations for international cocoa and coffee agreements, reports Reuter from Brussels.

'The (EC-ACP) Council (of ministers) hoped that the demonstrated political goodwill would be translated into an effective and economically viable (cocoa) agreement,' said a joint statement after a two-day ministerial meeting.

The EC and the ACP also called on producer and consumer countries to show flexibility to restart coffee talks.

QR European Economic Community (EC) XM Africa XF Caribbean XR Pacific Islands, Oceania P0179 Fruits and Tree Nuts, NEC P9721 International Affairs NEWS General News P0179 P9721 The Financial Times London Page 42 133
Commodities and Agriculture: Nigeria signs deal with BP-Statoil alliance Publication 930519FT Processed by FT 930519 By PAUL ADAMS and KAREN FOSSLI LAGOS, OSLO

NIGERIA YESTERDAY signed an oil exploration and production-sharing contract with the alliance between BP and Statoil, the Norwegian state oil company, for three deep offshore blocks south-west of the Niger Delta. It was the third agreement in a month by a foreign oil group to take all the risks in developing new fields since shortage of cash forced the government to stop taking majority stakes in exploration joint ventures.

After initial resistance to the terms offered by Nigeria's ruling transitional council this year, the foreign oil companies are falling into line following last month's signing by Royal Dutch/Shell and Elf of France. Exxon of the US is to sign a similar deal on Friday.

The contract marks the return of BP to active exploration in Nigeria after an absence since 1979, when its Nigerian assets were nationalised. It was welcomed by Mr Philip Asiodu, the oil minister, who said at the signing in Lagos: 'We are all sorry that matters political led to a rupture'.

The structure is estimated to hold reserves of at least 250m barrels and could have as much as 1bn barrels. BP-Statoil will pay a signature bonus of USDollars 42m and are committed to investing a minimum of Dollars 65m over the next six years. Seismic tests will begin this year and the first discovery is expected by the end of 1994.

Mr Asiodu said that Nigerian law would be amended by August to allow more favourable terms for the increased risk taken by foreign oil companies in the new contracts.

For deep offshore exploration the petroleum profit tax will be cut to 50 per cent, the investment tax credit will be 50 per cent and royalties to NNPC, the state-owned petroleum corporation, will be on a sliding scale from 16 per cent to zero, according to depth. Similar amendments will be made to terms for contracts covering onshore blocks.

The BP-Statoil alliance, established more than two and a half years ago, expects to complete negotiations next year with authorities in Azerbaijan on terms and conditions to develop the Chirakh oil field, according to the chief executives of the respective companies, writes Karen Fossli in Oslo.

Speaking in Stavanger at a briefing on the alliance's development, Mr David Simon of BP and Mr Harald Norvik of Statoil agreed that significant results had been achieved by the two companies in a very short time but recognised that its true test would be to bring production on stream with a resonable return on investment in the various areas where it was operating.

Mr John Brown, BP vice-president of exploration and development, said the Chirakh development could need investment amounting to 'several tens of billions of kroner' but he would not be drawn on specific figures, which could be sensitive in current negotiations.

The alliance believes the Chirakh field holds at least 1bn barrels of oil. The two companies aim to bring it on stream by the end of 1997 with output of about 200,000 barrels a day.

In March, the alliance delivered results of a development study for Chirakh to Socar, the Azerbaijani state oil company, and also results of a study on the prospects of exploring for oil and gas in the Shak Deniz area, in the southern part of the Caspian Sea. Elsewhere in the South Caspian Sea, the BP/Statoil alliance is participating in a licence operated by Amoco, which has commenced negotiations on obtaining a production sharing agreement.

Next month it aims to bring on stream non-productive wells in western Siberia that it has rehabilitated.

British Petroleum Nigerian National Petroleum Corp Statoil NG Nigeria, Africa GB United Kingdom, EC NO Norway, West Europe AZ Azerbaijan, East Europe P1311 Crude Petroleum and Natural Gas RES Natural resources P1311 The Financial Times London Page 42 651
Survey of Chile (12): Long catalogue of woes - Environmental laws are to be strengthened Publication 930519FT Processed by FT 930519 By KEN WARN

CHILE'S constitution enshrines the right to live in an environment 'free from pollution.' That is probably little consolation to Santiago's 4.5m citizens, who are forced, particularly in the winter months, to live under a pall of choking fumes.

In spite of the fine words of the constitution, Chile suffers from an array of intractable environmental problems resulting from its natural-resource intensive economy, inadequate government controls and sprawling urbanisation.

Only now is the yawning gap between the constitution and everyday reality being addressed. In the autumn of 1992, the government of President Patricio Aylwin submitted a package of legislation to Congress to strengthen and extend the country's patchwork of environmental laws and decrees.

Companies would for the first time be required to undertake environmental impact studies of new projects, and a start would be made on the formulation of environmental standards. The absence of a viable regulatory framework leaves complainants against polluters little option but to embark on often lengthy court actions.

The battle against pollution is still in its early stages. 'The country as a whole has not confronted the environment as an issue,' says Mr Juan Escudero, head of the Santiago anti-pollution commission. 'Only in the past five or six years has there been any kind of awakening to environmental problems.'

The commission's efforts to tackle the specific problems of Santiago are similarly at an early stage. Air pollution has been measured and the worst sources of emissions identified, according to Mr Escudero. But the hard part - implementing a pollution-control plan for metropolitan Santiago - is only just beginning.

Chile's capital is not helped by its geography and climate. Santiago is at 33 degrees south and is ringed by mountains up to 3,200 metres high. From April to August (autumn and winter) thermal inversions trap the city's pollutants, mainly particulates and carbon monoxide from vehicle exhausts. Under the plentiful summer sunlight, the main problem is photochemical smog.

Buses, particularly old and badly maintained ones, are the main culprits, and some successes have already been scored against Santiago's vocal and powerful bus operators.

The government has sought to reduce the number of buses, which account for over half of all journeys undertaken in Santiago, and cut duplication by putting some routes out to tender. There are now formal contracts between operators and the ministry of transport in what was formerly a completely unregulated system.

Some 4,000 old buses have been taken out of service in the past three years, and the total bus fleet has been reduced from 13,000 to under 11,000 vehicles - 'still too many,' sighs Mr Escudero. Private vehicles face controls, too. Car use is restricted for much of the year in central Santiago on a rotating basis, and since September 1992 all new private vehicles have had to be fitted with catalytic converters.

The catalogue of Santiago's environmental woes goes on. The city produces 10 cubic metres of untreated waste water every second. While the city is finishing its first water-treatment plant, at a cost of Dollars 12m, it will take hundreds of millions of dollars and at least a decade to create an effective system for the city as a whole. How many plants to build - and where to build them - is still being studied.

Outside the capital, the country's natural resource based industries have only recently begun to clean up their act.

The state-owned copper corporation Codelco, for example, is committed to spending between 15 and 20 per cent of its investment budget - about Dollars 90m a year - on environmental controls.

But the pace of the industrial clean-up and the government's gradualist approach to environmental regulation, aimed at minimising the impact on growth, is rejected by an increasingly vocal lobby.

'Chile's macro-economic indicators are quite spectacular, but also dangerous,' says environmental campaigner Mr Manfred Max-Neef. 'Another eight years of the same will leave the country devastated,' he says.

Mr Max-Neef is running for president in December's elections as an independent candidate backed by a 'rainbow coalition', including environmentalist and women's groups, and trade unions. He does not seriously expect to win the presidency but aims to push environmental issues up the political agenda.

He lambasts the government for allowing the 'devastation' of Chile's natural resources. At the southern port of Puerto Montt, 'there are mountains of wood chips waiting to be sent to Japan to be made into toilet paper. I don't think that's a very noble destiny for our native forests,' he says.

Chile's nascent environmental activists have already notched up some successes, including a legal campaign by olive growers in the Huasco Valley for more environmental controls at an iron pellet plant, which they claim blighted their crops.

As if its internally generated environmental difficulties were not enough, Chile faces an as-yet unquantified threat in the form of ozone depletion. Every spring, Antarctica loses much of its ozone cover, as a result of photochemical reaction with the greenhouse gases produced by the industrialised world, exposing neighbouring countries to increasing levels of cancer-causing ultraviolet rays.

The ozone hole is getting bigger, appearing earlier and lasting longer every year. The implications for southern Chile could be enormous. Whereas the government has at least started to take stock and act on Chile's more conventional environmental dilemmas, understanding of the ozone problem is only in the earliest stages.

CL Chile, South America P9511 Air, Water, and Solid Waste Management CMMT Comment & Analysis P9511 The Financial Times London Page 41 932
Survey of Chile (14): Modernised and export-oriented - The wine industry Publication 930519FT Processed by FT 930519 By KEN WARN

In the main plaza of Curico, about 200km south of Santiago in Chile's Central Valley, the festival to mark the start of the grape harvest is in full swing. The local bishop has blessed the year's first pressings and a wine fountain is flowing. The town band is earnestly tackling a vigorous march and the queen of the harvest is about to receive her reward - her own weight in wine.

Although the festival looks like time-honoured ritual it is in fact the celebration of a very recent phenomenon - the emergence of a modernised, export-oriented wine industry. A combination of foreign investment and a renewed dynamism on the part of Chilean estate owners has translated into soaring sales.

Exports grew 55 per cent last year to about Dollars 180m, according to the Chilean wine industry association. This was the fourth year in succession in which exports grew more than 50 per cent in dollar terms. Export volume last year climbed 25 per cent to 80m litres and the association forecasts overseas sales of 120m litres by 1995 and 180m litres by 2000.

Mr Miguel Torres, the Spanish winemaker, is the man widely credited with sparking this revolution. Mr Torres first invested in Chile 14 years ago, after a lengthy search for new opportunities in both California and Latin America. 'I really think the Central Valley is paradise for anyone interested in vines,' he says at his bodega outside Curico. 'The climate, the quality of the soils and absence of phylloxera (the vine pest) make this place just about perfect.'

Mr Torres introduced state-of-the-art wine-making technology, including the latest presses, new French oak barrels to lend more character to red wines, and cold fermentation tanks for the whites. In doing so he broke decisively with the Chilean philosophy of 'quantity not quality.'

Other foreign investors have proved eager to follow his lead. Chateau Lafite bought a 50 per cent stake in the historic vineyard of Los Vascos at the end 1988, with the aim, according to Lafite oenologist Mr Gilbert Rokvam, of creating 'a French chateau in Chile in the tradition of the great Bordeaux wines.' Another small family-owned business, Errazuriz Panquehue, formed a joint venture with California's Franciscan Estates the same year.

Errazuriz has a dual strategy, according to Mr Eduardo Chadwick, whose family have owned the business since 1870. On the one hand it is seeking to produce high-quality Reserva wines at the family's three properties. But it is also buying in grapes under long-term contract from farmers to produce Caliterra, a more middle-market brand. 'Our biggest job was getting farmers to prune back more to decrease yields and raise quality,' says Mr Chadwick.

Caliterra, launched three years ago, has become the biggest Chilean brand in the UK market, Mr Chadwick says. The link-up with Franciscan proved short-lived - the joint venture was dissolved amicably in 1991. Franciscan moved on to a Dollars 6m investment in the Casablanca Valley between Santiago and Valparaiso. The company remains the agent for Errazuriz in the US.

The main market for Chile's wines continues to be the US, which accounted for about a quarter of sales by value last year. Chilean wines make up 7 per cent of US wine imports and it has overtaken Germany as the third-largest wine exporter to the US after France and Italy.

Small vineyards such as Los Vascos, Torres and Errazuriz are at the cutting edge of Chile's wine industry. But it is dominated by Vina Concha y Torro, which accounts for about a quarter of wine exports, twice as much as its nearest rival, Vina Santa Emiliana. The average price per litre these winemakers command is low compared with smaller operators, but they also produce top wines.

CL Chile, South America P2084 Wines, Brandy and Brandy Spirits CMMT Comment & Analysis MKTS Foreign trade P2084 The Financial Times London Page 41 665
Survey of Chile (13): Distinguished ancestry - Profile: Senator Eduardo Frei Publication 930519FT Processed by FT 930519 By KEN WARN

Senator Eduardo Frei, leader of Chile's Christian Democrats and front-runner in the race for the presidency, is not exactly known for his fiery oratory or barnstorming campaign style. But at least, according to one political analyst, 'he has learnt how to smile.'

A sombre, rather taciturn businessman, Mr Frei is consistently the country's most popular politician in the opinion polls behind President Patricio Aylwin. His position as leader of the biggest party in the ruling coalition has given him a seemingly unbeatable hand against the divided opposition.

Despite a distinguished political ancestry - Eduardo Frei Senior was president from 1964-70 - Mr Frei only ran for office for the first time in 1990, when he won his senate seat. However, he joined the Christian Democrats in 1958 at the age of 16 and says he was always active in the party.

Mr Frei denies charges that he trades on the reputation of his late father - a popular and charismatic politician, and a founder figure of the Christian Democrats. 'It's foolish to deny that people remember my father. But not all sons of presidents follow in their fathers' footsteps. Ultimately people will judge me by what I do, not by my name.' His father, he adds, gave him 'a vision of this country and of public service.'

A key element of Mr Frei's political credo is a determination to preserve the ruling Concertacion coalition 'for as long as it is efficient and rational to do so.' The Aylwin government, which effected the transition from military to civilian rule, 'achieved high economic growth, political stability and increased social spending. For me, that proves the value of working together,' he says.

If elected president this December, Mr Frei promises to 'continue and deepen' the reforms of the Aylwin administration. But he highlights poverty, weaknesses in the education system and bottlenecks in infrastructure as obstacles to continued growth.

Mr Frei is unequivocal about the need for constitutional reform to remove the checks on the elected government handed down from the Pinochet era.

'This is a matter of principle for us. I don't know of any other democratic country where the head of state or civil authorities don't have control over the chiefs of the armed forces.'

The Senator may be well placed to succeed where the Aylwin government faltered - a constitutional reform package failed to win the required two-thirds majority in Congress this March.

'Frei has a strong sense of how power works in this country,' says Mr Oscar Godoy, head of political science at the Roman Catholic University of Chile. 'He is no great orator - he knows that - but he is a good team player, chooses his people well and he likes taking decisions.'

Mr Frei rarely departs from the language of gradualism and consensus. Even the attempt by the Socialist party and its ally the PPD to offer their own candidate, Mr Ricardo Lagos, for the coalition's presidential nomination is 'absolutely normal and unsurprising in a presidential system,' he says, smiling.

CL Chile, South America P8651 Political Organizations CMMT Comment & Analysis PEOP People Senator Frei, E Leader Christian Democrats Chile P8651 The Financial Times London Page 41 550
Survey of Courier and Express Services (9): Sell-off date approaches - UK parcels post Publication 930519FT Processed by FT 930519 By DAVID ROBINSON

EXPRESS parcel companies are generally cautious about their future.

Most leading UK operators report a small improvement which they expect to continue through the year. Others, however, are enjoying double-digit growth but do not say whether they are discounting or from what base they calculate their growth.

Rate cutting remains rife and there is still a lot of overcapacity. As recovery develops overcapacity will shrink but some executives say that there are still too many companies.

Parcelforce estimates 1992 sales of UK express services at Pounds l81bn of which some 43 per cent is accounted for by next day services while other guaranteed services command another 20 per cent.

Parcelforce itself has seen its next day volumes grow by 50 per cent during 1992-93.

There is much interest about the fate of the two public operators, Red Star and Parcelforce. Red Star, which has made notable progress towards returning to profitability, is expected to be sold by the late summer. The timing for Parcelforce is less certain.

At Parcelforce, it is a case of 'business as usual', says Malcolm Kitchener, managing director. 'Our overall strategy is geared to improving both cost and quality in all areas of our business. This involves investment in new depots such as Pounds 15m at Liverpool into new vehicles and other technology such as in-cab communications systems. Restructuring is also part of the programme with 50 depots due to be closed as part of a rationalisation programme to save Pounds 16m a year.'

Red Star reports that business is flat and has been for four or five months. However its budget for this year allows for some growth from the late summer onwards. Of the two, Red Star is considered the more saleable and a more manageable unit.

Reducing costs is one of the key ways in which operators are combating the recession. TNT has rationalised its management and cut its use of subcontractors to save some Pounds 6m a year in the UK. It is concentrating on next day services and reducing two and three day operations which have been losing money.

Tom Bell, TNT's UK general manager, says that 'order sizes are getting smaller but being sent more frequently. The use of premium services has fallen from more than 50 per cent to 42 per cent in 1992.' He forecasts between two and four per cent growth this year.

'There is no shortage of volume in the market but it is extremely cost conscious,' says Colin Millbanks, chief executive of Parceline. 'Cost is now the main deciding factor with customers in choosing an operator. They are much more prepared to trade off quality against price.'

Parceline had achieved a strong financial performance with borrowings down and net profitability up,' adds Mlllbanks. Over the past two years the company has invested some Pounds 2m in developing the parcel management system building on its bar coded technology. Quality is being improved, with BS5750 accreditation of the line-haul operation and its national hub being pursued.

Investment in new technology has been one of Securicor Omega Express's key policies through the recession. The company claims to be the UK's largest overnight carrier with an estimated 15 per cent of the market. It has a throughput of l6m parcels a week and employs 3,000 vehicles and more than 8,000 personnel through 154 branches.

Some companies have made considerable change in the UK during recession. Lynx, NFC's parcel arm, decided to take the opportunity of Federal Express's withdrawal from domestic operations in Europe to buy their hub at Nuneaton. This has warranted a change from depot-to-depot trunking to a new hub-based line haul network linking the 34 depots nationwide.

'We have improved hub efficiency by 50 per cent which has made a significant difference to our operations,' comments Kevin Appleton, Lynx sales and marketing director. 'We also installed a freight handling centre so we can provide a full range of services from a Jiffy bag to a pallet.' Over the past six months Lynx has won more than Pounds 6m of new business in the automotive, pharmaceuticals and electronics sectors.

UPS, after much speculation, last July bought Carryfast, claimed to be the UK's largest private package delivery company to be integrated in its UK domestic operation. 'Integrating Carryfast has been undertaken gradually since the purchase,' says Peter Quantrill, UPS's UK chief executive. This integration involves merging Carryfast depots with UPS's International depots where appropriate. To date four out of 15 have been integrated.

Quantrill comments: 'Our first quarter was up on 1992. Discounting is rife, an inherent sign of the current market. It is encouraging to be ahead and we will be looking for further growth through the year.'

The last 18 months have proved a particularly challenging time for Elan, which was bought out of DHL in August 1991. The company has since moved from losses into profit by concentrating on its speciality overnight service. It offers delivery before 10am, 12 noon and 5pm as well as a palletised service for shipments up to one tonne. It continues to progress well and won Pounds 3m of new business in the first quarter of 1993.

This encouraging growth in revenue comes on the back of record trading volumes for Elan at the end of last year, says Brian Draper, Elan's managing director. 'It more than justifies our recent Pounds 1m investment in new trucks and our investment in IT systems.'

'Recovery has been filtering through since Christmas,' says Peter Gent, Interlink's chief executive. 'There is improvement in volumes but not price. There does not appear to be any pattern of recovery, or a pattern we can follow, but we are moving about 5 per cent more than this time last year.'

A combination of cost control, better quality of customer service and limited investment in enhancing existing technology systems has been adopted by most operators to cope with the recession.

Few have introduced new services in the domestic market as their ranges were satisfactory for most needs. Some trimming of depot networks has been undertaken by some operators but trying to balance outgoings with revenue has been the main challenge.

As the economy improves and trade expands the impact of rate cutting could linger and keep revenue flows below what they should be. It is at this time that some trimming of capacity might occur as quality of service to match price as the key deciding factors on which operator to use.

GB United Kingdom, EC P4213 Trucking, Ex Local P4215 Courier Services, Ex by Air P4011 Railroads, Line-Haul Operating CMMT Comment & Analysis MKTS Market data P4213 P4215 P4011 The Financial Times London Page 22 1129
Survey of Courier and Express Services (8): Into the big time - Logistical services Publication 930519FT Processed by FT 930519 By PHILLIP HASTINGS

EMERY WORLDWIDE, one of the pioneers of international air express operations, recently announced the formation of a new subsidiary to spearhead its development of worldwide logistics services, writes PHILLIP HASTINGS.

That business could eventually become its biggest revenue earner, says the US-based company.

Together, those two points highlight both the most pronounced current trend in the international express service industry and the reasons for it.

Basically, express companies which initially made their mark by offering a set menu of fast, door-to-door delivery services, are now increasingly focusing on the provision of custom-designed systems geared to meet the often very specific requirements of modern logistics operations.

Manufacturers are developing JIT (Just In Time) logistics systems, for example, like the ability of express companies to control the total door-to-door movement of their goods but want services which precisely meet their requirements.

Reflecting those trends, the world's 'big four' express companies - DHL, TNT, Federal Express and United Parcel Service (UPS) - and leading competitors such as Emery and Air Express International (AEI) are all now stepping up their involvement in the broader international logistics sphere.

DHL, for example, is developing so-called Express Logistics Centres (ELCs) in various key markets. TNT and Federal Express already have well-established international logistics divisions, while UPS has set up special logistics management teams all over the world and begun establishing new bonded distribution centres.

Emery's new operation is called simply Global Logistics. Mr Roger Curry, the company's president and chief executive officer, says the Emery name has deliberately been left out of the organisation's identity to reflect the intended broad scope of its activities, some of which will be outside the company's traditional mainstream operations.

Global Logistics' services, he continues, will include warehousing both raw materials and finished goods on behalf of customers, taking material into inventory, maintaining computerised inventory records, updating the customers' computer files, picking from inventory, packing and shipping, and re-ordering when inventory gets too low.

Over the next two years, Mr Curry says value-added logistics services could develop to contribute around 10 per cent of Emery's overall revenues. Longer term, he expects that percentage to expand substantially. 'I think we will in future see Emery earning more from that logistics-type activity than from traditional freight services. That is definitely where the future is,' he adds.

DHL appears to be thinking along similar lines. Having already broadened its traditional courier image and activities to embrace packages and larger consignments, the company is increasingly promoting its capabilities as a general logistics service provider.

In that context, the company has now established ELCs in Brussels, Bahrain and Singapore, plus a joint venture programme in Amsterdam. Other sites are currently being evaluated.

Mr Patrick Lupo, Brussels-based chairman and chief executive officer for DHL International, says it can take some time for companies to complete the changeover to outsourcing their warehousing from suppliers like DHL. But, he claims, companies which have gone that way, have been pleased with the results.

'Our ELC here in Brussels, for instance, is proving particularly interesting to non-EC entities which have a need to distribute products like high-tech goods, medical instruments and oil industry analysis kits,' he adds.

Last year also saw the launch in the UK of a DHL business unit called Interface. Basically, the idea is that Interface team members work closely with specific customers on the development of their logistics operations.

UPS last year established its first bonded European distribution centre - a 6,000 sq metre facility at Best near Eindhoven, the Netherlands - as the forerunner in a series of such developments being planned by that company throughout Europe over the next five years.

The idea is that overseas goods will be brought to Europe by ship or air and held at the distribution centre in bond, under a Customs-approved licence. There, UPS will provide a range of services including warehousing, inventory management and order fulfilment, pick and pack, specialised labelling, assembly and configuration, repair and return systems, and customisation of products for individual markets. Once required in the end markets, goods will be distributed throughout Europe using the UPS air and road network.

One of the main reasons for that sort of service development is explained by Mr Tony Keating, the head of European logistics for UPS. 'More than 35 per cent of the total potential package market UPS is interested in is in the hands of the multinationals. Having established that, we decided we had to do more about meeting the requirements of those customers,' he says.

Responding to similar demands, Federal Express Business Logistics Europe has expanded its operations with the opening of a new logistics centre near Eindhoven airport. The 5,200 sq metre complex, which is fully bonded, will be developed as 'a strategic base for managing and running logistics operations serving global markets as well as supporting other operations in mainland Europe'.

One of the most significant recent worldwide logistics sector developments by Federal Express involved a 'radical redesign' of the global logistics process for US semiconductor manufacturer National Semiconductor Corporation.

According to Federal Express, the new set-up will give National Semiconductor a two business-day delivery to all its customers worldwide. Previously, its delivery cycles for international customers had ranged from five to 18 days.

While the trend for express companies to develop wider-ranging logistics services is most pronounced in the international sphere, similar developments are taking place in domestic markets.

TNT, for example, has a special contract logistics division in the UK working for a range of clients in industries such as the automotive, electronics and office equipment sectors. Federal Express BLS has a specialised UK division called Systemcare to handle the home delivery of furniture and electrical goods for companies such as Littlewoods and IKEA.

Other domestic express carriers are still concentrating primarily on their established door-to-door delivery operations but are increasingly introducing added-value services where they can or where customers demand them.

XG Europe P4213 Trucking, Ex Local P4215 Courier Services, Ex by Air P4513 Air Courier Services CMMT Comment & Analysis TECH Services & Services use P4213 P4215 P4513 The Financial Times London Page 22 1037
Survey of Chile (11): Coalition confounds its critics - There is new political stability Publication 930519FT Processed by FT 930519 By LESLIE CRAWFORD

IT is a tribute to President Aylwin's ability to govern by consensus that politics in Chile, once a matter of life and death, has become boring.

Seven months ahead of general elections, it is already a foregone conclusion that the ruling Concertacion coalition of centre-left parties will form the next government, and that Senator Eduardo Frei, leader of the Christian Democrats, will become Chile's next president.

The key to the Concertacion's success has been its unity and discipline, which have given Chile three years of stable government following the transition from dictatorship to democracy in 1990.

The Concertacion confounded critics who believed the 17-party coalition would unravel once its principal goal - to oust General Pinochet - had been achieved. But according to Mr Edgardo Boeninger, President Aylwin's chief of staff, the experience of government has given the Concertacion a 'shared diagnosis and shared solutions that will make the coalition strong enough to last one or two decades.'

'At this point in history,' Mr Boeninger continues, 'the parties of the Concertacion need each other. The challenge will be to sustain this consensus over time.'

The authority of the ruling coalition has been heightened by the total disarray in the opposition camp, where two right-wing parties are locked in a marriage of convenience, in a country where divorce is still illegal.

Even Mr Manuel Feliu, the presidential candidate of the main opposition party, Renovacion Nacional, admits: 'The Chilean right today is shattered. We are not an alternative for power. Our main task is to unite the right to ensure it polls one-third of the votes, so that it can check the excesses of the next government.'

Renovacion's spouse in this damage-limitation exercise is the Union of Independent Democrats (UDI). UDI wants its own party leader, Mr Jovino Novoa, to be the right's presidential candidate. The partners have yet to have their big showdown on who will finally go forward.

Since the return of democracy, the two opposition groups have been locked in a battle of supremacy for Chile's sizeable right-wing constituency. While Renovacion's efforts to forge a modern conservative party along European lines have foundered, through political infighting, UDI remains unashamedly nostalgic for the days of authoritarian rule.

The right has also been robbed of political ammunition, because President Aylwin's government successfully hijacked Gen Pinochet's economic model.

Nevertheless, the Concertacion and the opposition remain deeply divided over the legacy of military rule. The government recently failed to pass a package of constitutional reforms in Congress, because it lacked the necessary two-thirds majority. Among other things, the reforms would have restored the president's power to dismiss military commanders-in-chief, and would have abolished the nine non-elected Senate seats that were filled with Pinochet appointees before he relinquished power.

Although these issues lie at the heart of a fully-functioning democracy, they are unlikely to figure prominently in electoral debates. To understand why, it is necessary to remember that the Chilean military negotiated their departure from power, and effectively dictated the ground rules of civilian government.

This explains the Concertacion's acceptance of Gen Pinochet's unassailable position at the helm of the army, why it turns a blind eye to the surveillance activities of army spies, and why it has not pressed human rights trials.

'The effects of the negotiated settlement will be around for at least another 20 years,' says Mr Oscar Godoy, a political scientist at the Catholic University in Santiago.

CL Chile, South America P9121 Legislative Bodies P9711 National Security CMMT Comment & Analysis P9121 P9711 The Financial Times London Page 40 611
Survey of Chile (8): 'Big bang' to widen options - Capital markets Publication 930519FT Processed by FT 930519 By LESLIE CRAWFORD

The Chilean right is fond of portraying Mr Alejandro Foxley, the finance minister, as a mere administrator of the fruits of General Pinochet's economic miracle.

But before the end of the year, Mr Foxley hopes to have left his mark as an innovator, with a new law aimed at implementing 'the deepest and most complete reform to the domestic capital markets' since the early 1980s.

His 'big bang' will widen the investment options open to private pension funds and insurance companies. Since Chile reformed its social security system in 1981 - introducing a compulsory savings scheme, managed by private companies known as Administradoras de Fondos de Pensiones (AFPs) - pension funds have become the biggest institutional investors in Chile. They now manage almost Dollars 13bn of funds, equivalent to one third of gross domestic product.

The draft bill, sent to Congress in January, is long overdue. AFPs have been complaining since the late 1980s of the dearth of investment options in Chile, as they are accruing much faster than they are paying out benefits.

Under the proposed legislation, AFPs will be able to diversify their equity portfolios and invest in new instruments, such as securitised bonds and closed-end entrepreneurial development funds. The government hopes the latter will be a source of long-term capital to small and medium-sized businesses.

AFPs will be allowed to invest up to 10 per cent of their portfolios in shares, corporate bonds and gilt-edged securities abroad.

Although AFPs were authorised to invest in a more restricted number of foreign instruments last year, they have yet to dip their toes into the international capital markets. They are adopting a cautious 'let's study all the options' approach, much to the chagrin of the legions of foreign investment bankers currently touting for business in Santiago.

Mr Foxley says the reforms are imperative, in order to spread risk and ensure better long-term returns for Chile's 12-year-old private pension fund system. Both the government and the pension fund managers expressed concern last year over the growing concentration of AFP equity portfolios in a limited number of privatised utilities. Almost half of these investments are held in electricity and telephone companies, some of which performed poorly in 1992 and depressed the overall returns on AFP investments.

The reforms have called on some elements of US trustee legislation to introduce revenue bonds for the finance of large infrastructure projects. Under this scheme, the money raised by bond issuers is managed by a trustee who disburses funds as the project develops.

The finance ministry sees revenue bonds as an important vehicle for substituting foreign finance for big projects, particularly now that the country is pushing to upgrade roads, ports, irrigation, telecommunications and power generation.

Insurance companies, which manage about Dollars 3bn of funds, will be allowed to invest up to 15 per cent of their funds in foreign equity and bonds and in the derivatives markets at home and abroad.

While the stock market and Chile's 19 AFPs broadly welcome the proposed reforms, they are bitterly opposed to parts of the law that will tighten regulation on the thorny question of insider trading and other potential conflicts of interest. The controversy is bogging down discussions in the Senate.

In essence, investment managers, be they mutual funds, AFPs, stockbrokers or insurance companies, will be required the keep their own investments separate from the portfolios of their clients - a rare practice to date and a state of affairs that has caused Chile's securities watchdog many headaches.

The second issue - the handling of 'privileged' or insider information - is a much trickier question, given the close-knit nature of Chile's small business community. The government wants to oblige AFPs to appoint a certain number of independent directors to their boards, men who have no financial interest in the companies AFPs invest in. At present, it is quite common for company directors to wear several hats at once.

'Even if the government succeeds in tightening regulations,' says Mr Mario Lobo, an investment analyst in Santiago, 'loopholes will inevitably persist until the business community itself accepts that the use of privileged information is unfair practice.'

The proposed reforms have already galvanised the capital markets in Chile. Santiago's stock exchange rallied by 16 per cent in January, when the bill was sent to Congress. Trading was unusually heavy in second-tier stocks that might soon become eligible for the enlarged portfolios of AFPs. Santiago has also seen a spate of initial public offerings, which will give the stock market more depth and liquidity.

Social security reforms elsewhere in Latin America, modelled broadly on the Chilean AFP system, are also tempting Chilean pension fund management companies to venture abroad. Six Chilean AFPs are setting up subsidiaries in Peru, where private pension schemes were introduced this month. Another four AFPs plan to establish themselves in Argentina.

CL Chile, South America P6371 Pension, Health, and Welfare Funds P6231 Security and Commodity Exchanges P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P6371 P6231 P9651 The Financial Times London Page 40 858
Survey of Chile (10): Pinochet's influence lingers on - The politico-military relationship Publication 930519FT Processed by FT 930519 By LESLIE CRAWFORD

They say that old soldiers never die. In General Pinochet's case, neither is he prepared to fade away.

Chile's former dictator, now 77 and fitted with a pace-maker, granted himself the constitutional right to head the army until 1998. He has not expressed any wish to take early retirement.

Gen Pinochet has three main reasons for wanting to remain commander in chief of the army: Rightly or wrongly, he regards himself as the guardian of Chile's peaceful transition to democracy. He is the army's main insurance policy against the threat of human rights trials. And, having modernised the Chilean economy, the general still has one unfulfilled ambition: to go down in history as the man who also modernised the largest and most cumbersome branch of the Chilean armed forces.

For while the navy and air force effectively withdrew from government during the last years of military rule, the army's best cadres were busy running state bureaucracies and the ubiquitous security apparatus.

As a result, the 60,000-strong army (it includes 30,000 conscripts) finds itself far behind its sister branches in preparing for the challenges of the 21st century. Pay is poor; the army has forged few links with military academies abroad; and Gen Pinochet's intense dislike of the US has led to logistical problems in the search for non-American arms suppliers.

President Aylwin's 'cohabitation' with the former dictator has not been easy, but he has handled it with considerable skill and no small measure of restraint. The president's boldest initiative was to commission an independent report, published in March 1991, on the human rights abuses committed during Gen Pinochet's rule. The report stopped short of naming those responsible for the repression, but it provided moral reparation for the victims and their families.

The army rejected the report's findings, frustrating President Aylwin's efforts to heal the wounds of the past. Nevertheless, the government has not pursued human rights trials. Only a handful of cases, which fall outside a 1978 self-amnesty decreed by the military, are being pursued through the courts.

As the human rights legacy has diminished in importance, other issues concerning the role of the military in a democracy have taken centre stage. Spying on politicians caused a scandal last year which highlighted the government's impotence in dealing with the army intelligence services; they remain beyond civilian control.

Earlier this year the government failed to muster sufficient support in congress for a constitutional amendment that would restore the president's power to dismiss military commanders. The amendment was blocked by the right-wing opposition. The government's defeat was yet another example of how Gen Pinochet continues to exert an influence over domestic politics long after relinquishing power to civilians.

Nevertheless, these public battles have obscured the extent to which progress is being made in bridging the chasm of distrust that separates civilians and men in uniform. This year, for the first time, 20 civilians will be graduating with a master's degree in defence studies from the Chilean War Academy. 'It has been an invaluable forum for discussion, to get to know their way of thinking,' says Mr Hugo Espinoza, a left-wing sociologist who was expelled from the military-controlled universities during Gen Pinochet's rule.

Mr Espinoza also sees progress in the military's relations with congress. 'Their greatest fear was that politicians would meddle in military affairs,' he explains.

After a tense first year, the armed forces now send their top brass to parliamentary defence committees to explain and account for military expenditures. The navy and air force have made a special point of inviting senators and deputies on inspections and military manoeuvres.

Despite greater accountability, military expenditure remains high for a country with no border conflicts. The military budget consumes 15 per cent of the government's income - about 4.5 per cent of GDP. In per capita terms, Chile has the highest military expenditure on the continent, excepting Cuba.

Few Chileans feel bold enough yet to question the cost of their armed forces, let alone their efficiency. These troublesome issues have been left for a future government to tackle. President Aylwin's main aim during this transitional four-year government has been to establish a modus vivendi with Chile's former masters.

Mr Aylwin now says he has grown accustomed to the general. The military, for its part, has come to accept the legitimacy of democracy. No one in Chile fears another military coup.

CL Chile, South America P9711 National Security P9121 Legislative Bodies CMMT Comment & Analysis P9711 P9121 The Financial Times London Page 40 769
Survey of Chile (9): Plain talk has won respect - Profile of Alejandro Foxley, finance minister Publication 930519FT Processed by FT 930519 By LESLIE CRAWFORD

MR Alejandro Foxley, the Chilean finance minister, embodies the change in economic thinking that has put Latin America on a new course of development after the 'lost decade' of the 1980s.

Once a fierce critic of General Augusto Pinochet's free-market policies, Mr Foxley came to accept the benefits of an open economy and a reduced role for the state. He faced a difficult balancing act when he took over the finance ministry in March 1990, on Chile's return to democracy.

The business community was nervous of the new government, a coalition of Christian Democrats and Socialists. The political transition had also raised expectations among the mass of Chile's poor and middle-classes, who had suffered great hardship under military rule. 'Our main economic challenge was also an ethical one: how to balance economic development with a greater degree of social equality,' he says.

But Mr Foxley also had to prove that democratic governments in Latin America could avoid populist traps and be responsible economic managers. His leitmotif since assuming the finance portfolio has been to pursue a 'conservative fiscal policy with progressive ends.' One of Mr Foxley's first acts was to push a tax package through the congress that raised corporate taxes from 10 to 15 per cent, and the sales tax by two points, to 18 per cent.

The extra Dollars 1bn in revenues was earmarked for social spending. Pensions and family benefits were increased; state subsidies for low-cost housing were extended; and teachers and health workers got more pay. In spite of this, Mr Foxley faced a rash of public sector strikes in 1991.

He refused to bow to wage demands. He has been equally firm with Chile's business leaders; he once told them to 'stop whining' when they complained about high interest rates and the appreciating peso.

Mr Foxley's detractors accuse him of arrogance, and say he takes criticism badly. But his plain talking has also won much respect for the 53-year-old finance minister. He is acknowledged as a heavy-weight in President Patricio Aylwin's cabinet. If the ruling coalition wins the December 1993 elections, it will be largely as a result of the steady economic course charted by Mr Foxley. He is tipped to become Chile's next foreign minister, but many of his supporters believe he may want to make a bid for the leadership of the Christian Democratic party, to launch his presidential candidacy in 1997.

An economist by training, with a doctorate from the University of Wisconsin in the US, Mr Foxley cut his political teeth during General Pinochet's dictatorship. Like most academics who advocated the restoration of democracy, Mr Foxley was banned from teaching at state universities, and was subjected to police harassment, isolation and censorship. His house was broken into several times and death threats were left inside his passport.

Together with other banned academics, he founded Cieplan, an economic think tank with Christian Democratic leanings. When General Pinochet gave way to contested elections in 1989, Mr Foxley joined Mr Aylwin's presidential campaign.

By then he was convinced that retaining the broad lines of the military's economic policies was the key to a smooth political transition. He was rewarded with the finance portfolio.

Mr Foxley is also earning a reputation abroad as a leading exponent of the importance of free trade for developing countries. He chaired the IMF/World Bank's development committee between 1990 and 1992, from which position he reminded industrialised nations of the need to dismantle protectionist barriers.

With much of Latin America betting on an export-led model of development, he argues, access to foreign markets has become much more important than aid, soft loans or debt-relief. 'The absence of further liberalisation in industrialised nations means that middle-income countries like Chile are losing a unique opportunity to expand their exports,' Mr Foxley says.

CL Chile, South America P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis PEOP People Foxley, A Finance Minister Chile P9311 The Financial Times London Page 40 683
Survey of Courier and Express Services (5): Red tape and sealing wax - Richard Evans tries to unravel the great UK parcels sell-off mystery Publication 930519FT Processed by FT 930519 By RICHARD EVANS

THE long term structure of the parcels industry remains unclear following further delays by the government in reaching a decision on how to privatise the Post Office and float off its Parcelforce division.

Mr Michael Heseltine, trade and industry secretary, has yet to decide whether to sell off the Post Office as one unit or break it up into three - the Royal Mail, Post Office Counters, and Parcelforce. No clearly preferred option has yet emerged.

Mr Edward Leigh, the trade and industry minister with direct responsibility for the post office, is a strong supporter of privatisation, but he is understood to have accepted that the measure might have to be delayed until next year or beyond.

The sale of Parcelforce could still proceed without primary legislation, though. Under the British Telecommunications Act, 1981, Mr Heseltine has the power to sell Post Office subsidiaries, but he is thought unlikely to take a decision on this part of the privatisation process until he has decided on the overall form of the sale.

This caution comes as a great disappointment to the senior managers of Parcelforce following Mr Heseltine's announcement last July that he intended to privatise the post office division.

However, two weeks later, Mr Heseltine made a further announcement of a fundamental review of the future status of the Post Office. The two have been inextricably linked ever since and the future seems as unclear as ever.

Mr Heseltine said that financial support would be made available so that management and employees could bid for Parcelforce, but private sector groups have also expressed an interest.

Mr Malcolm Kitchener, managing director of Parcelforce, is philosophical about the delay, although he would clearly like the uncertainty to end as soon as possible. 'We have been in limbo and it has not been an ideal situation. It is unsettling and it is harder to win new business when people know there is a big decision in the offing,' he says.

Nevertheless, Parcelforce has held its own in the very difficult trading climate created by the recession. It currently holds nearly 30 per cent of the non-urgent market and about 25 per cent of the total market including express services. This makes it the largest UK parcels delivery organisation with an annual turnover in excess of Pounds 500m.

Considerable progress has been made in knocking the organisation into shape for privatisation as, in contrast to the Royal Mail division, with its monopoly in letters delivery, Parcelforce has made substantial losses in the past.

It notched up a loss of Pounds 131m in the year to the end of March, 1991 but this was reduced the following year to Pounds 24m with a programme of cost cutting, voluntary redundancies and the introduction of high-tech equipment and support services. In the financial year just ended more progress has been made with a reduction of costs of another Pounds 14m.

'It obviously gets harder all the time, but we will get there. What we need to do is get on with our business plan as that is where further benefits will come,' says Mr Kitchener. He joined Parcelforce from Fisons pharmaceuticals division early in 1991 as finance director and became managing director in August last year.

The business has taken great steps to distance itself from the Post Office and the nationalised image it represents. It began with the setting up of a separate parcels division within Royal Mail in 1986, the change of name to Parcelforce in 1989, and finally the dropping of the Royal Mail prefix entirely last year following success in establishing a separate identity.

Parcelforce makes commercially based payments to the Post Office for the use of its services, such as access to Post Office Counters and delivery to rural areas, and although it does not charge value added tax on its own services, Parcelforce is in turn is unable to reclaim an estimated Pounds 12m a year for costs incurred on items such as petrol or overheads.

A five year Pounds 250m investment plan was launched last year to upgrade the network of depots covering 23m UK addresses in the UK, the 10,000 strong vehicles fleet, and information technology. It is investing Pounds 15m in a high-tech sorting centre at Liverpool due to be fully operational next year.

'Our overall strategy is geared to improving both cost and quality in all areas of our business,' says Mr Kitchener. 'We have invested in high-tech equipment and have undertaken a restructuring and upgrading of all our services to meet the growing demand for guaranteed next day delivery and one-stop shopping.'

It is the guaranteed next day delivery that has been the weak link in Parcelforce services until now. The organisation delivers over 180m parcels a year, but mostly in the two or three day 'non-urgent' market, even though around 95 per cent of customers come from the business sector.

Research shows there is a trend towards time-guaranteed services, and it is estimated that next day services could soon account for over 40 per cent of the market. It is this potentially more lucrative area, at present led by Securicor, that Mr Kitchener is anxious to attack.

At present Parcelforce takes only a small slice of this sector, although volume growth on its next day service increased by 50 per cent in 1992-93, and so far this year it has secured Pounds 10m in extra revenue from its 24 hour express service.

It now offers a network of three time-guaranteed services, Parcelforce Datapost, Parcelforce 24 and Parcelforce 48. These ensure delivery by 10am or noon the next morning, close of business next day, or two days respectively.

Mr Kitchener and his colleagues now await some form of privatisation with impatience. They do not believe it would make a big difference to the way the business is already conducted in a highly competitive environment, but it would end the uncertainty and allow business plans to be fulfilled.

GB United Kingdom, EC P4311 U S Postal Service P4213 Trucking, Ex Local P9651 Regulation of Miscellaneous Commercial Sectors CMMT Comment & Analysis P4311 P4213 P9651 The Financial Times London Page 21 1054
Survey of Courier and Express Services (7): Danger; nervy computer on board - A mobile tracking system that boosts security and reliability Publication 930519FT Processed by FT 930519 By CLAIRE GOODING

ANYONE stuck in traffic behind a Securicor Datatrak van sees this warning emblazoned on the doors. 'Securicor vehicles are fitted with Datatrak, an automated vehicle tracking system. Should the vehicle be stolen, or unlawfully removed, Securicor will track its precise movements, and will pass that information to the police immediately.'

Securicor developed its Datatrak system to track these cash-in-transit vans, to provide continuous automatic real time reporting of location and status.

Between 1988 and 1991 the system was extended to include two-way messaging. Each vehicle has a small computer unit which receives signals from the nationwide transmitter network.

The data gathered is then sent via a network of base stations and displayed on a series of digital maps on a colour screen in the controller's office. Users of the Datatrak service include police, ambulances and London Transport.

The first independent courier operation to use the Securicor Datatrak system was Link Couriers at Heathrow. Dick Temple, Link's founder and managing director, says it helps to fulfil the two things which matter most to courier clients, 'speed of response and some feedback on where the parcel is and when it will be delivered'.

When Temple first set up in the courier business in Godalming in 1975, communications technology was non-existent, or at least limited to using the customer's telephone to report a delivery. But the 1980s saw great leaps in the technology available: private mobile radio, online databases, even barcoding for monitoring what arrived where and when. Now mobile data and satellite communications are providing increasingly sophisticated systems.

In the last two years, large companies such as Securicor, Parceline and Royal Mail have invested millions on information technology. Countrywide networks have created the infrastructure for Automatic Vehicle Location. Now smaller companies such as Link can benefit from some of that investment.

Temple says he has always been an enthusiast for any advances in communications technology which enable his company to improve its service. Link's fleet of 40 vans and motor cycles handles around 1,000 national and local jobs a week from its Heston, Middlesex base. Temple has moved from tone-only pagers in the 1970s into private mobile radio in the 1980s, and for the last two years, the company has used Band 3 radio, enabling it to take customers from a much wider area than the M25 corridor.

Temple sees Datatrak as a leap ahead of telephone and radio communications. Each of Link's 20 vans now has an antenna and locator unit which enables the controller to see the exact location of vehicles to within 50 metres' accuracy, via a signal that is updated every 108 seconds. (Security companies operate the more expensive eight-second option.)

The chief benefit is the efficient deployment of resources. 'In the early days it was acceptable to collect within the hour,' says Temple. 'Now customers expect 10 to 15 minutes. With this system we can use the closest vehicle. It is also very impressive in giving accurate feedback to the customer who is chasing a consignment on the phone.

'We can paint a picture for them - it's doing 60 mph on the A308, or just about to pass junction X on the motorway.'

The console in the van includes a small printer and a keypad. The driver can glance at a message as it is printed out and tap a number into the keypad in acknowledgment. The response is pre-coded signifying, for example, whether the van can accept another job or not.

'The next step', says Temple, 'is to have proper two-way messaging rather than the one-way message and confirmation from the driver.' Another company, Cognito, is already using two-way data terminals on its own network but without Datatrak's location tracking facility which allows the controller to pinpoint a van on a map.

The hardware in each van costs about Pounds 600, (the price has dropped from Pounds 1,400 two years ago) with radio charges at about Pounds 15 per week per vehicle. The controller uses a Compaq connected to the network, costing about Pounds 5,000, and the 20-inch screen used for the map display is an Eizo monitor, costing another Pounds 3,000. Link estimates the system costs it around Pounds 1,000 per year per van, an expense it can easily justify.

Link drivers are paid on performance, (commission per completed delivery), not on hours worked, so they are happy to use the system, and find it needs the minimum of training.

It is for the user to decide what level of detail is recorded for any one job. For example, Datatrak could solve the problem of policing a large fleet (100 vehicles or more), which might lose a great deal of money if the employees used the vans privately, or claimed unjustified overtime.

Temple is well aware of Datatrak's potential for policing and control, but that's not what interests him. 'It's a service benefit. The customer notices the difference because we are able to give realistic collection times. We would build a margin into our estimates previously, but now we can say with confidence that we can be there in 10 minutes.'

He knows that Datatrak might in time be overtaken by satellite systems, but feels he has picked the right technology for the moment, especially if delivering in urban areas where radio reception can be patchy. He believes that new advances may include voice/data lines, and yet smaller onboard computers, the size of a portable CD system, or even, eventually, a watch. Currently his main concern is integrating his Datatrak system with software bought from Marlow-based Fleetway, which manages booking and charging automatically.

Fleetway provides modular software for administration and online booking, for courier, taxi, delivery and other transport companies. According to Keith Fellowes, group sales manager, Fleetway has 250 users in the UK, and 4,000 worldwide. 'Currently we work with both Cognito and Datatrak. This gives users seamless integration making voice-radio contact unnecessary.'

Fleetway can use any existing messaging system, but currently finds these two provide the best result. Becky Clark, technical director, sees a largely unexploited market among smaller courier and delivery companies, who, as hardware costs spiral down, can afford to emulate larger companies with online systems. 'I reckon that there are at least 8,000 potential customers out there in the UK alone,' she says.

Mark Attwood, of Manchester Publishing Company, describes the industry as 'paranoid' in the 1980s: 'They never talked to one another.' His newly launched magazine, Courier Express, has a deliberately high IT content, looking at future trends such as mobile data. 'The people who have invested in technology early can point to success.' He cites two companies as proof: Link Couriers, and Dale Express, a fast-growing Croydon-based company with an unusual 'one-consignment per van' operation, which is administered by custom-built software from Fleetway.

'IT should be the key to growth in the future,' concludes Attwood.' I believe it's an investment in increasing service levels, and research shows that's an issue that rates above cost for most customers.'

GB United Kingdom, EC P4215 Courier Services, Ex by Air P4213 Trucking, Ex Local P3669 Communications Equipment, NEC CMMT Comment & Analysis RES Facilities TECH Products & Product use P4215 P4213 P3669 The Financial Times London Page 21 1228
Survey of Courier and Express Services (6): Meaner and fitter after the recession - After a heavy battering, the surviving wholesalers show they still have a role to play Publication 930519FT Processed by FT 930519 By PHILLIP HASTINGS

PREDICTIONS that the expanding global networks of leading express companies and activities by airlines would squeeze out independent wholesalers are proving wide of the mark.

There were a number of significant casualties in the wholesale sector in the late 1980s but surviving wholesalers are now generally expanding.

In line with the overall trend towards greater co-operation in the express and air transport industries, they are increasingly developing partnerships with airlines to sustain that expansion.

Mr Larry Woelk, managing director of John Menzies Group wholesale express company Menzies Worldwide Distribution (MWD), believes that sort of co-operation is the way ahead for independent wholesalers during the 1990s.

'Airlines are increasingly looking to focus on their core business - flying aircraft. An airline can do a deal with us and because we are a wholesaler, we can service the entire agent community,' he claims.

Wholesalers work on behalf of a wide range of freight industry companies - from traditional forwarders with a requirement for someone to handle their more urgent package traffic to established courier/express operators seeking a neutral organisation to cover routes where they lack the traffic volumes or presence to handle everything themselves.

Wholesalers tend to fall into one of two categories. The first involves independent companies like MWD which specialise in that particular business. Another is International Bonded Couriers (IBC), a US-based company with a European office in London which specialises in handling traffic for Latin America. The second group involves operations developed by some of the larger international airlines.

British Airways, for instance, has an organisation called Speedbird Courier which has built up a worldwide network of wholesale courier services. British Midland operates similar services within Europe and also has a separate wholesale division for worldwide shipments called International Cargo Marketing. Air France recently consolidated all its express products under one generic name - Air France Express - to highlight its renewed focus on wholesale operations.

It was that sort of involvement by leading airlines which led to suggestions that the days of the independent wholesale express company might be numbered.

However, many airlines have struggled to develop successful express operations and there is a pronounced trend for many to work with outside wholesalers.

For example, the three-year-old wholesale courier/express company Bridges Worldwide already has close links with a number of leading longhaul airlines. The company initially launched services between London, Singapore and Sydney with Singapore Airlines and is now UK agent for that airline's courier products.

Bridges also works with South African Airways for services into Southern Africa, Gulf Air for the Middle East Gulf and Virgin Atlantic Airways for the US and Tokyo, Japan markets.

In the case of Virgin, Bridges is the airline's general handling agent for express products worldwide.

'We work very closely with Virgin and we help them to develop their express products,' comments Mr Gary Kendall, general manager for Bridges Worldwide. 'All the airlines we work with can take advantage of our worldwide network - for example, we get traffic coming in from India on one carrier which is then transferred on to Virgin flights for onward movement to the US.'

Meanwhile, US carrier United Airlines has over the last year developed a wholesale airport-to-door service between the UK and the US in conjunction with MWD. Similar services are now being developed out of Spain, Belgium and France. MWD says it is also talking to 'a couple of other international airlines' about developments similar to its partnership with the US carrier.

Within Europe, the advent of the EC single market is expected to boost regional air courier wholesale operations. Specifically, the business should benefit from a reduced need for on-board couriers to accompany shipments and lodge documentation with Customs authorities.

Mr John Wilson, marketing manager express products for British Airways World Cargo, pointed out that up to the beginning of this year, the carrier's Speedbird organisation used couriers for all European services. Now, he says, it is beginning to dispense with them on some routes out of London, starting with those to Germany and Belgium, and is also planning to increase the frequency of services.

Apart from London, the only other UK airport with international Speedbird Courier services at present is Birmingham which has routes to Milan and Brussels. 'In future, we will be looking to open up direct services from places like Glasgow and Manchester to the Continent and also, further down the road, to start bringing in Continental regional airports,' he added.

British Midland is taking a similar path. The airline has already dispensed with on-board couriers for its wholesale services between London and Dublin, Frankfurt, Brussels, Amsterdam and Paris. It is launching new direct courier services between points such as Belfast and Amsterdam, Glasgow and Paris and Birmingham and Brussels.

'This month we are also introducing a new product, a sameday priority wholesale courier service from UK regional points like Glasgow, Edinburgh, Belfast, Teesside and Birmingham to the Continental centres we cover, via a transfer at London Heathrow,' British Midland added.

However, some general European wholesale courier/express service development is still being slowed down by continuing differences in the way individual EC Customs authorities treat courier shipments. The UK Customs, for example, now allow airlines to send EC-bound courier traffic without an on-board courier, as are their counterparts in Germany, Belgium and the Netherlands. Customs in France and Italy, though, are currently not prepared to make that concession for services which carry worldwide shipments in transit as well as items moving solely within the EC.

'If you take our London-Frankfurt route, for example, that carries both UK-originating traffic and also traffic which has originated in New York and been transshipped in London for onward movement to Germany,' pointed out Mr Wilson. 'So for the moment, we are going to have to retain on-board couriers on certain flights to cater for that international traffic.'

On-board courier service customers hoping that the reduced need for someone personally to accompany EC traffic will cut costs are also likely to be disappointed. Any savings on costs through not using couriers will be counter-balanced by additional ground-handling service and systems costs, warn wholesale courier service operators.

XG Europe P4213 Trucking, Ex Local P4215 Courier Services, Ex by Air P4513 Air Courier Services P4011 Railroads, Line-Haul Operating P5099 Durable Goods, NEC CMMT Comment & Analysis COMP Strategic links & Joint venture P4213 P4215 P4513 P4011 P5099 The Financial Times London Page 21 1103
Survey of Chile (6): Welcoming magnet for multinationals - Mining plays a crucial role Publication 930519FT Processed by FT 930519 By LESLIE CRAWFORD

Enormous mineral resources, a welcoming foreign investment regime and sound macroeconomic fundamentals have transformed Chile into a magnet for mining multinationals.

The foreign companies flocking to Chile reads like a Who's Who of the mining world: Anglo-American, Bema Gold, BHP, Chevron, Cominco - and all the way down the alphabet to RTZ and Shell/Billiton. The Chilean Copper Commission, Cochilco, estimates that Dollars 5bn worth of investment will be channelled into the mining sector to explore, develop or expand projects.

Nowhere else in the world are there so many projects so close to fruition. Chile is the world's leading copper producer: about Dollars 4bn of this foreign investment is being channelled into new copper mines. The country has one-quarter of the world's known copper reserves.

Some Dollars 560m in gold projects will move Chile up the ladder of the world's top 10 gold producers. A further Dollars 405m is being invested in non-metallics such as iodine and nitrates.

Chile's mining sector plays a crucial role in its economy, accounting for almost half of exports and 15 per cent of GDP. According to some estimates, mining production will increase more than 50 per cent by the year 2000. High ore grades at new mines mean that Chile will also continue to be one of the world's lowest cost producers. One estimate by Cochilco puts copper production rising from 1.94m tonnes last year to 2.18m tonnes in 1994.

The mining boom has been several years in the making. General Pinochet, who ruled Chile between 1973 and 1990, wooed back mining multinationals with a liberal foreign investment regime and a mining code which grants property rights over mining concessions. The return of democracy in 1990 did not upset this vigorous activity, as the new government decided to keep the mining and investment codes intact.

More than half of Chile's copper is mined by Codelco, the state-owned Chilean Copper Corporation. But Codelco's four mines, including Chuquicamata, the world's largest, are old. Production is in decline, operating costs are rising, and the powerful Copper Workers' Union, with 19,000 members, has blocked management plans to reduce overmanning.

Nevertheless, Codelco has a plan to reverse its dwindling fortunes. Voluntary redundancies and a crackdown on absenteeism increased labour productivity by 6 per cent last year, according to Mr Jorge Bande, Codelco's vice-president for development. The state concern has also launched an exploration drive to find new reserves.

An important breakthrough for Codelco came with the approval of a new law in 1992, authorising the state company to form joint ventures with the private sector. Earlier this year, Codelco invited 20 mining companies to bid for the exploration rights to four of its mining prospects. The idea, says Mr Bande, is to allow Codelco to share the risk of exploration. He expects the first joint-venture agreements to be concluded about the middle of the year.

Codelco owns one-third of the registered mining property in Chile. Investment, however, has been limited by budget constraints dictated by the finance ministry. Mr Bande sees the joint ventures as a way of tapping the huge mineral potential that Codelco is unable to develop on its own.

In addition, Codelco has completed the basic engineering for Radomiro Tomic, a huge ore body discovered near Chuquicamata. The new mine is scheduled to enter production in 1995. Radomiro Tomic will be a test case for the state-owned copper company. It is the first mine that Codelco is developing from scratch, and the challenge will be to produce copper as cheaply and efficiently as the private sector.

Mr Bande says Codelco is in the process of getting the final financial approval for Radomiro Tomic, which will require an investment of Dollars 450m. Once it is up and running, the mine will add 150,000 tonnes of copper to the 1.15m tonnes produced by Codelco's other divisions.

Most of Chile's increased copper output, however, will come from private sector projects. Leading the wave of foreign investment, La Escondida - the richest copper deposit in the world - entered production in December 1990. La Escondida is jointly owned by BHP of Australia, RTZ and a consortium of Japanese smelters led by Mitsubishi. The Dollars 900m project was completed six months ahead of schedule - a tribute to the engineering and organisational skills of the mainly Chilean contractors.

The mine, located in the Atacama desert, last year exported about 760,000 tonnes of copper concentrates (a semi-refined product equivalent to about 320,000 tonnes of refines copper), making it the second-biggest copper operation in the world. The company is studying plans to increase production by a further 80,000 tonnes - the output of a medium-sized mine - by 1994. It is testing a method to process the extra tonnage into pure copper cathodes, using a new technique which does not require smelting.

Exxon Minerals, of the US, is close to completing a Dollars 400m expansion programme at its Los Bronces copper mine which will double production to 200,000 tonnes a year.

Cominco of Canada recently wrapped up the Dollars 250m financing to develop its Quebrada Blanca copper deposit in the Atacama desert. It expects the mine will enter into production in 1994 with an output of 75,000 tonnes a year.

Phelps Dodge of the US is expanding its Ojos del Salado mine and plans to develop a deposit known as La Candelaria, already being dubbed Chile's new Escondida.

Outokumpu of Finland recently sold half of its Zaldivar copper deposit to Placer Dome for Dollars 100m. The Canadian resources group also agreed to finance up to Dollars 400m towards the cost of development.

Minorco, an investment company owned by Anglo-American of South Africa, paid the record price to enter a copper project last year. Minorco shelled out Dollars 190m to buy Chevron's (the US oil group) stake in Collahuasi, a copper deposit high up in the Andes, now owned in equal shares by Minorco, Royal Dutch/Shell and Falconbridge. Minorco estimates Collahuasi's start-up date will be 1996-97.

The huge sums being paid by multinationals for a share of Chile's mining bonanza reflects the country's growing reputation as a safe-haven for foreign investment. 'The risk factor is not there,' says one diplomat in Santiago. 'Companies are prepared to pay top dollars for good mining projects.'

A comparative example: in Peru, Anglo-American's Chilean subsidiary Mantos Blancos recently acquired the rich Quellaveco copper deposit from state-owned MineroPeru for Dollars 12m. The huge price differential between Quellaveco and Collahuasi, for roughly the same amount of copper reserves, reflects the penalty Peru is still paying for its political instability.

The wealth of mining projects, concentrated mainly in Chile's desert north, is putting a strain on the country's underdeveloped infrastructure. Finding water in the driest desert in the world is as much a priority as striking a rich mineral deposit. Electricity is also in short supply. Port facilities are deficient.

La Escondida chose to build its own port, rather than compete with Codelco for Antofagasta's overstretched docks. Phelps Dodge, which wants to ship La Candelaria's copper concentrates from the small port of Caldera, is encountering opposition from local fishermen. They fear the loading operation will pollute the bay.

Environmental awareness is growing in Chile, and the clash between Phelps Dodge and the fishermen of Caldera is by no means an isolated example.

Local farming and fishing communities have recently won important legal victories against the polluting activities of mining operations. The government has begun enforcing stricter air and water pollution controls. Several companies, including Codelco, are now investing millions of dollars to clean up their act.

Corporacion Nacional del Cobre CL Chile, South America P1099 Metal Ores, NEC P1041 Gold Ores P1021 Copper Ores CMMT Comment & Analysis RES Natural resources RES Capital expenditures P1099 P1041 P1021 The Financial Times London Page 39 1314
Survey of Chile (7): World glut hits kiwi-growers - The reasons for the fall in fruit exports Publication 930519FT Processed by FT 930519 By KEN WARN

THE OUTLOOK for Chilean fruit exports has become less sunny after a decade of spectacular growth. Rising protectionist sentiment and the emergence of new competitors have combined with last year's strong peso and lower international prices to place unaccustomed pressures on the industry.

The European Community has moved to curb imports of apples following a good growing season. In addition, tumbling prices for kiwi-fruit, due to a worldwide glut, have hit Chilean growers hard. Fruit exports, which constitute about a tenth of Chile's exports, slipped 2.3 per cent to Dollars 938m in the first 11 months of last year, according to the Central Bank.

By volume, fruit exports from September 1992 to March 18 this year grew a modest 2 per cent, compared with the same period of the previous season, according to the Chilean Exporters Association. Shipments to the EC fell 10.1 per cent, hit by the introduction of a licensing system in February aimed at protecting European apple growers.

While the problems over apples may prove a short-lived result of the good European season, the difficulties of Chile's kiwi-fruit growers are more intractable. 'The market cannot consume all the kiwi-fruit being produced. This is now a world problem,' says Mr Ricardo Ariztia, president of the Federation of Chilean Fruit Producers (Fedefruta).

Of the major producers - Chile, New Zealand, Italy and the US - one country will lose out heavily, according to Mr Ariztia. 'New Zealand and Chile is the big commercial fight. Some of our kiwi growers will undoubtedly go out of business,' he says. Chile has planted about 12,000 hectares with kiwis.

South Africa's re-emergence in international markets has added to these woes. The country shares the same growing season as Chile, as do emerging competitors elsewhere in Latin America, such as Argentina and Brazil. 'Last year we lost out in the German market competing against South African fruit,' says Mr Ariztia.

He cites South Africa's high quality control and standardised packaging as posing the biggest threat to Chilean growers.

Argentina, according to Mr Armen Kouyoumdjian, an independent economic consultant, 'is a sleeping giant. When it gets its act together it could compete very effectively against Chilean fruitgrowers.'

These challenges take place against a background of continuing tensions between Chile's exporters - dominated by multinational companies - and the growers, often small, under-capitalised operators. The biggest bone of contention is the 'free consignment' market system, under which growers hand over their produce to the exporters, not knowing what price they will eventually get after the fruit is sold on.

'We believe the final price we receive can be improved,' says Mr Ariztia.

Some growers have started to export direct, so far with very modest amounts of fruit, to circumvent the exporter companies. In turn, the multinationals have been buying agricultural land themselves in a bid to integrate their operations.

Yet, in the face of these internal tensions and mounting external compeition, the mood in the industry remains optimistic, if concerned. 'The market for Chilean fruit is not saturated,' says Mr Ronald Bown, president of the Chilean Exporters Association. 'This is a special year and we expect to overcome many of the problems that are facing us.'

Both growers and exporters are seeking to move to a mandatory system of quality control and to standardise packaging and box sizes. Almost all Chile's major fruit export companies have their own quality certification units. About 70 per cent of exports are self-inspected with only the remainder looked at by third parties.

'We must work very fast on these issues. But I hope we can reach agreement on mandatory quality control and packaging standardisation with the exporters by next season,' says Mr Ariztia.

The industry is also boosting its promotional activities. The exporters have earmarked Dollars 3m for promotion in Europe in 1994, and are working on a long-term marketing plan for the US. 'The EC and the US are still the most promising markets for us and will probably remain so for around the next 10 years,' says Mr Bown.

Fruit and vegetable exports to Latin America soared 48 per cent in the growing season to mid-March, from an admitedly low base, helped by a free-trade agreement with Mexico. A similar agreement with Venezuela at the beginning of April and a planned deal with Colombia should also help develop this market.

Longer term, Chile is hoping for great things from Asia. The exporters association is looking for a way into the coveted Japanese market, with its strict quarantine rules against agricultural imports, and expects to enter the Korean market in the next four to five years.

'We have to work with imagination and intelligence - exporters, growers and government together,' says Mr Ariztia. 'The industry is not going to grow at 10 per cent a year any more, but we still have a big contribution to make to this country.'

CL Chile, South America P0175 Deciduous Tree Fruits P0179 Fruits and Tree Nuts, NEC CMMT Comment & Analysis MKTS Foreign trade P0175 P0179 The Financial Times London Page 39 865
Survey of Chile (3): Key facts Publication 930519FT Processed by FT 930519

------------------------------------------------------------------------ Area 756,946 sq km Population 13.4 million (1992 estimate) Head of State President Patricio Aylwin Currency Peso (PS) Average Exchange Rate 1991 Dollars 1 = PS349.4 1992 Dollars 1 = PS362.6 ------------------------------------------------------------------------ ECONOMY 1991 1992 ------------------------------------------------------------------------ Total GDP (Dollars bn) 31.3 38.1 Real GDP growth (%) 6.0 10.4 GDP per capita (Dollars) 2,338 2,840 Components of GDP (%) Private Consumption 66.7 Total Investment 18.8 Government Consumption 9.6 na Exports 35.8 Imports -30.9 Consumer prices (% change pa) 21.7 15.4 Copper Production: (% change pa) 15.4 5.9 Reserves minus gold: (Dollars bn, year end) 7.0 9.2 M1 growth (% pa) 51.5 28.6* Deposit rate: (% pa, avg) 22.3 18.3 Current Account Balance: (Dollars bn) 0.1 -0.6 Exports (Dollars bn) 8.9 10.0 Imports (Dollars bn) 7.3 9.3 Trade Balance (Dollars bn) 1.6 0.7 Total external debt (Dollars bn) 17.4 18.4 Debt service ratio (%) 21.5 15.4 Main Trading Partners: (1991, % by value) Exports Imports Japan 18.1 8.4 USA 17.6 20.6 Germany 7.8 6.5 Brazil 4.9 9.1 ------------------------------------------------------------------------ Notes: * = Q3 figure ------------------------------------------------------------------------ Sources: IMF, World Bank, Datastream, Economist Intelligence Unit ------------------------------------------------------------------------

CL Chile, South America P9611 Administration of General Economic Programs STATS Statistics ECON Economic Indicators P9611 The Financial Times London Page 38 215
Survey of Courier and Express Services (4): The bidders are gathering - British Rail sell-off will start with disposal of Red Star parcels business Publication 930519FT Processed by FT 930519 By DAVID ROBINSON

BY late summer the Red Star express parcels business will be under new ownership. The information memorandum giving potential purchasers a comprehensive commercial and operational insight into the business is expected to be available by the end of May.

Once available the sale will be advertised inviting bids for the business.

'We expect there to be a great deal of interest in the sale,' says Dr Glyn Williams, managing director of the BR Parcels Group. 'l cannot divulge the number of companies who have so far expressed interest but it is likely to be between one dozen and three dozen.'

All companies applying for the memorandum will have to sign a confidentially agreement as it will contain sensitive commercial information. Few companies have yet declared a firm interest although press reports suggest that a number of the leading road-based operators will apply for the memorandum. One definite is a management buy-out team including six existing Red Star managers.

Because Rod Star does not run trains the sale does not require any enabling legislation as is the case with the privatisation of other parts of BR. Once the memorandum is issued the sale process is expected to be fairly quick.

The present management team has basically over the past year or so been making Red Star a leaner and fitter organisation to increase its productivity and competitiveness. The emphasis of these changes has been on rationalisation, service improvements and increasing quality to the customer.

Previously comprising four divisions, the BR Parcel Group has been reduced to two: Red Star and the Rail Express Systems. The latter handles the Pounds 40m a year contract with Royal Mail.

Red Star previously consisted of domestic and international businesses. The unprofitable international traffic was chopped with the exception of some parcel traffic into Europe and a successful business to Ireland. These are now merged in with the domestic business.

Track 29, a division operating a palletised service for heavier parcels was sold to the road agents which handled the collection and delivery last September because it was not making money and needed considerable investment.

'We managed to reduce our losses by massive productivity deals and we have looked very hard at every penny we spend,' explains Dr Williams. This involve the loss of some 300 jobs through the last financial year to the present 1,300 and also the number of parcel outlets has been steadily reduced over the past two years from 500 down to a core 250.

These steps have considerably improved the Parcel Group's financial performance. In the 1992/93 fiscal year to the end of March, turnover amounted to Pounds 47m. In that year 'we substantially reduced the losses incurred by Red Star which for 1991/92 which are more or less on record at being Pounds 11m,' commented Dr Williams.

'I am not able to tell you the losses in 1992/93 but I can say that they were roughly half at those in 1991/92, so we are making very considerable progress.' The exact figures will be in the sale memorandum.

'This has been achieve through very substantial cost

reduction,' explains Dr Williams. 'We have suffered like our competitors and the total market has gone over the last three years because of the recession and we are suffering although our market research does indicate that we are not suffering any more than anyone else. We have managed to maintain our market share of about eight per cent through the recession.

'We have had declining revenues but in the last four or five months it has been fairly flat but l cannot talk about green shoots yet,' observes Dr Williams. He is hopeful that as the economy picks up, so Red Star's business will improve. 'A one per cent improvement in the economy brings a much more than one per cent improvement in our business', he adds.

Red Star's key advantage over its competitors is its same-day business, be it door-to-door or station-to-station. Dr Williams describes it enthusiastically as 'being marvellous, really really good.'

Its next day services provide door-to-door options of delivery before 9am, before 10.30am and before 12 noon. There is also a next day station-to-station option. The next day services account for the largest proportion of Red Star's business but same day is the premium traffic, which probably represents a major attraction to potential purchasers.

As part of preparing Red Star for the sale a train space agreement is currently being negotiated with BR to ensure the new owners access to trains, especially InterCity, the cost of access to platforms and to put into longer term tenancy agreements the already existing annual agreements for renting the shops which serve as Parcel Points.

Recession has meant that customers have traded down, moving from same-day to next-day services. In a move to combat this from last October, Red Star introduced completely revised charges which included substantial reductions; increased its sales and marketing activities and introduced a completely redesigned range of corporate and sales literature. The number of area managers was reduced from 26 to Il and administration streamlined.

As part of the cost cutting review the operation of some 65 road agents handling all Red Star's collection and delivery operations and accounting for 20 per cent of all costs, was reviewed. To improve quality to customers Red Star is working through BS5750 with accreditation due in July for all its sites. This is part of Red Star's total quality management programmes.

Further productivity gains could be achieved if investment was made in technology to enhance its existing systems but there is a hold on such expenditure until after the sale. 'We would like to spend several million pounds on improving our current technology which would make our operations cheaper to run and on which the payback is excellent', says Dr Williams. There would also be more job cuts.

Two new Parcel Points have been opened this year in Brentwood and Glasgow where business justifies them. Delegation of responsibility down the management lines has also resulted in a number of local initiatives taking advantage of niche opportunities to boost business. 'This includes a courier service in Glasgow city centre. For the future Red Star has been talking with BR's European Passenger Services about operating express parcel services using Channel Tunnel train services. There will be a limited space available but same day options at a three hour service from London to Paris or Brussels could open up a whole new business area. EPS will be marketing this space to all operators interested in using it so there will be no exclusivity.

What it does highlight is the emergence of high speed rail services as a growing alternative to air and road based express carriers. With the high speed passenger network developing year by year, the range of rail-based services could develop considerably.

BR Parcel Group GB United Kingdom, EC P4011 Railroads, Line-Haul Operating P9621 Regulation, Administration of Transportation CMMT Comment & Analysis TECH Services & Services use P4011 P9621 The Financial Times London Page 20