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 2781414 bytes long, its text includes 416948 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.

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

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English 7 July 1995 Masja Kempen David Mckelvie processing of original corpus files into tei conformance.
Letter: Trade route through Turkey Publication 930419FT Processed by FT 930419 From Mr AHMET ERSOY

Sir, Mr Steve LeVine is not entirely accurate when he says that Armenia's efforts to find a trade route through Turkey have been hampered by that country's long enmity with Armenia ('Armenia battles on two fronts,' April 7).

In fact a certain amount of trade from the Caucasus and central Asia has already reached the outside world through the Turkish Black Sea port of Trabzon. Since Armenia declared its independence nearly two years ago, Turkey has worked hard at building up good relations with this country.

This involved a good deal of pragmatism, not least since it is only few years since Armenian terrorists gunned down more than 40 Turkish diplomats, members of their families, and staff in cold blood in cities across the world. Some of the Armenian leadership have welcomed Turkey's attitude.

Turkey watches with concern the Armenian attacks which began in Nagorno-Karabakh and later escalated in other parts of Azberbaijani territories, and wishes the killings and the bloodshed to be stopped immediately.

In spite of this, it is hard to find anyone in Ankara who does not believe that there is much more to be gained by co-operation, including trade, with Armenia.

Ahmet Ersoy,

press counsellor,

Turkish Embassy,

43 Belgrave Square,

London SW1X 8PA

AM Armenia, East Europe TR Turkey, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 14 242
Letter: EBRD - a meaningless comparison of estimates and the need for broader remit Publication 930419FT Processed by FT 930419 From Mr ROGER MANSER

Sir, The major failing of the European Bank for Reconstruction and Development in the ex-Soviet Union and eastern Europe was not discussed in your article ('Spending at the European Bank', April 13). It relates to the rules, approved by its founder governments, that 60 per cent of the loans go to private-sector projects and 40 per cent to the public sector.

Private sector loans/equity investments are in effect only being made by the EBRD to bankable projects with a substantial export component and with a western joint venture partner. However, western investors do not want to invest because the risks are too high and few east European enterprises have so far been privatised. In essence there are too few good projects to fund.

To be successful, the bank needs to be able to fund smaller projects run by state-owned enterprises meeting local as well as export needs. It needs to be pro-active to be able to fund feasibility studies and then bring in one or several western joint venture partners to manage and restructure the operation.

Roger Manser,

editor, Sulphur,

31 Mount Pleasant,

London WC1X 0AD

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 14 230
Letter: EBRD - a meaningless comparison of estimates and the need for broader remit Publication 930419FT Processed by FT 930419 From Mr DAVID H RUMLEY

Sir, On reading the article on the Bank of European Reconstruction and Development, and its London headquarters ('The bank that like to say yes - to itself', April 13), I was surprised to find a figure I had given as a general estimate for fitting out a city institution building was being used as part of a detailed article investigating a particular project.

Though I was pleased to see reference in the article to the estimate containing neither furnishings nor mechanical and electrical equipment, its use as a comparison to the very specific criteria of the EBRD's headquarters renders it totally meaningless.

When looking at an individual case such as the EBRD's headquarters, there is a whole range of specific needs that should be considered. The items generally include security, boardrooms, computer and telecommunications facilities, conference halls, etc, all of which add considerably to the cost of normal fitting out.

Gleeds has worked on a number of projects throughout Europe with the EBRD. Its very use of such firms as Gleeds points to its acknowledgement of the importance of the correct apportionment and control of funds.

David H Rumley,

senior partner,

Gleeds,

chartered quantity surveyors,

Trinity House,

Church Road,

Tunbridge Wells, Kent TN1 1JP

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 14 249
Letter: Keep talent from emigrating Publication 930419FT Processed by FT 930419 From Mr AMORY HALL

Sir, Edward Mortimer argues persuasively ('Convenient cracks in the wall', April 15) for an EC 'managed immigration' policy. But by syphoning off those with 'the needed skills and allowing them to come in legally', western Europe would be depriving eastern Europe and the former Soviet Union (FSU) of precisely the individuals - hard-working, youthful and skilled - that are essential to economic regeneration in these regions. More than 8,000 Russian scientists have emigrated to New York alone in the last two years. Multiply that across the entire FSU's territory and sphere of influence, and it is clear that managed immigration will degrade even further the ability of the ex-communist world ever to catch up with the west, which will simply feed the emigration cycle later on. A more powerful case can be made for targeting western aid to jobs that 'anchor' talented people from the FSU where they can best do good - in their home countries.

Amory Hall,

Hill and Knowlton,

420 Lexington Avenue,

New York, New York 10017

US United States of America XL East Europe XJ West Europe P9721 International Affairs P99 Nonclassifiable Establishments NEWS General News P9721 P99 The Financial Times London Page 14 212
Letter: Open up Publication 930419FT Processed by FT 930419 From Mr CHARLES PICKTHORN

Your report, 'ERM does not need reform, say central bankers' (April 13), states: 'The secretive (EC) monetary committee, which is unlikely to publish its analysis and recommendations, is believed to oppose significant changes.' Why should it be secretive? Why should not its analysis and recommendations be published? Are we allowed to know the names of the Titans who compose the committee?

Charles Pickthorn,

Manor House,

Nunney, Nr Frome,

Somerset BA11 4NJ

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 14 103
Northern light at the end of tunnel: A ray of hope in the Nordic banking crisis Publication 930419FT Processed by FT 930419 By CHRISTOPHER BROWN-HUMES and KAREN FOSSLI

In the depressed world of Nordic banking a little good news goes a long way. So the reduced losses for 1992 reported by Norway's commercial banks were warmly greeted by the country's central bank as an indication that the sector's five-year crisis might be drawing to an end.

But with similar optimism lacking in either Finland or Sweden, it is still too early to call the turn in the wider banking crisis which has ravaged the region.

The sector's difficulties are a result of financial deregulation throughout the region during of the late 1980s and the deep recession which followed it. Norway's banks were the first to feel the pain, and may be the first to recover, although they are still a long way from a sustained level of profitability. Banks in Sweden and Finland, meanwhile, have just reported their worst-ever results, and with both countries still in deep recession, there is little to suggest that the 1993 figures will be much better. The leading banks in neighbouring Denmark have also reported heavy losses for 1992.

The Danish banks, though, are better capitalised than those in other Nordic countries, and are likely to survive the crisis without state assistance. That is not the case in the other three countries, where governments have been forced to intervene to maintain domestic and foreign confidence in their financial systems and to ensure their banks continue to meet international capital adequacy requirements.

Huge sums of taxpayers' money have already been invested, with Sweden providing SKr67.5bn (Pounds 5.85bn) in support, Finland FM38bn (Pounds 4.43bn), and Norway NKr27bn (Pounds 2.57bn). Further substantial injections of government funds are likely as the process of restructuring and winding down problem loans continues. This is certain to put further strain on state finances at a time when budget deficits in Sweden, Finland and Norway are swelling in face of rising unemployment and falling tax revenues.

At the heart of the crisis is the financial deregulation of 1980s, which included the relaxation of foreign exchange restrictions and a lifting of official guidelines on lending. The subsequent credit expansion was further fuelled by advantageous tax rules for borrowers and a scramble for new business. But banks found themselves with little protection when recession arrived and many loans fell into default.

Despite such common factors, differences between the countries are significant. Norway's problems began in 1986 when oil prices sharply declined; Finland's only really became apparent in 1991 following the collapse of trade with the former Soviet Union; Sweden, where the crisis only fully materialised in 1992, has been hit most heavily by plunging real estate values.

Last year was the worst so far, with total write-offs of problem loans across the Nordic banking sector amounting to more than SKr100bn. Sweden was the most severely hit with credit losses of SKr70bn, followed by Finland with nearly SKr30bn. Norway's credit losses were halved last year, from NKr17bn in 1991 to NKr8.7 last year, largely because its problems began and were addressed earlier.

Such figures explain why governments have felt compelled to intervene. Failure to act would have brought the risk of a domestic credit crunch and shaken international confidence in their financial systems.

The result of the capital injections is that Christiania Bank and Fokus Bank, two of Norway's top three banks, are now 100 per cent state-owned while 70 per cent of the biggest bank, Den Norske Bank, is controlled by the government. Two of the five biggest banks in Sweden are fully in state hands, while the country's most prestigious bank, Skandinaviska Enskilda Banken, is negotiating a support package. In Finland, the two savings banks groups, Skopbank and Savings Bank of Finland, have been taken over by the state.

Relations between the banks and their new public-sector owners are proving tricky, particularly in those countries where governments otherwise committed to privatisation, as in Sweden and Finland, have been forced to extend state ownership.

'We want to reprivatise the banks but to what degree and at what speed, it is far too early to say,' says the Norwegian finance minister Mr Sigbjorn Johnsen.

The rescues have been complicated by what are often conflicting objectives: getting the best value for the taxpayer, maintaining a level playing field within the sector and minimising state involvement.

A good illustration of the dilemma is provided by the current talks between SE Banken and the Swedish government. The finance ministry expects the bank to do as much as possible to solve its own problems by raising capital from private sources. But the bank believes that before it can attract private capital the public support it can expect to receive must be quantified.

There is little doubt that private share capital will be required to get Nordic banks back on their feet. But investors will be wary of ploughing more money into institutions which have already cost them a great deal and where dividend prospects are uncertain. None of the leading banks paid a dividend on their ordinary shares in 1992.

The alternative to raising new capital is simply to slash lending activities, but that would mean cutting back on loans at the very time when fresh financing is needed to support economic recovery.

The prospect of raising private capital is not entirely gloomy, however. Kansallis-Osake-Pankki, Finland's leading commercial bank, has been the first of the big banks in the region to launch a share issue, and its current FM930m offer has been well received.

Recovery could also be assisted by rationalisation and mergers. In Norway, restructuring is already underway, with the merger of Bergen Bank and Den norske Creditbank. It is likely to gain momentum as the most unprofitable portions of the banks' business - such as property portfolios - continue to be hived off and the process of returning banks to the private sector begins.

In Finland a merger between KOP and the savings banks groups is currently being considered. Norway has commissioned the UK-based consultancy firm, Davis International Banking Consultants, to look at its banking problems, and expects recommendations that will form the basis of a restructuring programme to be presented to parliament in mid-May.

However, sustained recovery in the banking sector largely hinges on broader economic recovery. The worst may be over in some sectors of the economy, but unemployment is rising. Joblessness in Norway, at 8.7 per cent, is at its highest level since the second world war high, while in Finland more than 18 per cent of the workforce is out of work. In Sweden, official unemployment stands at 7 per cent, but the figure would be much greater if those in training schemes were included.

With so many people out of work, many are having difficulties repaying loans. The corporate sector, meanwhile, is squeezed by low demand and real interest rates that remain high. In Sweden the central bank's marginal interest rate is being held at 9.75 per cent to squeeze inflation and protect the value of the krona. But the Finnish central bank reduced its base rate to 7.5 per cent in February, while in Norway the central bank this year has gradually eased its official rate to 8.5 per cent.

Most analysts believe the leading banks in Sweden and Finland face at least two more years of heavy write-offs of problem loans, although recovery may come more quickly in Norway. '1993 will be a better year for the Norwegian banks, but the problems in Swedish and Finnish banks started later, so the real recovery will not be evident as early,' said Mr Torstein Joerstad, a bond credit analyst at UBS Limited in London. Of the big Swedish banks, Handelsbanken is an exception and it may return to profit as early as this year.

Yet even if the Nordic banking sector rebounds during this year and next, the region's financial problems will not be resolved soon. The task of rebuilding financial strength, restructuring and winding-down problem credits is likely to last into the next century.

-------------------------------------------------------- NORDIC BANKING BLUES -------------------------------------------------------- Sweden (+ Profits -losses) -------------------------------------------------------- 1992 operating results SKr bn -------------------------------------------------------- SE Banken -5.37 Nordbanken -16.00 Handelsbanken -0.84 -------------------------------------------------------- Norway NKr bn -------------------------------------------------------- Den Norske Bank -3.06 Christiania Bank +1.58 Fokus -2.06 -------------------------------------------------------- Norway FM bn -------------------------------------------------------- Kansallis-Osake-Pankki -2.63 Unitas -2.00 Skopbank -3.46 --------------------------------------------------------

SE Sweden, West Europe NO Norway, West Europe FI Finland, West Europe P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times London Page 14 1430
Letter: Nothing comic about wasted initiatives Publication 930419FT Processed by FT 930419 From Mr ANSEL HARRIS

Sir, The Pounds 1.5bn Training and Enterprise Councils initiative was launched in the UK on March 10 1989 - coincidentally Comic Relief day. For many in the private sector involved in some of the earlier initiatives such as the Small Firms Service, Enterprise Agencies, Business in the Community, the Business and Education Initiative, the Training Commission, the Manpower Services commission, and Pickup (Professional, Industrial and Commercial Updating Programme), the Tecs did, indeed, promise relief.

The Tecs were intended to rationalise what the then chairman of Courtauld's described as 'the great variety of initiatives now around'. Many of us involved in them greeted them with sceptical optimism. At least an umbrella organisation was in place and it should be given a chance. You yourselves had doubts. And within two years of the Tecs going live your own survey described 'widespread dissatisfaction over the levels of government funding'. On February 28 1992 (Management: 'Making it a game of skill, not of luck') you reported 'a great deal of frustration over the inability of the Tecs to fulfil the valuable role for which they were established'.

You now report ('Pilot 'one-stop' business advice centres chosen', April 15) a further umbrella initiative. Five Tecs and other bodies 'are to carry out a Pounds 500,000 study part funded by the government. . .aimed at establishing a central London one-stop shop' (business advice centre).

If the costs of these abortive initiatives were totalled, the EBRD extravagances would pale into insignificance. Ansel Harris,

MBA Partners,

23 Ferncroft Avenue,

London NW3 7PG

GB United Kingdom, EC P8331 Job Training and Related Services NEWS General News P8331 The Financial Times London Page 14 289
Maverick poses an interesting question Publication 930419FT Processed by FT 930419 By SAMUEL BRITTAN

THERE HAVE been several attempts to provide British chancellors with independent outside advice. Nigel Lawson had a Group of Independent Economic Advisers (soon christened 'Gooies'). This had the advantage that it discussed a wide range of economic questions and did not confine itself to forecasts. Its disadvantage was that its proceedings were oral and that no record was available to members.

Norman Lamont's Panel of Independent Forecasters has the advantage that its members submit papers which are published in a convenient volume. Its disadvantage is that the chancellor has tried to confine it to forecasts, a much overrated activity.

There is, however, a chance that the Lamont panel will turn out to be more interesting than either the chancellor or the official Treasury intended. This is because of its three maverick members - in alphabetical order, Tim Congdon, Patrick Minford, and Wynne Godley - who show no intention of confining themselves to a series of numerical guesses about GDP a few quarters ahead.

Indeed Congdon has just made a strong attack on the present fashion of simply looking for predictive indicators and has insisted on understanding the forces behind economic changes in a paper in the April issue of the Gerrard & National Economic Review. He is concerned to argue that excessive or deficient money balances are the causes of changes in the national income and not merely an advance warning.

But is not this what all monetarists believe? Apparently not. For Congdon's main argument is not with the orthodox panellists, but with fellow monetarists such as Minford who discuss the money supply mainly as an indicator of present or future activity. Indeed they have little option. For Minford's favoured indicator has been 'M0', which is mainly notes and coins and which no one in the British debate has claimed is an actual cause of changes in activity or prices.

Although I have some sympathy for Minford on another issue - the supply side changes since 1979 - Congdon seems to me more nearly right on the monetary side. For if you can identify some of the causal processes you are much more likely to understand the economy and to avoid policy mistakes than if you simply go by the economic tea leaves.

None of this means that any school of monetarists has at last found a key to securing stability at low inflation. Congdon's own greatest triumph was his diagnosis of inflationary overheating in the mid-1980s - when neither Minford-type monetarists nor the official Treasury could see cause for concern.

Unfortunately, however, a detail of definition played a crucial element in Congdon's predictive success. His diagnosis was made in terms of Pounds M3, which had been the target aggregate for well over a decade. But this aggregate was becoming more and more unsuitable as it omitted for instance building society deposits which were becoming an increasingly important part of the money supply, as Congdon himself came to recognise. The broader aggregate, M4, which takes these into account, and for which the Treasury now has a monitoring range, did not give nearly as clear cut a sign that something was wrong.

Some kind of test is now looming. M0 is above its monitoring range. What its most discerning supporters claim is that it is a good indicator of what is already happening. If they are right the turn-up in economic activity now taking place is much more vigorous than the modest sprouting of green shoots which is all that the government claims.

On the other hand, if the advocates of broad money targeting are right, whatever recovery is now happening will turn into dust and ashes before the year is out.

Congdon is, however, careful to avoid saying just this. He reminds us that 'the drop in interest rates has made interest-bearing deposits a less attractive asset to hold . . . this behaviour may be able to stimulate demand for a few quarters even if money growth is modest'.

One can agree with him that 'eventually' faster broad money growth will be required to sustain recovery. But broad money growth is not something that either just happens. It would be most likely to occur if there is a rise in business borrowing which the government does not need to knock on the head by high interest rates. So no school of monetarists has got the causality quite right.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 14 763
Arts: Urban under-class Boheme - Opera North Publication 930419FT Processed by FT 930419 By RICHARD FAIRMAN

With the resurgence of tuberculosis as a serious threat to health in the West, the fate of poor consumptive operatic heroines is no longer the stuff of dewy-eyed romantic legend. It is easy to imagine a production of La Boheme set in the present-day - a tale of the urban under-class, in which any aspirations for the future are smothered by a life of poverty and decay.

As it happened, the new production by Opera North did not go that far. Phyllida Lloyd, the producer, stopped short of bringing the opera right up-to-date and stayed (less persuasively?) in the period of beehive hair-dos and teenagers' motorbikes. Marcello, the painter, decorated his spartan living space with pop-art images of his girlfriend in the style of Andy Warhol. His student friends looked a fairly leftish lot, who pinned a cartoon of their landlord, marked 'fascist', up on the wall.

None of this was really controversial, as it turned out; more a case of good, clean fun. A producer of this opera has to make sure that the scenes of young people's horseplay have plenty of energy to them, if the right contrasts of mood are to be set up, and Phyllida Lloyd does so with conviction. The scene outside Cafe Momus was great fun: the cafe itself is a gaudy coffee bar, while the winter crowds skate past the window on an ice rink outside.

The end of the scene is marked by a parade of Father Christmases, which adds to the Anglo-Saxon flavour of the evening. Kerouac's On the Road is mentioned in the programme and Anthony Ward's settings are duly brashly American, but the good manners and palpably modest niceness of the leading couple make them seem distinctly English. (There is no red-blooded Italian feel to the production at all, despite the opera being sung in the original language.)

What is important, however, is the way that this Mimi and Rodolfo win over one's sympathy from their first scene together. The Canadian soprano Jane Leslie MacKenzie was a genuinely touching Mimi, the singing sincere and nicely shaped. Her American partner, William Burden, proved a very interesting find, not a truly Puccinian Rodolfo, as the voice is too small and English (Mozart and Britten material) in sound, but everything he did was tasteful and vocally well produced.

One really cared about both of them. The gaucherie with which they embark on their affair, the nervous smiles, the awkward wringing of the hands, all worked in the most charming way. They contrasted well, too, with Rodolfo's more outgoing friends - Robert Hayward's forceful Marcello and William Dazeley's Schaunard, who brought off his return from a fancy-dress party in drag with some elan. Juliet Booth made a lively, unexaggerated Musetta.

Despite signs of immaturity (Rodolfo's sobs at the end and the silent circling of the other characters are overdone) the production hits its target. When Mimi enters in the last act, deathly pale, and lurches forwards to be sick in the kitchen sink, a shudder of realism goes down the spine. This is real verismo - a reminder that such illnesses are marching out of operatic fiction and back into real-life documentary.

Production sponsored by Yorkshire Television. Further performances in Leeds until 22 May, then Manchester, Nottingham, Hull and Sheffield.

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 13 581
Arts: Dramatic talent, step forward / Review of the Humana Festival of new plays, Louisville Publication 930419FT Processed by FT 930419 By KAREN FRICKER

The 17th annual Humana Festival of New Plays at the Actors Theater of Louisville looked and sounded, to its credit, more like America than the fare of theatres in many of this country's major urban centres. Its nine playwrights, including four women and three writers of colour, took on some of contemporary society's most pressing issues in productions that upheld the high standard of acting and design that we have come to expect from America's best-known new plays festival. Though not all of its risks paid off this year, its unceasing commitment to producing work that pushes the boundaries of traditional playwriting keeps the Festival vital.

Humana's most conventional play this year was also its most successful: Joan Ackerman's Stanton's Garage, a two-act comedy set in an auto repair shop in rural Missouri. It is a big, overstuffed sofa of a play: too long, but comfortable, packed full of interesting characters and witty dialogue.

Car failure maroons Lee (Priscilla Shanks), a successful but uptight doctor, at Stanton's Garage with her fiance's bookish teenage daughter, Frannie (Jessica Jory), who is so involved in caring for her father that she has not developed a life of her own. Lee and Frannie never get to their destination - needless to say the mechanics in the garage have never seen a Volvo before - but two sweaty midsummer days in Stanton's Garage thaw these frosty, defensive women. Frannie gets her first kiss from the garage's junior mechanic, in a charming scene sensitively played by Jory and Rob Kramer, and Lee realises that she has spent her life defining herself by outside standards and decides to leave Frannie's father.

Local colour transcends any cliche through the actors' excellent performances, particularly Adale O'Brien as the garage's wisecracking receptionist. In Steven Albrezzi's adept production the play's potentially confusing plot lines crack along with perfect clarity. Scenic designer Paul Owen matches the naturalism of Ackerman's writing with a garage perfectly observed.

This year's most talked-about offering was Keely and Du, a play about abortion by one of the Festival's most prolific and mysterious writers, Jane Martin. Jane Martin is a pseudonym, and it is widely believed that 'she' is Actors Theater Artistic Director Jon Jory, who directed Keely and Du.

Keely and Du is similar in its spareness to David Mamet's recent two-hander about sexual harassment, Oleanna; but unlike Mamet, Martin's pared-down style does not expose the heart of the debate he tries to dramatise. The play opens in a barely furnished cell in which a young woman, Keely (Julie Boyd), is handcuffed to a bed. Impregnated when her former husband raped her, Keely was on her way to an abortion clinic when she was abducted by a radical anti-abortion group. Walter (Bob Burrus), the evangelical pastor responsible for Keely's capture, tells her that they plan to force her to carry the baby to term. Supervising Keely is an elderly woman, Du (Anne Pitoniak), whose growing fondness for the younger woman leads her to deviate from her orders.

Keely and Du is so well-plotted and the Humana production so tightly directed and intently played that its build up is inexorable and gripping, its denouement at once inevitable and shocking. But Martin's technical writing skills and this strong production cannot make up for Keely and Du's failure to talk about what it is really talking about: a political issue.

Humana's presentation of ten-minute plays this year was almost a non-event: one-idea situations the writers have tried to stretch, unsuccessfully, into plays. Deadly Virtues, a collaborative creation of its five-person ensemble that was adapted and directed by Brian Jucha, was Humana's most non-traditional offering. Though well-performed, painstakingly choreographed and gorgeously produced, this collage of movement, song and text came off as pretentious and meaningless - the kind of thing that gives performance art a bad name.

Another interesting idea gone awry was Shooting Simone, Lynne Kaufman's investigation of the ambiguities in feminist Simone de Beauvoir's relationship with Jean-Paul Sartre. Kaufman's reductive treatment of her subject matter was matched by a shallow production - Paul Owen's unimaginative set, Lazlo Martin's scattershot direction, and the actors' brassy performances - that played like a bad TV movie.

Far more exciting were works by two talented young writers testing the bounds of the traditional narrative play. Kevin Kling's Ice Fishing Play is an intriguing overlay of situational comedy, memory play, and meditation on mortality. Kling's convoluted storytelling calls out for a clarity of production that it did not receive from Michael Sommers, but the freshness of this writer's voice is indisputable.

Any disappointment in Jennine's Diary, a jumbled travelogue/memory play that was the first of Regina Taylor's brace of one-acts billed as 'Various Small Fires', was quickly eradicated by the second, Watermelon Rinds. In Novella Nelson's production, Taylor's hilarious and harrowing reinvention of the family drama for contemporary urban Black life exploded with imagination and verbal dexterity. We should be hearing more from Taylor, who is an accomplished stage and television actress as well as playwright.

US United States of America P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 13 875
Arts: Today's Television Publication 930419FT Processed by FT 930419 By CHRISTOPHER DUNKLEY

Monday night is rather an over-egged pudding these days for anyone who prefers factual programmes to drama or light entertainment, and often the pudding has a strong American flavour. Today's Horizon sounds as though it will complement Channel 4's current Tuesday night series in 'Without Walls' which is looking at some of the more scary effects of recent technological advances. Horizon considers the possibility of benevolent effects from 'intelligent technology' created by the 'new alchemists' in Britain, Japan and, of course, the US (8.00 BBC2). World In Action (8.30 ITV) promises to expose 'a secret group of right wing fanatics waging a campaign of political terrorism in Britain'. Channel 4 begins a series called Naked Sport produced by Nicholas Kent who made the memorable 'Naked Hollywood' series. This series, about sport in the US begins with boxing. Channel 4 offers States Of America (11.55) the second debate, with Camille Paglia, Robert Hughes and Edward Said on political correctness with Christopher Hitchens.

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services & Services use P7812 The Financial Times London Page 13 194
Arts: A conversion to sculpture - Colin Amery visits the new Henry Moore Institute in Leeds Publication 930419FT Processed by FT 930419 By COLIN AMERY

On Thursday the Henry Moore Institute opens in Leeds. The opening event is an important occasion for two reasons. Firstly, the new institute is the headquarters of the Henry Moore Sculpture Trust, which has the exciting remit to encourage the appreciation of sculpture of all periods; secondly, the inauguration will unveil to the public an intriguing and original new building by the architects Jeremy Dixon and Edward Jones.

'New building' is not quite an accurate description of the centre, which is a conversion of three 19th-century wool merchants' office buildings at the end of Cookridge Street, next door to the Leeds City Art Gallery. Leeds has some marvellous architectural set pieces from the last century, especially the proud, bombastic Town Hall by Cuthbert Broderick (1858). Its great tower rising out of the vast columned base is grander than Greenwich and redolent of Halicarnassus, despite being in the Corinthian mode.

Broderick's oval Corn Exchange in Duncan Street is also a remarkable structure and has been well adapted to its new retail uses. The City Square demonstrates the pride the city fathers of Leeds had in their urban improvements, and the statuary - particularly the equestrian statue of the Black Prince and the rows of bronze maidens holding their lamps - are effective sculptural elements in the townscape.

Sculpture is a growth industry in Yorkshire, largely because of the activities of the Henry Moore Foundation. Henry Moore was born in 1898 in Castleford near Leeds, the son of a Yorkshire coal miner. He went as a student to the Leeds art college after his demobilisation in 1919, and later to the Royal College of Art in London. At the Royal College he was to meet Barbara Hepworth as a fellow student - she had been born in Wakefield and was a scholar supported by the West Riding County Council. Coincidentally, their joint creative careers are both marked this year by the opening of this centre in Leeds and by the opening of the Tate Gallery in St. Ives, Cornwall, where Hepworth worked.

All this Yorkshire creativity has come home to roost in Leeds, where the Henry Moore Foundation has spent Pounds 5m on the new centre. It has one of the very few new galleries in Europe designed specifically for the display of sculpture. Jeremy Dixon and Edward Jones are clearly inspired by their frequent visits to the US. They seem to have absorbed that particularly American art gallery 'feel': in their conversion, the immaculate, minimally detailed white rooms gently smooths away the past of the old houses. It is a feeling I like for its neutrality and coolness, which demands great care from the architects and the project builders, depending as it does on precision.

The major shock is the facade that greets you as you arrive on The Headrow. The long square from the Town Hall to the war memorial is a recent creation. Many of the buildings that face onto it were not designed with any civic presence. The new entrance facade of Moore Institute was originally the naked cut-off gable end of a partly demolished row of houses. The architects' bold decision to make this wall the entrance to the Institute demanded some architectural imagination to create a suitably civic facade.

Not surprisingly they opted for a sculptural solution, but of the most minimalist kind. The architects have designed flights of steps mounting up towards the shiny blank black granite, where an asymmetrically placed slot marks the narrow entrance. The large black wall is totally abstract and could as easily represent a Yorkshire coalface or an ancient Egyptian tomb. It is to my eye reminiscent of the great black granite wall that forms the Vietnam war memorial in Washington DC. Or is it perhaps inspired by those 'vest pocket parks' that utilise the end-walls of partly demolished buildings in New York City and turn them into walls of water? Perhaps it is none of these things, but just a suggestion of a huge block of granite awaiting the hand of the sculptor. It is a radical and unusual solution to the planning problem. It certainly does not look inviting; my feeling is that it looks more like a tomb for Henry Moore than anything else.

Inside, things are decidedly more cheerful. Light breaks out in a splendid way in the new main sculpture gallery, which has one entire wall of bronze framed obscured glass. The opening exhibition, Romanesque Stone Sculpture from Medieval England looks very good in this space despite the rather heavy-handed, but presumably necessary, metal mounts and stands. There is an opportunity to look at recently restored work from York Minster and Lincoln cathedrals. The good level of natural light and the total absence of any architectural detail make it possible for sculpture of all periods to be shown here with ease. The upper floors house the archive and study centre and the top floor has handsome administrative offices and a board room. The whole institute is linked to the main art gallery by an elegant new bridge.

There is a lot to admire in the timber, glass and painted plaster interior of this new institute, and pleasure to be had in the atmosphere of calmness and contemplation that the architects have successfully created. The black facade shows how hard it is to move beyond the vacancies of abstraction to a convincing language for the faces of new public buildings.

GB United Kingdom, EC P8712 Architectural Services P8412 Museums and Art Galleries NEWS General News P8712 P8412 The Financial Times London Page 13 951
Arts: Song-bird of more decibels - Concerts Publication 930419FT Processed by FT 930419 By RICHARD FAIRMAN

Song-birds in the world of opera sing out with more decibels than they used to. June Anderson, arguably the leading soprano in the bel canto repertoire at the moment, gave a recital at the Wigmore Hall on Saturday and the hall's fine acoustics showed us how big this voice really is - surely several sizes larger than singers would have been in the early 19th century.

She began, predictably enough, with Bellini and Rossini, her known strength. The second Bellini song, 'La ricordanza', is a different working of the ideas from the main aria of I Puritani, in which June Anderson had such a success at Covent Garden last year. Her shining soprano, with its 100-watt brightness, is heard to its best effect in this sort of music and the phrasing was simpler, more effective, than she often makes it.

The only drawback in hearing this singer in recital is that she finds it difficult to turn down the brilliance over the course of an evening. The ears start to tire of the constant gleam in the sound, as the eyes might looking into a strong light. Liszt's 'Die Lorelei' talks of the glow of the evening sunshine, Duparc's 'Au pays ou se fait la guerre' of the pale moonlight. But here the voice was always at the height of its midday radiance.

From the items mentioned so far, it will be clear that this was not a conventional songbird's programme. In fact, the evening was very well planned - a Spanish group to close the first half with a flourish, French and American songs for contrasting moods after the interval. The accompanist, Charles Spencer, gave his singer the freedom that she needed.

For all that, in every item it was the voice that mattered most. In Ned Rorem's 'Ferry me across the water' the last note hung suspended in the air for what seemed an eternity, a beautiful, pure stream of sound that flowed on and on without any change or degradation in quality to be detected.

On Wednesday the Purcell Room continued with its Song Recital Series, a welcome enterprise which still has some way to go before it rivals the Wigmore Hall's long-established reputation for excellence in this area. The singer was the mezzo-soprano Fiona Kimm, unfortunately in the last stages of a cold, which put a dampener on the evening. Nevertheless, there was some life in it left, because Miss Kimm had put together an adventurous second half.

Berio's Four Canzoni Populari opened with a mix of folk simplicity and Italianate virtuosity (accompaniments played by Andrew Ball). Anthony Payne's Adlestrop set Edward Thomas's poetry to a free vocal line underpinned by Janacek-like motifs. John Cage's 'The Wonderful Widow of Eighteen Springs' replied with James Joyce sung to a chant-like theme, while the pianist taps out the accompaniment on the closed lid of the piano. Then Jerome Kern and Cole Porter to finish. Adventure rewarded.

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 13 522
Construction Contracts: Pounds 50m Teesside development Publication 930419FT Processed by FT 930419

Solid foundations are being laid by Tarmac for a Pounds 50m scheme to bring new leisure and business interests to Teesside and the north east.

A total of 15,000 cu metres of reinforced concrete is being pumped into the 'dry' bed of the diverted River Tees for the base of the Tees Barrage, being built by TARMAC CONSTRUCTION for Teesside Development Corporation.

The barrage, 70 metres wide and 50 metres long, is a key project in the Corporation's regeneration of 19 sq miles of derelict land.

The barrage at Blue House Point, Stockton, will create 12 miles of clean navigable waterway upstream for sporting and recreational activities, and access to newly-established commercial areas.

Other amenities and leisure facilities in the barrage project include a canoe slalom, navigation waterway and lock, a fish pass, cafeteria and a caravan park.

The foundation work will be completed in July ready for the erection of the bridge over the barrage structure. The bridge comprises 700 tons of tubular steel and 64 circular one and a half tonne castings which are being manufactured locally.

The river will be rediverted at the end of September to allow the temporary diversion to be filled in and the navigation channel to be constructed.

Installed between the piers of the barrage substructure will be four fishbelly gates, each weighing 50 tons, and measuring 13.5 metres long and eight metres high. The gates will regulate the flow of river water and also act as a barrier to prevent tidal flooding upstream. The barrage is being designed to work automatically and will be commissioned in October 1994.

Tarmac Construction GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 12 297
Construction Contracts: Maintaining local authority buildings Publication 930419FT Processed by FT 930419

JOHN MOWLEM CONSTR UCTION has won work worth nearly Pounds 17m. The largest contract, worth Pounds 11m, is a three-year appointment for maintenance and repairs to all municipal buildings (principally schools and leisure centres) within the London Borough of Newham.

Also in Newham, Mowlem has a Pounds 558,000 contract from the council for repairs to council housing on The Triangle Estate, London E16. This project is being undertaken under the Department of the Environment's training initiative.

In Westminster, Mowlem has won a Pounds 1.7m contract to build a nursing home at 131-151 Regency Street, London SW1 for Riverside Health Authority. Mowlem has demolished the houses on the site and is erecting a building of traditional construction on piled foundations.

At Angel Square, Islington, Mowlem has been awarded a Pounds 1.6m contract by HM Customs & Excise to fit out 60,000 sq ft of office space. The work comprises the installation of raised floors, new services, kitchens and computer rooms.

At Heathrow Mowlem has been awarded a Pounds 960,000 contract to fit out The Admiral's Club at Terminal 3 for American Airlines' first and business class passengers. The club will comprise a lounge bar, business and conference centre, library, quiet room, toilet and shower facilities, luggage storage and entrance hall.

In Bromley Mowlem is working on a complex three-phase project to refurbish the County Court while it is still occupied. The Pounds 692,000 contract is due for completion in May.

Finally, in Reading, the south east region of John Mowlem Construction has won a Pounds 473,000 contract to build a fire house for The Royal County of Berkshire.

The three-storey building will be used to provide smoke training for members of the County fire brigade.

John Mowlem Construction GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 12 316
Construction Contracts: Rendel Science & Environment Publication 930419FT Processed by FT 930419

RENDEL SCIENCE & ENVIRONMENT is to provide a professional materials testing service (PMTS) for the colony's public sector housing industry over the next three years.

Rendel Science and Environment GB United Kingdom, EC P8734 Testing Laboratories MKTS Contracts P8734 The Financial Times London Page 12 57
Construction Contracts: Testing materials Publication 930419FT Processed by FT 930419

A British scientific consultancy has clinched a Pounds 7.5m contract to supply technical expertise to the Hong Kong Housing Authority.

Rendel Science and Environment HK Hong Kong, Asia P8711 Engineering Services MKTS Contracts P8711 The Financial Times London Page 12 50
Construction Contracts: Dubai study Publication 930419FT Processed by FT 930419

MAUNSELL, in association with AMAR CONSULT, has been appointed by the Dubai Municipality for the study and improvement of Dubai Creek.

The aim of the project is to review its current status and investigate the potential for further development.

Maunsell Amar Consult XY Dubai, Middle East P8711 Engineering Services MKTS Contracts P8711 The Financial Times London Page 12 68
Construction Contracts: Medical project Publication 930419FT Processed by FT 930419

CONDER PROJECTS has secured a USDollars 6m (Pounds 3.9m) contract to build a paediatric polyclinic at Neftevgansk in Russia. The children's clinic is being funded by a number of oil companies, including Shell, which is carrying out exploration in the area.

Conder Projects RU Russia, East Europe P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 12 70
Construction Contracts: Aquapark scheme for Brno Publication 930419FT Processed by FT 930419

JOHNSONS and its joint venture partner HEXAPLAN, a firm of architects based in Brno, have extended their association with the Boby Centrum development with a further commission - the construction of Brno's first Aquapark.

The Aquapark will be built on the adjoining site to the leisure complex. Facilities will include both internal and external leisure pools.

Johnson Hexaplan is preparing working drawings for the Kcs430m (Pounds 10m) project scheduled to commence on site in mid-July.

Johnson Hexaplan CZ Czech Republic, East Europe P8712 Architectural Services MKTS Contracts P8712 The Financial Times London Page 12 106
People: Non-executive directors Publication 930419FT Processed by FT 930419

Dennis Sewell, finance director of Clayhithe, at LASER-SCAN HOLDINGS.

Laser-Scan Holdings GB United Kingdom, EC P3827 Optical Instruments and Lenses PEOP Appointments P3827 The Financial Times London Page 12 38
People: Non-executive directors Publication 930419FT Processed by FT 930419

Neville Root has resigned from NORWEB.

Norweb GB United Kingdom, EC P4911 Electric Services PEOP People P4911 The Financial Times London Page 12 32
People: Non-executive directors Publication 930419FT Processed by FT 930419

John Dawson at CLYDESDALE BANK; Max Bray has resigned.

Clydesdale Bank GB United Kingdom, EC P6021 National Commercial Banks PEOP Appointments P6021 The Financial Times London Page 12 37
People: Non-executive directors Publication 930419FT Processed by FT 930419

Sir John Morgan as chairman at DRAYTON KOREA TRUST following the resignation of Nicholas Johnson. Johnson has also resigned from DRAYTON ENGLISH AND INTERNATIONAL TRUST.

Drayton Korea Trust Drayton English and International Trust GB United Kingdom, EC P6726 Investment Offices, NEC PEOP People PEOP Appointments P6726 The Financial Times London Page 12 61
People: Non-executive directors Publication 930419FT Processed by FT 930419

Montague White has resigned from P-E INTERNATIONAL.

P-E International GB United Kingdom, EC P8742 Management Consulting Services PEOP People P8742 The Financial Times London Page 12 35
People: Non-executive directors Publication 930419FT Processed by FT 930419

Carel Mosselmans, chairman of Rothschild Asset Management, chairman of Exco International, and a non-exec at Coutts & Co, as chairman at JANSON GREEN.

Janson Green Holdings GB United Kingdom, EC P6531 Real Estate Agents and Managers P7374 Data Processing and Preparation PEOP Appointments P6531 P7374 The Financial Times London Page 12 60
People: Non-executive directors Publication 930419FT Processed by FT 930419

Bill Jarratt, a director of South Wiltshire Enterprise Agency, at FIRST CHOICE HEALTH.

First Choice Health GB United Kingdom, EC P8059 Nursing and Personal Care, NEC PEOP Appointments P8059 The Financial Times London Page 12 44
People: Non-executive directors Publication 930419FT Processed by FT 930419

Professor Sir William Taylor has retired from FENNER.

Fenner GB United Kingdom, EC P3535 Conveyors and Conveying Equipment PEOP People P3535 The Financial Times London Page 12 36
People: Non-executive directors Publication 930419FT Processed by FT 930419

Lord Cavendish of Furness, chairman of the Holker Estate Group of Companies and a former government spokesman in the House of Lords, at UK NYREX.

UK Nirex GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P4911 Electric Services PEOP Appointments P2819 P2869 P4911 The Financial Times London Page 12 64
People: Non-executive directors Publication 930419FT Processed by FT 930419

Sara Morrison at KLEINWORT CHARTER INVESTMENT TRUST.

Kleinwort Charter Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC PEOP Appointments P6726 The Financial Times London Page 12 37
People: Non-executive directors Publication 930419FT Processed by FT 930419

Franz Lutolf is retiring from SEDGWICK GROUP.

Sedgwick Group GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service P6719 Holding Companies, NEC PEOP People P6411 P6719 The Financial Times London Page 12 42
People: Non-executive directors Publication 930419FT Processed by FT 930419

Thomas Bierman at DOLPHIN PACKAGING.

Dolphin Packaging GB United Kingdom, EC P2679 Converted Paper Products, NEC PEOP Appointments P2679 The Financial Times London Page 12
People: Non-executive directors Publication 930419FT Processed by FT 930419

James Stride at LONDON & ST LAWRENCE INVESTMENT COMPANY and PRACTICAL INVESTMENT COMPANY.

London and St Lawrence Investment Practical Investment GB United Kingdom, EC P6726 Investment Offices, NEC PEOP Appointments P6726 The Financial Times London Page 12 46
People: Non-executive directors Publication 930419FT Processed by FT 930419

David Hardaker has resigned from COURTYARD LEISURE.

Courtyard Leisure GB United Kingdom, EC P7999 Amusement and Recreation, NEC PEOP People P7999 The Financial Times London Page 12 36
People: Non-executive directors Publication 930419FT Processed by FT 930419

David Dugdale, former deputy chairman of James Capel, at TRENCHERWOOD.

Trencherwood GB United Kingdom, EC P1522 Residential Construction, NEC P6719 Holding Companies, NEC PEOP Appointments P1522 P6719 The Financial Times London Page 12 42
People: Farmer takes over at Moscow Narodny Publication 930419FT Processed by FT 930419

Moscow Narodny Bank, the 73-year-old London-based bank which has been trying to find a new role for itself following the collapse of the Soviet Union, has appointed Derek Farmer as deputy general manager.

Farmer, 48, will be the senior British executive in a bank which has had a reasonably rapid turnover of general managers over the past few years. He will be acting general manager following the departure of Cliff Evans who had been in the job for just over two years.

Evans, a former Citibanker, had replaced Campbell Dunford, a former Midland Bank trade finance official, who had been doing the job since February 1988. Moscow Narodny gave no reason for Evans' departure but it is understood that he may be involved in setting up a joint venture bank in Moscow.

Moscow Narodny, which used to be the main overseas commercial bank of the former Soviet Union, is recovering from a turbulent period in 1991 when it lost Pounds 120.6m. The disintegration of the Soviet Union caused a run on its deposits and Russia was forced to step in and inject more than Pounds 300m of new capital to guarantee its survival. The balance sheet of the bank, which is now controlled by the Central Bank of the Russian Federation, has shrunk from Pounds 2.5bn in 1989 to Pounds 1.1bn in 1991.

The new acting general manager started his banking career at the Royal Bank of Scotland. Between 1970 and 1982 he worked for Toronto-Dominion Bank, including seven years in Toronto and two years in the Middle East. He has since worked at The Royal Trust Company of Canada, Ubaf Bank and Banque Paribas, and has most recently worked as a consultant with Harrods Bank.

Moscow Narodny Bank GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies PEOP Appointments P6081 The Financial Times London Page 12 322
People: Cooper quits Treasury for James Capel Publication 930419FT Processed by FT 930419

The Treasury has lost another of its top economists to the private sector in the shape of Adrian Cooper, who is leaving to join James Capel. Cooper, the Treasury's forecasting co-ordinator, is joining two other ex-Treasury economists in James Capel's six-strong economists group.

Cooper, 28, has worked at the Treasury since 1986. He has played a key role in extending the Treasury's contacts with outside economists in an effort to improve on its poor recent forecasting record.

Cooper, who graduated from Bristol University and has a higher degree from the London School of Economics, says he is leaving primarily to 'gain experience of economics in a private-sector environment'. The fact that he would be paid more at James Capel 'is not the main reason, though it is a nice feature'. Despite criticism directed at the Treasury, morale within the economists' department was high; 'I've enjoyed working here.'

Cooper will work in a James Capel team headed by Keith Skeoch which also includes two other ex-Treasury econ-omists, Gwynne Hacche and Stephen King. He will feel very much at home at James Capel's City offices, which are shared with its sister company Midland Global Markets, also owned by HSBC Holdings. In Midland's economics teams are a further two former Treasury officials in the shape of Simon Briscoe and Julian Jessop.

Cooper - who leaves the Treasury in early May - has recently been working under Colin Mowl, the Treasury's chief forecaster. He has sat in on meetings of the 'seven wise men' of outside forecasters and was responsible for a large amount of the draft of this group's first report issued in February.

He has also become involved with controversy over whether the Treasury might at some point seek to contract out its computerised economic model to an outside group. But the Treasury says it still has some way to go before deciding on whether to ask companies to do this work.

James Capel and Co GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 12 355
Construction Contracts: Research laboratories at Macclesfield Publication 930419FT Processed by FT 930419

LAING NORTH WEST, part of the Laing Group based in Mill Hill, London, has won a Pounds 4.8m contract to build central research laboratories and offices for Ciba at Macclesfield.

The project involves a local construction workforce of 30. The contract includes construction of a two-storey building with 11 laboratories, offices, stores, toilets, cafeteria, locker rooms, library and conference room. A large plant room will be on the first floor incorporating the main electrical and mechanical plant.

Construction will be steel frame with in situ concrete topping to the first floor. The roof comprises mono pitched raised seam sheeting to the offices and a dual pitched roof with raised seam sheeting with curved eaves to the plant room.

Office and laboratory external walls will be a prefinished aluminium panel rainscreen system with double glazed thermally broken prefinished aluminium windows and doors. The complex mechanical and electrical services include extensive fume extraction facilities.

Laing North West GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 12 184
Construction Contracts: Upgrading social housing in Hounslow Publication 930419FT Processed by FT 930419

UNITED HOUSE is to refurbish and upgrade a mix of 506 houses, maisonettes and flats on North British Housing Association's Beaver Estate at Hounslow, west London, under a contract worth Pounds 8.4m.

Because the internal work is so extensive the occupants will be moving out for the five/six weeks required to install new bathrooms and kitchens, central heating and windows and for the replacement of all wiring and plumbing. All flat roofs are being given new pitched, tiled roofs.

Responsibility for the timings and phasing of all movements, over a period of 20 months, rests with United House. The Housing Association is providing alternative accommodation elsewhere on the estate.

While all this is going on United House will also undertake a similar upgrading of the Beaver's Ermine Community Centre.

United House GB United Kingdom, EC P1522 Residential Construction, NEC MKTS Contracts P1522 The Financial Times London Page 12 161
Management: The rise and rise of profit-related pay - Carrots for employees Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR

Britain's workers are increasingly involved with their companies through government-backed financial participation schemes. An estimated 3m of them are covered by various forms of profit sharing and are in receipt of shares or options worth around Pounds 10.2bn.

The most spectacular growth, however, has been in the area of profit-related pay (PRP). Figures due to be published by the Inland Revenue tomorrow will reveal that about one in 20 workers - 1.3m people - are now covered by 4,500 PRP schemes. Introduced in the 1987 Budget, PRP only really took off after Norman Lamont, the chancellor, doubled tax relief on the scheme two years ago and the government published model rules to help employers. Since 1990 the number of PRP schemes has tripled. PRP provides all full-time employees in a company with tax-free payments worth up to Pounds 4,000 a year or 20 per cent of salary, whichever is the lower. The scheme has to be registered with the Inland Revenue and is subject to detailed regulations with the 20 per cent part of the worker's pay 'profit related'.

'PRP is not an incentive system but deliberately designed to make basic pay more variable,' says Brian Friedman, managing director of Stoy Benefit Consulting. 'It provides employees with tax-free money equivalent to a 7 per cent pay rise,' he adds.

'PRP has become a major attraction of profit sharing over the past year because it can boost net pay at a time when the cash for normal pay awards is not available,' explains David Shonfield at Incomes Data Services.

Gallaher, the tobacco company, Norwich Union, an insurance concern, and Nationwide Anglia, a building society, were among the early converts to PRP.

The growth has come despite last August's move by the Inland Revenue to close a tax loophole that had enabled companies to link their annual calculation of what was profit pay to other factors, so allowing an annual bonus to be paid tax free. Experts thought this might slow down the spread of PRP, but that does not appear to be the case. Up until now the vast majority of PRP schemes have provided workers with a tax free bonus on top of their basic pay. But there are signs of a change, particularly since the Revenue's tightening of the rules.

Some companies in the current pay round are offering PRP's as part of the basic pay offer. Others are introducing the concept of salary conversion. 'This is much closer to the original intention of PRP', admits Friedman.

Clearly companies in financial trouble are unlikely to win much support from their employees for PRP, but the size of the tax advantages do provide some flexibility for companies whose profits fall.

PRP is not the only government scheme on offer to companies which want to involve their employees more directly in their financial performance. And in a show of the broad industrial and political consensus on this subject a joint bid to encourage their spread will be launched tomorrow by Lamont, Norman Willis, the TUC's general secretary, and Howard Davies, the director-general of the Confederation of British Industry.

According to the recently published official 1990 workplace relations survey, 55 per cent of trading sector workplaces are covered by some form of worker financial participation scheme.

The first scheme, a profit-sharing trust scheme, was introduced in Denis Healey's 1978 Budget and came into force a year later. It enables companies to provide a discretionary allocation of shares to full-time employees of more than five years' standing. The maximum value of the shares that can be given to one worker is Pounds 3,000 or 10 per cent of earnings, whichever is the greater, up to an Pounds 8,000 ceiling. The shares are held in trust by the company for at least two years before they can be sold, but workers must wait a further three years before they can sell their shares without tax liability. The latest statistics show there are 1,012 such registered schemes in existence covering 800,000 workers.

In 1980 came the Save As You Earn Option Scheme. This also covers all employees in a company. They pay monthly contributions of between Pounds 10 and Pounds 250 for a five-year period into a bank, building society or national savings account. The eventual lump sum can be used to acquire shares at a 20 per cent discount to the current market price prevailing at the outset of the scheme. No income tax is payable on the options exercised at the end of the five-year saving period. There are now 1,058 such schemes covering 470,000 workers.

The Discretionary Share Option Schemes under the 1984 Finance Act is confined to an elite of managers and directors. Options can be granted to a full-time employee over shares worth up to four times the individual's annual earnings, or Pounds 100,000, whichever is the greater. If options are exercised more than three years but no more than 10 years after they are granted, the proceeds will be tax free. According to today's Institute of Management Survey the number of managers and directors covered by share option schemes rose to 34.7 per cent of the sample survey from 29.2 per cent in 1992.

Less popular in Britain because of the meagre tax benefits are Employee Share Ownership Plans. Under these, companies establish a trust elected by the workforce, which acquires and distributes shares to workers.

A recently published government survey suggests the majority of the above schemes would never have been created without the lure of tax relief. But it also points out that competitive pressures, rapid technological change and the need for more employee flexibility have all encouraged companies to introduce financial participation schemes.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy PEOP Labour MGMT Management & Marketing P9311 The Financial Times London Page 11 990
Management: Head office upheaval - Unilever's plans have been misunderstood Publication 930419FT Processed by FT 930419 By CHRISTOPHER LORENZ and GUY DE JONQUIERES

When a corporate giant heralds a 'review' of its head office, the outside world takes it as a clear signal that sharp cuts are in the offing. Expectations are inflamed if the company says that one of the purposes of the review is 'to achieve the most cost-effective provision of essential services'.

The precedents are legion: the blitzing of US General Electric's headquarters staff in the 1980s; a cut of more than two-thirds in British Petroleum's since 1990; and, most recently, a halving of the new ICI's head office over the next two years, in the wake of its demerger. The latter comes on top of a cut of more than 10 per cent since 1991.

With such exemplars in mind, outsiders were inevitably disappointed when the head office review initiated by Unilever last summer culminated more than two months ago in what seemed at first sight to be just a tidying-up exercise of the Anglo-Dutch consumer products group's unusual dual-centre headquarters. On a comparative basis, it entailed a net jobs cut of only 10 per cent in the core of the HQ, which has been rechristened 'the corporate centre' and will now number 1,075. Its London arm is being reduced by 120 posts, to 675. In Rotterdam the Dutch branch will be enlarged very slightly, to 400 people.

On the surface, the closest the reshaping has come to drama is in the decision to transfer almost 600 of the jobs which were previously classified as part of the group's 'headquarters' to the various operating companies (260 jobs) and national managements (330 jobs).

But real drama may yet emerge. In an HQ which has not changed substantially for decades, the working lives of its staff will now become more demanding. More fundamentally, the key justification for Unilever's head office - the ability to shape corporate strategy - may be given its sternest test in the next few years.

Not surprisingly, the February statement about 'reshaping' provoked irritation among investment analysts and others in the City of London. A common complaint was that, unlike BP in particular, Unilever had not decided to cut its headcount sharply by 'outsourcing' such support services as accounting, tax and legal affairs. Michael Fox, the senior manager who headed the review team, claims - controversially - that the term 'is normally associated with cleaning and maintenance'. On what he calls 'higher-level' activities, he says 'we don't see it as a significant opportunity for us'.

Hans Eggerstedt, Unilever's finance director, is dismissive of City attitudes to head-office cuts.

'Macho' announcements of the halving of HQ headcounts may excite people, but they are 'misleading', he claims. 'The City should be interested in the total performance of the business, not in the means,' he urges.

Fox says only about half of Unilever's new corporate centre consists of 'functional departments' such as personnel, finance, tax and legal staff. It was on this half that the review concentrated and from which all the 120 job cuts are coming; in that sense, it represents a reduction of 20 rather than 10 per cent.

The rest of the centre consists, first, of the 'office of the (twin) chairmen' which is being enlarged from 14 to about 20 in order to strengthen its 'strategic support' role. Beneath that come the regional and product 'management groups', the latter are known more popularly in Unilever-ese as 'co-ordinations'. These are, in effect, the top tier of the four individual businesses: food, detergents, personal products and specialty chemicals.

The string of detailed functional changes include: The removal of much duplication and overlap between departments in London and Rotterdam.

The amalgamation of many senior roles to provide 'single-point responsibility' spanning the North Sea and the globe. Reporting lines will be simplified accordingly in various other parts of the centre.

An insistence that each department should justify fully its existence, define its role and estimate the value it adds. The introduction of much tougher departmental and individual performance measures plus the concept of 'continuous improvement' in productivity and service to internal 'customers'. The likelihood of further job cuts later, at least in the functions. But some of the management groups may have to be enlarged, says Fox. An attempt to start changing the entrenched top-down 'control' culture of London and Rotterdam towards something more self-driven and consultative.

Beyond these issues of internal effectiveness and culture lies more fundamental questions which will be exposed to greater outside scrutiny - notably from investors - now that the centre's role has been made more transparent by the dispersal of activities which are not really corporate.

That, in turn, is likely to expose Unilever to future pressure on the most basic and threatening question that anyone - including potential predators - could ask about its centre: what strategic value does it really add in a corporate sense, over and above that created in the four businesses?

Recently the international management of the businesses has been strengthened and with it their strategic muscle. Various steps have been taken to ensure cross-fertilisation between them occurs more naturally, rather than having to be mediated by head office.

So what more does the corporate centre now provide than financial muscle and - especially vital within such a multinational company - personnel development which spans businesses and countries?

Eggerstedt says the reshaping is intended partly to reduce further the barriers between the different management groups, and enable synergies to 'flow easily' across them. And he says 'a major part of the discussion' has been around the need to improve Unilever's ability 'to develop a corporate strategy'.

That would seem to be an admission that this has been less than fully effective in the past. It cannot have been helped by the frequent confusion of head office managers between their corporate and other roles. The very size of the previous head office structure - almost 1,800 on its widest definition - was also a handicap to easy communication.

So the redefinition of managerial and support roles within the new centre's various departments should help matters. But no amount of reorganisation will recreate a proactive strategic role for Unilever's centre if the degree of leadership it provided in the past is no longer needed by its businesses.

Unilever GB United Kingdom, EC NL Netherlands, EC P2841 Soap and Other Detergents P2099 Food Preparations, NEC MGMT Management & Marketing P2841 P2099 The Financial Times London Page 11 1088
AEA prepares to emerge from shadows: Michael Cassell finds enthusiasm for the sale of the atomic energy body Publication 930419FT Processed by FT 930419 By MICHAEL CASSELL

IT HAS been a long march from Aldermaston but the UK Atomic Energy Authority is finally preparing to break free from its sometimes shadowy state-owned past to make its own way in the commercial marketplace.

The recent announcement that the government is to commission a report on the case for moving the organisation - now called AEA Technology - into the private sector is likely to signal an end to nearly 40 years of governance by statute and ministerial diktat.

But AEA Technology is a rare specimen, presenting ministers with the difficult task of stripping out its hugely expensive, historic nuclear liabilities from a thriving technology transfer business so that it can be offered for sale. The same sort of dilemma threw electricity privatisation into chaos.

If the government faces a headache, the organisation itself - which last year reported Pounds 28m profits on a Pounds 442m turnover - eagerly awaits the freedom to exploit its specialist skills fully and to complete its conversion into a world-class service bus-iness.

Although nuclear-related capabilities remain one of AEA Technology's prime commercial strengths, many original nuclear activities have long since gone.

British Nuclear Fuels was spun off in 1970 while radiochemical work went to Amersham International, the health science group, 10 years ago.

Responsibility for the development of nuclear devices at Aldermaston in Berkshire - once an annual target for Easter peace demonstrations - passed to the Ministry of Defence 20 years ago, al-though AEA Technology still has a hand in managing the site, now part of the At-omic Weapons Establishment.

Other operations also remain obscured by the Official Secrets Act, such as work on the strategic defence initiative - 'Star Wars' - programme for the US government and on Trident submarine reactor safety for the MoD.

But an organisation created in 1954 to spearhead the development of UK nuclear technology is today much more likely to be using its expertise to create specialist products or advise industries and governments on everything from the supply and use of energy to waste management, safety and environmental protection. Only half its revenue now derives from the UK government and this will fall to about 30 per cent, given the removal of its nuclear liabilities.

Since 1986 AEA Technology, based at Harwell near Oxford, has been required by the government to operate commercially - a shift in strategy made all the more vital by subsequent retrenchment in the government's own nuclear programmes.

But by the end of the 1980s, with government funding declining, the future of an organisation boasting 3,000 graduate scientists and engineers appeared uncertain. Mr Brian Eyre, chief executive, says: 'We reached the point where we either devised a new strategy or faced irreversible natural decay.'

The result was further change, signalled with the creation in 1990 of a number of nuclear-related and industrial business units. A continuing cost-cutting programme has now reduced staff to about 8,000, one fifth of the peak reached in the early 1960s, while several executives have been recruited from outside.

The business is expanding overseas - particularly in east and west Europe, the US and the Far East - and wants to see up to 30 per cent of turnover coming from abroad within the next four years. Overseas income could reach Pounds 70m this year.

But its ambitions hinge on the removal of legal constraints which still dog its activities as long as it remains in the public sector, a fact acknowledged last year in a report by the Monopolies and Mergers Commission.

At present AEA Technology's financial limits are set by the Treasury. It must also seek ministerial approval for alliances or joint ventures and is severely restricted in exploiting its non-nuclear expertise.

Mr Eyre stresses that total privatisation is not essential, providing AEA Technology is given the necessary freedoms, but there is no mistaking the enthusiasm for going the whole way.

Neither will any plan envisaging the separate disposal of business units regarded as totally interdependent be welcomed. 'We don't want the bits flogged off separately. We have a much better chance of surviving if everything is kept intact,' Mr Eyre says.

But for ministers the biggest dilemma is what to do with the unattractive 'baggage' left in the shape of nuclear installations scattered around the country - such as the Dounreay fast reactor in Scotland - for which the government pays about Pounds 100m a year in decommissioning and radioactive waste management costs.

The total state bill, likely to continue well into the next century, is put at Pounds 3bn to Pounds 4bn. The most likely solution will be the creation of a residuary body to handle AEA Tech-nology's former responsibil-ities.

Independent consultants charged with examining ministerial options will be appointed soon and should report by the late summer. A sale could be pencilled in for 1995 or early 1996.

But while the present government looks set to extend the disciplines of the marketplace to its old nuclear servant, any delays in privatisation would raise the possibility of a change in administration and an alternative outcome. Labour might be far less ready to see such a centre of technical excellence and innovation slip entirely from its grasp.

AEA Technology GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P4911 Electric Services COMP Company News P2819 P2869 P4911 The Financial Times London Page 10 920
Need for more curbs on brokers questioned Publication 930419FT Processed by FT 930419 By SCHEHERAZADE DANESHKHU

MR NEIL Hamilton, minister for corporate affairs, says the need for further statutory regulation of general insurance intermediaries is yet to be demonstrated.

He told the British Insurance Investment Brokers Association annual conference in Bournemouth: 'The real question is whether there is anything fundamentally wrong with the present position . . . in terms of the protection it affords. I am listening carefully to views, but I . . . will take some persuading.'

Mr Hamilton was giving his preliminary views on responses to a consultative document issued by the Department of Trade and Industry last year. The DTI invited comments on the European Commission's recommendation on the regulation of insurance intermediaries.

His remarks came in the wake of a report by the Consumers' Association which found that in a survey of insurance intermediaries - brokers and agents who sell policies on behalf of companies - the majority breached 'virtually all the provisions of the codes of practice which supposedly govern the sale of non-life insurance'.

The Consumers' Association is recommending that the regulatory body the Insurance Brokers Registration Council, or a new independent body, should enforce regulations more actively.

Mr Hamilton said: 'I realise current arrangements for independent intermediaries are uneven. But I am not convinced that unevenness by itself is sufficient reason for more regulation.'

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P6411 Insurance Agents, Brokers, and Service P6331 Fire, Marine, and Casualty Insurance TECH Safety & Standards TECH Services & Services use P9651 P6411 P6331 The Financial Times London Page 10 272
Minister to set out rolling-stock plans Publication 930419FT Processed by FT 930419 By DAVID OWEN

THE GOVERNMENT will today give fresh details of how Pounds 150m earmarked in last year's Autumn Statement for establishing a leasing market for railway rolling stock is to be allocated.

Mr Roger Freeman, transport minister, is expected to use transport questions in the Commons to tell MPs which company has been chosen to build the rolling stock. British Rail has put forward details of two competing schemes for using the promised government funding.

The BR proposals apparently leave the government with a choice between financing replacement trains for the London Euston to Glasgow line and replacing outdated rolling stock on Kent coast routes.

BR believes both proposed upgrades are necessary, but does not expect the money to be shared between them.

If the Euston to Glasgow line were selected, about 15 new InterCity 225 trains would probably be built by GEC Alsthom, the Anglo-French engineering company. If the Kent coast option were chosen the new rolling stock would be built by ABB Transportation (formerly BREL).

British Rail GB United Kingdom, EC P3743 Railroad Equipment P9621 Regulation, Administration of Transportation P4111 Local and Suburban Transit RES Capital expenditures P3743 P9621 P4111 The Financial Times London Page 10 211
Reorganisation at Peat Marwick Publication 930419FT Processed by FT 930419 By ANDREW JACK

KPMG PEAT MARWICK, the UK's second largest accountancy firm, is reorganising its consulting arm into a national practice in the first step away from its regional structure.

Mr Bob Simm, former head of consulting for the south-east region, has become national head of consulting and will assume partial control over the regional heads of consulting.

The firm plans to create a growing number of specialist national centres and encourage greater co-operation between the regional practices. The move runs contrary to KPMG's traditional structure, which operates through six autonomous partnerships - south-east, west, Midlands, north-east, north-west and Scotland.

Only 'general partners' share the profits of the practice from across the country. Their identities - let alone their remuneration - are not known by all their colleagues. The remaining partners - about 570 - receive a share of the profits purely from the region in which they are based. Under the new scheme the regional heads of consulting will report jointly to the head partners of their region and to the national head of consulting. Their profit share will still be determined by the performance of the region, but will include a contribution from the national consulting practice.

Mr Simm said he hoped to move to a national profit share for the consulting division within two years. He plans several national centres to add to those for manufacturing, the environment and health systems.

The reorganisation comes when the firm is going through a wider programme of change called 20/20 Vision, designed to make it more responsive to the needs of its clients.

KPMG Peat Marwick GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services COMP Company News P8721 The Financial Times London Page 10 296
Mayflower to take over car designer Publication 930419FT Processed by FT 930419 By KEVIN DONE, Motor Industry Correspondent

MAYFLOWER, the specialist UK automotive engineering group, is to take over the business and assets of IAD (UK), one of Europe's leading automotive design and engineering consultancies, which collapsed into administrative receivership less than two weeks ago.

The deal will increase Mayflower's annual turnover by 60 per cent to about Pounds 110m. It will create a significant force among the world's automotive design and engineering groups capable of rivalling the long-established Italian automotive design houses such as Pininfarina, Italdesign and Bertone, and Germany's Karmann.

Mayflower already owns Motor Panels, the Coventry-based automotive engineering group, which operates in fields from vehicle engineering design and development to tooling and manufacturing.

Mayflower is to pay Pounds 3.25m in cash to acquire IAD from the receiver and the shares of IAD's overseas trading subsidiaries, which did not go into receivership.

Mr John Simpson, Mayflower chief executive, said the combination of IAD and Motor Panels would provide 'a world-class capability in automotive design and engineering'.

Mayflower is already expanding rapidly and is in the midst of its second rights issue in less than two years.

It is raising Pounds 34.6m through a one-for-one rights issue to finance its existing expansion in the UK and the US. This includes a project to supply the bodies for a new MG sports car being developed by Rover, the UK carmaker.

Mayflower bought Motor Panels for Pounds 14.75m out of the receivership of the parent company, CH Industrials. It made a pre-tax profit of Pounds 1.7m last year on a turnover of Pounds 67.8m and has a worldwide workforce of nearly 1,000.

IAD made a loss of Pounds 105,000 on a turnover of Pounds 62m for the year to the end of April 1991.

Mr Godfrey Harker, IAD group finance director, said IAD was expected to make a loss of Pounds 2m to Pounds 2.5m on a turnover of Pounds 51m to Pounds 52m in the year to the end of this month.

IAD turnover has fallen sharply since mid-1992. The company, previously owned 77.5 per cent by Mr John Shute, chairman and managing director, and family interests, and 22.5 per cent by Cinven, the venture capital investor, has been under growing financial strain for the last two years.

Mr Simpson said that Mr Shute would remain as chairman of IAD responsible for strategy, sales and marketing. Mr John Fleming, Mayflower operations review director, would become IAD chief executive with immediate effect.

Mayflower Group IAD (UK) GB United Kingdom, EC P8711 Engineering Services P8741 Management Services COMP Mergers & acquisitions P8711 P8741 The Financial Times London Page 10 447
London set for patchy upturn Publication 930419FT Processed by FT 930419 By EDWARD BALLS

SIGNS of economic recovery are emerging in Britain's capital,the London Chamber of Commerce and Industry's latest quarterly survey indicates.

But falling employment and investment, and tough conditions for small and medium-sized companies, do not suggest a vigorous rise in activity.

Business activity was stronger in the first quarter of this year than at any time in the past two and a half years, according to the survey of 250 London-based companies. Twenty nine per cent of companies reported higher business levels, compared with 24 per cent reporting lower business levels.

The balance of 5 percentage points reporting higher rather than lower business compares with a negative balance of 7 points in the final quarter of 1992 and is at its highest level since June 1990.

But the aggregate improvement is not universally shared. Small and medium-sized companies reported a further net fall in orders, while employment is still contracting. Thirty per cent of manufacturing companies and 18 per cent of service-sector companies reported a reduction in their total staff in the first quarter.

Mr Simon Sperryn, chief executive of the London chamber, said: 'Recovery in London will be patchy and growth sluggish.' He predicted that London would lag behind other regions in the recovery's early stages. 'But this time there are a number of positive factors which should prevent a slide back into decline,' he added.

London Chamber of Commerce. 071-248-4444.

GB United Kingdom, EC P99 Nonclassifiable Establishments ECON Economic Indicators P99 The Financial Times London Page 9 261
Average 8.6% increase for top directors Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR THE DIRECTORS of Britain's largest companies

those with annual turnover of more than Pounds 600m each - secured average pay rises of 8.6 per cent last year, more than twice the national average, the Institute of Management's annual salary survey, published today, shows.

The average annual salary of managers is now Pounds 29,838, with 40 per cent earning more than Pounds 30,000. Directors have an average salary of Pounds 68,722 with as many as 68.8 per cent earning more than Pounds 50,000.

The biggest average salary rises of 10.6 per cent were secured by directors in Scotland, who now average Pounds 68,688, followed by a 10.2 per cent increase in salaries for directors in East Anglia to an average Pounds 58,205.

Managers in the west Midlands enjoyed the biggest improvement of 7.8 per cent in managerial grades to an average of Pounds 26,597.

The underlying rate of increase in all earnings over the same 12 months was 4 per cent.

The institute found wide salary discrepancies between different parts of Britain. The highest-paid managers are in inner London. They received an average 5.8 per cent increase last year, taking them to an average Pounds 37,457. Directors in inner London had a 5.3 per cent improvement in salaries to an average Pounds 82,471.

The lowest-paid managers work in the northern region of England, with an average salary of Pounds 24,842 after a 6.4 per cent rise. Directors in that region were the lowest paid, with a Pounds 52,807 average salary after a rise of 5.3 per cent.

The survey shows that the best-paid managerial jobs remain in the financial sector, with average salaries of Pounds 35,021 a year. The lowest-paid managers work in manufacturing, with an average of Pounds 24,533.

The highest-paid directors are in the privatised energy sector, where the average salary is Pounds 110,981 a year. The lowest-paid directors are in textiles, clothing and footwear, with an average of Pounds 49,835.

In chemicals and allied industries directors' pay rose 15.3 per cent, followed by the public sector (12.4 per cent), distribution (11.6 per cent), electricity, gas and other energy (10.9 per cent) and mechanical engineering and production (10.6 per cent).

The survey found 'little sign of any switch to flexible benefits packages' for managers and directors. The company car remains 'the most popular perk on offer' with 95.8 per cent of directors receiving one. There has been a decline in their provision among the lower managerial grades, with 59.3 per cent now having them.

The institute's survey is the most comprehensive covering UK managerial remuneration. It covers 25,180 individuals in 392 companies employing a total 2m people.

Management Remuneration Survey, 1993. Remuneration Economics, Survey House, 51 Portland Rd, Kingston upon Thames, Surrey KTI 2SH. Pounds 350.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour P99 The Financial Times London Page 9 487
Union leader says end of recession is near Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR, Labour Correspondent

THE president of Britain's largest manufacturing union said yesterday that the country is at last emerging from recession.

'The green shoots have arrived,' said Mr Bill Jordan, leader of the AEEU engineering union. 'The worst is over. We are approaching the end of the recession as the heartland of Europe goes into one.'

Mr Jordan, speaking on the eve of the union's national committee conference in Llandudno, was responding to the union's first quarterly report on employment trends in manufacturing, published today.

His comments are the first acknowledgment from a senior union leader that the economy is improving.

Mr Jordan said: 'The corner has been turned against a bleak background of massive cuts in jobs and production capacity.' He pointed out that British manufacturing industry was starting to benefit from the 'hefty devaluation' of the pound last autumn and the restructuring of many companies.

The AEEU president also suggested there were signs of a revival in industrial investment.

The union's survey - compiled from area reports filed by local AEEU offices - found that only 17.5 per cent of companies in the report had 'poor' order books for the first three months of the year compared with 30 per cent which described their order books as 'good' and a further 52.5 per cent which described their order books as 'average'.

It also reports that 17.5 per cent of companies surveyed had negotiated multi-skilling and flexibility agreements in the first quarter of this year, a further sign of recovery.

Job prospects do not look so healthy, however. Only 5 per cent of companies reported any vacancies while 20 per cent had made redundancies in the first quarter.

Union leaders acknowledged yesterday that the survey, the first of its kind, was by no means a perfect barometer of industrial performance. Only 40 companies were included in the first sample and none from Scotland and the London area, while 11 of the sample were from Tyneside.

Mr Jordan said the union hoped to improve the quality of the survey in as it would become a regular source of information on manufacturing employment trends.

Mr Jordan warned that the improvement 'had not yet been translated into the creation of additional jobs'. Unless the right measures were taken - including greater priority for training - 'the green shoots are in danger of withering away'. He added: 'Within the next six months we could see serious skill shortages in manufacturing.'

GB United Kingdom, EC P8631 Labor Organizations P3999 Manufacturing Industries, NEC ECON Economic Indicators P8631 P3999 The Financial Times London Page 9 444
Plan for ID cards on Ulster sites Publication 930419FT Processed by FT 930419

THE Northern Ireland Office is considering the introduction of identity cards for the 30,000 building workers in the province, it was disclosed last night.

Proposals to curb the siphoning of funds by the IRA and other terrorist groups would prohibit cash payments for wages and materials.

GB United Kingdom, EC P9229 Public Order and Safety, NEC P9711 National Security NEWS General News P9229 P9711 The Financial Times London Page 9 82
Bovis to complete Lelliot projects Publication 930419FT Processed by FT 930419

BOVIS Construction has agreed with Coopers and Lybrand, receivers of John Lelliot Construction, to complete 40 of the company's projects together valued at Pounds 23m, subject to client consent.

It is intended that a core team of senior Lelliot executives, including the chairman Mr John Lelliot, will join Bovis Construction to help complete the projects.

Bovis Construction John Lelliot Construction GB United Kingdom, EC P1542 Nonresidential Construction, NEC MKTS Contracts P1542 The Financial Times London Page 9 88
Pay deals respond to low inflation Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR

NEARLY three quarters of pay settlements made so far this year have resulted in rises of between 2 per cent and 4.9 per cent, new figures show, Robert Taylor writes.

The latest pay survey from Incomes Data Services says that negotiators in the private sector have responded to lower inflation while the government's 1.5 per cent pay limit in the public sector is holding.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P99 Nonclassifiable Establishments PEOP Labour P9651 P99 The Financial Times London Page 9 101
House price rise of 3% predicted Publication 930419FT Processed by FT 930419 By SCHEHERAZADE DANESHKHU

HOUSE PRICES will rise 3 per cent across the country this year, with sales volume increasing 10 per cent, an economic adviser to Lloyds Bank has predicted.

Mr Patrick Moon paints a mixed picture in the April issue of Lloyds Bank's Economic Bulletin, with some regions likely to experience further house price declines and others seeing above-average rises.

He says the areas offering greatest scope for revival, based on an analysis of house prices in relation to incomes, include the south-east, Greater London and the south-west. The areas most likely to see further falls are East Anglia, the east Midlands, the west Midlands, the north and north-west of England, and Wales.

Mr Moon says: 'Recovery in the housing market this year will depend on a restoration of confidence. With unemployment likely to rise further in 1993, this will serve as a constraint on any recovery in house prices.' The incomes of those in employment will also be influential, he adds.

Reports from housebuilders and estate agents indicate a higher level of viewings this year compared with last year.

Last week the ombudsman for corporate estate agents reported that the number of properties coming on to the market had jumped in the first two months of the year, but was still below 1992 levels.

GB United Kingdom, EC P1522 Residential Construction, NEC P6519 Real Property Lessors, NEC P6531 Real Estate Agents and Managers NEWS General News P1522 P6519 P6531 The Financial Times London Page 9 258
Spouse's career 'limits postings' Publication 930419FT Processed by FT 930419 By LISA WOOD, Labour Staff

LOSS OF a spouse's career is the reason most commonly given for employees turning down a posting abroad, a pan-European survey on expatriate management says.

In spite of the extent of the difficulty, only a minority of companies in the survey sought to address the problem formally - for example by offering financial compensation for loss of a spouse's income.

The survey, by Price Waterhouse, the management consultancy, examined compensation packages, benefits and allowances offered to expatriate workers by more than 200 companies based in 13 European countries.

Price Waterhouse said that a well-administered expatriate workforce was an important element in the successful growth of a business overseas and the survey highlighted the ways companies were tackling issues.

It said there were still significant barriers to the free circulation of labour - with pension portability one of the most important.

The main findings of the survey included:

Children's education was a significant reason for turning down expatriate assignments.

Career risk was the third most common reason for reluctance - with employees fearing that they would be 'out of sight, out of mind'.

One fifth of companies had no dedicated member of staff with responsibility for the management of the expatriate workforce.

Of companies surveyed, 37 per cent did not pay a financial incentive to encourage employees to accept and complete expatriate assignments.

More than half the companies did not offer any financial compensation to the expatriate for loss of state benefits, such as child allowance.

A Review of European Policy and Practice, Price Waterhouse Expatriate Compensation and Benefits Consultancy. Savannah House, 3 Ocean Way, Ocean Village, Southampton SO1 1TJ. Pounds 750.

GB United Kingdom, EC P99 Nonclassifiable Establishments PEOP Labour P99 The Financial Times London Page 9 301
RMT to discuss its next move Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR

THE EXECUTIVE committee of the RMT, the main rail union, meets today to decide its next move in its dispute with British Rail which has already resulted in two one-day strikes which paralysed the network.

There had been speculation that the RMT would switch the strike day from Friday to midweek, but Mr Jimmy Knapp, general secretary, has stressed that no decision on further action has yet been taken.

The prospects of an early settlement improved over the weekend after the union leadership said it had detected signs of a change in BR's bargaining stance over compulsory redundancies and the use of contract labour.

It wants a guarantee that there will be no compulsory redundancies for its members and a moratorium on the further use of contract labour.

It is possible that BR will now be able to accept a form of words that will satisfy the union on those two controversial issues without denying management some room for manoeuvre in the future.

BR has started to stress that it does not envisage any need for compulsory redundancies over the next couple of years in the approach to privatisation, or for a greater use of contract labour in track and signal maintenance work.

Today, Aslef, the drivers' union, is due to meet BR to try to resolve their specific differences over the future of the drivers' national agreement. The two sides reported progress had been made at the end of last week.

Aslef took part in the second one-day strike last week. Nearly three quarters of pay settlements made so far this year have resulted in rises of between 2 per cent and 4.9 per cent, new figures show.

The latest pay survey from Incomes Data Services says that negotiators in the private sector have responded to lower inflation while the government's 1.5 per cent pay limit in the public sector is hold-ing.

Since the start of the year the level of wage settlements has fallen, with half those concluded so far between 2 per cent and 3.9 per cent.

British Rail GB United Kingdom, EC P4111 Local and Suburban Transit PEOP Labour P4111 The Financial Times London Page 9 375
BA offers deal for part-time working Publication 930419FT Processed by FT 930419 By ANDREW FISHER

BRITISH AIRWAYS said yesterday that it will give a lump-sum payment of six months' salary to any of its 6,000 ground staff at London's Heathrow airport who accept an offer to work part-time as part of the airline's drive to cut costs and make its operations more flexible.

It said many employees, who include baggage handlers and check-in staff, had expressed interest in working part-time. BA wants to streamline its Heathrow workforce to fit in better with the peaks and troughs of daily traffic.

Most flight activity at Heathrow comes in the morning, when long-haul flights arrive from the Far East and the Americas, and in the evening, when many depart. Shuttle and business traffic is also heaviest at these times.

News of BA's offer comes as the UK and US governments hold talks today aimed at restarting negotiations on greater access to each other's skies. Mr John MacGregor, transport secretary, is expected to repeat that more US access to regional airports in Britain can be agreed only if the US grants the same to UK airlines.

Mr MacGregor is likely to say at the meeting this afternoon with Mr Federico Pena, US transportation secretary, that the UK wants to operate to destinations beyond the 22 main hubs such as New York. So far the US has been reluctant to allow this.

Lufthansa, the German airline, has also complained about restricted access to airports in the US.

BA yesterday gave no indication about how many people it expected to accept its Heathrow working proposals.

Under BA's proposals there would be two schemes for those prepared to move to part-time working: 'Switch', for the under-50s wanting to shorten their working week, and 'Wind Down', for those over 50 who want to work less as they approach retirement.

The offer of six months' extra pay applies to both schemes. Those in the 'Wind Down' scheme would have their pension rights protected.

BA started asking staff earlier this year if they wanted to change to part-time working and expects to know by the end of this month how many are interested.

It declined to say yesterday how many employees it expected to take up the offer, how many it would like to see on part-time working, or whether the schemes could be extended to other parts of BA.

British Airways GB United Kingdom, EC P4512 Air Transportation, Scheduled PEOP Labour P4512 The Financial Times London Page 8 419
A difficult test for the new boy: The educational challenge facing Sir Ron Dearing Publication 930419FT Processed by FT 930419 By JOHN AUTHERS

SIR RON Dearing, a former chairman of the Post Office, today takes over what promises to be the most difficult job in British education. He has been entrusted by Mr John Patten, the education secretary, with reviewing the entire national curriculum for England and Wales.

The increasingly confrontational tactics used this weekend by the government and by the unions threatening to boycott national curriculum tests make his position awkward.

Sir Ron wants the tests to go ahead, saying he needs them as evidence if the system is to be improved. He said: 'I really do need that information. That would enable me to make proposals for changes. I have views, but views aren't as convincing, with respect, as hands-on experience and true independent evaluation.'

He could not do an 'honest job' of serving teachers without completed tests, evaluated by the Office for Standards in Education, he said. He has already arranged meetings with all six teachers' unions, a move which Mr Patten has consistently refused to make.

This moderate stance could, however, be undercut by the legal action brought against the teachers by Wandsworth Borough Council. This reaches the Appeal Court tomorrow. Letters Mr Patten will send to governors and head teachers this week, telling them they are legally obliged to enforce the tests, add to the atmosphere of confrontation.

Sir Ron's potential influence over what children are taught is unprecedented. He takes over today as chairman of both the National Curriculum Council, responsible for setting the curriculum, and the School Examinations and Assessment Council, which decides on testing the curriculum. In October these two bodies will merge into the School Curriculum and Assessment Authority, under his chairmanship.

He wants the SCAA to be autonomous, saying: 'I've never had any political affiliation. I'm working first and foremost for the future of our youngsters. I regard myself as having an obligation to parents, and very much to teachers, who are out there in the front line doing a very demanding job, and finally to parliament.'

Previous incumbents at the NCC and the SEAC were hampered by a close identification with government education policy.

His efforts to win over teachers appeared to make some headway after his meeting with Mr Peter Smith, general secretary of the Association of Teachers and Lecturers, which is not affiliated to the TUC.

Mr Smith said: 'It was a very constructive meeting and I went away confident that he understands the reality of the immediate problems, and that he was in the business of attempting to solve problems rather than aggravate them.'

The ATL is still, however, calling for the tests to be abandoned. Mr Smith said: 'To put a lot of time and effort into something which everyone accepts isn't working and is not likely to work doesn't make a great deal of sense.'

Sir Ron could yet play a crucial role in reforming the education system if the political row abates. Whether he has the chance to play it seems to depend on Mr Patten, and on the teachers' unions.

GB United Kingdom, EC P8211 Elementary and Secondary Schools P9411 Administration of Educational Programs PEOP People P8211 P9411 The Financial Times London Page 8 551
Labour hopes to force retreat on Maastricht Publication 930419FT Processed by FT 930419 By RALPH ATKINS

LABOUR WILL today launch a fresh attempt at forcing ministers to back down over Maastricht's social chapter, hoping to dent government optimism that the bill's committee stage will end soon and without more concessions.

Mr George Robertson, Labour's Europe spokesman, will meet Mr Michael Morris, deputy speaker, to urge him to rethink the amendments on the social chapter selected for debate. But Labour is now looking more to the bill's 'report stage' - likely to follow soon after the committee stage - as offering the best chance of forcing a further government retreat.

Last week ministers agreed to support a Commons debate on the social chapter before formal ratification but after the bill completes its Commons stage, expected after the Danish referendum on May 18.

Labour and Tory Euro-rebel MPs agreed yesterday that the committee stage was likely to end next week, or possibly even this week if the government won votes allowing all-night sittings.

MPs are likely to vote on clause one of the three-clause bill today. Labour will abstain, allowing the bill to proceed but provoking Liberal Democrat and government accusations that they are anti-European. Mr Robertson said: 'We couldn't vote for clause one because there is still a social chapter opt-out.'

Votes on new clauses to the bill, including on a referendum, could follow on Wednesday or Thursday and perhaps one day next week.

Mr John Smith, Labour leader, is pledged to vote against a referendum and the rebels in his party or among Conservatives are unlikely to force a government defeat.

One Foreign Office insider said: 'By the week and by the day, the general confidence of the government is underpinned and reinforced.'

Labour wants the reinstatement of its amendment 27 for debate which it believes would have the effect of forcing the social chapter on the government and, in spite of ministers' denials, is seen by some Tory Euro-sceptics as a possible wrecking amendment.

Mr Robertson is also urging the reinstatement of new clause 74, which would impose tougher conditions on the debate on the social chapter than the government conceded last week.

Mr Morris decided against selecting amendment 27 last week but Labour hopes Miss Betty Boothroyd, the speaker who will preside over the report stage, will be more sympathetic.

GB United Kingdom, EC P8651 Political Organizations P9721 International Affairs NEWS General News P8651 P9721 The Financial Times London Page 8 412
Wage-link fines under review Publication 930419FT Processed by FT 930419 By RALPH ATKINS

THE GOVERNMENT is 'anxiously' reviewing the system of unit fines in which courts penalise offenders according to their ability to pay as well as the seriousness of the offence, the Home Office confirmed yesterday.

Mr Kenneth Clarke, the home secretary, is looking at ways to end anomalies such as minor offences attracting heavy penalties. The Home Office said that new legislation might not be required.

Unit fines were introduced under the 1991 Criminal Justice Act. Mr Clarke said in the Commons last week: 'I share the view of the Magistrates Association that in principle unit fines are right.

'However, we know that in practice they are producing some odd results, perhaps partly because of the way in which the rules to implement the act have been drawn up and partly because some magistrates' courts are not familiar with their powers.'

GB United Kingdom, EC P9211 Courts P9651 Regulation of Miscellaneous Commercial Sectors NEWS General News P9211 P9651 The Financial Times London Page 8 175
Solicitors warned against 'sharp practices' on fees Publication 930419FT Processed by FT 930419

A FEW solicitors are using what amounts to sharp practice by substantially increasing their original fixed fees in small cases, a representative of the lord chancellor said yesterday.

Mr John Taylor, parliamentary secretary at the Lord Chancellor's Department, regretted that solicitors were not required to inform clients of the likely costs of taking on a case and the basis of charging.

Mr Taylor said at the Law Society's Oxford weekend conference: 'For the small client - probably someone who will go to the solicitor only once in a lifetime and that once because they have to rather than because they choose to - the profession too often asks, as it were, for a blank cheque.'

He said it was crucial for ethical standards to have a place in solicitors' business. Mr Taylor referred to a few cases where clients were encouraged to enter into a fixed-fee arrangement which 'somehow becomes inappropriate and is replaced by a much more substantial fee'.

In other cases a low-cost service was offered which was so poor it led to continued problems and further ex-pense.

'Tales such as this smack of sharp practice rather than of professionalism. They also do a disservice to the profession as a whole,' he said.

He thought the Law Society's remuneration certificate procedure - which allows clients to challenge solicitors' bills without further costs - was a 'valuable safeguard'.

GB United Kingdom, EC P8111 Legal Services COSTS Service costs & Service prices P8111 The Financial Times London Page 8 261
Attali defends spending by bank Publication 930419FT Processed by FT 930419 By SCHEHERAZADE DANESHKHU

MR JACQUES ATTALI, the president of the European Bank for Reconstruction and Development, yesterday denied responsibility for the way in which Pounds 200m was spent by the bank on fitting out its London offices and meeting overheads since its launch two years ago.

He said on the BBC TV Breakfast With Frost programme that it had not been his role to decide on the Pounds 750,000 spent on replacing and installing new marble at the entrance to the bank's headquarters in the City.

'My role was to decide on the budget and to get it agreed by the board of the bank and to be sure that the cost of the building would be at the lower range of a City average,' he said.

Mr Attali, who is to be questioned this week by Mr Theo Waigel, German finance minister who is chairman of the bank, over the allegations of excessive spending at the bank said he had nothing to apologise for.

He said the bank had one-off start-up costs and that by investing to create its headquarters in the UK, the government would attract more business for the country. He said that many countries had competed to have the bank's headquarters in their capitals. 'I think it was a good decision for the British government to decide to invest a lot of money in the headquarters.'

Mr Attali avoided the question of whether he should resign if that was the price of restoring the bank's credibility.

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies COMP Company News P6081 The Financial Times London Page 8 281
Housing cash to be 'clawed back' Publication 930419FT Processed by FT 930419 By SCHEHERAZADE DANESHKHU

THE INCREASE in funds for spending on local authority housing projects announced by Mr Norman Lamont, the chancellor, in last year's Autumn Statement, will be clawed back, a survey by the Institute of Housing suggests.

The institute says today that a survey of 30 directors of housing authorities indicated that the amount raised as a result of Mr Lamont's decision to allow local authorities to spend all capital receipts generated from the sale of assets in the year to December will be far less than the Pounds 1.75bn he anticipated.

The government first estimated that of this amount, Pounds 1.1bn would be available from the sale of housing assets, a figure which the Department of the Environment has revised to Pounds 950m.

The institute's estimate is that housing receipts will total about Pounds 750m.

Mr John Perry, director of policy at the institute, said: 'Many local authorities are finding that the capital receipts holiday has a sting in the tail. The holiday is being paid for at the expense of investment in 1994 and 1995. Government will cut Pounds 441m to pay for a relatively minor boost now.'

The survey finds that although the authorities anticipate generating Pounds 150m in receipts this year, with Pounds 80m already earmarked for housing investment, there will be no new local-authority building and only 400 additional homes will be built through housing associations.

The institute said that every director surveyed expressed concern about the reduction in the government's contribution to mandatory renovation grants from 75 per cent to 60 per cent.

Capital Receipts - A Real Stimulus For Housing? Institute of Housing, Octavia House, Westwood Way, Coventry CV4 8JP.

GB United Kingdom, EC P1522 Residential Construction, NEC NEWS General News P1522 The Financial Times London Page 8 307
Rail union will meet on dispute Publication 930419FT Processed by FT 930419 By ROBERT TAYLOR

THE EXECUTIVE committee of the RMT, the main rail union, meets today to decide its next move in its dispute with British Rail which has already resulted in two one-day strikes which paralysed the network, Robert Taylor writes.

There had been speculation that the RMT would switch the strike day from Friday to midweek, but Mr Jimmy Knapp, general secretary, has stressed that no decision on further action has yet been taken.

The prospects of an early settlement improved over the weekend after the union said it had detected signs of a change in BR's bargaining stance over compulsory redundancies and the use of contract labour.

It wants a guarantee that there will be no compulsory redundancies for its members and a moratorium on the further use of contract labour.

Today, Aslef, the drivers' union, is due to meet BR to try to resolve their specific differences over the future of the drivers' national agreement.

British Rail GB United Kingdom, EC P4111 Local and Suburban Transit PEOP Labour P4111 The Financial Times London Page 8 190
Lloyd's urged to delay Names' writs Publication 930419FT Processed by FT 930419 By TRACY CORRIGAN

THE Association of Lloyd's Members has urged the insurance market to extend the moratorium on writs against names in the troubled Gooda Walker syndicates.

Mr Val Powell, chief executive of the association, made the plea in a letter to Mr Brian Garraway, chairman of Lloyd's of London's regulatory board.

The moratorium on all writs seeking to recover funds from Lloyd's Names is due to end on April 30.

Members of the four Gooda Walker syndicates are among the worst-hit of the insurance market's Names - the individuals who supply its capital. Their losses amount to more than Pounds 900m, with many individuals facing losses of more than Pounds 1m.

Following the release of a 200-page report on the four lossmaking Gooda Walker syndicates which was passed to the Serious Fraud Office last week, Mr Powell argues that the moratorium on writs against the Names should not be lifted.

In the light of the report, he says, 'It is clear that Names will have been encouraged to join certain syndicates on the basis of a false prospectus.'

The report focuses on the use by the Gooda Walker syndicates of 'time and distance' policies - reinsurance policies that allow Lloyd's syndicates to manage their reserves against long-tail claims, which emerge many years after the inception of policies - more effectively. Such deals allow insurers to 'discount' their reserves against future claims.

Gooda Walker GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service COMP Company News P6411 The Financial Times London Page 8 266
Appeal for talks on Timex dispute Publication 930419FT Processed by FT 930419

The AEEU engineering union last night appealed for talks to settle the bitter Timex dispute, and warned the row could scare potential foreign investors away from Scotland.

The union issued its plea on the eve of the Scottish TUC congress in Glasgow, where the dispute, now in its third month, is to be debated on Tuesday.

Mr Jimmy Airlie, AEEU national executive member for Scotland, said the union was willing to negotiate a settlement on the sole precondition that the sacked workers must be reinstated.

Timex Corp GB United Kingdom, EC P3873 Watches, Clocks, Watchcases and Parts PEOP Labour P3873 The Financial Times London Page 8 118
Ulster tourism development plan Publication 930419FT Processed by FT 930419

NEARLY Pounds 1m is to be spent on developing a tourism and environment centre around a mountain surrounded by Army observation posts in Northern Ireland.

The International Fund for Ireland, the EC and the Department of Agriculture (NI) will provide the Pounds 900,000 to fund the centre over the next two years.

The project will be around the Slieve Gullion mountain between Newry and Forkhill in south Armagh, and will include self-catering accommodation, commercial rental premises as well as a restaurant.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page 8 109
Cuts 'will reduce capital spending' Publication 930419FT Processed by FT 930419 By SCHEHERAZADE DANESHKHU

CUTS will claw back the increase in revenue to local authority housing for spending on capital projects announced by Mr Norman Lamont, the chancellor, in last year's Autumn Statement, the Institute of Housing says today, Scheherazade Daneshkhu writes.

It says in a survey the amount raised will be far less than the Pounds 1.75bn anticipated by Mr Lamont as a result of his decision to allow local authorities to spend all capital receipts generated from the sale of assets in the year to December 1993. The government first estimated that of this amount, Pounds 1.1bn would be available from the sale of housing assets, a figure which the Department of the Environment has revised to Pounds 950m. The institute's estimate is that housing receipts would total about Pounds 750m.

The survey of 30 directors of housing authorities was undertaken to establish whether housing receipts were likely to create the investment in growth anticipated by the government and whether there was evidence that receipts were helping to produce more homes to rent.

It finds that although the authorities anticipate generating Pounds 150m in receipts this year, with Pounds 80m already earmarked for housing investment, there will be no new local-authority building and only 400 additional homes will be built through housing associ-ations.

GB United Kingdom, EC P9121 Legislative Bodies P9111 Executive Offices NEWS General News P9121 P9111 The Financial Times London Page 8 245
London Marathon Publication 930419FT Processed by FT 930419

Runners in yesterday's London marathon passing Canary Wharf in Docklands. The men's race was won by Eamonn Martin of the UK, sponsored by stock loan specialists London Global Securities. Two people died during the race, in which some 25,500 took part.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page 8 68
Painful reforms should yield surge in third world's growth / Analysis of the latest World Bank report on prospects for developing countries - with east Asia leading the way Publication 930419FT Processed by FT 930419 By GEORGE GRAHAM

THE WORLD Bank is forecasting a surge in developing countries' growth rates over the next ten years, as a result of the often painful economic reforms they have undertaken.

Growth in the developing world is projected at 4.7 per cent a year over the period 1992-2002, compared to 2.7 per cent in 1982-1992, according to the Washington-based multilateral development bank's annual forecasts.*

Gross domestic product per capita is expected to grow at 2.9 per cent a year - more than three times the 0.8 per cent rate of the last ten years.

Mr D C Rao, the bank's acting senior economist, said much of the improvement reflected the transformation of economic policy in the developing countries in recent years: trade rules have been liberalised, the policy of import substitution abandoned, over-valued exchange rates corrected, public finances brought under control and the state's role in industry and commerce reduced.

These policy changes have led to a 'remarkable resurgence' of private capital flows to the developing countries, with foreign direct investment climbing by 50 per cent over the last two years to Dollars 38bn in 1992, with portfolio investment growing even more explosively to Dollars 34bn last year.

The World Bank expects growth in the developing world to be led by east Asia, where growth is projected to slow slightly over the next decade but to remain at the high level of 7.3 per cent a year. East Asia now accounts for a quarter of output in the developing world, Mr Rao said. Over the next ten years, its weight is likely to rise to one third.

In Latin America, the World Bank says growth of nearly 4 per cent a year is achievable over the next ten years, compared with a rate of 1.9 per cent a year in 1982-92, if countries such as Chile, Mexico and Argentina persevere with their domestic policies and if Brazil adopts credible policies of macro-economic stabilisation.

Sub-Saharan Africa could see growth rise from 2.0 per cent over the last ten years to 3.7 per cent in the decade ahead, largely as a result of improvements the World Bank anticipates in prices of commodities such as coffee and cocoa.

If their fundamental reforms succeed, the national economies of eastern Europe and central Asia should stop contracting and start to grow at a rate of 2.1 per cent for the next ten years, attaining a trend rate of 4 to 5 per cent in the second half of the decade.

Mr Rao cautioned that the World Bank's forecasts were heavily reliant on the assumption that the recovery that now appeared to be consolidating itself in the US would spread to the rest of the G7 leading industrial nations, with a prospect of sustained growth in the developed world over the medium term, combined with lower real interest rates.

The forecasts also assume faster growth in world trade, a stabilisation in real non-oil commodity prices, and a continuation of policy improvements, especially in Latin America.

'A more pessimistic set of assumptions would halve the rate at which developing countries' per capita income grows to about 1.3 per cent per year,' Mr Rao said, warning that this would mean an increase of 80m in the number of people living in poverty.

One of the most serious threats to the economic prospects of the developing countries is the continued failure to make progress in the Uruguay Round trade liberalisation.

Countries such as Bangladesh and Sri Lanka are hit by tariffs averaging 7 to 8 per cent on their exports to developed countries and by non-tariff barriers on 60 to 80 per cent of the goods they export, while expanding market opportunities are also critical for the prospects of the reforming economies of eastern and central Europe.

*Global Economic Prospects and the Developing Countries; World Bank, 1818 H Street NW, Washington DC 20433, USA.

Editorial comment, page 15

XA World P9311 Finance, Taxation, and Monetary Policy ECON Gross domestic product P9311 The Financial Times London Page 7 703
Help not reaching projects in Poland Publication 930419FT Processed by FT 930419 By CHRISTOPHER BOBINSKI WARSAW

JUST a quarter of the Dollars 8.6bn of western financing pledged to Poland in the last three years, or Dollars 2.1bn, had reached public and private investment projects by the end of last year, according to Poland's Central Planning Office (CUP).

A CUP study has also pointed to the tying of western government loans to purchases of equipment from specific countries as the reason for the meagre draw-down on the Dollars 6.2bn of funds committed in support of Poland's economic transformation programme.

Of the Dollars 5.3bn of bilateral credit pledged by western governments since 1990, Dollars 3.6bn was made available and just Dollars 268m spent, the report says.

In terms of tied loans, Italy was a star performer, with 78 per cent of the Dollars 468m it said it was prepared to lend having been assigned to concrete projects. But only 1.5 per cent of Australia's Dollars 200m credit, which can only be used on Australian wool and hides, was spent.

World Bank disbursement has also been delayed, with Dollars 2.6bn promised and Dollars 2.2bn committed, yet only Dollars 775m spent. Mr Ian Hume, head of the World Bank office in Warsaw, said the delays came down to, 'in essence, an anti-investment climate' in Poland caused by the struggle to maintain tight monetary policies with high interest rates.

The Ecu224m (Pounds 178m) pledged by the European Bank for Reconstruction and Development to public sector projects has yet to be spent. The study did not analyse the EBRD's private sector projects in Poland, which amount to Ecu310m, but their draw-down should be better. Two-thirds of this sum has been committed to western companies such as Ameritech, ABB or Pilkington investing in Poland.

PL Poland, East Europe IT Italy, EC AU Australia P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 7 321
Donors 'undermine their efforts' by tying aid to companies at home Publication 930419FT Processed by FT 930419 By GEORGE GRAHAM WASHINGTON

AID donors are undermining their own efforts to help developing countries by tying their assistance to requirements that goods or services be procured from companies in their own countries, the World Bank warns, George Graham reports from Washington.

Such donors, the bank believes, could generate another Dollars 4bn a year of benefits for the third world by untying their aid.

Tied aid is meant to help domestic employment and exports, but may have little effect in the donor country, the bank argues.

'The lobbying of individual sectors or business firms in the donor country for directed subsidies is a more rational, if less laudable, explanation for tying,' it concludes, in its annual review: Global Economic Prospects and the Developing Countries.

For the recipient country, however, the direct cost may be more than 15 per cent of the aid given.

'Untying all aid flows would generate economic benefits to developing countries of as much as Dollars 4bn per year, which equals one-fifth of the nominal increase in aid flows over the past decade,' the World Bank says.

Some improvement has occurred: 44 per cent of aid was tied in 1989, and 7 per cent partially untied, compared with 48 per cent tied and 12 per cent partially untied in 1977-1979.

A further improvement in the percentage is likely as a result of the agreement last year by industrialised nations to abide by new guidelines by way of limiting the use of mixed credits, which combine aid, export credits and non-concessional loans.

XA World P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 7 288
French approve of Balladur as PM Publication 930419FT Processed by FT 930419 By ALICE RAWSTHORN PARIS

Mr Edouard Balladur has won the approval of 56 per cent of French voters in his first three weeks as prime minister, according to the latest IFOP opinion poll. This was the highest approval rating for any premier in the fifth republic at the start of a term of office, Alice Rawsthorn writes from Paris.

President Francois Mitterrand has also seen his approval rating rise sharply - from 24 per cent a month ago to 34 per cent.

FR France, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 6 109
Iraq says three hurt in US raid Publication 930419FT Processed by FT 930419 By REUTER BAGHDAD

Iraq said yesterday two US aircraft, patrolling a no-fly zone in the north, had fired a rocket at an anti-aircraft position, wounding three soldiers, Reuter reports from Baghad.

'Two American jets fired a rocket on an air defence position, 55km (34 miles) to the south of the city of Mosul,' the Iraqi News Agency quoted a foreign ministry spokesman as saying. The new 'provocative hostile behaviour caused the wounding of three military men,' the spokesman added.

The US European Command headquarters in Germany said both aircraft returned safely to their base in Turkey.

IQ Iraq, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 125
EC to unveil growth package Publication 930419FT Processed by FT 930419 By LIONEL BARBER BRUSSELS

The European Commission will report today that joint efforts by EC member states to stimulate their faltering economies have produced a Community-wide growth package valued at Ecu35bn (Pounds 27.8bn), writes Lionel Barber from Brussels.

The package, to be unveiled at a meeting of EC finance ministers in Luxembourg, will trumpet Europe's contribution to a world economic recovery ahead of the G7 industrialised nations' meeting in Tokyo, a senior EC official said.

QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs NEWS General News P9311 P9721 The Financial Times London Page 6 110
Spain may be heading for hung parliament Publication 930419FT Processed by FT 930419 By TOM BURNS MADRID

SPAIN'S general election could produce a hung parliament on June 6, according to the first opinion polls to be published since socialist Prime Minister Felipe Gonzalez called a snap election a week ago, Tom Burns writes from Madrid.

A poll by the Madrid newspaper El Mundo puts the centre-right opposition People's Party(PP) narrowly ahead of the Socialist Workers' Party (PSOE), while another in the Barcelona daily El Periodico has the ruling party winning by a slender margin. A third poll, published by Madrid's YA newspaper, has the PP and the PSOE equal, each with 35 per cent of the total vote.

All three surveys forecast a hung parliament.

ES Spain, EC P9111 Executive Offices P8651 Political Organizations NEWS General News P9111 P8651 The Financial Times London Page 6 144
Egyptian minister sacked Publication 930419FT Processed by FT 930419 By ROGER MATTHEWS, Middle East Editor

PRESIDENT Hosni Mubarak of Egypt yesterday sacked his minister of the interior, following rising criticism of the violent response by the security forces to the recent wave of attacks by Islamic extremists.

Mr Mohammed Abdel-Halim Moussa had ordered large-scale police assaults against suspected extremist hideouts in upper Egypt, and in the Cairo district of Imbaba, during which dozens of people were killed or injured. He is replaced by another former governor of Asyut, Mr Hussein Mohammed al-Alfi.

The new minister immediately vowed a 'decisive and comprehensive confrontation with the outlaws,' suggesting his predecessor had been sacked for lack of success rather than harshness of approach.

Mr Mubarak has repeatedly blamed Iran for the terrorist attacks, which have cost Egypt hundreds of millions of dollars in lost tourism revenue.

He said recently that the authorities knew the identities of the extremists and that they would eradicate the problem within a few months.

The Egyptian leader also defended the tactics of the security forces and denied that detainees had been ill-treated.

Groups of liberal, secular professionals have warned the president that his policies were forcing Egyptians into an intolerable choice between an incompetent government and a radical Islamic alternative.

In another appointment, Mr Youssef Boutros Ghali, an economist and a relative of the UN secretary-general, has been appointed a minister of state - recognition of his key role in talks with the IMF.

EG Egypt, Africa P9111 Executive Offices PEOP People P9111 The Financial Times London Page 6 260
Arab delegations force delay in Mideast talks Publication 930419FT Processed by FT 930419 By ROGER MATTHEWS, Middle East Editor

ARAB delegations to the Middle East peace negotiations have forced a week's delay in the opening of the ninth round of talks which had been due to begin in Washington tomorrow.

After a weekend of intensive contacts, Arab diplomats said that a new target date of April 27 had been set for the talks, in the hope that Israel could be persuaded to ease its position on permitting home the nearly 400 Palestinian deportees who were expelled to southern Lebanon in mid-December.

The Palestinian delegation has also been angered by Israel's decision three weeks ago to seal off the occupied West Bank and Gaza Strip, thereby denying tens of thousands the opportunity to get to their workplaces. The Israeli action was condemned by the Palestinians as another obstacle to resumption of talks.

After discussing the issues in Damascus on Friday and Saturday, members of the four delegations flew to Cairo yesterday for a meeting of the Arab League. Mr Farouk al-Shara, Syrian foreign minister, told Mr Warren Christopher, US secretary of state, that the four Arab delegations would be unable to meet the April 20 date set for a resumption.

Mr Yassir Arafat, the chairman of the Palestine Liberation Organisation, said in Tunis that he was still not certain whether the new April 27 date could be kept.

Syria, Jordan and Lebanon have all expressed a desire to resume negotiations with Israel as soon as possible. But they also wish to preserve a common Arab position and accept that the Palestinians have been put in a very difficult position by Israel's actions in the occupied territories.

Extremists continued efforts to sabotage the process yesterday when an Israeli lawyer was killed in the Gaza Strip.

Doubts about the price of peace, Page 15

XN Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 326
Angola talks Publication 930419FT Processed by FT 930419 By AP ABIDJAN, IVORY COAST

Angolan government delegates returned to the peace table yesterday after consulting President Jose Eduardo dos Santos on giving rebels more representation in a unity government, AP reports from Abidjan, Ivory Coast. Gen Higino Carneiro said talks with Mr dos Santos in the Angolan capital, Luanda, went 'very well.' He would not elaborate.

AO Angola, Africa P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 80
French approve of Balladur as PM Publication 930419FT Processed by FT 930419 By ALICE RAWSTHORN PARIS

Mr Edouard Balladur has won the approval of 56 per cent of French voters in his first three weeks as prime minister, according to the latest IFOP opinion poll, in the highest approval rating achieved by any premier in the Fifth Republic at the start of a term of office, Alice Rawsthorn writes from Paris.

President Francois Mitterrand has also seen his approval rating rise sharply, from 24 per cent a month ago to 34 per cent now.

One factor behind Mr Balladur's popularity is his conciliatory approach to the potentially prickly problem of ruling France in cohabitation between his centre-right coalition govermment and the socialist President Mitterrand.

FR France, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 6 139
Mandela eases himself into S Africa's media spotlight - Patti Waldmeir witnesses a profound shift in the balance of power Publication 930419FT Processed by FT 930419 By PATTI WALDMEIR

AT times of great national crisis, South Africans are accustomed to seeing their leader address them on national television.

But now, as the country faces perhaps its greatest political crisis to date, the face on prime time television screens is not Mr F W de Klerk, the president, but Mr Nelson Mandela, leader of the African National Congress.

When Mr Chris Hani, the guerrilla leader, was assassinated, Mr Mandela broadcast a live address to appeal for calm. On the eve of last Wednesday's national day of mourning, Mr Mandela addressed the nation at 7pm, 8pm and 11pm. For his part, Mr de Klerk issued a statement from his seaside holiday home, via his press secretary resting at another holiday resort.

There can be no clearer evidence of the profound shift which has occurred in the balance of power between white and black.

The ruling National Party still insists that it will never 'hand over power' to blacks; but most of their supporters think they have already done so.

Gone are the days when Mr P W Botha, the former president, would simply declare a nationwide state of emergency and detain 50,000 people to deal with a crisis.

Mr de Klerk's language over the past few days has recalled the hardline rhetoric of the finger-wagging former President. But he cannot match him in action.

The fact is that Mr de Klerk cannot rule South Africa without Mr Mandela's help. With his dark threats against 'radicals' (which he knows he cannot carry out without sparking civil war) and his frantic warnings of a descent into chaos, Mr de Klerk has cut a somewhat pathetic figure in recent days. He may be President, but Mr Mandela is South Africa's leader.

This was never more apparent than when the ANC leader dominated TV screens on Tuesday evening (furious that his address had been cut in half for the 8pm newscast, he insisted on - and was granted - the right to broadcast again in full at 11pm).

Speaking with all the dignity and gravitas of the tribal African chieftain which he is, Mr Mandela tried to use his eloquence and authority to heal the racial rift caused by the murder of one of black South Africa's greatest heroes.

'Tonight I am reaching out to every single South African, black and white, from the very depths of my being,' he said. He praised the white woman who had risked her life to identify Mr Hani's assassin and condemned those who would 'plunge our country into another Angola.'

'Now is the time for all South Africans to stand together against those who, from any quarter, wish to destroy what Chris Hani gave his life for - the freedom of all of us.'

Mr de Klerk's statements, by contrast, have been clearly partisan in nature, aimed at his white constituents, who have been outraged and terrified by the violence which has followed the assassination. He has showed little understanding of the anger and loss felt by the black majority; his condolences lacked sincerity.

Mr de Klerk was no doubt worried that too sympathetic a response would antagonise whites, who largely viewed Mr Hani as a communist demon. But for a man who portrays himself as the natural leader of a multi-racial South Africa, he has showed little ability to bridge the racial gulf.

Mr Mandela's leadership abilities are also under severe strain. Dealing with large, young, militant crowds is not his forte. His style of public speaking is pedantic rather than charismatic. And he will have further enraged whites by allowing his more militant ANC colleagues to persuade him that the ANC should carry on mass protest actions for another six weeks.

His task is difficult: he must be seen to respond to the anger of militant youths while keeping them under control. It will take a rare man to tread that tightrope for a further six weeks.

ZA South Africa, Africa P9111 Executive Offices P8651 Political Organizations P9229 Public Order and Safety, NEC NEWS General News P9111 P8651 P9229 The Financial Times London Page 6 707
Ireland in drive to halve 20% unemployment rate Publication 930419FT Processed by FT 930419 By TIM COONE DUBLIN

MR Ruari Quinn, Ireland's minister for enterprise and employment, believes Ireland's unemployment rate can be halved by the end of the decade from 20 per cent to around 10 per cent, as a result of policies being manoeuvred into place by the Fianna Fail-Labour coalition government.

These include renewed emphasis on promoting indigenous Irish industry, on targeting small businesses with venture capital funding, on legislating for new investment products which will encourage equity investment by fund managers in Irish industry, 'and massive investment in improving the skills base of the workforce,' he said.

Until January Mr Quinn was the Irish Labour Party's spokesman on economic affairs. Labour's breakthrough at last November's election gave it leverage to negotiate for powerful positions in the coalition government. One of those was Mr Quinn's, which merged the ministerial post of labour with those of industry and commerce.

'We have merged the two departments because we want to do away with the old adversarial approach in the process of wealth creation and replace it with a social partnership approach. We want agreement between industry, the unions and government on a long-term strategy - so that any foreign investor can come here to Ireland and knock on the door of any of the three and know that we are all talking the same langauage,' he said.

Ireland's past three finance ministers, starting with Mr Ray MacSharry in 1987, all adopted this approach, firstly through the Programme for National Recovery, and later through the Programme for Social and Economic Progress. The public sector pay elements of this agreement will expire at the end of this year. Both programmes have sought to lay down macro-economic parameters to attain price stability, reduce government debt and to improve incomes through economic growth and gradual tax reductions. They have been largely successful. Ireland's economy has outperformed most EC partners over the past five years in GDP growth.

The cost, however, has been heavy in unemployment. Labour's success at the polls last year was largely on the back of the lengthening dole queues and the expectation that Labour would do something to reverse the trend.

'Our strategy is to build on a skill-based workforce. We are no longer a country of low-cost labour, and we don't aspire to return to that. Low-cost manufacturing jobs are drifting out of Europe anyway. We want intellectual skills-based industry here, such as electronics, pharmaceuticals, telemarketing and software. We shall continue to promote foreign investment, but our central focus will be on building and strengthening indigenous companies,' he said.

Where will the funding come from to finance these plans? Mr Quinn says that the IPounds 8bn (Pounds 8bn) in EC structural and cohesion funds due to be paid to Ireland over the next seven years will go a long way to help finance improvements. But he hopes the bulk will come from new equity investment.

IE Ireland, EC P9611 Administration of General Economic Programs ECON Employment & unemployment P9611 The Financial Times London Page 6 515
Spotlight on LA's social problems after King trial: Fears of riots abate as two policemen are found guilty and two acquitted of beating a black motorist Publication 930419FT Processed by FT 930419 By LOUISE KEHOE and Agencies LOS ANGELES

LOS ANGELES is looking hard at its social problems after the verdicts in the Rodney King case brought some relief to the city's tension and lessened, at least for the time being, its fear of new riots.

Politicians welcomed the peaceful end to the federal court trial, in which a jury found two policemen guilty and acquitted two others of violating the rights of Mr King, a black motorist, whose beating by officers was videotaped and shown on television.

Appealing for action on the city's problems, the Rev Jesse Jackson, the black leader, said the real question was not how to relieve fears but how to raise people's hopes.

'Hopes come in the form of jobs, and health care and education and justice,' he said. 'If we can have a plan to rebuild Russia, it is time to have a plan to rebuild Los Angeles.'

Some 40,000-50,000 people were left unemployed by last year's riots, sparked off when the four police officers were acquitted in a state court. 'Hundreds and hundreds of small latino and black-owned businesses remain nothing but ashes and ruins,' said Mr Fernando Oaxaca of the Latino Coalition for a New LA.

Police blanketed city streets yesterday to guard against trouble as defence lawyers charged that the two officers convicted were sacrificed to prevent rioting.

The jury found Sergeant Stacey Koon, who directed Mr King's beating, and Officer Laurence Powell, who delivered most of the baton blows, guilty. Their lawyers claimed they were convicted because jurors feared acquitting them would plunge the city into another wave of violence. However, a juror, who was not identified, denied on television that this had played any part in their deliberations.

In the event, no riots occurred. But many fear that unless social problems are tackled they will lead to new violence - perhaps this year when an appeal by the convicted officers is heard or when black youths face trial over the beating of a truck driver during last year's riots, in which 53 people died and nearly Dollars 1bn in damage was caused.

LA voters will go to the polls tomorrow to elect a new mayor to replace Mr Tom Bradley, who is retiring after 20 years in office. Also on tomorrow's ballots is a measure that would raise property taxes to pay for 1,000 additional police officers.

However, the turnout is expected to be extremely low, with the election all but eclipsed by the trial. Two dozen candidates are registered, and a run-off vote in June is likely.

President Bill Clinton, speaking in Pittsburgh, praised the verdicts of the federal court jury, saying they 'confirmed what many felt in their hearts'.

At the First African Methodist Episcopal Church, a rallying point for the black community in Los Angeles since the riots, Reverend Cecil Murray concluded: 'We are not going to have peace at last, but peace for the moment.'

US United States of America P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 4 540
Appreciating Japan's soaring exchange rate problem Publication 930419FT Processed by FT 930419 By EDWARD BALLS

THE POLITICAL economy of the yen-dollar exchange rate remains mystifying, as the events of the past week demonstrate. Surely, with the US increasingly hot under the collar over Japan's rising trade surplus, the surge in the yen to record levels against the dollar ought to be a cause for celebration in Tokyo? Nothing could be further from the truth.

Disapproving noises about the yen's rise have been seeping out in recent months from the Ministry for International Trade and Industry, the Liberal Democratic party and, recently, from Bank of Japan governor Yasushi Mieno. Yesterday finance minister Yoshiro Hayashi joined the chorus, declaring that the appreciation had been too speculative and was having 'a negative effect on the economy'.

It is easy to see why Miti is worried. Japanese companies are troubled by weak domestic demand and squeezed profit margins. The appreciating exchange rate, already 10 per cent higher against the dollar since the beginning of this year, compounds these domestic difficulties by undermining companies' ability to divert production abroad. With 60 per cent of export contracts denominated in dollars, a stronger yen raises the dollar price of Japanese exports in foreign markets while reducing the yen prices of foreign imports into Japan. The Economic Planning Agency calculates that each 10 per cent yen rise cuts half a percentage point from Japanese gross national product.

Harder to understand are the concerns of the Ministry of Finance and the Bank of Japan. Economically, an appreciating currency is the inevitable counterpart to Japan's growing trade surplus, needed in order to persuade investors to provide the capital outflow to balance the trade surplus. Politically, a higher yen ought to ease tension by meeting the US administration's demands for tangible steps to reduce the trade surplus. Financially, a stronger currency is a good way to keep a lid on inflation by reducing import price pressures. The yen appreciation is already pleasing inflation hawks: wholesale prices fell by 0.5 per cent in March, and were 2.3 per cent lower than a year ago.

The problem is that the short-term effects on the trade surplus of a strong yen make the trade surplus bigger and so worsen Jaoan's international relations. The reason is the close relationship between changes in the yen-dollar exchange rate and changes in the trade surplus, as the chart taken from the Bank of Japan's latest quarterly bulletin reveals.

When the yen appreciated in 1985 and 1986, the trade surplus grew too; when the yen weakened throughout 1989 and 1990, the trade surplus contracted; the rise in the yen since then has been accompanied by renewed growth in the surplus. For, while a higher exchange rate makes Japanese exports more expensive and thus should reduce volumes, it also raises the dollar value of each export unit sold.

The chart breaks the change in the trade surplus into three components: the change in the volume of exports and imports, changes in the price of imports and exports, and changes in the product composition of exports and imports. Exchange-rate driven price effects tend to dwarf the volume effect, at least in the short run. While the rise in the yen between 1985 and 1987 cut export volumes and raised import volumes throughout the rest of the decade, the price effect of the yen's appreciation swamped the volume changes.

Little wonder the Japanese are worried about the yen's continued rise. The rise in the dollar value of the trade surplus over the past two years is almost entirely the result of the yen's appreciation since 1990, while the latest trade figures show a monthly surplus in March of Dollars 13.8bn, 26 per cent up on the previous year. In time a stronger yen should should reduce Japan's surplus by boosting import values. But the dollar value of the surplus is likely to rise before it falls. President Clinton was right to welcome the yen's appreciation at last week's summit with Japanese prime minister Kiichi Miyazawa. But if he wants results, Mr Clinton will have to wait.

----------------------------------------------------------------------- INTERNATIONAL ECONOMIC INDICATORS: PRICES AND COMPETITIVENESS ----------------------------------------------------------------------- Yearly figures are shown in index form with the common base year of 1985. The real exchange rate is an index throughout; other quarterly and monthly figures show the percentage change over the corresponding period in the previous year and are positive unless otherwise stated. ----------------------------------------------------------------------- UNITED STATES ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 101.9 98.6 102.2 99.4 76.5 1987 105.6 100.7 103.8 96.7 65.4 1988 109.9 103.2 106.9 98.1 61.8 1989 115.2 108.5 110.0 98.9 65.5 1990 121.5 113.8 113.8 100.9 60.9 1991 126.6 116.3 117.3 103.5 1992 130.4 117.7 120.1 103.2 2nd qtr. 1992 3.1 1.3 2.9 -0.5 3rd qtr. 1992 3.1 1.6 2.3 -0.2 4th qtr. 1992 3.0 1.6 2.0 -1.0 1st qtr. 1993 3.2 1.9 April 1992 3.2 1.1 3.4 -0.6 na May 3.0 1.1 2.6 -0.7 na June 3.1 1.6 2.6 -0.3 na July 3.2 1.7 1.7 -0.2 na August 3.2 1.6 2.6 -0.4 na September 3.0 1.6 2.5 0.3 na October 3.2 1.7 1.7 -0.4 na November 3.0 1.4 1.7 -1.0 na December 2.9 1.6 2.5 -0.7 na January 1993 3.3 1.8 2.5 -1.8 na February 3.2 1.8 -1.2 na March 3.1 2.0 na

----------------------------------------------------------------------- JAPAN ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 100.8 95.3 101.4 103.3 131.0 1987 101.2 92.5 103.1 100.6 131.6 1988 102.2 92.3 107.8 96.2 140.3 1989 104.9 94.2 114.0 96.1 132.2 1990 108.2 95.7 120.1 98.2 114.8 1991 111.8 96.8 124.4 101.6 1992 113.9 95.8 126.1 110.5 2nd qtr. 1992 2.6 -1.0 2.4 8.7 3rd qtr. 1992 2.0 -0.9 1.0 8.7 4th qtr. 1992 0.9 -1.2 0.2 9.4 1st qtr. 1993 1.2 April 1992 2.8 -0.9 1.3 8.7 na May 2.3 -0.9 1.1 11.8 na June 2.5 -1.0 3.8 5.7 na July 2.0 -0.8 2.3 8.8 na August 1.8 -0.9 -1.5 11.4 na September 2.2 -0.9 1.4 5.8 na October 1.2 -1.1 1.5 8.6 na November 0.6 -1.1 1.5 9.4 na December 0.9 -1.2 -0.7 10.3 na January 1993 1.0 -1.1 na February 1.2 na March 1.2 na -----------------------------------------------------------------------

----------------------------------------------------------------------- GERMANY ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 99.9 97.5 103.8 103.8 110.2 1987 100.1 95.1 108.0 107.1 123.9 1988 101.4 96.2 113.0 106.8 125.3 1989 104.2 99.3 117.3 107.9 121.0 1990 107.0 101.0 123.8 110.4 125.0 1991 110.7 103.4 131.8 114.9 1992 115.1 104.8 2nd qtr. 1992 4.5 2.0 na 3.8 3rd qtr. 1992 3.5 1.0 na 6.1 4th qtr. 1992 3.7 0.5 na 1st qtr. 1993 4.3 na April 1992 4.6 1.9 5.4 na May 4.6 2.0 1.7 na June 4.2 2.0 4.3 na July 3.3 1.1 8.9 na August 3.5 1.1 5.2 na September 3.6 0.8 4.3 na October 3.7 0.5 7.8 na November 3.7 0.5 9.4 na December 3.7 0.5 na January 1993 4.4 0.8 na February 4.2 0.5 na March 4.2 na

----------------------------------------------------------------------- FRANCE ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 102.5 97.2 104.5 101.5 102.3 1987 105.9 97.8 107.8 103.0 102.6 1988 108.8 102.8 111.1 104.3 96.3 1989 112.6 108.4 115.4 105.5 92.3 1990 116.4 107.1 120.6 110.0 95.7 1991 120.0 105.8 125.8 114.0 1992 123.3 104.0 130.1 2nd qtr. 1992 3.1 -1.1 na 2.6 3rd qtr. 1992 2.7 -0.9 na 4th qtr. 1992 2.2 -1.5 na 1st qtr. 1993 2.1 na April 1992 3.1 na - na na May 3.1 na - na na June 3.0 na 3.8 na na July 2.9 na - na na August 2.7 na - na na September 2.6 na 3.5 na na October 2.4 na - na na November 2.1 na - na na December 2.0 na na na January 1993 2.1 na na na February 2.1 na - na na March 2.2 na 3.6 na na

----------------------------------------------------------------------- ITALY ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 106.1 100.2 104.8 102.7 101.5 1987 111.0 103.2 111.6 105.5 102.3 1988 116.5 106.8 118.4 109.7 101.6 1989 124.2 113.1 125.6 112.4 107.2 1990 131.8 117.8 134.7 118.9 113.7 1991 140.3 121.7 147.9 131.3 1992 147.7 155.9 2nd qtr. 1992 5.5 2.0 6.0 5.0 3rd qtr. 1992 5.2 1.9 3.7 4th qtr. 1992 4.8 2.9 1st qtr. 1993 4.3 April 1992 5.5 1.8 8.8 na na May 5.7 2.1 4.6 na na June 5.4 2.1 4.7 na na July 5.4 1.9 4.0 na na August 5.2 1.9 3.5 na na September 5.1 1.9 3.7 na na October 4.9 2.0 4.1 na na November 4.8 2.2 2.1 na na December 4.6 2.4 na na January 1993 4.2 na na February 4.4 na na March 4.2 na na

----------------------------------------------------------------------- UNITED KINGDOM ----------------------------------------------------------------------- Unit Real Consumer Producer labour exchange prices prices Earnings costs rate ----------------------------------------------------------------------- 1985 100.0 100.0 100.0 100.0 100.0 1986 103.4 104.3 107.7 104.5 93.3 1987 107.7 108.3 116.3 105.9 91.3 1988 113.0 113.2 126.2 108.9 97.5 1989 121.8 119.0 137.2 113.6 96.4 1990 133.3 126.0 150.1 123.2 102.3 1991 141.2 133.0 162.4 130.3 1992 146.4 138.0 173.1 132.4 2nd qtr. 1992 4.2 3.6 5.9 1.2 3rd qtr. 1992 3.6 3.5 6.2 2.0 4th qtr. 1992 3.0 3.4 5.7 -0.2 1st qtr. 1993 1.8 3.7 April 1992 4.3 3.8 5.0 -0.5 na May 4.3 3.5 7.0 2.4 na June 3.9 3.6 5.9 1.7 na July 3.7 3.6 6.2 3.0 na August 3.6 3.4 6.5 1.8 na September 3.6 3.4 5.7 1.1 na October 3.6 3.3 6.3 0.2 na November 3.0 3.3 5.6 0.0 na December 2.6 3.5 5.4 -0.8 na January 1993 1.7 3.6 5.0 -2.2 na February 1.8 3.7 na March 1.9 3.7 na -----------------------------------------------------------------------

Statistics for Germany apply only to western Germany. Data supplied by Datastream and WEFA from national government and IMF sources. Consumer prices: not seasonally adjusted. Producer prices: not seasonally adjusted, US - finished goods, Japan - manufactured goods, Germany - industrial products, France - intermediate goods, Italy - total producer prices, UK - manufactured products. Earnings index: not seasonally adjusted, refers to earnings in manufacturing except France and Italy (wage rates in industry). Hourly except Japan (monthly) and UK (weekly). Unit labour costs: seasonally adjusted, measured in domestic currencies. Germany and manufacturing, other countries - manufacturing industry. Real exchange rate: IMF real effective exchange rate based on relative unit labour costs (non-normalised). A fall in the index indicates improved international competitiveness.

US United States of America JP Japan, Asia DE Germany, EC FR France, EC IT Italy, EC GB United Kingdom, EC P9611 Administration of General Economic Programs ECON Economic Indicators ECON Balance of trade P9611 The Financial Times London Page 4 1814
Showdown in US-EC procurement row Publication 930419FT Processed by FT 930419 By NANCY DUNNE WASHINGTON

THE denouement of the latest US-EC feud over government procurement is scheduled to come today and tomorrow during the third meeting between the top trade officials, Mr Mickey Kantor and Sir Leon Brittan, Nancy Dunne writes from Washington.

Either Sir Leon, the EC commissioner for trade, will agree to waive the offending Article 29 of the EC Utilities Directive, which the US argues makes it more difficult than ever for US companies to win telecommunications and heavy electrical equipment contracts in Europe.

Or Mr Kantor, US trade representative, will ban EC companies from bidding on various US government procurement contracts, a retaliation estimated to cost Dollars 45m-Dollars 50m a year. Furthermore he will proceed to the General Agreement on Tariffs and Trade to complain that the offending article extends government rules to private sector activities, a Gatt violation.

The real contest between them has been and continues to be over the shape of the negotiations. The US insists the subject is utilities procurement - telecommunications and power equipment. The EC wants to bring in the entire body of Buy America provisions, which apply to defence, transportation, airports, waterways and other services.

The US complains that the EC is throwing in the iniquities of American state governments, while ignoring the discriminations of its own sub-federal procurement agencies.

In this week's face-off, Mr Kantor is in the enviable position of being unable to lose. He is seeking, as an 'interim' agreement, a real opening of the Dollars 15bn-Dollars 25bn a year EC utilities procurement market. This would be achieved by a waiver of Article 29 upon certification that the US gives EC companies 'comparable' access in the market.

If he fails to get the waiver and institutes the threatened sanctions, Mr Kantor will have demonstrated his grit to Congress. This could leave the administration free of the kind of congressional initiatives foisted on previous presidents, who seemed more reluctant to act.

The US does not argue that it is without sin in discrimination in the awarding of its government procurement contracts. Its transgressions are rooted in the Buy American Act of 1933, discriminating against foreign companies in federal, state and local bidding.

In fact a more unbiased source than the EC - a Gatt dispute settlement panel - months ago found that the US government had violated its multinational obligations by applying a Buy American provision to the procurement of a sonar mapping system by the National Science Foundation. The US, which complains about others blocking Gatt panel reports, has yet to adopt the conclusion itself.

However, both US and EC procurement markets are riddled with domestic preferences. Comparisons are tricky because of systemic differences between the Community, where publicly-owned utilities predominate, and the US, where most companies are privately owned.

US officials say they have 'incontrovertible evidence' that foreign companies have gained at times great chunks of the US government utilities market. However, this is not all that much, as 92 per cent of the US market is in the private sector. And if Asian companies have been better able to overcome the 6 per cent bidding preference given to American companies under Buy American laws, then the US still offers the EC twice as many 'bidding opportunities' in overall government procurement contracts. According to the US figures, EC companies get to bid on Dollars 16.8bn (Pounds 11bn) in the US market, compared with Dollars 7.8bn for American companies in the EC market.

All these numbers have been presented to EC officials in talks leading up to this week's showdown. If Sir Leon agrees to the waiver of Article 29, he will get US agreement to the joint study he has proposed of the US and EC procurement markets. It does not matter that this proposal was more probably meant to delay than hasten a settlement; Mr Kantor has taken it up as a route to the multilateral negotiating table.

US officials say an 'interim' agreement will have a salutary effect on the US mood as the two economic powers continue to work on an expanded market access package to wrap up the Gatt Uruguay Round.

US United States of America QR European Economic Community (EC) P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 4 722
Young US leader shatters old Japanese trade certainties Publication 930419FT Processed by FT 930419 By JUREK MARTIN WASHINGTON

THE Japanese, who understand symbols, used to feel rather proud when Mr Yasuhiro Nakasone, prime minister from 1982 to 1987, represented them in international deliberations. At sessions with President Ronald Reagan he had plenty to say, forging apparently genuine first-name relationships with the US administration, appropriate for a member of the statesmen's club. At G7 summits he was equally vocal and often was not even the shortest participant.

The contrast with Friday in Washington could hardly have been greater. There, captured on global television, was the young and vigorous 46-year-old President Bill Clinton towering over his diminutive Japanese counterpart, 73-year-old Kiichi Miyazawa, a reflective man but the last, and therefore the weakest, of his generation of Japanese politicians to become prime minister.

Worse than the symbolic physical contrast between the two men, Mr Clinton was lecturing Mr Miyazawa in a way that no US president has spoken publicly to a Japanese prime minister in living memory. Here was a president born after the last war telling a man old enough to have represented his country at the San Francisco peace conference in 1951 that the world had changed, the US was changing and that Japan would have to change with it.

This is serious stuff for Japan. The US has been the bedrock of its international constellation since 1945. More particularly, inside the relationship, there was an absolute Japanese assumption, even as it became economically mighty, that the man in the White House was their ultimate protector, no matter what retaliation was threatened by Congress, no matter how many Japanese radios were smashed on the lawns of Capitol Hill and what American public opinion felt about Japanese takeovers of US institutions.

Mr Clinton was careful not to throw all the co-operative fruits of the last two generations out of the window. He emphasised US commitment to regional Asian security, never threatened to withdraw US troops from Japan or South Korea, and was complimentary about Japan's role as G7 chairman in putting together the Russian aid package.

But he made it equally clear that, as far the US was concerned, the end of the cold war had altered the nature of US perception of its own national security. 'The cold war partnership between our two countries is outdated,' he declared. 'We need a new partnership based on a longer-term vision and above all based on mutual respect and responsibility.'

For Mr Clinton, who does not consider himself a protectionist as classically defined, the foundation is a new trade and economic relationship. It means a reduction in Japan's trade surplus, if necessary by agreements on specific sectors, replete with numerical targets. It also implies a continuous engagement by Japan in promoting global economic growth beyond the series of emergency stimulus packages that Tokyo has frequently contrived to produce as a result of US pressure.

Mr Miyazawa had conceded that 'gaiatsu' (foreign pressure leading to Japanese concessions) was 'perhaps part of our culture'.

But that sometimes leisurely practice now runs squarely up against a US government disinclined to be patient or play ritualistic games. In Tokyo last week, even Mr Warren Christopher departed from his nominal diplomatic brief as secretary of state to press his Japanese opposite numbers on specifics such as the Japanese personal computer market.

The US impatience on bilateral trade and with Japan's passivity in the Uruguay Round negotiations may also extend to a growing intolerance with the introspection of the Japanese political system. The ruling Liberal Democratic party's domestic problems are well understood in Washington, but attract little sympathy.

If 'change' is the present leitmotif of US politics, then the inability to adjust in the Japanese system becomes all the more difficult to accept, especially when the US can see that there is a new, rising generation of more outward-looking Japanese politicians apparently hungry for power but still consigned to the waiting rooms.

Certainly, Mr Miyazawa has left Washington, like none of his recent predecessors, with presidential fleas in his ear. For a country like Japan, always comfortable in certitudes, this is a very disturbing message.

JP Japan, Asia US United States of America P9721 International Affairs P9111 Executive Offices GOVT Government News P9721 P9111 The Financial Times London Page 4 719
Miyazawa returns after talks in Washington Publication 930419FT Processed by FT 930419 By CHARLES LEADBEATER TOKYO

Japan's prime minister, Mr Kiichi Miyazawa, yesterday returned to Tokyo after two days of talks in Washington to a chorus of concern about the prospects for Japan's economic relations with the US on both trade and macro-economic issues, Charles Leadbeater writes from Tokyo.

Most business leaders raised doubts about the wisdom of US demands for quantitative indicators to measure foreign access to segments of the Japanese market. There are also concerns that the US is embarked on a strategy to talk up the yen, to help choke off the growth of Japan's trade surplus with the US.

Mr Miyazawa's visit confirmed worries in Japan that the Clinton administration will be more assertive than its predecessor in pressing for measurable results in reducing the trade deficit.

Mr Miyazawa and President Bill Clinton on Saturday agreed to set up a joint panel to design a forum for discussing ways to reduce Japan's trade surplus. Mr Clinton stressed such talks would have to lead to measurable results in opening the Japanese market to competitive US producers.

He also noted that a strengthening of the yen against the dollar would help to reduce the Japanese surplus and that Japan's recent Dollars 117bn stimulus package was only a first step in resuscitating the flagging Japanese economy.

US United States of America JP Japan, Asia P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 4 247
Fiat may co-operate with Milan magistrates Publication 930419FT Processed by FT 930419 By HAIG SIMONIAN MILAN

ITALY'S political corruption scandal is poised to take a dramatic new turn, with signs of an agreement by Fiat, the country's biggest private-sector company, to co-operate voluntarily with Milan magistrates.

The accord, hammered out between magistrates and the group's lawyers at a lengthy weekend meeting, could see Mr Cesare Romiti, Fiat's chief executive, testifying before magistrates this week.

This represents a climbdown by Fiat, which has been increasingly implicated in allegations of bribes over public-sector orders. At least seven senior executives have become embroiled in the investigations, including Mr Giorgio Garuzzo and Mr Francesco Paolo Mattioli, Fiat's chief operating officer and chief financial officer respectively.

Before the weekend agreement, magistrates appeared poised to issue a stream of further cautionary warrants, including some for unspecified Fiat managers. It is believed the warrants, covering contracts for the Enel state electricity generating authority and the state railways, have been temporarily rescinded.

Mr Gianni Agnelli, Fiat's chairman, admitted at the weekend his company's involvement in doubtful practices. He told a conference of the Confindustria employers' federation in Venice: 'At Fiat, too, some episodes of incorrect mixing with the political system have been discovered.'

However, Mr Agnelli tried to draw a distinction between individuals and companies drawn into the corruption scandal: 'It is desirable that the inquiries should define as soon as possible the real significance of the episodes concerning us or other companies, and distinguish between those who have been serious industrialists and those, by contrast, who have based their fortunes almost exclusively on systematic collusion with the politicians.

'Fiat's heart is that of a company commited to free and strong competition in the marketplace.'

It remains to be seen how Fiat will co-operate with magistrates. The inquiries have touched four areas of its activities: construction, with investigations of the Cogefar-Impresit building arm; railway equipment, notably for the new Milan metro line; gas turbines, with allegations of bribes to politicians on Enel orders; and buses, where the group's Iveco commercial vehicles subsidiary is being probed for alleged payments for orders from the city of Milan.

Fiat IT Italy, EC P9211 Courts P3711 Motor Vehicles and Car Bodies MGMT Management & Marketing P9211 P3711 The Financial Times London Page 3 381
Sink or swim as currency storm abates Publication 930419FT Processed by FT 930419 By PETER MARSH, Economics Correspondent

NOW that the storms afflicting the European exchange rate mechanism have quietened, the survivors appear to be pulling up the gang planks on the unfortunates swept overboard.

Meanwhile, the hunt started by Britain for 'fault lines' in the ERM seems to have reached a dead end. This is likely to place a possibly permanent barrier to the UK goal of re-entering the system some time after the end of this year.

These conclusions follow from the spate of mostly-secret government inquests into the currency crises which reach a new stage today and tomorrow.

In discussions in Basle, Switzerland, governors from the 12 European Community central banks plan to finish a report to be handed to EC finance ministers next month on what caused the turmoil and lessons from it.

The talks will centre on the outlook for Britain and Italy, whose currencies were forced to leave the ERM last autumn. There seems little chance that either sterling or the lira will re-enter in the near future, given that other countries led by Germany appear disinclined to bend the rules to allow weaker currencies greater support.

Also worried about the future are Ireland, Spain and Portugal, all of which kept their positions in the ERM only through devaluation. They would probably be in the firing line if new ERM selling pressures were to emerge.

Denmark, France and Belgium saw their currencies emerge bloodied but essentially unbowed by the turmoil, leaving Germany and the Netherlands the only countries in the system to emerge with their currencies unscathed.

Even so, now that all currencies still in the ERM are trading comfortably above their lower limits against the D-Mark, the EC govenors' inquiry has lost some of its initial impetus. The consensus from this study - and from a parallel inquiry by the EC monetary committee of officials from finance ministries as well as central banks - appears to be that big reforms of the system are neither desirable nor likely.

Mr Lamberto Dini, deputy governor of the Bank of Italy, says: 'A number of views have been expressed (about ERM strengthing) but there is no intention of changing the existing system.' Mr Dini is the chairman of yet another working party - from the Group of 10 industrial nations, which includes Japan and the US as well as European representatives - which is also examining fallout from the ERM storm. The group is doing this in the context of a wider look at world currency fluctuations and will present its report to ministers in Washington on April 30.

Much of the discussion in all three committees has been about how to ensure all the countries in the mechanism help out currencies under threat. Current ERM rules put the obligation on the strongest and weakest countries to take action, either by currency intervention or changes in interest rates.

An innovative UK proposal - under which all countries would share the profits and losses of buying weak currencies in the effort to prop them up - has found little favour. This has been on the grounds it would reduce pressures on weak countries to take avoiding action by a devaluation.

The disapproval has been led by the Bundesbank, which in recent months has taken an increasingly hard line on making sure countries stick to existing ERM rules based around D-Mark supremacy. This is the case even though a 'burden sharing' arrangement might help the Bundesbank avoid a repeat of its heavy losses last autumn, arising from its spending of an unprecedented DM90bn on buying weak currencies such as lira and sterling.

QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 3 634
Yeltsin has the edge as his referendum nears: Russia - Referendum Publication 930419FT Processed by FT 930419 By JOHN LLOYD MOSCOW

THE final week of campaigning in the critical referendum on support for President Boris Yeltsin of Russia, on which radical reform in that country is thought to depend, opens today.

The polls show a significant - but not overwhelming - lead for Mr Yeltsin. This indicates that the result of the referendum next Sunday will set off a new round of hostilities between the president and his opponents in the Russian parliament.

Mr Yeltsin went to the historic city of Vladimir, east of Moscow, yesterday. There he took part in the Orthodox Easter procession and held talks with Alexei II, the Orthodox Patriarch.

On Friday, he had secured a carefully orchestrated chorus of support from leaders of the Commonwealth of Independent States, meeting in Minsk.

Seperate polls in Moscow, St Petersburg and in various Russian regions show between 50 and 60 per cent of those questioned willing to express their trust in Mr Yeltsin, but a smaller percentage was shown as intending to approve his economic and social policies.

A Moscow poll by the Institute of Sociology showed 35 per cent approved the economic policy, while 27 per cent did not approve and 24 per cent had yet to decide.

In St Petersburg, a poll by the Sociological Scientific Research Centre showed 56 per cent for Mr Yeltsin, with 28 per cent against - but with only 38 per cent supporting his economic programme and 39 per cent against.

Polls taken by the Gallup organisation for the Russian government, over the past week and based on group discussions, show about 60 per cent support for Mr Yeltsin, continuing support for the creation of a market economy, but substantial scepticism towards the privatisation programme.

Mr Yeltsin's supporters are calling for a 'yes' vote to three of the four questions in the referendum - to trust the president, to support his economic and social policies, and to call for early elections to a new two-chamber partliament.

They are calling for a 'no' vote to a question on early presidential elections.

Mr Yeltsin has said he will issue a decree tomorrow, which will lay down that only a simple majority of those voting will be required for victory to be declared in the referendum. The Russian parliament has decreed that a majority of the electorate is required - which the opinion polls show to be impossible, since only 60-65 per cent intend to vote.

Mr Sergei Filatov, Mr Yeltsin's chief of staff, said at the weekend that he understood the Constitutional Court would rule this week that the parliament's decree on the level of support needed was unconstitutional. However, Mr Yeltsin has said he will ignore any ruling of the Constitutional Court because he no longer trusts it.

The parliament in the Russian North Caucasian republic of Chechnya has moved to impeach the republic's president, General Dzhokar Dudayev, a day after he had dissolved the legislature and declared a dusk-to-dawn curfew, according to the Interfax news agency. Mr Husain Akhmadov, parliamentary chairman, told the agency that Gen Dudayev was being impeached for 'trying to carry out a state coup.'

The general, a former Soviet air force commander, declared Chechnya - then part of the larger Chechen Ingushetia - independent a year and a half ago. He imposed a curfew and dissolved the parliament after two days of demonstrations in the centre of Grozny, the Chechen capital, against falling living standards.

RU Russia, East Europe P9111 Executive Offices GOVT Government News P9111 The Financial Times London Page 3 604
Heavy guard for Mr Clean Publication 930419FT Processed by FT 930419 By ROBERT GRAHAM PALERMO

THE voters trickle into the cavernous school building, converted into a polling station, with the solemnity of people attending Mass. Wailing sirens suddenly puncture the tranquility of this balmy Sunday morning in Palermo.

Then, amid a screech of brakes, a stocky figures steps out of an armour-plated Fiat Croma, surrounded by bodyguards. Mr Leoluca Orlando, former mayor of Palermo and founder of La Rete, the rapidly growing movement for clean government, has come to cast his vote in Italy's ninth post-war referendum.

Mr Orlando is bundled forward, scarcely given time to greet a few supporters. An implacable opponent of the mafia, he is the politician most at risk in Sicily.

Inside an upper room, election officials respectfully check his identity card against the electoral register (one for men, another for women). He is handed eight coloured folders, a different one for each of the referendum proposals, then disappears into a small booth. Only his legs are visible.

To read the fine print of the proposals should take an average of eight minutes, but he emerges after little more than one. The first slip he casts into the line of eight boxes is yellow - the key ballot for ending proportional representation and introducing a system of majority voting in the Senate.

Although he originally backed the referendum movement, led by former Christian Democrat Mr Mario Segni, Mr Orlando has since come out against the majority vote proposal, claiming electoral reform has been hijacked by the traditional parties.

'If the majority system is accepted,' he told a packed crowd on Friday outside Palermo's decaying opera house, 'in the north we will have the regions nearly all represented by the Lombard League and in the south by the (Christian Democrat) old guard. The yes vote will mean that wholly discredited people will be called on to carry out electoral reform.'

IT Italy, EC P8651 Political Organizations NEWS General News P8651 The Financial Times London Page 3 338
Evacuation of Srebrenica under way Publication 930419FT Processed by FT 930419 By LAURA SILBER, AGENCIES and REUTER

UNITED NATIONS peacekeeping troops last night entered Srebrenica, the fallen enclave in eastern Bosnia, and evacuation of the first of tens of thousands of trapped Moslems began.

General Philippe Morillon, commander of the UN Protection Force (Unprofor) in Bosnia, said in Sarajevo that Srebrenica was under world guard following the arrival of 145 Canadian UN soldiers. 'We can now guarantee the survival of Srebrenica.'

The Canadians will monitor a ceasefire, collect arms from the Moslem defenders and help demilitarise the area under a plan for the Serb forces besieging the eastern Bosnian town to withdraw from positions around it.

The Canadians entered the town to a hero's welcome just hours after Serbs and the Moslem-led Bosnian forces signed a UN-brokered truce, said ham radio operators.

French and British helicopters then began ferrying sick and wounded to Tuzla, 70km northwest, under an agreement permitting airborne evacuation of the 500 most desperate cases before an overland evacuation starts for all those who want to leave the town. UN officials said 133 people were evacuated by nightfall.

But it is unlikely the mass evacuation will get fully under way before an agreement is reached on the fate of the defeated defenders of Srebrenica.

Shattered refugees who earlier managed to escape to Tuzla, the biggest government stronghold, described 'unbearable' conditions after a year under Serb siege in the town, set in the foothills of the Drina River valley. 'Everyone wants to leave. There's no food. The Chetniks (Serb forces) were constantly shooting at us,' said Ms Azreta Habibovic, who was fortunate to escape before the Serb bombardment which on April 12 claimed 56 lives and wounded scores more.

French prime minister Edouard Balladur said yesterday Gen Morillon's mission had been extended and there were no plans to recall him, Reuter reports.

This appeared to contradict defence minister Francois Leotard, who said last week Gen Morillon was unlikely to be in his post by next month.

BA Bosnia-Hercegovina, East Europe P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 2 357
Obituary of Turgut Ozal: Reformer who built on Ataturk's legacy Publication 930419FT Processed by FT 930419 By JOHN MURRAY BROWN

TURGUT OZAL, who died suddenly on Saturday, dominated Turkish politics for the last decade. Appointed by the generals in the wake of the 1980 coup d'etat, he was to oversee Turkey's critical transition to civilian rule, becoming prime minister in 1983 and eventually succeeding Gen Kenan Evren in 1989 as the country's second civilian president since the coup.

His achievements as a reformer are second only to those of Mustafa Kemal Ataturk, the country's founder. If Ataturk erected the social and political pillars of a pro-western, secular Turkey, Mr Ozal was the architect of the country's economic recovery and the driving force behind its policy to join the European Community.

His relations with the military were one of the central contradictions of his career.

He remained, to his death, the only Turkish politician strong enough to challenge the military on key security questions. As if to symbolise his independence of the generals, on one famous occasion he was to review troops dressed in Bermuda shorts and a sun hat.

In many ways, Mr Ozal epitomised modern Turkey. A devout Moslem - he was even said to have had ties with the fanatical Nakshibendi sect - he was profoundly democratic in many of his political views.

He once claimed to be the first Turkish leader to use the word Kurd in public; previously this troubled minority were referred to as mountain Turks. He was certainly the first Turkish leader to contemplate a political solution to the Kurdish problem, perhaps Turkey's single greatest challenge today.

His loss will be strongly felt by moderate Kurds who looked on him as an unofficial patron of the campaign for greater political and human rights.

His death occurs at a critical time, as Mr Suleyman Demirel's government considers its response to the current ceasefire offered by the rebel Kurdish Workers' party (PKK).

Mr Ozal was born in 1927 in Malatya and was an electrical engineer by training. He worked at the World Bank in Washington in the 1970s, returning to a series of posts in the Turkish private sector before becoming adviser to the government of Mr Demirel. With the military coup of 1980, Mr Ozal was asked to stay on, a move that soured his relations with Mr Demirel ever after.

In the restrictive political environment that followed the coup, Mr Ozal was able to push through an austerity package, which might have proved difficult under a more democratic system.

The reforms centred on trade liberalisation, removal of exchange controls, and in 1982 the rescheduling of Turkey's Dollars 3.2bn foreign debt. Within three years, adopting classical monetarist strategies, Mr Ozal pulled inflation down from 120 per cent to 30 per cent and doubled Turkey's exports.

After a timely resignation in July 1982, he founded the Motherland party (Anap), a curious mix of progressive and conservative elements, a coalition of technocrats, businessmen and farmers. The party emerged as clear winner in the restricted election of 1983. Somewhat reluctantly at first, the generals approved Mr Ozal's choice of cabinet, formally handing over power on December 13 1983. Anap won again in 1987 and Mr Ozal progressively turned his energies to foreign policy.

He was admired if not liked by the political establishment. Some Turks became concerned Mr Ozal's policies were threatening the country's European identity, as enshrined in the Kemalist legacy.

In 1987, against the advice of many foreign ambassadors in Ankara, Turkey applied for full membership of the European Community. A one-time Islamic nationalist, Mr Ozal strongly contended that Turkey's application was politely rejected, on the grounds of religion, by a Christian European club.

Throughout the cold war Turkey provided the Nato alliance with a bulwark against the Soviet Union on its south-eastern flank. During the Gulf war, Mr Ozal overrode strong public opposition to impose sanctions against Iraq and to provide the US-led coalition with the use of bases, once more re-asserting Turkey's western identity.

TR Turkey, Middle East P9111 Executive Offices PEOP People Ozal, T President Turkey P9111 The Financial Times London Page 2 690
Serbs look to Yeltsin's enemies Publication 930419FT Processed by FT 930419 By LAURA SILBER BELGRADE

IN SPITE OF stepped-up sanctions and the threat of military intervention, Serbs still believe that Russia will wrest them from the clutches of the west.

Serb leaders are rooting for the victory of their communist-nationalist counterparts in Russia over President Boris Yeltsin in the referendum set for April 25.

They have fostered ties with Mr Yeltsin's fiercest opponents, who make frequent visits to Belgrade and Serb-held territories in Croatia and Bosnia.

Serbia appears convinced that the US, faced with a choice between Bosnia and Mr Yeltsin, will not force Russia to oppose Serbia, its traditional ally and favourite of Russian nationalists. Remaining defiant even amid threatened sanctions, Serb commanders pressed on to mop up remaining pockets of Moslem resistance in eastern Bosnia.

Diplomats believe that, after Srebrenica, Serb forces will seize control of Gorazde and Zepa, the last two strongholds to the south.

Belgrade radio, in the grip of Serbian President Slobodan Milosevic, yesterday railed at Mr Yeltsin after Russia abstained from a vote in the UN Security Council on a new package of draconian sanctions on Serbia.

'Russia's abstention is nothing more than the shameful heeding of a western diktat and the unprecedented interference in the internal affairs of Yugoslavia,' said the radio, which frequently denounces Mr Yeltsin as a traitor to Russia and the Orthodox world.

'The UN resolution apparently was adopted before the referendum on April 25 because the west is afraid that it will not win after Yeltsin falls,' said the radio.

Mr Nikola Koljevic, a leader of the self-styled Bosnian Serb state, said on Belgrade radio at the weekend: 'If the Serbs are punished for Srebrenica, we will have to reveal the secret pact made with Mr Vitaly Churkin, Yeltsin's special envoy to former Yugoslavia, before the referendum is held.'

Mr Koljevic hinted that Serbia could help topple Mr Yeltsin if their 'Orthodox brethren learned the truth about the Bosnian game', said the radio, dismissing western outrage about Srebrenica as an 'unprecedented case of media manipulation'.

'Serb military and political chiefs see the current situation as a revival of the first world war and the Great Powers configuration,' says a western diplomat.

Mr Radovan Karadzic, Bosnian Serb leader, often warns that the war in Bosnia is the beginning of the third world war and believes Russia will take a stand against the west in the Balkans.

'Many wars have begun in the Balkans without Russia, but not one ended without Russia getting involved,' Mr Bozidar Vucurevic, a lorry driver turned leader of the self-styled Serb state in Bosnia, said recently.

'I am waiting for the day when Russia will air drop aid packets to the Serbs,' said General Milan Gvero, deputy Commander of Bosnian Serb forces.

Serbian television devotes far more attention to the power struggle in Russia than to the war in Bosnia. Strapped for cash after two years of war and 11 months under UN sanctions, the television has only two foreign correspondents. They are both posted in Moscow and constantly crowing about any setback for Mr Yeltsin.

Despite the official ire and venom unleashed on Mr Yeltsin, Serb leaders have even gone so far as to invite 'patriotic Russian forces' to intervene in Serbia.

'Help us escape from the ghetto and destroy the dungeon in which the hellish powers have locked us,' said a letter to Russian parliamentary deputies from Serbian politicians and Orthodox Church leaders, recently published in Vecernje Novosti, a Belgrade daily.

'Let your boats sail the waters of the Danube and the Adriatic. Let your planes appear on our skies. . . Russia was always together with Serbia and will be from the Pacific to the Adriatic.'

YU Yugoslavia, East Europe RU Russia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 643
Turkish clash looms over new president Publication 930419FT Processed by FT 930419 By JOHN MURRAY BROWN ANKARA

TURKEY appeared headed for a possible constitutional crisis yesterday after the death of President Turgut Ozal.

Mr Ozal, 65, who collapsed on Saturday from heart failure, was a reformer who for many in the west symbolised Turkey's return to democracy and transition to a market economy.

His death is unlikely to signal a shift in Turkey's pro-western foreign policy. But with no obvious successor and with party strengths in parliament finely balanced, diplomats say there is a real danger the coalition government of Mr Suleyman Demirel may become bogged down in infighting.

If no consensus emerges after four parliamentary ballots to choose a new president, the constitution calls for general elections for a new assembly.

Having dominated the Turkish landscape, steering the country through the Gulf war and the subsequent Kurdish refugee crisis, Mr Ozal had latterly become more isolated from the political process.

His loss will perhaps be most keenly felt by the Kurdish minority, which had come to look on him as informal patron of their campaign for greater rights. His death comes as the government tries to frame a response to the recent Kurdish ceasefire call.

The presidency is a largely ceremonial post, but while the Motherland Party (Anap) was in government Mr Ozal *something in here (HP) *

accrued considerable powers, particularly in foreign policy.

With the first parliamentary ballot to choose a new president due on April 27, two names have already been put forward.

Mr Husamettin Cindoruk, parliamentary speaker, has made little secret of his presidential ambitions.

A lawyer who acted for Mr Adnan Menderes, the former prime minister executed by the military in 1961, Mr Cindoruk has increasingly alienated government support with his maverick performance, particularly his public opposition to the recent government ban on private TV and radio, and his defence of the legal immunity of Kurdish deputies.

A more popular choice would be the deputy prime minister, Mr Erdal Inonu, the physicist son of Turkey's second president. Apart from the family name, he is widely respected and as a reluctant politician would have no difficulty in remaining non-partisan, something Mr Ozal found so difficult. Much will depend on his party, the Social Democratic Populists (SHP). They may argue that his departure could damage their standing at a time when they face defections to the newly revived People's Republican Party (CHP).

Some deputies suggest Mr Demirel himself might also proffer his candidacy.

TR Turkey, Middle East P9111 Executive Offices PEOP People P9111 The Financial Times London Page 2 432
Bosnian Serbs will quit talks: Anger over tighter sanctions - UN begins evacuation of Srebrenica wounded Publication 930419FT Processed by FT 930419 By ROBERT MAUTHNER and Foreign Staff

THE BOSNIAN Serbs intend to walk out of the international peace talks chaired by Mr Cyrus Vance and Lord Owen following the United Nations Security Council's decision at the weekend to impose tighter sanctions against the rump Yugoslavia.

This was made clear yesterday as UN helicopters began evacuating seriously wounded civilians from Srebrenica, the encircled eastern Bosnian Moslem town, under a ceasefire agreement negotiated between the military chiefs of the Serb attacking forces and the Moslem defenders early yesterday.

Mr Radovan Karadzic, the Bosnian Serb leader, told Belgrade Radio that the self-styled Bosnian Serb 'parliament' would decide whether the Bosnian Serb delegation would leave the talks before April 26 or after.

That is the deadline set by the Security Council for the implementation of the new sanctions, unless the Bosnian Serbs sign the Vance-Owen plan, dividing Bosnia into 10 semi-autonomous provinces.

The sanctions are intended to put pressure on Serbia to force the Bosnian Serbs to endorse the peace plan. Under the sanctions, all countries would be banned from transporting goods across Serbia and Montenegro, monitors would be placed on Danube river ships, financial assets would be frozen, a maritime exclusion zone would be set up in the Adriatic and Yugoslav aircraft and trucks abroad would be impounded.

For the moment, however, sanctions appear to be having the opposite effect from that intended, with Mr Karadzic angrily describing them as a 'diktat and imposition'. Lord Owen, who has been advocating air strikes against strategic bridges and roads in Bosnia as part of the effort to deprive the Bosnian Serbs of vital supplies, is flying to Belgrade on Wednesday for talks with President Slobodan Milosevic of Serbia.

His mission is widely seen as a desperate and possibly final attempt to persuade Mr Milosevic to make the Bosnian Serbs accept the peace plan.

In the UK, Mr John Major, the prime minister, under growing pressure at Westminster for greater military involvement by Britain to help the Bosnian Moslems, discussed possible options with President Clinton in a 50-minute telephone conversation yesterday. These almost certainly included air strikes.

The two leaders agreed that the tougher sanctions against Serbia should be imposed 'effectively and rapidly' and that loopholes should be closed.

In Srebrenica, French Puma and British Sea King helicopters flew out 133 casualties to the Moslem-held northern Bosnian town of Tuzla. They were aided by 145 UN Canadian troops who entered the town to monitor the ceasefire and start disarming the Moslem defenders. Evacuations by air of some 500 badly wounded or sick people are due to continue for several days, barring delays by Serbian inspections.

A UN spokesman said Srebrenica, which is surrounded by Serb troops within rifle-fire range, was calm while the evacuation took place. Claims by the Moslem-controlled Sarajevo radio that theSerbs shelled Moslem defensive lines around the town after the ceasefire came into effect at 2am local time, could not be confirmed by independent sources.

The Canadian UN soldiers have orders to secure the demilitarisation of Srebrenica, a town with a population of some 30,000 and one of the last Moslem-held strongholds of eastern Bosnia, within 72 hours of their arrival.

The UN-brokered agreement, signed by General Ratko Mladic, the Bosnian Serb army commander, and Mr Sefir Halilovic, the Moslem-led Bosnian army chief, demands that all Moslem troops should submit their weapons and ammunition to the UN forces by 11am on Wednesday. While it guarantees 'correct treatment' for any personnel who hand over their arms to the UN, it does not provide for the disarming of the besieging Serb forces.

Although UN spokesmen denied that the deal was tantamount to a Moslem surrender and Bosnian Serb leaders continued to protest that they did not aim to take the town, it seems that Srebrenica's survival as a Moslem community is unlikely.

The decision by the UN Security Council to strengthen sanctions against Serbia and Montenegro was taken late on Saturday, with 13 members voting in favour and two - Russia and China - abstaining.

Serbs look to Yeltsin's enemies Page 2

Relief workers set to enter Srebrenica Page 2

BA Bosnia-Hercegovina, East Europe YU Yugoslavia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 726
Insurers seek curbson scrip dividends Publication 930419FT Processed by FT 930419 By NORMA COHEN, Investments Correspondent

ONE OF Britain's largest shareholder groups is seeking a meeting with the Confederation of British Industry to voice concern about the trend for companies to offer dividends in the form of shares rather than cash.

The investment committee of the Association of British Insurers last week discussed the spate of so-called enhanced scrip dividends issued by seven large corporations in the past three weeks. The ABI wants CBI members to agree that the use of enhanced scrip dividends should be limited to the current year and to those companies with significant tax problems.

ABI members fear the consequences of some companies increasing the number of shares in issue. 'They are increasing the amount of equity that they must service and limiting the scope for future dividend increases,' one committee member said. The scrip dividends are expected to increase each company's outstanding share capital by 2.6 to 5.5 per cent.

If shareholders choose the cash option, their percentage holding in the company will fall. Furthermore, many large shareholders, such as life insurers and pension funds, rely on dividend cash flow to meet liabilities and may feel unable to take up the enhanced scrip offer.

The ABI will also press the stock exchange for a new rule barring companies from announcing enhanced scrip dividends after the ex-dividend date. Investors who sell shares after the ex-dividend date are entitled to receive the dividend payment. Accordingly, the share price normally falls after the ex-dividend date because new buyers do not receive the dividend.

But news of enhanced scrip issues causes the share price to rise. Some investors may have sold shares after the ex-dividend date but before news of the enhanced scrip. This, argues the ABI, means those investors sold at a price which was lower than it should have been. In enhanced scrip dividends, companies offer shareholders an option to receive a dividend in shares that is 50 per cent higher than the value of the cash dividend.

Fashion for the thinly veiled rights offering, Page 17

GB United Kingdom, EC P8611 Business Associations P6331 Fire, Marine, and Casualty Insurance NEWS General News P8611 P6331 The Financial Times London Page 1 373
Pakistan president ousts PM in power struggle Publication 930419FT Processed by FT 930419 By FARHAN BOKHARI ISLAMABAD

PAKISTAN'S president last night dismissed the government of prime minister Nawaz Sharif and appointed an interim military-backed administration.

The decision was the climax to a bitter power struggle between Mr Sharif and President Ghulam Ishaq Khan, who accused the government of corruption and terrorising its opponents.

Mr Khan dissolved the national assembly and ordered fresh elections for July 4.

Troops loyal to the president guarded state television and radio in Islamabad, but there was little sign of violence or unrest on the streets.

The 78-year-old president acted just hours after meeting Ms Benazir Bhutto, the opposition leader, whose government was ousted in a similar move by him less than three years ago. The meeting was widely seen as a thaw in their relations.

The president replaced Mr Sharif with Mr Balakh Sher Mazari, a little known feudal landlord from the province of Punjab.

The interim government will also include members of Ms Bhutto's party. One of two ministers sworn in last night, Mr Farooq Leghari, is among Ms Bhutto's closest aides.

Mr Sharif, who was at the time a protege of Mr Khan, won the general elections held after Ms Bhutto's government was sacked on charges of corruption in August 1990.

Mr Sharif initiated wide-ranging reforms to unshackle the economy from bureaucratic constraints.

He claimed last night that his ousting was intended to sabotage his economic policies and vowed to challenge it in court.

But senior government officials said the new government would try to reassure the business community that its interests would be protected in the face of fears of a reversal of Mr Sharif's policies.

On taking over his caretaker role, Mr Mazari described the business community as 'the backbone' of the country. Less than 24 hours before his dismissal, Mr Sharif indirectly accused the president of supporting the government's opponents and campaigning to oust it.

The president said he was stepping in because of the recent resignations of members of the national assembly and of government ministers, which had worsened relations between the federal government and the four provinces. He accused the government of 'maladministration, corruption and nepotism'.

PK Pakistan, Asia P9111 Executive Offices NEWS General News P9111 The Financial Times London Page 1 383
World News In Brief: Dame Elisabeth Frink Publication 930419FT Processed by FT 930419

Dame Elisabeth Frink, one of Britain's foremost figurative sculptors, died of cancer at her home in Blandford Forum, Dorset. She was 62.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 1 51
World News In Brief: Sport Publication 930419FT Processed by FT 930419

England beat Australia 21-17 to win the rugby World Cup Sevens final in Edinburgh. In football, Arsenal beat Sheffield Wednesday 2-1 in the final of the Coca-Cola Cup.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page 1 58
World News In Brief: Computerised parking Publication 930419FT Processed by FT 930419

Drivers in Plymouth could soon try a demonstration car park which does its own parking. Motorists drive on to a moveable pallet, collect a ticket and key their car registration number into a computer. Machinery parks the car and retrieves it later when the ticket is inserted into a bar code reader.

GB United Kingdom, EC P7521 Automobile Parking NEWS General News P7521 The Financial Times London Page 1 80
World News In Brief: China's nuclear development Publication 930419FT Processed by FT 930419

China has been conducting extensive nuclear activities in its western Tibetan areas since the early 1960s, according to the US-based International Campaign for Tibet. The group claims China has based its nuclear infrastructure in areas populated by ethnic minorities.

CN China, Asia P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 1 70
Patten says governors have legal duty to run school tests Publication 930419FT Processed by FT 930419 By JOHN AUTHERS

MR John Patten, education secretary, is raising the stakes in his confrontation with the teachers' unions by writing to head teachers and governors to tell them they are legally bound to implement the national curriculum tests.

The move comes as Sir Ron Dearing, who today becomes chairman-designate of the Schools Curriculum and Assesment Authority, is due to start the review of the tests announced by Mr Patten two weeks ago. Tomorrow, the Appeal Court will start hearing the case brought against the National Association of Schoolmasters Union of Women Teachers, which is boycotting the tests, by Wandsworth borough council, south London.

The high court has ruled that a boycott over high workloads would be a legitimate industrial dispute. The Department for Education refused to comment on speculation that it would try to rush through a change in the law if Wandsworth's appeal were unsuccessful.

Mr Patten's letters, to be sent this week to representatives of every school in England and Wales, will say the tests must go ahead. The education department said yesterday: 'The chairmen of governors are responsible for ensuring that the national curriculum is carried out, and that includes testing. He is reminding them of their legal duty.'

It refused to speculate on the legal penalties governors might face. No precedents exist for enforcing governors' legal duties in this area, but they could come under pressure to discipline headteachers. Mr Patten is also considering a campaign to promote the tests among parents similar to the campaign conducted when tests for seven-year-olds were introduced two years ago.

Speaking on Saturday at a conference of the pressure group Campaign for Real Education, he also repeated his threat that funds for education would be cut if the boycott goes ahead. 'How can I possibly argue the case for education expenditure if I do not have the results to deploy, evidence of improving standards, of money well spent?'

Teachers' unions reacted furiously to the news. Mr Doug Mc-Avoy, general secretary of the National Union of Teachers, which is ballotting members on a boycott, said: 'These are the actions of a man who is desperate to rescue a failed system. He clearly recognises that the teach-ers' criticisms are extremely well-founded and his insistence on going ahead is foolish. He's painted himself into a corner, and he must have the courage to come out of it.'

Mr Nigel de Gruchy, NASUWT general secretary, said: 'Mr Patten seems to be writing to everyone except the teachers.'

Hard test for new boy, Page 8

Private functions in public education, Page 15

GB United Kingdom, EC P8211 Elementary and Secondary Schools P9411 Administration of Educational Programs NEWS General News P8211 P9411 The Financial Times London Page 1 468
World News In Brief: Two die during marathon Publication 930419FT Processed by FT 930419

London Marathon competitor John Bailey, 47, collapsed and died six miles from the start and a spectator in his 60s also died. Both are thought to have suffered heart attacks. The race was won by Eamonn Martin, 34, from Essex, with the women's race going to Germany's Katrin Dorre.

GB United Kingdom, EC P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page 1 81
World News In Brief: Seats on the Shanghai exchange Publication 930419FT Processed by FT 930419

Three foreign brokers - Jardine Fleming, Standard Chartered Securities and Baring Brothers - have been granted seats on the floor of the Shanghai stock exchange. They will trade special B shares for foreign investors.

Jardine Fleming Group Standard Chartered Securities Baring Brothers Co JP Japan, Asia P6211 Security Brokers and Dealers COMP Company News P6211 The Financial Times London Page 1 76
World News In Brief: Action over Matrix Churchill Publication 930419FT Processed by FT 930419

The Iraqi-owned company which sold former machine tool maker Matrix Churchill to Automation Investments, the holding company for BSA Tools, is suing the buyer for alleged default on a staged payment. The deal was complicated by UN sanctions and the freezing of Iraqi assets in the UK.

Matrix Churchill GB United Kingdom, EC P3541 Machine Tools, Metal Cutting Types NEWS General News P3541 The Financial Times London Page 1 83
World News In Brief: US attack injures 3 in Iraq Publication 930419FT Processed by FT 930419

A US aircraft attacked an anti-aircraft position in northern Iraq after its radar locked on to it. Iraq said three soldiers were wounded. The aircraft was one of two on routine no-fly zone patrol.

IQ Iraq, Middle East US United States of America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 71
Hani's coffin carried by ANC members Publication 930419FT Processed by FT 930419

The coffin of assassinated South African Communist party leader Chris Hani is carried by members of the African National Congress's military wing into a stadium outside Soweto, where it lay in state before the funeral today.

Report, Page 16; Editorial Comment, Page 15

ZA South Africa, Africa P8651 Political Organizations NEWS General News P8651 The Financial Times London Page 1 71
Nato calls in UK and Turkish fighter jets Publication 930417FT Processed by FT 930427 By DAVID WHITE, Defence Correspondent

NATO yesterday called on British and Turkish fighter jets to join the force which this week began policing the Bosnian no-fly zone.

The UK is due to send six Tornado F3 fighters on Monday to Gioia del Colle in southeast Italy. They will be backed up by two VC-10 tankers for air-to-air refuelling.

The Tornados, based at Leeming in Yorkshire, were not included in the initial enforcement plan involving US, French and Dutch aircraft. Britain has offered a further six fighters if necessary.

Turkey is to send a squadron of 18 F-16 fighters over the weekend.

GB United Kingdom, EC TR Turkey, Middle East BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 2 139
City turned down Pounds 1.5m tent for EBRD Publication 930417FT Processed by FT 930420 By VANESSA HOULDER, ANDREW JACK and ALICE RAWSTHORN

THE European Bank for Reconstruction and Development approached the Corporation of London last autumn with a request that it should spend Pounds 1.5m on a temporary structure for the bank's annual meeting, which is being held next week.

The bank drew up plans to build a large tented structure in Spitalfields, across the road from its Bishopsgate building in London. The proposals included a bridge, to be installed by helicopter, that would link the two buildings for the duration of the meeting, to provide extra security for its senior delegates.

The corporation, asked to provide the accommodation for the meeting as a welcoming gesture, rejected the proposal as too expensive.

The corporation also rejected an earlier proposal to consider building a permanent conference centre, which could then be used for the bank's meeting, on the Spitalfields site at a cost of Pounds 14m.

The EBRD's difficulties in finding a conference centre large enough to accommodate the 4,500 people expected to attend its annual meeting began at the end of last summer, when it decided to hold the meeting in London.

More details emerged yesterday of the materials and furniture which went into decorating and fitting out the EBRD's new headquarters.

According to suppliers expenditure included:

Joinery for panelling, door frames and doors worth about Pounds 2.5m, including large amounts of crown-cut sycamore.

600 desks made of steel and glass, to a design by Norman Foster costing more than Pounds 600 each, supplied by Techno of Italy.

A custom-made carpet in a wide range of shades of green provided by Tyndale in London, designed to ensure that it appeared to be the same colour regardless of the different lighting.

Raised flooring from System Floors at a cost of more than Pounds 1.3m, including 2,000 square metres on the first floor in Italian white veined marble and 30,000 square metres of a more basic design on 11 other floors.

A designer bar furnished with 100 chairs representing European furniture throughout the century in the style of famous designers including Le Corbusier.

Mr Jean-Louis Berthet, founding partner of the firm of architects responsible for the design of the EBRD's headquarters is a prominent figure in French design.

He has worked on a number of commissions for Mr Saddam Hussein, president of Iraq, including the interior design of the presidential palace in Baghdad in 1979, the Saddam Hussein International Airport in 1981 and the Council of Ministers building in 1984.

The EBRD refused to comment on the way in which the architects were selected, or on other aspects of the costs of refurbishing their headquarters in Broadgate, London, as further details emerged of the high quality materials used.

'We answer to our shareholders and everything has been completed within budget. We have been extraordinarily transparent this week. Enough is enough,' a spokeswoman said last night.

Mr Jacques Attali, EBRD president, wrote the preface to a book about the work of the Berthet-Pochy firm published in the late 1980s by EPA Editions in Paris. He emphasised his belief in the importance of interior design. 'Certain kings of France', he wrote, 'are better known for their chairs than their achievements.'

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies RES Capital expenditures RES Facilities P6081 The Financial Times London Page 2 566
Finance and the Family: New Barclays mortgage - At a glance Publication 930417FT Processed by FT 930417

Barclays bank is replacing its 7.99 per cent fixed rate mortgage, fixed until January 1998, with a mortgage fixed at the same rate of 7.99 per cent (8.4 APR) but for a shorter term - until the end of April 1997. There is a booking fee of Pounds 100 and an arrangement fee of Pounds 150, which is waived if an endowment, pension or Barclays Lifestages policy is bought through the bank.

Barclays GB United Kingdom, EC P6021 National Commercial Banks COSTS Service costs & Service prices P6021 The Financial Times London Page II 111
UK Company News: Barclays launches Dollars 300m bond in US Publication 930417FT Processed by FT 930417 By RICHARD WATERS

BARCLAYS yesterday embark-ed on its second capital-raising exercise in a week when it launched a Dollars 300m (Pounds 200m) fixed-rate bond issue in the US which will count as tier two capital for regulatory purposes.

The issue is the first by a bank in the US market which is convertible into preference shares, which count as so-called tier one or core capital under Basle committee guidelines. The Basle rules require banks to hold capital equal to more than 8 per cent of assets, at least half of this in the form of core capital.

The bonds are structured to allow Barclays to claim the tax-deductibility of interest payments before conversion, while leaving it with the option at any time to convert into tier one capital and so boost its core capital ratio.

The bonds, which Barclays expects to be sold mainly to retail investors in the US, carry an indicative coupon of 8 per cent. If converted, the preference shares will pay 9 1/4 per cent.

Mr Brian Worsley, assistant treasurer, said the issue was structured in a way to discourage the bank to convert. If it did so, the higher interest rate and loss of tax relief would raise its financing costs by more than two percentage points. Also, the bank had a tier two ratio of 4.4 per cent at the end of last year, compared with tier one of 5.8 per cent, leaving it with little need to create more core capital.

The bonds yielded about 125 basis points over the US government's 30-year long bond yesterday. Barclays raised Pounds 200m in the Eurobond market a week ago.

Barclays GB United Kingdom, EC P6021 National Commercial Banks COMP Company News P6021 The Financial Times London Page 8 309
What the water companies say you've told them Publication 930417FT Processed by FT 930417

SEVERN TRENT WATER

'Consumers have shown a willingness to spend more on services but some are less willing to spend on waste water (sewage) projects which the regulators are pushing. Customers are more concerned about the cleanliness of their water, leakages and the replacement of lead'

WESSEX WATER

'When our researchers explained the cost involved in the EC directive on urban waste water customers were shocked. The only projects for which they have shown a willingness to pay more are those to prevent rivers running low, improvements in taste of tap water and the removal of lead pipes'

ANGLIAN WATER

'Customers support improvements and accept they will bring higher bills. Over three-quarters are willing to pay more to help implement the EC drinking and bathing water directives'

SOUTHERN WATER

Interviews with customers on the implications for bills of cleaning up much of the southern coastline are not yet completed

YORKSHIRE WATER

Will begin their survey in May, asking customers how they feel about increases in bills from new sewage treatment plants in Leeds and along the coast

WELSH WATER

'Initial research showed that our customers' paramount concern is better quality of river water. Generally they are happy with the quality of tap water'

NORTHUMBRIAN WATER

'We are finding that customers are prepared to pay a bit extra, for example, to reduce the risk of discoloured tap water and to improve the quality of coastal waters. On pricing, we expected them to say 'enough is enough' but no-one is saying that'

THAMES WATER

'Customers want better quality, better standards, but at the end of the day they don't want increases in price'

NORTH WEST WATER

'Most customers interviewed did not at first understand the link between bills and the company' investment programme of more than Pounds 5bn in the 1990s. Over half the spending is on cleaning up the Mersey, beaches, and sewerage treatment, yet many customers were unaware we dealt with these'

SOUTH WEST WATER

'Customers see the need for our massive investment programme - 31 schemes clearing up 81 beaches. We will be pushing for additional financial support from Europe and government. But our customers are only 2.6 per cent of population and don't see why they should have to pay for cleaning up 30 per cent of the country's coastline'

GB United Kingdom, EC P4941 Water Supply TECH Services & Services use COSTS Service costs & Service prices P4941 The Financial Times London Page 5 420
Treasury departure Publication 930417FT Processed by FT 930417

MR ADRIAN COOPER, a key member of the Treasury's forecasting team, is leaving to join the economists group at James Capel, the stockbroker, it was announced yesterday.

James Capel and Co GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 4 57
Gilts auction Publication 930417FT Processed by FT 930417

THE Bank of England will hold its next auction of gilts on April 28, when the stock on offer will have a maturity between 1996 and 1999. It is thought Pounds 2bn to Pounds 3bn worth of bonds will be offered.

GB United Kingdom, EC P601 Central Reserve Depositories P9311 Finance, Taxation, and Monetary Policy NEWS General News P601 P9311 The Financial Times London Page 4 73
Daf wins order for return of trucks Publication 930417FT Processed by FT 930417

LEYLAND DAF, the truck company in administrative receivership, yesterday won a High Court order for the return to Britain of 210 unsold trucks that were shipped to the Netherlands over the Easter holiday without its knowledge.

Contractors Edcrest and GM de Rooy, its Dutch parent company, which are in dispute with Leyland Daf over unpaid bills, moved the trucks, worth about Pounds 4m, from a compound at Leyland Daf's plant in Lancashire to de Rooy's base near Eindhoven.

At the request of Leyland Daf's joint administrative receivers Mr Justice Millett made a mandatory order for the return of the trucks to England within five days.

Edcrest argued it had a right to retain the vehicles until the settling of its claim against the company for between Pounds 3m and Pounds 4m in debts incurred before Leyland Daf's collapse.

In February an agreement was reached, pending a full court hearing of the dispute, which allowed Leyland Daf access to trucks and vans stored by Edcrest so that it could continue to trade, on the understanding that it kept a minimum of 260 trucks and 200 vans in the Edcrest compounds as security.

Leyland Daf has received an Pounds 8.2m order for 206 trucks from British Telecom. The trucks will come from Daf's plants at Leyland, Lancashire, and the Netherlands.

Daf's demise, Page 10

Leyland DAF Edcrest GM de Rooy GB United Kingdom, EC NL Netherlands, EC P3713 Truck and Bus Bodies GOVT Legal issues COMP Company News P3713 The Financial Times London Page 4 266
World News in Brief: Los Angeles poised for verdict Publication 930417FT Processed by FT 930417

Police in Los Angeles were on full alert as the jury in the trial of four white Los Angeles police officers charged with violating the civil rights of black motorist Rodney King was ready to announce its verdict early this morning.

US United States of America P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 76
World News In Brief: Leslie Charteris Publication 930417FT Processed by FT 930417

Leslie Charteris, the detective story writer who created Simon Templar, alias The Saint, has died aged 85.

GB United Kingdom, EC P2731 Book Publishing PEOP People P2731 The Financial Times London Page 1 44
World News In Brief: Leyland Daf wins order for return of unsold trucks Publication 930417FT Processed by FT 930417

Leyland Daf, the UK truck company in administrative receivership, won a High Court order for the return to Britain of 210 unsold trucks which were shipped to the Netherlands over the Easter holiday without its knowledge. Contractors Edcrest and its Dutch parent company GM de Rooy, which are in dispute with the failed manufacturer over unpaid bills, moved the trucks - worth about Pounds 4m - from a compound at Leyland's Lancashire plant to de Rooy's base near Eindhoven.

Leyland DAF Edcrest GM de Rooy GB United Kingdom, EC NL Netherlands, EC P3713 Truck and Bus Bodies COMP Company News GOVT Legal issues P3713 The Financial Times London Page 1 129
Clear case of humanitarian horrors: While diplomats and leader writers talk rubbish, women and children die Publication 930417FT Processed by FT 930417 By DOMINIC LAWSON

ON WEDNESDAY the US special envoy, Robert Bartholomew, met the former psychiatrist, and practising war criminal, Dr Radovan Karadzic. Dr Karadzic is more commonly referred to as 'the leader of the Bosnian Serbs'.

After his meeting Bartholomew proclaimed: 'What we are saying to them very clearly - and by we, I mean the international community - is that the military and humanitarian horrors have to stop now.' This is a fascinating sentence and deserves parsing.

What is meant by 'very clearly'?

Bartholomew was speaking in the context of Lady Thatcher's call on British and US television for immediate action against the Serbs to stop their massacre of Bosnian Muslims. Yet on the same day as Bartholomew made his position 'clear', his boss, the US secretary of state, Warren Christopher said: 'Thatcher's prescription is one for only increasing the carnage . . . a rather emotional response.'

So it is 'clear' that the US, in spite of Bartholomew's brave words in Belgrade, is absolutely against providing or encouraging any military impediment to the Serbian bombardment of Bosnian civilians. The US, in fact, is interested in Bosnia only in so far as it affects relations with Russia, and since Russia sympathises with the Serbian view, the State Department will not jeopardise Bill Clinton's buddy buddy relationship with Boris Yeltsin, merely for the sake of a few million measly Muslims.

But Bartholomew claimed that by 'we' he did not mean the US. He said 'we' meant 'the international community.' This phrase should be consigned to the dustbin of diplomacy. It occurs about four times in every newspaper leading article on Bosnia. It is constantly on the lips of Douglas Hurd and Malcolm Rifkind, when they seek moral authority for their policy of giving the besieged Bosnians butter before guns.

What, actually, is the 'international community', for whom Bartholomew, Christopher, Hurd, Rifkind et al, claim to speak? Who are the members of this club? Can anyone join? Does it consist of the entire membership of the UN?

Well, no. By common usage it does not include Libya or Iran. But does it include India? Is Chad 'saying clearly' to Dr Karadzic 'stop these humanitarian and military horrors now.' I think the good people of Chad and their leaders know little of the troubles of the Bosnian Muslims and care even less.

Does 'international community' mean just the security council of the UN? Well, no again, unless the UN envoy to Bosnia thinks that in his strictures to Dr Karadzic he is speaking on behalf of China's billions, but not for the Japanese population, disenfranchised from the great honour of membership of the UN security council. And what of South Africa? It used not be part of 'the international community'. Now, perhaps, it has country membership of this club.

Possibly, when Bartholomew refers to international community, he means only 'those who regularly and reliably support the actions and utterances of the government of the US.' That is quite a good working definition, particularly for Hurd and Rifkind. It means they - we - are quids in.

Back to parsing the US envoy's pregnant little sentence: what on earth does he mean by 'humanitarian horrors'? Human horror I understand, but not this polysyllabic refinement. He surely does not mean horrors in the name of humanitarianism. But that, actually, is the truth. We have a policy of 'humanitarian aid', which means that we are prepared to give food to the besieged Muslims of Srebrenica, but not to lift an arms embargo which prevents them from lifting the siege which is starving them, and which, when the city falls, will result in further murders of women and children.

The Muslim soldiers, will of course, escape Srebrenica: in this war it is the civilians who perish. In the name of 'humanitarianism' we leave these people to their fate.

Hurd argues that to allow the Bosnians arms, would 'increase the quantity of fighting.' Indeed it would, just as when President Franklin Delano Roosevelt agreed to send arms to Britain in 1940 it increased 'the quantity' of fighting in Europe: we were willing to fight more in the short term, in order to promote a just settlement for the long term. Unfortunately, the US is not now led by a man of the calibre of Roosevelt. As for Britain, Lady Thatcher is absolutely right: we should be ashamed of ourselves.

Dominic Lawson is editor of The Spectator.

US United States of America BA Bosnia-Hercegovina, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page XXII 783
Private View: The accountant who plays in the big league - Rick Parry, Premier League supremo, has created scoring chances. But will he get to kick the ball? Publication 930417FT Processed by FT 930417 By CHRISTIAN TYLER

EVERYTHING is run by accountants these days, even English football. Was that really appropriate, I asked Rick Parry, chief executive of the Premier League, as its first season dribbles to a close.

'What can I say but 'Yes'?', he replied, adding hastily: 'I don't really see myself as an accountant so much as somebody who is making use of the training.'

With his big briefcase, little moustache and gently receding hairline Rick Parry, not yet 40, might pass for a successful computer salesman from Slough. His manner is brisk but bland. He employs the language of Briefcase Man ('at the end of the day' is a favourite phrase) but, to be fair, not once in two hours did he refer to The Bottom Line.

You call football 'the product', I observed.

'I slip into it from time to time. I actually don't see it as a product because that's a gross oversimplification. To describe fans as customers is certainly unduly patronising.

'Nevertheless, there are certain basic lessons which need to be learned. Considering football has, or should have, a much more special relationship with its fans than any other business has with its customers it's remarkable how little football bothers to talk to its customers - far less than Sainsbury's or Marks & Spencer would, for example.'

Isn't it odd to use an industry or product model for what is after all a game? Don't you represent the ultimate commercialisation of the sport?

'Not at all. I'm a fan at heart.' He might have added that he was a good enough goalkeeper in his youth to be auditioned by Liverpool and Everton.

'Of course it's a sport, but that's too facile. At the end of the day it's a sport which pays participants huge wages. Clubs have to be run as businesses. They have to find about Pounds 250m to upgrade their stadia to comply with the Taylor Report (on ground safety). It's much more than just a game - always was ever since it became professional. Two Premier League clubs are quoted companies.' (At mid-week Manchester United stock went above 450p, a year's high; Tottenham Hotspur stood at 92p, near its low.)

'I'm a football fan through and through. I happen to have gained hopefully useful and relevant business experience. I'm not seen as a football person by insiders still, but I don't see myself as sort of grey businessman being brought in to become the sort of unacceptable face of football.'

Nobody seems to know much about Rick Parry. Even his secretary could not think what to buy him for Christmas. He would be the first to admit he does not stand out in a crowd and, in a game of big mouths, is accused of having risen without trace. Yet the boy has come good; he's made the space, created the chances - a record Pounds 304m TV deal with BSkyB and BBC, a record Pounds 12m sponsorship from Bass - and he has dodged some heavy tackles from the hard men among the 22 club chairmen who make up the Premier League board.

The chief executive sat on a bar stool drinking Coke and shovelling peanuts into his mouth. He nodded to Graham Taylor, the England manager, as he passed through the hotel lobby. He took a call from the Premier League's non-executive chairman, Sir John Quinton, former chairman of Barclays Bank.

What interests you apart from football, I asked him.

'Nothing at the moment.'

People say you are a closed book.

'Who says?'

The phrase is mine, I replied, but it's the impression you give. Yet you seem approachable enough.

'I am, if anyone bothers to approach me. The thing that gets up my nose with certain members of your profession is that I get patronising comments about what I'm attempting to do from people who've never met me.

'I don't go shouting from the rooftops. I'm not flamboyant, I'm not looking to make a name for myself. That's not my style. But I wouldn't say I was a closed book.'

You don't go rock-climbing or potholing or breed Vietnamese pot-bellied pigs? What about stamp-collecting - or train-spotting? I added unkindly.

Parry did not flinch. 'I don't really have a lot of time to climb mountains. I used to do a lot of windsurfing. I used to sail. I used to play a lot of football. I like going to the theatre when we get the chance. I'm very family-centred really.'

He lives near Chester with his wife Kate, who has no interest in football, and their sons James (10) and Tom (8), both keen players, on a salary of Pounds 120,000 plus car. They are buying a new house about 300 yards from their present one.

A change of scenery is always nice, I said.

Parry ignored this too, and looked serious. He had endured a lot of hostile publicity last May, he said, when ITV was thwarted in its bid to screen the Premier League. The family felt the pressure and he was determined to preserve a stable home life.

Influenced by Brian Hall, a Liverpool player, who had studied science, Parry took two maths and physics at A level and read maths at Liverpool University. His father, the physical education instructor at Chester College, advised him to get a professional qualification. He joined the local branch of Arthur Young (now Ernst & Young), qualifying as a chartered accountant in 1979. He went to work for Hoseasons, the canal and cottage holiday company in East Anglia, returning to Arthur Young as a sporting and leisure consultant.

Through the firm's involvement with the 1984 Los Angeles Olympic Games and a series of connections and coincidences Parry was asked to co-ordinate Manchester's successive bids to host the Games. In between he was asked to advise the Football League on its managerial efficiency. In 1991, the Football Association, soccer's parent body, asked him to draw up a blueprint for the breakaway Premier League (the old first division).

What is your relationship with the club chairmen?

'It's good. It's fine. We've had hiccups, we've had problems, but no illusions. It ain't ever going to be easy with those 22. I've not come across such passions, such extremes, in any other form of working life.'

What are they about these passions?

Parry sighed. 'I mean, you name it. I mean, it's the nature of the game. They're competing against each other every Saturday. There are big clubs, there are small clubs, northern clubs, southern clubs. There's a lot of self-interest, but trying to do things for the greater good.'

Do they make you feel a bit small, a bit too youthful?

He laughed ruefully. 'No, they're OK actually. If you recognise that you've been given two ears and one mouth and you use them them in that sort of ratio it's quite helpful.'

You're the tactful type?

'We try to be. Doing the groundwork is the best technique. It's very difficult in a room of 22 to run things off the cuff. Hugely difficult. We've managed it on occasions because there was so much to lose . . .'

We?

'Obviously the chairman plays an important role keeping order at the meetings.'

Parry became chief executive almost by accident. He was still a consultant when he was asked to chair his first meeting. 'I didn't duck fast enough', he said.

The clubs were going to decide whether or not to leave the League until someone pointed out that the meeting would become a shambles without a chairman. Parry's management training and Olympic committee experience came to his rescue. He took the trouble to visit all the clubs beforehand and listen to their gripes. 'You have to work on the principle that nothing goes to the general meetings for a vote unless you know it's going to win. You don't put it on the agenda if you don't have a two-thirds majority.'

There was a walk-out last year over the Bass sponsorship deal. Parry blamed time pressure. 'At the last meeting the identical offer went through without having to be put to a vote. That's a mark of how things have settled,' he said.

'I've never tried to give the impression that I know the answers. What I've tried to suggest is that perhaps I know the right questions. There are plenty of people in the game who can provide the right answers. What I've done a lot of in management consulting is to be a facilitator.'

A referee?

'Not quite. It's more than being a referee because you have to draw them towards common conclusions rather than simply arbitrate. Facilitator is a better word. I've had a lot of training.'

Group encounter training?

'Yes. The Arthur Young training technique.'

So your ability to read a balance sheet is . . .

'About 0.5 per cent of what I do. I mean the accountancy side is nothing, frankly. It's the level of Week One of accountancy training. People pick on the fact that I happened to train as an accountant as a useful label to criticise me with.'

Could you ever be accepted as the real leader of the Premier League?

'It may evolve. But one of the things I'm happiest about is that in the last six months I've largely managed to avoid the headlines.'

You don't want to be known as Mr Football?

'I've no pretentions or desires in that direction. I will get my satisfaction from the thing being done properly. I've no desire to be seen as the one who did it.' Parry said it so simply, it was hard not to believe him.

We talked about the inflation that would follow the League's huge TV contract. Parry said clubs were being forced not only to invest in their grounds but to dissuade players from accepting the 'crazy money' offered by Italian clubs. It was a European market now. 'Over there they are only allowed to use a certain number of foreign players but they buy players, they stockpile them to corner the market. That's terrifying.

'But at the end of the day this is back to what you said earlier. It isn't just a business. It's a sport and it's a sport which is all about winning and there is only one winner every year. So you'll never stop people playing for high stakes, and investing in excessive wages and transfer fees in order to win.'

So you won't turn be able to turn a bear garden into a gentleman's club?

'It's too competitive. We'd lose part of the essence of the game if we did.'

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters PEOP People CMMT Comment & Analysis P7941 The Financial Times London Page XXII 1831
Hawks & Handsaws: Queen sweeps the board Publication 930417FT Processed by FT 930417 By MICHAEL THOMPSON-NOEL

I HAVEN'T mentioned this before, but I and two friends have embarked on a series of chess lessons so as to prepare ourselves mentally for the Nigel Short-Garry Kasparov world title chess match in London in September. The two friends are: John Major, who is prime minister of Britain, and Queen Elizabeth II, who is head of the House of Windsor and not as glum as she's painted, in fact is rather fun.

We meet in great secrecy - no, not at Buckingham Palace - and our lessons last two hours. The reason for the secrecy is that our chess teacher is Nigel Short himself, the 27-year-old prodigy-genius-Dalek who will become Britain's first world chess champion (and earn a great fortune) if he beats the barbarian Kasparov.

We had a lesson yesterday. 'Remember,' said Nigel, 'that chess is hard physically and mentally. Grappling with your opponent's psyche can be mentally very bruising. And don't think of it as intellectual. I mean, I'm not even clever, couldn't mend a fuse. Nor does it run in families. Heredity doesn't come into it. Top-class players come from a variety of backgrounds - I used to be working class. But never in chess history have they been fathered or mothered by first-rate parents. In chess terms, I mean.'

'How extremely fascinating,' said the Queen. 'It is just the same with racehorses. Or even with actual dynasties. Top-class racehorses, such as winners of the Derby, almost never produce progeny that match their own exploits. One simply does not hear of it. As for actual dynasties, well there's a sorry tale.' The Queen chimed with laughter, like a pink porcelain bell. 'Most royal children set forth with all life's advantages, but fritter them away. They fall into unsavoury company. Develop a taste for the theatre. Talk to the trees and the sky. It must be in the blood. Such a terrible waste.'

'How remarkably interesting,' said John Major. Chess is quite like cricket, you know, in some of its particulars.'

After these pleasantries we knuckled down to a tutorial on the Scotch gambit. 'Remember,' said Nigel, 'with white openings we are trying to gain our share of the centre, best achieved by advancing the d- and e-pawns and developing at least one knight towards the middle. On appropriate occasions we find that a gambit proper, such as the Scotch, is most useful.

'After the opening 1, e4 e5; 2, Nf3 Nc6; 3, d4 exd4; 4, c3, the Scotch gambit continues 4 . . . dxc3; 5, Nxc3. Black often declines with 4 . . . d5, and then play can continue: 5, exd5, Qxd5; 6, cxd4 Bg4; 7, Be2. This gives us some highly active pieces. I expect I shall use it against the barbarian Kasparov.'

John Major looked puzzled. 'I must say, Nigel,' he said, 'that I am a bit in the dark on this one. I am not, as it were, illuminated. It sounds more than sufficiently complicated. It reminds me, I suppose, of the exchange rate mechanism of the European monetary system - remarkably clever on paper but liable to generate bother on a day-to-day basis.'

'Nonsense,' said the Queen. 'It is a perfectly simple gambit. Even a groom could employ it. After 7, Be2, white continues with Nc3, Be3 and 0-0. It is important to castle early, John. It is true that white's queen pawn is isolated on d4, but as Nigel has just told us, there is more than adequate compensation for this in the general deployment of pieces.'

'Absolutely right,' said Nigel, 'absolutely brill.'

'I have to confess,' said the prime minister, 'that I am more than somewhat confused. I do not like gambits. In politics, you know, it pays to keep things simple, even to play a dead bat, to get up on a soapbox and not try to flim-flam. That is how I won the election, you know. I avoided all gambits.'

The Queen said: 'How simple life must be for you in No 10 Downing Street. One wishes one were so fortunate. In any case, John, even sharper than the Scotch gambit is the Goring gambit, in which 4 . . .dxc3 is met by 5, Bc4 - and off we jolly well go.'

Then we played some games. And then we chatted sociably. The Queen asked Nigel if he would have to pay much income tax if he beat the barbarian Kasparov.

'I hope not,' said Nigel. 'I've got a really brill accountant.'

'So does oneself,' said the Queen. 'It did not, in fact, help one.'

GB United Kingdom, EC P9111 Executive Offices NEWS General News P9111 The Financial Times London Page XXII 792
Books: Wild times in nature's global village Publication 930417FT Processed by FT 930417 By NIGEL SPIVEY

THE MOON BY WHALE LIGHT by Diane Ackerman Chapmans Pounds 15.99, 249 pages

'ALTARWISE BY owl light' was the line of Dylan Thomas which Robert Graves castigated as utterly meaningless. The Moon by Whale Light is similarly obscure, but we will allow it as a title. The author has poetry in her soul: if, on a moonlit beach in Patagonia, she is more taken by the night-time sighs and sneezes of the nearby whales than the source of their illumination, it is forgivable. As so often in this book, the reader is simply writhing with envy.

The New Yorker is, by tradition, a sponsor of good writing (and tolerant of poetry, too). Diane Ackerman was commissioned by its editor to write the quartet of essays which constitute this book, and the result is a curious hybrid of proper reportage, poetic intelligence and wild-life documentary. Bats in Texas and alligators in Florida, whales off Hawaii and Argentina, penguins in California and the south Atlantic: these are the ultimate subjects, but they are reached only via the means and the words - reproduced verbatim, and at length - of those naturalists for whom they are a focus of study. The author part tags along, part throws herself into the action.

The result is a success, on two counts. First, these naturalists are people worth meeting and worth quoting. They come across as dedicated, sane, non-rhetorical and gracious. They are not planet-saving bores. Second, although the author has done some homework on the fauna, she has not overdone it; and what impresses one most about her essays is not the aggregation of scientific knowledge (although that is there) so much as the almost child-like responses she records of her own encounters.

Pathos is inevitable in some of these eyeball-to-eyeball meetings (a bat crawls around her head and gazes up at her 'with liquid eyes in which a thousand truths of the rain forest were hidden'); but it is generally tempered by good sense and, above all, by an ironic sort of respect.

It is ironic because human beings do not customarily expect to learn good manners from animals. And yet, the tendency to anthropomorphise animal behaviour imports injustice to some animals. This is most apparent with the whales. Swimming alongside a serene mother and her calf, the author registers that the disposition of the whale is, in fact, rather superior to that of humankind. Mother whale keeps an eye on the vistor's movements, and could blast her away with one whim of her flipper. But, again, eye contact is made: 'I knew that if I showed her where I was and what I was and that I meant her no harm, she would return the courtesy.'

The establishment of natural trust, which humans among themselves usually relegate to Utopia, is also patent with the penguins. Since they have no land predators, penguins are amiable to whoever comes to study them. In fact, penguins seem to think that if you come to study them, it is an opportunity for them to study you: check out how you feel, whether you might be good for mating with - and so on.

The literary precedents for this sort of exercise are formidable, as the author well knows. But it is saved from becoming some sort of cute bestiary by a steadily understated sense of urgency. Most of the people Ackerman uses as her agents for access to the animals are in the field because, if they were not, there might be nothing there.

Green polemicising, as I say, is not dominant in the book. But, by implication, it is a powerful contribution to the conservation case. Quite unheard by us, bats are often shouting very loudly to each other. Whales boom great submarine arias. Alligators have been chatting to each other for 230m years. Penguins give each other presents as part of their courtship. All this is not a romance of nature: rather, a great advertisement for the global village.

GB United Kingdom, EC P2731 Book Publishing TECH Products & Product use P2731 The Financial Times London Page XX 698
Books: Tinker, tailor, playwright, spy - and victim - Christopher Marlowe's double life seemed bound to lead to a sticky end / Review of three imaginative scenarios Publication 930417FT Processed by FT 930417 By ANTHONY CURTIS

A DEAD MAN IN DEPTFORD by Anthony Burgess Hutchinson Pounds 14.99, 272 pages

CHRISTOPHERUS, or Tom Kidd's Revenge by Robin Chapman Sinclair-Stevenson Pounds 14.99, 393 pages

THE SLICING EDGE OF DEATH by Judith Cook Simon & Schuster Pounds 14.99, 234 pages

WRITING PLAYS and spying on the enemies of your country appear to be occupations that combine happily. During the first world war Somerset Maugham, based in Switzerland, was turning out brittle marital comedies for the London stage with one hand while sending back to Whitehall secret reports on the activities of German agents in Lausanne with the other. In leading this double-life Maugham was following in the illustrious footsteps of a British playwright who appears a few paragraphs higher (above Marston and Massinger) in the theatrical dictionaries: Christopher Marlowe.

In Marlowe's period the threat to the security and sovereignty of England came not from Germany but from Spain. The Armada had been turned back, the King of Spain's beard well and truly singed in 1588, but that had not removed fears of a Spanish-led Catholic takeover, and these fears were exacerbated following the execution of Mary Queen of Scots by the prospect of an influx of Scottish Catholics under the banner of the new King, her son, from over the border. No one was more concerned about this than Sir Francis Walsingham, Elizabeth's spymaster-in-chief, who stood at the centre of an intricate spider's web of intelligence activity spreading into Scotland and over the Channel into France.

Around the time of the Armada Marlowe had put himself sensationally on the theatrical map with Tamburlaine, parts one and two, performed by the Admiral's Men with Edward Alleyn in the title-role. The brilliant young playwright, son of a Canterbury shoemaker, seems in retrospect like a glittering dragon-fly caught in the espionage web and ultimately destroyed by it.

As were later spies, Marlowe was recruited while still an undergraduate at Cambridge University. He interrupted his degree course to go on a mission to Rheims where he infiltrated the ranks of Catholic priests disguised as Huguenot refugees on their way to England. Back in London he put the finger on them and they were summarily executed.

After Tamburlaine Marlowe had several more smash-hits to write - The Jew of Malta, Edward II, Dr Faustus - but in spite of being the most successful dramatist of his day, the long arm of the Service refused to let him be.

Was Marlowe about to embark on some secret mission when he died suddenly as the result of a tavern brawl in the busy port of Deptford? It was a nerve-centre in those days of two-way traffic to and from the continent and it seems unlikely that Marlowe went there on a lunch date just for fun.

Speculation about the causes of his sticky end in Deptford has been rife, with dozens of books aiming to solve the mystery. But with the 400th anniversary of Marlowe's death on May 30 1593 coming up soon, the trickle has become a torrent. Marlowe-mania is currently sweeping the bookshops and theatres.

These three novels all cover exactly the same ground, spinning yards of fluent fantasy from the few scanty facts and documents. They each come to a different solution to the problem, and so does the play on the same theme, The School of Night, by Peter Whelan, now at the Barbican's Pit theatre.

The salient point on which all the authors agree is that Marlowe's death was not the fortuitous event that the inquest implied. They all detect the hand of the Service as being implicated, either directly or indirectly. It was Leslie Hotson, an indefatigable American literary sleuth, who unearthed the findings of the official inquest on Marlowe's death. To fuel our suspicions, it was conducted not by the regular coroner but by one directly responsible to the Crown. 'In the event' says Judith Cook 'the official version raised more questions than answers . . . '

It is the version presented in Cook's novel, The Slicing Edge of Death (published on May 27) that I would advise anyone new to the game to read first. It deals with all the main points in by far the clearest and most comprehensible manner while stating in an Author's note at the end exactly what is invention and what is derived from historical evidence.

Cook roots her exciting, readable novel firmly in the world of the playhouses and she highlights the rivalry between Henslowe's company, to which Marlowe was attached, and that of Richard Burbage, soon to be the Chamberlain's Men, where 'the upstart crow' from Stratford was beginning to make a name for himself.

Hamlet had not yet been written. In the little scene often cut in performance where Polonius sends a pair of agents to Paris to spy on Laertes and report back to him, as well as in the characters of Rosencrantz and Guildenstern, we can see how strongly intelligence-gathering and its perils pressed upon the minds of the Elizabethans. But if the Hamlet we know had not yet come into existence when Marlowe died, there may well have been an earlier version floating around by Thomas Kyd on which Shakespeare's play was based.

The unfortunate Kyd is given centre stage in Christopherus, or Tom Kyd's Revenge by Robin Chapman. One of the few alleged facts known about him is that he had the misfortune to harbour among his papers a rough draft of a blasphemous paper by Marlowe intended for Sir Walter Raleigh's putative School of Night (a kind of Elizabethan version of the Cambridge Apostles) which was discovered by the authorities when his lodgings were raided. Kyd was arrested and after being tortured signed a confession denouncing his former friend Marlowe as an atheist.

Kyd emerges as a tragic figure with whom Chapman identifies movingly. He focuses on him in the period after his release when Kyd is attempting to rehabilitate himself and come to terms with his betrayal of his friend. This long wayward book is not for the squeamish but it is full of many fine imaginative flights concerning the principal figures in Marlowe's life: his patron Thomas Walsingham (cousin of Francis), Baines and Poley the duplicitous false friends, Nick Skeres and Ingram Frizer, the hired thugs (the latter twisted the knife on that fatal afternoon). Chapman makes it all seem very complicated in terms of these individuals' motivations. But no doubt, if we could know the truth, it was.

They all re-appear in A Dead Man in Deptford. Anthony Burgess, that maestro of the mother tongue, has his own way of dealing with history, as a kind of musical fugue in which certain motifs constantly recur - drunkenness, blood-letting, whoring - and this novel is a typical Burgess performance.

The homosexual side of Marlowe's relations with his patron and his performers is thoroughly exploited. Marlowe becomes a brash camp Elizabethan Guy Burgess, strutting and preening his hour upon the stage. The nauseating stench of the stews of a London infested by Plague comes across pungently. The people of this period loved to play with words as if they were notes in music and so does Burgess. In some ways he is closest to them emotionally, but once again he has not given us an easy read.

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Books: Travellers' tales for anxious aspirants - Chloe Chard on tourism and its limitations Publication 930417FT Processed by FT 930417 By CHLOE CHARD

THE BEATEN TRACK by James Buzard Clarendon Press, Oxford Pounds 35,357 pages

TOURISM, as James Buzard points out, has long been the object of supercilious sneers: an article of 1865 suggested that the new package tours organized by Thomas Cook offered 'a kind of Continental experience which is to that obtained in the regular way precisely what a 'dicky' (a false shirt front) is to a shirt.'

Since the beginnings of touristic travel early in the 19th century, Buzard argues in this well-documented book (sub-titled European Tourism, Literature, and the Ways to Culture, 1800-1918), there has been a tradition of 'anti-tourism' which has established a sharp distinction between 'those who feel enthusiasm' and those of limited sensibilities. Anti-tourists have attempted to define their own experiences of foreign countries as 'authentic and unique,' partly by seeking out places removed sharply from the more mundane aspects of modern life.

Travellers aspiring beyond the banalities of the 'beaten track' have, nonetheless, often been troubled by an uneasy awareness that they are themselves trapped within the limitations of tourism. The final chapters, on Henry James and EM Forster, place particular emphasis on this discouraging realisation. Forster's writings, Buzard observes, show that those who profess spiritual affinities with foreign culture can be every bit as baneful in their effect on foreigners as more humble tourists.

In Forster's short story The Eternal Moment, for example, an English female novelist returns to the alpine town of Vorta, which has become a popular resort as a result of a novel she wrote about it 20 years earlier. On her first visit, a handsome, athletic young porter made amorous advances to her - an episode she remembers with some excitement.

He now re-appears as the fat, prosperous concierge of the Grand Hotel des Alpes; she realises that she herself, in bringing tourism to Vorta, is responsible for 'his greasy stoutness, his big black kiss-curl, his waxed moustache.'

Even in narratives of disillusionment such as this, it could be argued that it is possible to discern traces of a more uncompromisingly romantic approach to travel. Tourism enters into conflict not only with anti-tourist fastidiousness but also with an urge to cast aside constraint, to act out transgressive desires in foreign places, and to place one's self-identity at risk.

When outlining the 'romantic' attitude towards travel, Buzard cites Samuel Rogers' resolutely-staid definition of a journey abroad as a safe and 'innocent' outlet for potentially disruptive desires. A 'Byronic model' of the lone wanderer escaping home and family also is mentioned briefly.

Byronism, however, is associated less with wild, destabilising promptings than with a smugly self-confirmatory masculine pose - linked to the fantasy of Italy as a 'woman-country . . . yielding itself to appropriation by male imaginations from the North.'

Reference back to the life and works of Byron himself, Buzard demonstrates, became an expected part of the standard ritualised itinerary of Europe: the poet's reputation as 'the scandalous embodiment of an anti-British Continentalism' was modified swiftly as his writings were quoted sententiously by guide books and his travels invoked piously by local guides and servants. '

Many sections of The Beaten Track are full of insight and crisp definition; the book includes, for example, a brisk survey of the role of the guide book in the early-20th century novel; and an elegant account of the 'family abroad plot' in which ambitious but impressionable mothers and daughters pursue social advantage and trivial diversion in Italy.

If the reader feels, nonetheless, a bit dispirited by Buzard's emphasis on anxious aspiration, I recommend strongly the more cheerful view of tourism offered by Evelyn Waugh's Labels. Waugh, happily, envisages 'the middle-aged widow of comfortable means' attracted by travel brochures in which 'that rosy sequence of association, desert moon, pyramids, palms . . . all delicately point the way to sheik, rape, and harem.'

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Books: The human meteorite who fell without trace - Poetry Publication 930417FT Processed by FT 930417 By MICHAEL GLOVER

COLLECTED POEMS by Weldon Kees Faber Pounds 7.99, 180 pages

COLLECTED EARLY POEMS 1950-70 by Adrienne Rich Norton Pounds, 435 pages

WHAT more satisfying a name for an enigma than Weldon Kees, the American poet whose car was found abandoned near San Francisco's Golden Gate bridge in 1955? Was it suicide or a feint? No trace of his body was found, no satisfactory explanation offered.

A recent Bookmark programme set itself the thankless task of discovering the truth about Kees. It tracked him through the America of his lifetime - from his mid-west, pre-Depression childhood in Beatrice, Nebraska, through his years in New York City in the 1940s (where he made documentary films; worked briefly as art critic of the Nation; wrote for Time and Paramount Newsreel; painted canvases that allied him with the early abstract expressionists; and wrote Brechtian songs for vaudeville) and back to San Francisco where he took up classical jazz piano and collaborated on a book about non-verbal communication, illustrated with his own photographs. All this apart, there was the writing: short stories (still uncollected), a novel (published in the US two years ago), and the poems now available in Britain for the first time.

What sort of a man was he? A meteorite, by all accounts; a man of intense, feverish activity. A chain-smoking poser; a country boy turned city slicker (if the photographs are to be believed). 'He lived in a permanent and hopeless apocalypse,' said Kenneth Rexroth, godfather of the Beats, who knew him towards the end of his life. (That apocalypse was, of course, sustained by drugs and alcohol).

He was a man of narrow and profound vision whose poetry, prosaic in style, displays a kind of benumbed bitterness; a strange, obsessive, riddling analysis of the heart's paralysis. From time to time, it has the desolation of an Edward Lear: 'A white-faced man with sad, enormous eyes.' The light in the poems usually is bleached, wan, colourless. Nothing is healed, nothing shriven. Kees returns empty-handed from the search for life's meaning.

Although he lived 1,000 miles or more from the respectability of his family, Kees, an only child, used to send home newspaper cuttings on his 'successes' as a poet, film-maker, etc. Did his mother understand? When, two days after his disappearance, the dusty, fusty couple appeared in San Francisco and were taken to the bridge, his mother looked down at the water, disbelievingly, and said: 'But he was never the athletic type.'

Kees published only three small volumes of poetry over 11 years and was never regarded as a major figure during his lifetime. Adrienne Rich, on the other hand, in a career as poet and libertarian activist that spans nearly half a century, has become both a popular and a recognisably angry public voice.

And yet, it was not always so - as her Collected Early Poems 1950-1970 demonstrates. In her first collection of 1951,for example, which is full of the enormous assurance of youth, she regards everything with a calm, aestheticising eye. There is an attitude of wise resignation before the things of the world.

By the late 1960s, having passed through the political turbulence of that decade, there is no such thing as inner and outer any more - everything is political. The old language is the language of the oppressor and it must be wrested from his grasp.

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Books: Liverpool - the quick and the dead Publication 930417FT Processed by FT 930417 By RICHARD MCCLURE

'ABOVE ALL, pay attention to life,' wrote Henri Cartier-Bresson who, along with Robert Capa, was a founding member of Magnum Photos in 1947. It has been an edict to which Peter Marlow, the agency's president now, has subscribed faithfully; his previous work has recorded the conflict and suffering in war zones and refugee camps around the world.

Between assignments abroad, Marlow returned periodically throughout the 1980s to photograph the people and buildings of Liverpool. The cumulative result is a powerful social document, Liverpool: Looking Out To Sea, now showing at The Photographers' Gallery in London and also published by Jonathan Cape (Pounds 35/Pounds 20, 111 pages).

Marlow's achievement is to penetrate the humanity behind Liverpool's media image with an admirably unsentimental style that accommodates both the artless, snapshot aesthetic of social landscape photography and more painterly, chiaroscuro prints, such as those of men and boys scavenging in rubbish dumps.

Never shy of the grand gesture (one of his contributions to the Hayward Gallery's Magnum retrospective three years ago showed a US soldier grieving before Washington's Vietnam war memorial, here echoed by a fan mourning the Hillsborough victims), Marlow's ennobling, luminous tones inject a measure of sympathy for a city once fat on the imperial plenty of the slave trade.

And, amid this wasteland, a river runs through it. Marlow points constantly to the Mersey's embarrassed, disconsolate presence as a metaphor for the city's decay and disuse. Empty of the ships that brought Liverpool wealth, the only vessels to break its monotonous expanse are half-full ferries and a Sunday afternoon yacht race where a white marker flag offers up a symbol of surrender.

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Books: Crazy, man - crazy Publication 930417FT Processed by FT 930417 By MARK ARCHER

FADS, FASHIONS AND CULTS by Tony Thorne Bloomsbury Pounds 20, 310 pages

ONE MUST be so careful these days. Ask directions of a New Age traveller and you might find yourself addressing, instead, a Smellie, a Soap Dodger or a self-styled Cider Punk. Thanks to Tony Thorne's kaleidoscopic new guide to the pseuds' corners and sub-cultures of modern Britain, New Men, New Romantics and New Georgians can sit down and discover how new they really are.

For Fads, Fashions and Cults is no ordinary dictionary. Its world is a post-modernist one in which nothing has meaning but everything, from Cocteau to cocktail sticks, can have significance. Cross-referencing frantically, Thorne lays bare the song-lines of 20th century living. Like generational lists from the Old Testament, he says a disco craze like Talking begat Toasting which begat Dub which begat Rap. Hip Hop begat Body Pop which, in turn, begat Rave.

Not everything is as crystal-clear as that, of course. Did Punks or the Crusties ('Crusties practise a militant self-degradation involving drink and drug abuse, personal filthiness and public obnoxiousness') beget Grunge? Then again, which dissident hair-style came first: the Duck's Arse or the Argentine Ducktail? Replies on a postcard to the author, who says he wants his readers to answer back.

Some lines of enquiry lead nowhere. Trepanning, or drilling a hole in the skull to release higher levels of consciousness, seems to have begat only publicity for Dr Bart Hughers, a Dutch mystic who tried it in 1962.

Forest Therapy begat Tree Sniffing but little else. True, contemplating a tree at close quarters while inhaling the resinous fumes given off by its bark and leaves might, as our author speculates doggedly, have something to do with the 'outdoor Shamanistic rituals of the Men's Movement.' But by the time he has thrown in the Combat Games cult to boot, the reader has got his song-lines well and truly knotted.

Like the four rivers leading away from Paradise, if there are four grand-daddy cult fads and fashions which spawned the rest, then Hip Hop, the Beats, Existentialism and the hula hoop appear to have a lot to answer for. Indeed, we learn that the hula hoop looks forward to aerobics and back to the Maori war dance.

'Only connect,' EM Forster once suggested as a means of comprehending modern society. Reading this self-styled 'definitive' guide to modern culture, he might rather have wished he hadn't.

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Arts: Easter at Salzburg is changing its tune - The Wagner-and-verismo days are numbered Publication 930417FT Processed by FT 930417 By ANDREW CLARK

THE SHADOW of Herbert von Karajan may have been displaced from Salzburg last summer by the explosive impact of Gerard Mortier, but it still hangs heavy over the Easter Festival. This is the private festival Karajan founded in 1967 for himself and his rich friends and admirers. Unlike the publicly-funded summer event, which had an identity before and beyond him, Karajan was the Easter Festival. Its 3,800 Forderer (supporters) paid an annual fee of up to Pounds 800 to attend one opera performance and three concerts, after each of which the standing ovation was as precisely orchestrated as the music.

Since his death in 1989, the 'Karajan pilgrims' have continued to visit Salzburg at Easter to pay their respects. There is still an air of mourning - exemplified this year by two performances of Brahms' German Requiem, preceded by a minute's silence, with no applause at the end.

But the festival is finally being forced to look to the future and its long-term survival. Without Karajan, some festival-goers decided Salzburg was no longer worth supporting. Last year, the management had a nasty spat with the new regime at the Summer Festival, on whom it depends for co-production finance and set-building facilities. A power vacuum has developed.

The Easter Festival is still a limited company controlled by Karajan's heirs - his widow Eliette and their two daughters, who have shown no more than figure-head interest. The executor of the Karajan estate, the Swiss lawyer Werner Kupper, has a big say, but he is out of his depth in the arts. The festival administrator, Beate Burchhard, is not a strong personality in the Mortier mould. The artistic director for the past three years, Georg Solti, is a busy international conductor, not a native of Salzburg. The same can be said of his successor, Claudio Abbado, who shared this year's conducting workload.

But there is enough support - and reserve cash - to make plans, all of which suggests this Easter may have been a watershed. Next year Abbado will conduct Herbert Wernicke's new staging of Boris Godunov. There is talk of Wozzeck in 1995 with Bryn Terfel in the title role. The rift with Mortier has been patched up and an agreement signed for co-productions until 1997.

What matters now is the extent of Abbado's interest: whether he is willing to learn new operas (Lulu for example) and make the Easter Festival artistically, not just legally, independent of the Summer Festival. Whatever the outcome, the Berlin Philharmonic is eager to continue its 25-year association - conveniently so for Salzburg, because the orchestra's concert expenses are covered by the Berlin Senate. The Easter Festival's overwhelmingly conservative patrons may have to modify their traditional diet of Wagner-and-verismo, but at least the artistic standard will be maintained.

Salzburg at Easter has undoubted charm. The city is less crowded than in summer, the weather more temperate, and there is just one daily performance in the early evening, which helps to work up an appetite. Audiences may be uncritical, but at least there is an air of concentration. Karajan knew what he was doing.

This year's festival was a mixed success. In an all-Richard Strauss concert, Martha Argerich provided just the right blend of temperament and virtuosity to pull off the quirky Burleske, while Till Eulenspiegel found Abbado and the orchestra in superlative form. As for Solti, his endearing mannerisms and sheer energy at the age of 80 were fascinating - he has never really mellowed. But he and the Berlin Philharmonic inhabit different musical worlds. Given anything other than extremely quiet or lyrical music, Solti just drives through, an amalgam of nervous torso jerks, attacking downbeats and wrist-flicking tics. The orchestra's inbred tonal warmth, by contrast, softens the edges of everything it plays.

Last Saturday's programme of Beethoven's Second Symphony and Shostakovich's Fifth provided the stylistic battleground. The orchestra's strings won out in the slow movements of each, particularly in the meditative solemnity of the Shostakovich. But Solti refused to let the Beethoven breathe, and made the Shostakovich finale too triumphantly emphatic to hint at irony. Where orchestra and conductor did find common ground was in the Prelude and Liebestod from Tristan und Isolde, a perfectly-graded performance of breathtaking translucence, which crowned a star-studded charity concert for Bosnia on Easter Sunday.

The Berliners sounded less at home in the pit for Falstaff, this year's new opera production. Where Verdi calls for a nimble spring-in-the-step, they offered symphonic mass and less-than-sparkling ensemble. Their Vienna counterparts, who have the opera in their repertory, will probably make a better job when the production is revived in the summer. It was, nonetheless, a Falstaff of high musical values. This was the work which introduced Solti to Salzburg in 1937, as a 24-year old assistant to Toscanini - who had played cello in the premiere 100 years ago. Now the same age as Verdi was then, Solti paced the music with guileless ease, a master of its mercurial moods.

His cast included Luciana Serra's flirtatious Alice, Marjana Lipovsek's imposing Mrs Quickly and a delectable pair of lovers in Luca Canonici and Elizabeth Norberg-Schulz. Paolo Coni sang Ford with virile authority, while Kim Begley, Pierre Lefebvre and Mario Luperi made a well-contrasted trio of comic comprimarios. Jose van Dam's Falstaff was no buffoon, but a stubby, scruffy, cantankerous old terrier, capable of scuttling a Pistol twice his size, alternately outrageous, dignified and randy. The acting was all in the voice.

The staging was by Luca Ronconi, with designs by Margherita Palli and Vera Marzot. Like so many before them, they were seduced by the monumental breadth of the Grosses Festspielhaus stage, diluting the opera's intimate atmosphere in decor of architectural vastness. Some of Ronconi's ideas were distinctly odd: the Garter Inn resembled a bottling factory; Falstaff was tipped into the Fords' garden fish-pond; the last scene was a nonsensical Midsummer Night's Dream, with Falstaff's bedroom sprouting the foliage of Herne's Oak. If this was Ronconi's idea of fun, then for once the joke was on the producer.

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Books: Shades of the past Publication 930417FT Processed by FT 930417 By ELON SALMON

GHOSTS by John Banville Secker & Warburg Pounds 14.99, 244 pages

THE MUSEUM OF LOVE by Steve Weiner Bloomsbury Pounds 15.99, 214 pages

AIR AND FIRE by Rupert Thomson Bloomsbury Pounds 15.99, 311 pages

ODO'S HANGING by Peter Benson Hodder & Stoughton Pounds 14.99, 251 pages

ON AN island facing the Atlantic, the unnamed narrator of Ghosts serves out a personal penance for an unnamed crime. He has done his stint in jail; now he is working on a book in the shadow of the island's resident art historian and an irascible side-kick idiosyncratically named Licht.

Islands contain in narrower confines psychological as well as physical geographies. Hence their fascination for writers. They invite intrusion no less than metaphor. To this island, intrusion comes in the form of a disparate group of people to shake up the narrator's near arcadian existence, invoking unwelcome ghosts from his past. 'This is what happens to you in prison,' the narrator reflects, 'you lose your past, it is confiscated from you'. However, the past is richly retrieved in extensive inner monologues evoked by the narrator's interplay with the newcomers.

This is a strange novel of startling contrasts: a brooding gothic mood suffuses a pleasant pastel-tinted ambience. Ghosts is Banville's ninth novel. His originality has not deserted him. Much of the writing flows with a lyrical rhythm, and what a joy that is. Yet this is only half a commendation, for the full-bodied resonance of language obtrudes, exposing baldness of plot and some imperfectly-focused ideas.

By contrast, Steve Weiner's The Museum of Love is diamond-hard and lean. Its opening sentence is compelling: 'In August that year a Lutheran farmer named Ed Gien shot a social worker in the cranberry bogs.' From there on the hold on the reader is sustained to the end with hardly a let up.

The hero, Jean-Michel, is a French Canadian Catholic. His father, a prison warden, is depressive and violent. The young Jean-Michel hits the road, embarking on an odyssey whose arbitrary comic brutality recalls William Burroughs. Just about everything happens to him. His friends, his family, move in and out of his story like a parade of exotics in a circus. Jean-Michel is tough, resilient, totally without self-pity, and therefore engaging.

This is a first novel of astonishing power and accomplishment. The writing is superbly economical. Only a certain rawness of moral vision makes this novel a whisker short of being brilliant.

At the close of the 19th century, the setting for Air and Fire, a steamer makes its way to Santa Sofia, a remote copper-mining town in Mexico. On board is a French engineer Theophile Valence, with his beautiful young wife, Suzanne. His mission is to erect a metal church, whose 2,348 components are packed in the ship's hold. The project is the brainchild of Gustave Eiffel, with whom M. Valence corresponds. Ethereal and inexperienced, Suzanne yearns for the kind of romantic love her eminently rational husband is incapable of giving. Wilson, an American drifter can, so Suzanne believes, but won't. Montoya, the flamboyant local army commander, wants to but is rejected.

Rupert Thomson manages some marvellous writing here, in a style well-suited to the evocative, semi-fantastical landscape he creates. But the promise he skilfully upholds through more than half the novel, is never quite realised in the end: there is more Air than Fire to the story.

The Bayeux Tapestry propels the story of Peter Benson's charming novel. Turold, a master Norman designer of imposing stature and turbulent character, is commissioned by William the Conqueror's half-brother, Bishop Odo, to create the tapestry. Reluctantly, Turold sails for England with his dumb assistant Robert, the story's narrator. The 'real' story evolves side by side with that which the commissioned tapestry records for posterity. And it's a good one.

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Arts: Shaken and stirred by serial music - David Murray applauds the 'Alternative Vienna' mini-festival on the South Bank Publication 930417FT Processed by FT 930417 By DAVID MURRAY

ON THURSDAY the South Bank began one of its timeliest and best-planned mini-festivals, under the label 'Alternative Vienna'. That is a fairly sexy label: it suggests something subversive of Vienna's notorious conservatism about music - something brash and populist, and perhaps a bit tacky, as many cultivated Berliners found Kurt Weill's theatre-music in the 1930s.

There is some kinship. Yet an alternative label might have captured better why Kurt Schwertsik (born 1935) and HK Gruber (just turned 50) should have a mini-festival built around their music: 'The Viennese Alternative'. Far beyond Austria, many, many composers who were shaken and/or stirred by the potent ideals of serialism, in the 1950s and after, have ever since been seeking an Alternative like a Holy Grail.

On the one hand, serialism proposed a compositional means that could be both 'rigorous' and bracingly open-ended, with exciting room for development. On the other its lofty disdain for tonality - an omnipresent power no less in popular music (meaning the music we all grow up with) than in 'classical' - challenged new listeners with the test of learning the rules of an unfamiliar game. Only a few of them bothered to do that. Predictions that modern audiences would slip naturally into the right listening-mode proved over-optimistic by a very long way: between the general audience and an educated sub-set, a chasm has yawned.

It was a continuing embarrassment that the works of Alban Berg - only sometimes properly 'serial' and fraught with compromising tonal echoes - remained the sole public triumph of the New Music. Composers nowadays, like their colleagues in other arts, are acutely self-conscious about theory; there have been no good theories to accommodate both serialism, with its guiding premise about the 'democracy' of all 12 notes of the chromatic scale, and the bald fact that our ears hunt out tonally biased roots.

Yet there is an escape-route: which is to remember that every creditable theory about music - about any art] - follows practice, and does not precede it. The first thing to be said about the music of Schwertsik and Gruber is that it is directly engaging, sometimes hugely engaging, without trading upon familiar routines (except to contradict them). Continual surprises are essential to its charm, not least because in retrospect they seem to make perfect sense. These composers deploy elements of well-worn styles in unexpected orders, and a strictly up-to-date sensibility shines through.

They are close colleagues, but not twins. At the start of the 1960s, when Gruber had just retired from the Vienna Boys' Choir and taken up the double-bass, Schwertsik was a committed disciple of the Darmstadt school. With Friedrich Cerha he had already founded the ensemble die reihe ('the row', ie the Schoenbergian 12-note row, and by extension any new serialist methods) - a senior Continental equivalent of the London Sinfonietta. But doubts about communicability were setting in; Schwertsik was attracted by John Cage's musical anarchism, and he also became a friend of the young Cornelius Cardew, then a frustrated under-labourer on Stockhausen's arcanely elaborate scores.

While Cardew turned to writing for transparent popular appeal with a frank political message, Schwertsik published a manifesto inveighing against narrow serialist dogma. He had already produced the 'Violin Concerto' we heard on Thursday, really a five-piece suite of exquisitely dry, contrasted manners, all deeply quirky - weird little ensembles for accompaniments (but peculiarly telling), abrupt silences at unexpected places, the solo role bundled briskly from foreground to background and back again; but always, a limpid lyrical line.

The young Russian Sergej Stadler delivered it with all the right lusty innocence; Franz Welser-Most drew beautifully wry support from his London Philharmonic. It was appalling to hear them return after the interval to play Mahler's Symphony no. 9 so badly - ill-tuned, raw and rough - and to watch Welser-Most's extravagant windmilling achieve only a first movement that sounded like a kit of unassembled parts, middle movements of shrill crudity, and a heedlessly loud, vulgar finale. There must be more to the story; perhaps there had been some kind of cataclysm in the Green Room.

While Gruber played double-bass in die reihe, his music never travelled far. By the start of the 1980s, however, his 'pan-demonium' Frankenstein]] - a monster cabaret on gallows-humour verses, for himself as rampant chansonnier and a brittly twinkling orchestra (due here on April 27) - began to make the rounds of all the musical capitals. A first Violin Concerto soon confirmed that there was a unique Gruber idiom, besides a delectable sweet-and-sour sound (he loves vibes, marimbas, xylorimbas and glockenspiels), and that it was rich enough to nourish a substantial work.

His virtuoso Cello Concerto (April 24), commissioned by Yo Yo Ma, is a miracle of evasive wit and charm, a lovely gift to the repertoire. Londoners are still waiting to hear his intense, spidery, intimate Violin Concerto no. 2. What makes the Schwertsik-Gruber front a significant Viennese Alternative, and not just Alternative Viennese, is that they have found a musical diction that answers to ideals widely entertained, but scarcely realised anywhere else.

To be open and appealing to non-theoretical ears; to rise to succinct, complex expression nevertheless, escaping the constraints of popular Minimalism (a second-rate Alternative); to eschew stock routines and cosy pastiche, whilst acknowledging roots in the old musical basis - a lot of composers wish they could manage that] If you care about where 'modern' music might be going, you should go and hear some of this stuff. At the very least, which is already a lot, it will be fun.

Further 'Alternative Vienna' concerts tonight, April 17, 24, 26, 27, 28, 30 and May 6; details from South Bank Centre box-office

GB United Kingdom, EC P7922 Theatrical Producers and Services P7929 Entertainers and Entertainment Groups NEWS General News P7922 P7929 The Financial Times London Page XIX 998
Books: Deep in the soul of the American male - Fiction Publication 930417FT Processed by FT 930417 By STEPHEN AMIDON

WOLF by Jim Harrison Flamingo Pounds 4.99, 225 pages

A GOOD DAY TO DIE by Jim Harrison Flamingo Pounds 4.99, 176 pages

FARMER by Jim Harrison Flamingo Pounds 4.99, 160 pages

WARLOCK by Jim Harrison Flamingo Pounds 4.99, 262 pages

IN A time where courageous publishing decisions are thin on the ground, Flamingo's publication for the first time in the UK of four early novels by the grossly undervalued Jim Harrison deserves a standing ovation. Harrison is among the most accomplished American novelists of his generation, a raucous yet urbane storyteller whose books provide a useful map to the personal and national midlife crises that grip his country.

Wolf (1971), Harrison's first novel, tells the story of the frazzled and mercurial Swanson, a failed romantic of 33 years who returns to the wilds of his native Michigan after abortive attempts to find meaning in 1960s America. For five miserable, booze-free days, he fruitlessly tries to get a glimpse of the vanishing timberwolf before it becomes extinct. As he searches, he reflects on his own tenuous existence: drinking, wandering and engaging in a series of disastrous love affairs, all the while tortured by the notion that 'I don't want to live on earth but I want to live.'

Though thin on plot, the book is full of humour and anger. Swanson is the sort of left-handed rebel whose excesses and screw-ups stand more as a condemnation of his diseased culture than any personal shortcoming. He is a man in the throes of a spiritual hangover, blinking awake after a decade-long binge, gasping for a glimpse of something primitive and pure to make the pain go away.

This anger becomes increasingly focused in Harrison's second novel, A Good Day to Die (1973). Again, the hero is a dispossessed young man whose attempts at marriage and career have fizzled out. Lacking anything better to do, he teams up with a speed-addicted Vietnam vet and his redneck girlfriend in a crazed plot to blow up one of the many dams clotting America's west. 'It occurred to me I should question my motives but found that I had none,' the narrator confesses at one point. It is a taut, compelling story about people at war with themselves and their era, a howl of environmental outrage clothed in a fast-paced adventure story. Finely poised between farce and tragedy, it conveys the moral vacuity of Nixon's America with a rare fervour.

A different, quieter sort of energy fuels Farmer (1976), the story of a 42-year-old schoolteacher who has reached a Frostian crossroads in his life and has to choose which path to take. Joseph has just lost his job and must decide whether to begin working his ancestral farm or flee it to live near the ocean he loves without ever having seen. To complicate matters, he is engaged in two love affairs - one with a flighty student, the other with his widowed childhood sweetheart.

Harrison establishes these conflicts with a steady and subtle hand, evoking the sense of quiet dread that grips many men when they reach the middle point of their life. This crisis is examined more riotously in Warlock (1981), arguably Harrison's best book and undoubtedly his funniest. It tells the story of Johnny Lundgren, also 42, who loses his cushy job and sinks into morose self-absorption, jeopardising his marriage and waistline in the process.

He snaps out of it when a local millionaire hires him to straighten out his Byzantine personal and financial affairs. Lundgren turns into a cod private eye, travelling from the wilds of Northern Michigan to the equally dangerous mansions of Palm Beach in a series of increasingly hilarious adventures. It is as wildly raunchy as Farmer is understated, a book of high farce and low humour.

These four books, taken together, provide a fulsome portrait of the American male's soul every bit as incisive as Updike or Roth. Harrison is a writer whose ribald humour is balanced by a tight-lipped sensitivity, whose love of the rugged outdoors fails to mask the connoisseur of gourmet food and fine art.

But, in the end, what makes Harrison such a pleasure to read is the sheer inventiveness and grace of his prose. As he states in Wolf, 'An obtuse paragraph is always toxic.' Well, in these remarkable books the writing remains as toxin-free as Harrison's beloved Upper Peninsula must have been when the wolves were more common than that troublesome creature, modern man.

GB United Kingdom, EC P2731 Book Publishing TECH Products & Product use P2731 The Financial Times London Page XIX 780
Arts: Dance into a world of illusions / Review of 'Antic' Publication 930417FT Processed by FT 930417 By CLEMENT CRISP IN A programme note to his new Antic

given its first London showing on Thursday night at Sadler's Wells - Kim Brandstrup identifies what led him to make this danced version of Hamlet. Not narrative, but 'what lies behind the words'. This has also been Brandstrup's concern in such significant pieces as his Peer Gynt and The Dybbuk, and may be understood in Mysteries, his commentary on Duke Bluebeard's Castle.

Brandstrup's vision is refined, potent. His theatre is - thanks in part to what Karsavina called 'blessed poverty' - one where every effect is reduced to its mechanical or physical essence, and, like the dance, resonates with meaning. This is what I find so convincing about his work, and it is what makes Antic fascinating and powerful. As with Noh, or with the theatre dreamed of by Edward Gordon Craig, we enter a world of allusions, symbols. Appearances are essences; less is superbly more. And in Antic - as with his exquisite Orfeo for London Contemporary Dance - Brandstrup has looked to an earlier theatre form as frame for his choreography. (And he has been joined by the same magnificent Orfeo collaborators: Craig Givens for design; Ian Dearden for score; Tina MacHugh for lighting, who share Brandstrup's imaginative subtlety and economy).

Antic owes certain of its attitudes to the 17th century Trauerspiel of Northern Europe, a melange of sentiment and melodrama. Craig Givens sets the stage with grand simplicity by means of panels of almost spectral tapestry, with chairs, a table, the only properties. Costuming is of the period, sombre save for warm earthy shades for three actors in the play scene. The 'look' is austere, very beautiful. And Tina MacHugh lights this world with ideal sensitivity to every dramatic point. Ian Dearden's score mixes electronic and instrumental sound to provide music both atmospheric and sustaining of the action. Like the choreography, it adjusts exactly to the idea of a baroque style re-cast for today.

The choreography is that subtext Branstrup has discerned behind Shakespeare's words. Passions, motives, emotional unease, are exposed in dancing that is impressive in its perceptions as in its ability to explore feeling. We may identify incident and characterisation from the play - the closet scene; Polonius' death; Ophelia's madness - but more significantly, we are taken into the minds or memories of the characters, and see how obsessions repeat, how psychic wounds remain open, how Hamlet's sufferings hedge him in.

Images are everywhere sure, vivid: the mad Ophelia moving from one frozen pose to another; Hamlet circling the stage in a swirl of action that tells of his indecisions; Claudius arranging the seated Gertrude in a pose, as he has earlier placed Ophelia; Hamlet, at the last, held like a child on the shoulders of his ghost Father. Branstrup's theatre is compact of such memorable dynamics and such visual coups.

There are excellent performances from the ten members of Arc Dance: Jeremy James as Hamlet; Mark Ashman and Souli Yates as Claudius and Gertrude; Joanna O'Keeffe as Ophelia; Norman Douglas, Andrew Titcombe, David Scinto, Joy Constantinides, Daniel Belton, Patrick Mahoney. They provide ensemble playing of rare sensitivity.

Antic was made possible by sponsorship from the Stanley Thomas Johnson Foundation; Daniel Katz; the Leche Trust; the Mathilda and Terence Kennedy Charitable Trust. It is lamentable that Branstrup's company does not receive full funding from the Arts Council. I would urge Arc Dance to the attention of commercial sponsors: Brandstrup's serious and beautiful work stands in splendid contrast to the mediocrity and vulgarity that is so industriously promoted and bank-rolled as modern dance in this country by official bodies.

Antic receives its last performance tonight at Sadler's Wells Theatre

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page XVIII 650
Arts: Lille parades its artistic legacy - Patricia Morison visits the French at the National Publication 930417FT Processed by FT 930417 By PATRICIA MORISON

THREE magnificent paintings, David's 'Belisarius', Delacroix's 'Medea', and Courbet's 'Une Apres-dinee a Ornans', make a compelling case for a visit to Tradition and Revolution in French Art, 1700-1880 at the National Gallery. This exhibition is surely one of the most wide-ranging and informative surveys of French art to have been seen in Britain.

The exhibition comes from the Musee des Beaux-Arts in Lille, one of the best public collections in France. The museum opened in 1809, a few years after Napoleon had signed a decree permitting favoured towns to build museums at their own expense for works of art confiscated during the Revolution. The museum is now closed for rebuilding (reopening December 1994), and meanwhile parts of the collection have been sent abroad. It is a shrewd move, of a piece with Lille's commercial ambitions. The idea is that, once the Channel Tunnel is open, travellers crossing the mournful coastal reaches will flock to Lille as to a beacon of French culture.

Jacques-Louis David's 'Belisarius' of 1781 is a marvellous painting, noble and pathetic. The contrast is an affecting one, between the blind old warrior and the golden child who stands between his knees. Both gaze imploringly at the compassionate lady who drops a coin into the outstretched helmet. A stormy sky casts menacing shadows over Byzantine Constantinople, an omen of the divine displeasure incurred by Emperor Justinian when he had his great general blinded. The soldier with his hands raised in horror is not one of David's happier passages, but makes the point that a state which outrages the moral sense of its citizens cannot prosper.

Opposite 'Belisarius' hangs one of Delacroix's grimmest images, 'Medea', the fugitive poised to slit the throats of her two struggling infants. Sketches make clear how the artist wrestled to balance this complicated composition, drawn in essence (and perhaps with deliberate irony) from Andrea del Sarto's 'Charity'. A shadow across Medea's brow, missing in the oil sketch, is a masterly touch which shows that evil has entirely possessed this unnatural mother.

These two paintings could illustrate any textbook account of French art's progress from neo-classicism to romanticism. The third huge masterpiece, Courbet's 'Une Apres-dinee a Ornans' of 1848, represents the shocking arrival of realism on the scene. It is now a wreck because Courbet used bitumen and litharge, but thanks partly to restoration, the real thing turns out to be more legible than in reproduction.

After the preceding paintings, the shock is still palpable. Here is an artist who thought that his friends, unremarkable chaps relaxing after dinner with a smoke, a fiddle, and a bottle of wine, were a fit subject for a massive canvas. It was not at all the same thing as painting artists in a studio, a conventional subject here represented by Boilly's studies for his 'Studio of Isabey', part of an attractive group of paintings by this painter from Lille.

Courbet's scene is powerfully rustic and yet not the time-honoured depiction of peasants, as in Boilly's 'Mon pied-de-boeuf' and a queasy Millet of a mother spoon-feeding her children. A new kind of peasant painting was about to appear, solemn moments in village ritual. The famous example from Lille is Jules Breton's 'Procession to erect a Crucifix', itself based on Courbet's 'Burial at Ornans'.

And yet, so powerful is the mood conveyed by the 'Apres-dinee' that its underlying theme seems clear; the power of music over the senses. To be sure, it is a revolutionary painting in manner and technique, yet it is still rooted in a traditional subject. Such moments of realisation are many in an exhibition which fills a lot of gaps. The National Gallery's own collection of French art is patchy, even though the Wallace Collection compensates handsomely. However, Tradition and Revolution includes many unfamiliar artists who rarely find their place in textbook accounts of French art.

Unfortunately, the first room marks a dangerously low point with a feeble piece of mythological eroticism by Greuze and two laughable 'Combats between Minerva and Mars'. The first won Joseph-Benot Suve the 1771 Prix de Rome. The version by David is a terrible thing, so clumsily put together in boudoir shades of sky-blue and rose, that it seems incredible he ever achieved anything great. Most certainly that was not within the grasp of Jean Raoux, specialist in Vestal Virgins, by whom there are two truly terrible paintings of Virgins Ancient and Modern.

Frightful things also lurk in the later 19th century, such as Amaury-Duval's 'The Birth of Venus', and 'Achilles and Priam' by Bastien-Lepage, a painting so awful as to exert a mesmeric fascination. But there are many paintings to set against these, such as Gericault's 'Race of the Riderless Horses' and a glowing vase of flowers by Delacroix. Here, then, is a broad view of French art from Rococo to Impressionism (just, with two landscapes by Sisley and Lepine), as well as a powerful reminder that Lille vaut le voyage.

Exhibition closes July 11. late opening until 8 on Wednesdays

FR France, EC P8412 Museums and Art Galleries NEWS General News P8412 The Financial Times London Page XVIII 872
Arts: Cheek by Jowl - a tour de force / Michael Arditti talks to director Declan Donnellan Publication 930417FT Processed by FT 930417 By MICHAEL ARDITTI

WHEN Lysander and Demetrius stop jockeying for position and agree to pursue Helena 'cheek by jowl', they can little have guessed that their exit line would provide the name for the most successful theatre company of recent years. But then, what's in a name? In Brazil Cheek by Jowl are known as 'face to face', in Argentina 'elbow to elbow', in Uruguay 'shoulder to shoulder', in Spain 'flesh and nails' - and somewhere even 'arse in knickers.'

Few companies embodied the self-sufficient spirit of the 1980s more successfully - or more humanely. Frustrated by their inability to gain work from any established source, director Declan Donnellan and designer Nick Ormerod decided to mortgage their house and go it alone. They applied for a small Arts Council grant, patched together a nine-week tour and hit the road.

From the start the company established a reputation for exciting small-scale productions of the classics; although the size of the operation is often underestimated. As Donnellan says, 'it's only in London people talk of our studio work; elsewhere we perform in huge auditoria'. An accompanying reputation for irreverence is, in the director's view, equally unfounded: 'From where we are, we are middle of the road purists'.

After initial success with The Country Wife and Othello, it was their 1984 season of Vanity Fair, Pericles and Andromache which made their name with a metropolitan audience. The three productions exemplify the essential elements of the Cheek by Jowl approach - the narrative clarity and overt theatricality of Vanity Fair, with its heroic doubling by seven actors of 40 characters and inventive set in which boxes and banquettes became battlefields, boudoirs and ballrooms; the stylistic freedom of Pericles with its mime, music and direct address; and the rescue of Andromache from years of classroom tedium and theatrical neglect.

Their repertoire has remained resolutely classical: seven Shakespeares, two Restorations, one each of Calderon, Corneille, Racine, Ostrovsky, Sophocles and Lessing. In 12 years they have included only one new play, Donnellan's own examination of his Irish heritage, Lady Betty. And yet he explains that this neglect is utterly pragmatic: 'It's rather ridiculous that we're performing plays by people so incredibly dead. But the reason is that we don't have the means to evaluate new ones. We get masses and masses of scripts which we simply don't have a chance to read.'

It becomes increasingly clear that this pragmatism informs their whole operation. They never choose a play to score specific points, aesthetic or political, but rather to explore its meaning within a particular company. The main exception was in 1991 when they chose to examine the gender confusions of As You Like It with an all-male cast.

Their current production is Alfred de Musset's Don't Fool With Love, which reaches the Donmar Warehouse next week in Donnellan's own translation. He places it in the direct line of earlier revivals such as Andromache and Le Cid and its mix of styles fascinates him: 'It moves from an opening of commedia-type drunken priests to intense romantic duos which might have been written by Flaubert. It's a cross between Madame Bovary and opera buffo.'

Donnellan sees the keynote of his direction as the liberation of his actors' imaginations: 'to help them act better, to steer them on the path that is most truthful.' What is yet more unusual is that it is also the keynote of Ormerod's design. Not a sketch is committed to paper until he has worked with the company for at least two weeks. And, uniquely in contemporary British theatre, he remains present throughout rehearsals.

Such respect for their creativity is the reason that so many actors clamour to join Cheek by Jowl. The irony is that while both artistic directors consider it to be an actors' company, it is popularly perceived as a two-man band, existing solely to promote their own work. Only one production has ever been entrusted to an outsider, their former assistant Lindsay Posner. Certain actors do however remain constant; indeed it was the desire to create parts for company stalwart, Anne White, which led to two of their most contentious creations: the foul- mouthed female porter in Macbeth and the sex-changed King of Naples in The Tempest. But Donnellan insists that they never consciously try to be different. 'It may sound a paradox, but the truer you are to the play, the more original you will be. The more you try to put yourself in, the more you'll end up like everyone else.'

My own criticism would be less of such incidentals than of an emotional reserve. It is sometimes easier to admire the wit of a Cheek by Jowl production than to be fired by the passion. And, although Donnellan considers the greatest privilege of his work to be the poetry, his belief that poetry is what lies behind the words, rather than the words themselves, can lead to an underselling of the verse. Poetry is, famously, what gets lost in translation; to which Cheek by Jowl have been more susceptible than most. In ten years of intensive international touring, they have become our leading theatrical ambassadors. They played in Eastern Europe before the revolutions. In Prague they risked official displeasure by using a press conference to salute the imprisoned Vaclav Havel. In Bucharest their female King of Naples, seen here as Mrs Thatcher, was taken for the still more authoritarian Elena Ceaucescu.

Now that the cry of freedom has been heard, they stand at the forefront of cultural exchange with the new Romanian regime and next year will mount an epic production of Boris Godunov, first in Bucharest and then in Manchester, starring Ion Caramitru, who was that country's transitional vice-president and last seen here in the role of Hamlet. Only once have they been compromised by politics, when Macbeth was prevented from touring Chile for fear General Pinochet should see it as a reflection of his own career.

After twelve years on the road, 1650 performances, and a pervasive influence on the style of British classical production, its directors could be forgiven for sitting back on their laurels - or at least their Olivier awards. But they remain dedicated to touring and discount the alternative of running their own theatre as one where artistic considerations are submerged in those of patching up leaking roofs. And, although they have diversified with productions at the National such as Fuente Ovejuna, Angels in America and the forthcoming Sweeney Todd, their primary commitment to the company remains. It is a commitment as much personal as professional. For, if not as symbiotic as Gilbert and George, they are rarely apart. Indeed the key to their success lies in their total embodiment of their own ethos: living and working 'cheek by jowl'.

Don't Fool With Love: Donmar Warehouse from April 19 - May 15

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News PEOP People P7922 The Financial Times London Page XVIII 1183
Arts: Inside the United Nations - Radio Publication 930417FT Processed by FT 930417 By BA YOUNG

EASTER broadcasts began on Good Friday with Radio 1's Talk of the Devil, an anthology of evil, ranging from Paradise Lost to the bombing of Nagasaki, with music by Elizabeth Parker from the Radiophonic Workshop and readings by Dr Leslie Griffiths, the Rev Steve Chalke and DJ The Man Ezeke, a Restafarian. Michael Wakelin produced.

At the other end of the scale, Radio 4 has swapped its morning Bible slot for Something Understood, a collection of spiritual but not necessarily religious English verse. Donne, Herbert and the rest are there, of course, but so are many poems by modern writers. The selection of readers is as imaginative as the selection of writers. David Benedictus produces.

The Thin Blue Line, Radio 4's four-week series on the United Nations, produced by Anne Sloman and presented by James Naughtie, examines the internal work of the UN and its capacity in the field. The first programme (Thursday, repeated tomorrow) assessed the practical influence of Boutros-Ghali on the UN. 'The end of the cold war,' he says, 'means the democratisation of international relations, the new role of the United Nations'. Boutros-Ghali is one of those recorded, civil and military, not only on the 37th floor of the UN building in New York (where the Peacemaking and Peacekeeping Departments are), but in Zagreb, Cambodia and Cyprus, with occasional action-bites that emphasise the cleft between a decision and its realisation on the ground. The Canadians arguing with Serbs in Pankracs, the Royal Navy patrolling the Mekong River, the troops fighting boredom in Cyprus, these stress the gap between UN decisions and work in the field.

Naughtie can be an ace reporter on his various expeditions, and does not take sides - perhaps just as well. There is a written-in-advance feeling throughout that is a handicap in a current-affairs piece. Two days before the first programme went out, he had to report on the news that Prince Sadruddin Aga-Khan thought the Bosnian activities reflected 'the worst bungling since the end of the cold war', and that 'the moral foundations of the UN were at stake', thoughts much unlike Boutros-Ghali's, though rather like Lady Thatcher's.

The same disadvantage dogs Radio 4's six-part series Ice Cream to Eskimos, that began last Saturday. This scans the troubles of advertising agencies working on unpopular accounts, for the British Field Sports Association to popularise fox-hunting, for NACRO to promote the employment of ex-prisoners, and for CFW (Care for Family and Womanhood) against feminism and the employment of women. In this first programme, we had the easy answers - the fox is killed quickly; many ex-cons have no resources but valid skills; women's abilities are better suited to the home than the police or the armed forces.

Yet circumstances invade. Foxes, yes; but on Costing the Earth (Sunday, also Radio 4) we had the slaughter of pilot-whales by the Faroese, also regarded as a sport. Well, there are five more Saturdays for the arguments, which are matters of opinion, not the politics of The Thin Blue Line. In a fortnight we are to hear that the anti-feminism campaign has been relinquished, but no casualties are reported.

Less amusingly unwell than Jeffrey Bernard lately, I spent about ten hours with radio drama, of which I most enjoyed the start of Edith Wharton's The Age of Innocence (Radio 4, Wednesday). The 1920 world of New York snobs monitoring the progress of Newland (Andrew Wincott), newly engaged to sweet young May (Cathryn Harrison) but in danger from fast Ellen Olenska (Suzanne Bertish) is refreshingly unlike the romance of our own day, and Christopher Reason's adaptation should sustain the novel's excitement if all six parts are as good as this. David Hunter directs.

GB United Kingdom, EC P4832 Radio Broadcasting Stations P7922 Theatrical Producers and Services NEWS General News P4832 P7922 The Financial Times London Page XVIII 654
How To Spend It: Chanel . . . the name to whisper Publication 930417FT Processed by FT 930417 By LUCIA VAN DER POST

OF ALL the big brand names Chanel is the one that has attracted the greatest hoopla. In the late 1980s no fashion groupie went anywhere without her quilted bag, with its overlapping double C motif, declaring her allegiance to a special club. No-one was in doubt over the provenance of those chain-handled handbags, braided jackets, gilt and pearl earrings and - ultimate accolade of real cult status - an awareness of factories in Hong Kong, Korea and Taiwan which churned out copies.

But what was there for the chaps? Where were the cult accessories for him? Nowhere, so far as most of us knew. But lurking quietly on the shelves, all this time, have been Chanel's own versions of that ubiquitous power symbol - the motif tie. Every bit as well-made and desirable as other better-known labels, it has been a strangely well-kept secret. A few women who went to Chanel to shop for themselves noticed them and bought them. But, when it came to ties, for a man to think of Chanel was almost unheard of.

All that may change now that word is getting out. Chanel ties are recognisably in the familiar, traditional mood of the executive power-tie. Just as other purveyors of neckwear to the board-room set have moved into motif ties, so Chanel has its own offerings. This summer's motifs take in old-fashioned toys, drums, racing-cars (sketched above), hot-air balloons, as well as motifs from traditional English sports such as cricket, tennis and football. New silk knitted ties (one of which is sketched here) come in plains and stripes and sport the gold chain to keep them hanging straight just like the jackets.

There are also several club stripes but no spots. Prices start at Pounds 55 for the silk motif ties and the knitted versions are Pounds 45. There are a few, luxurious, expensive accessories all with essential Chanel touches - washbags (sketched below, Pounds 230), wallets, credit-card holders and the like.

All can be found at Chanel shops at 26 Old Bond Street, London W1 and 31 Sloane Street, London SW3.

Chanel GB United Kingdom, EC P2323 Men's and Boys' Neckwear NEWS General News P2323 The Financial Times London Page XVII 390
How To Spend It: The sweet smells of success - Lucia van der Post sniffs fragrances fit for the most discerning noses Publication 930417FT Processed by FT 930417 By LUCIA VAN DER POST

SOMETHING STRANGE has been happening to perfume. Where once public relations blurb used to wax lyrical about green notes and oriental essences, today the language has changed. The deconstructionists, having finished with clothes are moving in on perfume.

Listen to Japanese designer Issey Miyake, talking about his own perfume, L'Eau D'Issey, launched last year: 'For me the most beautiful perfume for a woman is water. Water is like a surge of energy: it has upward positive movement; spiritually it's more of a fountain than a trickle.' Well . . . er . . . perhaps. But wouldn't it just be easier to bottle some spring water and leave it at that?

Listen next to French designer, Jean-Paul Gaultier, darling of the French Haute Boheme, whose first bottled elixir goes on sale in Harrods this week: 'It's one part dusty loose powder, like my grandmother wore - I think it was old Coty; one part that smell you get when you are sitting in the front row of the theatre - for me I think of going to the Chatelet when I was 12 - and the curtain goes up, and the hot lights are on the costumes, wigs and sets, and you breathe it all in; and, just to be modern, one part nail polish remover.'

All very frank, very modern and very barrier-breaking but I cannot help wondering whatever happened to jasmine and ambergris, to musk and tuberose, to seductive nights and scented mornings, to romance and mystery ?

But, hark, what have we here? Jean-Paul Gaultier is on about eternity - you will, I am sure, remember eternity, that staple of PR perfume utterances. 'Why hasn't he thought about it (ie creating a perfume) before?' asks the blurb, 'For the sake of eternity,' comes the Delphic answer. Ah, but of course.

Instead of water, Bulgari has drawn on the 'ancient Oriental tea culture and the more profound sense of the rituals connected with it' for inspiration for its new perfume, Eau Parfumee, Cologne au The Vert.

For a text it has taken some lines from Lin Yutang, a contemporary Chinese writer: 'There is something in the essence of tea which guides one towards a world of serene contemplation of life'. So there is and Eau Parfumee looks as cool and green and serene as any Oriental tea ever did.

Kenzo has a more traditional source of inspiration - summer - for his latest perfume which is just about to be launched. Kenzo, it seems, loves summer. He sees it as a 'symbol of happiness, of openness to the world, of freedom without end . . . ' an 'invitation to the pleasures of living in rare communion with nature, celebrating the union of body, mind and sun.'

So Parfum D'Ete is 'A song to summer, his muse, his inspiration.' It 'dances like a sunbeam, softly caressing the skin with a warm and fragrant wind. Inside us, sun-filled, exhilarating pictures of summer come alive, transporting us away from today towards gold, eternal fields.' Goodness, I cannot wait.

Clearly, what we are seeing is a new mood in the traditional world of perfume and this extends beyond the conception and the smell to the design of the bottles.

Where once the talents of Baccarat and Lalique and great designers of the day combined to produce bottles of lavish seductiveness, today's bottles perfectly express the new mood in the world of perfume.

Issey Miyake's bottle, as befits the most intellectual of fashion designers, is strong, sculptural, simple and clean. It exudes an air of purity and strength. A slender, tapering, conical-shaped bottle (described as 'timeless - pure and flowing, just like water') of clear glass which allows the perfume to be seen is finished by a 'silver' conical top.

Jean-Paul Gaultier's is a joky, funky, pink torso of a woman. It may look absolutely 1990s but as new-age thoughts go this harks back to the 1930s and 1940s when many scent bottles, including a famous one by Schiaparelli, came woman-shaped. But, as Jean-Paul Gaultier puts it: 'As it is a fragrance for a woman it was obvious that the bottle ought to be woman shaped.'

The torso/bottle comes packaged in a slicked-up version of a tin-can which has a ring-pull opener. Gaultier admits that there is a certain perverseness at work here: 'Nobody before thought of a can as a classy packaging.' He simply took a pair of scissors and cut up a tin can which he gave to a jeweller to smooth down. The result, as Jean-Paul Gaultier must be satisfactorily aware, is indubitably different.

The Bulgari bottle is - like the tea ceremony - all serenity. Clean - lined, frosted glass reveals the cool pale green perfume and the classily simple silver top is etched with the Bulgari name. Classic, timeless, elegant.

As for Kenzo, summer has clearly set him (and co-designer Serge Mansau) off. We have a bottle of frosted glass shaped like a leaf with fine indentations of leaf-veins, which comes in an aquamarine blue box imprinted faintly with a sheaf of grasses bound with raffia.

Traditionalists can take heart, for all the new-age language, the talk of breaking barriers and the hint of iconoclasm behind the designs all four of these perfumes smell quite nice.

L'Eau d'Issey, for instance, is light, refined, and will never embarrass you by shouting too loudly. Gaultier is bright pink but is richer, more sensuous and could happily be worn to the grandest soiree. Bulgari smells of citrus and if you go on sniffing 'the green tea essence,' so runs the blurb, 'is slowly released to give one a truly refreshing feeling.'

As for Kenzo's oeuvre, it is hard to define: light but more floral than the others, it, too, has the inestimable merit of being nice and quiet and well-behaved. Not the sort that, like some of its transatlantic cousins, would knock out all other contenders in an olfactory contest.

Prices: L'Eau D'Issey, is Pounds 68 for 15 ml of the Extract, Pounds 32.50 for 50 ml of the Eau de Toilette Spray and there is a range of body lotions, creams, gels and soaps as well. Major stores and selected chemists and perfumeries.

Jean-Paul Gaultier, Pounds 90 for 30 ml of Extract, Pounds 32.50 for 50 ml of Eau de Toilette. Available for the next four weeks at Harrods and after at selected stores and perfumeries.

Bulgari's Eau Parfumee is Pounds 140 for 350 ml and is available exclusively in Bulgari's London shops at 172 New Bond Street and at Harvey Nichols, Sloane Street, London SW1.

Kenzo's Parfum D'Ete is Pounds 47.50 for 7.5 ml of Extract Natural Spray and Pounds 32 for 50 ml of Eau de Toilette. Available exclusively from Harrods from May 17.

GB United Kingdom, EC P2844 Toilet Preparations NEWS General News P2844 The Financial Times London Page XVII 1176
How To Spend It: Step out in style Publication 930417FT Processed by FT 930417 By LUCIA VAN DER POST

AS A RELIEF from all those teetering wedge and platform-heeled shoes that the fashion pundits would have us don this summer, I offer Keds as my contribution to foot welfare.

Keds have long been a cult shoe in the US, but in the UK they are only just beginning to be well-known.

Keds have lots of things going for them, not least is price. The most expensive versions - in soft Nubuck leather - are Pounds 39.95 a pair and the least expensive - the canvas and denim range - are just Pounds 19.95. At these sort of prices it is possible to build up a small collection to go with every outfit.

Apart from the price, Keds are also welcome because the range, leather and canvas alike, is completely machine-washable and machine dryable, too.

Informal, insouciant, practical and fun, canvas Keds are not the shoes to wear to formal functions but are great for wearing around the house or for doing the shopping or teaming with summer day-clothes.

The leather versions, which also have no heel, are slightly more formal in feel and could be teamed with the new, long skirts.

In the canvas range, the Champion Oxfords are in all the fashionable, useful colours such as black, grey, khaki, white, navy and red. Then there are also tartans and denims, plain and flowered patterns. For the really young and funky there are also glittery versions in bronze, gunmetal grey and silver.

There is also now a new finish which Keds calls 'Sandwashed Silk' though it is important to note that they are not made of silk - the name is derived from the fact that the finish is silk-like in feel.

These come in a range of colours (including summery colours such as pale green, butter yellow, navy and red) and cost Pounds 24.95 a pair.

The shoes are widely available at branches of Carvela and Russell & Bromley.

If anyone has any difficulty in tracking down a local stockist they could ring Shoon, the distributors, on 0458-834019 where Ruth Staple, who is in charge of Customer Service, will do her best to help.

Photographed above is a small selection from the canvas range.

GB United Kingdom, EC P3149 Footwear, Ex Rubber, NEC NEWS General News P3149 The Financial Times London Page XVII 403
Fashion: Never wear your Barbour to shop at Peter Jones - The rights and wrongs of rural attire / Dressing for the Professions, The Country Set Publication 930417FT Processed by FT 930417 By BRENDA POLAN

THE BRITISH have a greater nostalgia for a vanished rural past than any other nation. Dreams of Arcadia, Mother Nature, Merrie England, images and fantasies of rustic simplicity, bucolic innocence, sylvan peace and pastoral purity pervade UK art and literature. Immersed in an overwhelmingly urban culture, Britons all crave a slice of the country.

But where once their aspirations may have focused on the artless peasant plainness of the unaffected cottage with roses round the door, in recent years their focus has shifted upwards towards the manor house of the country gentleman. They yearn to be there in the setting of the PG Wodehouse caper, the Agatha Christie plot, the television dynastic saga. And so well have they been able to study its ambiance, its mores, its rituals and its clothes that they feel they know just how to fit in. Indeed, funded by the new riches of the 1980s, many tried. But many failed. And it was often their clothes that left them on the outside, peering in.

'Clothes in the country,' says Ewa Lewis, the social editor of Tatler magazine, 'are really all about suitability and practicality. It may look as if an arcane set of rules applies but, really, it is to do with the work of the countryside, the fact that life is inevitably led as much outdoors as in and that, therefore, you have rough terrain and real weather to deal with.

'So, looking wrong can happen in two ways. You can wear clothes which are unsuitable because they are impractical - leather jeans, spiky high heels, fabrics you can't wash the mud off - or because they are in the wrong mood: too formal, too glossy, too city-glamorous. You can also earn the derision of the country set by wearing what they see as working gear in the town.'

Nigel Hadden-Paton, born to the country, snorts in agreement: 'You could always tell a yuppie by the fact that he wore his Barbour for shopping at Peter Jones.' Bumble, his wife, adds: 'And by his white socks. And by his girlfriend's taste for stilettos worn with trousers - my pet hate.'

Barbara Daly - who, with husband Laurence Tarlo, is a transplanted townie - says: 'You instinctively go for the functional and relaxed, rotating your London wardrobe down to the country when it starts to date. The only time I have felt out of place is when I have worn a short skirt or a tight body or one of my sharp suits or something in the evening that is too sparkly, too revealing or too glam.'

Nigel and Bumble Hadden-Paton live at Rossway Park in Hertfordshire, a handsome Victorian house in 1,220 acres of which 620 acres are under the plough. Nigel is reducing this every year as he returns more of it to woodland and parkland in order to extend the game crop and his hospitality events business.

A former officer in the Blues and Royals, he says: 'When I left the army after 13 years and Bumble and I took over the estate, it seemed to me I had a choice. I could, at 35 and with two children, take myself off to agricultural college and learn to farm; or I could retain our farm manager, who knows exactly what he's doing, and find some way of being able to afford him.'

Using the house and park for conferences and corporate entertainment - a day's shooting is very good for bonding an executive team - proved the answer.

For the landed gentry, opening their doors to outsiders is, increasingly, the best way to retain a much-loved but expensive-to-maintain family home. It exploits gently that yearning for access which the rest of us share. Nigel's strong selling line in his small brochure is Rossway's 'feeling of calm and serenity which restore a sense of balance and perspective amid the pressure and hurly-burly of everyday life.'

It is not just a line, though. As you enter Rossway's tiled and pillared hall with its speadeagled tiger skin (the animal was shot by Nigel's father in 1956), glassy-eyed stags' heads and welcoming fire, you can almost hear the calls of house guests greeting each other in excited anticipation of a jolly weekend of rural sport, large meals, and many changes of clothes. It was a style of life with which the rest of the world has, retrospectively and thanks largely to movies and Ralph Lauren, fallen in love.

The grand English country house style reached its apogee in Edwardian times, due in large part to the expanding railway network bringing weekend guests 'down' quickly and comfortably and bearing them away again before they became boring.

It flourished through the 1920s and '30s and was maintained stalwartly through the 1950s and '60s with a smaller staff, fewer courses and warmer clothes. But it declined through the 1980s as mass entertaining became too expensive and difficult logistically because of the problems of getting domestic help.

'Of course,' says Bumble, 'it is still nice to have a party for the weekend and we still do it, but it is much more informal these days. In the summer, for instance, we usually have supper in the kitchen. Nor do you need an elaborate wardrobe. Or, in any sense, a 'correct' wardrobe. You just don't do all that changing any longer, and country people are much less husky-and-green wellingtons than they used to be.

'If we are dressing in the evening, it is more likely to be a half-change where the men wear a smoking jacket and trews with velvet or needlepoint slippers, and the women can pass in almost anything as long as they look as if they have made an effort.'

Running the house as a business has modified Bumble's wardrobe. 'I have to have some clothes which are smart in a country way. The wonderful thing about the past few years is designers like Paul Costelloe, Mulberry and Nicole Farhi who understand the country and produce excellent clothes which are sturdy, stylish and timeless. High fashion just does not look right.'

Nevertheless, much of her life with Nigel and their four children is lived out of doors. When not on hospitality duty, she tends to live in corduroy breeches.

'When we were clearing out the maids' rooms upstairs, I found a pair of coachman's breeches which fitted me perfectly. When I wanted a replacement, I asked Nigel's tailor, who quoted me Pounds 400 to make them. So, next time we went back to Cyprus - where we were once stationed - on holiday, I took them to Mr Osman in Nicosia who copied them perfectly. I have several pairs now.'

'Neither of us,' says Nigel, 'is really a jeans person. My working clothes are my holiest jersey, scruffiest boots and a Viyella shirt. My father always wore breeches, stockings, brown shoes, a shirt, a tie, a moleskin waistcoat, a tweed jacket and, if it rained, a Barbour. Even for tying the woods] Even when dealing with the clients, I tend to wear just a slightly smarter version of my workwear. That's politeness.

'It would be ridiculous for me to climb into a tweed suit just because I might think that's what they expected. We're not running a theme park, after all.'

Ewa Lewis says: 'If there is a point to dressing correctly for the country, it is under-dressing. And the level of conformity required varies from county to county. If you misjudge it in Gloucestershire, Berkshire or Hampshire, it is not going to be as noticeable as it would be in Lincolnshire.

'I have noticed, too, that while town imports may ape country work-wear during the day, they make no concessions in the evening. This means that, in their fashionable outfits, they tend rather to outshine the country ladies in their black velvet skirts and frilly white blouses.

'But I doubt if anybody really notices unless they have to be carried across the puddles from the Land-Rover because their shoes are non-functional. That's when you look silly.'

Lewis dismisses the widely-held belief that country folk like to affect scruffiness as an aspect of a cultivated eccentricity. 'The upper middle class squirearchy may, indeed, aim to look as battered as possible but, although most country people's kit may be old, it is always impeccably maintained.'

'The rule,' says Bumble Hadden-Paton, 'is no self-conscious dressing up. No wafting around like something out of a Ralph Lauren ad. Apart from that, you dress for practicality and to look as nice as possible.'

GB United Kingdom, EC P23 Apparel and Other Textile Products P56 Apparel and Accessory Stores NEWS General News P23 P56 The Financial Times London Page XVI 1481
Fishing: Mayfly make me mad - Tom Fort thinks you can have too much of a good thing Publication 930417FT Processed by FT 930417 By TOM FORT

IN MY dry fly apprenticeship, I displayed all the characteristic intolerance of youth towards the mayfly. On the stretch of the upper Kennet which I then fished, the insect did not appear. Nor would it have been in the least bit welcome if it had. We much preferred our modest hatches of well mannered olives and delicate pale wateries. Our view of the mayfly carnival was akin to that of monks hearing reports of Roman orgies.

I no longer fish the upper Kennet, so crystalline and lovely in those days, before it was stricken by drought. I have moved down river, to a fishery on which the mayfly hatches in abundance. And my snooty attitude towards it has been necessarily modified.

A good deal of the old prejudice does survive. I cannot help thinking that there is something gross and undignified about the mayfly season, which is an affront to notions of fly fishing as the most refined and graceful of pastimes.

Partly, it is the behaviour of the fish. We like to think of trout as reasonably discriminating creatures, which help themselves in moderation at Nature's table, and examine our imitations with a critical eye. But all this goes out of the window with the arrival of ephemera danica. Gluttony and piggishness rule in the frenzy to swallow as many of these fat, luscious titbits as possible. Our chalkstream trout become like schoolboys who find the tuckshop left unlocked.

The scale of the hatch is also over the top, provoking excess succeeded by biliousness and torpor. The fish, stuffed to their gills, circle dyspeptically to the bottom, contemptuous of anything as puny as a trickle of olives.

'If only', one exclaims irritably as one surveys the unbroken surface in early July, 'if only Nature would organise matters more sensibly. Why could not the mayfly be supplied little and often, rather than in one colossal binge?'

A hatch of fly should be an unassuming affair. It should not blot out the sun, obscure the meadow, form a hovering cloud over the river. The fisherman does not really wish to have huge insects settling on his ears, festooning his hat, creeping across the lenses of his spectacles. Nor, if he has any sensibility, does he care to see his favourite river transformed into the aquatic equivalent of the classic French film about gastronomic frenzy, La Grande Bouffe.

I am, of course, overstating my case. The scenes of abandon I have described are hardly the norm. And when they do occur, they tend to involve fisheries recently stocked with large numbers of greedy, simple-minded trout whose ingrained instincts of caution and common sense are nullified by the transfer from stewpond to river. There was, for instance, a day on the Test last year, when the water heaved and a discarded toenail would have brought a rise.

On stillwaters, the mayfly hatch is likely to be as maddening as any other. I am thinking of the great Irish lakes, such as Corrib, where more often than not the surging hope which attends the start of the mayfly day is transformed into despair by the time a fishless evening is reached.

I am also quite unjustifiably blackening the reputation of the insect itself. It is a lovely and fascinating creature, and I am well aware that its appearance is one of the wonders of the angler's year. Who am I to denigrate it, and the sport in inspires in these harsh times?

What, above all, quickens the heart about the mayfly season is the matter of BIG fish. It is the time par excellence when the disciplined angler can put aside thoughts of quantity and may reasonably pursue the dream of the monster. It is the time at which the five and six pounders which one has been told exist actually offer proof of the fact. It is a time for putting oneself to the test.

I confess now that I have done so - and I have failed. The memory of the episode is still painful, but they say that self exposure is part of the healing process, so I shall relate the tale.

There is a sidestream which leaves the lower Kennet by some hatches and rejoins it some distance downstream. On its meandering journey it is connected to a lake, which a few years ago was home to a few, very large, wild brown trout. In the mysterious way of the mayfly, it hatched on the stream but not on the lake. So, when the hatch was at its height, the leviathans would move into the stream to feast.

I spotted one feeding beneath a tangled gorse bush. There were sucking sounds and ripples of a character calculated to promote panic and incompetence.

The luxuriance of the surrounding vegetation made normal casting impossible. On my knees, I thrust the end of my rod through the thicket, and lowered a French partridge on to the water. It travelled slowly into the monster's lair, and there was a noise like a wet kiss. I tightened, and thereafter the drama was played out at paralysing speed.

The fish went upstream, turned, headed past me, dived, broke me; and I never even got off my knees. Trembling and panting, like a mountaineer at high altitude, I stumbled away.

A little later, I bumped into the keeper and recounted the terrible story. He endeavoured to console me by telling me that he had seen this fish, or enough of it, to estimate its weight at eight pounds. He did not think it it was possible to land such a creature in such a spot.

I am a few years older now, and I still have not caught a chalkstream trout half the size of the one I lost that afternoon. But the giants are still there, which is why, come the end of the month, I shall be prowling the river bank, apologising to mayfly and trout for having been so rude about them, and hoping against hope for a chance to make amends.

GB United Kingdom, EC P0971 Hunting, Trapping, Game Propagation NEWS General News P0971 The Financial Times London Page XV 1053
Brazil goes nuts for a new king: Christina Lamb meets three 'royals' as the country votes on whether to restore the monarchy Publication 930417FT Processed by FT 930417 By CHRISTINA LAMB

AN EIGHTY-year-old man with caterpillar eyebrows, bushy moustache and a floppy felt hat, living in a candy pink and white palace in the mountains above Rio de Janeiro and speaking Portuguese with a thick French accent, Dom Pedro Gastao de Orleans e Braganca seems an unlikely threat to the Brazilian republic. But the great grandson of the country's last emperor, together with a radical right-wing recluse and a former surfer, is one of three eccentric candidates campaigning for Brazilians to vote for the restoration of the monarchy in a bizarre plebiscite on Wednesday.

Dismissed by most politicians as 'maluco' or crazy, the so-called 'royal option' is drawing astonishing support from Brazilians fed up with a presidential republic which has left Latin America's biggest country with the world's worst income distribution, 1,500 per cent annual inflation and rampant corruption.

Only one elected president has completed a mandate in the past 65 years, the rest opting out through suicide or resignation, dying before taking office, forced out by military coups or impeached, as in the case of the last President Fernando Collor. By contrast, the 67-year-long monarchy, cut short in 1889, is regarded as a golden era of stability and glory.

After a century of prohibition of monarchist politics, tell-tale gold crown lapel pins are being sported by public figures as diverse as Paulo Protasio, the head of Rio's Chamber of Commerce, Mario Henrique Simonsen, a conservative former finance minister, Sandra de Sa, a left-wing folk singer and Dona Neuma, the first lady of Rio's oldest samba school.

'It's a natural choice for a country where social groups and events such as carnival always use 'king' to refer to something good and dignified,' says Roberto da Matta, one of Brazil's best-known sociologists and himself a monarchist. But the chances of Brazil reverting to its ancient title of kingdom are being weakened by a split in the House of Braganca, the Brazilian royal family. At the last count, there are a dozen imperial relatives with claims on the throne and little in common except for the Braganca name and bright blue eyes.

Of the three leading contenders, Dom Pedro is the most senior member of the family and most direct descendant of the last emperor, Dom Pedro II. He divides his time between Seville in Spain and Brazil's royal winter capital of Petropolis, where he lives surrounded by oil paintings of his ancestors in a palace that used to be the emperor's guest house. Riding horseback along the cobbled streets, where he has long been a tourist attraction, Dom Pedro is also a popular figure among locals, who shout 'Long live the king]' as he passes.

'It is not that I am asking to be king but if it is my duty to save my people then I will,' says Dom Pedro, in between complaining about the difficulty of finding blacksmiths to shoe his English thoroughbred. Stressing that 'a monarch should protect his people against the government,' Dom Pedro refers to his nephew, Spain's King Juan Carlos, as providing who an 'extraordinary example'.

Dom Pedro denies that monarchy would be a step back, asking: 'Is there a greater example of modernity than Japan, one of the most traditional monarchies in the world?' But his claim is jeopardised by the fact that his father renounced his rights to the then-defunct throne in 1908 in order to marry a Czech countess of non-royal lineage.

His most serious rival is his cousin, 54-year-old Dom Luiz, whom Dom Pedro describes as 'a crazy fanatic who thinks going to the beach is a sin.' The oldest of 12 brothers, Dom Luiz is a member of a right-wing militant group called Tradition, Family, Property, which allegedly lit candles in support of military dictatorships in the 1960s and '70s.

Although he ventures rarely from his modest apartment in Sao Paulo, Dom Luiz promises to break his vow of chastity and marry 'if it is necessary to produce heirs.' His eloquent lawyer brother, Dom Bertrand, who acts as his spokesman, says: 'The republic has brought nothing but political chaos and economic decadence. Under the monarchy, we were a first-world country with the world's second telephone and postage systems.'

He claims that monarchy would be a cheap option for Brazil, and says: 'The running of (Britain's) Buckingham Palace costs only 20 per cent of Brazil's presidential palace running costs.'

The most active candidate is 38-year-old Dom Joao Henrique, Dom Pedro's favourite nephew. Known as Little Prince Johnny, the glamorous former beach bum has swapped his surfing gear for European suits, and riding the waves of Bali for a hectic programme of talk shows and speeches. A regular figure in Rio's social columns, Dom Joao runs a hotel, the prince's guesthouse, and is a leading environmental photographer.

Surrounded by royal memorabilia in his rented sea-front flat, where ancient leather-bound tomes jostle with modern art and jazz books, Dom Joao argues: 'The system is totally rotten. Even if you put an honest man in the presidency, it will not work because the president is elected and prisoner of political parties and economic interest groups. A king, by contrast, is impartial.'

He adds: 'Restoring the monarchy will not achieve immediate miracles, such as reducing inflation or making food appear in the mouths of the hungry millions, but at least it would give stabilisation.'

Were the royal option to prevail in the plebiscite, it would be left to the nation's congress to decide on who should be crowned - and it is there that Dom Joao's chance lies. Several political parties have already asked him to run for senator or congressman. But the mere fact that a big industrial country should, in the 1990s, even be contemplating restoring a monarchy that was unseated more than a century ago reflects tremendous disillusion with the present system.

Public disgruntlement has increased in recent months as those named in the Collorgate corruption scandal continue to stay free to enjoy their wealth, Meanwhile, the new president, Itamar Franco, has got through a record three finance ministers in six months.

With so many other problems to tackle, and a largely illiterate population, the farcical nature of the plebiscite was highlighted by an poll last week which found that 52 per cent of those questioned did not understand what they were voting for. Apart from choosing between monarchy and republicanism, Brazil's 90m voters must also decide between parliamentarianism and presidentialism, begging the question of what would happen if they vote for both presidentialism and monarchy. The level of confusion is illustrated by Marcia, the cleaner of the Financial Times' Brazil office, who says: 'I am going to vote for the king as president.'

BR Brazil, South America P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page XV 1158
Jeepers - how about those creepers?: Stuart Marshall gets dirty, just like the settlers of old, taking the Rubicon Trail Publication 930417FT Processed by FT 930417 By STUART MARSHALL

THE WOMAN in red perched on the rocky outcrop like an overweight Lorelei. Before her, a seemingly endless line of four-wheel drive vehicles taking part in the Jeepers' Jamboree inched their way laboriously up a smooth granite slope as steep as the roof of a house.

'Jeeping,' she remarked, in one of those turbocharged American voices that can be heard in the next county, 'is creeping, and walking is quicker.'

She was absolutely right.

The fastest way of covering the worst 15 miles of the Rubicon Trail would certainly be on foot. 'Jeepers' is the generic term for people who rough-ride for pleasure in four-wheel drive vehicles that are mostly, but not exclusively, Jeeps. The Rubicon Trail is to Jeepers what Cowes is to yachtsmen or Wimbledon to tennis players. It starts at Georgetown, California, and goes east to the shore of Lake Tahoe, rising to just over 7,100 ft (2,185 m) at its highest point.

It begins innocuously because much of the 71 miles (114 kms) is on paved country roads. The going gets difficult enough for four-wheel drive to be desirable at Loon Lake, which is only eight miles - but four hours driving - from Rubicon Springs. A few hundred yards further on and four-wheel drive is essential.

The Oxford Dictionary defines a trail as 'a path or track worn by the passage of persons travelling in a wild or uninhabited region'. That sums it up perfectly. The region through which the Rubicon Trail passes is wild. You may spot brown bears if you are lucky, though all I saw were dozens of paw marks in the mud. It is also uninhabited and consequently quite unspoiled. Commercial logging is out of the question. The tall pines that find living space between the granite masses grow, die and and rot where they have fallen.

It was Indian country before white men first went in with packhorses in 1844. Later, engineers dreamed of a wooden tunnel to pipe water from Lake Tahoe (altitude 6,229 ft, or 1,917 metres) to San Francisco, 200 miles (334 kms) away. It came to nothing.

When mineral water was found at Rubicon Springs in the 1880s, health freaks beat a path there. Wagon loads of timber were eventually hauled in to build a hotel which operated until the 1920s. Guests arrived first by coach-and-four and later by 10-passenger Pierce Arrow motor car.

Even though the trail was then regularly maintained, it must have been an appalling journey. Perhaps that was why the hotel failed in the 1920s. Years later, the building collapsed under heavy snows. There is now no sign it was ever there.

The Rubicon Trail reverted to the wild. Snow shuts it from November to June and the thaw brings floods which wash down new rock piles and create fresh mudholes. Every year, the lie of the land as seen by a Jeeper changes. When I joined the Jeepers' Jamboree and drove the Rubicon in an open Jeep Wrangler, windscreen folded on the bonnet, much of the trail was like the bed of a mountain torrent. Which, of course, in winter is what it is.

It was the 40th Anniversary Jamboree last year. More than 1,500 people from across the US had converged there, driving and riding in 500 vehicles. It is rated the most difficult American off-road event open to all comers. There are no prizes. Simply to get into Rubicon Springs, camp overnight, enjoy a noisy and uninhibited party and get out again with the vehicle in one piece is reckoned to be reward enough.

Half a ton of New York steaks, sufficient beer to stock a large pub, a generator-powered sound system and, because this is the US, a grand piano had been airlifted in, slung in nets under a helicopter. Every piece of litter that could not be burned on a huge bonfire was picked up and carted out again. Part of the Jeepers' code is to leave the wilderness as they find it.

That night, as I crawled filthy and unwashed into a pup tent, I had a thought. If the hotel had still been there, it could have made a fortune selling hot showers at whatever price it cared to name. As it was, staying dirty seemed the lesser of two evils. The only way to clean up was to clamber down to a cold, snake-infested river.

Recreational off-road driving is really the mechanised equivalent of trail riding on horseback. The Rubicon Trail is its pinnacle but at four-wheel driving's broad base, thousands of American families climb aboard their vehicles every year and head for the wilder areas of their vast country. Some go on their own, others in convoy with a few other vehicles. They take tents, sleeping bags, plenty of food and water, petrol and oil. Plus, if they are wise, essential spare parts, some tools, a jack, an axe, shovel, towrope and CB radio.

But is going cross country on four wheels the soft option?

Compared with hiking or mountain biking - and I saw people doing both - I suppose it is. As for riding the Rubicon, I would not have risked a half-decent horse on the harsh, boulder-strewn terrain. I could see no signs of anyone having done so.

Driving a Jeep has to be less physically taxing than using muscle power but it certainly is not easy. A week afterwards bruises traced the seatbelt's line across my body. The technique of driving across country as rough as the worst parts of the Rubicon Trail is to do everything very slowly indeed. If you tried to go quickly, you would smash the vehicle, an ugly prospect in a remote area.

In four-wheel drive with the transmission in low range, a Jeep Wrangler's 4-litre engine has power enough at tickover to let it clamber over rocks the size of cabin trunks. If a boulder looks surmountable, you drive the Jeep's wheels over it. Never let the rock get under the vehicle. If you do, the axles ride up and you are stranded, wheels spinning in the air.

Defiles of V-shape with a floor narrower than the Jeep's track are driven through with the sidewalls of the tyres wedged against the rock. It is cruel treatment for a tyre but the oversized Goodyear radials took it in their stride, as they did everything else.

The Jeep Wrangler I used had automatic transmission which meant ignoring a cardinal rule of off-roading. This is to keep your foot off the brake pedal when going downhill and let the drag of the engine, equally distributed to all four wheels by the transmission, control your speed.

But automatics, unlike 4x4s with manual gearboxes, tend to run away even when locked in low-range first gear so now and again slight braking was essential. It worked on the ultra-rough but basically grippy rock but would have been a recipe for disaster on the muddy hillsides European four-wheel drivers are used to.

The Jeep, I am glad to say, is well protected underneath. However carefully I drove there was the odd crash and bang as the steel plates armouring the engine and transmission came into contact with boulders. But nothing broke. None of the 20-strong British team had any mechanical mishaps or, even more remarkably, any tyre trouble.

Four-wheel driving in wild areas is a potentially controversial activity. In the Lake Tahoe area, the authorities and local people take a generally tolerant view. But not all approve. One of the toughest and roughest sections of the traditional Rubicon route was out of action last year.

Militant objectors had used explosives to bring down tons of rocks and block the trail. The alternative route, though, could not have been much less testing than the original.

The Forest Service of the US Department of Agriculture insists on managing off-road driving and has authorised the use of off-highway vehicles (OHVs) only on certain listed trails, the Rubicon included.

It lays down a number of conditions which it says must be observed if the sport-cum-recreation is to have a future. This says: Tread only where motorised vehicles are permitted; Respect the rights of others to enjoy their activities undisturbed; Educate yourself on OHV rules and regulations; Avoid meadows, wildlife, livestock and private property; Drive responsibly to protect the environment and preserve opportunities to drive on public land.

It was all very different 40 years ago when Mark A Smith organised the first Jeepers' Jamboree. Then, more or less anything went. But, as the sport became more popular and numbers of vehicles increased, so did an awareness that the environment was fragile and had to be protected.

Smith stepped down as 'Jeepmaster' after last year's Jamboree but says he will retire from four-wheel driving 'probably when I die.' Now into his late sixties, he looks as rugged as the Jeeps he loves, and good for many years of off-road driving to come.

If the participants in the 1992 Rubicon Trail Jamboree were anything to go by, Jeeping is a sport that mainly attracts the middle aged and over. Most couples in their 20s and 30s are probably too busy bringing up families to go four-wheel driving into the wild blue yonder. In any case, a wilderness is hardly the place to take young children.

But when the call to that great off-road driving course in the sky finally comes, several Jeepers have chosen to be laid to rest in the land they loved to bang and crash about over.

What look like their graves (actually, it is where their ashes were scattered) can be seen at one side of the Rubicon Trail. Headgear ranging from baseball hats to Stetsons was doffed by last year's participants as they lurched by, already dreaming of this year's event.

US United States of America P3711 Motor Vehicles and Car Bodies NEWS General News P3711 The Financial Times London Page XV 1679
Property: Shute first and worry later - Cadogan's Place Publication 930417FT Processed by FT 930417

SHUTE HOUSE near Shaftesbury, Dorset, is somewhere I could move at once. Mainly Georgian, it combines rural relaxation with urban sophistication and has an unusual sense of the garden coming right inside.

Step outside and you see what a garden it is - one of the greatest of the 20th century in England. Sir Geoffrey Jellicoe designed it to be an integral part of the countryside. Thanks to having the river Nadder rise there, he achieved a rare harmony by creating a spectacular set of ponds, canals and streams.

Everywhere, you hear the sound of running water. In the main water garden, designed like Moghul gardens in India, the small falls make different tones as the water runs through. The ponds reflect plantings that survive only if they delight the eye - the camellias are a joy. It is an architectural garden, using statues, earthenware jars and topiary in box and yew to reinforce a magical blend of man and nature. If I had Pounds 1.25m, I would call Savills (0722-320 422) right away.

Halkin Gate House off Belgrave Square, London SW1, is totally urban and provides a chance to peep into the life of the super-rich. Two town cottages with a grand facade have become a splendid house of impressive workmanship. A new second floor holds a huge master bedroom suite, with the shower tucked into the angle of the roof, and the basement has been dug out to take a swimming pool large enough for doing proper lengths. De Groot Collis (071-235 8090) offers the house at over Pounds 6.5m for a lease ending on Christmas Day 2050.

The Property Misdescriptions Act has now been in force for two weeks and already it has caused a fine stir among agents who are having to tone down their purple prose and be as quick to mention minuses - the disco next door or the motorway at the bottom of the garden - as they always have been with the pluses. False or misleading statements can lead to Pounds 5,000 fines.

It is far too early to see how the act will work and what attitudes local trading standards officers will take. But it should inhibit rogue agents and help buyers by letting them know the snags before they make long journeys to inspect properties. Reputable firms have little to fear, provided they can show they have acted with due diligence. In the longer run, though, sales particulars may reduce to little more than a list of rooms and their sizes, and the make of the boiler.

Owners should not throw away receipts for improvements, repairs or maintenance (including for leaseholders' service charges or rent for common gardens or tennis court) as the estate agents may ask to see them one day if you decide to sell.

Easter marked the start of the season for visiting stately homes. A useful guide to what is open and when - covering houses anywhere from Bantry, Co. Cork, Ireland, via Spencer House, London SW1, to the Queen's at Sandringham, Norfolk - is the Historic House Directory 1993 (Pounds 7.95) prepared by Norman Hudson of the Historic Houses Association. Its information includes advice for couriers and coach drivers, which will help those organising groups: Sudeley Castle in Gloucestershire, for instance, lays on meal vouchers, a rest room and television for drivers. The directory also lists properties where you can stay as a paying guest, those that are now hotels, and houses that can manage corporate entertaining and other special events.

GB United Kingdom, EC P6514 Dwelling Operators, Ex Apartments P7999 Amusement and Recreation, NEC NEWS General News P6514 P7999 The Financial Times London Page XIII 625
Property: Suddenly, life on the farm is attractive again - Gerald Cadogan discovers that the economic clouds over agriculture now have some silver linings Publication 930417FT Processed by FT 930417 By GERALD CADOGAN BLACK Wednesday

September 16 1992 - brought UK farmers an unexpected bonanza. Sterling's fall against the European Currency Unit (Ecu) brought them windfall gains in the 'green pounds' which are paid by the European Community under the Common Agricultural Policy for farm support and premiums.

Then there was the low price of land (down 60 per cent in real terms over the past 13 years, says estate agent Savills), halved interest rates, and a realisation of just how generous were last year's changes in inheritance tax (IHT) relief for farms. Suddenly, agriculture was looking attractive again.

Farm land now costs roughly Pounds 1,000-1,500 an acre (with the best silt land up to Pounds 2,500). The farmer receives the newly-enhanced payments for what he produces and can benefit from other money-generating schemes. He might, for instance, 'set aside' 15 per cent of his arable acreage and receive around Pounds 106 an acre a year, the precise amount depending on the Ecu exchange rate. (He must, however, rotate that 15 per cent and, sooner or later, will have to set aside his best land).

Among other spurs, the government's farm woodland schemes pay well and encourage planting broad-leaved trees rather than conifers. There is even a Hedgerow Incentive Scheme which, ironically, pays Pounds 1.50-2.50 a metre for replacing hedges when, 20 years ago, farmers got grants to take them out. And the interest rate cuts - provided they are maintained for a long time - are a big help, as farmers rely on overdrafts to smooth their seasonal business.

As for IHT, the 1992 Budget brought 100 per cent relief for farms in hand if they have been occupied for two years. (For tenanted farms, the relief is 50 per cent). It is hard to think of a greater stimulus, especially as using contractors to do the work still counts as farming in hand. Businessmen considering farming will welcome this arrangement. So will working farmers thinking of retirement; they can pay someone else to do the slog without IHT worries.

That there was any farm market at all last year is significant. Strutt & Parker, for instance, bought and sold 67,000 acres in 144 transactions. The sellers had had enough of high interest rates and the struggle to make a profit. Most of the buyers were other farmers, often those who had pulled out of the market in the 1980s (when businessmen channelling money into farms pushed up the prices) and saw a chance to round off their holdings while land was cheap and they had some money. Indeed, farmers who have survived the past two years have done well; the Ministry of Agriculture estimates that their incomes rose 24 per cent in 1992.

Buying land still looks attractive, and prices have hardly gone up. Why? James Laing, of Strutt & Parker, explains: 'There is uncertainty ahead, including what will happen when the green pound is re-set in July.' He has just sold all but one in a portfolio of nine farms around the country for Refuge Assurance, which regards them now as non-core investments. But the green pound might not suffer that much, although the sceptical are hedging against the Ecu or selling their crops forward to lock into present rates. Nicholas Leeming, of Humberts, points out: 'The farming lobbies of France and Germany are pretty vociferous. Levels will be set to suit them.' That will suit UK farmers equally.

A substantial increase in land prices is unlikely unless supply cannot match the increasing demand. And although there are potential long-term bear factors - such as a rise in Hungarian cereal production, forecast by Savills' Bertie Ross - the future looks rosier than for a long time. Laing suggests that a businessman wanting to invest should probably go for an arable acreage because it is 'simpler and less risk.'

Farms are available everywhere, with prices that include the farmhouse and outbuildings (although there is a shortage of large estates). And some make money from activities other than simple agriculture. Newton farm in Fife, Scotland, is one such. Close to St Andrews and Leuchars station for Edinburgh and London, and on offer from Strutt & Parker in Edinburgh at over Pounds 500,000 for the main farm of 494 acres, it has a clay pigeon shoot, an off-road driving course for 4 X 4 enthusiasts (Pounds 12 an hour), and a trout loch that produced Pounds 38,600 in 1992.

Cardwell farm, near Holbeach in Lincolnshire, grows cereals and vegetables on grade one silt land three miles south of The Wash. It is so productive that it does not need ancillary businesses and Savills offers its 990 acres as a whole for Pounds 2.3m, or in 10 lots. The same agent is selling a let estate of 599 acres at Bishopsthorpe, near Grimsby, for over Pounds 450,000. This comprises the more usual grade two and three land and produces rent of Pounds 29,315 a year.

In rich country near Evesham, Gloucestershire, Hoden farm is just 194 acres of arable (although formerly a dairy unit). Charles R. Phillips is looking for around Pounds 300,000. Firs farm at Farnborough, near Banbury, Oxfordshire, is a 211-acre mixed operation on offer through Howkins & Harrison for around Pounds 500,000.

Just on the market - for the first time in 60 years - is Snitterfield fruit farm near Stratford-upon-Avon with 162 acres, 85 of them orchards and 16 for pick-your-own soft fruit. Four cold stores holding 50 tonnes apiece keep the produce fresh. The farm has been split into lots but the total guide price is around Pounds 580,000 (from Knight Frank & Rutley).

In Powys, Wales Phillips is selling Bron-Rhydd, in the hills near Llanwrtyd Wells, for Pounds 450-500,000. It has 530 acres for sheep and cattle. In south-west England, Strutt & Parker in Exeter offers Stream farm at Broomfield, near Taunton, in one or two lots - totalling 222 mixed acres - for around Pounds 475,000. Last year, the owners opened a two-acre lake for fishing rainbow trout at a charge of Pounds 1-1.50 a day - which included two fish to take home.

Further information from: Howkins & Harrison, Rugby (0788- 560 321); Knight Frank & Rutley, Stratford-upon-Avon (0789- 297 735); Charles R. Phillips, Henley-in-Arden (0564-794 331); Savills, Lincoln (0522-534 691); Strutt & Parker, Edinburgh (031-226 2500) and Exeter (0392-215 631).

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P0191 General Farms, Primarily Crop P0291 General Farms, Primarily Animal COSTS Commodity prices P6552 P0191 P0291 The Financial Times London Page XIII 1119
Motoring: Racing that's hard to beat - How to put the fun back into driving Publication 930417FT Processed by FT 930417 By STUART MARSHALL

THE ROADS get more crowded and stressful every month, holiday weekend tailbacks are awful and driving a car really is not much fun any more. Right? Well, yes. For most of the time, motoring is something one has to do to carry on a normal business and social life. The modern motor car - refined, reliable, comfortable and safe - is easy and effortless to drive.

But fun? Surely not? And the Queen's highway is no place to have fun on. It is there to let you and me and about 24m other drivers go from A to B and back again without inconveniencing, frightening or banging into one another.

For fun, you must get off the road. Off-road is usually taken to mean across country but it also covers private circuits. On both, you can enjoy yourself without breaking laws or putting anyone (including yourself) at risk.

Providing facilities for this kind of fun has become big business. At various sites one can first be shown how to drive a racing car and then be allowed to have a go. Which was how I found myself in the company of about 20 other people at a wind and rain swept Brands Hatch racetrack in Kent.

The Brands Hatch Racing Circuit company, Europe's largest organiser of racing instruction courses, also operates from Snetterton, near Norwich, and Oulton Park in Cheshire.

After a briefing that stresses commonsense and safety, candidates start by driving three laps with an instructor in a race-prepared saloon car - in my case a Ford XR2i - complete with roll cage and full harness.

It is not a foot-hard-down and hang-the-tail-out kind of drive. You are told to keep below 4,000 rpm. And warned that if you overdo it, you may be asked to leave the circuit.

The instructor explains basic racing technique. It boils down to doing all braking and gear-changing in a straight line on the approach to a corner. Then, with the car set up properly, you accelerate, clipping the apex of the curve and using the full width of the track as you exit.

At this early stage of race driving training, speed takes second place to smoothness because you cannot have one without the other. 'Be gentle. Coax the car; don't fight it,' is the instructor's theme - and, together with the need for ceaseless concentration, the main practical road-driving benefit.

It must come as a surprise to 'boy racer' candidates who had equated fast driving with a heavy foot on the accelerator and sawing at the steering wheel.

So far, the experience is not wildly different from driving a normal car on a miraculously wide and deserted road. The next stage - eight laps in a single-seat Formula First 1600 - is something else.

I insinuated my legs into the sharp end, felt around for the pedals, lowered myself into the unpadded seat until my full-face helmet was just poking above the body and pressed the starter.

Compared with a Formula 1 car, the Vauxhall Astra engined FF1600 is a toy, a Mickey Mouse racer. But the engine, only inches behind one's head, growls excitingly. As the car weighs next to nothing its acceleration matches a Porsche 911 Turbo's and it turns likes a gazelle pursued by a hungry lion.

After a settling-down lap, I enjoyed myself. Having to use only the top two gears and strictly observe the 4,000 rpm took away none of the excitement.

Handling a tiny, twitchy single-seater on a track streaming with water is a full-time job. One's horizon is limited by the rev counter, the two mirrors barely visible through a rain-spattered visor and a pair of front tyres flinging fountains of water high in the air.

I was quite sorry to be flagged in at the end of my drive. Having squelched back to the debriefing instructor I asked him how on earth people like Nigel Mansell saw where they were going when they drove F1 cars in pouring rain at up to three times the speed I had been doing. 'With great difficulty,' he said. I believed him.

An initial race-driving trial at Brands Hatch costs Pounds 79 on a weekday, Pounds 89 at weekends and a super trial (the main difference is that you get more driving) is Pounds 149 (Pounds 159 at weekends). About 15,000 people, ranging from teenagers to pensioners, have a go each year. One in four of them is female.

Most candidates come just for the fun. Many have had courses as birthday or Christmas presents and may never go on a circuit again. It can, though, be a hesitant step toward a career in motor racing: former World Champion James Hunt drove his first single seater at a Brands Hatch circuit.

Race driving training is not the only kind of fun motoring offered. There are also courses in off-road driving - the mud and slime variety - in Suzuki Samurai 4x4s as well as in skid control.

Of great potential road safety benefit is Earlydrive, which gives children their first experience of driving a real car on simulated urban road layouts. There is no lower age limit but they must be over 4ft 10in (145 cm) tall so they can reach the pedals. For details, telephone 0474-872331.

GB United Kingdom, EC P7948 Racing, Including Track Operation NEWS General News P7948 The Financial Times London Page XII 922
Sport: Sevens brings home the cash - Rugby Union Publication 930417FT Processed by FT 930417 By JOHN HOPKINS

NED HAIG and David Sanderson are the two Scotsmen credited with inventing seven-a-side rugby late in the last century - the first tournament was held at Melrose in 1883. I wonder what their reaction would be to the World Cup Sevens tournament which began at Murrayfield, Edinburgh, yesterday morning and finishes tomorrow afternoon?

Perhaps it is better not to ask. On the other hand, the Scots themselves have given it an emphatic vote of approval. Tickets worth more than Pounds 1m have been sold and many more would have been sold if the rebuilding of the west stand been finished. As it is, ground capacity is limited to 37,500.

The Sevens are brought to you by the same people who ran the full-scale World Cup in Britain in 1991 - Rugby World Cup Ltd. ITV is transmitting several hours each day. The sponsors are similar: Famous Grouse, Mizuno, Bass Breweries and South African Airways. In subsidiary roles are Unisys; Gilbert, the ball manufacturer; Umbro, the equipment maker; Medisport, the supplier of medical equipment, and Citroen.

The World Cup Sevens is an ambitious title for an event that might in time become as all-embracing as its name suggests but is little more at present than an upstart cousin to the real sevens tournament the Hong Kong Sevens, which was staged recently. The World Cup Sevens to that event is as margarine is to butter.

There will be similarities, one of the most likely is that southern hemisphere countries will dominate at Murrayfield as they did in Hong Kong where the semi-finalists were Fiji, Australia, Western Samoa and New Zealand.

Fiji, in particular, concentrate on sevens these days, perhaps to the detriment of their performance at the 15-a-side game. They have competed in 25 events already this year and, in Waisale Serevi, they have the outstanding sevens player in the world. Watch for him. He has a most distinctive style: one minute he is lurking at the back of his team, some way from the ball; the next, he will be running in for a try.

The Australians are making a big effort to win at Murrayfield, the undoubted incentive being the chance of adding the sevens to their World Cup title. Their team is built around David Campese (who is even more devastating at sevens than at 15-a side), Michael Lynagh and the huge, strong and fast forward Willie Ofahengaue.

Sevens is a lot more than half as enjoyable and half as good as the fuller version. At its best, it can be sublime: seven men weaving intricate patterns on a full-size pitch until one or two of them, by deft handling and quick interplay, work a man clear. Then, watch him go - sometimes, from 60 or 70 yards.

I grew up watching Ian Laughland mastermind London Scottish to victory in the Middlesex Sevens in the 1960s, and then Gerald Davies dazzle his opponents with speed and footwork when he helped London Welsh dominate this event 10 years later. Those days are gone, along with pounds, shillings and pence and the three point and four-point try. No longer are speed and guile the two most important characteristics in sevens. A substantial physical presence is just as important.

The Fijians and Samoans have brought a physical edge to sevens that has turned it from a sort of high-speed touch rugby to a high-speed, highly-physical game. The final in the recent Hong Kong tournament was described by Dick Best, the England coach, as one of the most brutal games he had ever seen.

Each player needs to be fast, most should be robust, and one or two in each team must be play-makers. These are the characteristics needed to cope with someone like Fiji's Mesaka Rasari who is 6ft 5in, more than 17 stone - and a sprinter.

While the World Cup Sevens provides a feast of rugby, it is an organisational nightmare: 24 teams - including many hardly known for their rugby such as Latvia, the Netherlands, Korea and Spain - compete in four pools of six. Minutes are vital. The semi-finals tomorrow start at 15.32 and 15.49 and the final iself at 17.16. Blink and you miss a match.

Weather permitting, the tournament will demonstrate the attraction of sevens rugby. But there are doubts it will catch on in Europe as it has in the southern hemisphere. Weather, fixtures, and the strength of the 15-a-side game are all against the growth of the shortened game. So, you had better make the most of it while you can.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page XII 794
Sport: A season at a slower pace - Cricket Publication 930417FT Processed by FT 930417 By TERESA MCLEAN

WELCOME to the new cricket season, to the rugs, hot drinks and music of ball on bat.

It has been a long winter. There has been nothing to keep cricket fans going through the barren months since the end of last season, except newspaper descriptions of the English Test team failing in India and Sri Lanka, weary with too much cricket.

There may be too much to play, but there is never enough to watch and such as there is depends on the weather. It always has done, of course, and bad weather has always led to what the editor of Wisden in 1974 attacked as 'the practice of contrived finishes on the third day.'

Today these contrived finishes are used as an argument in support of the four-day game, which is with us on trial for the next three years. It will mean fewer county matches - 17 instead of 22 - but the hope is that these will be fuller and better than three-day matches. Even rain should leave time for both sides to bat and bowl their way through two innings and reach a genuine result.

We shall see.

I think the real question for English cricket is not how long its games should be but whether these games, be they three, four or five days long, can cash in on the popularity which the one-day game has brought back to cricket.

One of the keys to success in longer games is balance. I write as one who has sat through countless hours of medium pace bowling leading nowhere, not challenging batsmen, not inspiring other bowlers and certainly not entertaining spectators. It is not strength in one-pace depth, but a balance between speeds: fast, medium and slow, and between types: seam, spin and drifter, which is most likely to cope with the varied demands of longer games.

Uncovered wickets would probably boost an assorted range of bowling, including more slow and spin, but with batsmen skittled out on drying wickets like the 'sticky dogs' of Derek Underwood's great days, county games would be more likely to last two than three or four days. You cannot win. But you can have a go.

Sussex's captain, Alan Wells, used Ian Salisbury's leg spin with increasing confidence last season and Salisbury took 79 wickets in the county championship, while Sussex strike bowler Franklyn Stephenson took 40. Bowling in the classic spinners' style of match-winning bursts, Salisbury took 23 wickets in Sussex's last two games, against Lancashire and Yorkshire, whom he mesmerised into ignominious defeat.

Sussex have followed this up by signed off-spinner Eddie Hemmings. At 44, sacked by Nottinghamshire, Hemmings is nothing if not experienced and, most important, is a partner in spin for Salisbury.

I am a believer in partnerships, with bat and with ball. They are pivots of strength, which the English Test team so sorely lacks. Northamptonshire's Alan Fordham and Nigel Felton, competent but not brilliant batsmen, opened their county's batting splendidly last season, working as a pair. Wasim and Waqar showed how devastating a bowling partnership can be.

Somerset have shown enterprise in signing Mushtaq Ahmed to provide an element of the unfathomable and to work in harness with off-spinner Harvey Trump, backing up the pace attack of Andy Caddick and Mark Lathwell. I look forward to watching Somerset's double acts this summer.

At Derbyshire, much will depend on the extent to which bowlers Ian Bishop and Dominic Cork can settle into a high-powered, high-speed opening partnership. Devon Malcolm is always fast, often wayward and usually lonely - a true Derbyshire man. One reason Derbyshire have sometimes done well but never triumphantly well in recent years is the individual and erratic nature of its cricket. If captain Kim Barnett can work his talented players, not least the slow left-arm bowler Richard Sladdin, into a coherent team, then with John Morris starting to bat consistently as well as elegantly, the county could be a formidable proposition.

Unlike Derbyshire, Essex are used to being a solid, well balanced team, thanks to years of astute management by Keith Fletcher, now departed for national service. Essex's confident steadiness is reflected in the way their overseas signings, such as Mark Waugh and Salim Malik, come back for more.

Kent are pleased with themselves for achieving this with Carl Hooper, who is going to do another year of bowling as well as batting for them. They are also pleased with their wicket-keeper, Steve Marsh, latest of a long line of good Kentish keepers. There is something about Kent - wind? grass? cider? - that breeds good wicket-keepers. Marsh kept wicket happily last season to the off-spin of Hooper, the zippy fast medium of Martin McCague and the slow left-arm of Richard Davis.

If only England would copy the many counties profiting from the services of a good keeper. The Test team needs a proper keeper. Batsmen who also keep wicket should not spill over from one-day into county and Test cricket, any more than bowlers who can throw the bat a bit should replace genuine all-rounders.

A powerful all-rounder like Chris Lewis, who averaged 49.25 with the bat and took 40 wickets for Nottinghamshire last season, would have helped to lift Yorkshire, Worcestershire and Durham from their bottom three places in the county table last year.

Of these, Worcestershire's next-to-bottom was the most humiliating, after their sixth place in 1991. Among other things, they were hurt by fast bowler Graham Dilley's continuing injuries. It seems rare for any player, certainly a fast bowler, to get through a season without an injury. Sometimes it looks as if injuries are an indication of a team's unhappiness. The answer is not concentrated fitness, which brings strains and stress fractures galore, but a confident captain knowing when to push his team and when to let its secret resources bear fruit for itself.

GB United Kingdom, EC P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page XII 1013
Sport: Power vacuum in the Afrikaner's game - South Africa Publication 930417FT Processed by FT 930417 By TOM BEDFORD

RUGBY and politics lie at the heart of Afrikanerdom. There is a certain natural symmetry, between reform of the body that runs the Afrikaner's national sport and the search for a new political order.

After more than 44 years of apartheid, the stumblings towards a new democratic rugby system inevitably reflect the political fumblings of a new South Africa, trying to find its way towards some kind of third world democracy.

Just as there are no obvious leaders to take South Africans out of the escalating mess in the country as a whole, so there are, after Danie Craven, no readily identifiable leaders with the charisma to take the most important sport in South Africa in the direction which it requires.

When the South African Rugby Football Union finally came into being through the amalgamation last March of the predominantly white South African Rugby Board and the predominantly non-white South African Rugby Union, no one foresaw that the doughty Craven, who had already been president of the white union for 35 years, would die within nine months of having become president of the amalgamated body - even though he was 82 and had not been well for years.

Craven was succeeded for only two months by Fritz Eloff, his vice-president of some 23 years. A month ago, Ebrahim Patel, the long-serving former president of the non-white players became president of the new body, as agreed at the amalgamation. Patel will hold the post for a year. Patel is something of an unknown quantity, because black and brown rugby had such a low profile. He was fiercely anti-apartheid and fiercely opposed to the white establishment.

Finally, in March of 1994 there will be a genuine vote and a president will be elected. The 19 executives of all colours, who elected themselves to a two-year stint as the first representatives of this new phase of South African rugby, will have to be properly elected to serve on an executive body of 11; a more manageable size.

The national government has been in power for too long (since 1948) and wants to cling on in the new South Africa in spite of the almost daily revelations of misconduct. Similarly, the administration of rugby has been bogged down. Until recently, rugby presidents and officials, once elected, stayed on forever and an autocratic system of administration prevailed.

But Jan Pickard, president of Western Province, the most powerful of the old white SARB provincial unions, has resigned because of ill health. The presidents of three of the wealthiest, and therefore most powerful, provincial unions - Koos Vermaak of Eastern Province, Nick Labuschagne of Natal and Steve Strydom of Orange Free State - have all resigned or been voted out of office following questions about financial matters. All were at times candidates to succeed Craven.

Suddenly there are few contenders for Craven's old jobs. In this league Louis Luyt, the president of the Transvaal Rugby Union, is the only one left with any sort of pedigree. But he is a maverick. He attracted controversy when he sanctioned the playing of Die Stem, the South African anthem, at the test against New Zealand in August. His forthrightness, a commodity rare in South African rugby and is not always appreciated by his peers. He has frequently been voted off rugby's hierarchical executive; only to be asked to return.

I believe he has taken the initiative in trying to shake up the administration of South African rugby. It is his union which made the first and largest contribution (in excess of R2m - Pounds 450,000) to the SARFU's development programme for the black townships. I believe Luyt's heart has come to be in the right place, and even if he does ruffle feathers, he loves what he is doing in rugby and could just be the least worst successor to Craven.

Johan Claasen, the respected former Springbok and president of a less affluent, smaller and therefore more neutral former white union, Western Transvaal, would have been a contender for the presidency too. With Craven's death he may have reconsidered but six months ago he told me he was not interested in the job.

Although the names of others, mainly former white players outside the administration of South African rugby, have been mentioned, the autocratic system meant that younger, more progressive, thinkers could not easily be accommodated. It would be difficult for anyone who has not been involved in the nitty gritty of the game to walk into rugby and simply take over the presidency.

For the immediate future at least, the clout in South African rugby will remain with the six former white unions. They have the money and while they have it they will also have much of the power to pull strings within rugby. But the six, the Currie Cup unions, are also fiercely competitive and it might not do to have one of their presidents elected president of SARFU at the expense of the rest.

This could mean that Patel is elected next March; provided that, in his year in office, he remains neutral between provinces, as Craven was, and shows that he understands that the key to the presidency is not what he gets out of rugby but what he can put in. While Patel is in the running for the presidency, no other black or brown South African will, dare to run.

ZA South Africa, Africa P7941 Sports Clubs, Managers, and Promoters NEWS General News P7941 The Financial Times London Page XII 935
Travel Focus, Italy: Sunstruck Puglia, home of Horace Publication 930417FT Processed by FT 930417 By NIGEL ANDREWS

THE WORDS my schoolmaster once used when none of us knew what he meant - 'Ontogeny recapitulates phylogeny' - now come back to me whenever I look at a map of Puglia.

There it is: 240 miles of rugged, gorgeous, sun-struck earth, with its very own 'heel' in the Gargano peninsula and its own 'toe' below, in the curling tip of land from Otranto on the east to Gallipoli on the west.

'Ontogeny recapitulates phylogeny. Andrews minor - give me an example.'

Sir? Back then, aged 10, I was flummoxed or day-dreaming. Now I might lob Puglia at him as an impertinent geographical illustration. The development of the individual (Puglia) recapitulates the development of the species (southern Italy).

And not just in appearances. Puglia in its time has been over-run by every ragged army that ever set bruising foot on Italy's larger foot. Greeks, Saracens, Normans and Spanish left calling-cards: from bits of old temple to the mini-casbahs of Bari, from Norman cathedrals (Trani) to Spanish-baroque churches. Meanwhile, the Swabians under Frederick II left a legacy of castles, notably the spectacular polygonal Castel Del Monte, resembling a giant threepenny bit on a hill.

But the largest invasion force, in Puglia as in all Italy, has been tourists. They may be more merciful here than almost anywhere else. Still my advice is: retreat from the ports and beaches, avoid 'gateways to Greece' like Brindisi, and enjoy the hinterland of olive-tree-dotted plains, wandering donkeys, sleepy sun-baked villages, grape-dressed tavernas, boundless vineyards and, above all, trulli.

Trulli give southern Puglia its bizarre, knockout enchantment. Sometime between 2,000 and 1,000 BC - the travel books are vague - these cylindrical stone cottages with cone-shaped roofs first appeared in the area. The roofs themselves are topped with white crosses or other adornments. When the owner wants more room for himself, or his family, or his goats, or his television, he knocks down a wall and attaches another stone cylinder plus cone roof plus cross (or star or sickle or satellite dish). Result: south-central Puglia can look like Disneyland gone delirious.

If you are hurried, Alberobello is the place to visit for a definitive eyeful. Here the white-topped trulli cascade down the town's main hill.

If you are unhurried - much better - get into a car and roam over the plains. Here the wacky edifices are in their natural, random habitat. You spin past the cone-homes from town to town, and southern Puglia really is worth covering entire. In clockwise order from Alberobello these should be your major points of call:

Polignano sul Mare. Leave the car on the edge of town; thread the narrow medieval streets; peer over limestone cliffs into a rock-slapping sea. Then eat in the dining-room of the main hotel which looks out into a floodlit sea cavern.

Ostuni. This hill village near the coast can snow-blind the unwary passer-by. A man-made cliff of dazzling white, Ostuni is composed of rearing town-walls flush with slit-eyed houses, of higgledy churches and piggledy towers. Note the splendid 18th century Spanish obelisk and the fulsome views from Largo Castello.

Lecce. Showcase for baroque architecture. The soft local sandstone allowed 17th century Spanish-influenced chisel-masters to run amok. Enjoy not just the shapes of the churches and palaces but their colouring too: deepest honey mellowed by the sun.

Otranto. Horace Walpole never slept here. His Gothic shocker, The Castle of Otranto, came straight from his imagination. Never mind. The town boasts its own grand guignol character and history, including an Archbishop who was sawn in half and 800 citizens who were decapitated, both in the wake of a 1480 AD Turkish siege; and it has its own haunting beauty: a glorious Romanesque cathedral, a craggy Aragonese castle. In the old port, linger romantically to enjoy the moon over the water.

Gallipoli. Good beaches to the south.

Martina Franca. Welcome back. You are now in trulli country again. Wander through this Moorish-flavoured town, feel its medieval heart, and then gaze from the 14th century town walls over the cone-roofs of the distant valley.

The poet Horace, who studied his advocacy of wine and song during hours normally appointed for homework, was born in Apulia and knew what it was all about. It is the capital of the grape. It sluices Italy and much of western Europe with vino da tavola and sometimes even adds quality to quantity. Try Castel Del Monte: a fruity red with a hint of bucolic insouciance.

Horace, if he lived today, might also sample the fish restaurants on the coast. And if the poet felt like a trip to the hills he could visit Selva di Fasano, where two majestic restaurants await. Fagiano's serves delicious goat meat and if you ask politely it will pour wild mushrooms over the regional pasta speciality, orechiette (little ears). Down the road is a pizzeria where the products emerge from the ovens spitting like volcanoes and waving tiny sage-leaves as surrender signals.

Since sun-dried tomatoes and oil-soaked vegetables are also local favourites, you will probably realise that Puglia is a bit Greek. My theory is that it snapped off from western Greece thousands of years ago and drifted aimlessly across the Adriatic. It bumped into Italy during siesta hour and started attaching itself geologically and culturally.

My schoolmaster once nodded vigorously at this theory when I put it to him. But then it was the end of term and he was hurrying to get away for his Italian holiday.

IT Italy, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page XI 944
Travel Focus, Italy: To Sicily with a strawberry blonde - James Bentley is thoroughly upstaged Publication 930417FT Processed by FT 930417 By JAMES BENTLEY

'WE NEED to promote Sicily,' said Dr Bevacqua, 'so I'm offering you and a friend two weeks' half-board there, plus a car.' It was October. That evening, I told my wife the good news. 'But who will pick our walnuts?' she asked. In vain I replied that this time the squirrels could have them.

So then I rang my younger daughter, who lives in France. 'I'll be on the next plane from Toulouse,' she said. Her swift response was a bonus, for Emma-Jane is a strawberry blonde, and such hair drives Italian men into ecstasy.

'Che bella,' they would cry when she was little, signalling their affection by an affectionate, excruciatingly painful pinch of her cheek. I shall never forget the sight of her chubby infant legs pounding the sand as she tried to escape from yet another adoring Italiano.

Immediately on our arrival in Sicily I realised that little has changed in the psyche of the Italian male since my daughter grew up. From the start, no-one spoke to me, not even the man at the car-hire, who asked her whether she or her 'grandfather' would be driving. As if I might not understand, Emma-Jane replied in Italian: 'Il mio nonno guidera.'

Meanwhile, I was placing our baggage in the back seat. The car-hire attendant cautioned me. 'We are close to Catania,' he admonished. 'A couple of youths could ride by on a motorbike, smash your window and steal the cases.' So he kindly placed our luggage in the boot.

As I drove away he called out: 'Be careful. They drive fast in Catania.' They certainly do. The moment we arrived there we stopped, to let my nerves calm down. Fish, meat and fruit markets abound in Catania.

At the fruit stalls in little alleyways, stallholders were gingerly handling prickly pears with rubber gloves. Once you enter the inner city, the atmosphere is different, with an 18th century cathedral (it was founded seven centuries earlier), fountains and the 13th century Castello Ursino.

It was time to drive north to Taormina, where our hotel was the Villa Riis. From the balcony of our room we gazed at lazily-smoking Mount Etna. I loved the hotel swimming pool and was disappointed in its food: excellently cooked, but German in style, for the hotel was filled with Germans. I prefer to eat German food in Germany, in Sicily, Sicilian food. Each evening Emma-Jane and I compensated by drinking copious quantities of Donnafugata, a wine named after the heroine of Lampedusa's Sicilian novel, The Leopard.

As the citizens never fail to remind you, Guy de Maupassant once observed: 'If someone should spend one day in Sicily and ask, 'What must I see?', without hesitation I should answer Taormina.'

A long narrow street guarded at both ends by a fortified gateway is flanked by crumbling buildings and centres on Piazza Duomo, which is cooled by a fountain dated 1635.

The little Romanesque cathedral has a superb sculpted main doorway and another one, equally fine, on the north side. Opposite rises the town hall, above Tony's bar. Boutiques display videos depicting Etna erupting, accompanied by the strains of Wagner's Ride of the Valkyries.

We decided to drive up the volcano. Emma-Jane collected bits of lava as presents - cheap gifts, as she put it. That evening my wife phoned. As we told her about our day, we could hear at the other end of the line the strangled sobs of one who had always wanted to climb Etna and had passed up the opportunity.

On our last day in Taormina we explored the Greek theatre, rebuilt by the Romans and overlooking the sea. A guide was lecturing a group of Americans, so Emma-Jane and I free-loaded the tour. He was telling the Americans not about the theatre but about what they really relish hearing - the cost of hotels, including half-board at the Villa Riis.

'Half-board', he added, to our deathly horror, 'does not include wine.' That evening, as the waiter brought our accustomed bottle of Donnafugata, Emma-Jane declined it with the words: 'Papa has drunk a little too much today.'

Lava helps to mark out the patterned walls of the finest Arabic-Romanesque building in Italy: Monreale cathedral, with its Benedictine cloister. 'To visit Sicily and not see Monreale', runs a local proverb, 'is to go as a donkey and return as a brute' (which rhymes in Italian).

Among its splendours is a vast cycle of mosaics depicting scenes from the Old and New Testaments. William II, the third of the Norman kings of Sicily, founded this magnificent building in the 1170s. Who knows what else he might have commissioned had he not died at the age of 37?

Sicily is a small island, and soon we reached Agrigento. Founded in 580 BC by colonists from Gela, its valley of the temples encompasses, in my view, finer buildings than Athens itself. Grooved sandstone pillars, pediments and broken columns speak of a long-dead civilisation. Under them dogs snoozed in the sun, and cats scurried where once ancient gods and goddesses were worshipped.

At Agrigento, our hotel restaurant was closed, so we went to eat complex pizzas at a pizzeria along the coast. As ever, the proprietor took to a strawberry blonde, so we stayed drinking with him. The following morning he turned up at breakfast in our hotel, this time garbed as a waiter.

It was time to leave for Siracusa. I was driving gently when a Catanian (recognisable by the number-plate of his car) shot past me, screeched to a crumping halt and then drove on again. He had struck a stray sheep as it wandered in the road.

I drove cautiously past its flailing legs, while Emma-Jane urged me to stop and tend the dying beast. Usually she is stronger-willed than I am, but this time I resisted, and drove on to Siracusa, with its ramparts and a cathedral built on the site of a Greek temple.

Siracusa is a port boasting architectural riches bequeathed by the Normans, the Aragonese, the Catalans, the Greeks and the Romans. Undoubtedly its Greek theatre is the most impressive in the western world.

As a bonus, Siracusa also has a magnificent Roman amphitheatre. In the quarries that supplied the stone for these monuments are caverns in which tyrants imprisoned their enemies. One of them is an echo-chamber, where (so the guides tell you) the screams of the tortured would reverberate to terrorise other imprisoned unfortunates.

I had fixed a meeting with Siracusa's head of tourism. Before we arrived I was not sure whether Vittorio Gallo had intended to give us lunch, but once he spotted my assistant he instantly suggested that we eat together.

As they talked and I tucked into the fantastic fish caught off Siracusa (squids, oysters, smoked swordfish, king prawns, kippers, salmon), I congratulated myself on my foresight in arranging to be her father.

James Bentley's visit to Sicily was arranged by Dr Aldo V Bevacqua of Italia nel Mondo, 6 Palace Street, London SW1E 5HY, tel: 071-828-9171.

IT Italy, EC P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page XI 1213
Travel: Smart way to fly - Practical Traveller Publication 930417FT Processed by FT 930417 By MICHAEL THOMPSON-NOEL, Travel Editor

THE STORY two weeks ago about my magical mystery flight to Bali aboard Garuda, the hapless Indonesian state airline - we stopped four times and endured a door-to-door travelling time of 28 hours - has drawn a reply from Timothy Knight, managing director of Eastravel, writes Michael Thompson-Noel, Travel editor.

Eastravel, an air travel consultant and organiser based in Ipswich, specialises in tailor-made holidays, especially to the Far East.

Knight writes: 'Whilst I fully agree with your philosophy of ensuring the most direct or non-stop flight for a long-haul journey to a single destination, those flights on quality airlines which stop en route offer the opportunity to stop over, thus getting far better value for money and a chance to break up the journey into smaller sectors.

'For example, the journey undertaken by yourself to Indonesia could have been just a one-stop flight with Singapore Airlines, which Eastravel offers as a possible choice; or up to three stops flying with Emirates (the airline of the United Arab Emirates). The stops could be selected in either direction and then combined with Singapore Airlines' (one-stop) flight in the other.

'En route to Indonesia, Emirates offers Dubai and the Emirates with a choice of adventure and superb hotels; Sri Lanka, with possibly a chauffeur-driven tour; and then Singapore, a gateway to Malaysia. All these possibilities could be combined with an overland tour in Java ending finally (exhausted) in a Bali resort.

'Similar journeys can be organised to Japan and Korea, Australia and New Zealand, via numerous Oriental countries.'

This is all quite true: the market in stop-over travel is large and growing. You can do virtually anything you want and stop anywhere you want, though you need a perspicacious travel agent to help you wade through the fine print and spot the best-value deals.

As Timothy Knight acknowledges, my whinge was about the time taken on Garuda just to get to Bali. I didn't want to stop in Paris, Abu Dhabi, Singapore and Jakarta; but I did.

If you are planning a single-destination long-haul holiday, try and get a non-stop flight. Failing that, insist on the most direct (fewest stops) flight available. You may encounter trickiness. Many airline staff use the word 'direct' to imply 'non-stop.' I have heard them do it time after time.

Keep flying hours to the minimum. Do not patronise airlines that take you all round the houses for obscure reasons of their own.

I used to have a rule that 15 hours' flying time was the maximum I would consider without a proper stop and rest. It sounds wimpy, but I plan to re-adopt it. If you fly for 20 hours or more you can suffer severe jet-smack, and that can spoil your holiday.

If you can afford the time for genuine stop-overs and mini-breaks as a way of interrupting your journey, get some specialist brochures, including those of the airlines. Eastravel has its own. (Eastravel: 79 Norwich Road, Ipswich IP1 2PR, tel: 0473-214305/210770, fax: 0473-232740).

Useful for would-be holiday litigants is Successful Holidays, And What To Do If They're Not, by Michael and Jacqui Welham, which serves three broad purposes. It decribes the parties involved in travel, from operators and agents to travel associations. It steers you towards holiday success with pointers and advice. And it explains the varied options for winning compensation if things go wrong.

It offers numerous case histories, and describes the impact of the new EC directive on package holidays. There is a directory of addresses and telephone numbers for government offices, tourist boards, embassies, travel associations, airlines, vaccination centres, what have you. Available in some bookshops and newsagents, also from: J A W Publications, Becketts Cottage, Bungay Road, Hempnall, Norfolk NR15 2NG, England. Tel: 0508-498103. Pounds 7.99.

ID Indonesia, Asia P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page X 661
Travel: Ho-ho, Ho Chi Minh - Nicholas Woodsworth travels out-of-season to the Vietnamese capital Publication 930417FT Processed by FT 930417 By NICHOLAS WOODSWORTH

HANOI, for me, begins on the back of a motorcycle some 1,200 kms to the south, in the early-morning streets of Saigon.

Sitting behind Mr Ha, I have my baggage slung across my back and my heart in my throat. Mr Ha runs the tiniest of businesses from a narrow ground-floor hallway in central Saigon; he owns half-a-dozen bicycles and rents them out to tourists. But he is such a kind man that when I asked him about taxi transport to Tan Son Nhut airport for a dawn flight to Hanoi, he insisted on taking me himself.

No problem at all, he indicates with sign language and the few English words he knows; he has a motorcycle. Mr Ha's mime of revving a motorcycle engine is not the most convincing, for he has only one arm. But his offer is so kind I take it anyway.

Does one ask for a sign-language explanation of such a misfortune in the middle of Saigon's anarchic traffic? One does not. One simply holds on and prays. But over coffee at the airport Mr Ha demonstrates how he lost his arm.

Using his stump to hold down a piece of paper, he draws row after row of stippled lines with a pen, and makes deep rumbling noises in his throat. 'Me Hanoi VC. Viet Cong.' He giggles, apologetically, as if the whole thing were some mild and amusing embarrassment, a fault of his own. In 1971, a 20-year-old recruit with the army of North Vietnam, he was hit by shrapnel in one of the United States' countless B-52 carpet bombings of Hanoi. It is one of the sadder introductions I have had to a city.

Not so sad are Massimo and Sandro, whom I meet aboard a Vietnamese Airlines Tupelov bound for the capital. They are Milanese freelance photo-journalists, collecting stories and pictures to sell to some of Italy's more lurid colour magazines. They have just claimed an Italian scoop for their coverage of the Miss Saigon beauty contest. They are on their way north to interview General Giap, military mastermind of colonial France's defeat in Indochina and second only to Ho Chi Minh himself in the pantheon of modern Vietnamese heroes.

Today Giap is an old man and no longer a central committee member but, none the less, difficult to see. How was that arranged, I ask, full of admiration. I have found even simple administrative procedures here maddeningly complicated. It was nothing, they say with only the tiniest shrug of Latin bravado, simply a short call to the ministry of information.

The countryside as we approach Hanoi reminds Massimo and Sandro of the north Italian plain in winter. In February the table-flat surface of the Red River delta is chilly, grey and wet. Fresh from the colour and sunlight, the sensual distractions of the south, the Italians are already finding Hanoi depressing. As we land they are once again discussing Miss Saigon's legs.

We install ourselves in the Gold Hotel in the centre of Hanoi. Like the rash of new hotels that have sprung up in the last year or two, it tries to cater to the tastes of Hanoi's growing number of foreign visitors. Homesick, Massimo tries the spaghetti bolognaise.

His eyeballs roll upwards with the first fork-full - Hanoi, he reports to the maitre d' who hovers anxiously behind him, still has some way to go in matters of western cuisine. The maitre d' apologises profusely: he is not familiar with Italian food. In fact, he is not professionally familiar with food at all. He is a plastic surgeon who has taken a second job to make ends meet. Things are difficult these days in Hanoi, he tells us. How much does he make at the hospital where he works, we ask. About Dollars 11 a month, he replies. We stop complaining about the food.

In the afternoon we go for a walk. For anyone arriving from the bright tropical bustle of Saigon, Hanoi in February is a dismal place, drab, dour, dejected, dressed in funereal grey.

This is the season marked by what French colonists called the crachin - spit - and the Vietnamese in their own language more poetically refer to as 'rain dust.' When dry winter air sweeps southwards out of central Asia and meets humidity over the Gulf of Tonkin, a fine mist of suspended water particles descends upon the city for weeks at a time. It is cold, thin and cheerless.

Outside, I can hardly believe that north and south Vietnam are two parts of the same country. Saigon's boulevards are lively and cheerful, a zingy blend of commercial hustle and outdoor social get-together. There is laughter, shouting, music from sidewalk speakers. For visitors there are inquiring glances, imprecations from cheeky children, ingenious sales pitches to buy watches or cauliflowers. There is contact on Saigon's streets, and foreigners get drawn into its life whether they want to or not.

There is little contact on Hanoi's streets. Massimo, Sandro and I walk through the grey crachin beside the Hoan Kiem, a lake that lies in the city centre like a sheet of cold slate.

Decades of hardship, sacrifice and autocratic rule seem to have left the people of Hanoi without much joy or ability to express it. There are no smiles, no hellos, no propositions commercial, salacious or otherwise.

Hunched old men in glasses, dark raincoats and berets drift by us, the last of a colonial generation. Younger generations seem hardly more cheerful - in browns and greys and olive drabs, in khaki pith helmets and worn-out military surplus wear they go their sombre way. Hanoi's people seem no more high-spirited indoors than out. In a cafe so cold that its patrons wear their Russian-style hats with the ear-flaps down, we sit in doleful silence.

Attempts at conversation bring the shortest of answers. Even the dogs here are uncommunicative; in the market of the city's old quarter we watch a women with a large cleaver dismember a cooked, lacquered dog and set out its head as an advertisement. Massimo, still homesick, says it has the same eyes as his dog back home.

The days pass, the interview with General Giap, to which the Italians have invited me, comes no closer. I suspect it never will. Over Hanoi hangs not just a mist but the heavy hand of a Confucian-style, by-the-book bureaucracy designed not to facilitate but to inhibit. I take myself off to see Ho Chi Minh.

Since 1975, Ho has resided in a grey marble and granite building not far from Hanoi's military Citadel. He seems to be as popular in death as he was in life. Every day fleets of buses make their way past magnificent colonial villas to deposit school-children, factory workers and village peasants at the mausoleum of the man who did away with French Indochina.

No photography, no shorts, no hats on heads, no hands in pockets, no irreverence. These are the rules that govern a pilgrimage to the glass sarcophagus deep in the bowels of the mausoleum. Shuffling slowly forward in an awe-struck queue, I gaze at Ho's famous wispy beard, his bald, liver-spotted pate. He is waxy-looking.

In the past, Ho's thin, embalmed body has spent two months a year in Moscow undergoing maintainance. With Russian aid and personality cults things of the past, what will happen now?

Far livelier is the small group of elderly men I meet every morning in a shabby cafe not far from the hotel. They are retired academics from Hanoi's universities. Mathematicians, physicists, literary lecturers, they spent their youth studying in France. Today they are back on the left bank once again, reviewing de Chardin, debating the philosophes, arguing for or against Gide. Why, I ask them? On their tiny pensions, they laugh, it is the only pleasure they can afford - just the price of a cup of coffee.

For Dollars 4 apiece, Massimo, Sandro and I go to the VIP Club, just about the hottest - indeed, just about the only - night spot in town. After four decades of isolation, Hanoi is opening up to the outside world. Down the road, the Credit Lyonnais has opened an office. The Bank of America has announced its intention of doing the same. The Pullman Hotel group has renovated the Metropole, now the most elegant hotel in town. Not even the infamous 'Hanoi Hilton', the prison in which downed US pilots were kept during the war, is to be spared; soon it, too, will be converted.

For foreigners, diplomats and for the government officials wealthy enough to use it, the VIP Club is a taste of another world. There are disco hits and strobe lights. There are sophisticated bar girls who drink Johnny Walker Black Label. There is one machine that produces clouds of vapour, another that spills out bubbles. Sandro dances, surprising party cadres with innovative Mediterranean gusto. For a while, even Massimo cheers up.

It is all short-lived, though. The next morning, after a final phone call, the Giap bubble pops. As they pack their bags, they consider the bright lights of Manila, the charms of Jakarta, the lures of Bangkok. They consider just about anywhere, in fact, that will get them on an aircraft out. I take a train to Haiphong and that much reputed north Vietnamese wonder, Halong Bay.

The countryside around Hanoi is as poor as any I have seen in Asia. I am not even sure I am on the right continent; from the rail line you can see mud huts as miserable as any in Africa. South-east Asia's technological revolution seems to have by-passed the Red River delta.

In the port of Haiphong, I find a Moscvich communal taxi to take me on to Halong. Despite the lace curtains in the back window, it is old and ailing. Halfway there, we grind to a halt in a stretch of greasy mud. The driver crawls under the engine and bangs away. When he is finished we have everything but battery power and an ability to change out of third gear. We four passengers gather behind the car and push as fast as we can. It coughs into life and we throw ourselves in through the open doors. Ninety minutes, several villages and many startled chickens later, we arrive at Halong without having slowed down once.

'You must stay in Room 208 at the Halong Hotel 1', a French tour guide had drooled at me in Hanoi. 'Catherine Deneuve slept there, you know, when she filmed Indochine.'

With or without Catherine Deneuve's bed (I end up in Room 106 at the Halong Hotel 2), I find the bay superb. From the town of Bai Chay I board a tour boat in a heavy drizzle. Slowly, as we head out over calm water, the crachin lifts and delicate bobbing sampans appear. A few minutes later, Halong's 3,000 green and sheer-sided islands, each a miniature alp, emerge from the mist.

I am elated. This is as cheering as a chat with General Giap. I only wish Massimo and Sandro could be here. Miss Deneuve's is one north Vietnamese address they would have enjoyed.

Worth knowing:

Hanoi's cold and foggy winter is followed by the blue skies of spring: the best time to travel in the north is between April and October.

Independent travel is possible in Vietnam and Royal Thai Airlines, Cathay Pacific and Singapore Airlines all fly to Saigon and Hanoi from London for between Pounds 600 and Pounds 750 return airfare.

In London, visas, air travel, accommodation and car and driver can be organised by Vietnam Tourism, tel: 081-961-0117. A two-week tour, exclusive of airfare, costs about Pounds 1,000.

VN Vietnam, Asia P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page X 1991
Food and Drink: Appetisers Publication 930417FT Processed by FT 930417 By LUCINDA DE LA RUE

NOW IS a good time to buy sea kale.

The leaves - waxy, blue-green and coarsely toothed - are tastiest when young and should be steamed and eaten with melted butter and flakes of freshly grated Parmesan or eaten raw in salads. Michael Paske grows it on his Grantham, Lincolnshire, farm following roughly the same methods used by Victorian gardeners. The cut fresh vegetable is available by mail order until the end of July; a standard pack of 500 gms costs Pounds 6.50, inclusive of post and packing. It is also available at Waitrose supermarkets at Pounds 1.45 for a pack of 135 gms. Ring 0400-50449 to order.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page IX 139
Cookery: Nice, nutty and healthy - Buckwheat, a substantial staple, shows its lighter side Publication 930417FT Processed by FT 930417 By PHILIPPA DAVENPORT

I USED to associate buckwheat only with Russia and sturgeon. Flour made from tiny, nutty buckwheat seeds and raised with yeast produces blinis which, when teamed with the roe of that fish and tots of vodka, make a memorable feast. The grain itself is also traditional with the flesh of the fish (or sometimes with salmon), together with mushrooms, onions, dill, butter and soured cream, the whole lot wrapped in a brioche parcel known generally as coulibiac.

Now, I have learned that buckwheat is also a staple food of the people of Valtellina, in the northern fringes of Italy where the alpine peaks that rise from the valley are so snow-packed that you can ski in high summer.

The buckwheat dishes I ate there were wonderful - and very substantial. The coarsely-ground seed is mixed with maize meal and whipped up with butter and cheese to make taragna, a splendidly rich variation on polenta. Buckwheat flour is used to make ribbon noodles called pizzoccheri. A dish of the same name - consisting of the noodles cooked and served with potatoes, cabbage, garlic, sage, butter and cheese - is marvellous, rib-sticking fare and just the ticket to revive you when you have spent the day swooping on skis or pony-trekking.

Recipes like these are too good to miss, but I shall save them until next winter. Instead, I shall make some lighter suggestions - for which you will need to buy a packet of buckwheat flour or saraceno. You will find it sold in many health food stores as well as Italian specialist shops and delicatessens. Store it in the refrigerator when you get it home; it will keep better, and longer, than if you leave it in a kitchen cupboard.

Use small quantities of buckwheat flour to replace some of the wholewheat in bread-making. This gives loaves good, nutty flavour, agreeably light texture and an attractively-speckled look. I also like using buckwheat in batter and, particularly, shaping the batter into small cakes, like king-size drop scones.

Serve them for brunch or Sunday supper topped with similarly large mushrooms, fried or baked with garlic and butter. Add a scattering of chives or dill plus, perhaps, a few rashers of bacon on the side. Or, offer them as a generous first course for dinner teamed with sauteed chicken livers, onion marmalade and soured cream, or a fresh tomato salsa with basil.

Last, buckwheat batter without the pepper can be served for breakfast to spread with butter and honey or marmalade - a lovely change from toast or croissants.

BUCKWHEAT BATTER (Makes 8 rounds about 4 inches in diameter)

Ingredients: 2 oz buckwheat flour; 1/4 teaspoon baking powder; a good pinch each of Maldon salt and freshly-ground black pepper; 1 oz butter, at room temperature; 1/4 lb cottage cheese; 3 tablespoons milk beaten with 2 large eggs.

Method: Put the buckwheat flour and raising agent into the bowl of a food processor or blender. Season, add the butter, cut into dice, add the cottage cheese. Mix briefly. Pour on the liquids, adding them through the hole in the lid while the machine is running, and continue processing until the ingredients are blended to a thick, creamy batter.

Heat and lightly butter a small griddle or omelette pan. Ladle enough batter into the pan to make a 4-inch circle and cook over moderate heat until bubbles begin to show and the batter is sufficiently cooked so that you can slip a spatula under it easily.

Flip it golden side up and cook for a few seconds more until the second side is set. Then, remove it from the pan, wrap it between the folds of a napkin and slip it into a low oven to keep tender and warm while you cook the rest. Serve in any of the ways described above.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page IX 677
Food and Drink: Let's go for a bite at the opera - Restaurant critic Nicholas Lander combines a night of culture with a meal on the town Publication 930417FT Processed by FT 930417 By NICHOLAS LANDER

GOING TO the opera or a show in central London? Then where do you go to eat? There are increasing pressures on achieving that elusive sensation of combining an uplifting cultural experience and a good meal. Cost and time are the most obvious as opera, concert and cinema ticket prices rise and managements, in an effort to minimise overtime after 11.30pm, bring forward their curtain-up.

Bringing your own sandwiches for the interval may be one way of staving off the hunger pangs. For others this may detract from the pleasures of the first act. And what about eating out after the performance when there are fewer restaurants and cafes open until the early hours? Here are some ideas about where to eat. It is not a definitive list and it is obviously best to book in advance to let the restaurant or cafe know your requirements. For combining an evening meal with a night out I have split central London into areas - the places around Shaftesbury Avenue, the streets near the English National Opera, in St Martin's Lane, and eateries near Covent Garden, Wigmore Hall, the Barbican and the South Bank. They are placed in two categories: the first for special celebrations and when you are on expenses, the second for when you are paying yourself. Bon appetit]

SHAFTESBURY AVENUE

1. The Oak Room, Le Meridien Hotel, Piccadilly (734-8000), Alastair Little (734-5183) and L'Epicure (437-2829) Frith Street, Bentley's (734-4756) Swallow Street, Au Jardin des Gourmets (437-1816) and The Gay Hussar (437-0973) Greek Street, Fuji (734-0957) Brewer Street and Manzi's (734-0224) Leicester Street, Quaglino's, Bury Street (930-6767), The Square, King Street (839- 8787) and Le Caprice, Arlington Street (629-2239) offer the chance to stretch one's legs. 2. Cafe Royal Brasserie, Regent Street (439-6320), Hamine a Japanese noodle bar (439-0785) and Hokkai (734-5826) a Japanese restaurant, both on Brewer St, the Criterion Brasserie, Piccadilly Circus, (925-0909), Pizzicato, Rupert Street (734-0122), Cafe Fish, Panton Street (930-3999), dell' Ugo (734-8300), Est (437-0666), Bahn Thai (437-8504), Chiang Mai (437-7444), Soho Soho (494-3491) all Frith Street, Wheeler's, Old Compton Street, (437-2706), Melati, Great Windmill Street (437-2745) Malay and Singapore food, The French House Dining Rooms, Dean Street (437-2477), The Red Fort, Dean Street (437-2525), Jin, Korean food on Bateman Street (734-0908), Pizza Express, Wardour Street (734-0555) and the Swiss Centre, Leicester Square (434-1791). For vegetarians, Mildreds, Greek Street (494-1634), Olive Tree, Wardour Street (734-0808) and the Neal's Yard Dining Rooms (379-0298).

Or venture into Chinatown. The best dim sum, useful pre-matinees, are at London China Town, Gerrard Street (437-3186), Ley-Ons, Wardour Street (437-6465) and the cavernous New World, Gerrard Place (434-2508). The better Chinese restaurants include Ming, Greek Street, (734-2721), Mayflower (734-9207) and Dragon's Nest (437-3119) both on Shaftesbury Avenue, Joy King Lau, Leicester Street (437-1132), Fung Shing (437-4170) and Poon's (437-4549), Lisle Street. Close by, on the site of what was the Petite Launderette, is now the Tokyo Diner (287-8777) for a quick, cheap Japanese meal.

Interesting pubs include the Blue Posts, Rupert Street, Coach & Horses, Greek Street and the Dog and Duck, Bateman Street.

ST MARTIN'S LANE

Sandwiches and drinks can be ordered for the intervals at the Coliseum and more formal meals for groups in private rooms (836-0111).

1. The Ivy, West Street (836-4751), Giovanni's, Goodwin's Court, (240-2877), Beoty's, St Martin's Lane (836-8768) Mon Plaisir, Monmouth Street (836-7243), Neal Street Restaurant (836-8368), L'Estaminet, Garrick Street, (379-1432) and Le Palais du Jardin, Long Acre (379-5353).

2. On St Martin's Lane, Pret a Manger for self service, filling sandwiches open until 22.00, Aroma (836-5110) for better coffee, and for more serious food Cafe Flo (836-8289) and Cafe Pelican (379-0309). Two good wine bars, Solange's, St Martin's Court (240-0245) and the grand-daddy of them all, the Cork & Bottle, Cranbourn Street (734-7807). Tageen, Upper St Martin's Lane (836-7272) for Moroccan food and Kagura, West Street (240- 0634) and Ajimura, Shelton Street, (240-9424) for Japanese food and for more prosaic, British cooking, Smith's, Neal Street (379- 0310).

Good pubs include The White Swan, New Row, The Lamb & Flag, Rose Street, The Essex Serpent, King Street and the Lemon Tree, Bedfordury.

COVENT GARDEN

The Royal Opera House has its own caterers which serve meals in the Crush Bar and Pit Lobby. Telephone 836-9453.

1. Boulestin, Henrietta Street, (836-7061), Orso (240-5269), Simpsons-in-the-Strand (836-9112), Poons of Covent Garden, King Street (240-1743) and The Savoy (836-4343) with the Upstairs Bar useful pre-theatre and the newly revamped Waldorf Hotel, Aldwych (836-2400).

2. Old favourites include Joe Allen, Exeter Street (836-0651), Tutton's, Russell Street (836-4141), Cafe des Amis du Vin, Hanover Place (379-3444), Bertorelli's, Floral Street (836-1868), Luigi's, Tavistock Street (240-1789), Rules, Maiden Lane (836-5314) and Magno's Brasserie, Long Acre (836-0677). Relative newcomers are Boulevard, Wellington Street, (240-2992), Flounders, Tavistock Street, (240-0883), Plummers, King Street (240-25340), and Smollenskys on the Strand (497-2101).

Covent Garden encompasses some of London's oldest pubs - the Globe, Bow Street, Nell of Old Drury, Catherine Street and the White Hart, Drury Lane.

THE SOUTH BANK

The Royal Festival Hall. Within this mighty complex are a restaurant, Review (921-0800) with a stunning river view, open 17.00-20.00 except Saturday and Monday, the Festival Buffet including a pasta bar, open 12.00-22.00 and the Riverside Cafeteria for light meals open 10.00-20.00.

The National Film Theatre houses a useful self-service cafe and bar. The National Theatre's main restaurant is Ovations (928-3591) open 12-14.00 and 17.30-23.00 and the Terrace Cafe (401-8361) for lighter meals plus the Lyttleton Buffet and bars.

Close by are the Archduke Wine Bar (928-9370) Concert Hall Approach, RSJ restaurant (928-4554), Coin Street, with a wonderful wine list, La Rive Gauche (928-8645) and Meson Don Felipe (928-3237) along The Cut.

THE WIGMORE HALL

In the basement of the Wigmore Hall is the newly opened Wigmore Restaurant (487-4874). The restaurant is open from 12-15.00 and 17.30-20.00, the cafe/bar from 11.30-23.00.

Just around the corner are the Restaurant and Arts Bar, Jason's Court (224-2992) and Zoe, 3-5 Barrett Street, (224-1122).

THE BARBICAN

Searcy's manage the catering in the Barbican with the Brasserie on Level 7 (588-3008) 12-15.00 and 17.00-23.15 and also the banqueting facilities within the spectacular Conservatory. Justin de Blank manages the Waterside restaurant 12-20.00, the Balcony Cafe on Level 6 (17.00-20.00 Mon-Fri, 12-20.00 weekends), Cafe on Six and the two coffee points, levels 3 and 5.

Close by are Alba, Whitecross Street (588-1798), Stephen Bull's Bistro, St John Street, (490-1750), The Quality Chop House, (837-5093) and opposite, The Eagle (837-1353), both on Farringdon Road.

GB United Kingdom, EC P7922 Theatrical Producers and Services P5812 Eating Places NEWS General News P7922 P5812 The Financial Times London Page IX 1134
Computing: Secret of the free Windows software - A hidden word-processing package Publication 930417FT Processed by FT 930417 By DAVID CARTER

THE WORLD'S top word processing package sells around 1m copies a month, with over 22m sold to date. Is it Word for Windows perhaps, or WordPerfect, or maybe Wordstar? No, compared with THIS package these are small potatoes. The top seller sells more than all three put together.

So which is the world's best-selling word processor? The answer, of course, is Windows Write, which comes free with every copy of Microsoft Windows.

I have been using Write for a couple of months now and very impressed I am too. All the basic functions are there - word wrap, cut and paste, layout controls, and the full range of Windows fonts. Very similar in appearance to Microsoft Word for Windows, Write only lacks Word's heavyweight features for handling multipage documents and sophisticated page layouts. For the two-finger typist who wants to produce basic letters, memos and reports Write is ideal, and its simplicity makes it one of the easiest packages to learn.

But the computer industry despises the simple and applauds the complex, so Write is virtually ignored. Of those 22m purchasers of Windows, I would be willing to bet that a high proportion have no idea that Write exists, let alone that they own a copy. If there is a PC in your office which has been bought during the last two years, there is a good chance that unknown to you Windows Write has been sitting there all the time. Perhaps you should take a look?

You will need some help to find your way around Windows and Write. Unfortunately, the Windows manual is difficult to use. Nor can I find any recommendable self-teach books. Few of them take Write seriously. The best of a mediocre bunch is Robert Cowart's Mastering Windows 3.1 (Sybex).

I have put together a brief tutorial to help you find out whether you have Windows on your PC and how to get started on Write. I have assumed you are a non-mouse user so a mouse is not required. (By the way, if you do not use Windows you may believe that you cannot use it without a mouse. Not so. In fact, the key to becoming productive in Windows is to forget the mouse and to master the keyboard commands just like a DOS package. A full set of these 'keyboard shortcuts' can be found in Appendix C of the Windows manual).

1. First, check that you have Windows: start up the computer. It should display C:> (the 'C prompt') Type CDWINDOWS and press Enter. If the screen now displays c:windows> you are in business

2. Type WIN and press Enter. The Windows screen appears, headed 'File-Options-Window-Help'.

3. Call up the 'Window' option by holding down the Alt key (to left of the spacebar) and pressing W.

4. Use down arrow to highlight and select 'Accessories'.

5. The 13 Windows accessory programs (Paintbrush, Notepad etc) appear. Write's icon is a quill pen. Use the arrow keys to highlight Write. Press Enter. The heading 'Write - (Untitled)' appears over a File-Edit-Find menu. You are now in Windows Write.

6. Bring up the 'File' menu by pressing Alt-F.

7. Press the right arrow six times to go through the other menus, finishing at the Help menu. 8. Now, from the Help menu option, press right arrow once more. You see an unexpected menu headed 'Restore, Move etc'. It shows the all-important Alt-F4 key which is rather like Escape in DOS. There are also commands for varying the size of the screen. 'Maximise' the Write screen now pressing X.

9. Press Alt-H for Help and Enter for Contents. Press down arrow to list all the features of Write. Look at the bottom one - 'Document Help Commands' by pressing the Tab key repeatedly and working your way down (if you go too far, shift-tab will take you back).

10. Exit from Help by pressing Alt-F4. You are now back at the blank File-Edit-Find screen. At this point either start experimenting or use Cowart, chapter nine.

Cut and paste in Write is delightfully easy. Try this. Type three lines of text. Now move line one to below line three as follows: move the cursor to the start of line one; Shift-Down arrow to highlight line one; Shift-Delete key to delete line one. Move the cursor to below line three; Shift-Insert key to insert line one.

If you use a mouse you can accomplish most of the above by moving and pointer to the instruction you want and clicking the button.

You will find that the rest of Write is similarly elegant and simple. No wonder this is the world's best selling word processing package.

GB United Kingdom, EC P7372 Prepackaged Software NEWS General News P7372 The Financial Times London Page VIII 814
As They Say In Europe: Manana arrives - a bright Euro-dawn Publication 930417FT Processed by FT 930417 By JAMES MORGAN

THE Easter headlines read 'Socialist Party in crisis meeting' and 'Elections to be brought forward.' The big opinion pieces were written by earnest men with titles like 'Professor of Moral Aesthetics at the University of Montpellier.' Spain is like other nations, but with more respect for other nations.

All I know of the country comes from the papers and history books. And the papers are as dull as are the domestic concerns of Spain these days.

Apart, that is, from one glorious period last year when El Pais offered a specially commissioned detective story to coincide with the Olympics. One memorable episode opened with the words, 'Inspector Carvalho left the Serbian javelin thrower in her delirium, singing the Internationale, and wended his way back from the hospital to the building of the International Olympic Committee.' Those unfamiliar with post-modern Catalan deconstructionism would do well to study the works of the writer, Manuel Vazquez Montalban.

That aside, Spain is the most normal of countries. It has thrown itself into the process of integration with astonishing enthusiasm, its nationalism is expressed in foraging for as much cash as Brussels can provide.

It accepts the whole Maastricht ethos and much else: subsidiarity? Certainly not. Federal Europe is the thing. More power to Brussels' elbow.

Perhaps this is because Spain spent 40 years of this century subjected to the kind of crass, introverted nationalism that dominated others for 20 at most. But then it probably spent most of the last millennium in that peculiar state. Spain is the one European nation that has shuffled off its unsavoury past through its own efforts and, in effect, 'reinvented itself.'

The normalisation of Spain means that for foreigners the dark allure of Holy Week in Seville has been overtaken by images of nihilistic self-indulgence limited only by the possibilities of a packaged fortnight: El Greco submerged by Salvador Dali.

It is not the land of Gerald Brenan's wonderful Spanish Labyrinth. Today Homage to Catalonia would be a publicity handout from the Barcelona Tourist Board. Hugh Thomas' Spanish Civil War is a magnificent history that might be of another country. And no bad thing.

The dark side that has nearly disappeared may not be worth having, but there is something about the European-ness of contemporary Spain that is all wrong. 'Africa,' ran the cliche, 'begins at the Pyrenees.' That is hardly true today. The road signs are the same as the French and, although the country stretches as far west as Ireland, the time zone is that of Berlin and Warsaw.

It is 20 years since I found myself chatting to a woman in Bilbao who told me that her father had not been able to speak to anybody in his home town, Pamplona, since the day Franco landed in 1936. On hearing the news over the radio while playing cards in a local bar, he said, 'That means trouble.'

From that moment he ceased to exist in the eyes of his friends. They joined the requetes, a fanatical army of Carlists, unorthodox monarchists, who supported Franco's cause and seemed even crazier than the African Legion which would marched into battle under the slogan 'Long live death and down with intelligence.'

The man went to republican territory; I asked his daughter what he did then.

'Oh, he became a Liberal Democrat,' she said.

'What did that mean?'

'It meant he shot everyone who wasn't'

Today, I imagine, that man and his one-time friends are reunited, the only irreconcilable differences are over the relative merits of football teams. The Spain of anarcho-syndicalism and clerical fascism has disappeared with the end of a nation that seemed to exist in a permanent corrida. Spain has become efficient, manana just means 'tomorrow.'

In Italy 500 ago there was a saying, mi venga la morte di Spagna - 'Let my death come from Spain.' It was a prayer, which, if granted, would guarantee for immortality. Today such a prayer would mean death delivered custom-wrapped by Federal Express in 24 hours together with a 'genuine hand-tooled morocco leather-bound coffin and miniature stainless steel-style Toledo sword replicas.'

The press holds few comforts for the traditionalist: the Letter from the Editor in El Mundo last Monday concerned the row in the Socialist Party and appeared under the headline, 'Both sides are right.' I could find only one remnant of Espana autentica in that edition of the paper. It was in a story headed, 'A source in the Ministry of Defence says that a woman is less stable than a man.' Many members of the armed forces do not accept a woman as an equal 'and still less would they take orders from one.' Somewhere the real Spain still exists.

James Morgan is economics correspondent of the BBC World Service.

QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page VIII 830
Minding Your Own Business, Press Review: Long haul in the spice trade - Clive Fewins on the slow growth of Fox's and its strategy for showing its wares Publication 930417FT Processed by FT 930417 By CLIVE FEWINS

SPICES bring variety to the life of the Pester family. When Mike Pester, now 59, bought the loss-making Fox's spices for a Pounds 200 25 years ago he inherited a business that owned one ageing Renault 4 van, sold a small range of herbs and spices, and had a trading loss of Pounds 25,000.

'It was a marvellous time to buy,' said Pester. 'The tax credit kept the Inland Revenue off my back for the first few years, I was gradually able to buy stock from the former parent company, and the van stayed on the road for another three years.'

At the time Pester was a salesman with the now defunct Cavenham Foods. Fox's spices, was part of the group's German operation.

Nowadays 'Mr Fox' as Pester is known throughout the trade, controls a company with nearly 400 product lines, 1,000 retail outlets, a workforce of 35, a fleet of 17 vehicles, and a turnover of just under Pounds 1m.

Fox's name is most in the public eye at large agricultural and other shows. Its wares can be sniffed out by foodies at some 50 shows, including The Royal Show and the Ideal Home Exhibition. Forty per cent of sales come from shows. The rest come from mail order, the trade, and retail sales.

Pester decided on the show policy in 1971. 'It was simple really,' he said. 'We found the sales of spices and herbs slumped in the summer because people refrained from eating heavier cooked meals and ate salads instead. At the time we had no product answer.

'But by selling at low prices direct to the public at shows we found the supplies they bought from us lasted a whole year and our loyal customers returned, rather than buying at inflated prices from their local supermarket in the interim period.'

The move into shows was the start of a period of expansion that has continued in spite of the recession.

'If anything the recession has done us good. More people are eating at home and using herbs and spices to make cheaper cuts of meat more interesting,' Pester said.

He also thinks that entry into the European Community in 1973 aided business.

'Food prices went up and the English housewife was forced to do what her continental equivalent had been doing for years - making cheaper meats more tasty by the use of herbs and spices.'

At the same time there was the large increase in the popularity of ethnic foods - both in restaurants and at home. Pester supplies herbs and spices to many of the shops and restaurants opened by Asian immigrants in Britain in the last 20 years.

The expansion of the company, which is jointly controlled by Pester, his wife Fay and son Andrew, 31, has been steady but unspectacular.

All this will change in May, when Fox's moves from the former village garage at Wilmcote, Warwickshire that has been home for the past 17 years, to a new headquarters in nearby Stratford-on- Avon.

The 12,000 sq ft former printworks will give Fox's four times the space it has in Wilmcote. Nearly all the extra space will be used because Pester plans to expand into 'wet mixes' or pastes. This will create at least half a dozen jobs.

Wet mixes will mean more raw materials arriving in huge sacks from the spice merchants which supply Fox's, but they will also mean a big saving on the 30 or so lines that the company buys ready mixed from a Dutch supplier.

These lines consist of bumbus, for cooking Indonesian dishes, and sambals, an Indonesian chili relish. An old Indonesian friend of Pester's, John Stekkinger, who works in the Netherlands, will be on loan for a few weeks to help commission equipment and to work on the new mixes.

The cost of importing heavy, ready-mixed spices is high. It is also expensive to mail the wet mixes in glass jars and these can break. Fox's post the sambals and sauces in glass jars but Pester and his team are looking at other methods, such as the plastic vacuum packs for mailing the mixtures.

'The gains from the expansion will rapidly pay off the cost of the bridging loan we took out at the end of last year to cover the period between the purchase of the new building and the eventual sale of the Wilmcote premises,' he said.

'Making everything we sell is the obvious way to go. In addition it gives us better quality control and more chance to develop new lines and means of presentation, notably converting some of the dry mixes, for which we have a excellent reputation, into wet mixes.' Novel methods of exploiting the mail order market will be the other top priority in the new building.

'We have three representatives more or less permanently on the road in vans and estate cars,' Pester said. 'Delivering a small order to a far-flung place can be uneconomic, so we plan to make more use of professional carriers and to use our sales force more to develop accounts with large caterers and public bodies.

'Combined with the greater space available to expand our mail order section this is the way we see the business going for the next few years.'

Fox's Spices, Aston Cantlow Road, Wilmcote, Stratford-on-Avon, Warwicks CV37 9XN. 0789-266420. Free mail order catalogues are available.

Fox's Spices GB United Kingdom, EC P5499 Miscellaneous Food Stores P5963 Direct Selling Establishments CMMT Comment & Analysis P5499 P5963 The Financial Times London Page VIII 959
Finance and the Family: Investments with a sense of Balance - A sector that looks attractive for first-timers Publication 930417FT Processed by FT 930417 By PHILIP COGGAN

THE UK Balanced sector might seem attractive for investors making their first move into unit trusts. Funds invest in a mixture of bonds and equities and, accordingly, tend to have a relatively high yield - which can be made even more appealing in a personal equity plan.

As a sector, UK Balanced ranked eighth of 21 in the industry over the three years to April 1, with the average fund returning 24.9 per cent (offer-to-bid with income re-invested); and seventh of 20 over 10 years, with an average return of 284.2 per cent.

To qualify for the sector, a fund must have no more than 80 per cent of its portfolio in either shares or fixed interest. This gives the manager a lot of latitude. At the most conservative end, the fund could have 80 per cent in gilts and the rest in utilities such as water stocks. But an aggressive manager could have 80 per cent in equities and the rest in convertibles.

So, first-timers need to choose a fund which meets their own risk preference. Unit trust managers should be prepared to send potential investors an annual report, setting out the fund's policy.

The best performer in the sector over 10 years is Henderson Extra Income. Manager Kate Medd tries to run it for the private investor: her portfolio is split 80 per cent equities and 20 per cent bonds and she tends to favour high-yielding shares, a section of the market which has performed well over the past few months.

Over three years, the fund is 17th of 33 and it has an above-average performance over both one and five years. The present quoted yield is 5.06 per cent.

Over the short term, the best performer is Perpetual High Income. This fund is top over both three and five years and second over one year. Neil Woodford, who runs it, says the maximum 80 per cent is invested in equities. The trust holds more than 80 stocks, with no position worth more than 5 per cent. In terms of selection, it has been recovery-oriented.

Although Woodford admits the move into recovery stocks might have been premature, it meant the fund was well placed for the market's post-ERM change of direction. The trust has moved gradually into an overweight position in medium and smaller sized companies, which also has improved its showing in recent months.

Perpetual's performance - which has won it a number of fund management prizes - brought in a lot of funds from Pep investors at the end of the 1992-93 tax year. Micropal quoted its size on April 1 as Pounds 62m, but Woodford says the valuation is Pounds 95m now. The latest quoted yield is 4.52 per cent.

N&P's Higher Income trust is second in the sector over three years and top over one year. The trust is managed by Capel-Cure Asset Management (which also runs the highly successful Capability Growth and Capability Special Situations trusts).

Crispin Finn, co-manager with Leonard Klahr, says it does not own any conventional bonds but has a mixture of equities and convertibles. The trust takes a contrarian view and has benefited from its holding of recovery stocks. At Pounds 3m, it is small, but funds are flowing in with the help of the link to the National & Provincial building society. The present quoted yield is 5.07 per cent.

Gartmore's High Income fund is third in the sector over 10 years. Ross Watson, the manager, says it has a 35 per cent weighting in fixed interest; it switched into these because of a disappointing performance from high-yielding shares. The fund has a below-average performance over one, three and five years. Its latest quoted yield is 5.02 per cent.

The launch of three funds with a bond-equity mix earlier this year indicates this is a sector of the market which is likely to grow. Broadly speaking, the higher the proportion of bonds, the greater the yield and the more attractive the fund is to income-seeking Pep investors. A maximum of 49 per cent can be held in bonds for a trust to qualify for Pep status.

Cazenove's Bond and Utility fund, which has a 7 per cent yield, should appear in Micropal figures for the sector next month. But M&G's Managed Income trust, although it will have a bond-equity mix, is classed in the fund of funds sector and Fidelity's High Income fund will be classed under UK equity income. The vagaries of unit trust classification do not make the investor's life any easier.

----------------------------------------- BEST UK BALANCED TRUSTS OVER 3 YEARS ----------------------------------------- Fund Percent growth ----------------------------------------- Perpetual High Inc 63.6 N&P Higher Inc 48.4 Buckmaster High Inc 48.1 Arkwright Inc 40.8 Brit Life High Yld 40.8 ----------------------------------------- Source: Micropal. Offer-to-bid with income reinvested over period to April 1. -----------------------------------------

----------------------------------------- BEST UK BALANCED TRUSTS OVER 10 YEARS ----------------------------------------- Fund Percent growth ----------------------------------------- Henderson Extra Income 382.3 Lloyds Bank Extra Inc 346.5 Gartmore High Income 327.4 Midland High Yield 313.7 CU PPT Mthly Income 313.5 ----------------------------------------- Source: Micropal. Offer-to-bid with income reinvested over period to April 1. -----------------------------------------

GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis P6726 The Financial Times London Page VII 895
Finance and the Family: Mortgage gloom for the self-employed / A look at the limited options available Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

AS MORTGAGE lenders sit poised waiting for a housing market recovery, the self-employed and those whose earnings are not regular are finding it no easier than before to get a loan.

Lenders who had their fingers burnt in the credit-happy 1980s are understandably more cautious. The weak housing market has hit their own mortgage books, while the recession has made them extra careful about the prospects for those who run their own business or depend on commission income.

Ian Darby, of mortgage broker John Charcol, believes the clampdown could have gone too far. 'A gradual process which started two years ago is now reaching its peak,' he said. 'It is a very tough market for the self-employed.'

Some types of lending are no longer obtainable - including 'non-status' loans, where lenders were prepared to grant up to 65 per cent of a home's cost without references. These mortgages, regarded now as the most irresponsible of all, disappeared in the mid-'80s.

'Self-certification' loans have diminished, too. These involved applicants putting up a large deposit - usually 25 or 30 per cent of the loan - and giving details of their income or spending. The lender would not normally seek to verify income but would want to see a previous credit reference. While variants on this type of loan remain available, they are sparse and mostly from centralised lenders.

For self-employed applicants, the standard minimum demand from the large building societies is to see three years' fully-audited accounts. 'That time scale gives them time to become established, and indicates to us the income they are taking from the business,' said the Halifax building society, Britain's biggest lender. 'We would expect a regular income from the business by the third year - that is what we are interested in.'

The Halifax will consider giving a loan to those whose business has been running for three years but can produce accounts for only two. It will not accept those working on commission. But Alliance & Leicester says that if the commission is regular, it will consider a maximum loan based on half the annual commission earnings.

Abbey National, the second-largest lender, says it wants proof the self-employed can afford to make regular payments. It also requires three years' audited accounts, but says there is flexibility in cases where the company has been formed because of a split. Abbey adds: 'We take a view on the business too, - we look for signs of how robust it is.'

Ian McKenna, of mortgage broker Blyth McKenna, says some people may find that the bank handling their business deals might consider providing a mortgage on more flexible terms than the societies. And some of the centralised lenders - which fund their businesses through the wholesale markets instead of deposits - may be willing to give loans on less rigorous terms than the societies.

Centrebank, a division of Bank of Scotland, has a 'special status' loan for those with a minimum deposit of 30 per cent. Applicants state the nature of their employment and the bank will take up a previous lender's reference (although first-time buyers will also be considered) and a bank reference. It would not usually want confirmation of income. The application fee is Pounds 200.

Self-employed people wanting more than 70 per cent of the purchase price need to provide a letter from an accountant stating their income for the previous three years, and a set of the past year's accounts.

Capital Home Loans, the UK mortgage arm of Credit Foncier de France, does not ask for detailed accounts although it will contact the accountant to verify the details supplied by the self-employed person - who must have been in business for at least three years.

The maximum proportion lent will be 75 per cent of the value of the house, up to Pounds 150,000. Re-mortgages also are considered, to a maximum of 70 per cent of the value. The completion fee is Pounds 175 and the mortgage-holder pays a quarter percentage point above the present standard variable rate of 7.95 per cent. But first-time buyers are not eligible.

Earlier this month, Prudential launched a mortgage for the self-employed. It requires a letter from the accountant confirming that the business has been trading for 12 months and that the applicant can afford the payments. The loan is for a maximum of 75 per cent of the purchase price and there is an arrangement fee of Pounds 250. While the interest rate is 9.8 per cent, the Pru says this is due to come down soon.

The Bank of Ireland and UCB also accept self-employed people on flexible terms. However, the choice in the market is not wide.

McKenna blames the problem generally on 'a knee-jerk reaction to what has gone on in previous years when lenders generally abused the non-status facility in order to gain market share.' He adds: 'Those picking up the tab now are the good customers in the self-employed market.'

Halifax Building Society Abbey National Centrebank Capital Home Loans GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents P6021 National Commercial Banks TECH Services & Services use CMMT Comment & Analysis P6162 P6021 The Financial Times London Page VII 893
Finance and the Family: Pension opt-outs soaring Publication 930417FT Processed by FT 930417 By BARBARA ELLIS

MANY companies affected by the recession have, unofficially, stopped contributing to their pension schemes. But this problem can be hidden from scheme members and stay beyond the reach of watchdogs.

When selling group pension schemes to company directors, insurance companies commonly emphasise the flexibility allowed over payment of contributions. 'It's all part of the sales patter, particularly in money purchase schemes,' said one pension sales executive this week. 'You control the costs, you have flexibility. If profits are down next year, it doesn't matter - skip a year.'

This message had been put into practice often during the recession, he added, with the result that up to two years' worth of pensions contributions could have been missed before the insurance company took any effective action.

'When a company gets into difficulties, pension contributions can be a good source of additional cash flow,' said Mike Hayhurst, product development manager at Save & Prosper. 'It might be a short-term thing and the contributions turn up (eventually).'

Hayhurst said that to avoid problems of this kind getting worse Save & Prosper now shut down any pension scheme where contributions have gone unpaid for three months, and told scheme members.

S&P has also recently negotiated a change of practice with the Occupational Pensions Board, which monitors the adequacy of pension scheme resources.

'We feel the OPB really does not have any teeth,' said Hayhurst, explaining that the board's only sanction was to withdraw the certificate allowing a scheme to contract out of the state earnings-related pension scheme (Serps).

Now, instead of simply reporting to the OPB that a company pension scheme had gone into arrears on its contributions, and leaving matters to seep through the usual channels, Save & Prosper made a direct request for removal of the contracting-out certificate. 'At that point, members' rights in Serps are at least restored,' Hayhurst added.

Meanwhile, 60 members of the CTU Limited pension scheme, some past pension age, have experienced the perils of the normal procedures. More than 2 1/2 years after their company went out of business, they have no firm news of their pensions.

The CTU scheme was set up in 1988, to be operated through Eagle Star. CTU fell Pounds 60,000 short in its pension contributions in 1988, and missed a further Pounds 170,000 in 1990. None of this was known to members at the time.

Eagle Star says it reported the missed contributions to the OPB several times but the board did not withdraw CTU's contracting-out certificate until after the company had gone into receivership in June 1991.

Independent Trustee Services Ltd, which was appointed as independent trustee by the receivers at the start of 1992, has been involved almost ever since. Director Chris Martin described it this week as a Catch 22 situation. 'The OPB has been asking us to state that the assets of the scheme are sufficient to cover the guaranteed minimum pensions,' he said.

'We have told them we can't do that because we suspect they are not. They say that if we can't give that assurance, then we can't wind up the scheme.' It also meant the trustees could not switch the scheme's assets out of Eagle Star's unitised fund and into cash or gilts.

Martin said the OPB finally had agreed to accept a statement from an actuary that the assets would be sufficient to pay the premiums to get the members back into the state scheme. But he pointed out that this all might change if a successful claim could be made on the Department of Employment for up to one year's worth of missed contributions.

This claim would have to be made with the help of the Official Receiver, with whom negotiations are in progress. But Martin warned: 'That is a long way from getting a claim processed.'

GB United Kingdom, EC P6371 Pension, Health, and Welfare Funds NEWS General News P6371 The Financial Times London Page VI 669
Briefcase, Q&A: No right to allowance Publication 930417FT Processed by FT 930417

I AM A basic-rate taxpayer aged over 65. My total income for tax purposes is about Pounds 20,000 and I do not receive an age-related personal or married couple's allowance. My wife is a 20 per cent band taxpayer aged over 65 with a total income of about Pounds 4,500. She does get a personal age allowance.

1. Am I right in thinking that I still cannot have an age-related personal or married couple's allowance? 2. If I am right, and if I were to transfer my Pounds 1,720 married couple's allowance to my wife, would this then become a Pounds 2,465 married couple's age allowance for her in 1994/95? (being too late to apply for 93/94).

3. On a different subject, am I right in thinking that the new advance corporation tax rates in 1993/94 and in 1994/95 onwards apply to income from equity-based unit trusts as well as to share dividends (but not to interest from banks or building societies)?

1. Yes.

2. No.

3. Yes.

Ask your tax office for a copy of the free pamphlet IR121 (1992) (Income tax and pensioners). Pamphlets IR80(1192) (Income tax and married couples) and IR90(1989) (Independent taxation - a guide to tax allowances and reliefs) may also interest you.

NB: This reply has been written before publication of the Finance (No 2) Bill, which received its first reading in the House of Commons on March 22).

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All enquiries will be answered by post as soon as possible.

GB United Kingdom, EC P6282 Investment Advice NEWS General News P6282 The Financial Times London Page VI 291
Briefcase, Q&A: Change of ownership Publication 930417FT Processed by FT 930417

MY SON and I own a three-bedroom holiday house in Wales. But I am 91 and my wife 90 and we are no longer able to go. I am considering giving my half share to my daughter-in-law. How should I do this? Also, I have two sons, five grand-children and one great grand-child. Are there advantages in forming a family trust?

You could give the home to your daughter-in-law, or in trust for your children and grandchildren. For inheritance tax purposes, if you gave it away but continued to use it without paying rent, you could be caught by the 'gift with reservation' rules. But if you can no longer use it, you are no longer getting a benefit from it and the gift can be made without these rules applying. The effect of the gift with reservation rules would be that the property would stay in your estate for IHT purposes even though you had given it away.

Should you die within the next three years, the value of the gift will become chargeable to IHT. But if property values increase over the next few years, then the increase in value will escape IHT. Once you have survived for three years, then tapering relief would apply. But this might not be helpful as the gift could be covered by your nil rate band, so other assets in your estate would be subject to IHT at the full rate. For the gift to create the IHT savings you propose, you would need to live for seven years so that the gift becomes exempt fully.

It might be worth considering other assets in your estate which could be gifted. It would be possible for these to be transferred into a trust for the benefit of your children/grand-children.

One of the drawbacks of giving property is that, if the value of the property increases in the future, there could be capital gains tax disadvantages. If your daughter-in-law were to sell the house at some future time, the probate value might be higher than the present value so less CGT would be payable. You need to weigh possible IHT savings against potential CGT disadvantages.

This reply was provided by Barry Stillerman of Stoy Hayward.

No legal responsibility can be accepted by the Financial Times for the answers given in these columns. All enquiries will be answered by post as soon as possible.

GB United Kingdom, EC P6282 Investment Advice NEWS General News P6282 The Financial Times London Page VI 426
Finance and the Family: Making CGT work for you - Philip Coggan considers the pros and cons of a new tax-efficient investment trust Publication 930417FT Processed by FT 930417 By PHILIP COGGAN

THE ANNUAL capital gains tax allowance of Pounds 5,800 is one of the great unexploited tax breaks. Scottish fund management group Ivory & Sime will launch a new investment trust in May which will use the CGT allowance to offer investors a 7 per cent tax-free income, paid monthly.

Investors in the trust - Ivory & Sime ISIS - will earn their income by monthly sales of shares. Over the long term, the stock market tends to rise at a rate greater than 7 per cent. Thus, Ivory & Sime believes investors can receive their income without depleting their capital long term.

If investors have not used up their CGT allowance elsewhere, this monthly income plan is highly tax-efficient. A basic-rate taxpayer who gets Pounds 5,800 of dividend income will pay Pounds 1,160 in tax; the higher rate-payer will pay Pounds 2,320. But there is no tax to pay on the first Pounds 5,800 of capital gains. Put another way, this 7 per cent income is equivalent to 9.33 per cent gross from the building society for basic rate-payers.

Another point in favour of the monthly income plan is that there are no initial or annual charges; nor are there any dealing costs when selling shares. And the trust does not need to invest in high-yielding (and possibly low-quality) stocks for investors to earn their income. ISIS will buy growth stocks in the FT-SE 350 index and will have a below-average portfolio yield, giving scope for capital growth.

One potential snag is that the steady sale of shares by income investors will create an ever-widening discount. But I&S hopes to get round this through its monthly savings scheme, which will offer a loyalty bonus (in the form of warrants) for those who put money away for a full year. It hopes the added value provided by the warrants will lure enough people into the savings scheme to provide a regular demand for shares and eliminate the discount problem.

Like the monthly income plan, there are no initial or annual charges. The savings plan does not pay income but, for those who are likely to pay CGT, there is a Pep option at no extra charge. Those who buy shares in the trust will receive no conventional dividend income. Instead, the future dividend income stream is being sold to institutions in the form of convertible annuity shares, with a seven-year life.

There are two advantages to this structure. The first is that the sale of the future income stream generates cash up-front which immediately boosts the asset value of the ordinary shares. The second is that the annuity shares absorb Ivory & Sime's annual management charge.

It all sounds too good to be true, so what could go wrong? If there were to be a repeat of Black Monday, or a prolonged bear market, investors could find they were rapidly eating up capital to provide their income. This could also occur if I&S managed the portfolio badly and underperformed the market substantially.

The existence of the warrants will also have a dilutive effect on the net asset value per share performance - but Ivory & Sime argues that, since the warrants are available only to monthly savings investors, the dilution will be small.

Probably the biggest question is whether the structure will work and enough monthly savings plan investors will be found to buy the shares sold by the monthly income investors. If that does not happen, shares will have to be sold at a discount to pay the income, which could erode investors' capital.

Still, this is an ingenious, low-cost and tax-efficient scheme. As Robin Angus of County NatWest has argued, investors should concentrate on total return rather than aiming for high income alone. This trust gives them a way of doing so. You could argue about whether it can be classified as a split capital trust. What is certainly true is that there are no classes of shares with a prior claim on its assets; thus, the ordinary shares represent a 'clean' investment.

Full details of the trust will not be available until next month but a helpline is open on 0800-441 441.

Ivory and Sime GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis TECH Products & Product use P6726 The Financial Times London Page VI 753
Finance and the Family: Proof that he who ventures wins - Philip Coggan examines the record of Pantheon International Participations, which profits from a somewhat esoteric strategy - Investment Trusts Publication 930417FT Processed by FT 930417 By PHILIP COGGAN

ONE OF THE best-performing investment trusts over the past year could well be one of the least known.

Indeed, the trust's name, Pantheon International Participations, or PIP for short, does not give much of a clue as to what it does - investing in other people's venture capital funds.

This rather esoteric-sounding strategy has been fairly successful in recent times - according to Micropal, it was the fourth best-performing non-split capital investment trust over the year to April 1 (mid-market to mid-market with income re-invested) with a rise of 93.5 per cent.

It was top of the venture capital sector over that period and third over both the three- and five-year periods.

What is the rationale for PIP's investment policy? Most venture capital trusts buy direct equity holdings - but this can involve them in a lot of hands-on management if the companies get into difficulties. PIP avoids that problem.

Furthermore, PIP's policy means its portfolio is highly diversified. Each of the funds in which it invests has a wide range of holdings - so the damage caused by the failure of any one company is much smaller.

Other venture capital trusts, such as Drayton Consolidated, have been hit badly by prominent corporate collapses.

PIP also can benefit by buying so-called 'secondary interests.' Many venture capital funds are launched on a private basis, with fund managers persuading a number of institutions to participate.

If one of those institutions then wants to sell, PIP can acquire their holdings. And given the lack of alternative purchasers, usually it can buy at a discount.

Some of the recent uplift in performance, however, has come from a special factor. In February 1989, the trust purchased approximately Pounds 20m of unquoted assets from the water authorities.

The bulk of the consideration was in the form of convertible loan stock. This had a nominal rate of interest - 3 per cent - which was rolled up to allow the water authorities to purchase more ordinary shares when conversion became profitable.

Since then, the water authorities have been replaced as owners of the convertible by the National Rivers Authority, which decided it wanted to realise the convertible for cash. PIP has agreed to buy it back, but at a discount to face value.

This resulted in a double boost to net asset value per share - the value of the debt fell and the prospect of the creation of a large number of new shares disappeared.

But there is hope of a more fundamental pick-up in net asset values as the US and UK economies recover. Venture capital funds tend to lag behind the quoted sector. Valuations are based on the previous year's profits, and thus will reflect the depressed conditions of 1992.

Stock market investors already are anticipating the increases in profits in late 1993 and 1994; eventually the unquoted sector could catch up.

Of course, the whole issue of valuation is one which has dogged the venture capital sector. Investors have been disillusioned as managers have written down their previous valuations in response to bad news.

The result has been that trusts have traded at wide discounts to net asset values - 33 per cent in the case of Electra, the biggest trust in the sector. (PIP stands at a 20 per cent discount.)

PIP says it scrutinises the valuations given by the managers of funds in which it invests - and applies a discount if necessary. It never increases the manager's valuation.

But Lewis Aaron, investment trust analyst at SG Warburg, says that PIP has in the past bought portfolios at a discount and then written up the holding to asset value. 'That is not necessarily a conservative approach,' he points out.

He stresses, however, that manager Rhoddy Swire probably has the best knowledge of US venture capital funds of anyone he has met.

The group has a large concentration of its portfolio in the US, where the venture capital market is more developed than elsewhere.

At June 30 1992, its UK content was 43.8 per cent (funds 27.2, unquoted 8.4, gilts 8.2) and the US portion was 51.4 per cent (funds 44, unquoted 5.8, quoted 1.6). Japanese and continental funds made up the remainder.

PIP's largest 10 investments at June 30, 1992 were: Juno International Participations; Scotia Holdings; Sequoia Capital IV; Grosvenor Technology Fund; Apax Ventures II; New Enterprise Associates III; APA Excelsior Venture Capital Holdings (Jersey); Southwest Enterprise Associates; Fleming Ventures; and East of Scotland Industrial Investments.

The trust was floated in September 1987 as GT Ventures. Although it was launched a month in advance of the crash, it did not invest any money before Black Monday, and so was unaffected by the stock market turbulence that followed.

Since then, Swire has set up an independent management company, Pantheon, to run the trust. GT sold its remaining holding in Pantheon last year and the trust's name was accordingly changed from GT Venture.

Any venture capital fund is risky, and PIP is not for the cautious or for the short-term, investor.

Warburg's Aaron says the trust might be attractive to those who believe, like him, that it is quite a good time to be exposed to the US venture capital sector - particularly in view of the stimulus package proposed by President Bill Clinton.

Key facts

At the end of December, the trust's gross assets were Pounds 35.3m and the net assets were Pounds 27.8m. As of April 14, the trust's net assets per share were 176.1p, according to NatWest Securities. At 142p, the shares were trading on a discount of 19.6 per cent and a yield of 2.2 per cent.

Board

Thomas Griffin, chairman, was one of the founders of GT Management. The other directors are: John Brakell, the manager (venture capital) at Postel Investment Management; Alain Lefebvre, a director of a number of continental investment companies; Richard Stanley, a director of Friends Provident; Lionel Sackville, chairman of Union Jack Oil; and Swire.

Savings scheme and Pep details

Pantheon has no savings scheme and does not qualify for Pep status.

Pantheon International Participations GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis P6726 The Financial Times London Page V 1069
Finance and the Family: Directors' Transactions Publication 930417FT Processed by FT 930417 By COLIN ROGERS, Directus Ltd

THIS WEEK'S table is dominated by directors taking advantage of the new tax year to exercise and sell options. The large sales by nine of the directors of Steel Burrill Jones, the insurance broker, included disposals by Hugh Armytage, Kevin Grant-Dalton and David Low, who sold Regis Low to SBJ and, under the terms of the sale agreement, were entitled to sell 928,555 shares on or after January 7 1993. They have now sold most of these. Six other directors sold various amounts of stock while the three non-executive directors, including the chairman, made small purchases.

Over the past 18 months, the directors of Rathbone Brothers have sold shares to satisfy demand from the market; and the recent disposals by four of them leave the board still owning about 34 per cent of the issued ordinary shares.

Shares in Granada Group, the television and leisure company, have continued to perform well. The recent exercise and sale of options by Graham Wallace at prices between 393p and 402p, follows purchases by Charles Allen of 100,000 shares at the end of March and 85,000 in August at prices of 350p and 235p, respectively. Last week also saw an announcement that the finance director had purchased 10,000 at 398p.

------------------------------------------------------------------------ DIRECTORS' SHARE TRANSACTIONS IN THEIR OWN COMPANIES (LISTED & USM) ------------------------------------------------------------------------ No of Company Sector Shares Value directors ------------------------------------------------------------------------ SALES ------------------------------------------------------------------------ BAA Tran 6,500 51 1 Cable & Wireless Tele 30,500 218 2* Cater Allen OthF 14,435 68 1* Daily Mail & Gen A Med 7,250 660 1* FII Group Misc 13,772 62 1* Glynwed Intl Metl 28,125 69 1* Grampian Holdings Cong 18,000 21 1 Granada Group H&L 36,772 147 1* JIB InsB 90,000 174 1* Johnson Matthey Metl 5,881 26 1 Johnston Press Med 5,000 26 2 Logica Elns 14,000 29 2 Low & Bonar Nil Pd Pack 275,000 575 1 MB Caradon Cong 377,354 1,116 2* Molins EngG 16,182 77 1 NFC Variable Voting Tran 9,168 23 1 Northumbrian Water Watr 19,900 129 2* P & O Tran 5,200 30 1 Porvair Chem 15,000 31 1 Prism Leisure Corp H&L 40,000 43 2* Rathbone Brothers OthF 80,000 213 4 Schroders Merc 40,000 592 1* Southern Water Watr 12,000 66 1 Spear (JW) & Sons Misc 8,000 38 1 Staveley Industries OthI 28,416 67 1* Steel Burrill Jones InsB 1,031,989 2,415 9

TT Group EngG 24,000 62 1 Wessex Water Watr 23,889 153 2 Wilson (Connolly) C&C 10,000 16 1 ------------------------------------------------------------------------ PURCHASES ------------------------------------------------------------------------ Baltic OthF 742,823 517 1 Cookson Group OthI 15,000 29 1 Erskine House Misc 202,000 62 4 Granada Group H&L 10,000 40 1 Johnston Grp BdMa 20,000 22 1 Mirror Group Med 50,000 54 1 Steel Burrill Jones InsB 20,845 48 3 Taylor Woodrow C&C 65,360 59 3 TI Group EngG 10,000 30 1 ------------------------------------------------------------------------ Value expressed in Pounds 000s. Companies must notify the Stock Exchange within 5 working days of a share transaction by a director. This list contains all transactions, including the exercise of options (*) if 100% subsequently sold, with a value over Pounds 10,000. Information released by the Stock Exchange 5 - 8 April 1993. ------------------------------------------------------------------------ Source: Directus Ltd, The Inside Track, Edinburgh ------------------------------------------------------------------------

Steel Burrill Jones Rathbone Brothers Granada Group GB United Kingdom, EC P99 Nonclassifiable Establishments COMP Buy-in & Buy-out P99 The Financial Times London Page V 572
Finance and the Family: Lender offers to explain - A credit confession by Barclaycard Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

BARCLAYCARD, which turns down almost half of new applicants for its credit card, is to explain to applicants its reasons for rejecting them.

Until now, issuers of credit cards have fought shy of disclosing too much information, claiming that this would make them vulnerable to fraudsters. Last year, however, Sir Gordon Borrie, Director General of the Office of Fair Trading, said lenders should be more open about their use of credit scoring - a technique used to decide whether to grant credit.

The system works by allocating points to various characteristics which the lender believes will help predict whether an applicant will repay credit. These include age, occupation and residential status. The total score is then used by the lender to decide whether to issue a card.

Barclaycard, which ran a pilot study on 3,000 people late last year, says it has decided to tell applicants why they failed the credit scoring process because it believes many creditworthy customers slip through the net. It hopes to accept thousands of new customers a year as a result.

'Being refused a new credit card must come to many customers as a shock,' said Bob Potts, managing director of Barclaycard. 'This new scheme is designed to explain why a card has been refused and will particularly help consumers whose ability to repay credit cannot easily be established from a standard credit card application form.'

Although there may be many areas in which a low overall score is made, Chris Tucker, of Barclaycard, says that one section may let down an applicant more than others. Pilot tests showed that the most common reason was an inability by Barclaycard to verify bank or building society details. This was not necessarily because of bad relations between an individual and their bank but because it was not the bank's policy to provide details.

Sometimes an applicant is refused because they have not made clear what their job is. A house move could also contribute to a low score because the applicant may not yet be on the electoral roll which Barclaycard would use to verify details of where they live.

'We've been asking card issuers for a long while to do this and we applaud Barclaycard for providing this improved service,' said Graeme Jacobs, of the Consumers' Association. 'We have always understood the need not to give away too many details but at the same time, applicants should be given an indication of the reason for their refusal.'

The credit scoring process is just one test which issuers run on an individual. Others include referral to a credit reference agency. Applicants turned down for a credit card because of the information supplied by a credit reference agency have a right to know its name and should contact the issuer within 28 days of refusal. The issuer will have to supply the name and address within seven working days.

Credit reference agencies have to make available to individuals the file they hold on them so long as individuals requesting information enclose Pounds 1 and their name and address.

Barclaycard GB United Kingdom, EC P6141 Personal Credit Institutions TECH Services & Services use P6141 The Financial Times London Page IV 554
Finance and the Family: The Week Ahead Publication 930417FT Processed by FT 930417

Associated British Foods, the bread to sugar group, reports interim results on Monday and is likely to show little change on the Pounds 175.2m pre-tax made in the comparable period. While baking margins are still under pressure, the group's British Sugar division is expected to have gained from the green pound devaluation.

Hammerson, the UK's third biggest property company, will on Tuesday reveal the damage inflicted by the collapse of the property market in the UK, Canada and Australia, its main markets. Analysts expect pre-tax profits to fall from Pounds 55.5m to around Pounds 43m, while net assets per share may fall from 637p to 470p. It is expected to unveil a cut in its 1992 dividend payout from 20.5p to 10p, as indicated by its interim results in October.

Smiths Industries, the defence and aerospace components group, is expected to report on Wednesday a drop in interim pre-tax profits from Pounds 44m to about Pounds 40m. Analysts believe restructuring could lead to exceptional costs.

Albert Fisher, the food processing and distribution group, reports interim results on Thursday, with City expecting a drop in pre-tax profits from Pounds 37.2m to about Pounds 25m. Some expect interim dividends to be reduced (1.85p last time).

Associated British Foods Hammerson Property Investment and Development Corp Smiths Industries Albert Fisher Group GB United Kingdom, EC P2061 Raw Cane Sugar P2051 Bread, Cake, and Related Products P6552 Subdividers and Developers, Ex Cemeteries P3728 Aircraft Parts and Equipment, NEC P3812 Search and Navigation Equipment P5149 Groceries and Related Products, NEC CMMT Comment & Analysis P2061 P2051 P6552 P3728 P3812 P5149 The Financial Times London Page IV 283
Finance and the Family: Brokers who fail to deliver the goods - Insurance intermediaries are sharply criticised in a new survey Publication 930417FT Processed by FT 930417 By RICHARD LAPPER

INSURANCE brokers are quick to recommend their services as the best route to obtaining value for money from home and motor policies, as well as good advice and service. But a Consumers' Association (CA) survey, published today, suggests that brokers and other intermediaries rarely deliver on their promises.

'The incompetence of some of the insurance intermediaries was truly alarming,' said Jean Eaglesham, head of money policy at the CA. 'Breaches of relevant codes were common and flagrant. Too many intermediaries claimed false status, offered inappropriate policies, and refused to answer legitimate questions.'

CA conducted the survey by sending anonymous CA researchers to visit a random selection of 82 intermediaries - brokers, who sell policies on behalf of a number of companies - and agents, who sell for a limited number of companies - in six towns - Rotherham, Chichester, Preston, Bolton, Norwich and Hemel Hempstead. Each of the researchers sought advice over the purchase of a home contents insurance policy. Their requirements were standard apart from two factors: an expensive portable computer (not used for business) and a possible absence on holiday of more than 30 days.

The conclusions of these interviews show that too 'often, intermediaries were incompetent and ill-informed.'

The survey shows that the majority of insurance intermediaries breached 'virtually all the provisions of the codes of practice which supposedly govern the sale of non-life insurance.'

Flagrant breaches of the codes of the Association of British Insurers, the industry trade association, and Insurance Brokers Registration Council included the following:

Sixty-five of the 82 intermediaries did not disclose the amount of commission they received, even when asked.

Many brokers did not state whether they were tied or independent. Some of the insurance sellers 'clearly did not understand the requirement to disclose their status: one even said that he did not know what being tied or independent meant.'

Only four intermediaries were able to hand over a full copy of the insurance policy they were selling. Most of the intermediaries surveyed did not appear to have a copy of their policy for their own reference, usually working from rating guides. One intermediary said as he handed over a policy document: 'Will you understand it? We don't'

Among other shortcomings highlighted in the report:

Intermediaries rarely warned buyers about the consequences of non-disclosure of information. Some 53 intermediaries recommended 'clearly inappropriate' insurance policies. Few intermediaries provided adequate information about policy details.

'In the majority of cases, terms with a distinct meaning under the policy, such as 'valuables', were left undefined . . . information on exclusions was virtually never volunteered . . . researchers were rarely warned of any excess (the part of any claim that the policyholder must pay).'

Most intermediaries asked too few questions to establish customers' needs - out of six possible questions (picked from typical proposal forms), 50 intermediaries asked questions in only one or two categories. 'It is therefore hardly surprising that whether policies were suitable (eg in terms of having few exclusions that would be a problem for the customer) appears to have been a matter of chance,' says the CA.

Concluding, the CA report pulls no punches. It says that although the insurance market is highly competitive, individual consumers are poorly placed to benefit without good information and good advice. 'At the moment, in too many cases, they are receiving neither, and instead are burdened with the costs of being sold unsuitable products,' it says.

GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service NEWS General News P6411 The Financial Times London Page IV 620
Finance and the Family: Protect yourself against school fee inflation - John Authers with timely advice on how to pay for your child's education Publication 930417FT Processed by FT 930417 By JOHN AUTHERS

PARENTS with children of school age must feel trapped between the devil and the deep blue sea.

The strife over national curriculum tests in the state sector is well-publicised. Meanwhile, the independent sector makes life harder for parents by continuing to increase its fees far faster than inflation.

According to a provisional estimate by the Independent Schools Information Service, fees have risen by 8 per cent in the last year - way ahead of earnings or price inflation. ISIS's figures show that in 1992 at the senior level girls day schools cost from Pounds 1,000 to Pounds 2,100 per term while boarders paid from Pounds 2,100 to Pounds 3,500. Boys' schools tended to be more expensive, with fees ranging up to Pounds 2,600 per term for day boys, and Pounds 3,700 for boarders.

If school fees inflation resumes at its average rate for the last few years of ten per cent, projections of the total bill sound alarming. According to Sun Life, educating a child born in 1992 at independent schools from the ages of seven to 18 would cost Pounds 310,000.

Perhaps it is not surprising that parents are resorting to desperation tactics.

Group Captain David Goucher, bursar of Bryanston, elaborated on some techniques in the latest edition of the Headmasters' Conference magazine: 'The common ploys, familiar to all bursars, for delaying the day of reckoning include the accidental misdating of cheques, an irate telephone call ten days into a new term complaining that the bill has not arrived and delivering dire threats if the next account includes a surcharge for late payment, computer breakdowns in the international bank credit transfer system, fees not yet released by trust funds, insurance companies and building societies, and, not least, the pathetically disabled duck excuse that the cheque must have been lost in the post.'

None of these techniques is recommended. It makes more sense to save in advance, which will lessen the burden of fees once you have to pay them, and to take out insurance against sudden falls in income.

It is also worth analysing what the school is intended to achieve. If you just want good exam results, then the best 'value for money', assuming your child is able to beat the competition, should come from big city single-sex day schools. They are cheaper than boarding schools.

Once you have decided on a school, you should find out from the bursar how much it will cost.

Parents who think that meeting fees will be difficult should ask the following questions:

How much help can the state provide?

The government-backed assisted places scheme will pay fees for children from low-income households. The amount of government help will depend on your family's 'relevant income', which includes the total pre-tax income of both parents, and any unearned income from dependent children. It does not include social security benefits, and an allowance of Pounds 1,105 is deducted for each child in the family who is not applying for an assisted place.

On this basis, families with income up to Pounds 9,056 are eligible to have their fees paid in full. Assistance for families on higher incomes is available on a declining scale. The maximum income you can have is Pounds 25,000. Parents interested in the scheme should contact the Department for Education Assisted Places team, Mowden Hall, Darlington, Durham DL3 9BG (tel. 0325 392163), which provides details of the scheme and the schools involved.

Can the school help out?

Several schools offer pre-payment plans, which can work out as offering better value than paying as you go along. The volume of fee income which arrives late leaves them feeling grateful for the improved cash flow. Some also have scholarship funds.

School schemes can be inflexible. Some, such as Harrow's, will allow you to transfer money to another school. Others will not.

Are the fees protected for the future?

This is most important if you have not saved in advance, and need to fund fees out of your regular income. Life term insurance for the main bread winner of the family, to last until the end of your youngest child's projected school career, makes sense and should not be expensive.

Permanent health insurance, to protect your income in the event of ill health, could be vital. ISIS has launched three schemes, administered by the broker Mason & Mason, to help when economic life gets tougher.

Future Term allows you to cover against death, disability, and redundancy (or bankruptcy for the self-employed) for the period of your child's education. The rates are expressed as a percentage of fees covered, and will increase at the end of June. They are - 1.5 per cent for death, 1.75 per cent for disability, and a maximum of 3 per cent for redundancy. The entire package would therefore cost 6.25 per cent of fees, and the scheme will not pay out if you are made redundant within 90 days of joining.

That is an individual scheme. Rates are lower if your child goes to a school covered by Feesure. This covers the fees against disability, redundancy or bankruptcy, again with a 90-day period at the beginning of the policy. It will pay out for a maximum of 12 months.

A scheme launched this week will be administered by schools. Educare will cover all fees against redundancy or disability for a flat premium of 1.5 per cent. The risk for the insurers is sufficiently reduced by covering so many parents that they can afford not to bother with the 90-day exclusion at the beginning of the scheme.

Contact ISIS on 071-630-8793, or Mason & Mason on 0625-529 536, for further details.

It is best, while you have time, and a high income, on your side to save capital to be protected against these problems. If that is no longer possible, there is no reason to allow independent education to become even less accessible by failing to take out protection.

GB United Kingdom, EC P8211 Elementary and Secondary Schools COSTS Service costs & Service prices P8211 The Financial Times London Page III 1043
Finance and the Family: Pibs may fit the bill - Scheherazade Daneshkhu considers fixed-interest instruments Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

FIXED-interest instruments are attractive against today's economic background of low inflation and relatively low interest rates.

To those looking for income, the fixed-interest market is able to offer higher yields than the building societies. Two of the most accessible fixed-interest instruments for private individuals are bond funds and permanent interest bearing shares.

Bond Funds

Bonds are simply IOUs where the issuer agrees to pay interest and to return the capital on maturity. But since they can be traded, their market price varies during their life.

They come in a variety of forms, the best-known in Britain probably being government-issued securities gilts).

Few people hold a bond from issue to maturity, and the price at which they buy it might not be the same when they sell. Most gilts trade 'above par value' (in the jargon), so there is always a risk of capital loss - the sacrifice for getting a higher income than might otherwise be available.

The relationship between the interest rate and the bond's price is measured by the yield. The running yield is calculated by dividing the interest rate by the market price. As prices rise, yields fall, and vice-versa.

Many people feel they lack the expertise to buy individual bonds and find bond funds a convenient alternative.

Most bond funds are unit trusts which, by investing in a portfolio of bonds, aim to provide the client with income and/or capital growth. Since investors must pay both initial and management charges, they will want to make sure the fund's performance makes up for the fees.

The table of the 10 largest UK bond funds with three-year records shows the yield and performance in terms of percentage growth.

Most of the funds listed invest in gilts but some, such as CU Preference, invest in the fixed-interest shares of companies.

Since companies can go bust and the UK government cannot, the increased risk of CU Preference is reflected in an above-average yield, but its performance - the lowest of the 10 - should caution investors not to look simply at the yield when choosing a bond fund.

Some funds might offer a high yield which is achieved purely by eating up capital. That might be attractive to some investors, but they should know what they are buying.

Investors should also be aware that profits from a bond fund are subject to capital gains tax - which is not the case if the investor had bought government securities directly.

Barclays Unicorn gilt fund, the largest, has both a high yield and the best performance over three years of the 10 quoted.

Apart from gilts, it also holds fixed interest securities in companies such as British Telecom and Barclays bank. The initial charge is 3.25 per cent on amounts up to Pounds 5,000 and reduces after that; the yearly fee is 0.75 per cent.

Not all bond funds aim to give a high income. Whittingdale's Short Dated gilt fund, which has the lowest yield - 3.5 per cent - of the funds listed, is aiming for capital growth through investment in short-dated, fixed-interest securities. But its performance is lower than the sector average, although it is top over five years.

Permanent Interest

Bearing Shares

These are issued by building societies to raise capital and are classified as debt. The market is small so far and began in July 1991 when Leeds Permanent launched the first issue.

Pibs pay a fixed income twice a year net of basic-rate tax. Any gains when selling are exempt from CGT. But they are deeply subordinated - which means that if the society collapsed, holders would be last in the line of creditors for repayment. These risks are reflected in the yields, which are higher than those for bond funds.

Since Pibs are irredeemable, the building society is under no obligation to repay the principal, so the original investment can be regained only by selling them.

Like bonds, the investor is exposed to the risk of a capital loss. So far, though, most holders have seen the value of their shares rise. Indeed, since we published a table last month showing prices at midday on March 11, all have risen - gently, in most cases. Skipton and Bradford and Bingley 11 5/8 have risen by 0.5p, while Bristol & West has seen a rise of just under 4p.

Yields have fallen correspondingly but are still some of the highest available on the fixed-interest market. Hoare Govett says that, of the Pibs on issue, it believes Bristol and West 13 3/8 is the most under-valued.

The society had a setback last year when interim results showed a 65 per cent fall in pre-tax profits, but it went on to register full-year figures which were down 42 per cent on the previous year. Hoare Govett says it believes the price for the Pibs fails to reflect the upturn at the full-year stage.

Next week: Returns from international bond funds

------------------------------------------------------------------------ LARGEST 10 UK FIXED INTEREST FUNDS ------------------------------------------------------------------------ Fund Size (Pounds m) Yield (%) Perf* ------------------------------------------------------------------------ Barclays Unicorn Gilt 115.4 8.95 50.6 Axa E&L Gilt 70.3 6.45 48.7 Midland Gilt & Fixed 61.1 7.05 45.9 Whittingdale Sht Dated 51.1 3.50 36.0 All Dunbar Govt Secs 44.3 5.20 37.0 CU Preference 38.9 8.16 32.1 Kleinwort Gilt Yld 35.1 8.00 43.5 TSB Premier Income 34.7 6.71 43.4 Manulife Gilt & Fixed 32.4 7.20 48.7 M&G Gilt Income 25.4 8.37 41.2 Sector average 15.1 6.78 39.2 ------------------------------------------------------------------------ Source: Micropal. Performance figures are offer-to-bid with income reinvested over 3 years to April 1. Funds without 3 year records are excluded. ------------------------------------------------------------------------

------------------------------------------------------------------------ PERMANENT INTEREST BEARING SHARES ------------------------------------------------------------------------ Stock Coupon Minimum Issue date (gross %) (Pounds) ------------------------------------------------------------------------ Bradford & Bingley 13.00 10,000 30/9/91 Bradford & Bingley 11.63 10,000 29/6/92 Bristol & West 13.38 1,000 11/12/91 Bristol & West 13.38 1,000 31/10/91 Britannia (1st) 13.00 1,000 13/1/92 Britannia (2nd) 13.00 1,000 8/10/92 Cheltenham & Gloucs 11.75 50,000 21/10/92 Coventry** 12.13 1,000 28/5/92 Halifax 12.00 50,000 23/1/92 Leeds Permanent 13.63 50,000 3/6/91 Leeds & Holbeck 13.38 1,000 31/3/92 Newcastle 12.63 1,000 8/9/92 North of England 12.63 1,000 23/6/92 Skipton 12.88 1,000 27/2/92 ------------------------------------------------------------------------

Issue price Price* Yield* (pence) (pence) (gross, %) ------------------------------------------------------------------------ Bradford & Bingley 100.20 127.50 10.19 Bradford & Bingley 100.13 113.75 10.22 Bristol & West 101.79 120.25 11.12 Bristol & West 100.34 120.25 11.12 Britannia (1st) 100.42 120.75 10.77 Britannia (2nd) 107.13 120.75 10.77 Cheltenham & Gloucs 100.96 112.50 10.44 Coventry** 100.75 115.50 10.50 Halifax 100.28 122.00 9.84 Leeds Permanent 100.00 131.50 10.36 Leeds & Holbeck 100.23 123.50 10.83 Newcastle 100.45 123.50 10.22 North of England 100.14 121.00 10.43 Skipton 100.48 114.75 11.22 ------------------------------------------------------------------------ Source: Hoare Govett. ------------------------------------------------------------------------ * Purchase price as at close of business on April 14; excludes accrued interest ------------------------------------------------------------------------ **includes stamp duty payable on Coventry pibs only ------------------------------------------------------------------------

GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P6162 P9311 The Financial Times London Page III 1178
Finance and the Family: FT Quarterly Review of Personal Finance - At a glance Publication 930417FT Processed by FT 930417

The recession may be easing, but redundancy continues. Increasingly, those who lose their jobs are middle-class professionals and executives, many of whom have found redundancy a mixed blessing, allowing them to embark on new careers. Meanwhile, steps can be taken to soften the impact, and to protect one's financial position during a traumatic period. The spring issue of the FT Quarterly Review of Personal Finance, to be published with next Friday's paper and repeated with Saturday's, suggests 10 sensible steps to take if the axe should fall. The Review also includes a survey on Investment Trusts.

GB United Kingdom, EC P2711 Newspapers NEWS General News P2711 The Financial Times London Page II 131
Finance and the Family: Happy Easter for smaller companies - At a glance Publication 930417FT Processed by FT 930417

Small company shares rebounded in the post-Easter week. The Hoare Govett smaller companies Index (capital gains version) rose 0.6 per cent, from 1366.19 to 1373.89, over the eight days to April 15.

GB United Kingdom, EC P6289 Security and Commodity Services, NEC TECH Services & Services use P6289 The Financial Times London Page II 72
Finance and the Family: Age Concern focus on rights - At a glance Publication 930417FT Processed by FT 930417

The charity Age Concern has designated April 19 - 23 'Your Rights Week' in an attempt to ensure that older people are made aware of all the benefits to which they are entitled. A book, Your Rights 1993-94, costs Pounds 2.50 from Dept YR3, Age Concern England, Astral House, 1268 London Road, London SW16 4ER.

GB United Kingdom, EC P8399 Social Services, NEC NEWS General News P8399 The Financial Times London Page II 91
Finance and the Family: Govett cuts minimum investment - At a glance Publication 930417FT Processed by FT 930417

John Govett is reducing the minimum investment on its Futures & Options Funds to Pounds 2,000 for postal dealings. Among the 18 funds are indexed funds on the US, UK, Japanese and European markets and bear funds which profit when those markets fall. Bull and bear funds are available on currency and bond markets. Charges vary from 4.5 per cent to 0.5 per cent initial and 1 to 0.5 per cent annual.

John Govett and Co GB United Kingdom, EC P6726 Investment Offices, NEC TECH Services & Services use P6726 The Financial Times London Page II 114
Finance and the Family: New trust from Axa - At a glance Publication 930417FT Processed by FT 930417

Axa Equity & Law has launched a new Balanced unit trust, which will invest in its range of funds. The initial charge is 6 per cent and the annual charge is 1.5 per cent - this allows for the charges on the underlying funds. The trust will qualify for Personal Equity Plan status, with no additional charges. The minimum investment is Pounds 1,000, or Pounds 60 per month. Axa Equity & Law is offering a 1 per cent discount on lump sum investments made before June 30.

Axa Equity and Law GB United Kingdom, EC P6726 Investment Offices, NEC TECH Products & Product use P6726 The Financial Times London Page II 129
Finance and the Family: Record high for Hang Seng - At a glance Publication 930417FT Processed by FT 930417

The Hong Kong stock market reached a record high this week as traders celebrated the resumption of talks between Britain and China on the colony's future. The Hang Seng index rose nearly 6 per cent on Wednesday to close at 6,789, before falling back slightly on Thursday and Friday. The news also lifted the shares of Hongkong & Shanghai Banking Corporation, owners of the Midland Bank, and a constituent of the FT-SE 100 index.

HK Hong Kong, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page II 111
Finance and the Family: Analysts divided over gold price direction - At a glance Publication 930417FT Processed by FT 930417

Gold prices wobbled this week after achieving a five month high on April 2. Analysts appear divided about whether the recent rises mean a rally in a bear market or the beginning of a new bull market. Ted Arnold, metals specialist at the Merrill Lynch financial services group, suggested that gold prices probably had bottomed out but thought it unlikely that prices would rise rapidly. 'There is little doubt that Asian demand would dry up very rapidly and we would expect to see selling by investment jewellery holders in both Asia and the Middle East,' he said.

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 II 145
Markets: Bond's the name, bank stock is the game - Wall Street Publication 930417FT Processed by FT 930417 By PATRICK HARVERSON

AS THEY say in the baseball park: 'It ain't over till it's over,' a point the New York Yankees learnt the hard way in the dying moments of two games against the Kansas City Royals this week. Like the Bombers from the Bronx, the US stock markets also got hit by a bolt from the blue this week - but this one did more good than harm.

Ten days ago, the bond market rally, which had proved a source of strength for equity investors for the best part of the year, looked to be over. The yield on the benchmark 30-year treasury bond, which had fallen to an all-time low of 6.72 per cent in early March, had jumped back up past 7 per cent and appeared to be heading even higher.

Fixed-income investors were selling bonds because they feared inflationary pressures were building up again in the economy.

The retreat unsettled equity investors, who had been looking to declining - or at least low - interest rates to provide fuel for economic growth for the rest of the year. Their concern peaked on April 2 when bond yields returned to 7 per cent and the Dow Jones Industrial Average gave up almost 70 points in one day, dropping below 3,400 in the process.

This week, however, everything seemed to go in reverse. Reassured by recent low inflation statistics, and pleased bythe news from the White House that President Clinton was prepared to compromise over his economic stimulus plan, treasury investors began buying bonds again and pushed the yield down to 6.71 per cent - the lowest since the government began regular auctions of 30-years in 1977.

The stock markets, delighted by this unexpected turn of events, rallied. In the 6 1/2 days since bond yields dropped back under 7 per cent, the Dow gained 75 points and is now trading above 3,450.

Not surprisingly, interest-rate sensitive stocks - banks, other financial companies and utilities - have been at the forefront of the rally. Undermined initially by fears of rising rates, they all have rebounded in recent days.

Bank stocks have been particularly buoyant, not just over the past week but for the entire year so far. The shares of a host of big commercial operators - including Citicorp, Wells Fargo, Chase Manhattan, BankAmerica, Banc One and First Chicago - all are trading at, or close to, their 52-week highs. Improved asset quality and impressive earnings momentum have contributed to the boom.

The improvement in earnings has been particularly spectacular - and industry-wide, judging by the first batch of quarterly bank reports out so far. Five banks posted the following percentage increases in their first-quarter earnings this week: First Union, up 158 per cent; First of America, up 125 per cent; NBD, up 94 per cent; Bank of New York, up 56 per cent; and Huntington, up 48 per cent. Anticipating such gains, investors have been buying bank stocks all year.

According to American Banker, the market value of the largest US banks jumped 12.3 per cent in the first three months of the year, and the publication's index of bank shares climbed 10.7 per cent in the quarter, nearly triple the gains achieved by the Standard & Poor's index.

JP Morgan has been among the very best performers in the sector. Yet, the New York group has ridden the coat-tails of the boom in brokerage stocks this past week, an indication that the market regards JP Morgan stock as just as much of a securities industry play as a banking play.

As one of the few US banks allowed to operate in the domestic securities markets, JP Morgan earns more from its underwriting of new debt and equity, and from its trading of securities and sophisticated derivative products, than it does from such traditional banking activities as lending. Its Wall Street-type business spurred the bank to pre-charge profits of Dollars 432m in the opening quarter, news of which helped to lift the shares Dollars 4 3/4 to Dollars 73 1/2 this week. Fortunately for JP Morgan, it is not identified so closely with brokerage stocks that when profit-taking hits the sector, as it did on Thursday, it gets trampled in the rush to sell.

In the first three days of the week, investors could not get enough of brokerage stocks. Another impressive quarter from industry leader Merrill Lynch, which unveiled record three-month profits of Dollars 342m, had sparked the buying.

By Thursday, however, there was a feeling that the buying might have been overdone and that it was time to take some profits in the sector. Even shares in discount broker Charles Schwab, which announced record earnings, were hit hard.

To borrow another baseball saying, it seems as if the Fat Lady has sung for brokerage stocks - at least for now.

Monday 3428.09 + 31.61 Tuesday 3444.03 + 15.94 Wednesday 3455.64 + 11.61 Thursday 3455.92 + 0.28 Friday 3478.61 + 22.69

US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page II 863
Markets: Sweating in the Crucible - The Bottom Line Publication 930417FT Processed by FT 930417 By RICHARD GOURLAY

TO REPORT profits bang in line with forecasts and then watch your share price tumble 20 per cent must be a chief executive's recurring nightmare. But this has happened at Morgan Crucible, the materials technology group. Its Pounds 61.3m profits, reported last week, triggered a 66p fall to 279p at the close yesterday.

Hurt and chastened, chief executive Bruce Farmer, whose acquisitive approach has built Morgan Crucible, continued with a walking holiday in Scotland while the company and its advisers prepared for a hard round of presentations to institutional investors. Their main concern is Morgan's apparent inability to generate cash. Implicit in this is the fear that Pounds 174m raised in two rights issues in 1990 and 1991 might not have been spent wisely.

But the catalyst for the sell-off last week was concern about the group's red-blooded use of acquisition provisions. The habit has been losing favour rapidly since the Accounting Standards Board proposed that most such provisions should be taken as expense items through the profits and loss account.

Morgan Crucible greeted the share price fall by pleading it was no worse than other acquisitive companies like Hanson - which set up more in provisions last year than it made in profit. But what distinguishes Morgan - with 'only' Pounds 17m of provisions - from Hanson is that gearing at the Anglo-US conglomerate is modest. Morgan has gearing of 67 per cent and will really have to battle to generate the cash to keep this under control.

Herein lies the rub. Morgan Crucible's plight is the result of several factors, none of which on its own is particularly new but which, together, were too much for the markets.

First, City analysts looked at what profits would have been had the ASB's rule changes been in place and the provision items been expensed to the P&L. Answer: Morgan Crucible would have had a dividend barely covered by earnings. Could the company sustain this over time? the market asked. What, if not the yield, was there to support the stock?

Then there was the poor cash flow. At operating margins of 10 per cent, the group is self-funding only if it makes no further acquisitions and cuts back capital spending in line with depreciation.

Had past provisioning led to a sharp increase in profitability and cash generation, the markets might well have been more forgiving. Finally, there was debt. Some of the jump in gearing was a result of translating dollar-denominated debt, and interest cover remains high. But even by selling Holt Lloyd, the car care products company, and some other lower margin companies for about Pounds 60m, debt might not fall dramatically. Investors are going to need some convincing that they are not going to be asked to stump up more cash in the near future.

Morgan Crucible recognises a cash call would not wash for some time. 'Before we can breath a word about any sort of fund-raising exercise, shareholders have a right to see an improvement in performance,' says Graham Swetman, finance director.

The market's short sharp shock might, therefore, have a good effect if Morgan does indeed focus on raising margins, squeezing cash from working capital and resisting the acquisition trail.

And there are other things going for it. It has cyclical recovery potential; the sale of Holt Lloyd would not only raise cash but increase the overall group operating margin; in the long term, the carbon and thermal ceramics business should be cash-generative, if not growth businesses; while technical ceramics and speciality materials - after some pruning - should be profitable growth businesses.

So, the prescription for Morgan seems clear. The greatest problem could be Farmer's sometimes overwhelming enthusiasm for technology, which might not always be good for profitability.

No doubt he will return, rejuvenated, from springing across the Scottish heather. He could find this energy being channelled firmly - by advisers, investors and some not too far from his own board - towards sweating the businesses he owns already.

Morgan Crucible GB United Kingdom, EC P3255 Clay Refractories P3264 Porcelain Electrical Supplies CMMT Comment & Analysis FIN Annual report P3255 P3264 The Financial Times London Page II 711
Markets: Steering a safe course offshore - Serious Money Publication 930417FT Processed by FT 930417 By PHILIP COGGAN, Personal finance editor

THE WORLD of the offshore fund is one which many UK investors choose not to explore. Certainly many funds are best suited to expatriates. But while the offshore market will not suit every domestic investor, it does have its peculiar attractions.

It is a mistake to think that by investing offshore, you are escaping the UK tax system. Resident UK citizens are liable to pay tax on all their worldwide income.

But offshore funds can pay income gross and this has a number of potential advantages. The first is that a non-taxpayer can receive a full income without the hassle of claiming back tax from the Inland Revenue.

Of course, for cash investors, this facility is now available onshore from banks and building societies. But onshore bond funds cannot pay gross income. Given that long term interest rates are now above short term returns, income-seeking non-taxpayers may well be attracted to offshore bond funds, which can. These funds frequently invest in Eurobonds, which pay interest gross.

The second potential advantage is that of cashflow. An investor who receives gross will have to declare income at the end of the tax year and may not have to pay tax for several months.

A so-called 'roll-up' fund allows the investor to postpone this tax payment for even longer. These are deposit-based funds which accumulate interest; tax is not paid until the income is repatriated. So the income compounds at a gross, rather than a net, rate; and investors could wait to repatriate their income until they fall into a lower tax band. This could benefit those about to retire.

But Graham Barker of Fidelity points out there are many other potential uses. A non-working spouse could earn exactly as much as their personal allowance; or children could accumulate income until they reach adulthood, and become entitled to their own personal allowance.

There is no tax reason for a UK investor to invest in an offshore equity funds, and in the case of UK equities, it can prove a disadvantage.

It is a golden investment rule that one should not invest purely for tax reasons: and two other factors are important, security and performance. The term 'offshore' may conjure up the image of the scandals created by Barlow Clowes, or for those with longer memories, Bernie Cornfeld.

But it would be wrong to assume that 'offshore' is the equivalent of 'shady'. There is an increasing tendency for funds which want to attract international investors to move offshore, often to Luxembourg or Dublin.

One reason is that UK tax laws do not allow onshore unit trusts to pay income gross. International investors do not want to receive income net of UK tax which must later be reclaimed.

As a consequence, many offshore funds are run by the same perfectly respectable names, such as Fidelity and GT, that sell unit trusts in the UK. One of the consequences of European integration is the creation of UCITS (Undertaking on Collective Investments in Transferable Securities) - funds authorised in one state which can be sold across the European Community.

Many such funds appear in the back of the Financial Times under the heading Managed Funds. If a fund appears under the heading 'SIB-recognised' that means the Securities and Investments Board, the UK's leading financial services regulator, has accepted that regulation in that centre is of an equivalent standard to that in the UK. Examples include Bermuda and Guernsey. The funds also have to satisfy the SIB that they are run in a proper manner.

If a fund comes under the 'regulated' heading, that can mean one of two things. The centre may have its own system of regulation, but SIB does not consider it equivalent to UK standard; or the fund managers have not gone through the rigmarole of getting UK approval (perhaps because they are not interested in the UK market). Such funds cannot be promoted in the UK.

The upshot is that if the fund is run by a well-known name, and is SIB-recognised, the investor has no cause to worry.

As for performance, there is no intrinsic reason why a fund should be better run offshore than onshore. Our sister publication Money Management lists rankings for these funds every month. It is important to note that some funds have a bid-offer spread (as in the UK); others have a single price, but add on an initial charge. As a result, funds are ranked on a offer-to-offer basis, and thus the performance shown is slightly better than the investor has actually achieved.

Offshore funds can offer a slightly wider range of investments. Martin Harrison of GT points out that onshore trusts are prevented from investing more than 10 per cent in 'emerging markets', not recognised by SIB. An offshore fund does not have this restriction. And many of the offshore currency funds represent a cost-effective way of getting exposure to a foreign currency.

But this is definitely a field where care and professional advice is needed. There are plenty of funds to choose from. As of April 1, Finstat listed some 1,762 funds under the offshore heading.

GB United Kingdom, EC P6726 Investment Offices, NEC CMMT Comment & Analysis P6726 The Financial Times London Page II 891
Markets: Sometimes, a Mars bar just isn't enough - London Publication 930417FT Processed by FT 930417 By PETER MARTIN, financial editor

LIKE those British walkers stranded in the Caucasus, the stock market has been getting by this week on a handful of Mars bars and a bit of melted snow.

Not surprisingly, it has failed to put on weight in the process: the FT-SE 100 index closed yesterday at 2824.4, up only 2.6.

The Mars bars were the week's tasty economic statistics; the melting snow came with indications that customer attitudes to price rises were thawing.

The most important economic figures were Wednesday's statistics for manufacturing output in February, which showed a 1.2 per cent rise over the previous month. The rise - the third successive monthly increase - took manufacturing output to its highest level for 18 months.

Other equally tasty indicators were a sharp improvement in business expectations of sales in the current quarter, recorded in a survey of 2,000 companies by Dun & Bradstreet; and a healthy rise in air traffic in March. Estate agents reported good business over the Easter weekend, traditionally the start of the year's house-hunting season.

Customers' softer attitude to price rises showed up in announcements from basic materials companies. British Steel announced its second round of price increases this year, after price rises implemented in recent weeks were accepted by customers. And RMC and Blue Circle said they planned to raise prices for building materials such as sand, gravel and concrete.

These signs provided welcome confirmation of the recovery the stock market has been expecting since sterling left the ERM seven months ago this week. They were greeted as appetising mouthfuls: the FT-SE 100 index jumped 25 points on Tuesday, the day the Dun & Bradstreet numbers were announced, and British Steel gained 16 per cent on the week, to close at 94 3/4 p. But the market is still looking for the more lasting sustenance that will allow it to move from the trading range in which it has been trapped since January.

Perhaps it has been looking in the wrong place. That is the implicit message of the equity analysts at SG Warburg Securities, who point to an apparent irrationality in the way investors have been treating different sectors.

The chart shows the best performing sector of the past seven months, Contracting and Construction, which has outperformed the FT-Actuaries All-Share index by 45 per cent since Britain left the ERM. Some of the individual stocks in the sector have doubled.

The Warburg analysts point out, though, that there is as yet no evidence of construction activity recovering. Any revival in housebuilding, they say, is likely to be swamped by further falls elsewhere. 'This must raise questions about the scale of the rally in the construction sector since last autumn,' they add.

Other sectors where there is more substantial evidence of economic improvement have yet to show the same stock market performance. The big gainers in terms of manufacturing output, according to Wednesday's figures, have been the pharmaceuticals and computer industries. Capital equipment producers have also done well: investment goods output was 2.6 per cent higher in the first quarter of 1993 than in the preceding three months, and 4.1 per cent higher than a year ago.

In stock market terms, though, there is little sign of companies in these sectors significantly outperforming their peers. Indeed, the pharmaceuticals companies continue to be the market's dogs, as evidenced by Glaxo's 3.3 per cent fall in heavy volume on Tuesday merely because US fund manager told a New York magazine that he disliked the stock.

The Warburg analysts put down these anomalies to investors' recent obsession with high-yielding shares, an enthusiasm which they view as misplaced, since there is little dividend growth to come from such companies in the foreseeable future. 'At best many of the sectors and stocks which have led performance tables recently are perhaps best regarded as 'fixed interest' securities in yield terms,' they say, rather sniffily.

The comparison with bonds is an interesting one, since it goes some way to explain what has happened since September. The stock market slid last summer after its post-election rally because it had started to fear that sterling's ERM membership would prove a Doomsday machine for British industry.

Devaluation dismantled the machine. High-yielding shares, the ones closest to the machine's jaws, benefited most. 'Fixed-interest' securities they may be; but in bond market terms they had just received a significantly upgraded rating. Their subsequent share-price performance reflects that fact.

Still, seven months is a long time in stock market terms; by now you might have expected investors to have moved on, to be looking for those specific sectors that stand to do well from the pattern of this particular recovery. Instead, the market still seems to be looking backward.

It has an excuse. The awful effects of the past three years are still showing up in company figures: Forte cut its dividend this week for the first time in two decades, reporting pre-tax profits after exceptionals for the year to January 31 of Pounds 164m, propped up by the Pounds 275m sale of its Gardner Merchant contract catering business.

And Queens Moat Houses, still suspended, dropped out of the FT-SE Mid 250 index. The change produces a one-off reduction in the index of 10 1/2 points - a reminder that, even though the stock may eventually come back to the market at a higher figure, some Pounds 439m of shareholders' wealth is up in the air. Queens Moat is still trying to make its figures add up; its shareholders are on the accountant's version of a walking tour of the Caucasus.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page II 965
The Long View: Getting high on drugs Publication 930417FT Processed by FT 930417 By BARRY RILEY MANY BRITISH fund managers did something remarkable last year

they beat the stock market. It is a trick far more often claimed than achieved.

If you look at the performance figures published by Caps, a firm which measures the investment returns of pension funds, you will find that the median return on UK equities in 1992 was 22.4 per cent whereas the return on the All-Share Index was 20.6 per cent. Over ten years, however, these pension funds have only performed just about in line with the All-Share, and have underperformed foreign equity markets by about 2 per cent a year.

Have fund managers at last got their act together? In fact it looks as though their gains resulted from favourable patterns in the market rather than from bursts of new inspiration. There are detailed explanations, one of which is the pharmaceuticals effect.

Briefly, Glaxo and Wellcome together account for a significant percentage of the aggregate value of UK equities (about 5 1/2 per cent at the end of 1992, down from 7 per cent 12 months earlier). They have a detectable influence upon the UK market indices but many of their shares are owned by foreigners or in Wellcome's case by the Wellcome Foundation. In the jargon, UK investment institutions tend to be underweight in pharmaceuticals.

It follows that when drugs shares are strong the British fund managers mostly fail to keep up with the market indices, but when Glaxo and Wellcome tumble, as they did in 1992, and have continued to do in 1993 so far, British fund managers can hardly help beating the market. If you meet a fund manager he may prefer to describe this effect more positively but opaquely as 'stock selection' or 'sector rotation'.

In fund management things are rarely quite what they seem. Investors spend too much time chasing the impossible and too little pursuing achievable, if duller, objectives. Such thoughts are stimulated by a re-reading of Charles Ellis's book Investment Policy: How to Win the Loser's Game, in its new US-published second edition. Although Ellis, a top US investment services consultant, originally wrote the book for a professional audience he has added a chapter for private investors. He says, for instance, do not add up your wealth more than three or four times a year or you may get too caught up with what the crowd are doing.

Choosing stocks to beat the market is the classic case of hope triumphing over experience. Between 1970 and 1990 over 75 per cent of professionally managed funds in the US underperformed the broad measure of the US stock market, the S & P 500. Of course, some managers appear to do well: over the past five years the best UK pension fund managers have outperformed the average fund by about 3 per cent a year. But will they do so over the next five years? It would be very surprising.

Fund managers have manoeuvred themselves into the strange position of offering almost guaranteed disappointment. Other professionals do not fall into this trap: your doctor and lawyer do not promise to beat their peers, just that they will do a competent job. But the competent fund manager who does an average job will underperform his over-ambitious benchmark and will eventually be sacked.

The only reliable way to achieve higher returns is to invest in higher-risk assets - in equities, say, rather than fixed interest bonds, or bank deposits. But this only works in the long run. And it only works if you can tolerate a sudden market setback without being forced to sell at the bottom.

British pension funds are valued on a smoothed-out actuarial basis, and can accept a lot of risk, so can have a high equity exposure. US funds are valued at market prices, are less risk-tolerant and must therefore have a high proportion of fixed interest securities. Thus, creating the right framework is much more important in the long run than picking an ace investment manager who promises to perform better than all the others (he may well produce some historical figures to back up his claims).

Risk is often ill-understood by professional investors, let alone by amateurs. Private investors live in dread of another 1987 crash, although from a long-run perspective Black Monday's collapse was just one of those temporary misfortunes which must be expected from time to time.

Retail investment institutions are currently doing a roaring trade in guaranteed products which offer downside protection against a stock market setback. Often these make ingenious use of the futures markets. But is there really any point? The market pays equity investors to accept risk. These fancy products often lose four or five points of gross annual return, of the same order as the extra return available on equities compared with bonds. Moreover there are early surrender penalties, plus an unquantifiable risk that the guaranteed returns will not actually be delivered because of market failures in a crisis, as happened in the US with so-called 'portfolio insurance' during the 1987 crash. It might be better to opt for lower-risk non-equity products in the first place.

Private investors, Ellis points out, also usually fail to understand the risks involved in high stock market valuations. For the long-term investor it is best that share prices stay low, so that the future stream of dividends can be bought more cheaply. However, private punters prefer to buy into a rising market which creates a glow of prosperity but offers poorer and poorer value. On the other hand they shun a weak stock market even though it offers greater future rewards. It is, of course, difficult to avoid mixing up short-term valuations with long-term objectives: we all like to make a quick paper profit.

In any case, your friendly fund manager will generously offer to take your money and beat the market for you. After all, look at what he did last year . . .

GB United Kingdom, EC P6722 Management Investment, Open-End P6211 Security Brokers and Dealers CMMT Comment & Analysis P6722 P6211 The Financial Times London Page I 1029
On song at the opera: Covent Garden has confounded its detractors but the once-mighty ENO is in decline Publication 930417FT Processed by FT 930417 By ANTONY THORNCROFT

JEREMY ISAACS, general director of the Royal Opera House in London's Covent Garden, can look forward to his dinner tomorrow night. While his colleagues among the arts world glitterati in the Great Room at London's Grosvenor House will be awaiting nervously the announcement of the annual Laurence Olivier awards for excellence in British theatre, opera and dance, Isaacs is serenely confident.

Not for him the stomach-churning moment when the winning envelopes are opened and success or failure becomes public property. The reason is that all eight nominations in the opera categories are for productions or performances which took place at Covent Garden in the past year.

For Isaacs, it is a change in fortune that would be meat and drink to one of Verdi's tragic heroines. Last summer, not only were the daggers out for the combative Scotsman - but they were entering right between his shoulder blades.

The media was full of an orchestrated campaign criticising his management of Covent Garden and suggesting that an Arts Council investigation - chaired by Baroness Mary Warnock, former Mistress of Girton College, Cambridge - would produce an extremely critical report. The hostile headlines were timed to influence the board of the ROH as it considered whether to renew his contract.

In the end, the board wavered only slightly under the pressure and extended Isaacs' contract for two rather than three years, until 1995. And the Warnock report, although censuring Covent Garden for giving artistic considerations priority over finance (not in itself a heinous attitude for an opera house), was not totally negative. The would-be assassins melted away and Isaacs ran up many successes.

On Wednesday, he put on a typically bullish performance for the media, announcing a profit for the year of Pounds 750,000 (reduced to Pounds 266,000 by contingency payments towards early retirements and redundancies) and audiences over the year of 85 per cent of capacity for opera and 86 per cent for dance. He also confirmed that the Covent Garden board was determined to go ahead with its controversial Pounds 150m re-development programme for the opera house and its surrounds, despite the marked lack of enthusiasm shown for the project by Warnock and the council, Covent Garden's main paymaster.

There was even some speculation that Isaacs would be able to announce this week that the funding for the 'new' Covent Garden, which involves modernising a back-stage mechanical system that pre-dates the first world war, was actually in place; but it was not to be. A meeting last month with John Major, the prime minister, produced expressions of goodwill but not a firm promise to deliver the Pounds 45m the ROH is seeking from public funds. It is pledged to raise a matching Pounds 45m itself, with the remaining Pounds 60m coming from an adjacent commercial development. But Isaacs' willingness to pursue the project publicly suggests that Covent Garden is confident the scheme will go ahead.

A few hundred yards down the road at the Coliseum, Peter Jonas, director of the English National Opera, also has experienced the vicissitudes of fortune. While Covent Garden could do little right, the ENO was riding a critical high. Just before last year's general election, its success in attracting a new, and younger, audience to its acclaimed productions, always sung in English, was rewarded by the government with the gift of the Coliseum's freehold, worth Pounds 11m.

It marked a fitting climax to the nine-year reign of Jonas, who had previously announced he was quitting this summer to take over as supremo of the Bavarian State Opera in Munich. He seemed to be handing over the musical success story of the age to his successor, Dennis Marks, head of music programmes at BBC Television. Even when the ENO took considerable risks, such as a season devoted solely to 20th century operas, the challenge succeeded.

In the past few months, though, the ENO has lost its glitter. The critics have started to quibble at the perverse modernistic gloss - often involving a tilted stage - endemic among its new productions and audiences have been deserting the Coliseum in worrying numbers.

The failure to win even one nomination for the Olivier awards was confirmation that Marks takes over a nervous ENO, troubled both artistically and financially. Audiences this season are down from around 80 per cent to nearer 65 per cent and the Coliseum reported an annual loss of Pounds 1m, building towards an accumulated deficit of Pounds 2.4m.

By its very nature, opera, as the most expensive and exaggerated of art forms, always attracts dramas (not to say melodramas) and recent events in London are tame compared with the traumas in Milan, where the local audience turned against its former hero and booed Pavarotti loudly; and Paris, where the new Bastille opera house has been dogged by strikes, resignations and vast deficits. Yet, beneath the superficial story of an heroic figure defying hostile forces and subduing them, the recent history of Covent Garden has a more sinister sub-plot.

Last year, for the first time, there was questioning at the very heart of the arts establishment as to whether Covent Garden need continue to exist. Its annual grant of Pounds 19.5m was a sizeable slice of a total Arts Council budget of Pounds 226m: think how many new arts ventures could be nurtured on this sum, said the critics. The populists also were shocked by Isaacs' attempt to solve the ROH's ingrained financial problems by raising prices way above the rate of inflation, so that a top seat for opera could easily cost over Pounds 100.

Lord Palumbo, the chairman of the council - who has pioneered the idea of big building projects to celebrate the millennium - was enthused by a new national opera house to rise up on London's South Bank, where the capital's big concert halls are sited. A modernised Covent Garden seemed a second-best use of scarce resources.

Isaacs' opponents seized upon some lacklustre new productions, plus a series of disputes with orchestra and chorus which suggested Isaacs was heavy-handed in labour relations. They also claimed he had an easy-going attitude to financial controls, At the same time, they could point to the Coliseum as an opera house for the age, contemporary in approach and attracting a new audience at popular prices. But, at the crunch last summer, Covent Garden could still call enough well-connected friends to its defence, and the improvements in programming came through in time to charm critics and audiences alike. Now, the scenario has changed radically.

Not that Covent Garden is totally free of problems. The makings of a deal are in place, but they depend on the present run of good fortune continuing. The government seems inclined to allocate some of the proceeds from the proposed national lottery, which should come on stream by the end of 1994, towards the re-building fund.

In return, Isaacs will eliminate the Pounds 3m deficit by the 1995-96 season. This will be achieved by fewer new productions, a safer repertoire, and clever programming involving more matinees, popular revivals, and an acceptance of the Warnock recommendations on reducing operating costs. But the ballet company seems destined to continue as the poor relation, starved of the funding needed to increase the number of dancers to an acceptable performing level, and of fresh productions. This reflects its position as the inferior revenue-spinner.

Isaacs also has promised that his successor should be in a position to accept that the modernisation of the opera house will enable savings to be made backstage, especially in overtime payments. This could increase the number of performances and, along with an additional 113 seats, reduce the size of the annual grant, thus saving the government money in the long run.

His hand has been much strengthened by the support of two rich patrons: Lord Sainsbury, the supermarkets tycoon, and Vivien Duffield, who oversees the charitable foundation set up by her late father, businessman Sir Charles Clore; they have pledged most of the Pounds 45m to be contributed by Covent Garden.

The recent visits by the company to the Far East have paid off handsomely, too, not only in lucrative sponsorship deals but in uncovering a Japanese benefactor whose contribution of Pounds 2.5m will help to ensure that the deficit is paid off by 1995-96.

There are obvious pitfalls ahead. The staff accepted a pay freeze last year and will be asked to accept a minimal increase, if that, this year. They may feel they have been squeezed enough. On top of this, the reductions in overtime could mean employees have less time to spend on quality control in productions.

The experience of the ENO suggests that audiences are very fickle. In a recession, too, they are more selective in their occasional visits to the opera. So far, the ENO has suffered most because its policy of extra performances of popular revivals lost it the support of those discriminating opera-goers who went to the Coliseum for an intriguing experience.

The Covent Garden audience probably is richer and more conservative and has, to date, accepted more evenings of Madama Butterfly and La Boheme. But its patience could be exhausted soon, especially as seat prices next season have been raised by 4 per cent, making an average price of Pounds 62 for an opera performance. At the ENO, the top performance price is Pounds 39.

Isaacs is forcing the pace because the decisions on temporary closure have to be made in the next three months. The plan is to re-open the modernised Covent Garden with a great gala, probably of the Berlioz opera Les Troyens, on December 31 1999. This would involve extended summer breaks in 1996 and 1996 and a total closure from 1997, with the opera company probably confined to touring abroad or doing seasons at a venue such as London's Royal Albert Hall while the ballet company camped down in what could be London's new dance house (lottery money willing).

The favourite sites for this are the Theatre Royal, Drury Lane, or the derelict Lyceum nearby - but both would require a government hand-out almost as big as that for Covent Garden. So, the imponderables abound. As in many aspects of national life, much depends on the revenue from the lottery, which could be worth Pounds 60m a year to the arts.

After a stormy start, Isaacs seems to be getting to grips with the politics of opera. Marks will have a shorter learning programme. He, too, must raise money - around Pounds 15m - to shore up his theatre. And, in the short term, he must stamp a new, popular face on the ENO. The departure of Jonas coincided with the resignation of his two right-hand men, musical director Mark Elder and David Poultney, the director of productions.

This gives Marks a clean sheet - but extra responsibilities. His new music director, Sian Edwards, has little experience of working in an opera house and has few productions in her conducting repertoire. Her most recent performance at the Coliseum, in The Queen of Spades, drew mixed reviews.

Jonas is leaving London in a relaxed mood. He has done his bit, taking it upon himself to fight the corner for the arts - although he feels he failed to convert the government to the proposition, accepted on the Continent, that a thriving, publicly-funded arts scene is essential in a civilised society. There were periods when the message seemed to be accepted but, in the past two years, the philistines have got the upper hand. Worrying about finance was the biggest concern of his job - and the reason why the ENO never performed a complete Ring cycle during his stewardship.

This is an obvious challenge for Marks, and one that could feature when he announces his 1993-94 programme later this month. He is planning an attention-grabbing repertoire, including an opening production of La Boheme in Italian, a provocative break with ENO philosophy. But all Marks' plans will be controlled by the financial imperatives. The really important ENO performance takes place on April 27 when the board meets to discuss the sudden and potentially disastrous financial short-fall. So for some time to come the dominant theme behind the programmes of both of London's opera houses will be the same: Money, Money, Money, Money . . .

GB United Kingdom, EC P7922 Theatrical Producers and Services CMMT Comment & Analysis P7922 The Financial Times London Page I 2099
European banana war looms after Fyffes rejects Pounds 421m bid Publication 930417FT Processed by FT 930417 By TIM COONE and NIKKI TAIT DUBLIN, NEW YORK

A RENEWED battle over market share in the European banana market loomed yesterday with the announcement by Fyffes, the UK and Irish fruit and vegetable distributor, that it had rejected a IPounds 420m (Pounds 421.5m) bid for the company.

News of the approach, widely believed to have come from the California-based Dole Foods, drove up Fyffes' share price to around 130p. It followed two days of heavy trading in the stock as rumours grew of an imminent takeover bid. Dole said it had no comment to make on the Fyffes' announcement 'at this stage'.

The board of Fyffes said last night that, having considered the approach, 'which may or may not' have led to an offer of IPounds 1.15p per share, it decided 'that the proposals involved in the approach are not in the best interests of the company or its shareholders and, accordingly, the discussion has terminated'.

Fyffes has become a tempting takeover target for the three world leaders in the banana business, namely Chiquita (United Brands), Dole (Castle and Cooke) and Del Monte, which face substantial cuts in their access to the fast-growing EC market under new Community quota arrangements due to be implemented in July.

Under the arrangements, the cheap 'dollar' bananas sourced in Central and South America by the three majors, which supply about 63 per cent of the European market, will face a quota limit of 2m tons.

Any excess triggers a tariff of Ecu850 (Pounds 677) per ton, around 170 per cent. About 2.3m tons of 'dollar' bananas were imported by the EC last year, two-thirds by Chiquita. Fyffes stands to benefit strongly from the new quota arrangements. Mr Neil McCann, group chairman, said the new quota regime was vital for the future of the company.

A former UK subsidiary of United Brands, Fyffes was sold for IPounds 29.4m in 1986 to FII, an Irish fruit distribution company built up by the McCann family from Dundalk, during the 1960s and '70s. Fyffes received a full listing on the stock exchange in 1987. At IPounds 1.15p per share, yesterday's bid values Fyffes at about IPounds 420m, including some 60m convertible preference shares on top of the 278m ordinary shares.

See Lex

Fyffes Dole Foods Co Inc IE Ireland, EC US United States of America P5148 Fresh Fruits and Vegetables COMP Mergers & acquisitions P5148 The Financial Times London Page 22 420
Tarmac in row over stake for US group Publication 930417FT Processed by FT 930417 By ROLAND RUDD and DAVID OWEN

TARMAC, the UK construction group, was embroiled in a political row yesterday over its plan to give a US group a 50 per cent stake in PSA Projects, the building design division it bought from the government five months ago.

The Labour party immediately attacked the proposed joint venture with Black & Veatch, saying it was 'tantamount to handing over a subsidy to an American company for British public-sector assets'.

Mr Doug Henderson, shadow local government minister, said he had written to Mr John Redwood, his opposite number at the Environment Department, asking when the government had become aware that Tarmac had 'no intention' of operating PSA Projects and whether it now proposed to act.

The sale to Tarmac of PSA Projects - formerly part of the state-run Property Services Agency - proved controversial because of unexpectedly high costs to the taxpayer. It involved a government payment to Tarmac of Pounds 54.9m to cover unpaid bills and to meet the cost of putting the business on a commercial footing, and a further Pounds 40m to cover redundancies.

The Environment Department dismissed Labour charges, saying: 'Those monies are not going to Black & Veatch. We were not conned; we knew about the relationship.'

Its officials, it said last night, were aware that Black & Veatch had been interested in PSA Projects at the time of its deal with Tarmac last November. However, the department said the proposals for equal control were a recent development.

Tarmac said the government subsidies were to develop the maximum number of jobs in PSA Projects and guarantee the terms and conditions of the workforce. 'To suggest otherwise is nonsense,' it said.

There will be no consideration payment for the joint venture. Tarmac expects to double its Pounds 50m fee income from PSA's capital projects, at present worth about Pounds 3.5bn.

Black & Veatch is expected to be given an immediate role in PSA Projects.

Tarmac PSA Projects Black and Veatch GB United Kingdom, EC US United States of America P1611 Highway and Street Construction P8712 Architectural Services COMP Strategic links & Joint venture P1611 P8712 The Financial Times London Page 22 375
Row over Tarmac plan to give stake to US concern Publication 930417FT Processed by FT 930417 By ROLAND RUDD and DAVID OWEN

TARMAC, the UK construction group, was embroiled in a political row yesterday over its plan to give a US group a 50 per cent stake in PSA Projects, the building design division it bought from the government five months ago.

The Labour party immediately attacked the proposed joint venture with Black & Veatch, saying it was 'tantamount to handing over a subsidy to an American company for British public-sector assets'.

Mr Doug Henderson, shadow local government minister, said he had written to Mr John Redwood, his opposite number at the Environment Department, asking when the government had become aware that Tarmac had 'no intention' of operating PSA Projects and whether it now proposed to act.

The sale of PSA Projects - formerly part of the state-run Property Services Agency - to Tarmac proved controversial because of unexpectedly high costs to the taxpayer.

It involved a government payment to Tarmac of Pounds 54.9m to cover unpaid bills and to meet the cost of putting the business on a commercial footing, and a further Pounds 40m to cover costs of redundancies.

The Environment Department dismissed Labour charges, saying: 'Those monies are not going to Black & Veatch'.

It said: 'We were not conned; we knew about the relationship. The obligations that were made to staff remain exactly the same as they were.'

Its officials, it said last night, were aware that Black & Veatch had been interested in PSA Projects at the time of its deal with Tarmac last November. However, the department said the proposals for equal control were a recent development.

Tarmac said the government subsidies were to develop the maximum number of jobs in PSA Projects and guarantee the terms and conditions of the workforce. It said: 'To suggest otherwise is nonsense.'

Tarmac is unlikely to pay Black & Veatch a consideration for a stake in PSA Projects.

Instead, the UK materials and construction group expects to double its Pounds 50m fee income from PSA's capital projects, at present worth about Pounds 3.5bn.

Black & Veatch is expected to be given an immediate role in PSA Projects.

Tarmac PSA Projects Black and Veatch GB United Kingdom, EC US United States of America P1611 Highway and Street Construction P8712 Architectural Services COMP Strategic links & Joint venture P1611 P8712 The Financial Times London Page 22 407
Inflation rises to 1.9% as retailers lift prices Publication 930417FT Processed by FT 930417 By EMMA TUCKER and JAMES BLITZ

THE rate of UK inflation nudged higher last month, buoyed by food, clothing and shoe price increases. Economists, however, believe the introduction of the council tax this month will have a downward influence on the retail prices index.

Prices rose by 0.4 per cent in March, compared with February, taking the annual rate to 1.9 per cent from 1.8 per cent. The underlying measure, which excludes mortgage interest payments, rose to 3.5 per cent in the year to March, from 3.4 per cent.

The latest figures indicate that retailers are more confident about raising their prices as consumer confidence recovers. Clothing and footwear prices, for example, rose by 1.9 per cent last month compared with February, and by 0.3 per cent year-on-year, the first increase in the annual rate for four months. Sharper food price rises than a year ago also affected the index.

The rise in inflation led dealers in the money markets to take the view that the UK government would not cut interest rates below the present 6 per cent.

For the first time since sterling left the European exchange rate mechanism in September 1992, prices in the sterling cash and futures markets implied that base rates would move upwards from their present levels.

Three-month interest rates in the sterling cash market - often seen as a bellwether of future rate movements - rose more than 1/16 of a percentage point to close at 6 1/16 per cent. The cost of borrowing sterling for one year moved up even more sharply, to 6 3/16 per cent, from a previous close of 5 7/8 per cent.

The gilt-edged market also reacted badly to the news, with long-dated gilts shedding a point on the day.

The Treasury said it was 'unconcerned' at the official figures from the Central Statistical Office. 'We have said all along that there will be a slight rise in the underlying rate as a result of the devaluation of the pound, but there is still downward pressure on inflation,' it said.

Mr Gordon Brown, the shadow chancellor, said inflation had started to rise. 'By the end of the year it will be considerably higher than that of most other major industrialised countries.'

Although prices often rise in April, it is possible that the annual inflation rate will drop back this month as the council tax replaces the poll tax. Council taxes are generally expected to be lower than the poll tax and statisticians said its introduction would exert a downward influence on the index.

Some economists, however, said the sharp increase in clothing and footwear prices heralded renewed inflationary pressures. Mr Leo Doyle, of Kleinwort Benson, said: 'As the economy gathers strength, it is going to be harder to repress the inflationary potential that devaluation entails.'

The official figures add to evidence that the UK economy is recovering. They come after a sharp monthly increase in manufacturing output, and a big rise in house sales in the first quarter of the year.

Food price rises push up inflation Page 5

Revival reawakens old demons Page 6

Currencies Page 11

London stocks Page 13

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy ECON Inflation P9311 The Financial Times London Page 22 556
European banana war looms as Fyffes rejects bid Publication 930417FT Processed by FT 930417 By TIM COONE and NIKKI TAIT DUBLIN, NEW YORK

A RENEWED battle over market share in the European banana market loomed yesterday with the announcement by Fyffes, the UK and Irish fruit and vegetable distributor, that it had rejected a IPounds 420m (Pounds 421.5m) bid for the company.

News of the approach, widely believed to have come from the California-based Dole Foods, drove up Fyffes' share price to around 130p. It followed two days of heavy trading in the stock as rumours grew of an imminent takeover bid. Dole said it had no comment to make on the Fyffes' announcement 'at this stage'.

The board of Fyffes said last night that, having considered the approach, 'which may or may not' have led to an offer of IPounds 1.15p per share, it decided 'that the proposals involved in the approach are not in the best interests of the company or its shareholders and, accordingly, the discussion has terminated'.

Fyffes has become a tempting takeover target for the three world leaders in the banana business, namely Chiquita (United Brands), Dole (Castle and Cooke) and Del Monte, which face substantial cuts in their access to the fast-growing EC market under new Community quota arrangements due to be implemented in July.

Under the arrangements, the cheap 'dollar' bananas sourced in Central and South America by the three majors, which supply around 63 per cent of the European market, will face a quota limit of 2m tons.

Any excess triggers a tariff of Ecu850 (Pounds 677) per ton, around 170 per cent. About 2.3m tons of 'dollar' bananas were imported by the EC last year, two-thirds by Chiquita.

Fyffes stands to benefit strongly from the new quota arrangements. Mr Neil McCann, group chairman, said the new quota regime was vital for the future of the company.

A former UK subsidiary of United Brands, Fyffes was sold for IPounds 29.4m in 1986 to FII, an Irish fruit distribution company built up by the McCann family from Dundalk, during the 1960s and '70s. Fyffes received a full listing on the stock exchange in 1987. At 1.15p per share, yesterday's bid values Fyffes at around IPounds 420m, including some 60m convertible preference shares on top of the 278m ordinary shares.

Cash-rich Fyffes is a debt-averse, but acquisitive company. In 1990 it began a strategy to develop its own sources of 'dollar' bananas in Central America, with a view to expansion in the post-1992 European Single Market.

See Lex

Fyffes Dole Foods Co Inc IE Ireland, EC US United States of America P5148 Fresh Fruits and Vegetables COMP Mergers & acquisitions P5148 The Financial Times London Page 22 453
The Lex Column: Queens Moat Publication 930417FT Processed by FT 930417

There is logic in the removal of Queens Moat Houses from the FT-SE Mid 250 index at a nominal price of 1p. Its current value is zero because holders cannot sell. However, assuming the quotation will eventually be reinstated at a higher price, the move amounts to an unintended distortion of the index which will come as a blow to the infant derivatives market. The problem could be avoided if the suspension was lifted, allowing the market to establish a clearing price. US investors do not expect to be trapped by such long suspensions.

Queens Moat Houses GB United Kingdom, EC P7011 Hotels and Motels CMMT Comment & Analysis P7011 The Financial Times London Page 22 127
The Lex Column: Fyffes Publication 930417FT Processed by FT 930417

The prospect of a slice of the banana market changing hands quickly has slipped away with the rejection by Fyffes' board. It remains to be seen whether the putative bidder will return for a more aggressive bite. If one of the large American companies is interested, the temptation must be strong. The new EC regime has cut the market share of dollar-based producers and handed it on a plate to Fyffes and Geest. US companies - particularly Dole, which is the best placed - must be tempted to buy that quota back. Geest has its own dollar-based plantations, so would not offer an outlet for more US bananas. Fyffes is thus the more tempting target.

Presumably the Fyffes' board faced a nice calculation. On the one hand, it might not be sensible to sell out when earnings are about to jump. On the other, the company is probably at its most attractive to a US acquirer now. The EC quota system may, after all, be eased in future. If the McCann family wishes to sell its holding, it may not get a better moment. Perhaps the offer was seen as inadequate. In which case the board must hope that the buyer's taste for bananas encourages him back at a fuller price.

Fyffes Dole Foods Co Inc IE Ireland, EC US United States of America P5148 Fresh Fruits and Vegetables CMMT Comment & Analysis COMP Mergers & acquisitions P5148 The Financial Times London Page 22 254
The Lex Column: Gold Publication 930417FT Processed by FT 930417

It is tempting to see a connection between the Dollars 10 rise in the gold price in the last six weeks and the first mutterings about the inflationary consequences of recovery. Fighting inflation has taken second place to restoring growth as a priority of economic policy, not only in the US but also in the UK and in Japan. In theory that should be good for gold. The bullion market may be saying that the inflationary risk should be taken seriously.

Over a slightly longer period, though, the signal is not very strong. Gold is still Dollars 20 short of its 1992 high and there are other reasons for its lustre, the latest being fresh political worries in South Africa. In the background is strong demand for jewellery use, particularly in Asia. The crisis in Russia also makes the D-Mark less attractive as a financial investment. Gold, like the Swiss franc, has increased in relative attraction as an alternative to the dollar. These factors might underpin its price without any discussion about inflation, but they are offset by the threat of sales by central banks. More striking is the trend in currencies other than the dollar. Take the commercial rand for instance. After averaging R980 an ounce last year, the price has risen to R1080, enough to make a significant impact on the margins of South African producers. As long as supply is not disrupted, mining stocks may continue to offer a better return than the metal itself.

XA World P1041 Gold Ores P3339 Primary Nonferrous Metals, NEC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P1041 P3339 P9311 The Financial Times London Page 22 286
The Lex Column: Lloyd's insurance Publication 930417FT Processed by FT 930417

Whatever the fine details of the business plan being prepared for the Lloyd's insurance market, it must not fail to attract fresh capital. A Pounds 2bn loss for the 1990 underwriting year would mean a serious erosion of capital. Lloyd's cannot be far from the point where it is simply not viable as a marketplace for big international risks. There is a good opportunity to attract corporate capital while insurance rates are hardening, but new entrants will need insulating from mistakes of the past, such as long-tail claims on pollution and asbestosis.

The idea of leaving underwriting years open right across the market seems to have been rightly dropped. That would have been unfair on profitable syndicates. A central fund to manage such long-tail risks would be a more equitable solution. What remains open is quite which risks should be covered - and exactly how it should be funded. New entrants might readily accept a levy, but only if they can expect a decent return on capital.

Tackling Lloyd's bloated cost base is thus an obvious place for the business plan to start. Central overheads are only part of the problem. The complex system of managing agents and members' agents entails too much duplication of effort. That leaves the sensitive question of pricing, especially the solvency requirements applied to different forms of capital. If that can be cracked too, Lloyd's would have at least a fighting chance.

Lloyd's of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service CMMT Comment & Analysis P6411 The Financial Times London Page 22 272
The Lex Column: Lacklustre gilts Publication 930417FT Processed by FT 930417

The UK authorities must be painfully aware that their borrowing programme leaves them little latitude to choose the timing of gilt auctions. Yesterday's announcement of a sale of short-dated paper came on a day of disappointing inflation figures at the end of a week in which the chancellor has reaffirmed his reluctance to cut interest rates. The inflation news may be less serious than it looks. Some impact on food prices from the green pound devaluation was inevitable and it is natural for stores to limit discounts on clothing and footwear as retail demand returns. That does not add up to a serious inflationary threat, but it was enough to unsettle long gilt prices. Since it also makes the prospect of lower base rates even more remote, there is even less incentive than before at the short end.

It is unclear where the natural demand for the new auction stock lies. This contrasts with the last sale when domestic institutions were queueing up to lengthen the maturity of their holdings. The government must hope the difference of nearly one percentage point between five-year gilts and three-month deposit rates will again attract hedged funds, but the gap may have to widen further to entice.

It would be different, of course, if sterling's strength were to change the government's mind on base rates. Then it could sell short gilts hand over fist and the equity market might awake from a lethargy which caused it to all but ignore Wednesday's manufacturing output figures.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 22 281
World Stock Markets (America): Dow gains as investors digest economic data Publication 930417FT Processed by FT 930417 By PATRICK HARVERSON NEW YORK

Wall Street

US share prices ended a volatile day in mostly positive territory, thanks to news of some strong quarterly earnings and late options expiration-related buying, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 22.69 at 3,478.61, the high for the day and a new record. The more broadly based Standard & Poor's 500 finished 0.54 higher at 448.94, while the Amex composite ended up 0.50 at 419.92 and the Nasdaq composite down 3.54 lower at 666.78. Trading volume on the New York SE was 300m shares.

The market opened in a positive mood, in spite of declining bond prices and mixed economic reports. The trade deficit widened in February to Dollars 7.2bn as exports, after months of solid growth, fell because of weakness in overseas economies. March industrial production, meanwhile, was flat. Although the severe winter storms of last month were partly to blame for the lack of output growth, the data suggests nonetheless that the economy is not exactly firing on all cylinders.

Investors, however, chose to ignore the economic news. Attention was primarily fixed instead on quarterly earnings, and on the afternoon expiration of options contracts. The expiration led to a backup of buy orders in many large stocks, temporarily halting some trading. By the close, the expiration-related business had added about 15 points to the Dow.

Affected by earnings news, Storage Technology jumped Dollars 3 3/4 to Dollars 25 5/8 after the company reported first quarter operating profits of 14 cents a share, down from a year ago but better than expectations.

One of the day's biggest losers was Gillette, which plunged Dollars 5 to Dollars 49 after brokerage house Bear Stearns downgraded the stock from a 'buy' to a 'hold'. On Thursday, Gillette announced higher profits, but static sales.

Wal-Mart, which earlier in the week told analysts that sales growth at its stores this year would not make it into double-figures, continued to suffer at the hands of sellers. The retailer's stock fell another Dollars 1 to Dollars 26 5/8 in volume of 6m shares. The stock is within Dollars 1 of its 52-week low.

Manufacturers of brand-name consumer products remained out of favour. Pepsico fell Dollars 1 5/8 to Dollars 37, Coca-Cola dropped Dollars 1 5/8 to Dollars 38 and Procter & Gamble fell Dollars 1/2 to Dollars 48 5/8 .

Canada

TORONTO stock prices closed at a high for the day, as the exchange set a new volume record. The composite index rose 17.63 points, closing at 3651.86. Advancing issues outnumbered declines 377 to 305.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 19 473
World Stock Markets (Asia Pacific): Region volatile as Nikkei declines Publication 930417FT Processed by FT 930417 By WAYNE APONTE TOKYO

A wave of profit-taking by dealers, investment trusts and arbitrageurs left equities 1.8 per cent lower ahead of yesterday's summit in Washington between Mr Kiichi Miyazawa, the Japanese prime minister, and Mr Bill Clinton, the US president, writes Wayne Aponte in Tokyo.

The Nikkei average fell 377.98 to 20,297.86, still 1.9 per cent higher on the week, after a day's high of 20,743.20 and a low of 20,225.78. The broader Topix Index of all first section issues ended 24.63 lower at 1,565.10.

Volume was estimated at 550m shares compared with Thursday's 637m. Declines led advances by 821 to 271, with 99 unchanged. In London, the ISE/Nikkei 50 index rose 1.48 to 1,233.92.

Losses were attributed to political uncertainty and to some nervousness over Monday's money supply data for March. Data reflecting private bank lending and demand for time deposits rose last February for the first time in six months. However, some economists expect negative figures for March, indicating slower economic recovery.

In spite of the day's declines, the consensus among market participants is that the Nikkei will hold above 20,000 in the short-term. One analyst at a British brokerage said that investors were looking for fresh incentives to join the market.

Profit-taking pushed Sumitomo Metal Mining, again the day's most active issue, Y22 lower at Y950. Nippon Telegraph and Telephone dropped Y10,000 to Y1.01m.

The financial sector was also under pressure, with Fuji Bank down Y60 at Y1,990. Mitsubishi Bank lost Y50 to Y2,440 and the Industrial Bank of Japan dropping Y40 to Y2,600.

Mazda Motor, developing a fuel efficient engine, was actively bought, gaining Y51 to Y601.

In Osaka, the OSE average declined 193.86 to 21,984.83, in volume of 22.5m shares.

Roundup

THE REGION was mixed, and volatile.

SINGAPORE hit a third consecutive closing high, the Straits Times Industrial index closing 31.95, or 1.85 per cent higher at 1,763.35, 2.6 per cent up on the week, as volume fell to 398.9m shares from Thursday's record 550.1m.

KUALA LUMPUR, likewise, saw volume shrink from a record 1.04bn shares to 512.5m as the KLSE composite index rose 1.29 to a new high of 662.02, a fraction higher on the week.

BANGKOK saw foreign buying and climbed by 1.6 per cent, the SET index closing 14.44 higher at 888.96, 3 per cent higher on the week, in turnover up from Bt3.1bn to Bt4.6bn.

AUSTRALIA closed mixed after a strong week, with banking and industrial stocks ahead and mines mostly easier as the All Ordinaries index eased 0.9 to 1,703.2, up 2.3 per cent on the week.

HONG KONG fell on profit-taking, the Hang Seng index finishing 57.70 lower at 6,732.04, still 7.1 per cent higher on a week enlivened by news of renewed Sino-British talks. Turnover was HKDollars 5.68bn against Wednesday's record HKDollars 7.74bn.

TAIWAN dropped 3.4 per cent on late selling after unconfirmed local media reports that the country might be included on a list of unfair traders by the US. The weighted index slid 161.30 to 4,534.19, 6.5 per cent lower on the week in turnover of TDollars 42.87bn.

SEOUL tumbled as cautious investors pulled back before the market could reach a new high for the year, the composite index falling 9.90 to 706.86, 0.6 per cent up on the week, as volume rose from 50.9m to 63.2m shares.

BOMBAY picked up to close marginally ahead after a hesitant start. The BSE index finished 6.66 higher at 2,299.78 - or 0.4 per cent lower on the week - after recovering from the day's low of 2,259.71.

JP Japan, Asia SG Singapore, Asia AU Australia HK Hong Kong, Asia TW Taiwan, Asia KR South Korea, Asia IN India, Asia MY Malaysia, Asia TH Thailand, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 19 648
World Stock Markets: Brazil Publication 930417FT Processed by FT 930417

SAO PAULO rose another 2.7 per cent at midsession, following a 9 per cent rise in the Bovespa index earlier in the week. Investors welcomed news that the head of the privatisation commission was to stay in his post.

Equities have been active ahead of Monday's options settlement as well as on fears that the government might introduce an anti-inflation package. Inflation currently stands at 26 per cent a month.

BR Brazil, South America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 19 98
World Stock Markets: South Africa Publication 930417FT Processed by FT 930417

INVESTORS were nervous as the country braced itself for possible weekend violence. The overall index gained 18 to 3,563 as industrials lost 5 to 4,367. Golds advanced 4 to 1,203. Vaal Reefs fell R2.50 to R221.00 and De Beers was up 50 cents at R76.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 19 74
World Stock Markets (Europe): Senior bourses mark time ahead of Buba meeting Publication 930417FT Processed by FT 930417 By Our Markets Staff

SENIOR bourses continued to mark time yesterday, waiting for next week's Bundesbank meeting in the hope of more interest rate cuts, writes Our Markets Staff.

FRANKFURT ended the week 1.4 per cent ahead, with the DAX index up 3.64 to 1,678.85 in turnover down from DM5.6bn to DM4.8bn.

Volkswagen rose DM6.40 to DM317.70. Dealers liked the fact that the VW brand name sold 5.2 per cent more cars in March than it did in the same month of 1991.

Mannesmann rose DM3.50 to DM260.50 as it confirmed a DM1.1bn financing arrangement for its D2 mobile telephone network; Veba climbed DM4.50 to DM388 on expansion plans at its PreussenElektra power generation unit, and following a recent Merck Finck buy recommendation which looked for better things from its cyclical chemicals and oils divisions.

BRUSSELS turned its attention from Petrofina, active this week on unfounded speculation that Elf Aquitaine might be building on its 5 per cent stake, to Solvay.

Reports that a number of brokers had reduced their 1993 eps forecasts and issued sell notes left Solvay BFr300 or 1.8 per cent lower at BFr12,500, after an intraday low of BFr12,350.

Petrofina suffered some profit-taking as it closed BFr50 lower at BFr9,350, still 4 per cent better since Tuesday. The Bel-20 index shed 4.86 to 1,254.07, barely changed on the week, in turnover of BFr1.45bn.

MILAN picked up, taking its lead from strong demand for telecoms and helped by end of account book squaring. The Comit index rose 4.94 to 513.26, little changed on the week.

Telecoms climbed on proposals to change tariff. Stet, the state holding company, rose L122 or 5.2 per cent to fix at L2,450 while Sip, the main telephone utility, added L70 or 3.9 per cent to L1,829. Strong foreign buying was reported.

ZURICH edged marginally higher ahead of a holiday weekend. A firmer trend in the dollar helped exporters late in the session and the SMI index rose 2.0 to 2,162.9, 1.1 per cent lower on the week.

Sulzer, the engineering group, rose SFr29 or 4 per cent to SFr755 ahead of next week's annual news conference which is expected to unveil a bright outlook for the company.

Alusuisse dipped SFr9 to SFr485 in response to Thursday's late announcement of a one-for-10 rights issue.

MADRID moved up gently again, the general index closing 0.75 higher at 239.83 for a 2 per cent gain on the week on the conviction that interest rates are coming down.

PARIS drifted into the weekend with the CAC-40 down 1.94 to 1,986.69 and unchanged on the week. Turnover slipped to FFr2.1bn.

Total continued to attract buyers but the shares only nudged up 80 centimes to FFr272, while Elf Aquitaine, which denied that it might be lifting its stake in Petrofina, rose FFr2.60 to FFr371.50.

Eurotunnel, which is expected to release results on Monday, lost 25 centimes to FFr38.85.

VIENNA saw an operating loss and a passed dividend take Austrian Airlines Sch45 or 3 per cent lower at Sch1,485. The ATX index fell 9.81 to 765.46, off 2.3 per cent on the week.

AMSTERDAM was supported by options expiry as the CBS Tendency index rose 0.1 to 109.7, up 2 per cent on the week. Among the insurers ING added Fl 2.30 to Fl 67.60 while Amev lost Fl 2.40 to Fl 71.10, on switching following results from both earlier this week.

DUBLIN extended its gains on the week to 4.5 per cent as the ISEQ overall index rose 17.93 to 1,591.74, a placing of 55m shares in Irish Life at a 5 per cent discount to Thursday night's price being offset by a IPounds 1.15 a share bid for Fyffes, the fruit wholesaler, and another half-point base rate cut to 9 per cent.

Dealers noted that Fyffes promptly outpaced the bid price, closing at IPounds 1.22 after IPounds 1.30, and that it took other food companies up with it.

ISTANBUL continued its relentless drive higher, adding 5.3 per cent for a weekly rise of 8.7 per cent. The market index rose 374.23 to 7,341.37, firmly through the 7,000 level and establishing this month's eighth record high.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ April 16 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1159.66 1160.13 1159.60 1159.10 FT-SE Eurotrack 200 1220.29 1220.63 1220.89 1219.75 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 100 1159.35 1159.26 1159.97 1159.61 FT-SE Eurotrack 200 1217.00 1216.50 1218.33 1217.23 ------------------------------------------------------------------------ Apr 15 Apr 14 Apr 13 Apr 8 Apr 7 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1156.40 1160.63 1157.54 1151.40 1144.36 FT-SE Eurotrack 200 1220.62 1223.50 1220.72 1211.28 1206.25 ------------------------------------------------------------------------ Base value: 1000 (26/10/90) ------------------------------------------------------------------------ High/day: 100 - 1160.84; 200 - 1221.60 Low/day: 100 - 1158.61 200 - 1215.59. ------------------------------------------------------------------------

DE Germany, EC BE Belgium, EC IT Italy, EC CH Switzerland, West Europe ES Spain, EC AT Austria, West Europe NL Netherlands, EC IE Ireland, EC TR Turkey, Middle East FR France, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 19 857
World Stock Markets: Tokyo rally fails to change the sceptics's minds - Emiko Terazono reports that serious doubts remain about the recovery of the Japanese economy Publication 930417FT Processed by FT 930417 By EMIKO TERAZONO

The sudden rise of the Tokyo stock market in recent months has renewed enthusiasm for stocks and increased the confidence of Japanese brokers.

The Nikkei average has risen by 20 per cent since the beginning of the year, and volume has risen to levels reminiscent of the late 1980s bull market. While the index corrected down 1.8 per cent to 20,297.86 yesterday, Japanese brokers continue to cheer prices on.

The unexpected rally, however, leaves many investors still sceptical about the recovery of Japan's economy, and has raised concerns about a resurgence of asset inflation, seen in the days of loose credit in the late 1980s.

The change in investor sentiment was initially triggered by a wave of government buying through public funds at the beginning of last month. Foreigners were quick to respond to the rise, and a jump in Nippon Telegraph and Telephone, a benchmark for investor sentiment, fuelled further optimism.

Share prices received another boost earlier this week with the government's Y13,200bn emergency economic package, and the Nikkei recovered the psychologically important 20,000 level for the first time since March last year.

Japanese brokers have been quick to point out that the stock price movements reflect rational investor behaviour, and that share prices were reacting to the bottoming out of the economy and future corporate profits. 'The economy has hit the bottom and investors are discounting future earnings,' says Mr Takatoshi Okuyama at Daiwa Securities.

Indeed, some economic indicators have been encouraging. New car sales in March rose 1.5 per cent after 14 consecutive months of decline. Money supply expanded by a slim 0.2 per cent in February after a 0.3 per cent contraction in January.

However consumer demand has yet to recover, as indicated by a 11.4 per cent fall in March department store sales, the sharpest fall since the Japan Department Store Association started collecting statistics in 1965. Capital investment is still weak, and some economists are expecting last month's money supply figures to indicate sluggish growth.

The speed of the market's rise against the mixed economic backdrop has triggered concerns over a potential recurrence of the asset 'bubble' last seen in the late 1980s. Low interest rates, a Y6,000bn emergency package, and a higher yen triggered the sharp rise in asset prices in 1987. While government officials point out that they are keeping a close watch, cynics suggest that the Japanese authorities are now trying to counter the sluggish economy by shoring up share prices.

Some analysts point out that the Japanese economy is closely linked to asset prices. Since a rise in share prices will help Japanese companies and banks by relieving them of losses on their stock portfolios, the rise in share prices will help to increase the flow of funds into the economy.

Kleinwort Benson in Tokyo reckons that a 15 per cent rise in the stock market creates Y45,000bn of financial wealth. Thus, while the economy has yet to recover, a sustained recovery in share prices may lead to an improvement in economic fundamentals.

The emergency economic package may also help property prices. The package includes a total Y1,600bn to be pumped into the property market through advance land purchases for public works projects and increased funds for the Housing Loan Corporation, which provides a third of all mortgages in Japan.

Brokers are already resuming the trading patterns seen in the late 1980s, using 'themes' to sell stocks and whipping up market activity by rotating trading from one sector to another. The big question is whether economy and corporate earnings will catch up with the 'bubble' on the stock market, which is currently trading at a price/earnings ratio of 74 times. Mr Geoffrey Barker, economist at Baring Securities, says the package will help the economy, but adds that it will recycle existing cash rather than pump in new funds.

Although Japanese brokers maintain a bullish stance, foreigners, who led the recent rally, are starting to take a cautious stance as the index approaches its forecast ceiling of 22,000. Technically, some analysts consider the index overstretched at 17 per cent above its 200-day moving average of 17,200. Mr Chris Newton at James Capel says: 'Normally if the market is 11 to 13 per cent over the 200-day average, there is a correction.'

However, with more public funds waiting to be invested, a floor is expected around the 19,500 level. The earnings reporting season in mid-May is unlikely to bring big surprises and the focus will be on companies' profit estimates for the current year to next March.

Mr Alan Livsey at Kleinwort Benson says that unless the higher yen forces the Bank of Japan to ease its monetary policy, the next few months may see few events for investors to get excited about.

Meanwhile, smaller stocks have also recovered, with the over-the-counter market yesterday closing at 1,581.67, up 44 per cent from its low in November. Foreigners seeking exposure in Japan have been leading buyers; investment trust funds have also actively purchased shares.

However, Mr Takehiro Tsuda, at Ichiyoshi Securities, a medium-sized brokerage specialising in OTC stocks, says the index may be at a near-term peak. 'The OTC index will face a correction to the 1,400 level ahead of the March earnings announcement season.'

JP Japan, Asia P6231 Security and Commodity Exchanges CMMT Comment & Analysis P6231 The Financial Times London Page 19 925
London Stock Exchange: New Highs and lows for 1993 Publication 930417FT Processed by FT 930417 By PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

NEW HIGHS AND LOWS FOR 1993

NEW HIGHS (72).

AMERICANS (1) Gen. Elect., BANKS (1) Anglo Irish, BLDG MATLS (3) Epwin, Heywood Williams, RMC, BUSINESS SERVS (1) Capita, CONGLOMERATES (1) Bodycote, CONTG & CONSTRCN (8) Bryant, Hewden-Stuart, McAlpine, Mowlem, Persimmon, Taylor Woodrow, Wilson Bowden, Wison (Connolly), ELECTRICALS (1) Motorola, ELECTRONICS (3) Eurotherm, Kalamazoo, Kewill, ENG GEN (2) VSEL, Vosper, FOOD MANUF (2) Avonmore, Barr, FOOD RETAILING (1) Fyffes, HEALTH & HSEHOLD (1) IWP, HOTELS & LEIS (1) Ryan, INSCE LIFE (1) Transatlantic, INV TRUSTS (13) Abtrust New Thai, Do Wts., Dartmoor 6 1/4 pc Deb. '05, First Ireland Wts., Flmg. Far Eastern, JF Fldg. Japan, Moorgate Smllr. Wts., Overseas Inv., Do Wts., St David's Cap., Turkey Tst., Do Wts., Value & Inc., MEDIA (3) Aegis 9 3/4 pc Pf., Headline, Watmoughs, MERCHANT BANKS (2) Warburg, Do 6pc Pf., MTL & MTL FORMING (1) Br. Steel, MISC (3) BLP, Headlam, Waterford Wedgwood, MOTORS (2) Bletchley, Jessups, OTHER FINCL (6) Edinburgh Fd. Mngrs., Gerrard & Natl., Lon. Forfaiting, Oceana, Perpetual, Tyndall Aust. Options, OTHER INDLS (1) Norcros, PACKG, PAPER & PRINTG (2) Wace, Do 8pc Pf., PROP (5) BDA, Daejan, Eng. & Overseas, Letinvest 11 1/4 pc Deb. '12, Smith (J), STORES (2) Amber Day, Wyevale, TRANSPORT (2) LOF's, Norish, MINES (3) Monarch, Do Cv. '93, Southvaal.

NEW LOWS (47).

BRITISH FUNDS (9) Tr. 12 1/2 pc '93, Tr. 13 3/4 pc '93, Tr. 14 1/2 pc '94, Ex. 13 1/2 pc '94, Tr. 10pc '94, Ex. 12 1/2 pc '94, Tr. 12pc '95, Ex. 13 1/4 pc '96, Tr. 8pc '13, AMERICANS (1) Sun Inc., BREWERS (1) Allied-Lyons, BUSINESS SERVS (2) Brooks Service, Sketchley, CHEMS (2) BOC, Br. Vita, CONGLOMERATES (2) Bibby, Cannon St., ELECTRONICS (1) Indl. Control Servs., ENG GEN (3) Barry Wehmiller, Plasmec, Prospect, FOOD RETAILING (1) Low, HEALTH & HSEHOLD (8) Bespak, Creighton's Naturally, Fisons, Huntingdon, Life Sciences, ML Labs., Smith & Nephew, UniChem, HOTELS & LEIS (2) Chrysalis, IMC, INSCE BROKERS (1) Heath, INSCE LIFE (1) Lloyds Abbey, MEDIA (1) Reuters, MTL & MTL FORMING (1) Garton, MISC (2) Hartstone, Pentland, MOTORS (1) Alexanders, OTHER INDLS (2) Amber Indl., Williams 5 5/8 pc Pf., PACKG, PAPER & PRINTG (1) MR Data Mngemt., PROP (1) Herring Baker, STORES (1) Dixons, TELE NETWORKS (2) Securicor, Do N/V, TRANSPORT (1) NFC.

Other market statistics, Page 9.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 427
London Stock Exchange: Reuters suffers Publication 930417FT Processed by FT 930417 By PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

The impact of recent currency shifts, arbitrage activity and analysts' caution conspired to push down Reuters Holdings. The shares, already under pressure, fell a further 25 to 1277p. At that level analysts said the stock was well supported.

The shares are ex-dividend in the UK but not in the US and the disparity between prices has prompted arbitraging which has forced the price down.

Also, UBS discussed the company at the morning meeting, particularly reports that a broker had switched from Reuters new electronic trading system Dealing 2000-2.

News that Hanson was returning to the acquisition trail added encouraged further buying of the stock which added 1 1/4 at 233 3/4 p on heavy turnover of 8.9m.

RTZ, the world's largest mining company, fell 10 1/2 to 647 1/2 p after copper prices hit a five and a half year low.

SmithKline Beecham lifted 6 to 419p in the 'A's as a result of the announcement late on Thursday that the company had settled its patent dispute with Glaxo over the anti-nausea treatment ondansetron. The removal of uncertainty was broadly positive for both companies but was unable to counter the persistent selling pressure on Glaxo which ended the day a net 8 lower at 554p.

Transport and distribution group NFC shook off recent weakness after SG Warburg turned buyers of the stock.

Pointing out that NFC had underperformed the market by 15 per cent over the last quarter, Mr Andrew Fitchie at the securities house said NFC remained attractive on fundamentals with good US and UK exposure. The shares rose 6 to 247p on turnover of 2.8m.

Shell Transport edged up 2 1/2 to 583 1/2 p with heavy turnover of 5.8m shares said to have been stimulated by sizeable switching from Royal Dutch.

An early attempt at a rally in the regional electricity stocks (recs) and the power generators prompted minor gains in the sectors but these were mostly eroded as the wider market tumbled after the inflation numbers. One securities houses was said to have been especially positive on the generators, citing expectations of above average dividend growth.

All the utilities sectors have come under pressure this week as some institutions have switched from the safer high-yielding areas of the market into recovery stocks.

PowerGen was the most resilient, closing 3 up at 347 1/2 p. National Power edged up 1 1/2 to 341 1/2 p.

Water stocks, which outperformed the market by 8 per cent during the first quarter, remained out of favour. The Footsie stocks were given another mauling, with Thames 13 off at 513p, North West 11 lower at 491p, Anglian down 10 at 505p and Severn Trent down 11 at 491p.

SG Warburg continued to tell clients to reduce weightings. It says the sector will underperform ahead of next summer's expected outcome of the regulatory review. The water companies are expected to reveal capital expenditure plans for the next five years later this month.

Irish-based fresh produce and foods group Fyffes jumped 23 to 123p, after it said it had received an approach which might lead to a bid. Geest moved 4 ahead to 448p, in sympathy.

Bid speculation was once again heard in United Biscuits sending the shares 5 up at 389p.

Engineering and defence group Vickers hardened a penny to 132p as Robert Fleming Securities yesterday reiterated a buy recommendation on the stock predicting a recovery for Vickers on the back of a better performance from its Rolls Royce cars subsidiary begining in 1994.

Investors appreciated the enhanced scrip alternative to the final dividend offered by BICC and the shares jumped 13 to 358p.

In the rest of the transport sector, P&O fell 15 to 547p, on suggestions that James Capel had cut profit expectations.

Reuters Holdings SmithKline Beecham Glaxo Holdings NFC PowerGen Thames Water North West Water Group Severn Trent Water Anglian Water Vickers National Power Peninsular and Oriental Steam Navigation GB United Kingdom, EC P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P6231 The Financial Times London Page 13 692
London Stock Exchange: Lasmo flounders Publication 930417FT Processed by FT 930417 By PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

Oil exploration and production group Lasmo ended a difficult week under renewed pressure. The shares closed 5 1/2 lower at 142 1/2 p, having equalled the 1993 low of 141 1/2 p at one stage. Dealers said that the sellers appeared on the scene after SG Warburg Securities lowered its net asset value for the group, along with a general reappraisal on the exploration production sub-sector.

Lasmo was the worst performer in the Footsie 100 index last month, falling by more than 14 per cent after the troubled group slashed the final dividend.

Dealers said the continued selling also reflected lingering worries that Lasmo might lose its Footsie 100 status when the FT-SE Steering Committee meets on June 9.

LASMO GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P1311 P6231 The Financial Times London Page 13 169
London Stock Exchange: Steel hardens Publication 930417FT Processed by FT 930417 By PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

The continuing recovery of cyclical stocks was illustrated by the further advance in British Steel. The shares gained another 4 to 94 3/4 p, having touched 96p earlier in the day, as volume rose to a hefty 16m shares.

This week's strong performance of British Steel began on Thursday after SG Warburg upgraded profit recommendations, and James Capel reiterated a buy recommendation. Both said the recent price increases are likely to hold and will thus prompt a recovery in the group's figures.

Other brokers remain cautious but several are expected to turn positive in the next week or so.

British Steel GB United Kingdom, EC P3312 Blast Furnaces and Steel Mills P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P3312 P6231 The Financial Times London Page 13 150
London Stock Exchange: Challenge fear hits telecoms Publication 930417FT Processed by FT 930417 By PETER JOHN, JOEL KIBAZO and STEVE THOMPSON

NEWS that AT&T, America's biggest telephone operator, intends to attack the UK market focused attention on UK telecom operators BT and Cable & Wireless yesterday and sent both stocks lower in what some analysts considered a knee-jerk reaction.

Many telecoms specialists were surprised to see BT shares slip 9 1/2 to 411p on heavier than average turnover of 11m. They argued that as BT had already applied to operate in the US it should have been no surprise that its US counterpart would make a quid pro quo move. They added that AT&T's proposals posed a far greater threat to Cable's telecom subsidiary Mercury, which was targeting the international market.

Cable shares fell 13 to 729p with 2.6m traded. The shares have performed very well on the back of a strong Hong Kong market and several UK buy recommendations. However, both stocks were further hit yesterday by the shift away from recession defensive stocks to issues geared for recovery.

British Telecommunications Cable and Wireless GB United Kingdom, EC P4813 Telephone Communications, Ex Radio P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P4813 P6231 The Financial Times London Page 13 214
London Stock Exchange: Weaker gilts unsettle equity market Publication 930417FT Processed by FT 930417 By STEVE THOMPSON

THE improvement in market sentiment for much of the week all but disappeared yesterday as dealers reacted strongly to extremely disappointing inflation numbers as the long three-week Easter account drew to a close.

Already shortened by the Easter Monday bank holiday the week's trading was severely disrupted by the second national railway strike in two weeks. Many trading desks were badly affected by the industrial action but its was the inflation statistics which took the heart out of the day's trading. 'The market's appetite went out of the window with the inflation figures,' commented the head of trading at one of the leading UK securities houses.

Equities took their cue from the gilts market where early minor falls rapidly turned into substantial losses after the inflation details were published.

The Footsie 100-index ended a thoroughly disappointing session 15.3 lower at 2,824.4, leaving the index only 2.4 higher on a week which provided strong evidence in the form of increasing business confidence, rises in house prices and an upturn in car sales, that the recovery in the UK economy is well and truly underway

The session began quietly with dealers opening share prices marginally below their overnight closing levels after a less than convincing performance by Wall Street, which rallied after some hefty early falls. And London dealers were unhappy at the steep decline on the Tokyo market.

Opening some 1.7 lower the Footsie 100 did little more than mark time until the release of news that the underlying rate of inflation had risen to 3.5 per cent shook the market. It triggered a sharp sell off in gilts where the longer dated stocks, down around an eighth of a point at the opening, quickly went into reverse and eventually ended a busy session with losses extending to just over a full point. Index-linked issues settled with falls of around 5/8 .

The inflation numbers doused lingering hopes that UK interest rates could move lower in the short-term. Sterling fell heavily against the dollar although it was only marginally lower against the D-Mark.

The Footsie future immediately fell sharply as the inflation implications filtered into The market, taking the cash market with it. At its worst the Footsie 100 was down 22.6 at 2,817.1 with traders noting the appearance of some large lines of stock.

A modestly firm opening by Wall Street helped steady the London market which managed to recoup some of its earlier losses. Turnover was a creditable 586.7m shares.

GB United Kingdom, EC DE Germany, EC US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 454
London Stock Exchange: Equity futures and options trading Publication 930417FT Processed by FT 930417 By JOEL KIBAZO

THE release of worse than expected inflation figures led to a retreat in stock index futures, writes Joel Kibazo.

The tentative start in trading of the June contract on the FT-SE 100 at 2,853 was the first indication that a poor session lay ahead.

Sporadic buying in the first hour however saw it climb to 2,860 but this soon ran out of steam leaving the contract to drift lower. The release of disappointing inflation figures at 11.30am led to active selling which sent June falling to 2,835.

By 3pm it had fallen to the days low of 2,819. However this proved a spur for bargain hunters and it bounced to finish at 2,832, a fall of 57 on its previous close and at a four-point discount to its estimated fair value premium to cash of around 11. Volume improved to 7,434 lots.

Expiry of the April stock options was the main feature in the traded options which saw total volume of 25,178 lots. Turnover in the FT-SE 100 option was 10,223. United Biscuits was the busiest stock option.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 13 213
Foreign Exchanges: Mixed fortunes for the dollar Publication 930417FT Processed by FT 930417 By JAMES BLITZ

THE DOLLAR had mixed fortunes in the currency markets yesterday, showing further strength against the D-Mark but weakening once more against the Japanese yen, writes James Blitz.

Despite the lack of any fresh currency-related news in the European morning, the dollar rose against the German currency, peaking at about DM1.6170.

The recent sell-off of the US currency has been strong enough to trigger some short covering by dealers in recent days. At the same time, there were growing expectations in the market yesterday that the Bundesbank might cut rates at its council meeting next Thursday, narrowing the differential between short term US and German rates which is capping the dollar's progress.

However, the dollar eased off against the D-Mark at the end of the day, partly as a result of lacklustre US economic indicators. The Michigan university consumer confidence index raised new fears about the pace of economic recovery, falling to 84.0 per cent in April from 85.9 per cent in March. The market had been looking for a small rise.

The US currency later closed in London at DM1.6135 from a previous DM1.6025.

Mr Gerard Lyons, chief economist at DKB International in London, believes that the Bundesbank could ease rates on Thursday. Much will depend on the figures for M3 money supply growth which are due out next week. 'If these prove to be on the weak side, the Bundesbank might lean towards easing again,' he said.

By contrast, the dollar was very weak against a yen that strengthened across the board.

The main concern in the market was that neither President Bill Clinton of the US nor Mr Kiichi Miyazawa, the Japanese prime minister, would register any concern about the strong yen at their meeting yesterday.

Although the Japanese authorities announced a large fiscal stimulus to the economy this week, Clinton administration officials appeared sufficiently concerned by the Japanese trade surplus to want to see the yen rise further.

There were also signs yesterday that the Japanese are not too perturbed by their currency's progress. The head of research of the ruling LDP party in Japan said that Japanese exporters would not feel any pain from the yen/dollar rate until it reached the Y110 level.

All this helped to boost the yen to a close of Y112.60 against the dollar in London from a previous Y113.20. The Japanese currency also performed very strongly against the D-Mark closing at Y69.75 from a previous Y70.62.

US United States of America DE Germany, EC JP Japan, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 11 446
Money Markets: UK futures tumble Publication 930417FT Processed by FT 930417 By JAMES BLITZ

THERE was a sharp change of mood in both the sterling cash and futures markets yesterday, with dealers taking the view that UK base rates could soon be on an upward trend, writes James Blitz.

On the futures market, there was a substantial sell-off in the June and Septmber sterling contracts following the announcement that the headline figure for inflation in March had risen to 1.9 per cent from 1.8 per cent year-on-year.

The unexpected rise in the data raised speculation that the UK authorities might have to tighten monetary policy if inflation were to remain within the government's target range.

The data also came at the end of a week which has seen a raft of indicators suggesting that the UK economy is in the midst of an unswing, and that another cut in base rates might not be needed.

Compounding the change of mood was the Bank of England's announcement yesterday that it will set another gilt auction on April 28. This may mean there is a drain on liquidity at the end of the month, bringing tighter money market conditions and rates.

All these factors created a strong view in the market that 6 per cent may mark the bottom for UK rates in this cycle. Last night, there was a clear upward sloping yield curve in both the cash and futures markets for the first time this year.

The strongest reaction to the RPI data came in the futures market, where the June contract fell 14 basis points to bottom out at 93.92. It later closed at 93.94, pricing 3-month money in June at 6.04 per cent.

There was an even stronger reaction in the March 1994 contract, which lost 44 basis points on the day to close at 93.60.

Cash rates firmed sharply in the wake of the figures with 3-month money closing up more than 1/16 per cent at 6 1/16 per cent. One year money moved up even more sharply at 6 3/16 per cent from a previous 5 7/8 per cent.

Despite the stark change of mood, some dealers expressed the view that the market had heavily over-reacted.

One dealer pointed to more UK economic data due out next week, including unemployment figures and retail sales figures for March. 'The market will retrace this latest move if these point out any sluggishness in the UK economy,' he said.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 11 428
International Company News: First Chicago lifts profits to Dollars 179m Publication 930417FT Processed by FT 930417 By ALAN FRIEDMAN

FIRST CHICAGO, the mid-western US bank with Dollars 48.5bn of assets, yesterday unveiled first-quarter 1993 net profit of Dollars 179.1m (Dollars 1.97 per share), up significantly from the Dollars 86.8m (Dollars 1.08) earned a year ago.

The first-quarter comparison is based on stripping out an extraordinary accounting gain a year ago that resulted from the valuation of venture capital investment securities.

Mr Richard Thomas, chairman, said core earnings were improving and noted that the burden of bad debts was decreasing as revenues increased.

First Chicago also said it had entered an agreement with GE Capital during the quarter, under which it would sell up to Dollars 1bn of real estate loans for about Dollars 500m.

Non-performing assets declined by 9 per cent to Dollars 377m during the first three months of 1993, while bad debt provisions were 44 per cent lower year-on-year at Dollars 65m.

Net write-offs were Dollars 74m, of which commercial write-offs accounted for Dollars 46m and consumer write-offs Dollars 28m.

Non-interest income rose by 29 per cent to Dollars 490.5m, while net interest income was 3 per cent higher at Dollars 305m.

First Chicago strengthened its capital position by issuing Dollars 200m of convertible preferred stock.

The bank's Tier One risk-adjusted capital ratio - the ratio of capital to assets used by US regulators - stood at a healthy 7.7 per cent as at March 31.

On Wall Street, First Chicago's share price declined by Dollars 1/4 to close at Dollars 43 5/8.

First Chicago Corp US United States of America P6081 Foreign Banking and Branches and Agencies FIN Interim results P6081 The Financial Times London Page 10 290
International Company News: Gambro rights issue aims to fund expansion Publication 930417FT Processed by FT 930417 By CHRISTOPHER BROWN-HUMES STOCKHOLM

GAMBRO, the Swedish medical equipment maker, has announced plans for a SKr424m (Dollars 57m) rights issue to strengthen its capital base and fund further expansion.

The company is to issue 1.84m new shares at SKr230 a share, which is 33 per cent below the current stock market level of SKr345. The move will boost its share capital by SKr36m from SKr547m.

Mr Jan Gustavsson, chief financial officer, said the group had no specific acquisition target in mind, but was looking to ensure it had adequate strength to continue the expansion that has seen it buy a number of companies in the US and Europe over the last five years.

The group's current equity-assets ratio is just above 30 per cent.

For 1992, Gambro disclosed a 27 per cent increase in profits to SKr753m and raised its dividend 20 per cent to SKr4.50 per share.

The company's two largest shareholders in terms of voting power - Cardo, which holds 58.4 per cent of Gambro's votes, and the Crafoord Foundation, which has 11.3 per cent - have both said they would fully take up their preferential rights under the issue.

The company's A-shares, which have 10 times the voting power of the B-shares, are being offered on a one-for-five basis, and the B-shares at a one-for-15 ratio.

Gambro SE Sweden, West Europe P3841 Surgical and Medical Instruments FIN Share issues P3841 The Financial Times London Page 10 255
International Company News: Northwest offers to buy USAir London route Publication 930417FT Processed by FT 930417 By NIKKI TAIT NEW YORK

NORTHWEST Airlines, the fourth-largest US carrier which is integrating operations with KLM Royal Dutch Airlines, is offering to buy USAir's Baltimore-London route for Dollars 5m. Northwest said that it would then seek government approval to switch the route to Detroit-London.

The US carrier has long fought to obtain a route between London and Detroit, where it has a large hub. However, the bilateral aviation agreement between the US and the UK permits only one non-stop authority between London and Detroit, which is held by Delta Air Lines.

A US bankruptcy court judge has approved the reorganisation plan put forward by Continental Airlines, meaning that the fifth-largest US carrier is poised to emerge from bankruptcy. As part of Continental's re-emergence, Air Canada and a Texan investment partnership are investing in the US carrier, in return for minority stakes. Continental went into bankruptcy - for the second time in its history - in 1990.

Northwest Airlines USAir Group Inc Continental Airlines Inc US United States of America P4512 Air Transportation, Scheduled COMP Mergers & acquisitions COMP Company News P4512 The Financial Times London Page 10 205
International Company News: Rescue plan for Uni may emerge next week Publication 930417FT Processed by FT 930417 By KAREN FOSSLI OSLO

A PLAN to restructure financially Uni Storebrand, Norway's biggest insurance group which collapsed last August, is expected soon following a breakthrough in negotiations between creditors and potential investors.

A choice is expected to be made next week between two proposals.

The collapse followed Uni's NKr4.7bn (Dollars 692m) acquisition of a 28.3 per cent stake in Skandia Forsakring, Sweden's biggest insurer, financed through short-term loans. A joint bid for the Swedish group with fellow insurer Hafnia failed, and the value of Uni's stake more than halved when Skandia's share price plunged. Uni's creditors called in their loans and the insurer was unable to pay.

One proposal calls for a foreign investor to take a significant stake in Uni. Last month Norwegian authorities cleared the way for such a solution by expanding the allowance for foreign ownership in domestic financial institutions to 33 1/3 per cent from 10 per cent.

Sources close to Uni said yesterday that a large French insurer has been undertaking a due diligence process over the past few months with a view to taking a stake in Uni.

The other solution, due to be presented soon to Uni's administration board by two domestic brokerage firms, calls for a share issue to raise up to NKr2.8bn.

Uni Storebrand NO Norway, West Europe P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance COMP Company News P6311 P6331 The Financial Times London Page 10 254
World Commodities Prices: Spices Publication 930417FT Processed by FT 930417

Coffee harvest will keep Indonesian farmers too busy to cut cassia trees for a few weeks, which might lift prices, reports Man-Producten. Cassia va/ka sticks, spot USDollars 2,300 a tonne, shipment Dollars 2,050, cuttings Dollars 2,150, korintji b br/cl Dollars 1,375; Madagascar and Seychelles unchanged at Dollars 1,200-Dollars 1,400 spot, Dollars 1,060-Dollars 1,275 shipment; Vietnam whole Dollars 2,500, broken Dollars 2,100. Indonesian nutmegs, bwp spot Dollars 750, shipment Dollars 675; shrivels shipment Dollars 925, abcd shipment Dollars 1,100. Pimento - Mexico spot Dollars 1,700, shipment Dollars 1,650, Jamaica spot Dollars 2,100, shipment Dollars 2,140, Guatemala spot Dollars 1,900.

US United States of America P0191 General Farms, Primarily Crop P6231 Security and Commodity Exchanges COSTS Commodity prices P0191 P6231 The Financial Times London Page 10 133
International Company News: Pirelli set to raise L110bn Publication 930417FT Processed by FT 930417 By REUTER MILAN

PIRELLI & Co, the holding company that controls the Italian tyre and cables group, yesterday said it planned a capital increase of L110bn (Dollars 71m), Reuter reports from Milan.

The group will offer one ordinary share for every four ordinary or savings shares. The price for each new share would be L2,000, which compares with an average price on the Milan bourse of L3,838 per share in the first quarter of this year. The shares closed yesterday at L3,979.

The rights issue is subject to shareholder approval.

Pirelli & Co also reported a preliminary loss of L125.6bn in 1992, against a L16.1bn profit in 1991. Consolidated results, together with those of Pirelli SpA, will be announced on May 14.

Pirelli and Co IT Italy, EC P6719 Holding Companies, NEC P3011 Tires and Inner Tubes FIN Share issues P6719 P3011 The Financial Times London Page 10 162
International Company News: Genentech more than quadruples net income Publication 930417FT Processed by FT 930417 By ALAN FRIEDMAN NEW YORK

GENENTECH, the California-based biotechnology company that was taken over in 1990 by Roche Holdings of Switzerland, yesterday reported an impressive jump in 1993 first-quarter net income to Dollars 14.3m - more than four times the level of a year ago.

The profits, which translate into earnings per share of 12 cents against three cents a year ago, were struck on revenues of Dollars 153m, up from Dollars 129m in the same quarter of 1992. Higher product sales, royalty income and contract revenues contributed to the 19 per cent increase in turnover.

Mr Kirk Raab, president and chief executive, said that while the results were very good, it was 'even more important' that the company had filed for approval to market Pulmozyme, a new cystic fibrosis drug, in the US, Europe and Canada.

Pulmozyme is claimed to reduce the rate of respiratory infection and improve lung functioning in patients. Mr Raab noted that as recently as five years ago the drug was merely a 'scientific idea'.

In line with Genentech's heavy investment in research and development, first-quarter R&D expenses were Dollars 74.2m, up from Dollars 66m in the first quarter of 1992.

The R&D spending represented 48 per cent of total revenues in the quarter.

Sales of Protropin, a human growth hormone, increased by 8 per cent to Dollars 52.2m. Sales of Activase t-PA, a heart attack drug, were 11 per cent higher at Dollars 49.2m.

Genentech also said it had begun Phase II trials of a genetically-engineered treatment drug for patients infected with the HIV virus.

On Wall Street, where biotechnology stocks have suffered along with other drugs stocks amid concern about the Clinton administration's plans for healthcare reform, Genentech's share price declined by Dollars 1/2 yesterday to Dollars 33 5/8 before the close.

Genentech Inc US United States of America P8732 Commercial Nonphysical Research FIN Interim results P8732 The Financial Times London Page 10 335
International Company News: Desperate days in Daf's demise - Kevin Done charts the final months of the Dutch truck maker Publication 930417FT Processed by FT 930417 By KEVIN DONE

AS THE waters closed over Daf at the end of January, the troubled Dutch commercial vehicle maker had finally begun to achieve an operating profit on its core operations.

The signs of a tentative recovery provided cold comfort to the hapless holders of the now worthless shares in old Daf (Daf NV), however, at Thursday's emotional, six-hour shareholders' meeting.

Mr Cor Baan, formerly chief executive of old Daf and now chief executive of the reborn Daf Trucks, tried to justify past management actions. 'The question everyone is asking themselves . . . is, how could Daf get into this state? We are convinced that we did everything possible to guide Daf through the difficult period.'

Daf filed for protection from its creditors in The Netherlands on February 2. Leyland Daf, its UK subsidiary, went into administrative receivership a day later.

Mr Baan drew back the veil from the intractable problems that confronted the increasingly desperate Daf management, as it battled last year to stave off collapse. For the first time, he disclosed:

the extent of Daf's mismanagement of its finance subsidiary, which by the end of 1991 had landed itself with a debilitating mismatch of long-term loans financed by short-term funding;

that Daf had planned to close its van operations at Birmingham in an attempt to rescue the rest of the business (the UK van operation, now close to a management buy-out, has actually been saved by Daf's financial collapse);

he implicitly accepted that Daf management had been misled by its ambition to match its much bigger competitors, such as Mercedes-Benz and Iveco (Fiat), in continuing to develop and renew its entire truck range without a strategic partner, in spite of Daf's much smaller sales and production volumes; he expressed regret that Daf had agreed to take over British Leyland's van operations (Freight Rover), when it also acquired Leyland's truck operations in 1987.

'The whole of 1992 was marked by a difficult and time-consuming process concerning short and long-term financing,' said Mr Baan.

He revealed that Daf's banking consortium had already sought collateral for their loans at the start of 1992, as the company was failing to meet some of the ratios stipulated in its loan agreements.

'The financial situation throughout the second half of 1992 was such that discussions took place with the banking consortium virtually every month concerning an extension of the bank facility agreement,' he said.

Mr Baan disclosed that it was the banks that had finally forced the company to find a deal that would force it to give up its independence. The banking consortium set the condition in its facility agreement in June 1992 that Daf should enter 'co-operation with a financially strong partner' as quickly as possible, he said.

The prime candidate for a partner was Mercedes-Benz of Germany, the world's biggest truck maker. The Dutch group's bankers insisted that Mercedes-Benz should be persuaded to take an equity stake in Daf, however, which the Dutch company's managers found difficult to bear.

Mr Baan said that Daf also held exploratory discussions with Hino of Japan and Cummins, the US engine manufacturer, but 'no longer-term structural solution was offered'.

By October 1992, with no progress on the Mercedes-Benz alliance, the company had begun to formulate 'a new, accelerated and far-reaching plan for reorganisation'. The earlier action plan Operations 92/93, implemented only 10 months before, had already become 'completely inadequate', admitted Mr Baan.

By the end of January this year, Daf planned:

to cut another 4,000 jobs, or a third of its workforce (the payroll had already fallen from 16,782 in 1989 to 12,289 in 1992);

to cut the management board from six to four, and to halve the corporate staff to 75;

to end van production in Birmingham, which employed 2,000, and to pull out of a project with Renault to develop a new generation of vans; to sell the Daf Finance subsidiary 'as soon as possible'.

This drastic restructuring was expected to cause an extraordinary charge of Fl 700m (Dollars 389m), which would have wiped out the group's entire Fl 458m equity.

Mr Baan revealed that the deep-rooted problems of Daf Finance meant that for the whole of 1992 the group was forced to operate without a captive finance company.

The slide in Daf Finance's fortunes meant that financiers were no longer willing to provide long-term funds, so expiring long-term borrowings had to be converted into short-term debt. In 1991, 56 per cent of Daf Finance's Fl 1.3bn portfolio of long-term loans was funded by short-term debt.

As funding to Daf Finance dried up, the group's liquidity problems intensified. Mr Baan admitted that in late-1991 and early-1992, Daf 'was already considering stopping the financing activities entirely, but it was not deemed advisable to signal this to the market'.

Daf could wait no longer. Mr Baan said that sales financing was substantially reduced from mid-1992 and 'finally completely stopped'. Daf Finance made a loss of Fl 130m last year, including a Fl 95m charge to facilitate its disposal.

Daf Finance's balance sheet had mushroomed from Fl 849m in 1986 to Fl 2.66bn in 1991. Mr Baan insisted, however, that 'conclusions suggesting that Daf bought market shares through the finance company and that the company attracted customers who by definition can be regarded as being in the category of doubtful debtors are absolutely incorrect.'

------------------------------------------------------------------------ DAF PRODUCTION ------------------------------------------------------------------------ % change 1989 1990 1991 1992 92 v 89 ------------------------------------------------------------------------ Daf Eindhoven (medium/heavy trucks) 18,432 17,207 14,468 13,775 -25.3 Daf Leyland (light trucks) 16,310 12,786 11,905 13,846 -15.1 SUB-TOTAL 34,742 29,993 26,373 27,621 -20.5 Daf Birmingham (vans) 23,616 24,575 22,274 20,099 -14.9 TOTAL 58,358 54,568 48,647 47,720 -18.2 ------------------------------------------------------------------------ Source: Daf ------------------------------------------------------------------------

DAF NL Netherlands, EC GB United Kingdom, EC P3711 Motor Vehicles and Car Bodies P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories CMMT Comment & Analysis P3711 P3713 P3714 The Financial Times London Page 10 1010
International Company News: Dutch group to resume dividend payments Publication 930417FT Processed by FT 930417 By RONALD VAN DE KROL AMSTERDAM

INTERNATIO-MULLER, the Dutch trading and technical installation group, is to resume dividend payments for the first time since 1989 after swinging back into profit in 1992 following substantial losses in 1991.

The company, which has divested 40 companies over the past two years as part of a strategy of refocusing on its core businesses, said it posted a net profit of Fl 30.1m (Dollars 16.7m) in 1992.

This marks a significant improvement from the losses of Fl 121.3m suffered a year earlier, when charges of Fl 92.4m were incurred for book losses and reorganisation costs. In 1992, charges fell to just Fl 7.2m.

Internatio-Muller said it intended to pay a dividend of Fl 1 a share over 1992 results, compared with its last pay-out of Fl 3.60 per share over 1989 results.

Sales fell by nearly 10 per cent to Fl 2.8bn last year, mainly as a result of divestments and deconsolidations. In the two years since it began its divestment drive, Internatio-Muller has sold off businesses which generated a total of Fl 700m in sales.

Operating results, excluding extraordinary charges, swung into a profit of Fl 43m from a loss of Fl 25.2m a year earlier.

Internatio-Muller NL Netherlands, EC P3699 Electrical Equipment and Supplies, NEC P2899 Chemical Preparations, NEC FIN Annual report P3699 P2899 The Financial Times London Page 10 243
Commodities and Agriculture: S African riots push up platinum - Week in the Markets Publication 930417FT Processed by FT 930417 By RICHARD MOONEY

CIVIL DISTURBANCES in South Africa following the killing of black leader Chris Hani produced strong reverberations in the platinum market this week.

South Africa accounts for about two-thirds of western world platinum supplies so the market is particularly sensitive to the prospect of escalating unrest in that country. An erratic rise saw the New York Mercantile Exchange's July futures position touch Dollars 374 a troy ounce at one point, the highest since December, but in late trading yesterday it was quoted at Dollars 371.90 an ounce, up Dollars 13.10 on the week.

Analysts say Dollars 373.50 an ounce remains a strong resistance level and that a break above Dollars 375 is needed to trigger a sharp rise. Dealers will be watching Mr Hani's funeral on Monday for indications as to whether tensions in South Africa are likely to intensify or relax in the near future.

At the London Metal Exchange sentiment was dominated by the continued slide in copper prices to fresh 5 1/2 -year lows. Following the heavy pre-Easter fall a recovery was attempted on Tuesday. But that proved short-lived and by Thursday's close the psychologically-important Dollars 2,000-a-tonne level had been breached. Overnight selling in the Far East set the tone for yesterday's opening and stop-loss and options-related selling quickly pushed the three months delivery price to Dollars 1,877 a tonne. By the close the price had recovered to Dollars 1,903 a tonne, but that was still Dollars 113 down on the week.

Mr William Adams of LME trader Rudolf Wolff said yesterday that the copper market was very over-sold but suggested that the price was likely to remain volatile because of options-related activity. The latest falls, which took losses over the past ten days to Dollars 270 a tonne, or 12.5 per cent, seemed to have been partly influenced by panic selling, he said. 'Copper hasn't been down here since October 87. . . it is running off the charts.'

The price was now close to break-even level for some of the higher cost producers, Mr Adams pointed out. But he did not expect to see production cuts yet as 'people are still making profits'. Producers would not begin to scale down output until the market price was well below costs, Mr Adams said, 'and producers have to believe that it is going to stay there'.

Copper's weakness affected sentiment in the other LME contracts. Nickel was particularly weak with the three months price slipping Dollars 235 to a 10-week low of Dollars 5,840 a tonne at one point after the breaching of the Dollars 6,000-a-tonne support level triggered the operation of stop-loss selling orders and commission house and merchant selling. The price rallied yesterday, however, and broke through resistance at Dollars 5,900 a tonne to close at Dollars 5,397.50 a tonne, up Dollars 90 on the day and Dollars 137.50 down on the week.

The zinc market began the week in a relatively buoyant mood as chart-based resistance around Dollars 1,030 a tonne for three months metal was overcome and investment fund short-covering was triggered. There was also talk of production cuts in Pacific Rim countries, though this remained unconfirmed.

Overhead resistance appeared at Dollars 1,050 a tonne, however, and disappointment at the modest scale of Chinese production cuts helped to push prices lower. The three months zinc price closed yesterday at Dollars 1,025.75 a tonne, down Dollars 3 on the day and up a mere Dollars 7.75 on the week.

At the London Futures and Options Exchange robusta coffee prices regained some more of their lost ground but once again ran into resistance as the Dollars 900-a-tonne level for the July contract was approached. The price reached Dollars 885 a tonne on Thursday but slipped back yesterday to Dollars 876, up Dollars 27 on the week. Dealers were encouraged, nevertheless, by signs that the coffee market was building a solid base and suggested that the break-out from the present range, when it came, was likely to be on the up-side.

The collapse at the end of last month of attempts to renegotiate a price-supporting International Coffee Agreement seems to have done the market little harm. In fact it may have helped sentiment by removing any lingering uncertainty about the prospects for a new pact.

Producing countries are not yet ready to abandon all hope, however. Officials of the Inter-African Coffee Organisation told the Reuter news agency yesterday that ministers from Africa's 10 main coffee nations, including Ivory Coast, Ethiopia, Uganda, Kenya and Zaire, were expected to attend a meeting in the Ivory Coast on April 26-27 to consider their next step after the failure of the pact talks.

Mr Guy-Alain Gauze, the Ivorian commodities minister and the current IACO chairman, said last week that African countries wanted to try to revive the negotiations in a desperate bid to force up languishing world prices which have crippled poor producers. He explained that the Abidjan meeting would examine new proposals to be put to a session of the International Coffee Organisation's 16-member executive board in London on April 28-30.

Sugar prices continued their retreat from recent highs this week but analysts were suggesting after a modest bounce yesterday that the 'rout' might be over. The July futures position in New York was quoted at 11.12 cents a lb, up 0.12 on the day but down 0.36 on the week.

------------------------------------- LME WAREHOUSE STOCKS (As at Thursday's close) ------------------------------------- tonnes ------------------------------------- Aluminium -6,400 to 1,756,825 Copper +2,350 to 369,600 Lead +400 to 247,975 Nickel +288 to 88,686 Zinc +5,150 to 609,350 Tin unchgd at 19,650 -------------------------------------

XA World GB United Kingdom, EC ZA South Africa, Africa XM Africa P3339 Primary Nonferrous Metals, NEC P0179 Fruits and Tree Nuts, NEC P0722 Crop Harvesting CMMT Comment & Analysis COSTS Commodity prices P3339 P0179 P0722 The Financial Times London Page 9 991
Economic Diary Publication 930417FT Processed by FT 930417

TODAY: National Savings results (March).

TOMORROW: Italian referendum on electoral reform.

MONDAY: Finished steel consumption and stock changes (fourth quarter). The economic and finance ministers of the European Community meet in Luxembourg. European Parliament in plenary session in Strasbourg (until April 23). European Community finance ministers meet with EFTA colleagues in Luxembourg to discuss initiatives to promote economic growth.

TUESDAY: Confederation of British Industry publishes survey of distributive trades (March). Public sector borrowing requirement (March). US housing starts-building permits (March). Middle East peace talks due to resume.

WEDNESDAY: Index of production and construction for Wales (fourth quarter). National referendum on Brazil's future form of government. Pathfinder prospectus for Zeneca.

THURSDAY: Britain and China are to hold talks in Beijing over the future of Hong Kong. Engineering sales and orders at current and constant prices (February). Provisional figures of vehicle production (March). Labour market statistics: unemployment and unfilled vacancies (March-provisional); average earnings indices (February-provisional); employment, hours, productivity and unit wage costs; industrial disputes. US jobless claims. Mr Edouard Balladur, French prime minister, meets Mr Helmut Kohl, German chancellor, in Bonn. British Chambers of Commerce publishes quarterly economic survey. Bundesbank council meets.

FRIDAY: Building societies monthly figures (March). Retail sales (March). Major British banking groups' monthly statement (March). Provisional estimates of monetary aggregates (March). Balance of trade with countries outside the European Community (March). US durable goods (March). The energy/environment council of the European Community meets in Luxembourg. EC/Latin America group meets in Copenhagen (until April 24). Annual meeting of EBRD.

XA World P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 9 274
UK Company News: Queens Moat replaced by Norcros in FT-SE Mid 250 Publication 930417FT Processed by FT 930417

QUEENS Moat Houses, the hotel company the shares of which were suspended last month amid financial difficulties, was yesterday removed from the FT-SE Mid 250 and replaced by Norcros, building products and packaging group.

Under rules introduced last year, Queens Moat was withdrawn from the index after yesterday's close at a nominal share price of 1p compared to its suspension price of 47 1/2 p.

Although this leads to falls in the value of the FT-SE Mid 250, the FT-Actuaries All Share and other indices, the new rules are designed to be more realistic.

In the past, shares were withdrawn from the FT-SE 100 at their suspension price, which few shares could match if and when trading resumed.

This meant it was often impossible for fund managers to match the performance of the index.

The following is the full text of the statement issued by the FT-SE Actuaries UK Indices Committee after the stock market closed yesterday:

'The FT-SE Actuaries UK Indices Committee has today approved, following the suspension of shares in Queens Moat Houses on March 31 1993, that Queens Moat Houses be removed from the FT-SE Mid 250 at a nominal price of 1p and replaced by Norcros after close of business today.

'The removal of Queens Moat Houses has been made in accordance with Rules 7.4.2 and 7.4.3 of the Ground Rules for the Management of the FT-SE Actuaries Share Indices. Rule 7.4.3 allows for a suspended constituent which subsequently restores its quotation to be reinstated at the value at which it was removed (eg, 1p).

'Norcros will be promoted to the FT-SE Mid 250 from the FT-SE SmallCap.

'No replacement company will be included in the FT-SE SmallCap.

'The removal of Queens Moat Houses from the FT-SE Mid 250 will result in the following adjustments to the FT-SE Actuaries UK Indices after today's close:

FT-SE Mid 250: -10.47 index points;

FT-SE Actuaries 350: -1.05 index points

FT-SE-A 350 Hotels & Leisure Industry Basket: -48.97 index points.

FT-Actuaries All-Share: -1 index point;

FT-A All-Share Hotels & Leisure sector: -40.9 index points.'

Lex, Page 22

Queens Moat Houses Norcros GB United Kingdom, EC P7011 Hotels and Motels P3272 Concrete Products, NEC P2679 Converted Paper Products, NEC COMP Company News P7011 P3272 P2679 The Financial Times London Page 8 398
UK Company News: Vardon moves into bingo with Pounds 9m buys Publication 930417FT Processed by FT 930417 By ANGUS FOSTER

VARDON, the acquisitive leisure company which owns the London Dungeon, is moving into bingo with the purchase of 12 clubs for up to Pounds 9m.

Vardon, which was listed last October, will fund the acquisitions through a placing and open offer at 72p a share to raise Pounds 13.5m. The shares added 1p to 79p.

Mr Nick Irens, chief executive, said bingo would broaden Vardon's base away from seasonal businesses. As well as the London and York Dungeons, Vardon also owns Sea Life Centres and a seal sanctuary, all of which rely on summer turnover.

He added that there were also growth opportunities as new, edge-of-town sites were developed to compete with existing facilities. The extra money raised in the placing would be used to build new clubs.

Vardon is buying Ritz, a private company which owns three clubs and is about to open a fourth, and Lion Leisure, a subsidiary of Wembley, which operates seven clubs. Both companies were profitable in their latest financial year.

The open offer, underwritten by SG Warburg, is on a 2-for-5 basis.

Causeway Smaller Quoted Companies Fund, one of Vardon's largest shareholders, has sold its 12.5 per cent stake, which was placed by Warburg. Mr David Hudd, Vardon's chairman, said Causeway invested in Vardon at 45p and had decided to take its profits.

Vardon Ritz GB United Kingdom, EC P7999 Amusement and Recreation, NEC COMP Mergers & acquisitions P7999 The Financial Times London Page 8 261
UK Company News: Siebe offshoot chief lured to head US company Publication 930417FT Processed by FT 930417 By ANGUS FOSTER

MR Robert Smialek has stepped down as chief operating officer of the temperature and appliance controls division of Siebe, the engineering company, writes Angus Foster.

Mr Smialek joined Siebe four years ago and became a main board director last November. He is to become chairman and chief executive officer of Insilco, the US automotive and consumer products group which recently emerged from chapter 11 proceedings.

Mr Barry Stephens, Siebe's chairman, said Mr Smialek had been made an offer 'he just couldn't refuse'. 'He's going to have a salary you can choke on and millions of share options,' he said.

Siebe GB United Kingdom, EC P3822 Environmental Controls PEOP People P3822 The Financial Times London Page 8 136
UK Company News: Hanson pays Dollars 116m for US housebuilder - Deal is part of strategy for bolt-on acquisitions Publication 930417FT Processed by FT 930417 By ROLAND RUDD

HANSON INDUSTRIES, the American arm of the Anglo-UK conglomerate, is expanding its property interests with a Dollars 116m (Pounds 75.5m) purchase of a residential housebuilder with assets in California, Arizona and Nevada.

Beazer Homes Inc, an affiliate of Hanson Industries, is buying the assets from Watt Housing Corporation.

Mr David Clarke, chief executive of Hanson Industries, said: 'The acquisition of Watt Housing at an appropriate time in the homebuilding economic cycle, further expands Hanson's operations in building materials'.

The move is also part of Hanson Industries' strategy of buying bolt-on acquisitions to existing core businesses. Mr Clarke said recently it was part of 'a continuing programme ofexpanding Hanson's core businesses'.

After being in recession for five years since the end of 1986, the building industry is recovering with new work rising by 3.5 per cent last year. NatWest Securities estimates that it will rise by 5 per cent this year and that the recovery should continue at least until 1995, when total work in place will be more than 15 per cent higher than it is today.

California remains the weakest state, and NatWest Securities believes it will continue to underperform the rest of the US for another two years.

Mr Martin Taylor, Hanson's vice chairman, said: 'You would expect us to take that into consideration when we did our due diligence and decided on what price we would pay for the assets'.

Last year Beazer Homes sold 1,182 homes in the south-east of the US. Beazer Homes Limited, the UK's third largest homebuilder, sold 4,948 houses. Combined Beazer sales for the US and UK homebuilding operations in 1992 were Dollars 602m with pre-tax profits of Dollars 80m.

Hanson Industries Beazer Inc Watt Housing Corp US United States of America GB United Kingdom, EC P6719 Holding Companies, NEC P1521 Single-Family Housing Construction COMP Mergers & acquisitions CMMT Comment & Analysis P6719 P1521 The Financial Times London Page 8 346
UK Company News: CSC Investment net asset value lower Publication 930417FT Processed by FT 930417

CSC Investment Trust reported net asset value of 101.63p at December 31 down from 108.42p a year earlier.

For the 1992 year net revenue came out at Pounds 45,000 (Pounds 85,000) for earnings per share of 2.75p (5.15p). The final dividend is a proposed 2.5p for a total of 4p (5p).

CSC Investment Trust GB United Kingdom, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 8 87
UK Company News: Property Security Investment Trust Publication 930417FT Processed by FT 930417

Property Security Investment Trust has changed its name to PSIT.

The company said that the initials had been generally used both by the company itself as a logo and by many of the people and institutions in the financial and property markets.

Property Security Investment Trust PSIT GB United Kingdom, EC P6726 Investment Offices, NEC COMP Company News P6726 The Financial Times London Page 8 78
UK Company News: HTV plans sale of Cordmate Inv Publication 930417FT Processed by FT 930417

As part of its strategy of concentrating on its core activities, HTV, the independent television company for Wales and the west country, has reached conditional agreement to dispose of Cordmate Investments, poster planning and buying agency.

Alban Securities, which has been formed by a management team supported by an institutional investor, will pay Pounds 2.2m cash on completion of the sale. However, HTV is required to repay certain inter-company balances which will reduce the sale proceeds to about Pounds 500,000.

In 1992 Cordmate, which is a holding company for three subsidiaries: Concord, Alban and Cordmate, made pre-tax profits of Pounds 426,000. At the end of December net assets amounted to Pounds 1.9m.

An extraordinary general meeting is to take place on May 4 to seek shareholder approval.

HTV Group Cordmate Investments Alban Securities GB United Kingdom, EC P4833 Television Broadcasting Stations P7312 Outdoor Advertising Services COMP Disposals P4833 P7312 The Financial Times London Page 8 170
UK Company News: Time Products pays Dollars 7m for agency Publication 930417FT Processed by FT 930417

Time Products, the watch and jewellery distribution group, has paid Dollars 7m cash (Pounds 4.53m) to acquire the agency to distribute Audemars Piguet watches throughout North America.

Last month Time purchased a 5 per cent interest in Audemars Piguet, one of Switzerland's prestigious watch makers.

Mr Marcus Margulies, chairman, said for a long while Time had been seeking to exploit its brand marketing expertise more widely in North America.

Time Products Audemars Piguet and Cie GB United Kingdom, EC P5094 Jewelry and Precious Stones COMP Mergers & acquisitions P5094 The Financial Times London Page 8 111
UK Company News: Elys suffers 43% decline to Pounds 502,000 Publication 930417FT Processed by FT 930417

Pre-tax profits of Elys (Wimbledon) showed a 43 per cent decline, from Pounds 879,000 to Pounds 502,000, in the year to January 30. Turnover for the period fell by Pounds 472,000 to Pounds 12.11m.

A same-again final dividend of 14.5p is proposed to maintain the total for the year at 16p. The dividend is covered 1.8 times by earnings per share of 29p (49.3p).

Elys Wimbledon GB United Kingdom, EC P5311 Department Stores FIN Annual report P5311 The Financial Times London Page 8 99
UK Company News: Brasway Tube sold for up to Pounds 3.4m Publication 930417FT Processed by FT 930417

Brasway has sold its Brasway Tube business to Senior Tube, a subsidiary of Senior Engineering Group, for a total cash consideration not exceeding Pounds 3.4m, with Pounds 3m payable on completion.

The price was based on plant and machinery, vehicles and stocks at completion of Pounds 2.5m. Brasway Tube made pre-tax profits of Pounds 182,000 for 1991/92, but incurred losses of Pounds 157,000 for the nine months to January 30 1993.

Brasway Brasway Tube Senior Tube GB United Kingdom, EC P3317 Steel Pipe and Tubes P5199 Nondurable Goods, NEC COMP Disposals P3317 P5199 The Financial Times London Page 8 116
UK Company News: Wills offer for Platon unconditional Publication 930417FT Processed by FT 930417

Wills Group, the industrial, electronic and automotive products group, now owns or has received valid acceptances in respect of 5.6m Platon International ordinary shares, being 52.6 per cent of its issued share capital.

The recommended offer for the USM-quoted instrumentation group has accordingly been declared unconditional as to acceptances and remains open until further notice. The cash alternative will close at 3pm on April 22.

Wills Group Platon International GB United Kingdom, EC P3823 Process Control Instruments P3714 Motor Vehicle Parts and Accessories COMP Mergers & acquisitions P3823 P3714 The Financial Times London Page 8 109
UK Company News: Golden Vale has 99% of Leckpatrick Publication 930417FT Processed by FT 930417

Golden Vale, the Irish dairy group which has made an agreed offer for Leckpatrick Holdings, announced that by the first closing date it had received valid acceptances in respect of 6.48m Leckpatrick shares - 99 per cent of the target's issued capital.

Accordingly, the offer has become unconditional as to acceptances and is held open until further notice.

Leckpatrick is a private dairy processor based in Northern Ireland, and Golden Vale's offer was made through Anorra Holdings, its UK investment vehicle.

The offer, which consists of 10-year loan notes, redeemable after one year, valued each Leckpatrick share at 332p and included a partial cash alternative up to a total of IPounds 4.34m.

Golden Vale Leckpatrick Holdings IE Ireland, EC GB United Kingdom, EC P2026 Fluid Milk P2021 Creamery Butter P6719 Holding Companies, NEC COMP Mergers & acquisitions P2026 P2021 P6719 The Financial Times London Page 8 161
UK Company News: Wharfedale restructure hits Verity Publication 930417FT Processed by FT 930417

PROBLEMS AT Wharfedale Loudspeakers, which were more intransigent and deep rooted than earlier thought, were the main reason behind continuing pre-tax losses of Pounds 1.54m at Verity Group in the six months to December 31, against Pounds 1.71m.

In addition the expected launch of the car alarm was delayed due to design and licensing problems.

On turnover of Pounds 6.84m (Pounds 4.75m) the USM-quoted electronics products producer incurred operating losses 69 per cent higher at Pounds 1.01m (Pounds 597,000). The figures included a contribution from the Mission companies from their acquisition in October which contributed turnover of Pounds 3.13m.

Net interest payable was Pounds 366,000 (Pounds 299,000) and there were exceptional charges of Pounds 172,000 (Pounds 809,000) relating to costs of reorganising Wharfedale. Further costs of Pounds 750,000 are expected in the second half.

The figures are produced in accordance with FRS 3. Last year's reported interim pre-tax loss was Pounds 1.34m.

On prospects Sir Gordon Brunton, chairman, said that the board was confident the problems at Wharfedale had been largely resolved and in the third quarter the core audio business was trading profitably at the operating level.

Losses per share came out at 2.2p (7.7p).

Wharfedale Loudspeakers Verity Group GB United Kingdom, EC P3651 Household Audio and Video Equipment P3669 Communications Equipment, NEC FIN Interim results P3651 P3669 The Financial Times London Page 8 238
UK Company News: Dublin nets IPounds 104m in sale of Irish Life shares Publication 930417FT Processed by FT 930417 By TIM COONE DUBLIN

THE IRISH government has disposed of just over half of its remaining 33.6 per cent stake in Irish Life, the largest fund manager in the Irish Republic, for a total of IPounds 104m.

The 55m shares were sold at IPounds 1.90 a share, to 'a large number of institutional investors, both domestic and foreign' according to the finance department.

Two thirds went to Irish investors. Market analysts said the government chose a good moment to sell. The price realised represented only a 5 per cent discount on the last traded price.

Mr Bertie Ahern, finance minister, said at the time of the budget last January, that the government intended to raise some IPounds 150m this year by selling off part of its remnant shareholdings in the former state-run companies Greencore and Irish Life, which were both privatised in 1991. The hangover of the government shareholding has tended to depress the price of both stocks.

Irish Life said it was pleased at the broadening of its shareholder base and particularly encouraged by the overseas interest in Irish Life stock. Government efforts to sell its 30.4 per cent stake in Greencore, a sugar, milling and malting concern, have not progressed so smoothly, however.

Interest has been shown by ADM, the US food conglomerate, but fears over losing control of the Irish sugar quota to a foreign company have fuelled political opposition to the sale, forcing the government last month to open the sale to tender with the intention of encouraging a bid by Irish food companies. None came forward however, and ADM is now playing hard-to-get, presumably with a view to beating the government down on an earlier offer of IPounds 2.60 a share.

Irish Life IE Ireland, EC P6722 Management Investment, Open-End COMP Shareholding CMMT Comment & Analysis P6722 The Financial Times London Page 8 327
UK Company News: A pan-European pipe-dream come true - Delta has seized upon the opportunities presented by the single market Publication 930417FT Processed by FT 930417 By JANE FULLER

IF A company could treat the single market like a blank canvas, it would be easy to establish a pan-European business.

In manufacturing, the company could site its factories according to wage and skill levels to give the lowest production costs; in marketing it could promote a single brand and corporate name; in management it could be cosmopolitan, making it easy to spread best practice through the group.

Delta, the UK electrical cables and engineering concern, has tried to follow such guidelines in building up a pan-European business for copper-alloy plumbing fittings.

It started with a small UK subsidiary, manufacturing in Birmingham and Dundee. The home market was, however, mature as the vast majority of domestic sanitary and heating systems had already been converted from galvanised iron to copper.

Continental Europe held much more potential, with only half the old systems converted in the west and plenty of virgin territory in the east.

Delta decided that the market offered enough scope for a Europe-wide approach in spite of local variations - in pipe diameters for instance - and local loyalties to companies and brands.

The first step came in 1987 with the acquisition of NIBCO Europe from a US group, bringing in German, French and Spanish subsidiaries.

After a total investment of about Pounds 55m, IBP - the name adopted for the Europe-wide business - has factories in five countries and a marketing and distribution network extending to about 20. Sales have doubled since the original NIBCO purchase.

IBP accounts for nearly half of Delta's engineering division, the group's biggest operating profit earner in 1992 with Pounds 22.2m on sales of Pounds 320.1m.

The NIBCO deal brought in two key executives: IBP's managing director, Mr Rudi Brodkorb, a German, part of whose education was in France, and the production director, Mr Luis Adarraga, also MD of ATCOSA in Spain, whose family has worked in copper for two generations.

Their first aim has been to reduce production costs. The idea is to make low-volume items in areas with lower labour costs, such as Spain and Poland, while the emphasis in Germany is on high volumes and automation.

When you look at the data on labour, however, 550 of the near 1,200 employees are in Germany. This is partly because it is the biggest market and partly historic. With NIBCO, Delta inherited a copper pipe factory, which supplies a third of in-house needs, a red-brass facility (for threaded components) and a foundry.

Mr Brodkorb acknowledges that if the group were starting from scratch it would not locate a foundry in Germany. But the planning barriers to building one elsewhere are prohibitive.

In ATCOSA's factory in Cordoba, southern Spain, 800 different products are made - although 26 of them account for 75 per cent of the volume.

Some product lines have been transferred to this plant to take advantage of lower labour costs, but such moves are always accompanied by an effort to improve the process. 'We develop a more automated system to deal with a future problem of higher wages,' Mr Adarraga says.

Typical improvements are to knock two procedures into one and to find ways of saving material - the next highest cost after labour. For instance the Cordoba factory has developed a method of making an 'elbow' joint that simplifies the cutting process and saves copper in the pipe walls.

Such advances can be extended to other areas of the group. But it would be wrong to attribute much of the momentum to the single market. International competition and customer demands for flexibility of supply are the driving forces.

On the marketing side, the promotional effort operates on three levels. The bulk of the products, wherever they are on sale in Europe, come under the B brand. This means the customer does not know where they are produced.

Mr Brodkorb says that transportation costs are relatively small. Here the single market has saved time and paperwork.

However, it has yet to provide a common set of standards. These are supposed to be hammered out by 1994, but Mr Brodkorb is pessimistic about the timetable because national quality standards are still being generated, effectively forming barriers to entry.

The next level of branding is the subsidiary name. Here IBP has respected the local loyalties of customers - typically regional plumbing wholesalers - and kept historic names. Finally the pan-European banner is promoted via the IBP prefix.

Product prices are an important part of the marketing equation. Before Britain left the ERM, a big effort had been made to bring prices into line. Mr Brodkorb says the variation had been reduced to 7 per cent, which minimised the incen-tive for cross-border under-cutting. The pound's devaluation has severely disrupted this effort.

With both manufacturing and marketing presenting a cross between single-market values and historic national constraints, the third ideal of having a cosmopolitan management might seem harder to achieve.

However, the IBP board is surprisingly international. The managing and marketing directors are German, the production director Spanish, and the finance director English. Product development and purchasing is split between English and French directors.

The benefits of the cosmopolitan approach are the exchange of ideas and technology, and the overview that informs the endless process of rationalisation.

This was put to the test when IBP took over Atub in Normandy in 1990. Changes had to be made to both management and technology. But Atub insisted that one of its processes was the best. As a PR exercise initially, IBP decided to hear them out. It turned out that Atub was right, and now some of its technology is being spread through the group.

As IBP extends its ambitions, both geographically and in terms of product range, that open-mindedness will increasingly be called upon to ease the tension between European goals and specific regional situations.

Delta GB United Kingdom, EC P3357 Nonferrous Wiredrawing and Insulating P3452 Bolts, Nuts, Rivets, and Washers CMMT Comment & Analysis P3357 P3452 The Financial Times London Page 8 1027
UK Company News: Enhanced scrip from BICC - Companies hope to attract increased take-up and make ACT savings Publication 930417FT Processed by FT 930417 By MAGGIE URRY

BICC, the cables and constr-uction group, yesterday joined the lengthening list of companies offering an enhanced scrip dividend. However, analysts believe that most companies for which the scheme has attractions, have by now decided whether or not to pursue them.

Like other companies which have introduced enhanced scrip dividends in recent weeks - BAT Industries, RTZ, Coats Viyella, Ladbroke, Forte and Redland - BICC will offer shareholders a 50 per cent higher dividend in shares as an alternative to its final cash dividend for 1992.

The net final dividend proposed was 13.25p, the scrip alternative is 19.875p.

BZW, the stockbroker, is offering to buy any shares issued to shareholders who take up the scrip offer, at a price of 18.875p, free of commissions.

The scheme enables companies to cut their advance corporation tax bills, as ACT is not payable on scrip dividends, and is beneficial for groups which are paying more ACT than they can offset against mainstream corporation tax. However, changes to the ACT regime announced in last month's budget are expected to make the scheme redundant.

If they take up the scrip offer, tax exempt shareholders who normally reclaim ACT on dividends, would not receive a tax credit but this would be more than offset by the higher dividend. Tax-paying shareholders would be better off, although the extent of the gain depends on individual tax positions.

Companies therefore hope for a much higher take-up of the offer than is usual with ordinary scrip dividends, which are rarely accepted by more than 5 per cent of shareholders.

Mr Ron Henderson, finance director of BICC, said earnings per share would be increased by 1.5p in 1993 if there was a 50 per cent take-up of the scrip offer. BICC's 1992 earnings per share were 20.2p before exceptional charges. Full take-up would result in a 5.4 per cent increase in the group's share capital.

Mr Henderson said the group had about Pounds 30m of surplus ACT and the final dividend would have required an ACT payment of between Pounds 12m and Pounds 13m.

He said the group would use the cash retained, which could total Pounds 28m, to reduce gearing. Mr Henderson said the money would not be used for a specific project but that the group would continue to invest in its continental European and North American cable operations.

BICC GB United Kingdom, EC P3357 Nonferrous Wiredrawing and Insulating P1731 Electrical Work CMMT Comment & Analysis FIN Share issues P3357 P1731 The Financial Times London Page 8 444
Computers that put the 'face' into interface: A race to apply the personal touch to the world of information technology Publication 930417FT Processed by FT 930417 By LOUISE KEHOE

There may be someone new in your future.

You will be able to choose the appearance, name and personality of this new companion and nobody, not even your spouse, should raise any objections, even if you take it home with you.

This 'person', who you may be spending many hours with, will be a computer 'agent', an electronically created personality that acts as your personal assistant; arranging meetings, finding information, making travel arrangements and reminding you that it is time to pay the phone bill, get the car serviced or send a birthday card to your mother.

And when you are tired after a long day at work, you can look forward to coming home to find that he or she has recorded television programmes selected to match your tastes and ordered your favourite dinner to be delivered.

It may sound too good to be true. But not if the visions of some of the world's largest computer and telecommunications companies are realised. By 2000, the 'personal' in personal computing could take on a very different meaning.

Making computers companionable will require some big advances in semiconductor, communications and computer software, but already the electronics industry is moving forward rapidly on several fronts.

International Business Machines, for example, has several projects under way to develop what it calls 'human interfaces' for computers; speech recognition technology that will enable a computer to comprehend spoken commands and visualisation techniques that could be used to give the computer a human-like 'face'.

IBM recently demonstrated this technology by creating a computer-version of its vice-chairman, Mr Jack Kuehler, who engaged in a mock conversation with his computer-simulated image.

Apple Computer is also in the forefront of making computers more 'user friendly'. This year it will launch its first 'Newton' product, which it calls a 'personal digital assistant', a pocket-sized device that can be used to send hand-written messages electronically and keep track of your personal diary and notes.

Competing with Apple is a group of companies including AT&T, Matsushita of Japan, and Olivetti of Japan, which is backing EO, a Silicon Valley venture that has launched a 'personal communicator' a device that combines a computer and a cellular telephone. Wireless communications systems that extend cellular technology to allow electronic handsets to send or retrieve messages 'anytime, anywhere' are a critical element of this new world. So too is digital technology which converts electronic signals into binary codes.

Digital systems store a much larger amount of data than existing analogue systems and process the data much more quickly.

Motorola, one of the leaders in communications technology, has formed an international alliance with telecommunications companies from the US, Europe and Asia to help fund Iridium, an ambitious Dollars 3.8bn satellite system that would provide global wireless communications. In the US, Ardis and Ram Mobile Data are building competing national wireless data networks. Such wireless networks could free office workers from their telephones and facsimile machines and enable them to take their work with them wherever they care to go.

Yet if you see yourself conducting business while basking on the beach of some remote island, keep in mind that in the future you may not want to stray too far from an 'information superhighway'; a fibre optic cable that can transmit video signals as well as voice and text messages.

US telephone and cable television companies are rushing to build these high - speed data channels. In California, for example, Pacific Bell, a regional telephone company, has announced plans to provide such a service to nearly half of the residents of the state within the next decade and to all Californian homes by 2015. Over the next 18 months, the company will begin trials of services such as 'movies on demand', video games, home shopping and tele-education.

The prospect of enhanced communications services has set off a race to provide devices that will connect to these new networks. Intel, the leader in microprocessor chips - the 'brains' inside a computer - is working with Microsoft, the leading personal computer software company, and General Instruments, a supplier of cable television control boxes, to develop a decoder device that will take the signals from the information superhighway and display them on a television set.

General Magic, another Silicon Valley company which is developing software for personal communicators, calls the approach 'whole person' computing. Computers should be fun to use, not devices that try the patience and test the technical acumen of users, the company maintains.

Not everyone will be excited at the prospect of having vast quantities of information available at their fingertips whether it be the 500 TV channels promised by cable companies or instant access to libraries full of publications over the phone. People are already inundated with information from newspapers, television, junk mail, facsimile and telephone messages.

But this is where the friendly computer 'agent' comes in. Your electronic assistant will filter all your messages, throw away the 'junk' and sort the rest according to your priorities.

International Business Machines Corp Apple Computer Inc Motorola Pacific Bell General Magic GB United Kingdom, EC US United States of America P3571 Electronic Computers P3669 Communications Equipment, NEC P7372 Prepackaged Software P4813 Telephone Communications, Ex Radio TECH Products & Product use TECH Services & Services use P3571 P3669 P7372 P4813 The Financial Times London Page 7 916
Bank at the heart of the new Europe: Ron Freeman, first vice president of the EBRD, responds to criticism of the institution's performance Publication 930417FT Processed by FT 930417 By RON FREEMAN

The European Bank for Reconstruction and Development was established in May 1990 by 39 member countries (this is now 54), including the UK, and two international institutions, primarily to finance privatisation in eastern and central Europe and the former Soviet Union.

To date the board has approved investment of more than Pounds 1.6bn (Ecu2bn) of the EBRD's own funds and we have raised an additional Pounds 6.3bn from third party lenders and investors for 88 projects. No other institution, public or private, has mobilised anything like these sums for eastern Europe. Headquartered in London, the bank also provides a unique opportunity for British industry to obtain 'local' financing for British investments and business development among the 300m consumers in the eastern European markets.

Last month Prince Charles inaugurated our new headquarters in the Broadgate development in the City of London. We were gratified to be able to become the anchor tenant in this building at very attractive terms. Our presence in the Broadgate complex reinforces the City's standing as the heart of the European financial community.

An article in the FT on March 29 confirmed that we had been able to fit out the interior of this building without detracting from the quality of the Broadgate complex. The article concluded that: 'The bank is indeed welcome in London as a crucial and inventive catalyst for the new Europe. If the creative atmosphere of culture and commerce, which is so evident in the new headquarters, is indicative of its approach to the rejuvenation of formerly communist Europe then the future in the east will be bright.'

Therefore, it was with decidedly mixed emotions that we read in the FT on April 13, rapidly followed by other national papers, that we spent too much money on ourselves, not enough on central and eastern Europe and the former Soviet Union and were too slow in disbursing funds.

On the one hand, we recognise such press attacks as a feature of life today, as the BBC, the Bank of England, the government, and even the Crown can confirm. As such my immediate reaction was to view this assault as a wry form of acknowledgement that the EBRD had joined the UK establishment. However, as a public institution it is our responsibility to set the record straight on a number of the criticisms we have had levelled at us over past few days.

First, let me deal with the costs of establishing our headquarters at Broadgate. Before we committed to Broadgate, our advisers conducted athorough review of all accommodation options in London. Our intention throughout was to secure best value for money. We achieved this at Broadgate, agreeing terms for our building which were highly competitive. The building was finished to a 'shell and core' basis and needed then to be fitted out for occupation.

The overall fitting out cost was Pounds 55.5m which we financed through a variety of sources: a contribution from the landlord of Pounds 9.5m; a 29-month rent-free period for the new headquarters granted by the landlord, saving the Bank Pounds 38.4m; a Pounds 250,000 contribution from the City of London and Pounds 7.95m which would have been spent on rent at our temporary accommodation at Leadenhall Street had the new building not been completed in record time. Tight cost and budgetary control was exercised throughout by us and the teams acting for us. In the event, the building was finished well ahead of time and to budget, at a cost per square foot which is fully comparable with other headquarters buildings in the City and indeed with other international institutions.

Inevitably, there will be comment about some features of the building and whether some things could have been done differently or at lower cost. In overall terms, however, the approach which we adopted and the result which we achieved in establishing our new headquarters will stand up to objective scrutiny. We have ended up with a good building which suits our particular requirements as cost effectively as any other we have found in London.

The second criticism was the level of funds we had disbursed to the countries of central and eastern Europe and the former Soviet Union. Compared with commitments made, the disbursement figure of Pounds 144m may seem rather limited.

The reality is that disbursement of funds lags behind board approval deliberately and by our own bank rules. First, since the majority of our financing is for the private sector, state owners of entities we finance must be 'implementing' a programme of privatisation. For state sector financing, we must normally obtain sovereign guarantees. Either of these alternatives requires government action prior to our disbursement.

Second, we co-finance nearly all our operations. This is consistent with our goal of multiplying the impact of our financing. As indicated above, our multiplier ratio is currently four to one, as the Pounds 1.6bn of EBRD project approvals is accompanied by Pounds 6.3bn of third party co-financing. To ensure this multiplier, we normally require that our co-financiers' money goes into the project before ours.

Third, we must comply with international tender procedures in all our projects. And finally we only disburse our funds directly against invoices.

These factors are all evidence of our caution. We are dealing with taxpayers' money. We carry out all our operations according to sound banking principles.

As a result, disbursement takes time. I would rather be accused of caution in our disbursement process than of taking unnecessary risks with taxpayers' money. Notwithstanding, we have disbursed as fast as any other funds provider.

Let us now look to the future. We have already committed substantial funds to projects in eastern Europe which will be disbursed as soon as the process allows. We have this week been asked by the G7 group of leading industrialised countries to establish a Dollars 300m fund with the specific aim of promoting small and medium-sized enterprises in the Russian Federation.

We are also charged by the G7 with implementing a Nuclear Safety Fund, with a secretariat in the bank, which will allow the dangerous nuclear power plants in eastern Europe to be overhauled. Finally, we have launched 260 technical assistance projects with a total value of Pounds 52.7m, much of which is provided by British accounting, legal and consulting firms. Thus, we have not been either slow to disburse or slow in any other respect as our beneficiary countries have repeatedly confirmed. And, we are continually looking at new proposals.

Next week, we hold our annual meeting in London. On this occasion we will welcome more than 2,500 foreign guests out of 3,000 participants representing both governments and business communities, to London. All will, I am sure, share with us our pride in the fast start we have made in carrying out our mission, the splendid staff we have assembled and the role we assume as the sole international institution headquartered in the UK.

I anticipate that as a result of this meeting many new proposals will come to the bank. The bank provides a forum where investors from both eastern and western Europe can meet to finance investment opportunities in eastern Europe.

I am confident that the UK business community will not be distracted by the misdirected focus of current press coverage, but will instead participate fully with us in the extraordinary opportunity presented by the greatest event of our times; the opening of the European continent.

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times London Page 7 1287
Letter: Remarks are out of bounds Publication 930417FT Processed by FT 930417 From Mr ERIC OSTERWELL

With reference to Dominic Lawson's article, 'What the President did not say' (April 10/11), Mr Lawson is within the bounds of propriety in analysing President Clinton's letter and even in attributing ulterior motives to him.

However, what I think is particularly distressing is the last paragraph of his letter in which he suggests that President Clinton and others would be 'stinking hypocrites' if they do not in the future send messages of sympathy on the occasion of the death of a member of the Royal Ulster Constabulary.

Given the fact that neither President Clinton nor most other politicians are likely continually to send messages of condolence whenever an atrocity is perpetrated, Mr Lawson would in effect have us conclude, in advance, that President Clinton and other are 'stinking hypocrites'. Now really. . .]

Eric Osterwell,

Oppenheimer, Wolff &

Donnelly,

Avenue Louise 250, Box 31,

1050 Brussels, Belgium

US United States of America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 7 180
Letter: A surfeit of scorn, a tilt at British institutions - and meanwhile the barbarians are at the gate Publication 930417FT Processed by FT 930417 From J G FREELAND

Sir, I was sickened by Michael Thompson-Noel's two articles, 'Travel-Soothing luxury of the 'real' Bali', and 'Hawks & Handsaws' (April 10/11). The first was an unoriginal piece of nastiness: the journalist from his all-expenses-paid five star hotel pouring scorn on the local culture which he has neither the wit nor the inclination to research.

But it was the second piece, about the Grand National, which really made me see red. How dare he compare the voided race with the fall of Saigon? How dare he label as unintelligent all those who enjoy or are involved in National Hunt racing and the Grand National in particular - no football hooligans these but the widest possible cross section of the British public? Has he ever been to a race meeting?

Yes, the anachronistic starting system will be modified; but it worked well enough in previous years. Significantly, it was delay and the resulting over-anxiety at the start which exposed the flaws in the system. And what caused the delay? An animal rights protest.

But Mr Thompson-Noel is not really interested in horses. He has just used the event as an excuse to tilt at Britain's traditions and institutions (including the poor old monarchy again) - his target being those special attributes of English heritage which in the past have earned the respect and admiration of the rest of the world.

And what shall we have left when these traditions and institutions have been dismantled? A mediocre England in a mediocre Europe, governed by classless politicians and media men, a country within which the pseudo-intelligentsia like Mr Thompson-Noel can flourish.

The irony is that one of these respected institutions, the Financial Times, can allow a member of its staff to publish such subversive propaganda.

And what will he achieve from this, the odious Mr Thompson-Noel, the middle class revolutionary with the double-barrelled name? Well, probably another freebie holiday in an even more exotic place than Bali, well beyond the means of those who earn their living from a less distasteful profession.

I despair more and more for the future of this country. Truly, there are barbarians at the gate.

J G Freeland,

122 Rivermead Court,

Ranelagh Gardens,

London SW6 3SD

GB United Kingdom, EC ID Indonesia, Asia P7948 Racing, Including Track Operation P7999 Amusement and Recreation, NEC NEWS General News P7948 P7999 The Financial Times London Page 7 423
Letter: A model with something important to say Publication 930417FT Processed by FT 930417 From Mr ANDREW BRITTON

Sir, I would like to respond to Wynne Godley's letter about the use of macroeconomic models in forecasting and policy design (April 14). A model is not a 'monster', but a convenient way of setting out in formal mathematical terms the lessons you think you have learnt from experience. One advantage of doing this explicitly is that the basis on which you form your judgment is there for the public to see and to criticise. It makes economic forecasting less like soothsaying, and more like applied science.

After the devaluation of sterling last September, we decided at the institute to back our model and to predict a significant economic recovery beginning in the early part of this year. In doing this we were using the relevant information about the way that the economy had responded to exchange rates and interest rates in the past. But we were going against the forecasting consensus and the gloomy mood of industry at the time. That mood has changed now, and it begins to look as if the model had something rather important to say.

Andrew Britton,

National Institute of

Economic and Social Research,

2 Dean Trench Street,

Smith Square,

London SW1P 3HE

GB United Kingdom, EC P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 7 236
A squall over Street: A small town awaits the outcome of a family row over the Clark shoe business Publication 930417FT Processed by FT 930417 By PEGGY HOLLINGER

Something is amiss in the town of Street, Somerset. The Clark family is falling out.

The Clark's shoe business - based in Street since it was founded 168 years ago - has been built on market expertise and family harmony, in the Quaker tradition. Now, the future of the UK's biggest shoemaker is obscured by an emotionally charged dispute between family members. The town's inhabitants are watching anxiously, concerned about employment and the local economy.

The arguments in the family have been prompted by the question of whether to sell the business. They have been brought to a head by an approach from Berisford International, the UK property and agribusiness group. A formal offer for C&J Clark is expected within the next few days. From then until the company's extraordinary general meeting on May 7, when the shoemaker's fate will be decided, board relations are likely to become increasingly tense.

Disagreements are not new. Since the early 1980s, when the growth of cheap imports from Asia started to affect profits and margins, shareholders have been divided over the best way forward for the private company. The problems in the market have been compounded by recession. Pre-tax profits have fallen from Pounds 30m in 1990 to just Pounds 1.7m last year. Not surprisingly the 500 members of the Clark family which own about 80 per cent of the company are worried. Most have all their personal wealth tied up in the shares, which have fallen from almost Pounds 2 in 1990 to 90p.

But if all are agreed that the business faces problems, the Clarks differ over the best solution. There are three basic factions: sellers, sellers at a price, and non-sellers.

Many of the sellers are in need of money. Some shareholders have suffered losses in the Lloyds insurance market, while others have found their incomes sharply reduced by last year's cut in the company's dividend from 7.5p to 3.8p.

Those advocating a sale also include directors such as Daniel Clark, great-great grandson of the founder and a former chairman, with a 7 per cent stake. Daniel has stated publicly that only a sale could end years of shareholder interference in the running of the business.

Daniel, one of two family members on the 11-member board who favours a change of ownership, has personal reasons to complain. While chairman, between 1967 and 1986, he and his team were strongly criticised by a triumvirate of retired directors, including his own father and a predecessor, Bancroft Clark. The three executives had ruled over Clark's in the glory days of expansion after the second world war and controlled the bulk of the family shareholding. They felt that Daniel was resisting their advice, in particular their calls for increased overseas sourcing, and forced him to make way for the company's first non-family chairman, Larry Tindale.

Others, such as Anthony Clothier, the grandson of a Clark daughter, say they have no alternative to a sale. With the shares traded only twice a year many investors find it difficult to take advantage of their inherited wealth. A previous attempt to float 25 per cent of the company in 1989 failed when shareholder support fell just short of the required 75 per cent.

Mr Clothier, a former director who parted company with Clark's in 1986, also contends that the difficulties of running a company with such a vociferous family shareholding are too great at a time of deep recession. 'Things cannot go on as they are,' he says. 'We need a proper board to get on with the running of the business.'

Nevertheless, Mr Clothier is prepared to consider alternatives. These include the creation of a voting trust to represent the family stake, thus reducing the impact of board divisions. This would be followed by eventual flotation. The problem is, he says, there are no concrete proposals on the table. Thus, 'it would be stupid not to consider the Berisford bid.'

The second faction is prepared to sell, but not at the 205p a share which Berisford is expected to offer. It includes non-family shareholders who, having seen last week's balance sheet, believe the decision to sell has come at the wrong time. In its annual statement, Clark's showed a net asset value of 278p, against 282p last year.

Mr Henry Cook, who retired from Clark's retail division in 1987 after 39 years at the company, has changed his mind about the bid in recent days. 'Now I'm wondering whether we would not be giving the business away too cheaply,' he says.

This last argument has been used by those resolutely opposed to a sale, including four family board members. Mr Charles Robertson, a founder member of the lobby group, Shareholders Opposed to an Enforced Sale (Shoes), is adamant that to sell now, when Clark's has just finished a Pounds 12.5m restructuring programme, would not be in anyone's interest. He believes that many of the difficult tasks facing the company have been achieved, including the closure of the original factory in Street last year and a sharp reduction in the workforce.

The feelings of this last group run deep, rooted in 168 years of tradition based in the town where Cyrus and James Clark set up their sheepskin slipper factory in the farmyard of their elder brother Joseph.

The town of 11,000 has been largely built by the Clark family which, in the Quaker tradition, promoted the welfare of its workers through the provision of libraries, schools, swimming pools and social clubs. Many members of the family still live there.

The original farmhouse where the first Clark set up house in 1720 still stands. It is inhabited by Richard Clark, one of the rebel board directors who jealously guards the family's position in the company. Richard, along with many of the non-sellers, are determined to retain family control of Clark's for a variety of reasons. The less sentimental argue that any sensible investor, with their wealth tied up in one company, would want control of that investment.

For this group, who claim it is not a family row, the troubles started when outsiders began to wield influence. About 20 years ago, they say, the board was made up mainly of family members. 'There were not meetings of the family to alter anything, partly because there were a lot of family members in the company's management,' says Robertson.

However, Shoes has accepted that the formula of 20 years ago may not apply in the 1990s. Hugh Pym, a Clark and founding member of the lobby group, says Shoes backs 'work already being done . . . to set up a board which is realistic for the needs of the company'. This would include a shareholder council to channel views to directors.

Opponents of a sale also believe that Clark's troubles of recent years are almost over. 'The company is actually recovering and it will happen quite quickly,' says Nathan Clark, the 76-year-old great grandson of the company's founder and inventor of the desert boot. 'As soon as we are making better profits again, people will not want to sell.'

In Street the locals watch the dispute with a degree of resignation. 'We just wish they would knock their heads together so we can get back to work,' says one local resident.

Berisford International C and J Clark GB United Kingdom, EC P3149 Footwear, Ex Rubber, NEC COMP Company News P3149 The Financial Times London Page 7 1266
Letter: British Rail - self-delusion in industrial relations Publication 930417FT Processed by FT 930417 From Prof RONALD DORE

Sir, So Sir Bob Reid has his revenge. No more check-off ('Rail strike looms as talks break up after eight minutes', April 15). The unions can collect their own dues. We have come a long way from the pre-Second World War days when it was the unions who organised the training for footplate men who wanted promotion, when unions helped work out fair duty rosters and promotion systems which accorded with workers' sense of fairness by taking account of seniority - 'service' - as well as of merit. And when people rather enjoyed travelling by rail.

There were two ways to go from there; the German/Japanese way of formalising this kind of 'microcorporatist' union involvement, sometimes thereby sacrificing potential short-term profits in the interests of (i) the flexibility needed for long-term change, and (ii) the concern for quality (eg, caring about service to the 'customers' and whether trains run on time), which comes from high worker morale and a spirit of co-operation. The alternative is the US way based on two principles: (i) efficiency is to be defined in terms of the effect on profit and loss in the short term; (ii) the only effective work incentives are short-term, in cash and based on individual not group performance. Rigorous application of these requires total managerial control; the only good union is a dead union.

British and American managers have seized on the transitional slow-down in German and Japanese growth to proclaim the bankruptcy of those countries' recipes. Self-delusion can always find evidence to sustain itself. Luckily, some leading private sector companies - eg, ICI - are wiser. But BR is still ours, subject to political decision. Parliament is about to intervene to push it further down the US road. One-nation Tories, where are you?

Ronald Dore,

London School of Economics,

Centre for Economic Performance,

Houghton Street,

London WC2A 2AE

British Rail GB United Kingdom, EC P4011 Railroads, Line-Haul Operating NEWS General News P4011 The Financial Times London Page 7 347
Revival reawakens old demons: Barry Riley examines the extent to which the end of the UK recession may mark the beginning of higher inflation Publication 930417FT Processed by FT 930417 By BARRY RILEY

A rise in the annual headline inflation rate from 1.8 to 1.9 per cent last month might not seem very significant, but it was enough to set off a minor attack of the jitters in the financial markets yesterday.

The background is an apparent revival of the British economy. Once again the forecasters appear to have got it wrong, this time by being too cautious, and manufacturing output in February was 1.5 per cent higher than a year earlier. Meanwhile a frisson of expectation spread through the housing market over Easter, and the press positively glowed at the indications of a recovery in house prices.

But will the downside to the economic recovery be a revival in inflation? This week's wholesale price indices for March appeared to show that industry is still absorbing much of the inflationary year-on-year 8.3 per cent rise in input costs of materials and fuel which has resulted from last year's devaluation. Output price inflation has remained stable at about 3.7 per cent for several months.

But if demand picks up substantially industry could decide to take advantage of the opportunity to rebuild its battered profit margins.

Mortgage interest rate cuts in the past few months have allowed the headline rate of retail price inflation to fall below 2 per cent, the lowest level for 26 years, but the underlying rate excluding mortgage interest has stayed obstinately at around 3 1/2 per cent.

This is the version of the inflation rate that the government is targeting within a 1 to 4 per cent range. Both the Treasury (which has forecast a 3 3/4 per cent rate for the final quarter of 1993) and the Bank of England appear to believe it is touch-and-go whether the 4 per cent ceiling will be exceeded later this year which may explain why the government has been so pleased to see sterling strengthening in recent weeks.

Indeed the sterling index has bounced up by more than 5 per cent since its February low point, and although exporters may not be pleased at losing competitiveness, nevertheless there will be benefits for inflation, for instance from this week's cuts in petrol prices.

But these are very short-term effects. Does anybody really believe that over the longer run Britain's bad inflationary habits have been cured? Certainly the long end of the government securities market weakened on this week's evidence of economic recovery. Long gilt yields of about 8.3 per cent strike an awkward compromise between the 4 and 6 per cent returns in Japan and Germany, regarded as low inflation countries, and the double-figure yields of, for example, Italy and Spain.

There are two schools of thought. One argues that almost regardless of what the British government does the country has entered a period of strong deflationary tendencies. It could be quite misleading, and indeed dangerous, to look back to the 1970s and 1980s and follow over-restrictive policies.

But many other people are scarred by their inflationary experiences of the past 25 years, during which average annual inflation has been 9 per cent.

Professional investors in the City of London are deeply cynical about the ability and integrity of the government. They fear that the huge scale of prospective public borrowing will eventually force the government down an inflationary path.

To begin with, however, the optimists. The first point is that the decline in inflation is common to most developed countries, even to those like Italy which have the worst financial problems.

Average inflation in the Group of Seven leading industrialised nations has dropped from 4.7 per cent in 1990 to maybe 2.5 per cent this year.

Besides the short-term cyclical effects from the current recession, there has been a long-term downtrend in commodity prices. Moreover the emergence of big new industrial powers, notably China, has depressed the price level of traded goods, which in turn has caused industrial recession and a shakeout in the labour markets, especially in Europe. Pay pressures have collapsed: yesterday's UK rail strike was about job security rather than incomes, while pay inflation is now below 5 per cent and hitting new lows.

Moreover many of the English-speaking countries (together with Scandinavia and Japan) are in the grip of so-called debt deflation, as they seek to throw off the after-effects of bank lending binges and property market bubbles.

The UK is a prime member of this group. Through the 1980s the broad measure of the money supply, M4, grew at an average annual rate of 16 per cent, fuelling eventual inflation.

But now M4 growth has collapsed to little more than 3 per cent, which according to monetarist economists makes a revival of inflation quite impossible in the near future.

Finally, the social balance in Britain has changed substantially over the past 25 inflationary years. The trade unions, primarily representing aggressive younger workers, have dwindled in importance; pensioners and other older age groups who fear inflation have grown in relative numbers.

The inflation of the 1970s, it can be argued, was triggered by a combination of trade union power and commodity price shocks.

By the 1980s inflation had been brought right down (to 2.4 per cent in the summer of 1986) but a new burst was set off by irresponsible financial deregulation leading to excessive monetary growth.

Now, however, monetary growth is, if anything, too low. There is no need to worry about inflation any more.

Investors, on this argument, may be making a dangerous mistake - the reverse of the error made in the postwar period when fixed interest securities were bought without proper regard to the danger of future inflation. This time investors are staying in equities or in short-term deposits instead of buying long-dated gilts on yields of 8 per cent-plus. When those yields tumble to 5 or 6 per cent as fears of inflation dwindle, big profits will be made. Investors clinging to the equity market or building society accounts could be left more or less stranded.

But experienced British investors who have spent a lifetime combating the menace of inflation cannot change their mind set quite so easily. Above all they are concerned about the vagueness of government policy. If a fiercely independent central bank like the Bundesbank were in charge it would be very different. But the British government bungled its participation in the European exchange rate mechanism and is now wallowing in apparent confusion.

For instance, until recently it was targeting the narrow version of the money supply M0, which was supposed to rise no faster than 4 per cent year-on-year. Recently, however, M0 growth has accelerated - to 4.9 per cent for March. The government's response has been purest Sir Humphrey: it has changed the target band to a 'monitoring range' which it says requires no action.

Similarly, but in reverse, when M4 growth sank below the 4 per cent lower limit of its previous monitoring range the Treasury simply widened the range to 3 to 9 per cent. If the government's approach to monetary control is as wishy-washy as this, how seriously can we take the target for underlying inflation? This is for a range of 1 to 4 per cent in the near term, falling to the bottom half of the range - that is, 1 to 2 1/2 per cent - by the time of the next election in, say, 1996.

This kind of target in itself may be ill-advised. It has, for instance, ruled out early rises in indirect taxes.

It also fails to differentiate between imported inflation, which may be a good thing if it encourages a revival of production of traded goods in the UK, and domestic inflation deriving from the public sector or the services sector, which should unquestionably be avoided.

Inflation sceptics point to the desperate need of the government to get the British economy moving ahead, which may cause it to bend its monetary policies further. But the biggest problem arises from government borrowing, forecast to reach Pounds 50bn in the current financial year, or 8 per cent of gross domestic product, a level of excess spending not seen since the inflationary 1970s. Borrowing on a similar scale could easily persist for several years.

On March 31 the Bank of England auctioned Pounds 3bn of a 20-year gilt at a yield of 8.53 per cent. Such issues are now coming monthly, and if inflation is really to tumble to 2 per cent or so they will prove cripplingly expensive for the taxpayer to service.

You can look at this problem two ways. On the one hand, faced with wary and suspicious capital markets the government will find it difficult to pursue inflationary policies, or interest rates will move up further. On the other hand, the high interest rates will eventually make the debt burden intolerable. At some point - which might be several years off - the government would end its long-term funding programme and would resort to financing itself through the banking system.

This would set off a new spiral of rapid inflation, and the holders of the vast volumes of government debt now being issued would be the victims, effectively, of progressive de facto default. So you can imagine two profiles for the UK inflation rate. In one case there will be short-term pressures as price rises suppressed during the ERM period emerge through the pipeline, but deflationary forces will dominate as we move into the mid-1990s.

On the alternative model, however, inflation will become re-established as the economic recovery proceeds, and the difficulties of funding the public sector deficit will become acute.

In practice, the key to the riddle may lie in how the government reacts to economic shocks. But for the rosy scenario to unfold, surely at the very least public borrowing must be reduced well below current medium-term projections, and the authorities must develop a coherent and consistent framework for monetary policy.

The government must resist delights such as a renewed house price boom, and must initiate large-scale cuts in public spending. If you believe it will, you may believe in its inflation targets.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis ECON Inflation P9311 The Financial Times London Page 6 1733
Leading Article: Clinton, Japan and Russia Publication 930417FT Processed by FT 930417

WHETHER Mr Clinton will succeed in rejuvenating the US economy may be doubted. What is noticeable, however, is how far he has changed the US domestic debate. The same is true on the global economic stage. The week's events in Tokyo - the Dollars 43bn package of assistance for Russia from the group of seven industrial countries and the Y13,200bn (Pounds 76bn) emergency spending programme announced by the Japanese government on Tuesday - bear witness to his impact.

It is not that either is an altogether new departure. Assistance for Russia and stimulus packages in Japan were on last year's agenda as well. As often happens, however, developments in policy preceded a change in administration. Where the Bush administration was tentative, Mr Clinton's is aggressive. At the top of its international agenda are the twin aims of helping Russia and dealing with Japan. But its goals for the two countries conflict. Mr Clinton wants to introduce market forces into Russia's controlled economy and controls into Japan's market economy.

Naturally, that is not how he would put the point. The US view is that the Japanese trade surplus is the result of obscure obstacles to the proper working of the market. This week Japan announced an overall trade surplus for fiscal 1992-93 of Dollars 111.34bn (Pounds 73bn), up 26 per cent on the previous year. The bilateral surplus with the US was Dollars 46.1bn, up 20 per cent. Such figures reinforce US determination, as Mr Clinton must have told Mr Kiichi Miyazawa, the Japanese prime minister, in Washington yesterday.

Pre-emptive

Japan's response was a shrewdly-timed pre-emptive fiscal strike. The Japanese government produced its plump rabbit from the fiscal hat just as Mr Lloyd Bentsen, US Treasury Secretary, and Mr Warren Christopher, US Secretary of State, arrived in Tokyo for the meeting of the group of seven industrial countries on help to Russia and immediately before Mr Miyazawa went to Washington. The Ministry of Finance even argued that the spending and tax concessions would produce a 2.6 per cent increase in nominal gross national product.

Governments would be sorely embarrassed if laws governing truth in advertising applied to their pronouncements as well. As so often - including, indeed, the Dollars 43bn supposedly on offer for Russia - the rabbit was thinner than it looked. Many analysts believe the Japanese package will generate at most half the growth envisaged by the government. Unfortunately for Japanese international public relations, amongst the doubters appears to be the redoubtable governor of the Bank of Japan, Mr Yasushi Mieno.

Even the government claims that its measures would boost the country's imports by only some Dollars 8bn, a mere dent in the surplus. Partly for this reason, but still more because lobby-infested Washington views trade in industry-specific terms, the Japanese package is unlikely to achieve its chief strategic goal, which was to ward off US pressure for 'results-oriented' agreements on trade. Mr Christopher, for example, was not so busy urging more support for Russia that he did not find time to persuade Japan to solve individual trade issues.

Bottomless pit

Yet if the Japanese government is to secure target shares of particular imports in the Japanese markets, it must first force its citizens to make the necessary purchases. As foreign appetites grow upon what they feed, such arrangements will spread, not just within Japan but to other successful exporting countries. A market-oriented international trading system would then be replaced by a sort of mini-Comecon.

Yet Mr Clinton's emissaries also put great pressure on Japan to assist Mr Yeltsin in his attempts to rebuild the ruins left by the collapse of the real Comecon. As usual, Tokyo did not dare to say 'no'. Japan did not raise the vexed issue of Russian occupation of the Kurile islands. Instead, it agreed to increase its planned bilateral assistance from Dollars 1.2bn to Dollars 1.8bn. This it did despite its well known conviction that Russia is the closest thing on earth to a bottomless pit.

If this perfectly plausible conviction is to be proved wrong, Russia must have a coherent and effective government implementing a coherent and effective reform strategy. At present doubters have good cause for their doubts. Mr Yeltsin is going into a referendum on April 25 that poses great risks for him. No likely result will give him the decisive victory he needs if he is to rule where now he reigns.

It is only the extraordinary importance of the effort that justifies its being made at all. But the same applies to Japan's wish to avoid results-oriented trade. In Tokyo the Europeans - particularly the Germans - insisted upon the importance of helping Mr Yeltsin, but stressed that they themselves had done enough. Germany's position is certainly defensible. But Europeans do have a fresh role to play in the US-Japan bilateral trade conflicts. They should support Japan if it decides at last simply to say 'no'.

JP Japan, Asia US United States of America RU Russia, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 6 855
Man In The News: A narrowing of horizons - Rocco Forte Publication 930417FT Processed by FT 930417 By MICHAEL SKAPINKER

Mr Rocco Forte is in Warsaw today where Lady Thatcher is due to reopen the 92-year old Bristol Hotel. The Bristol, a joint venture between Forte and the Polish tourist agency, is a striking demonstration of the UK hotel and restaurant group's drive to expand outside its home market.

Or so Mr Forte might have said a few months ago - expanding in continental Europe has been Forte's priority for years. However, when this Thursday he presented his first full-year results since taking over from his father as chairman, the message was markedly different.

Forte is to sell Pounds 500m of assets over the next few years. It is scaling back its US operation. The Continent will have to wait. Forte's pre-tax profit of Pounds 72m before exceptional and property items was only slightly up on last year's Pounds 70m, itself well down on the year before. The value of the property portfolio has fallen by Pounds 344m. Gearing has risen to 48 per cent. There are few signs of recovery. The dividend was cut for the first time in 20 years.

These are burdens piled on top of the one Mr Forte has faced ever since, as a 16-year old, he spent his holidays working in the cellars of the company's Cafe Royal: that no-one is prepared to judge the son of Lord Forte, Britain's greatest hotelier, in the way they would any other businessman.

'Poor old Rocco is trapped,' a City analyst once said. 'If things go well, it's because of the company his father built up. If they go badly, it's because Rocco cocked it up.' It is an observation with which Forte insiders grimly concur.

Investors criticised the group's announcement last October that Mr Forte was adding the title of chairman to the position of chief executive he had held since 1983. Unease was heightened by the news that the 84-year old Lord Forte was remaining on the board as president - suggesting that little would change.

The appointment of three new non-executive directors - Sir Anthony Tennant, former chairman of Guinness, Sir Paul Girolami, chairman of Glaxo, and Mr Alan Wheatley, departing chairman of 3i - has only partly mollified critics.

The question of bringing in outside senior directors provokes an uncharacteristically fiery response from the mild-mannered Mr Forte. He says: 'There are a lot of people who would want to be on the Forte board. But I went out and chose some high-powered and independent individuals.'

The critics accept that the three new non-executives are not pushovers. They concede, too, that their appointment has changed the Forte board's balance of power. 'These are Rocco's choices rather than his father's colleagues,' says one. Several close observers note that Mr Forte seems more confident since becoming chairman. Other board changes are likely to follow.

Mr Forte says that Sir Anthony, who is now Forte's deputy chairman, plays an active role in the group. But when asked how often he sees Sir Anthony, it turns out to be once a week at most.

City critics still want Forte to appoint a strong managing director. Mr Forte says the group will appoint one eventually, but that it will not be a complete outsider. He also makes it evident it will not be the sort of person who might shrug him aside.

'It would have to be someone who has worked in the business for at least a year,' he says. 'Someone from outside might have very different views. We don't want to have rows. You've got to have harmony. The idea that you can have two equally powerful men is complete nonsense. You either have a strong chairman or a strong chief executive.'

The Forte group knows all about rows. The struggle between Lord Forte and Lord Crowther, chairman of Trust Houses, rocked the City when the two groups merged in the 1970s. The 1980s row was with the Savoy group. Mr Forte says he does not intend to repeat that one either.

An acrimonious takeover battle left Forte with a majority of Savoy shares but a minority of votes, after which the two sides declared a five-year truce which ends in November next year. Mr Forte has not hidden his desire to gain control of the Savoy, but he says he wants the two sides to reach a civilised agreement when the five years are up. 'I think the way towards a solution is on a discussed basis - not having a slanging match and punching each other in public.'

Controlling the Savoy group would give Forte an internationally-renowned name under which it could group its luxury hotels. Despite owning the Ritz in Madrid, the Plaza Athenee in New York and the George V in Paris, Forte has never entirely shaken its image as, in the sneering words of the then embattled Savoy management, 'a vast combine which, among other things, runs service stations on the main arterial roads.'

In the meantime, Mr Forte has enough to contend with. Last year, the group bought the Relais motorway restaurant business in France and announced a joint venture with Agip, the Italian state petrol company, to manage 18 hotels in Italy. It sold its Gardner Merchant catering company, but the exceptional profit of Pounds 257m was outweighed by the collapse in property values.

In the US, 15 Travelodge hotels are for sale. Mr Forte says the remaining US motels are likely to be floated separately. He still wants to sell Forte's in-flight catering business. Even the core hotels business might be reduced. Mr Forte says 70 per cent of hotel profits comes from just 40 establishments.

The group this week offered shareholders an enhanced scrip dividend as an alternative to the reduced cash payout. Mr Forte says the group will only consider a rights issue if it has a large purchase in mind. With the City still stunned by the financial crisis at the rival Queens Moat Houses, the hotel sector is not currently an investors' favourite.

By the time the hotel business follows the rest of the UK economy into recovery, memories of Queens Moat may have faded a little. If he can reduce the group's debt, Mr Forte might then be able to fashion a new, more internationally-based business. Until then, he will have to make the most of what he has inherited.

Forte GB United Kingdom, EC P7011 Hotels and Motels PEOP People Forte, R Chairman Forte P7011 The Financial Times London Page 6 1099
Rates on vacant premises at Pounds 574m Publication 930417FT Processed by FT 930417 By VANESSA HOULDER, Property Correspondent

BUSINESSES IN England and Wales paid Pounds 574m in rates on empty property last year, nearly 5 per cent of the total business rate bill, new statistics show.

This is a sharp rise over previous years, in line with the large increase in the number of vacant commercial properties. Most of the revenue came from London, where the Pounds 353m of rates charged on unoccupied buildings was nearly 9 per cent of the total London commercial rates bill.

The rising bill for rates on empty property, which is levied at half the cost of occupied property, has become an increasingly heavy overhead for landlords and those tenants that have been unable to find new occupiers for unneeded premises.

Some landlords have escaped paying rates on empty buildings by stripping out services to make their buildings uninhabitable. This option is not open to tenants, many of whom are facing problems sub-letting unwanted space.

The statistics, which were not previously compiled, were put together by the Royal Institution of Chartered Surveyors and the Institute of Revenues, Rating and Valuation.

The body is lobbying the government to cut the empty-rates liability from 50 per cent of the normal levy to 25 per cent. It is also asking the government to extend the grace period when occupiers are excused from paying rates from three months to 12 months after they have moved out of their premises.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Taxes P9121 The Financial Times London Page 5 265
Sharp rise in National Savings Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

NATIONAL SAVINGS con-tributed Pounds 4.36bn to government funding in the 1992-93 financial year, an increase of 39 per cent on the previous year.

The controversial fixed-rate First Option Bond, launched in July to increase National Savings' intake, raised Pounds 880m in the year even though it was on sale for only four months.

The best-selling National Savings category was fixed-interest certificates, accounting for a net addition of Pounds 1.35bn. Index-linked savings certificates were the next most popular category with a net addition of Pounds 1.1bn.

Premium Bonds made a net contribution of Pounds 229m - more than double the previous year's figure of Pounds 104m. Sales of Pounds 382m were the highest for any financial year since they were launched. Capital Bonds made a net contribution of Pounds 582m.

National Savings said the amount contributed to government funding for the year was 'in line with expectations' against a background of 'falling interest rates and strong competition'.

Net receipts for March amounted to only Pounds 87m. Total gross sales were Pounds 627m but National Savings made repayments of Pounds 540m. The contribution to government funding in March, including accrued interest, was Pounds 198m, with fixed-interest savings certificates making the highest contribution.

The total amount invested in National Savings at the end of March was Pounds 44.1bn.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 5 248
Building materials groups act on margins Publication 930417FT Processed by FT 930417 By DANIEL GREEN

SOME construction materials companies are managing to raise prices to rebuild profit margins, but many are having difficulty making the increases stick.

Customers of cement group Blue Circle have already received notification of price rises of between 2 per cent and 3.5 per cent to take effect from June.

For the rise to stick, Blue Circle needs its big customers, such as RMC, to pass on the increase through higher concrete prices. RMC has not officially decided on such a move yet.

The pattern across the whole construction materials industry is similarly patchy.

Redland tried to raise the price of concrete roofing tiles in January. Yesterday, Mr Gerald Corbett, the company's financial director, admitted that discounting was still going on, although volumes were up.

Brick prices, which have fallen by a third over the past two years, remain depressed.

Mr Michael Rose, managing director of Butterly Bricks of Ripley, Derbyshire, said: 'Stocks have peaked at record levels in the last few months.'

Timber importers have tried to raise prices, spurred by the fall in the value of sterling as much as a desire to rebuild margins, but have so far failed.

Mr Bruce Wright, finance director of London-based Meyer International, said: 'The sterling price of softwood is the same as it was 10 years ago.'

Plywood and chipboard have fared a little better, helped by Japanese demand. Prices are 1 per cent to 2 per cent higher this year.

Mr David Taylor, building materials analyst at stockbroker UBS, said that the PVC industry, which supplies piping and guttering, has also tried to raise prices without success.

Plasterboard price rises in the first quarter had trouble in holding but since the end of March the increases have become more widespread.

Knauf (UK), the Kent-based subsidiary of a German company increased prices by about 10 per cent on March 29. Mr Tony Galloni, marketing manager, said: 'It is too early to tell whether the new prices are holding.'

Pilkington raised glass prices by 8 per cent in February and says the prices have held. The company said: 'The glass merchants are keen to see prices rises stick so they can raise their own margins.'

Pilkington is also raising the price of insulation materials by between 7.5 per cent and 10 per cent from April 26. But the company acknowledged it has been 'very difficult to get these rises to stick in recent months'.

Blue Circle Industries Meyer International Knauf (UK) Pilkington GB United Kingdom, EC P3241 Cement, Hydraulic P2436 Softwood Veneer and Plywood P3231 Products of Purchased Glass CMMT Comment & Analysis COSTS Product costs & Product prices P3241 P2436 P3231 The Financial Times London Page 5 460
Another Group 4 prisoner escapes Publication 930417FT Processed by FT 930417 By ALAN PIKE, Social Affairs Correspondent

POLICE WERE last night searching for another prisoner who escaped yesterday from a court guarded by Group 4 Court Services, Britain's first private prison-escort service.

The man fled from Sheffield magistrates' court shortly after being sentenced to 14 days in prison. Group 4 said one of its custody officers suffered facial injuries while trying to prevent the escape.

Yesterday's incident increased to five the number of escapes since Group 4 took over prisoner-escort services last week in the east Midlands, Yorkshire and Humberside.

Another two prisoners have been wrongly released.

At a meeting with Group 4 on Thursday Mr Derek Lewis, director-general of the Prison Service, held the company responsible for only one of the first four lost prisoners. Further problems with the Group 4 contract since the meeting will, however, add considerably to pressures on Mr Lewis and Home Office ministers, who are facing opposition ridicule over the escapes.

The issue is certain to be raised by MPs when Mr Lewis and Mr Peter Lloyd, the Home Office prisons minister, appear before the cross-party Commons home affairs committee on Monday.

Group 4 Court Services GB United Kingdom, EC P7381 Detective and Armored Car Services NEWS General News P7381 The Financial Times London Page 5 222
Water purity boils down to a question of price: Next week the results of surveys by water companies will start to emerge. They have taken the unusual step of asking their customers how much they are prepared to pay for purer water before they commit themselves to the huge investment needed to bring English and Welsh water into line with EC standards Publication 930417FT Processed by FT 930417 By BRONWEN MADDOX, JIMMY BURNS and RHODRI DAVIES

THE water companies' customers are so concerned about rising bills that some companies may ask industry regulators to allow them to delay expensive modernisation.

That is one of the results to emerge from the first nationwide surveys of water customers' attitudes, which water companies will start to publish next week.

Water companies have found that where customers are offered a choice in standards of service or water quality, they often prefer to have lower bills, even if that means forgoing some improvements.

The exceptions are improving the taste of drinking water, the cleanliness of beaches and replacing lead piping.

Customers' strong feelings about bills in many regions of England and Wales are likely to play a part in government deliberations over whether to privatise the Scottish water industry, already emerging as a political battleground.

Most of the 33 companies in England and Wales will soon publish the conclusions from months of interviewing customers, domestic and commercial, in the biggest exercise of its kind in the industry.

The consultations were ordered last summer by Ofwat, the industry regulator, at the same time as it published its controversial report, The Cost of Quality, which warned that ambitious environmental regulation would continue to push up bills above the rate of inflation for many years. Ofwat told companies that they had to gauge customers' reactions before committing themselves to further investment between 1992 and 2005.

In the past month Ofwat has clashed with the National Rivers Authority, the water quality watchdog, over whether all these improvements - which could cost about Pounds 45bn in the 1990s - are necessary. Friction has arisen because Ofwat, which fixes price rises, does not control the environmental regulations, which are set by the European Commission, the UK government and the NRA.

The survey methods chosen by the 10 large companies to get round this problem ranged from Welsh Water's questionnaire posted to all customers, to Thames Water's 'quality circles' with hand-picked panels, and long face-to-face interviews by many of the others.

Customers were keen to have their say. Welsh Water said: 'We have been overwhelmed by the speed and volume of the response. Within five days of the first questionnaires going out, 67,000 of our 1.2m customers had replied.'

North West Water, which conducted hour-long interviews with its chosen sample, said that more than half did not realise that the company managed sewage as well as water, and so were unaware of the link between their bills and the company's spending programme of more than Pounds 5bn this decade.

Preliminary analysis suggests that the surveys will strengthen Ofwat's argument that the pursuit of perfection in water standards, beyond levels necessary for health, is resented by many cus-Tomers.

Companies have found that:

Much customer concern focuses on the spending needed to meet the EC urban waste water directive, one of the most expensive of all the new rules, which covers treatment of sewage and its discharge to estuaries and coasts.

Water companies have estimated that this directive alone could cost Pounds 8bn. Many customers would like to see the most ambitious improvements - such as waste water treatment - stretched out over a longer period to slow the rise in bills.

Customers are prepared to pay more for some 'aesthetic' improvements such as avoiding discoloured water in the Northumbrian region and, in Wessex, better-tasting water and a solution to the problem of rivers running low.

While customers are wary of future price rises, they are generally appreciative of the investment that has already been made. They tend to accept the principle that much of the cost of improvements is passed on to them - Anglian Water reports that more than three quarters of its customers are willing to pay more for higher standards.

The companies will publish these responses and their spending plans in 'market plans' which Ofwat says must be made available to customers in a 'short, illustrated document in non-technical language'.

The market plan will be a main part of the business projections which the companies must submit to Ofwat next spring, as a basis for Ofwat's periodic review.

The review will be the first wide-ranging assessment of pricing formulae since the 1989 water privatisation and will set price rises until 2005.

Ofwat said last week 'customers were not involved in setting price rises at privatisation and this time Mr Ian Byatt (Ofwat's director-general) wants them to play a part'.

Welsh Water Thames Water North West Water Group GB United Kingdom, EC P4941 Water Supply P9651 Regulation of Miscellaneous Commercial Sectors TECH Safety & Standards P4941 P9651 The Financial Times London Page 5 842
Developers are urged to take up public cash Publication 930417FT Processed by FT 930417 By DAVID OWEN and VANESSA HOULDER

PROPERTY COMPANIES are failing to take advantage of billions of pounds worth of public-sector funding, a local-government minister said yesterday. Mr John Redwood appealed for action from commercial developers to spark the market into life.

He warned property specialists that they risked missing the bottom of the market if they did not act now. He said nearly Pounds 3bn of government money was available over five years for those working in tandem with public bodies under schemes such as City Challenge partnerships and urban development corporations.

Mr Redwood said in a Commons debate on local-government services that the present state of the property market presented 'enormous opportunities'. There had rarely been a better conjunction of rental yields and borrowing costs.

'When do the property specialists think they will next be able to buy properties and undertake developments at current high yield levels and current low interest rates?' Mr Redwood asked. 'Why did so many clamour to buy land at Pounds 1m or more an acre in 1988, which they would now turn down at Pounds 1/4 m an acre?'

The government would benefit from a revival in the property market because it wants the private sector to play a leading role in reviving urban areas. It is also seeking to dispose of large tracts of land and property through organisations including the Commission for New Towns, which has about Pounds 2bn of property to sell; English Estates, the government's property development arm; and public-sector bodies such as British Rail.

The property industry is reluctant to increase investment as it is hamstrung by the oversupply of buildings - particularly offices in the south - its own weak finances and the reluctance of banks to make further loans to property.

Property companies are especially reluctant to invest in the inner-city areas favoured by the government.

The few developers which are still active in inner cities say that an increasingly high proportion of public money is needed if schemes are to be viable.

Turning to local government, Mr Redwood made clear that the government had no philosophical objection to councils contracting private companies to provide any service for which they were responsible. Under the government's concept of the 'enabling' council, authorities decided 'how much service the community requires but does not necessarily employ the people providing it'.

Councils should move to 'make the best use' of what the marketplace had to offer. Market testing was not just a way of cutting costs but could also improve service quality.

Mr Doug Henderson, shadow local-government minister, said the government's 'real' policy over 14 years had been to dismantle local democracy in order to centralise power in Whitehall.

He accused the government of contributing to the 'failure' of the Canary Wharf development by ignoring the advice of the local community.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries NEWS General News P6552 The Financial Times London Page 5 503
Boost to food costs pushes up inflation: Prices are up 1.9% but construction suppliers say it is difficult to make rises stick Publication 930417FT Processed by FT 930417 By EMMA TUCKER, Economics Staff

SHARPER PRICE increases for food were the main influence behind the rise in inflation last month, official figures showed yesterday.

The retail prices index rose by 0.4 per cent in March from 138.8 in February to 139.3. Compared with a year ago, prices were up by 1.9 per cent, marginally higher than in February, when the annual rate was 1.8 per cent.

Although mortgage interest rates fell more steeply last month than at the same time last year, increases in food prices were sharper than a year ago. This, with price rises for motoring, clothing and household goods, nudged the all-items index upwards.

The Central Statistical Office reported that excluding mortgage interest payments - an underlying measure favoured by the Treasury - the annual rate rose to 3.5 per cent in March from 3.4 per cent. The month-on-month rise in this index was 0.7 per cent.

The sharpest price increases were for seasonal food, in particular fresh vegetables and home-killed lamb. The CSO said price increases for non-seasonal foods such as beef, dairy products, sugar and soft drinks reflected the recent devaluation of the 'green pound' in which agricultural products are priced.

Overall food prices rose 0.8 per cent on the previous month and 1.5 per cent in the year to March, the largest March rise since 1986.

There were also big price increases for clothing and footwear. On the month, prices rose 1.9 per cent, reflecting recoveries from the sharp reductions in the winter sales and increases for the new seasons' fashions in the shops.

A 0.2 per cent month-on-month rise in fuel and light prices reflected increases of domestic heating oil prices. The final phase of the recent increase in telephone charges was behind a 0.5 per cent rise in household services prices compared with February.

Motoring expenditure prices rose by 1 per cent on the month, mainly as a result of increases in petrol and second-hand car prices.

City economists had been expecting an unchanged inflation rate in March, although the modest increase is unlikely to generate new concerns about growing pressure on price increases.

Increases in excise duties announced in the Budget will start to affect the retail prices index this month. Statisticians said the effect on the annual rate would be fairly neutral, however, because of similar rises a year ago.

------------------------------------------------- INFLATION RISES TO 1.9% ------------------------------------------------- Housing (172) -3.6% Motoring (143) +3.1% Food (non-seasonal) (130) +2.8% Alcoholic drink (80) +5.0% Household goods (77) +1.3% Clothing & footwear (59) +0.3% Household services (48) +4.2% Leisure goods (47) +1.7% Catering (47) +5.3% Fuel & light (47) -0.2% Personal goods, serv. (40) +4.6% Tobacco (36) +9.1% Leisure services (32) +5.8% Food (seasonal) (22) -6.8% Fares & travel costs (20) +5.4% ------------------------------------------------- Figures in brackets are weights in retail prices index in parts of 1,000 ------------------------------------------------- Percentage represent annual percent change to March 1993 -------------------------------------------------

GB United Kingdom, EC P9611 Administration of General Economic Programs ECON Inflation P9611 The Financial Times London Page 5 528
Tax adviser in court over deception totalling Pounds 330,896 Publication 930417FT Processed by FT 930417

THE FORMER owner of an accountancy firm and former chairman of Nottingham Forest Football Club yesterday admitted obtaining a total of Pounds 330,896 by deception.

Mr Julian Baughan QC, prosecuting, said Mr Maurice Roworth, 63, from Lowdham, Nottingham, had posed as a taxation expert and offered to invest clients' money although he had no qualifications and was not registered to carry out any kind of investment business.

He had started work at the Nottingham accountancy firm of White and Co as a clerk in 1949 and worked his way up to managing director, eventually owning the firm outright and conducting a tax-advice business.

Birmingham Crown Court heard that through the firm he took up to Pounds 750,000 from friends and business associates, telling them he was investing their money in the Isle of Man.

He used the cash to pay off personal bank overdrafts while assuring friends their money was safe.

It was alleged that the deception was carried out between 1982 and 1991. He was arrested in March last year.

Mr Baughan said: 'Over a nine-year period he received a total of 34 payments from clients, but none were invested in the Isle of Man or anywhere else. They all went to credit his two NatWest bank accounts and had the effect of reducing his overdrafts.

'Despite substantial payments into his bank he was still overdrawn by Pounds 450,000 at the time of his arrest and has since been declared bankrupt. There are no funds available to compensate the losers.'

Mr Roworth pleaded guilty to eight specimen charges of obtaining money by deception. Flanked by two prison officers, he sat perfectly still as the prosecution outlined the case against him. He was remanded in custody to await sentence in four to six weeks, when mitigation arguments will also be heard.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services NEWS General News P8721 The Financial Times London Page 5 335
Sharp rise in National Savings Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

NATIONAL SAVINGS con-tributed Pounds 4.36bn to government funding in the 1992-93 financial year, an increase of 39 per cent on the previous year.

The controversial fixed-rate First Option Bond, launched last July to increase National Savings' intake, raised Pounds 880m in the year even though it was only on sale for four months.

The launch of the bond provoked charges of unfair competition from building societies, which blamed the government for their own shortfall in funds last year.

But the shortfall far exceeded the amount taken by the First Option Bond. Building society net receipts were Pounds 295m in 1992, down from Pounds 5.8bn in 1991. There was a net outflow of Pounds 262m in the third quarter last year, when the bond was launched.

The best-selling National Savings category was fixed-interest certificates, accounting for a net addition of Pounds 1.35bn. Index-linked savings certificates were the next most popular category with a net addition of Pounds 1.1bn.

Premium Bonds made a net contribution of Pounds 229m - more than double the previous year's figure of Pounds 104m. Sales of Pounds 382m were the highest for any financial year since they were launched. Capital Bonds made a net contribution of Pounds 582m.

National Savings said the amount contributed to government funding for the year was 'in line with expectations' against a background of 'falling interest rates and strong competition'.

Net receipts for March amounted to only Pounds 87m. Total gross sales were Pounds 627m but National Savings made repayments of Pounds 540m. The contribution to government funding in March, including accrued interest, was Pounds 198m, with fixed-interest savings certificates making the highest contribution.

The total amount invested in National Savings at the end of March was Pounds 44.1bn.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 5 320
Bank of England to hold gilt auction Publication 930417FT Processed by FT 930417 By PETER MARSH

THE Bank of England said yesterday it will hold its next auction of gilts on April 28, when the stock on offer will have a maturity between 1996 and 1999, Peter Marsh writes.

The Bank will announce further details on April 20. It is thought the Bank will seek to auction Pounds 2bn to Pounds 3bn worth of bonds as part of the effort of funding this financial year's government deficit which is expected to be about Pounds 50bn.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 5 114
Skills fear over Tecs' policies Publication 930417FT Processed by FT 930417 By LISA WOOD, Labour Staff

THE NATIONWIDE supply of skilled electricians is being jeopardised by the local emphasis of Training and Enterprise Councils, according to the Electrical Contractors' Association, the main supplier of trained electricians.

The association provides a broad-based national training programme through a joint training organisation with the unions.

However, the 82 Tecs in England and Wales have different priorities for what they perceive as local skills needs and this is reflected in the amounts they offer to employers to take on young people under the Youth Training programme.

The association said that the amount offered to employers by Tecs varied from Pounds 15 to Pounds 40 a week, making it much less attractive in some areas for employers to recruit young people. This development, combined with the recession, had resulted in the intake for electrical installation apprentices halving from 4,607 in 1990-91 to 1,770 in 1992-93.

There was no organisation, either of Tecs or at government level that was looking at what the UK as a whole needed. Mr Harry Simpson, the association's director, said: 'A consistent, uniform provision of training funding and qualifying procedure on a national basis is essential if this national training initiative and requirement is to be fostered and fulfilled.'

The complaint is a common one among trade associations, which have a national perspective of skills needs. Attempts by the associations and industry training organisations to feed their requirements into Tecs' planning procedures have not proved successful.

The government has sought to address some other concerns of national training providers which have complained of the bureaucracy of negotiating with up to 82 Tecs. The National Training Partnership is being set up to negotiate funding with Tecs on behalf of the big national providers.

Amounts will still vary for the same training, however, and training organisations will still be responsible for providing separate attendance records and other details of each trainee's activities to individual Tecs. Mr Simpson said these procedures absorbed much of the efforts of trainers. Devonport Management, which runs the Devonport Dockyard, Plymouth, will not take on any apprentices this year. Mr Ian Williams, for the company, said this was because of job reductions and a much younger profile of the workforce.

The dockyard has taken on up to 50 recruits a year in the past and traditionally has been an important provider of craft and technology training for the region.

Devonport Management GB United Kingdom, EC P1731 Electrical Work P8331 Job Training and Related Services P3731 Ship Building and Repairing NEWS General News PEOP Labour P1731 P8331 P3731 The Financial Times London Page 4 444
Atomic body fined Publication 930417FT Processed by FT 930417

THE UK Atomic Energy Authority has been fined Pounds 5,000 for breaching waste controls, after the escape of tritium gas at its Harwell laboratory, Oxfordshire.

GB United Kingdom, EC P9631 Regulation, Administration of Utilities RES Pollution P9631 The Financial Times London Page 4 51
Thatcher rebuffed Publication 930417FT Processed by FT 930417

MR IAN LANG, the Scottish secretary, yesterday attacked Baroness Thatcher's claim that there was 'no such thing as society'. It marked a further distancing of the government from the former prime minister's political legacy.

He said at a meeting of the Scottish Tory Reform Group in Glasgow it was 'self-evident' that society existed.

GB United Kingdom, EC P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 4 77
Jasper Conran Shop in liquidation Publication 930417FT Processed by FT 930417

THE JASPER Conran Shop, in Brompton Road, west London, has gone into voluntary liquidation. It was set up at the height of the 1980s consumer boom to sell the designer's clothes and was separate to Mr Conran's design activities, which are trading normally.

Mr Bernard Harrington of Morison Stoneham has been appointed liquidator.

Jasper Conran Shop GB United Kingdom, EC P5621 Women's Clothing Stores COMP Company News P5621 The Financial Times London Page 4 85
Ministers back Patten on tests Publication 930417FT Processed by FT 930417

CABINET ministers yesterday launched a concerted operation to back Mr John Patten, education secretary, in stressing the importance of school tests going ahead. Mr Michael Portillo, chief Treasury secretary, said: 'Everyone wants higher standards. Achieving them depends on testing.'

Mr William Waldegrave, public-service minister, said the importance of the tests 'to our competitiveness as a country should no longer be ignored'.

GB United Kingdom, EC P9411 Administration of Educational Programs NEWS General News P9411 The Financial Times London Page 4 90
Smith seeks air strikes on Serbs Publication 930417FT Processed by FT 930417 By RALPH ATKINS

MR JOHN SMITH, the Labour leader, last night responded to growing public alarm over Bosnia by backing for the first time 'punitive' United Nations air strikes against Serb supply and communication lines, Ralph Atkins writes.

He said an ultimatum should be issued to Serb forces in Bosnia threatening that unless they agree to an immediate ceasefire 'the UN will begin air strikes. . . consistent with the proposals being made by Lord Owen, the EC peace envoy'.

His remarks broke the near-consensus between the Labour and Conservative front benches that has prevailed so far. Mr Smith also called for an immediate UN Security Council meeting to intensify economic and military sanctions.

His decision to step up Labour's demands reflects pressure within the party for a more aggressive stance.

Two frontbench spokesmen yesterday urged sending ground troops to Bosnia - an escalation of UN involvement greater than Mr Smith has envisaged. Mr Keith Vaz, local government spokesman, and Mr Tony Banks, spokesman on London, said troops should be sent to enforce peace.

Separately 17 Labour MPs issued a letter calling for 'the active engagement of troops on the ground' if required.

GB United Kingdom, EC P8651 Political Organizations P9721 International Affairs NEWS General News P8651 P9721 The Financial Times London Page 4 225
Blizzard of publicity for Mars Publication 930417FT Processed by FT 930417 By GARY MEAD, Marketing Correspondent

'GOOD old Brits came through with a Mars bar,' said the front-page headline.

Now Mars, the confectionery company, has launched an advertising campaign to capitalise on the tale of the four British climbers who were rescued on Thursday after spending six days stranded in the Russian Caucasus mountains with their local guide.

Since the first Mars bar emerged from the original factory at Slough, Berkshire, in 1932, Mars has probably spent more on advertising than the annual gross domestic products of some countries.

In the UK alone last year the confectionery company spent Pounds 5.6m on advertising the Mars bar.

For Mars the story of the climbers has been a case of some of the best publicity coming free. One public-relations executive said: 'You can't even buy (advertising space) on the front pages of the tabloids. The first page you can buy in the Daily Star is page 11, and that will cost you thousands.'

The confectionery company is backing up the welcome free publicity with its own advertising campaign. Today the British press is saturated with large advertisements from Mars, featuring the part the chocolate bar played in the survival of the lost climbers.

They are said to have endured the ordeal sustained only by snow and three Mars bars.

Mars said yesterday: 'We're obviously absolutely delighted for the chaps themselves. The fact they had the presence of mind to take Mars bars with them is a terrific bonus.'

Out of near-tragedy, Mars has gained an almost priceless marketing benefit - not just masses of free publicity, as the tabloids latched onto the story, but an endorsement for its most famous product splashed across front pages of national newspapers.

Mars did admit, however, to being a little puzzled. 'It's bizarre . . . clearly there is not sufficient nutrition in a Mars bar to keep one person going for a whole day, let alone five of them for more than one day,' the company said.

So today's campaign does its best to reinforce the company's advertising slogan: - 'A Mars a day helps you work, rest and play'.

Today's hurriedly created advertisements welcome back the four British climbers, adding: 'Thank goodness they took their Mars bars with them.'

But for Mars, the most important message to get across is the punchline: 'There really is life on Mars.'

Mars (UK) GB United Kingdom, EC P2066 Chocolate and Cocoa Products MGMT Management & Marketing P2066 The Financial Times London Page 4 426
Strike 'fails to halt many pits' Publication 930417FT Processed by FT 930417 By ROBERT TAYLOR, Labour Correspondent

BRITISH COAL said that half its 40 operational pits were producing coal yesterday in spite of a 24-hour strike called by the National Union of Mineworkers in protest at pit closures.

British Coal said this was twice the number of collieries that produced coal on the first one-day stoppage on April 2. But it would not specify how many miners reported for work.

The corporation suggested that pits were operating far beyond the moderate Nottinghamshire coalfield, which as a stronghold of the Union of Democratic Mineworkers did not strike. But it would not specify which areas these were.

It added that many miners were also reporting for work at other collieries where they were carrying out installation and salvaging work.

Mr Kevan Hunt, employee relations director, said: 'An increasing number of NUM members have recognised the futility of staying away from work in a protest to save their jobs.

'Mineworkers at pits producing today are giving a clear message that industrial action is not the answer to the changes facing the coal industry at this time,' he added.

Mr Ken Capstick, vice-chairman of the Yorkshire area of the NUM, accused the corporation of 'propaganda'. He said the only jobs being undertaken were concerned with safety and maintenance.

Mr Arthur Scargill, the NUM president, said that all the collieries were shut down by the strike.

Yesterday British Coal announced the end of production at two more mines, Clipstone and Bevercote on the Nottinghamshire coalfield. From this weekend all development work will end and production will cease on April 30. For the time being the two pits will be placed on a care and maintenance basis. It added there would be no compulsory redundancies with redeployment of men to other pits.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground MKTS Production PEOP Labour P1222 The Financial Times London Page 4 327
Asian bank considers acquisition Publication 930417FT Processed by FT 930417 By SCHEHERAZADE DANESHKHU

MEGHRAJ BANK, the private banking arm of Meghraj group, is exploring the possibility of acquiring Equatorial Bank, which served about 3,000 Asian small-business customers in the UK before it went into administration last month.

The Asian community has been affected by the closure of four banks in the past year, following the collapse of Bank of Credit and Commerce International in 1991.

Roxburghe Bank went into administration earlier this month. Mount Banking was wound up last October while Albaraka International Bank's deposit-taking activities have been suspended.

Mr Anant Shah, chairman of Meghraj Bank said: 'With liquidity at around 60 per cent and with assets of over Pounds 225m, we are in a strong financial condition. This gives us the ability to consider acquisitions and affords Meghraj Bank a unique opportunity to strengthen its presence in the Asian community in the UK.'

The bank has offices in the Isle of Man, Luxembourg and Liechtenstein and an associate company in Jersey. Meghraj said it had instructed Coopers & Lybrand, the accountants, to investigate the possible acquisition.

Meghraj Bank Equatorial Bank GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies COMP Mergers & acquisitions P6081 The Financial Times London Page 4 213
Lang attacks Thatcher claim Publication 930417FT Processed by FT 930417 By RALPH ATKINS

MR IAN LANG, the Scottish secretary, yesterday attacked Baroness Thatcher's claim that there was 'no such thing as society'. It marked a further distancing of the government from the former prime minister's political legacy.

After a week in which Lady Thatcher has embarrassed the government over its Bosnia policy, Mr Lang said: 'Whoever said there is no such thing as society was talking nonsense.'

At a meeting of the Scottish Tory Reform Group in Glasgow, Mr Lang urged the Conservative party to 're-establish its ground'.

Lady Thatcher 'had a task to do: to destroy socialism and all its works. She largely succeeded and that destruction is apparent not just in Britain but around the world.'

Mr Lang argued it was 'self-evident' that society existed 'in every nation or people that has found pluralistic form, whether tribal or clannish, communal or colonial, national or imperial'.

He adopted a tone similar to calls by some senior Labour figures for a government that addresses the aspirations of individuals.

Mr Lang urged Conservatives to seek 'the fulfilled society' in which 'talents are developed, where each has the chance to find a measure of contentment in passing through life'.

GB United Kingdom, EC P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 4 223
AT&T 'ready to dig up Britain's streets' Publication 930417FT Processed by FT 930417 By ALAN CANE

AMERICAN Telephone & Telegraph, the largest US telephone company, is ready to dig up Britain's streets to build its own telephone network if its application for a UK telecommunications operator's licence is granted.

It said yesterday that it was prepared to spend millions of dollars on the infrastructure necessary to reach private and business customers and that no option was being ruled out.

The possibilities include buying lines from BT and Mercury, strategic alliances with cable television operators with licences to offer telecommunications services, radio links to homes and business premises and laying underground cable.

AT&T applied on Thursday for a licence to provide communications services in the UK and between the UK and the US. Its application is direct retaliation for BT's equivalent approach to the US Federal Communications Commission last month.

Sources close to both companies said yesterday reciprocal licences were likely to be granted within a year. Both the government and BT have welcomed the AT&T move. The government is keen to open the UK market to competition, while BT sees it as a lever in its efforts to enter the US market.

AT&T plans to move into the UK market in three phases if it wins its licence. In the first it would offer international business customers the same voice and data transmission services it offers in the US. A company based in the US would be linked with UK subsidiaries by a single network. Network management and billing would be handled comprehensively by AT&T.

In the second phase it would add advanced services that are not marketed extensively in the UK. In the US, for example, AT&T handles 135m calls a day - 40 per cent of which are generated by its 'free phone' service. Businesses pay for their customers to make toll-free calls to them, generating business worth Dollars 6bn a year to AT&T.

The third phase would involve extending the service to domestic customers. In the US customers pay Dollars 6 for their own free phone number on which, for example, their children can call home without charge.

Mr David Haddington, director-general of the UK Telecommunications Managers Association, welcomed the prospect of a new competitor in the UK market prepared to invest heavily in the telecommunications infrastructure. Both quality of service and prices would benefit.

He was concerned, however, that to boost cash flow AT&T would concentrate in the first instance on 'cherry picking' the more lucrative business services, upsetting the delicate balance between BT and its smaller rival Mercury.

He said the emergence of global superplayers such as AT&T and BT would benefit business, leading to:

Harmonised global numbering schemes, where customers would 'own' their telephone numbers and so be free of interference and manipulation by the telephone operators.

Harmonised tariff structures. Mr Haddington said he did not expect uniform pricing, but he did believe telephone calls between subscribers should cost the same regardless of which of them initiated the call.

Harmonised standards for inteconnection between different telecommunications systems to create a seamless global network.

BT plans to offer similar services in the US if granted a licence, through its 'international virtual network' service - codenamed Cyclone - expected to start this autumn with switching in London, New York, Sydney and Frankfurt.

The key issue remains terms on which reciprocal licences will be granted. AT&T is determined that it should not have to negotiate with BT over access to the UK company's network. In the US terms for access are published and standard.

There are signs that BT finds the prospect of competing in the US market sufficiently enticing to soften its stance on the price of access to its network. About 40 per cent of the world's multinational companies have their headquarters in the US and would be potential customers for Cyclone.

American Telephone and Telegraph British Telecommunications US United States of America GB United Kingdom, EC P4813 Telephone Communications, Ex Radio TECH Patents & Licences COMP Company News P4813 The Financial Times London Page 4 681
Pride of Bilbao Publication 930417FT Processed by FT 930417

Tomorrow the biggest cruise ferry to operate from a British port will arrive at Portsmouth. The 37,500-tonne Pride of Bilbao has a capacity of 2,500 passengers and 600 cars and will join P&O European Ferries' fleet to operate a twice-weekly service between Portsmouth and Bilbao in Spain

P and O European Ferries GB United Kingdom, EC P4482 Ferries RES Facilities P4482 The Financial Times London Page 4 76
Tougher rules for insurance brokers urged Publication 930417FT Processed by FT 930417 By RICHARD LAPPER

THE CONSUMERS' Asso-ciation yesterday called for tougher rules for insurance brokers. It said advice offered to people buying policies was of poor quality and sometimes 'abysmal'.

Ms Jean Eaglesham, head of money policy at the association, described the incompetence of some brokers and agents as 'truly alarming'.

The criticism follows a Consumers' Association survey published today which revealed flagrant breaches of industry codes of practice governing the activities of brokers and agents.

Anonymous researchers visited a random selection of 82 intermediaries in six towns and cities. They found that intermediaries frequently failed to disclose the amount of commission payments or to provide customers with copies of insurance policies.

Many intermediaries also failed to give details of their status when requested. More than half the intermediaries recommended 'clearly inappropriate policies'.

Mr Mike Jones, chief executive of the Association of British Insurers, said he believed the survey overstated the problem. 'I don't think it's as bad as that. Most people have perfectly satisfactory policies. It's always possible to pick holes in a system.'

Ms Ruth Rooley, director-general of the British Insurance and Investment Brokers Association, which represents 3,000 brokers, said the conclusions underlined the need for greater investment in training and acknowledged the need for regulatory reform.

She said the association's inability to enforce its code of practice was a weakness in the system.

The Consumers' Association is recommending that the insurance brokers' registration council or a new independent body should enforce regulations more actively. It says the association 'has no effective sanctions' and 'has neither the will nor the motivation' to fill the dual role of trade association and regulator.

It is also recommending the introduction of minimum standards of professional competence and better training.

Weekend Page IV

GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service NEWS General News P6411 The Financial Times London Page 4 321
On the move Publication 930417FT Processed by FT 930417

One of the only trains on the move in Britain yesterday went by road on the back of a lorry. The Sir Nigel Greeley steam locomotive passed Kidderminster Station, Hereford and Worcester, on its journey from Birmingham's railway museum to the Severn Valley Railway.

GB United Kingdom, EC P8412 Museums and Art Galleries NEWS General News P8412 The Financial Times London Page 4 71
Crescent order Publication 930417FT Processed by FT 930417

THE GOVERNMENT has served a compulsory purchase order on Capitalrise, owners of the former St Ann's Hotel in The Crescent, Buxton, a Grade I listed building.

Capitalrise GB United Kingdom, EC P7011 Hotels and Motels P6513 Apartment Building Operators COMP Company News P7011 P6513 The Financial Times London Page 4 58
Holiday move Publication 930417FT Processed by FT 930417

THE DEPARTMENT of Trade and Industry has applied to the High Court for the winding up of French Country Holidays, of Lowestoft, Suffolk. The company has been trading since late last year.

French Country Holidays GB United Kingdom, EC P4725 Tour Operators COMP Company News P4725 The Financial Times London Page 4 60
GM right-hand drive car deal Publication 930417FT Processed by FT 930417 By MICHIYO NAKAMOTO TOKYO

GENERAL MOTORS is to supply Toyota of Japan with right-hand drive cars for the Japanese market, the US motor group said yesterday.

The two companies agreed that GM would manufacture right-hand drive cars with the Toyota badge in the US which would be marketed in Japan through the Toyota dealer network, GM Japan said.

The agreement was reached between Mr John Smith, GM president and Mr Tatsuo Toyoda, president of Toyota, in the US on April 5, GM said.

Toyota would neither confirm nor deny the deal, which was revealed by GM as Mr Kiichi Miyazawa, Japan's prime minister, visits Washington for his first meeting with President Bill Clinton.

Car and car parts exports to Japan have become an increasingly important issue for the US. When former President George Bush visited Japan last year Japanese motor manufacturers agreed to make efforts to import and locally procure more US cars and car parts.

However, there has been increasing criticism in the US of what is seen to be a lack of progress by the Japanese companies in carrying out their proposed procurement plans.

Toyota, at the time, indicated it would make efforts to purchase Dollars 9.2bn (Pounds 6.1bn) worth of car parts worldwide by 1994. Of this, Dollars 5.28bn was expected to be purchased from the US, including local procurement by Toyota's US manufacturing facilities.

General Motors Corp Toyota Motor Corp US United States of America JP Japan, Asia P3711 Motor Vehicles and Car Bodies COMP Strategic links & Joint venture P3711 The Financial Times London Page 3 272
Japan's small companies bear brunt of bankruptcies Publication 930417FT Processed by FT 930417 By CHARLES LEADBEATER TOKYO

THE SLUMP in the Japanese economy is continuing to take a heavy toll on companies, with a sharp rise in corporate bankruptcies last month and a further fall in confidence among small businesses.

There were 14,441 corporate failures in the year to the end of last month, up 22.7 per cent from the year before, according to a report by the Teikoku Databank, the private research company. The rise in bankruptcies is increasingly concentrated among smaller companies.

The rise was mainly accounted for by a 42.7 per cent increase in manufacturing failures, a 29 per cent increase in failures in the service sector and a 22 per cent rise among construction companies.

The severity of the slump among smaller companies was reflected in figures published by the Ministry of International Trade and Industry which show small business confidence declined sharply in the first three months of the year.

JP Japan, Asia P3999 Manufacturing Industries, NEC NEWS General News P3999 The Financial Times London Page 3 181
S Africa braces for violence Publication 930417FT Processed by FT 930417 By PATTI WALDMEIR JOHANNESBURG

THE African National Congress (ANC) yesterday announced that a protest campaign calling for early all-race elections would continue to the end of May.

The move came as South Africa braced itself for a weekend of potential violence, with mass protests planned to mark the funeral of slain Communist party leader Chris Hani. Mr Hani's body will lie in state from tomorrow and he will be buried on Monday.

Business leaders and the ruling National party immediately condemned the ANC announcement that mass action, which might include strikes, would not end after the funeral as planned. ANC leaders were seen as struggling to placate radical ANC youth, who regarded Mr Hani as a hero. A similar campaign last May led to scores of deaths in clashes with police, and between rival black groups.

ANC officials said they were concerned that negotiations had so far yielded nothing concrete for their supporters. 'So far, all the negotiations have accomplished is to get Chris Hani killed,' said one ANC official, quoting a common view among angry young supporters.

Meanwhile, gunmen shot and wounded a white businessmen in the Transkei black homeland, the fourth such attack in recent days. In South Africa itself, the government declared emergency measures in 19 districts including Johannesburg and drafted in police reinforcements. In these areas, police may arrest without warrant, detain without trial and impose curfews.

ZA South Africa, Africa P9229 Public Order and Safety, NEC P8651 Political Organizations NEWS General News P9229 P8651 The Financial Times London Page 3 265
Spring rite keeps Swiss woman in her place at home / A look at obstacles to women having a role in national life Publication 930417FT Processed by FT 930417 By IAN RODGER

ON MONDAY afternoon, a strange annual spring tribal rite will be played out on the streets of Zurich.

According to a 650-year-old tradition, the (male) pillars of the city's business establishment will dress up in medieval garb and, having had slap up lunches in the halls of their various guilds (zunfts), will parade down the streets of the old city on foot or on horseback. The procession ends in a city park where a symbolic figure of winter, known as Boogg and capable of being pronounced only by Swiss, is put to the torch.

The strangest part of this ritual is the audience. Lining the streets will be mainly the men's wives, mistresses, secretaries and other female friends and acquaintances, many of whom will have been dragooned into being there.

Their role is to throw flowers at their preening menfolk. The man who accumulates the most flowers by the end of the parade acquires new prestige. He is easily identifiable because he will have acquired a woman assistant along the way to help carry his load of flowers.

Whatever else may be said about this festival, called Sechselauten, it is an example of male domination in Swiss society. This is the country, after all, where women have had the right to vote only since 1971, and that only at the federal level. The tiny half canton of Appenzell Inner Rhodes (population 13,600) was finally forced by a federal court just three years ago to give their women the vote in local matters.

Swiss women are still not permitted to work night shifts in factories and they have so far made little headway in senior business circles. Moreover, strong social and logistical pressures force them to stay home and look after their children.

Primary school schedules, for example, are perversely arbitrary. A mother of two may find that one child must attend school for two hours early in the morning and two hours late in the afternoon, while the other has different hours. She is thus in effect prevented from taking a regular job.

Swiss women soldiers have only been allowed to carry firearms since 1991 - just pistols for self protection.

The army is undoubtedly one of the main clues to the strong strain of misogyny in Switzerland. The Swiss army is a militia force in which every able-bodied male must serve for an average of three weeks every two years until he is 50.

While on army service, men from Switzerland's many different social and cultural backgrounds rub shoulders and assess each other thoroughly in trying circumstances. They then take the contacts and assessments back and apply them in their civilian lives with a confidence that they could never extend to women.

Meanwhile, women's main role in the country's defence is to stay home, look after the children and do their menfolk's laundry which is sent back regularly from the front by special free post.

There are signs Swiss leaders have finally recognised that they must change their ways. A few leading companies have appointed a token woman to their board. The army held its first mixed 17-week training course for recruits in March. The air force will begin training its first women pilots in May.

But Swiss women are also growing more impatient, as was demonstrated three months ago when a woman, Ms Christiane Brunner, was put up for election to the federal cabinet. The overwhelmingly male parliament, which had only once before agreed to put a woman in the country's supreme governing council, bristled.

Ms Brunner was attacked for her militant feminism, her casual dress habits and her past - she has had three husbands. To the surprise of the parliamentarians, women throughout the country stood up and protested against this muck-raking.

In the end Ms Brunner was not elected, but the parliamentarians felt obliged to vote in another woman, Ms Ruth Dreyfuss. Ms Dreyfuss made clear that her views were identical to those of Ms Brunner, notably on the idea that some day women should be in the majority in the cabinet.

If that ever happened, their first move might be to outlaw Sechselauten.

CH Switzerland, West Europe P7999 Amusement and Recreation, NEC NEWS General News P7999 The Financial Times London Page 3 738
EC-US buying row continues Publication 930417FT Processed by FT 930417 By LIONEL BARBER BRUSSELS

EC and US negotiators have apparently failed to make a breakthrough in two rounds of talks this week in Brussels aimed at resolving the trans-atlantic dispute over government buying rules.

The impasse raises the stakes ahead of next week's talks in Washington between Sir Leon Brittan, EC commissioner for external economic relations, and Mr Mickey Kantor, US trade representative. 'Everything depends on the Brittan-Kantor talks,' the Commission said yesterday.

The US has threatened to impose sanctions against the EC unless the Community agrees to suspend Article 29 of its utility directive which gives a 3 per cent price preference for EC businesses bidding for contracts in the gas, water, transport and telecommunications sectors.

The EC is prepared to waive the article, but only in return for reciprocal concessions in the US market.

The sanctions would amount to just Dollars 50m (Pounds 33.1m) on existing EC contracts in the US, but the political fall-out would be much greater. EC-US relations have soured over disagreements on steel subsidies and the stalled Gatt world trade talks.

During next week's talks, both sides will discuss how to give fresh impetus to the Gatt Uruguay Round, focusing on improving market access through lower tariffs.

EC officials expressed disappointment yesterday with US tariffs proposals, but said President Bill Clinton's decision last week to press ahead with 'fast track' negotiating authority for the Gatt round was encouraging.

US United States of America QR European Economic Community (EC) P9611 Administration of General Economic Programs P9721 International Affairs NEWS General News P9611 P9721 The Financial Times London Page 3 273
Clinton offers Dollars 4bn cut to spending plan Publication 930417FT Processed by FT 930417 By JUREK MARTIN WASHINGTON

PRESIDENT Bill Clinton yesterday offered to cut about Dollars 4bn (Pounds 2.6bn) from his Dollars 16bn economic stimulus package, but Senator Bob Dole, Republican leader, promptly rejected the compromise and again demanded offsetting spending cuts.

Mr Clinton's new approach, made 'reluctantly' according to the White House, is intended to break the Republican filibuster and will be first tested in a Senate vote on Tuesday.

The White House said the essence of the jobs creation proposals remained intact, as did the immunisation and Aids programmes to which the Republicans have objected as inappropriate for economic stimulus. The administration also added yesterday another Dollars 200m for recruitment of more policemen.

Mr Clinton, who has been lobbying intermittently to break the filibuster, criticised the 'unwillingness of the minority' to appreciate the need to create more jobs. The White House spokesman said 'the ball in now in the Republican court.'

The latest data yesterday provided further evidence that the economic recovery had begun to lose some steam. Industrial production last month remained unchanged from February, breaking a run of five consecutive monthly advances. In February the index had risen by 0.6 per cent and in January by 0.3 per cent.

The mid-March blizzard that shut down much of the east coast particularly affected textiles, steel, furniture, tobacco and clothing.

The Commerce Department also reported a fractional widening in the US merchandise trade deficit in February, to Dollars 7.2bn from Dollars 7.16bn in January. Exports and imports were virtually unchanged, but the export growth rate turned negative, mostly a reflection of weakened demand among the main US trading partners.

The figures, announced just before Mr Clinton was to meet Mr Kiichi Miyazawa, the Japanese prime minister, in the White House, showed the US deficit with Japan growing to Dollars 4.13bn in February from Dollars 3.90bn in the previous month.

US United States of America P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 3 342
Italians set to vote for change Publication 930417FT Processed by FT 930417 By ROBERT GRAHAM ROME

ITALIAN voters look set to endorse a major change in the electoral system in Sunday's referendum that proposes to reduce the importance of proportional representation and introduce the principle of majority voting in the Senate.

As the referendum campaign closed last night opinion polls indicated a majority of the 48m voters backed a reform of the voting system. But the polls also showed continued widespread uncertainty.

This has been blamed at least in part on the fact that seven other issues are being voted on the same day - ranging from de-penalising personal drug use and ending state funding of political parties to the abolition of the ministries of agriculture and tourism.

A survey by pollsters Doxa published yesterday showed 57 per cent in favour of a change in the voting system, 10 per cent against and 33 per cent undecided.

Polls, only ever approximate in gauging Italian voter intentions, have consistently given a majority for the change but the percentages have varied widely.

With polling stations also open on Monday, the result will not be known until late that night. But already yesterday there were signs that Mr Giuliano Amato, the prime minister, was preparing the ground for significant changes in government next week in the aftermath of the referendum.

IT Italy, EC P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 3 242
Bankruptcies rise in Japan Publication 930417FT Processed by FT 930417 By CHARLES LEADBEATER TOKYO

THE SLUMP in the Japanese economy is continuing to take a heavy toll on companies, with a sharp rise in corporate bankruptcies last month and a further fall in confidence among small businesses.

There were 14,441 corporate failures in the year to the end of last month, up 22.7 per cent from the year before, according to a report by the Teikoku Databank, the private research company. The rise in bankruptcies is increasingly concentrated among smaller companies.

In spite of the rise in the number of business failures the combined debts of the companies involved fell by 4.2 per cent to Y7,445bn (Pounds 43bn).

The rise in bankruptcies was mainly accounted for by a 42.7 per cent increase in manufacturing failures, a 29 per cent increase in failures in the service sector and a 22 per cent rise among construction companies.

In March there were 1,340 bankruptcies, up 18.2 per cent from the year before and 20 per cent up on February.

The severity of the slump among smaller companies was reflected in Ministry of International Trade and Industry figures which show small business confidence declined sharply in the first three months of the year.

A Miti survey of more than 17,000 small companies found that business confidence fell to minus 36.6 per cent from minus 32 per cent in the previous three months. The index measures the percentage of companies reporting an expected improvement in business conditions, minus the proportion of pessimistic firms.

The sales index for the three months to the end of March stood at minus 35.5 per cent, down from minus 28.9 in the final quarter of last year, while the pre-tax profits index stood at minus 39.8 per cent, compared with minus 34 per cent in the previous quarter.

JP Japan, Asia P3999 Manufacturing Industries, NEC NEWS General News P3999 The Financial Times London Page 3 324
Asian economies head for growth spurt: Asian Development Bank survey credits strong performance from China Publication 930417FT Processed by FT 930417 By VICTOR MALLET BANGKOK

DEVELOPING Asian economies are likely to grow at more than 7 per cent a year in 1993 and 1994 and to continue outperforming other regions of the world, according to Asian Development Outlook, the annual survey published yesterday by the Asian Development Bank.

Gross domestic product in the 26 Asian countries covered by the report increased by 7 per cent last year, up from 6.1 per cent in 1991.

The Manila-based ADB attributes Asia's success to:

Strength of the Chinese economy.

Growing importance of intra-regional trade and investment.

Continuation of rapid export growth through greater market penetration and diversification.

Rise of domestic demand.

Upgrading of technology and increased productivity flowing from foreign direct investment.

Widespread adoption of policies promoting competition and efficiency.

Exports from developing Asian countries rose 13 per cent last year - twice as fast as world exports - to reach Dollars 555bn (Pounds 367.5bn), while inflation fell to 6.7 per cent from 8.4 per cent in 1991.

The Asia-wide figures embrace divergent performances: the Chinese economy grew by a remarkable 12.8 per cent last year, after 7.5 per cent in 1991, while the growth rate for the four newly industrialising economies (Hong Kong, South Korea, Singapore and Taiwan) slipped to 5.3 per cent, the lowest since 1985 and down from 7.3 per cent in 1991.

South Asian economies recovered strongly last year, with the regional growth rate rising to 4.7 per cent from 2.1 per cent.

Although the ADB praised the broad thrust of economic policy in Asia - and published a section in its report analysing the continuing development of capital markets and the tax reforms being undertaken throughout the region - it also warned that future growth could be stunted by the deadlock in world trade negotiations and by a shortage of investment in infrastructure.

Mr Kimimasa Tarumizu, ADB president, criticised the congestion and pollution suffered by Asian cities in his foreword to the report.

'The pressing need for additional infrastructure investment is apparent nearly everywhere,' he said.

'If not addressed quickly, bottlenecks in power, transport, communication and urban services could well become a drag on future economic growth.'

Chinese economic growth is forecast to remain in double digits, but the ADB predicts that the rate of expansion will decline from last year's level because of such bottlenecks and a rising rate of inflation.

'To avoid the emergence of excess demand and an overheated economy' the report urges China to establish a strong, market-oriented system of macroeconomic management that uses indirect instruments, including interest rates and bank reserve requirements, rather than direct controls on credit expansion.

The report forecasts that Chinese exports will continue to grow at annual rates of 15 to 16 per cent, largely as a result of new production financed by foreign investment.

Chinese imports will rise even faster - at 20 or 25 per cent a year - and the current account surplus is expected to shrink this year and poss-ibly turn into a deficit in 1994.

India's economy is expected to grow by between 5.5 and 6 per cent annually over the next two years, the ADB says, while Malaysia and Thailand are likely to be the star performers in south-east Asia with annual GDP growth of around 8 per cent.

The report acknowledges the validity of some Asian fears about the creation of the North American Free Trade Agreement between the US, Canada and Mexico, noting that manufacturing wages in Mexico are highly competitive with those of Asian exporters and that investment funds might be diverted to Mexico from Asia.

But it says that proposed lower tariffs within Nafta may have only a minimal effect in diverting trade from Asia because tariffs between Mexico and the US are already 'quite low'.

----------------------------------------------------------------------- ASIA AND THE WORLD ECONOMY (Real GNP annual % change) ----------------------------------------------------------------------- 1991 1992 *1993 *1994 ----------------------------------------------------------------------- World 0.1 0.5 1.5 3.5 Industrialised countries 0.5 1.5 1.9 2.7 US -1.2 2.1 3.2 3.3 Japan 4.0 1.5 2.1 2.5 Germany 1.0 1.4 0.0 2.7 Developing countries 3.4 5.1 5.5 5.8 Africa 1.5 2.0 3.0 3.2 Asia 6.1 7.0 7.2 7.4 Latin America 2.8 2.4 2.5 3.0 Middle East and Europe 0.0 6.1 7.0 7.2 Eastern Europe and Former Soviet Union -9.7 -16.0 -10.0 5.5 ----------------------------------------------------------------------- *Forecasts Source: ADB -----------------------------------------------------------------------

XO Asia P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 3 752
German bank chief airs treaty worries Publication 930417FT Processed by FT 930417 By JUDY DEMPSEY BERLIN

MR Helmut Schlesinger, president of Germany's Bundesbank, said yesterday the Maastricht treaty had created tensions because some countries felt threatened about loss of national identity and the road towards full political union remained undefined.

'Just how uncertain people are in assessing the treaty is reflected in the outcomes of the referendums in Denmark and France, perhaps even in the avoidance of such referendums in other countries,' he said. 'The essential debate on Europe's future political shape, a federal state versus a federation of states, has not even reached major parts of the general public as yet.'

Mr Schlesinger warned that uncertainty regarding further developments towards political union, had a direct impact on plans for monetary union.

In a speech to the World Affairs Council in Los Angeles, Mr Schlesinger set out Bundesbank reservations about the pace of European political union and monetary union. 'I believe it to be short-sighted simply to regard European monetary union as the logical conclusion to the process of economic integration. Monetary union is rather a step with a significance of its very own. A single market can exist and be beneficial without inevitably requiring further moves towards integration in the monetary sphere.'

He also warned that the creation of a completely independent European Central Bank as a plank for monetary union was not a 'cure-all' for ensuring price stability. 'Monetary policy cannot reverse a grave misdirection of fiscal and wage policies. Anti-inflation policy cannot be reduced to the problem of providing the proper set of technical instruments.'

The Maastricht treaty has already established four criteria for entry into monetary union. But Mr Schlesinger, quoting Chancellor Helmut Kohl, repeated that there was 'no side entrance for candidates who do not meet the stringent prerequisites'.

The Bundesbank president questioned how consensus on the need for currency, budgetary, and fiscal stability could be achieved once monetary union has been established, particularly following the uncertainity arising from political union.

IG Metall, Germany's powerful engineering union, indicated yesterday it would focus its pay campaign in east Germany on enterprises it believes can afford to meet the union's wage demands. Its leaders will decide on Monday on a ballot of members in eastern Germany for an all-out strike in support of higher wage increases.

DE Germany, EC P9721 International Affairs P8651 Political Organizations NEWS General News P9721 P8651 The Financial Times London Page 3 408
Palestinians to seek peace talks postponement Publication 930417FT Processed by FT 930417 By ROGER MATTHEWS, Middle East Editor

PALESTINIANS said yesterday that they would seek a delay in the resumption of Middle East peace talks scheduled to open in Washington on Tuesday.

The proposal, in protest at Israel's deportation of 415 Palestinians, was put to a meeting of the four Arab delegations to the peace talks who gathered in Damascus yesterday for a two-day meeting aimed at reaching a joint response to the US-Russian invitation.

Syria, Jordan and Lebanon have all expressed their desire to return to the negotiating table, but are reluctant to resume bilateral talks with Israel in the absence of the Palestinians.

Mr Yassir Abed-Rabbo, who heads one of three PLO factions directing the Palestinian negotiators, said in Damascus: 'We did not say we are leaving the peace process. We are not quitting. All we are saying is let us postpone for a short period of time - we insist a short period of time - in order to reach a compromise.'

He added that Israel's recent closure of the West Bank and Gaza Strip, which had caused serious hardship by stopping 100,000 Palestinians crossing to work in Israel, had added a further obstacle.

'We have not received any clear and concrete answers,' Mr Abed-Rabbo said. 'There are various promises and ambiguous suggestions which do not convince us or convince Palestinian public opinion.'

In the occupied West Bank, two Arabs died and seven Israeli soldiers were wounded yesterday when a bomb exploded in a roadside cafe. The attack appeared to be timed to increase tension in the run-up to the peace talks.

Security forces said that an Arab had driven a truck at the cafe and had died when it exploded, causing serious damage and setting fire to vehicles parked nearby.

The Palestinians whose expulsion from the West Bank and Gaza in December provoked the crisis in the peace process, launched their own protest yesterday by marching from their makeshift camp in south Lebanon towards Israeli military positions.

Israeli troops responded with artillery and tank fire and the march was called off several hundred metres short of the positions after a shell injured one of the marchers.

Mrs Hanan Ashrawi, the spokeswoman for the Palestinian delegation to the peace talks, said in Washington after two days of talks with US officials that it was not possible at this stage to recommend a resumption of the negotiations.

The Palestinians have been pressing Israel to accelerate the timetable for allowing the men expelled to Lebanon to return home. They also want a commitment from Israel that it will not again carry out mass expulsions.

President Bill Clinton has promised that the US will become more closely involved in the peace talks and together with Mr Yitzhak Rabin, Israel's prime minister, and President Hosni Mubarak of Egypt, has expressed hope that substantial progress can be made this year.

All sides have also agreed that no time limit will be placed on the next session, the ninth since the inaugural meeting in Madrid in October 1991.

IL Israel, Middle East XN Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 534
UN prepares for Srebrenica's evacuation: The enclave's fall would be a devastating blow to Moslem-led forces Publication 930417FT Processed by FT 930417 By LAURA SILBER

UN RELIEF workers yesterday finalised plans to evacuate tens of thousands of civilians from Srebrenica, as Serb forces tightened their stranglehold on the enclave in eastern Bosnia.

The fall of Srebrenica would be a devastating blow to the Moslem-led Bosnian forces. One of the few remaining strongholds in the once mostly Moslem region of eastern Bosnia, it has become a symbol of resistance against Serb forces.

Conflicting radio messages yesterday were the only reports out of Srebrenica, cut off from the outside world for a year by a Serb siege. Crowded with Moslem refugees from the Serb onslaught on neighbouring towns in eastern Bosnia, Srebrenica's population has swollen to some many times its original size.

Bosnian leaders broadcast desperate appeals to the outside world for help in defending the town. 'It is a question of hours. . . of whether they will be slaughtered or run over by tanks,' said Mr Stefan Siber, a Bosnian official.

Amateur radio reports received in Sarajevo said Serb forces had stepped up their shelling of the town. They described panic among the battered population, hiding in underground shelters. Most are hungry, suffering scabies and body lice. 'In the name of God, do something,' said one

Serbian TV said Serb forces had come within 1km of the town. UN reports said Serb attacks had subsided to two shells an hour, in the foothills of the Drina River valley. 'We have been saying since February that Srebrenica would fall if some protective measures were not taken,' said Mr Laurens Jolles of the Belgrade office of the UN High Commissioner for Refugees.

It is likely that Serb forces, after seizing control of Srebrenica, would seek to advance on the two other Bosnian government strongholds, Gorazde and Zepa, to the south.

This would further undermine the international peace plan on Bosnia which envisages Moslem control of most of eastern Bosnia, on the frontier with Serbia. Bosnian Serbs have rejected the proposed maps because it separates Serb-designated provinces from Serbia.

The fall of nearby Kamenica, which cut off a vital route to Srebrenica, left it completely vulnerable. Further, Croat forces severed supply lines into Moslem-held territory which helped Serb forces advance on the badly outgunned Bosnian fighters.

UN officials believe an artillery attack on Srebrenica on Monday, which claimed at least 56 lives, left local military leaders reeling with little hope of defending the town. 'I saw bodies everywhere. The streets had been packed with people, taking advantage of a lull in the fighting to get out because they live in hellish conditions,' says Mr Louis Gentile of the UNHCR, who was in the town centre.

'Serb artillery guns pounded the town from north to south for over an hour in an attack clearly designed to hit the main street. They (Serb forces) can probably lob the odd shell without orders. But for the mass and systematic shelling, approval must have come from above,' he added.

Refugees from Srebrenica tell how special forces from the Yugoslav army have been operating around the town. 'The people who are attacking us are not from Srebrenica. I lived there; I know who is local and who isn't. They are from Serbia,' said Mrs Azreta Habibovic, a Moslem refugee who recently fled Srebrenica to Tuzla.

UN officials have confirmed reports of Yugoslav Army presence in the area. Diplomats based in Belgrade also say there is evidence of army involvement crossing from Serbia to Skelani, just south of Srebrenica.

BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs NEWS General News P9711 P9721 The Financial Times London Page 2 620
Yeltsin comes under attack on two fronts Publication 930417FT Processed by FT 930417 By JOHN LLOYD and DMITRI VOLKOV MOSCOW, MINSK

PRESIDENT Boris Yeltsin of Russia sustained attacks on two fronts yesterday, as his vice president accused the president's closest associates of corruption and Russian industrialists laughed at his claim that the worst was over in the economy andinflation was going.

The ferocious attack from General Alexander Rutskoi, in his capacity as inter-departmental fighter against corruption to the Russian Supreme Soviet, accused Mr Mikhail Poltaranin, head of the federal information service, and Mr Gennady Burbulis, former first deputy prime minister and until recently the closest of Mr Yeltsin's advisers, of being involved in crime rings.

Mr Burbulis, he alleged, was implicated in the 'Red Mercury' scandal, in which a company in Ekaterinburg (the former base, as Sverdlovsk, of Mr Yeltsin) called Promecologia had received monopoly export rights for mercury.

Mr Poltaranin was implicated in the theft of money for the sale of former Red Army property in Berlin, and in the diversion of German aid to the Russian military to build houses, he said.

Making explicit the link between criminal circles and radical reform, Gen Rutskoi told parliament that officials most involved in corruption 'are very interested that the present course of reform be maintained, since it's filling their pockets'.

Striking the populist note which could make him a formidable electoral opponent for Mr Yeltsin, Gen Rutskoi said: 'The people of Russia were robbed twice last year: once because of shock therapy and the liberalisation of prices, and once because of those sums of money and resources which, without any control, were sent abroad.'

Mr Yeltsin hinted this week that he would ask Gen Rutskoi to resign.

Mr Yeltsin's humbling before a 4,000-strong gathering of the Union of Industrialists and Entrepreneurs in a hall within the Kremlin came when he claimed inflation had dropped from nearly 30 per cent in January to 17 per cent in March. The last figure was drowned in a chorus of jeers and catcalls. 'I don't understand. . . ', said the president, turning to Mr Arkady Volsky, the union's president, for assistance.

Inflation, according to figures compiled by the state statistical service Goskomstat, has come down in the first quarter, though its estimate is 21 per cent for March. The underlying rate of credit expansion, the root cause of inflation, has itself come down sharply, to as little as 10 per cent in February from highs last year of over 30 per cent a month.

As Mr Yeltsin came under fire in Moscow, leaders of the Commonwealth of Independent States yesterday produced an orchestrated chorus of support for the Russian president.

The meeting in the Belarussian capital of Minsk, called by Mr Yeltsin to decide the future of the CIS, became a campaign rally for the president a little more than a week before his crucial constitutional referendum on April 25.

Even President Leonid Kravchuk of Ukraine, a bitter critic of Russian policy, was induced to endorse Mr Yeltsin as the best Russian president Ukraine was likely to get. He said the referendum would determine whether the Commonwealth would continue to exist and added that 'there are forces in Russia which want a return of the Soviet Union, but that way lies bloodshed'.

Uzbekistan President Islam Karimov said: 'We fully support the Russian president even if we do not support every action of his government.' There was no overt disagreement but it is doubtful that this unity will survive a more detailed examination of Mr Yeltsin's proposals in a month.

Mr Yeltsin could gain the support of 60 per cent of voters in the referendum on April 25, according to polling by the Gallup organisation.

RU Russia, East Europe P9111 Executive Offices P9121 Legislative Bodies NEWS General News P9111 P9121 The Financial Times London Page 2 641
Germany to shun bombing raids Publication 930417FT Processed by FT 930417 By JUDY DEMPSEY BERLIN

GERMANY will not take part in any Nato-backed selective bombing in the former Yugoslavia because of constitutional constraints and its legacy in the Balkans in the second world war, the Foreign Ministry said yesterday.

Although the constitutional court last week allowed German-manned Awacs aircraft to help impose a United Nations no-fly zone over Bosnia, the ministry stressed this was a 'one-off' arrangement.

'We fully understand the emotion and engagement of David Owen facing these terrible pictures of the Serb offensive in Srebrenica. We have lost any belief in the Serbs' will to find an honest and peaceful compromise,' said Mr Hanns Schumacher of the Foreign Ministry. 'The next step can only be the tightening of the sanctions, although the idea for selective bombing has been proposed before.'

'As regards military steps by Germany in the former Yugoslavia, everybody knows (about) our constitution and our historical burden. We do not want to participate in a public debate about our participation.'

Germany's involvement in military activities outside the Nato area is constrained by the interpretation of the constitution.

Even if the constitution was amended to state specifically Germany's military role in the post-cold war era, Mr Schumacher said, 'there is a clear majority' in the Bundestag, or lower house of parliament, against involving German solders in Yugoslavia.

A Nazi-backed regime was set up in Croatia during the second world war.

DE Germany, EC BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 2 266
Mexican press bribery claimed Publication 930417FT Processed by FT 930417 By REUTER MEXICO CITY

Mexico's attorney general's office said yesterday drug traffickers were buying and bribing their way into provincial newspapers in an attempt to influence coverage of drug and police matters, Reuter reports from Mexico City.

The statement said some journalists and law enforcement officials were taking bribes from traffickers to provide leaks and articles. The attorney general's office leads the fight against drug trafficking in Mexico.

It named no individual journalists.

MX Mexico P2711 Newspapers NEWS General News P2711 The Financial Times London Page 2 96
Slovaks take to the streets Publication 930417FT Processed by FT 930417 By REUTER BRATISLAVA

More than 4,500 Slovaks took to the streets yesterday in Slovakia's biggest labour protest against government policies since independence on January 1, Reuter reports from Bratislava. At a mass rally outside the headquarters of the Slovak Confederation of Trade Unions, speakers accused the government of Prime Minister Vladimir Meciar of failing to cope with Slovakia's rapidly deteriorating economy.

Trade union leaders have been alarmed by forecasts that unemployment will reach 20 per cent this year.

SK Slovakia, East Europe P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 2 108
Finnish foreign minister named Publication 930417FT Processed by FT 930417 By REUTER HELSINKI

Farmers' leader Mr Heikki Haavisto will replace Mr Paavo Vayrynen as Finnish foreign minister, a senior government official said yesterday, Reuter reports from Helsinki. Mr Haavisto is known to be a critic of proposed Finnish membership of the European Community although he is showing signs of softening his anti-EC stance.

Finland applied to the EC in March last year and the government aims for membership in 1995 after a referendum. But public support for joining the Community has declined.

Mr Vayrynen said this week he would leave the four-party coalition government led by his agrarian-based Centre party to concentrate on campaigning for the presidential election in January next year.

FI Finland, West Europe P9721 International Affairs PEOP Appointments P9721 The Financial Times London Page 2 137
Brussels passes missile deal Publication 930417FT Processed by FT 930417 By LIONEL BARBER BRUSSELS

Short Brothers, the UK aeronautics company, and Thomson-CSF, the French defence manufacturer, can proceed with a planned joint venture to produce missile defence systems, European Commission merger authorities announced yesterday, writes Lionel Barber in Brussels.

Short Brothers Thomson-CSF IE Ireland, EC FR France, EC P3721 Aircraft P3812 Search and Navigation Equipment P3761 Guided Missiles and Space Vehicles COMP Strategic links & Joint venture P3721 P3812 P3761 The Financial Times London Page 2 86
Irish cut short-term interest rate again Publication 930417FT Processed by FT 930417 By TIM COONE DUBLIN

IRELAND'S Central Bank yesterday reduced its short term facility (STF) interest rate by half a percentage point to 9 per cent, the seventh reduction in the official rate in eight weeks, writes Tim Coone in Dublin.

The STF is the rate which underpins wholesale money market rates and is now at its lowest level in four years.

Wholesale money rates in Dublin soared to as high as 100 per cent during autumn's ERM currency crisis, as the Central Bank struggled to defend the punt against speculative attacks and exhausted its foreign currency reserves.

The punt's devaluation in January however, and the easing of German interest rates, has since enabled the Central Bank substantially to rebuild reserves and therefore sharply to reduce interest rates in the Irish market.

IE Ireland, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 2 161
World Bank, IMF wage bills to rise by 6%: Institutions defend pay increases against opposition of rich member countries Publication 930417FT Processed by FT 930417 By GEORGE GRAHAM WASHINGTON

DIRECTORS of the International Monetary Fund and the World Bank have voted for a pay increase that will increase wage bills at the two Washington-based institutions next year by more than 6 per cent.

Despite opposition from the US, UK, Canada and Australia, which together represent a third of the voting capital of the IMF and World Bank, the two boards this week approved a pay increase of 4.6 per cent with effect from May 1.

This will result, because of additional recruitment and pension costs, in a rise of 6.9 per cent in the IMF's total personnel bill, budgeted at Dollars 273m (Pounds 180.7m) for the year ending April 30.

At the World Bank, staff costs will rise by 6.2 per cent from Dollars 804m budgeted for year ending June 30.

Bank and Fund officials said the pay rises were based on comparisons of public and private sector salaries in the US, France and Germany, collected by Hay Associates, a consulting company. The move, at a time when the US plans to freeze federal workers' pay and other countries are actually rolling back civil service salaries, was attacked by outside critics of the two institutions as well as by some inside the two institutions.

'Considering that the donor countries are financing an institution that is not performing well, to pat themselves on the back and give themselves a raise is not the thing to do,' said Ms Peggy Hallward of Probe International, an environmental group that has criticised many World Bank projects in the developing world.

'We can't restrain our appetites,' added one Bank official.

The World Bank and IMF pay rise also follows a week of intense criticism of lavish spending at the European Bank for Reconstruction and Development, a similar multilateral financial institution. Mr Norman Lamont, the UK chancellor of the exchequer, and Mr Theo Waigel, the German finance minister, have raised questions about EBRD salaries, travel and office expenses.

Opponents of the pay rise believe it is particularly unfortunate because it could increase hostility in the US Congress towards funding the US commitment to give Dollars 3.75bn for the 10th replenishment of the International Development Association, a World Bank offshoot which provides loans at concessional rates to the poorest developing countries.

The administration has included Dollars 1.25bn for the first tranche of this commitment in its budget for 1994.

Officials from the Bank and the Fund said this year's pay rise reflected historical data. The US pay freeze would show up in next year's calculations.

They also noted that they had to pay competitive salaries to ensure their ability to recruit internationally, adding that staff who moved to Washington often came with spouses who had to give up jobs in their home countries.

Both the Bank and the Fund have often been criticised in the past for adding subsidies, perquisites and substantial travel expenses to already generous salaries.

Neither institution would provide salary figures, but independent guesses estimate the average for the World Bank group's 7,000 employees at over Dollars 70,000 a year, and for the 2,200 IMF staff at around Dollars 80,000 a year. Since non-US citizens are not subject to tax, equivalent taxable salaries would be much higher.

Mr Lewis Preston, president of the World Bank, and Mr Michel Camdessus, managing director of the IMF, earn Dollars 190,000 a year plus a representational allowance of Dollars 95,000 - salaries which were substantially increased in 1991, at Mr Camdessus's insistence, to retain parity with Mr Jacques Attali, president of the EBRD.

Criticism of the World Bank has been particularly barbed because of its role in helping poor, developing nations.

US United States of America P9311 Finance, Taxation, and Monetary Policy PEOP Labour P9311 The Financial Times London Page 2 652
EBRD told to provide details of spending Publication 930417FT Processed by FT 930417 By ROBERT PESTON and KEVIN BROWN LONDON, SYDNEY

THE 56 countries and inter-national agencies which own the European Bank for Reconstruction and Development have asked the bank's executives for a detailed breakdown of how it spent Pounds 55.5m on furnishing and equipping its offices.

The 23 directors of the bank, which represent these countries and agencies, have also asked for proof that 'proper procurement policies' were followed and that the bank received the best prices for the construction.

One director said yesterday that the bank's board was unhappy about last year's process of fixing the budget which was eventually set at Ecu136m (Pounds 108m) for administrative costs. The board has prepared a working paper to ensure it receives more detailed information from the banks' executives when fixing future budgets.

Canada's representative, Mr Don McCutchan, was so concerned he asked Mr Jacques Attali, the bank's president, to record his refusal to approve the 1993 budget when it was passed on December 14.

The Australian representative, Mr Jim Humphreys, is also said to have protested to Mr Attali about lax control on spending by the bank, including the cost of its London headquarters, which the Australian government believes was excessive.

Mr Humphreys felt so strongly about the allocation of Pounds 52,000 for a staff Christmas party last December that he wrote to Mr Attali refusing to attend. He felt it was an 'inappropriate' way to spend shareholders' funds.

Building contractors said yesterday the bank had spent about Pounds 2.5m on joinery for panelling, door frames and doors. It had bought 600 desks, designed by leading architect Norman Foster, for more than Pounds 600 each.

Mr Anders Ljungh, the EBRD's vice president in charge of finance, said that the building had been fitted out within budget and that good prices were obtained for all elements.

He said it was 'it was not necessarily appropriate' to order more modest furnishings. 'We got beautiful offices for a useful price,' he said.

One director said proposals to change the budget-making process would be implemented after the annual meeting beginning next weekend. Several directors, including those from Canada, Australia and the UK, have been concerned that the bank's control of overheads should be tighter.

Mr Ljungh said the bank's investments in the money markets had been so successful last year that all its running costs of Ecu92.8m were covered by interest earnings and dealing costs.

The bank made a profit of Ecu3.8m before Ecu10m provisions to cover possible losses on investments in eastern Europe and the former Soviet Union. Its net loss for the year of Ecu6m was Ecu40m better than it had been expecting, Mr Ljungh said.

City rejects Pounds 1 1/2 m tent, Page 2

Bank at Europe's heart, Page 7

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies RES Capital expenditures P6081 The Financial Times London Page 1 489
Clinton lectures Japan on access to markets Publication 930417FT Processed by FT 930417 By JUREK MARTIN WASHINGTON

PRESIDENT Bill Clinton yesterday delivered what amounted to a public lecture to Japan on the need for 'rebalancing' its bilateral economic and trading relationship with the US.

Mr Clinton confirmed that the US would seek specific targets for exports in selected markets in Japan. 'We are concerned not only by how much we sell, but by what we sell,' he said.

His comments came at a joint press conference after morning White House meetings with Mr Kiichi Miyazawa, the Japanese prime minister. Mr Clinton was complimentary about Japan's achievements and implied few disagreements on issues such as regional security and aid for Russia. However, he focused most of his remarks on the imperative of forging a new, economically-led relationship in the post-Cold War era.

'Economics have been at the heart of our discussions,' he said, with Japan's persistent trade and current-account surpluses and 'inadequate market access' at the top of the agenda.

While recognising the complexity of many of the issues, Japan, Mr Clinton declared, 'must accept the challenge of change as we have in the US'. Just as the US was acting to cut its deficit, 'so it is important that Japan lead the way to global economic growth'.

He praised the Japanese economic stimulus package as 'an important first step', but said Japan had to understand that such actions were only part of a continuous process, in which co-ordinated macro-economic policies played only a role along with the removal of trade barriers.

Mr Miyazawa replied with untypical asperity. He said economic prosperity was founded on deep and mutual economic inter-dependence, but added that 'this cannot be realised under managed trade or under the threat of unilateralism'. He urged US companies to improve their competitiveness.

Clinton spending offer, Page 3

Editorial Comment, Page 6

US United States of America JP Japan, Asia P9721 International Affairs P9611 Administration of General Economic Programs NEWS General News P9721 P9611 The Financial Times London Page 1 339
West warns Serbs as forces close in on Srebrenica: Britain, US and France pledge early strengthening of sanctions Publication 930417FT Processed by FT 930417 By JUREK MARTIN, ROBERT MAUTHNER and LAURA SILBER WASHINGTON, LONDON, BELGRADE

THE US, Britain and France last night agreed that stronger sanctions should be imposed against Serbia as soon as possible.

The announcement from the British Foreign Office came amid growing fears that the besieged Moslem town of Srebrenica in eastern Bosnia was about to fall to surrounding Serb forces.

The decision to push for tighter sanctions came shortly after President Bill Clinton said he believed the situation had now deteriorated to a point where Russia, the UK and France would have to consider options they had previously ruled out.

The US did not specify what additional measures it would seek, though one unidentified Defence Department official was quoted as saying that bombing Bosnian Serb military installations was under consideration.

In London, the Foreign Office said that Mr Douglas Hurd, the UK foreign secretary, had been in touch with his opposite numbers in Washington and Paris. 'In view of the deteriorating situation in Srebrenica and the seriousness of what the Serbs are doing, the three agreed to adopt a Security Council resolution bringing in more sanctions against the Serbs as soon as possible.'

Members of the United Nations security council were last night discussing what measures might be taken and the timing of a full Security Council meeting to adopt them.

Under consideration are likely to be measures to turn sanctions into a complete economic blockade. The resolution pending before the council would tighten sanctions against Serbia and Montenegro - which form the rump Yugoslavia - by strictly controlling traffic along the Danube and curbing transshipments through Serbia.

It would also require UN members to impound Serbian vessels, freeze Serbian assets, and ban all commercial vessels from entering former Yugoslav territorial waters.

Also last night the council was expected to pass a separate resolution proposed by non-aligned members declaring Srebrenica and surrounding areas a safe haven with provision for UN troops to monitor the situation.

Mr Warren Christopher, the US secretary of state, had already told Russian diplomats that, if the town fell, the US would not wait until after the Russian referendum on April 25 to seek more UN sanctions. Russia and Serbia have traditionally been allies, and Washington had originally promised the delay in order not to jeopardise the position of Mr Boris Yeltsin, who is seeking popular backing for his presidency.

Serb forces yesterday advanced to within 1km of Srebrenica, the former silver-mining town which has come to symbolise Bosnian resistance against Serbia. But there was no confirmation of reports from Paris that Serb forces had entered the town.

Last night Bosnian leaders broadcast desperate appeals to the outside world as terrorised civilians cowered in cellars to escape Serb artillery bombardments. An amateur radio operator in Srebrenica reported: 'I don't know how much longer we can resist . . . the offensive is unrelenting.'

If Srebrenica surrendered, it would probably mean the end of other Moslem-held strongholds such as Gorazde and Zepa, to the south. Mr Kemal Muftic, an aide to Bosnian president Alija Izetbegovic, said talks were under way on the terms of surrender of the town. 'The most important thing is to avoid a massacre,' he said.

About 50 UN lorries were on standby to evacuate tens of thousands of Moslems from the town, whose population has been swollen to an estimated 30,000-50,000 inhabitants by an influx of refugees. During the past week some 60 people have been reported killed by the Serb bombardment.

The US warning on sanctions coincided with a statement by Mr Hurd calling for existing economic measures against Serbia to be tightened into a full blockade. He also proposed the appointment of 'a heavyweight international figure' to ensure the full compliance with and enforcement of sanctions.

Contributing to the calls for action against the Serbs, Lord Owen, one of the international mediators for a peace settlement, said the time had come for the world to consider the selective bombing of roads and bridges in Bosnia, to stop supplies reaching the Bosnian Serb forces.

Mr John Smith, Labour leader, backed his proposals. Mr Hurd said the British government was not ruling out air strikes 'but we would have to be clear how they would help'.

Six RAF Tornado fighter aircraft will leave Britain on Monday to enforce the no-fly zone.

Meanwhile Mr Radovan Karadzic, the leader of the Bosnian Serbs, stressed that Serb units would not try to take Srebrenica if its Moslem defenders agreed to disarm but his words were not being taken seriously by the UN.

A small party of Canadian UN soldiers was expected to cross Serb lines to Srebrenica last night, a move which fuelled fears that the town was about to fall. The UN Protection Force said the troops would try to 'avert a major humanitarian tragedy'.

UN prepares for Srebrenica's evacuation Page 2

Smith seeks air strikes on Serb lines Page 4

Dominic Lawson Weekend section, Page XXII

US United States of America GB United Kingdom, EC FR France, EC BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 874
Stock and Currency Markets Publication 930417FT Processed by FT 930417

------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------ FT-SE 100: 2824.4 (-15.3) Yield 4.03 FT-SE Eurotrack 100 1159.61 (+3.21) FT-A All-Share 1386.07 (-0.4%) FT-A World Index 155.89 (-0.5%) Nikkei 20,297.86 (-377.98) New York: Dow Jones Ind Ave 3478.61 (+22.69) S&P Composite 448.94 (+0.54) ------------------------------------------------------ US CLOSING RATES ------------------------------------------------------ Federal Funds: 2 13/16% (3 1/4%) 3-mo Treas Bills: Yld 2.879% (2.89%) Long Bond 104 11/32 (105 5/32) Yield 6.752% (6.719%) ------------------------------------------------------ LONDON MONEY ------------------------------------------------------ 3-mo Interbank 6 1/8% (6%) Liffe long gilt future: Jun 105 3/8 (Jun 106 11/32) ------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------ Brent 15-day (May) Dollars 18.67 (18.81) ------------------------------------------------------ Gold ------------------------------------------------------

New York Comex June Dollars 339.9 (338.3) London Dollars 338.85 (338.15) ------------------------------------------------------ STERLING ------------------------------------------------------ New York: Dollars 1.525 (1.541) London: Dollars 1.5265 (1.5465) DM 2.4625 (2.4775) FFr 8.3225 (8.37) SFr 2.2525 (2.26) Y 171.75 (175.0) Pounds Index 80.0 (80.8) ------------------------------------------------------ DOLLAR ------------------------------------------------------

New York: DM 1.6175 (1.606) FFr 5.4645 (5.4275) SFr 1.4825 (1.46665) Y 112.2 (113.115) London: DM 1.6135 (1.6025) FFr 5.4525 (5.4125) SFr 1.476 (1.462) Y 112.6 (113.2) Dollars Index 64.6 (64.3) Tokyo close Y 112.95 ------------------------------------------------------

GB United Kingdom, EC US United States of America 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 1 230
Restructuring at Lloyd's to follow record loss of Pounds 2bn Publication 930417FT Processed by FT 930417 By RICHARD LAPPER

LLOYD'S of London hopes to soften the shock of another record loss totalling more than Pounds 2bn by announcing plans within the next few weeks for a radical restructuring of the insurance market's operations.

The Lloyd's 'business plan', however, will not provide for an immediate settlement to the legal actions dogging the market.

Negotiations to settle out of court will continue, but Lloyd's appears to be resigned to a continuation of more than a dozen legal actions between Names - the individuals whose assets support the market - and the agents who organise their affairs.

The market's governing council hopes its new business plan will re-establish confidence in the market by paving the way for a substantial injection of corporate capital as early as January 1994. It is understood that Lloyd's council has agreed in principle that corporate investors would be 'ring-fenced' from the heavy potential losses that are emerging from liability business underwritten in the past.

The price for such 'ring-fencing' would be a higher contribution by the new participants into Lloyd's central reserve, which meets claims when Names are unable to fulfil their obligations. Corporate investors might also be asked to pay an entrance fee.

Senior members of the board now acknowledge that the losses in 1990 - the latest under the Lloyd's three-year accounting system - will total more than the Pounds 2.06bn in 1989.

Mr David Rowland, chairman, and Mr Peter Middleton, chief executive, want the business plan to be presented before June to a meeting of all the market's participants.

The market has suffered a sharp decline in its capital base in recent years, but with insurance rates rising and the prospect of profits returning, informal contacts are understood to have shown up a substantial interest among potential corporate investors.

The plan is also understood to include a reinsurance scheme allowing syndicates to reduce the uncertainty arising from old liability policies, from which claims are continuing to emerge.

Lex, Page 22

Lloyd's of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service COMP Company News FIN Annual report P6411 The Financial Times London Page 1 371
Hopes rise of early end to rail dispute Publication 930417FT Processed by FT 930417 By ROBERT TAYLOR, NEIL BUCKLEY and RICHARD DONKIN

HOPES ROSE last night that the rail dispute might be resolved early next week after union officials said British Rail appeared to be shifting its attitude toward compulsory redundancies and the use of contract labour.

The executive of the RMT union meets on Monday to decide its next move after yesterday's second 24-hour strike, with an early resumption of negotiations with British Rail now probable.

Union officials said last night that BR seemed to be 'edging forward' and there was 'the basis for a restart of talks'.

The optimism came after Sir Bob Reid, BR chairman, wrote to Mr John Prescott, Labour's transport spokesman, stating: 'The board has no plans currently for any compulsory redundancies.

'No employer can give such an unqualified guarantee on job security as no compulsory redundancies, although BR's record here is good with relocation and retraining resulting in almost all displaced staff who wished to stay in the industry being able to do so.'

Sir Bob added that the board could not give any unconditional guarantee to limit contracting of services 'where this can be done safely and efficiently'. But he pointed out to Mr Prescott that: 'We have no plans for a major extension of the use of contractors in the area of track maintenance during the next couple of years.

'The board is continuing to seek to resume discussions and to dissuade the union from taking further damaging industrial action.'

Last night Mr Prescott said the letter indicated 'a change in BR's attitude'. He called for the intervention of conciliation service Acas to help resolve the conflict. 'There is no reason why an agreement should not now be reached to bring this dispute to a conclusion,' he said.

Yesterday's 24-hour rail strike did not prevent thousands of railway commuters reaching work while others took the day off or worked from home.

In London, the Stock Exchange and Lloyd's said they were not affected. Mr Peter Stillwell, vice-president of London's Oxford Street Association and manager of Marks and Spencer at Marble Arch, said the strike had 'a very considerable effect' on the central London retail trade.

Miners on strike, Page 4

British Rail GB United Kingdom, EC P4011 Railroads, Line-Haul Operating PEOP Labour P4011 The Financial Times London Page 1 397
World News In Brief: Not deceased Publication 930417FT Processed by FT 930417

Firemen in Horsham, Sussex, saved a suffocating parrot by giving it oxygen from their breathing apparatus. Jack was lying unconscious in its cage, legs in the air, after its owners fled a fire.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 64
World News In Brief: County faces tax challenge Publication 930417FT Processed by FT 930417

Welsh secretary David Hunt is taking Gwent County Council to court over the level of this year's council tax. Mr Hunt claims Gwent may not have complied with the legislation in setting its council tax.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Taxes P9121 The Financial Times London Page 1 64
World News In Brief: Radiation fine Publication 930417FT Processed by FT 930417

The United Kingdom Atomic Energy Authority was fined Pounds 8,000 with Pounds 10,510 costs after a court heard that two workers were exposed to radiation at Harwell Laboratory, Oxfordshire.

GB United Kingdom, EC P9631 Regulation, Administration of Utilities TECH Safety & Standards P9631 The Financial Times London Page 1 60
World News In Brief: Au pair found safe Publication 930417FT Processed by FT 930417

German au pair Simone Schleiffer, 20, missing for almost two weeks from the north London house where she worked, was found safe and well in the Irish city of Galway.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 63
International Company News: Strong rebound in trading profits lifts JP Morgan Publication 930416FT Processed by FT 930714 By PATRICK HARVERSON NEW YORK

JP MORGAN yesterday reported strong first-quarter earnings as a rebound in trading profits and healthy underwriting revenues helped the New York banking group recover from a disappointing final three months of 1992.

The bank earned Dollars 432m in the January-to-March period, although that was reduced to net income of Dollars 295m after a previously-announced after-tax charge of Dollars 137m related to the adoption of new standards for the accounting of post-retirement benefits.

First-quarter profits were well up on a year ago, when the bank reported earnings of Dollars 264m (although that was later restated as net income of Dollars 716m to reflect changes in the bank's accounting of income taxes), and on the final quarter of last year, when poor trading results depressed earnings to Dollars 298m.

The biggest contribution to the improvement came from the bank's trading business, where revenues totalled Dollars 469m, ahead of the same quarter a year ago and the last quarter of 1992.

Both of those quarters were affected by losses on the trading of mortgage-backed securities. In this term, however, the results were boosted by successes in the trading of swaps, foreign exchange forward contracts, and global (especially European) debt securities.

In a rare move for a US bank, JP Morgan chose not to make any loan-loss provisions in the quarter. The ratio of reserves to non-performing loans stands at about four-to-one (Dollars 1,202m to Dollars 299m), the highest of any leading US bank.

The corporate finance division also put in a good performance, with revenues rising 23 per cent to Dollars 119m following strong demand for the bank's debt and equity underwriting services, both in the US and overseas. JP Morgan is one of only a handful of US banks allowed to underwrite securities in the domestic markets.

First-quarter profits were also buoyed by gains of Dollars 74m from the sale of Brazilian interest bonds, which boosted net interest revenues to Dollars 432m, and Dollars 95m from the sale of foreign government and US Treasury investment securities.

Among other revenue sources, credit-related fees rose to Dollars 54m, investment management earnings climbed to Dollars 113m and operational service fees for custody, clearing and brokerage activities increased to Dollars 116m.

Operating expenses rose sharply to Dollars 809m, primarily because of higher performance-related employee compensation payments.

JP Morgan and Co US United States of America P6221 Commodity Contracts Brokers, Dealers P6211 Security Brokers and Dealers P6081 Foreign Banking and Branches and Agencies FIN Interim results P6221 P6211 P6081 The Financial Times London Page 23 438
International Company News: Property sale behind Holvis profit rise Publication 930416FT Processed by FT 930419 By IAN RODGER ZURICH

HOLVIS HOLZSTOFF, the Swiss non-wovens and paper distribution group, revealed yesterday that its 8.3 per cent rise in net profit last year to SFr32.7m (Dollars 22.1m) was made possible by an SFr9m net extraordinary profit on the sale of a property.

The sale more than offset the slump in profits from operations caused by a SFr12m loss at Sodoca, the group's French subsidiary. Sodoca, the company with which Holvis first began its diversification into the non-wovens business in 1969, lost orders from a large customer early in 1992 due to the inadequate quality of part of its production.

Mr Pedro Reiser, chief executive, said there had been some dismissals and Sodoca was expected to return to profit next year.

Holvis forecast that its net profit this year would rise despite higher invest-ment and development costs for non-woven activities.

The group, which removed all restrictions on foreign ownership of its shares last year, said 44 per cent of its shares were now held by foreigners. The British Rail pension fund, with 15 per cent, and Mercury International Investment, also of the UK with 10 per cent, were the two largest.

Alusuisse-Lonza, the Swiss aluminium group, plans a one-for-10 rights issue. The price of the new shares will be revealed on April 28.

Holvis Holzstoff Alusuisse-Lonza CH Switzerland, West Europe P511 Paper and Paper Products P3334 Primary Aluminum FIN Annual report FIN Share issues P511 P3334 The Financial Times International Page 16 259
Torture 'still widespread in China' Publication 930416FT Processed by FT 930419 By REUTER

Torture is still widespread and systematic in China despite the Beijing government's claims to have instituted reforms, Amnesty International said in a report published today, Reuter reports.

The London-based human rights group said the practice of torture had actually spread in the last 10 years to become endemic in many Chinese detention centres and prisoners now suffered much more severe abuses.

A Chinese government report to be submitted to the United Nations' Committee Against Torture on April 22 makes largely false claims that torture cases are scrupulously investigated and the torturers brought to justice, Amnesty said.

CN China, Asia P9721 International Affairs P9229 Public Order and Safety, NEC NEWS General News P9721 P9229 The Financial Times International Page 5 131
Hekmatyar tries to break Afghan deadlock with new cabinet Publication 930416FT Processed by FT 930419 By REUTER CHARASYAB, AFGHANISTAN

Afghan prime minister-designate Gulbuddin Hekmatyar said yesterday he had drawn up a new cabinet list to try to break a deadlock before more fighting erupts, Reuter reports from Charasyab, Afghanistan.

His arch-rival President Burhanuddin Rabbani countered with proposals agreed after consultations among four other main guerrilla parties.

A five-week-old peace accord among the fractious guerrilla groups has become bogged down amid disagreement between Mr Hekmatyar and Mr Rabbani over allocation of ministries. Mr Hekmatyar appeared to rule out any discussion with Mr Rabbani, accusing the government of preparing for more fighting.

Under the March 7 Pakistani-brokered peace accord signed by the Mujahideen leaders in Islamabad, Mr Hekmatyar was to finalise the cabinet in consultation with the president in two weeks.

Mr Hekmatyar hinted that his main compromise was over Mr Rabbani's powerful defence minister, Mr Ahmad Shah Masood, who has held the job since the guerrillas took power from the former communist government last April. Mr Hekmatyar had vowed to sack him.

In the new cabinet list, Mr Masood is to be one of three deputy prime ministers and is to head the foreign ministry, which will be run by a council of all the nine main parties.

AF Afghanistan, Asia P9111 Executive Offices P8651 Political Organizations NEWS General News P9111 P8651 The Financial Times International Page 5 236
Angola governmentand Unita in talks Publication 930416FT Processed by FT 930419 By REUTER ADBIJAN

Angolan government and Unita rebel delegates met alone behind closed doors yesterday at peace talks in Ivory Coast, Reuter reports from Adbijan.

United Nations mediators and official observers from the US, Russia and Portugal agreed to stay away from the conference room during the first private discussions between the warring parties.

The Abidjan talks, formally opened on Monday under UN auspices, are aimed at stopping fighting which erupted after Unita rejected its defeat in last September's elections.

Although all sides have reported a good atmosphere, progress was slow and a UN official said the Angolans were avoiding divisive matters that would 'poison the situation.'

The Angolan government said it had sharply revalued the kwanza, the national currency.

The state news agency Angop reported that as of Wednesday the official exchange rate was adjusted to 4,000 kwanza to the dollar from the previous 7,000 exchange rate. The street market rate is above 10,000 kwanza to the dollar.

The adjustment had long been expected following a controversial and unsuccessful move by the previous finance minister, Mr Salomao Xirimbimbi, to align the official and parallel market rates which effectively devalued the kwanza.

He was sacked last month and replaced by Emanuel Carneiro.

AO Angola, Africa P9711 National Security NEWS General News P9711 The Financial Times International Page 5 228
UK currency support plan set for veto Publication 930416FT Processed by FT 930419 By PETER MARSH, Economics Correspondent

PROPOSALS by Britain to increase support for weak currencies in the European exchange rate mechanism seem likely to be vetoed by other countries in a move which could add a further barrier to the UK's eventual re-entry into the system.

The suggestion was made during discussions by the European Community's committee of central bank governors. The group is meeting early next week in Basle, Switzerland, to finalise a report on possible ERM reforms.

Under the UK's proposal, weak currencies in the system could be helped by joint efforts by several ERM countries, rather than the single country with the strongest currency.

These technical moves would be a mixture of both interventions on currency markets and changes in interest rates. Profits and losses on purchases of weak currencies to increase their value would be shared by all the nations in the system.

The UK suggestion, which comes close to following a policy idea from the opposition Labour party, has received only limited support from the other 11 nations represented on the governors' committee.

One objection, voiced in particular by the German Bundesbank, is that the proposal might reduce the pressures on countries with weak currencies to devalue in order to remove currency strains.

However, some support for the concept of sharing out the burden of supporting weak currencies is believed to have come from nations such as Spain, Portugal and Ireland. These countries in recent months have been forced to devalue their currencies during spells of market turbulence.

Britain's proposal was made during recent debate about possible changes to the ERM in the light of last autumn's crisis on financial markets which forced both sterling and the Italian lira out of the system.

The UK has made clear that it wants changes to so-called 'fault lines' in the ERM as a condition for possible re-entry.

While the EC governors are close to finishing their report, a second document on possible changes to the system was finalised this week by the Community's monetary committee. This committee comprises officials from finance ministries as well as central banks. Both reports are to be presented to EC finance ministers at the end of May.

Britain's suggestion was made in part to answer criticisms from the Bundesbank that, under current ERM procedures, the country with the strongest currency in the system at one time is obliged to buy whichever currency is the weakest.

That arrangement is seen by some commentators as being unfair on the country with the strongest currency, which by buying weak ones inevitably makes an exchange rate loss.

GB United Kingdom, EC QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times International Page 2 467
Delors welcome for Sweden Publication 930416FT Processed by FT 930419 By HUGH CARNEGY STOCKHOLM

MR Jacques Delors, the EC Commission president, said yesterday he was confident that Swedish entry to the European community would take place on schedule at the start of 1995.

But Mr Carl Bildt, the prime minister, said a decision would not be taken until 'the latter part of this year' on when to hold a vital referendum on membership. With public opinion in Sweden running against membership and negotiations on entry facing difficult issues such as Stockholm's high agricultural subsidies, Mr Delors made a strong defence of the community in a speech to the Swedish parliament.

He played down local concerns that EC rules would slash subsidies to northern rural communities, saying Sweden's philosophy of helping poorer regions was exactly the same as the community's.

'We can assist remote regions in particular in a way no individual nation state can do,' he said, adding that negotiations - begun in January along with Finland and Austria - were 'progressing well'.

At a press conference with Mr Bildt, Mr Delors, who will visit northern areas today, said: 'I remain confident that it is possible to maintain the schedule and have practical entry to the Community at the beginning of 1995.'

However, Mr Bildt struck a more cautious note. He said Sweden's intention was to join by 'roughly' January 1, 1995. But he would not say when a referendum would be held and added that no decision on the timing of a vote would be taken until late this year when the outcome of negotiations was clear.

If the original timetable for holding a referendum well in advance of the September 1994 general election slips, entry to the community could be delayed because of constitutional requirements that membership be ratified by two successive parliaments.

Mr Paavo Vayrynen, Finnish foreign minister, resigned yesterday to prepare his campaign as the Centre party's candidate for the presential election next January.

QR European Economic Community (EC) SE Sweden, West Europe P9721 International Affairs NEWS General News P9721 The Financial Times International Page 2 349
Armenians escape blame in Caucasus Publication 930416FT Processed by FT 930419 By JOHN MURRAY BROWN ANKARA

A UN report on the conflict in the Caucasus falls short of alleging Armenian government involvement in the latest fighting in Azerbaijan. Western diplomats say it is unlikely to lead to a binding Security Council resolution imposing sanctions on Armenia, reports John Murray Brown in Ankara

The UN findings will come as a disappointment to Turkey, which has lobbied for UN action to stop the fighting as Azerbaijan claimed Armenian forces had seized 10 per cent of its territory.

The Armenian government has denied that its forces are involved.

AM Armenia, East Europe AZ Azerbaijan, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times International Page 2 125
IG Metall leaders to set strike date Publication 930416FT Processed by FT 930419 By JUDY DEMPSEY BERLIN

LEADERS of IG Metall, Germany's powerful engineering union, are to meet on Monday to decide the timing of an all-out strike in eastern Germany in support of pay increases.

Once the decision is made, the union will ballot its members in enterprises in the five eastern German states. All-out strikes will then take place if the union gets the support of 75 per cent of its members in any one company.

The steel employers' association Arbeitgeberverband Stahl said yesterday that no talks were planned with IG Metall before next Monday. A spokesman said he saw no room for compromise at the moment. 'I think the union will strike for a few days, and having shown it can strike, it might return to the negotiating table.'

The employers are recommending pay rises of 9 per cent this year, instead of the planned 26 per cent in the metal and electrical sectors, and 21 per cent in the steel sector in eastern Germany.

The planned pay rises were agreed in March 1991 as part of a move to raise pay in eastern Germany to west German levels, but employers withdrew them on the grounds that the economy has worsened.

DE Germany, EC P8631 Labor Organizations PEOP Labour P8631 The Financial Times International Page 2 228
Major and Owen reject call to lift Bosnia arms embargo Publication 930416FT Processed by FT 930419 By ROBERT MAUTHNER and LAURA SILBER BELGRADE

MR JOHN MAJOR, the British prime minister, and Lord Owen, one of the international mediators for a peace agreement in Bosnia, yesterday rejected suggestions that supplying arms to the Moslems would help resolve the year-old conflict there.

Mr Major, answering a parliamentary question, said the weapons flow to all sides should be cut off rather than increased.

The US has said that a partial lifting of the UN arms ban to help the Moslems defend themselves against Serb attacks was under consideration to put pressure on the Bosnian Serbs to sign the peace plan drawn up by Mr Cyrus Vance and Lord Owen.

The public endorsement of such a step earlier this week by the former British prime minister, Lady Thatcher, has provoked a passionate political debate in Britain about the need for the international community to take more decisive action to stop Serb aggression in Bosnia.

'The whole European Community takes the view that lifting the arms embargo is not the right priority at this stage and that the fundamental thing is tightening sanctions' against the rump Yugoslav federation of Serbia and Montenegro, Lord Owen said in a BBC radio interview.

Speaking after talks in London with Mr Reginald Bartholomew, the US special envoy to the peace talks, Lord Owen said the danger of arming the Moslems was that it would unleash a sophisticated arms race, with the Russians supplying Serbia and Montenegro.

Mr Cedric Thornberry, deputy chief of the UN Protection Force mission in Zagreb, also said the lifting of the arms embargo was 'not a very practical or useful idea. If you put more arms into Bosnia, you get more war.'

The international mediators have always believed Serbian president Slobodan Milosevic can play a key role in persuading the Bosnian Serbs to accept the plan, which only the Bosnian Croats and Moslems have signed.

At a 40-minute meeting later yesterday with Mr Douglas Hogg, a British Foreign Office minister, Mr Bartholomew was understood to have accepted that a decision to lift sanctions would inevitably increase the fighting in Bosnia and might well result in the suspension of the humanitarian relief operations.

He also conceded that it would be very difficult to get the Russians to approve a UN Security Council resolution to implement such a step. But the US envoy assured Mr Hogg that the lifting of sanctions was not an immediate issue and would only be considered if tighter sanctions failed to work.

Mr Bartholomew, who later had talks with Mr Malcolm Rifkind, the defence secretary, and Mr Hogg agreed that everything possible should be done to ensure that a resolution to tighten economic sanctions against Serbia should be pushed through the Security Council later this month, if the Bosnian Serbs had still not signed the Vance-Owen plan by then.

Laura Silber adds from Belgrade: In Srebrenica, the besieged Moslem enclave in eastern Bosnia, local authorities refused to allow the evacuation of refugees unless the UN provided helicopters for some 500 wounded. A spokeswoman for the UN High Commissioner of Refugees said a relief convoy was allowed to evacuate only five elderly women.

Meanwhile, Serb forces tightened their stranglehold on the town and were reported to be within range of small arms fire.

Elsewhere, Bosnia's Croat forces sealed off key towns in Bosnia-Hercegovina with the aim of forcing Moslem troops to withdraw from provinces designated for Croat control under the Vance-Owen plan.

Risks of intervention, Page 2

Pressure on Moscow, Page 4

BA Bosnia-Hercegovina, East Europe GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times International Page 1 619
World News in Brief: German arsonists sentenced Publication 930416FT Processed by FT 930419

A Rostock court sentenced three right-wing extremists to jail terms of two to three years for firebombing a hostel for Romanian gypsies last August. The sentence on one was suspended.

DE Germany, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 1 61
London Stock Exchange: New highs and lows for 1993 Publication 930416FT Processed by FT 930416

NEW HIGHS (99).

BANKS (3) Anglo Irish, Bank Ireland, Toyo, BREWERS (1) Kirin, BLDG MATLS (4) Baggeridge Brick, Blue Circle, Epwin, Heiton, BUSINESS SERVS (3) Capita, Christie, Wills, CONGLOMERATES (1) Bodycote, CONTG & CONSTRCN (9) Berkeley, Kajima, McAlpine (A), Mowlem (J), Persimmon, Taylor Woodrow, Westbury, Wilson Bowden, Wilson (C), ELECTRICALS (5) BICC 10 3/4 pc Cv. '20, Delta, Fujitsu, Motorola, NEC, ELECTRONICS (7) Eurotherm, GEC, Logica, Pegasus, Racal, Radamec, TDS Circuits, ENG AERO (1) Westland, ENG GEN (1) Vosper Thornycroft, FOOD MANUF (5) Barr (AG), Avonmore, Greencore, Sheldon Jones, Treatt, FOOD RETAILING (1) Fyffes, HEALTH & HSEHOLD (1) IWP, HOTELS & LEIS (2) Granada 7 1/2 p Pf., Ryan, INSCE BROKERS (1) Berry Birch & Noble, INSCE LIFE (1) Transatlantic 6pc Pf., INV TRUSTS (20) Abtrust New Dawn Wts., Do B Wts., Abtrust Scotland, British Empire Secs., Drayton Korea Wts., EFM Japan Wts., Finsbury, Genesis Malaysia Maju, Govett Oriental, Henderson Strata, JF Fldg. Japan, JF Japan OTC, Do Wts., JF Pacific Wrt., Japanese Wts., Morgan Grenfell Equity Inc., Overseas Inv., Do Wts., Parambe, River & Merc. American Cap., MEDIA (3) Headline, Quarto, Reed, MERCHANT BANKS (1) Warburg 6pc Pf., MTL & MTL FORMING (2) Downiebrae, Utd. Industries, MISC (2) BLP, Headlam, OIL & GAS (1) Woodside, OTHER FINCL (11) Baltic, Do 7pc Pf., Edinburgh Fd. Mngrs., Govett, Ivory & Sime, Mitsubishi, Perpetual, Smith New Court, Do Prf., Tyndall Australia, Do Options, PACKG, PAPER & PRINTG (1) Jarvis Porter, PROP (3) Asda Prop., Bilton, Merivale Moore, STORES (3) Amber Day, Church, Tie Rack, TRANSPORT (2) All Nippon Airways, LOFs, MINES (4) Monarch, Do Cv. '93, Sons Gwalia, Southvaal.

NEW LOWS (37).

BRITISH FUNDS (3) Treas. 13 3/4 pc '93, Treas. 14 1/2 pc '94, Exch. 13 1/2 pc '94, AMERICANS (2) CPC, Sun Inc., BREWERS (2) Burn Stewart, Macallan-Glenlivet, BLDG MATLS (1) Russell (A), BUSINESS SERVS (1) Holmes Protection, CHEMS (1) Leigh Ints., ENG GEN (3) Barry Wehmiller, Bullough, Prospect, FOOD MANUF (1) Sims, FOOD RETAILING (1) Thorntons, HEALTH & HSEHOLD (5) Bespak, Crieghton, Haemocell, Life Sciences, Smith & Nephew, HOTELS & LEIS (1) Chrysalis, INV TRUSTS (2) Korea Librs., New City & Comm., MEDIA (3) Allied Radio, Radio Clyde, Sunset & Vine, MISC (1) Applied Holographics, OIL & GAS (1) Sidlaw, OTHER INDLS (1) Amber Indl., PACKG, PAPER & PRINTG (1) MR Data Mngmt., PROP (2) CMW, Herring Baker Harris, STORES (2) Mallett, Oriflame, TELE NETWORKS (1) Securicor, TRANSPORT (1) NFC, SOUTH AFRICANS (1) Tiger Oats.

Other market statistics, Page 25.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 36 444
London Stock Exchange: Bond market decline upsets equities Publication 930416FT Processed by FT 930416 By STEVE THOMPSON

A DECLINE in international bond markets, influenced by worries that the Bundesbank will continue to resist pressure for further cuts in German interest rates, took the shine off a promising performance by London's equity market.

In a generally muted trading session share prices made good early progress, led by the Footsie future, before slipping into negative territory as today's national rail strike loomed and the long three-week trading account comes to an end.

But dealers said the market was ending the extended account in good shape and there had been a marked improvement in both sentiment and the level of genuine customer business in the market yesterday. Turnover totalled 583.4m shares.

The new trading account is expected to bring out some strong support for the market as recent evidence that the recovery in the UK economy is well underway prompts the big institutions to allocate substantial funds to equities for the second quarter. And overseas investors, particularly in Germany, are said to be increasingly interested in the UK equity market, focusing on recovery trends and a strong pound. Mr Ian Harnett at SGST, the French-owned securities house, said he was much more confident that the FT-SE 100 will go to 2,950 and potentially to 3,000 over the current quarter.

The 100 index ended the day a net 2.4 lower at 2,839.7 while the FT-SE Mid-250 index continued its recent bout of underperformance against the 100 index in closing 6.8 down at 3,085.9.

There was widespread enthusiasm in the market at the outset with trading statements from a number of the UK's leading companies generally receiving a warm reception around the City's dealing desks. The announcement from Forte, one of the UK's leading hotel and leisure groups, of a cut in the final dividend had been well flagged and saw the shares move up strongly.

A maintained dividend from Blue Circle plus profits from RMC ahead of the most forecasts led to some aggressive buying of both stocks. Redland, another of the leading building materials shares, attracted keen support after offering shareholders an enhanced scrip dividend.

At its best, in mid morning, the Footsie 100 index was up 12 points at 2,854.1. However, a bout of profit-taking, the easier trend in bond markets, and a slightly disappointing opening by Wall Street, which was down more than 15 points on the Dow Jones Average shortly after London closed, saw share prices slip back to close marginally easier on balance.

Water and electricity stocks came under the lash again, both sectors plunging as institutions continued to cash in some of the substantial profits in the sectors and switched the proceeds into some of the market's underperformers. The FT-SE Actuaries water index fell 2.9 per cent while the Electricity index dropped 1.7 per cent.

The best performer in the Footsie 100 was British Steel, responding to price increases and a much more positive stance on the shares adopted by at least two of the market's leading broking houses. ICI maintained its recent good showing, the shares racing higher as US investors continued to react to the upgraded earnings estimates instigated by one of the top US brokerage houses.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 36 559
London Stock Exchange: Market debuts Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

First-day dealings in two recent flotations saw both stocks race ahead to healthy premiums.

Gear and pump manufacturer David Brown made an impressive debut as placed at 170p, the shares raced forward to 209p. Profit-taking late in the session saw the stock ease to close at 207p with a hefty 12m shares traded.

Nursing homes group Westminster Health Care achieved a more modest premium, closing at 287p compared to the 260p issue price, which capitalised it at Pounds 132.6m. Westminster made 6.4m shares available to the public, and this offer was 4.8 times subscribed. Both issues were handled by BZW.

Water and regional electricity (Recs) stocks continued to tumble as investors again shunned the sectors and dealers sought to find new levels for the shares. Sector specialists continued to point out that the stocks were suffering from a combination of high rating, a lack of news and the move from defensive to cyclical shares.

Pointing out that turnover was mostly derisory, Ms Angela Whelan at BZW added: 'Water shares remain fundamentally good value. They probably have a little further to fall on current sentiment, but this should open up good buying opportunities ahead of the results season next month.' Among waters, North West dropped 15 to 502p, Southern 17 to 519p and South West 20 to 533p and Yorkshire 20 to 556p. In the Recs, Northern slumped 18 to 517 and South Wales 17 to 540p.

The widely expected cut in Forte's dividend was not as deep as some in the market had predicted and that, with the enhanced scrip, left the market relieved. The shares gained 6 1/2 to 188 1/2 p on bulky turnover of 10m. However, many analysts remain pessimistic about the hotel market in general and Forte's strategy in particular. Mr Mark Finnie at NatWest Securities, one of the specialists who first forecast yesterday's dividend cut, said: 'It does not go far enough and barely gives Forte the flexibility for the rights issue which we believe it needs to recapitalise. The real issues have not been addressed.'

There was tired takeover heard talk around Cadbury-Schweppes, up 5 at 485p, while another favourite candidate, United Biscuits, was spurred on by options activity and the shares advanced 7 to 384p.

A broker's buy recommendation helped Hanson shares lift 3 to 232 1/2 p. Shaw & Co advised clients that exposure to US recovery and recent falls in the share price made the stock attractive at 230p.

Big overseas earner Reuters Holdings eased 14 to 1302p in reaction to a stronger pound and reports that Lehman Brothers had signed on to EBS, an Electronic Broking System that competes with Reuters Dealing 2000-2.

An AGM statement from BP failed to ripple through to the market. In spite of a pointed comment by the chairman about the disparity between BP's rising share price and the pessimism of UK analysts, the stock was flat at 301p. BP has been well supported by the US although ADR traders in London said yesterday that enthusiasm was beginning to fade.

News of an oil discovery prompted Cairn Energy to rise 4 to 50p.

Results from cement manufacturer Blue Circle came in ahead of forecasts with overseas trading making up for poor domestic results. One leading securities house raised its 1993 profit forecast by Pounds 15m to Pounds 140m, pencilling in Pounds 175m and Pounds 205m for the following years. The shares put on 3 1/2 to 241p. RMC Group also beat most market forecasts, the shares leaping 21 to 629p.

Yorkshire Television rose sharply on little volume as speculation returned that retailer WH Smith is poised to sell its 14 per cent stake in the group to Granada. Yorkshire shares gained 19 to 173p, Smith 5 to 414p, while Granada slipped a penny to 395p.

News that AT&T, the giant US telecoms group, was seeking to enter the UK telephony market predictably hurt BT, the shares dropping 6 to 420 1/2 p. Cable and Wireless, which owns Mercury, fell 8 to 742p.

Automated Security Holdings advanced 3 to 165p after announcing sharply improved first quarter profits.

British Petroleum Hanson Blue Circle Industries GB United Kingdom, EC P3273 Ready-Mixed Concrete P7011 Hotels and Motels P6719 Holding Companies, NEC P1711 Plumbing, Heating, Air-Conditioning P1311 Crude Petroleum and Natural Gas CMMT Comment & Analysis P3273 P7011 P6719 P1711 P1311 The Financial Times London Page 36 746
London Stock Exchange: Bespak tumbles Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Healthcare manufacturing group Bespak suffered a sharp fall as the company broker cut profit forecasts in reaction to US distribution worries. The group achieves 25 per cent of its sales through US Surgical which last week warned of lower profits and announced significant distribution changes that are expected to hit Bespak's sales. Subsequently BZW, cut its 1994 forecast for the group to Pounds 13.3m from Pounds 14.5m. The shares which had already fallen by more than 70 tumbled 66 to 561p.

Bespak GB United Kingdom, EC P2844 Toilet Preparations CMMT Comment & Analysis P2844 The Financial Times London Page 36 119
London Stock Exchange: Gibbs Mew stake Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Brierley Investment Limited signalled an end to hostilities at Gibbs Mew, the Salisbury-based brewer it made a hostile Pounds 11m for last summer, unloading its 19 per cent stake at a healthy profit. Brierley, a shareholder in Gibbs since 1987, built up its stake when the price was significantly below its bid price of 200p. Carr Kitcat & Aitken, the stockbroker, bought the 1.088m shares and placed them with institutions at 213p.

Gibbs Mew GB United Kingdom, EC P2082 Malt Beverages CMMT Comment & Analysis P2082 The Financial Times London Page 36 112
London Stock Exchange: Drug stocks revive Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Heavily sold pharmaceuticals stocks recovered some of their losses helped by a hefty piece of chart analysis from Smith New Court.

Glaxo, SmithKline Beecham and Wellcome were firm as the house, which has all three as both short- and long-term buy recommendations, argued that the three companies were 'well positioned to deliver above average growth'.

Glaxo held out against research that claimed combinations of anti-nausea medicines might be more effective than sole use of Glaxo's Zofran. And, after the market closed, it was announced that Glaxo and SmithKline had settled a long running patent dispute. Glaxo closed 7 up at 562p while SmithKline added 4 1/2 at 413p. Wellcome lifted 10 to 729p.

Glaxo Holdings SmithKline Beecham Wellcome GB United Kingdom, EC US United States of America P2834 Pharmaceutical Preparations CMMT Comment & Analysis P2834 The Financial Times London Page 36 161
London Stock Exchange: ICI surges Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Heavy US interest following a strong recommendation by one New York broker prompted ICI shares to rise sharply for the second consecutive trading day.

PaineWebber, already a keen supporter of the company, raised its first-quarter earnings estimates and its 1993 prediction. It cites a recovering UK economy and the benefit of corporate cost-cutting on margins. Traders said US investors now hold less than 7 per cent of ICI shares compared with more than 20 per cent of most of the leading internationally traded companies. They added that there was a growing belief that ICI had been undeservedly mauled by the UK financial community. In London ICI shares rose 34 to 1201p.

Imperial Chemical Industries GB United Kingdom, EC P2834 Pharmaceutical Preparations P2899 Chemical Preparations, NEC CMMT Comment & Analysis P2834 P2899 The Financial Times London Page 36 156
London Stock Exchange: Recovery hopes lift Steel Publication 930416FT Processed by FT 930416 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

SHARES IN British Steel consolidated their recent recovery after two securities houses turned more positive and one predicted the company would return to profit this year. Having doubled in value to become the best performer in the FT-SE 100 index over the first quarter, Steel's shares jumped 5 to 91p yesterday on turnover of 8.1m.

SG Warburg told clients that steel price increases announced on Tuesday, and the prospect of more to come in October, would prompt a turnaround in the group's figures. Warburg expects a loss for the year to March 1993 but is more optimistic about current-year performance and predicts a Pounds 70m profit against its previous estimate of a Pounds 30m loss.

In addition, James Capel reiterated its buy recommendation on the stock. The agency broker expects Steel to report a loss of around Pounds 150m for the year to March 1993 but break even this year.

While several other brokers remain cautious, dealers said there was a reluctance to sell the shares.

British Steel GB United Kingdom, EC P3313 Electrometallurgical Products CMMT Comment & Analysis P3313 The Financial Times London Page 36 207
London Stock Exchange: Equity Futures and Options Trading Publication 930416FT Processed by FT 930416 By JOEL KIBAZO

INITIAL strength in Footsie futures faded as UK gilts and international bonds slipped and New York opened on a weak note, writes Joel Kibazo.

Buyers of the June contract on the FT-SE 100 were seen in the first part of the session. Having opened at 2,856 it gained steadily reaching the day's high of 2,877 around 12 pm. It registered a healthy premium to cash at the higher levels and was also said to have helped pull the underlying cash market higher.

However, the June contract began to drift lower on weakening sentiment in the gilts and a decline in the international bond markets. When Wall Street registered a negative start of trading, sellers of the June contract emerged driving it lower. It touched the day's low of 2,852 in the last half hour of trading and it finished at 2,859, three ahead of its previous close and around 4 points above its estimated fair value premium to cash of about 12. Turnover reached 6,586 lots.

The traded options were dull, and volume fell to 24,650, against Wednesday's 36,605 contracts. The Euro FT-SE 100 option was the busier of the two index options trading 5,361 lots, while the FT-SE 100 option saw business of 4,361 lots.

In the stock options, British Steel, the subject of a buy recommendation from SG Warburg, was the busiest with a total of 2,124. It was followed by Boots at 1,549.

GB United Kingdom, EC P6221 Commodity Contracts Brokers, Dealers CMMT Comment & Analysis P6221 The Financial Times London Page 36 272
World Stock Markets (America): US shares recover to finish little changed Publication 930416FT Processed by FT 930416 By PATRICK HARVERSON NEW YORK

Wall Street

US SHARE prices recovered from early losses yesterday to end virtually unchanged, bringing to a close three day's of solid gains, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 0.28 at 3,455.92, well above its low for the day of 3,437.54. The more broadly based Standard & Poor's 500 finished down 0.26 at 448.40, while the Amex composite ended 1.10 lower at 419.42, and the Nasdaq composite 3.60 lower at 670.34. Trading volume on the New York SE was 261m shares.

In recent day's the markets have been supported by declining bond yields. Yesterday, bond yields opened higher in the wake of a stronger-than-expected jobless claims report.

The absence of an early lead from the bond market left equities to the mercy of corporate earnings and profit-taking. Brokerage stocks were out of favour, as were retail issues, which were hit by rumours that the Clinton administration will introduce a value added tax to pay for healthcare reform.

Prices recovered in the final few hours of trading, aided by a rally in bond prices, which pushed yields down to new lows. The bond market turned around on the news that President Clinton is willing to compromise on his economic plans.

Forest product stocks were buoyed by Wednesday's late news of improved earnings at Georgia-Pacific. That company's stock rose Dollars 2 1/8 to Dollars 64 1/4 , while Weyerhauser, which reported its earnings yesterday, added Dollars 1 at Dollars 44 3/4 and Louisiana-Pacific firmed Dollars 1 1/8 to Dollars 73 7/8 .

Declining stocks, which rose early in the week on news of big profits at Merrill Lynch, were hit by profit-taking and a broker's sector downgrade. Merrill fell Dollars 5/8 to Dollars 76 3/8 , PaineWebber gave up Dollars 3/8 at Dollars 26 1/2 , Charles Schwab fell Dollars 3 1/8 to Dollars 35 1/8 (despite reporting record first quarter profits) and Morgan Stanley dropped Dollars 1 3/8 to Dollars 64 3/4 .

Among retail stocks hurt by talk of a new sales tax were Gap Stores, down Dollars 1 3/4 at Dollars 28 5/8 , Sears, Roebuck, Dollars 1 1/4 lower at Dollars 52 5/8 , and JC Penney, down Dollars 7/8 at Dollars 84 5/8 .

On the Nasdaq market, leading technology issues were lower, with Apple down Dollars 1 1/2 at Dollars 47 1/4 and Microsoft down Dollars 1 7/8 at Dollars 87 1/8 .

Canada

TORONTO prices closed little changed in heavy trading, as gold stocks gave back part of Wednesday's gains. According to preliminary data, the 300 composite index rose 4.38 points, of 0.12 per cent, to close at 3,634.

Imperial Oil fell 1/2 to 47 7/8 . The company said it will permanently shut down its Ioco refinery operations, resulting in a one-time charge of CDollars 54m against second-quarter earnings.

Cameco jumped 1 1/2 to 20. The company issued a statement at the request of the TSE stating that the results of drilling at its 50 per cent owned Fort a la Corne diamond project 'warrant further exploration of the area.'

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 559
World Stock Markets: Brazil Publication 930416FT Processed by FT 930416

Brazilian stocks fell sharply on the Sao Paulo stock exchange in a session dominated by rumours ahead of Monday's options contract expiry.

The Bolseva index closed down 313 points, or 1.4 per cent, at 21,241.

BR Brazil, South America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 63
World Stock Markets (Asia Pacific): Arbitrage activity boosts Nikkei as Topix eases Publication 930416FT Processed by FT 930416 By WAYNE APONTE TOKYO

ARBITRAGE-related buying led by the futures markets boosted equities to intraday highs in late trading, but overall share prices ended mixed amid choppy activity, writes Wayne Aponte in Tokyo.

The Nikkei average closed 142.46 higher at a session peak of 20,675.84, after a low of 20,394.14, while the broader Topix Index of all first section issues lost 3.07 to close at 1,589.73.

Volume was estimated at 620m shares, down from 830.2m, as advances outpaced declines by 590 to 457 with 144 unchanged. In London, the ISE/Nikkei 50 index fell 0.16 to 1,254.86.

Traders said that the Topix is more representative of current market sentiment, and they doubt that the Nikkei's strength will last. An analyst at a Japanese brokerage said that investors are waiting for stocks to consolidate before they enter the market more aggressively.

Speculative dealers targeted non-ferrous metal stocks on reports of violence and rioting in South Africa, together with the subsequent strengthening of gold prices. Sumitomo Metal Mining, the day's most active issue, rose Y82 to Y972 and Mitsui Mining and Smelting by Y26 to Y532.

Sega, the video game and entertainment company, rose Y340 to Y10,100 on reports that it will co-operate with American cable television companies to deliver video game software to the US.

Foreign and domestic institutional investors remained subdued, awaiting the outcome of the G7 meeting here. So far Russian reform has been a primary focus of the G7 meeting.

Foreign exchange-rate stability gave a boost to Nikon, which ended Y35 higher at Y1,030, while Canon rose Y10 to Y1,540.

Nissan Diesel ended at Y520, up Y80, the maximum high for the day, on reports that the manufacturer and Ibiden, a Japanese chemical company, had made progress in developing a filter to cut nitrogen oxide emissions for diesel engined vehicles.

NTT dropped Y20,000 lower to Y1.02m. The financial sector also suffered losses across the board. Mitsubishi Bank declined Y50 to Y2,490, Daiwa Bank lost Y50 to Y1,100 and the brokerage house, Nikko Securities, slipped Y40 to Y1,040.

In Osaka, the OSE average rose 25.59 to 22,178.69 in volume of 27.1m shares.

Roundup

PACIFIC Rim markets put in mostly strong performances with a number of markets at or near record highs.

HONG KONG, however, turned lower as profits were taken after Wednesday's record-breaking rally, and the Hang Seng index ended 57.70 lower at 6,732.04 in turnover of HKDollars 5.68bn.

HSBC Holdings continued to top the most active list, falling 50 cents to HKDollars 73.

SINGAPORE's Straits Times Industrial index rose 22.79 to a record close of 1,731.40 in turnover which was also at an all-time high of SDollars 765.31m. The surge in volume was attributed to demand by fund managers who are currently underweight in Singapore.

TAIWAN saw late demand for bank shares pull the market to a sharply higher close. The weighted index rose 119.64 or 2.61 per cent to 4,695.49 although turnover remained thin at TDollars 31.7bn. Small investors took a lead from institutions which began buying financial stocks in the last trading hour.

MANILA closed at an all-time high amid heavy buying of oils, on expectations that drilling projects off Palawan, south-west of Manila, will yield positive results. Foreign buying helped the composite index 4.4 higher to 1,583.25, surpassing the previous all-time high of 1,580.95 set on June 11.

SEOUL picked up from an easier start after an aggressive, across-the-board late buying spree. The composite index, which lost 7.69 points during the morning, ended 11.84 higher at 716.76.

BOMBAY moved ahead as it returned to work after Wednesday's holiday. The BSE index rose 66.28 to 2,293.12 as the nervousness which had gripped the market since last week's announcement of a credit policy subsided.

BANGKOK benefited from strong institutional buying of banking and finance shares and the SET index rose 11.84 or 1.37 per cent to 874.55.

AUSTRALIA edged lower after Wednesday's surge and the All Ordinaries index shed 0.3 at 1704.1.

HK Hong Kong, Asia SG Singapore, Asia TW Taiwan, Asia AU Australia PH Philippines, Asia KR South Korea, Asia IN India, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 708
World Stock Markets: South Africa Publication 930416FT Processed by FT 930416

SHARES bounced back after Wednesday's sharp falls helped by late US buying. The overall index closed 47 higher at 3,542 while the gold and industrial indices both rose 31 to 1,199 and 4,371 respectively. De Beers rose R2.50 to R75.50.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 69
World Stock Markets: Malaysia enjoys frantic trading activity - Investor interest has mainly concentrated on second-line stocks Publication 930416FT Processed by FT 930416 By KIERAN COOKE

Brokers forced to sleep in the office at night as they battle with the paperwork of millions of share transactions; helicopters chartered to fly scrip in from various parts of the country: the pace is frantic on the Kuala Lumpur stock exchange.

In terms of trading volume Kuala Lumpur has outperformed New York on several recent days. Whereas a year ago about 30m shares were being traded daily, by the middle of this week daily volume was more than 1bn units valued at nearly MDollars 2.5bn (Dollars 950m). Market values are considerably higher in New York, but daily trading volume is only in the 250m to 300m shares area.

Malaysian share prices are also at peak levels, but they have experienced a far more modest rise. Against a figure of 644 at the end of last year, the KLSE composite index yesterday hit an all-time closing high of 660.73 against a previous peak of 660.35 last November 5.

Tenaga Nasional and Telekom, the partially privatised electricity and telecommunications utilities, together account for nearly 40 per cent of market capitalisation. But trading in these stocks has been light: instead investors have been trading unprecedented volumes of secondary stocks.

For instance, Idris Hydraulic, a financial and property holding company, has seen its share value leap by 300 per cent. Malaysia is embarking on a number of large infrastructure projects, including the construction of another international airport outside Kuala Lumpur, new sewage systems and power generation facilities. There have been strong rumours that Idris, said to be politically well connected, might be awarded work on some of these lucrative projects.

Renong is a larger company than Idris with interests in construction, manufacturing and financial services. It, too, is believed to have substantial political connections, serving in the past as the investment vehicle of the ruling United Malays National Organisation (UMNO). There are rumours that Renong might also be awarded valuable government contracts and trading in its shares has likewise been exceptionally heavy.

Officials insist that the present frenzied activity, which began more than a week ago, is a reflection of the country's buoyant economy. In each of the past five years Malaysia has achieved growth rates of more than 8 per cent and while some slowdown is evident, most analysts predict 1993 GDP growth of between 7 and 8 per cent.

But there are plenty of sceptics. 'The fundamentals of the economy are not that much different from a year ago - if anything things are not looking so good now,' said one broker. 'There's really no logical reason for all this activity. It's just that people have suddenly decided to indulge in an orgy of speculative buying and selling.'

Malaysia's sound economic performance of recent years has encouraged record levels of foreign capital inflow and analysts say that the liquidity rich banking system has been an important factor in encouraging market activity.

Kuala Lumpur has also been influenced by the generally bullish sentiment in other regional markets, particularly Hong Kong and Tokyo. In turn the performance of the exchange has been the main factor behind the recent rise in Singapore, with Malaysian-related stocks being the main focus of attention.

Concern has been expressed about Kuala Lumpur's ability to cope with the present trading volumes. In early 1990 the exchange could not cope with a sudden surge in volume and MDollars 250m worth of share certificates went missing. The incident took several months to sort out and raised questions about the exchange's management. Hence the warning from Mr Salleh Majid, the exchange's general manager, for brokers not to trade beyond their financial and physical capabilities.

There have been allegations that well organised syndicates involving speculators from Taiwan, Malaysia and Singapore have been launching raids on individual stocks to ramp up the market. The exchange says that it is closely monitoring the market and that, so far, it has found no evidence of manipulation.

Most brokers feel that while the present trading surge is unlikely to last many more days, the market will probably consolidate rather than experience a steep rise or fall. 'We know it can't go on like this,' said one weary broker. 'But it's fun to think that, for a few days at least, little Kuala Lumpur has been outgunning New York.'

MY Malaysia, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 754
World Stock Markets (Europe): Intervention rate decision knocks Paris Publication 930416FT Processed by FT 930416 By Our Markets Staff

UNCHANGED intervention rates in Paris gave sentiment a knock yesterday, writes Our Markets Staff.

PARIS, too, continued to reflect disappointment at the slight easing in base rates earlier this week, as the CAC-40 index fell 26.80 to 1,988.63 in turnover of FFr2.4bn.

Most of the day's activity took place in Total and Elf, with switching from the latter to the former by some big US houses. Total, recently the subject of a positive broker's note, closed FFr2 higher at FFr272, while Elf slipped FFr2.10 to FFr368.90.

Comments by Mr Edouard Balladur, the prime minister, expressing a wish for the suspension of permits to construct new large retail sites, affected Carrefour, down FFr56 at FFr2,674 and Casion, FFr4.90 lower at FFr146.00.

Lyonnaise Dumez lost a further FFr21.40 or 4.4 per cent to FFr465.30 following Wednesday's disappointing results.

FRANKFURT's DAX index ended 2.77 higher at 1,675.21, 8.34 off its day's high, in turnover up from DM4bn to DM5.6bn. Among the market's superheavyweights, Daimler rose DM2.00 to DM569.50 after an intraday high of DM571.50, Siemens by DM2.60 to DM645.60 after DM649.00 and Deutsche Bank DM2.50 to DM713.00 after DM715.50.

Bigger moves were registered lower in the order, with Kaufhof DM16 higher at DM478 and, in the chemicals sector, Degussa up DM6.50 to DM324, Schering DM8 better at DM767 and Henkel DM8.80 lower at DM546.20.

Mr Roderick Hinkel at Hoare Govett said that Degussa was recovering from a fall on Tuesday, inspired by unwarranted rumours and by thoughts that trouble in South Africa would put the platinum price higher, and Degussa's catalytic converter business at risk.

In fact, he said, the company has made a profit on trading the metal; secondly, Germany gets 80 per cent of its requirements from recycling; and, finally, there has been no halt to platinum production in South Africa to date.

AMSTERDAM was impressed by publishers, VNU outperforming with a gain of Fl 2.20 to Fl 118.20. VNU sold its printing division earlier this week. Elsewhere in publishing, Wolters Kluwer advanced 80 cents to Fl 94.20 while Elsevier hit a 12-month intraday high before easing slightly to close 20 cents higher at Fl 136.80.

The CBS Tendency index improved 0.4 to 109.6. ING was another of the day's best performers as it reported a rise in 1992 profits, closing 70 cents better at Fl 65.30.

ZURICH continued to be weighed down by the weak dollar, leaving industrial stocks lower and the SMI index down 4.8 at 2,160.9.

Ciba-Geigy bearers remained under pressure, down SFr14 to SFr623, while Nestle bearers were SFr5 easier at SFr1,140.

Among engineers, Sulzer gained SFr16 to SFr726 on a bank's buy recommendation.

Investment banks were also firm against the trend after March figures showed sharply higher bourse trading volumes. The day's most active issue, Leu Holding which is losing the chief executive of Leu Bank to Swiss Bank, rose SFr6 to SFr417.

MILAN was uncertain, the Comit index edging 3.99 lower to 508.32 in largely technical trading connected with today's end of the monthly account.

Volume remained low ahead of this weekend's referendum on electoral reform, in which a vote in favour of change is viewed as a foregone conclusion. However, the size of the majority will be crucial in laying the ground for a new government to tackle the country's political and economic problems, which will provide the lead for the future direction of the bourse.

VIENNA saw a fall in the ATX index of 4.59 to 775.27. Austrian Airlines fell another Sch20 to Sch1,530 ahead of today's 1992 results, which are expected to show a loss for the first time in 20 years.

ISTANBUL firmed 1.5 per cent after Wednesday's pause for breath, leaving the market to close at its seventh record high this month. The market index added 102.2 to 6,962.52.

------------------------------------------------------------------------ FT-SE Actuaries Share Indices ------------------------------------------------------------------------ April 15 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes ------------------------------------------------------------------------ Open 10.30 11.00 12.00 FT-SE Eurotrack 100 1161.30 1161.49 1161.08 1160.64 FT-SE Eurotrack 200 1225.21 1225.36 1226.17 1226.55 13.00 14.00 15.00 Close FT-SE Eurotrack 100 1159.55 1159.00 1156.38 1156.40 FT-SE Eurotrack 200 1225.71 1225.57 1222.35 1220.62 ------------------------------------------------------------------------ Apr 14 Apr 13 Apr 8 Apr 7 Apr 6 FT-SE Eurotrack 100 1160.63 1157.54 1151.40 1144.36 1147.43 FT-SE Eurotrack 200 1223.50 1220.72 1211.28 1206.25 1210.05 ------------------------------------------------------------------------ Base value 1000 (26/10/90) High/day: 100 - 1161.63; 200 - 1227.57 Low/day: 100 - 1154.88 200 - 1219.84. ------------------------------------------------------------------------

FR France, EC DE Germany, EC NL Netherlands, EC CH Switzerland, West Europe IT Italy, EC AT Austria, West Europe TR Turkey, Middle East P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 784
Foreign Exchanges: Yen recaptures lost ground Publication 930416FT Processed by FT 930416 By JAMES BLITZ

THE YEN yesterday recaptured some of the ground it had lost to the US dollar on Wednesday amid signs that US officials would still like to see the yen strengthen to reduce the Japanese trade surplus, writes James Blitz.

Earlier in the week, the announcement of a Y13,200bn fiscal package to stimulate the Japanese economy appeared to have brought the upward march of the yen to a halt. In Thursday's Tokyo trading, the dollar strengthened against the Japanese currency and, at one stage, was even testing the Y114 level, having hit a new record low of Y112.58 on Monday.

The situation changed in yesterday's European trading, however, as more detail became known about the US response to the fiscal package.

There was a strong focus on a report in the Washington Post newspaper, suggested that Mr Kiichi Miyazawa, the Japanese prime minister, might signal that Japan is prepared to let the yen rise following his meeting with President Bill Clinton today.

This helped the yen back up to a London close last night of Y113.20 to the dollar, from a previous Y113.95. The yen was also stronger against the D-Mark, however, closing at Y70.62 from a previous Y71.66.

Trading inside the European exchange rate mechanism was calm, in spite of what seemed rather hawkish comments from Mr Helmut Schlesinger, the Bundesbank president.

Mr Schlesinger said that, if higher interest rates could not help relieve pressure on weaker ERM currencies, the only solution would be for them to devalue. He was also reported as saying that the Bundesbank would continue to lower its interest rates gradually.

The comments had little impact on ERM currencies. There were rumours that the Bundesbank had announced a press conference to follow next Thursday's council meeting, but a Bundesbank spokesman said there were no such plans.

The French franc closed a fraction stronger at FFr3.378 to the D-Mark from a previous FFr3.380. The peseta closed almost unchanged at Pta72.07 to the D-Mark. Sterling continued to strengthen against the D-Mark following this week's spate of good data. It closed 3/4 of a pfennig up on the day at DM2.4775.

However, Mr Steve Hannah, director of IBJ International in London, said the Bundesbank president's comments might have an impact on the ERM grid in the longer term. 'We have to recognise that, if ERM pressures did re-emerge, the peer group of the system feels more-and-more that people should devalue currencies at an earlier stage,' he said.

The dollar perked up against the D-Mark, helped by short-covering of the US currency following the recent sell-off. The weekly jobless figure was dollar positive, falling to 335,000 from a previous 373,000. The dollar closed at DM1.6025 from a previous DM1.5915.

JP Japan, Asia FR France, EC DE Germany, EC US United States of America XE South America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 27 495
Money Markets: Day out for rate bears Publication 930416FT Processed by FT 930416 By JAMES BLITZ

SHORT-DATED sterling futures fell again yesterday as dealers took the view that another cut in UK base rates was increasingly unlikely, writes James Blitz.

There was no concrete news to make the sterling market so modest in its view of rate cuts yesterday. But this week's raft of good economic indicators has robbed the cash and futures markets of their speculative edge.

Although sterling futures dealers had a relatively quiet morning, there was a sharp sell-off in the front-month contracts at 2 pm.

The June contract fell 6 basis points on the day to a close of 94.06, while the September contract fell 7 basis points to close at 94.15. At this level, the market is predicting that 3-month sterling cash rates will be at 5.85 per cent by the autumn, and that they will go no lower.

There was an equally downbeat view in the interbank market, partly influenced by a huge shortage of Pounds 2.5bn forecast by the Bank of England.

Three-month money closed a touch firmer at 5 31/32 per cent from a previous 5 15/16 per cent. The cost of overnight lending touched 10 per cent as the shortage proved difficult to remove, and there was late assistance of Pounds 315m.

One dealer in a London- based commercial bank said he could not remember the market being as negative about rate cuts for many years. There are now only 15 basis points separating the December 1993 contract from most cash rates out to 1 year.

Another dealer was more cautious. 'There is something of a recovery going on in the Uk economy,' he said. 'But we will need more figures in a month's time before people lose all hope of a rate cut.'

In Europe, dealers were particularly concerned by comments from the Bundesbank President, who said that, if interest rate cuts did not relieve pressure on weaker currencies in the European exchange rate mechanism, the only solution might be devaluation.

The June Euromark contract consequently fell back 3 basis points to close at 92.73, nearing the lows seen in January. The June French franc contract was up 1 basis point at 91.69. German call money rates remained firm at between 8.20 and 8.25 per cent as tax payments drained liquidity from the market.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 27 412
Commodities and Agriculture: Low-cost CIS smelter clean-up likely Publication 930416FT Processed by FT 930416 By KENNETH GOODING, Mining Correspondent HELSINKI

THE ALUMINIUM industry of the Commonwealth of Independent States is likely to go ahead soon with a low-cost scheme drastically to cut pollution from most of its smelters. It would cost about USDollars 600m, compared with previous estimates of Dollars 6.6bn to upgrade the CIS plants, according to Mr Vesa Kumpulainen, chief executive of the Kumera Corporation of Finland, which would act as manager of the project.

The scheme would go a long way towards answering complaints by the European Community's aluminium industry that it is being forced to shut down modern smelting capacity to make way for exports from heavily polluting CIS smelters.

Mr Kumpulainen said that Kumera, a privately-owned group with an annual turnover equivalent to about Dollars 100m, had completed studies at some CIS smelters that showed it would be possible, as an intermediate step, to convert the existing Soederberg operations rather than to move completely to the modern, so-called pre-bake technology. This could be done with well-established technology developed by Reynolds Metals, the US group, which had used it to convert to Soederberg smelters in its own country.

'The CIS industry can afford this scheme but the cost of converting to pre-bake technology is not financially viable,' Mr Kumpulainen declared.

As an example of how pollution could be reduced, he said that at one CIS smelter some 20 kg of emissions a year could be cut to only 2 kg. Upgrading the Soederberg lines would also produce huge energy savings because the present power efficiency of 80 per cent would increase to 90 per cent.

Ten of the 14 CIS aluminium smelters use the Soederberg process - including the two largest, Bratsk (850,000 tonnes a year) and Krasnoyarsk (800,000 tonnes). Kumera has made proposals to them all. Mr Kumpulainen said work was expected to start at the 60,000 tonnes-a-year Kandalaksha smelter later this year, which would take two years to complete. It would be possible to convert all the CIS Soederberg smelters in two to three years.

One side effect of the conversion would be an increase in the annual capacity of each by 8 or 9 per cent.

Mr Kumpulainen was speaking during meetings here to arrange the formation of a new organisation to promote and defend the interests of the CIS aluminium industry internationally. Mr Igor Prokopov, president of Concern Aluminiy, the holding company for the CIS industry, said that CIS aluminium output this year was expected to be in line with the 3.2m tonnes produced in 1992. He also expected that official exports would be about the same at 850,000 tonnes.

Mr Boris Yeltsin, Russia's president, a few days ago signed a decree permitting the industry to export 520,000 tonnes of aluminium free of duty to pay for its raw materials, equipment, food and other necessities, he said. Last year's duty-free total was 650,000 tonnes. Russia was taking steps to cut unlicensed and unofficial exports of metal by imposing new customs regulations between itself and other members of the Federation.

Mr Prokopov pointed out that the CIS industry was producing at well below its rated annual capacity of 3.5m to 3.8m tonnes mainly because reconstruction was taking place at smelters to improve their performance. However, 'political problems' in Tadzhikistan would this year reduce output at the smelter there to between 300,000 and 320,000 tonnes, compared with its capacity of 520,000 tonnes.

XV Commonwealth of Independent States P3334 Primary Aluminum RES Pollution P3334 The Financial Times London Page 26 594
Commodities and Agriculture: EC import restrictions 'wrong and ineffective' Publication 930416FT Processed by FT 930416 By KENNETHN GOODING

IT WOULD be 'wrong and ineffective' for the European Commission to impose quotas on imports of CIS aluminium, said Mr Igor Prokopov, president of Concern Aluminiy, the holding company for the CIS industry, yesterday.

The commission is considering a quota system at the request of some European aluminium producers who claim that their smelters are threatened by an unprecedented surge in CIS exports since 1991.

Mr Prokopov pointed out the CIS industry had costs which were among the lowest in the world but all its contracts were related to the world market price established by the London Metal Exchange. Most exports were handled by large, reputable western trading organisations. Also, much of the proceeds from CIS aluminium exports were used to pay for imports of raw materials, equipment and food for the smelters and most of these came from Europe.

If the EC forced cuts in aluminium exports from the CIS, its own exports would suffer. In any case, there was no such thing as a 'European aluminium market' - just a world market in which the CIS was playing a normal role. It made no sense to put a fence between Europe and the CIS - 'it would achieve nothing'.

XV Commonwealth of Independent States QR European Economic Community (EC) P3334 Primary Aluminum MKTS Foreign trade P3334 The Financial Times London Page 26 241
Commodities and Agriculture: Peru's fishmeal industry set for bumper profits - Production survived last year's El Nino visitation to reach a fresh record Publication 930416FT Processed by FT 930416 By SALLY BOWEN

THE PERUVIAN fishmeal industry is gearing up for a bonanza predicted to last for the next two to three years. By late 1992, the sardine and anchovy that form the staple raw material for the industry were back in abundance after being temporarily affected by the appearance of the dreaded warm current known as 'El Nino', which last ravaged fishmeal output in 1983.

Contrary to predictions, however, Peruvian production survived last year's milder visitation and a late boost in fish stocks turned 1992 into yet another record year. Peru topped the world exporters' league with 1.37m tonnes, narrowly outstripping Chile's 1.21m tonnes.

'Statistically, the years after a Nino are excellent,' says Mr Espino of Imarpe, Peru's maritime institute, which is charged with husbanding the resource and recommending periodic fishing bans. Mr Espino estimates that the Peruvian catch could be raised by a quarter or a third from the present 6m tonnes a year without detriment to the species.

'And if the fishmeal producers started going for jack mackerel - at present only about 80,000 tonnes a year are landed, perhaps 5 per cent of total stocks - then the sky's the limit,' he says.

The main limitation on such expansion is fleet capacity. Most Peruvian fishing boats are small, with no refrigeration and hug the coast. When El Nino hits, the fish move into deeper waters farther out to sea where these boats cannot follow.

Peruvian producers say they have invested more than Dollars 200m in the past two years in fleet renovation and plant and equipment modernisation ashore. The industry is moving towards production of higher-quality, low temperature, steam-dried meal with 'stickwater' plants to maximise protein recovery. New boats with refrigerated holds are under construction in local yards. But there's still plenty of room, and a warm welcome waiting, for new investment from abroad.

Representatives from Chile's huge Angelini group have been in Peru recently on 'feeling-out' visits. And Venezuelan capital has already entered in the form of a new fishmeal joint venture under the name of Palangrera Peruana.

But the big surprise of 1993 could be the arrival of the Chinese. Pesca Peru, the state-owned fishmeal and fishoil giant that produces around 40 per cent of all national output, is high on this year's privatisation list. Coopers and Lybrand, with financing from the Canadian development agency and the World Bank, is currently completing a valuation and will recommend on sale procedures.

Essentially, the choice is between splitting the company into its 20 plants and four refineries to sell off individually; or selling the whole company as one unit.

The only likely buyers on the latter basis would be the Chinese - 'and it's a possibility that has the private producers in a state of panic', says Mr Eric Topf, head of the Pesca Peru privatisation committee.

Unofficially, senior Pesca Peru officials say the company should fetch 'at least Dollars 200m', a ball-park figure considered over-optimistic by private producers.

The state-owned plants are, by and large, elderly and outdated - though several are excellently located on the now-desirable extreme southern coast and have their own quays. Drastic personnel reductions during 1992 put Pesca Peru back into profit after years in the red, underlining just how profitable producing fishmeal can be, even from scrap-yard plants.

China has established itself as far and away Peru's largest customer, buying last year almost 60 per cent of all output. Peruvian fishmeal goes to feed the Pacific prawn, turbot and eel which China is successfully exporting in quantity to the US and Japan.

The Chinese are said to be producing at present some 32m tonnes of animal foodstuffs a year, in which they use 2 per cent fishmeal - a very low percentage compared with most competitors. A high-level Peruvian delegation is now in China 'to try to convince them of the bounties of boosting that fishmeal component,' says Mr Salomon Manzur, Peruvian president of the Fishmeal Exporters' Association.

If the Chinese do increase the percentage of fishmeal in their current animal feedstuff production, Peruvian producers will be assured of sales for their expanded fishmeal output for several years to come.

------------------------------------------------------ FISHMEAL PRODUCTION ('000 TONNES) ------------------------------------------------------ 1990 1991 1992 ------------------------------------------------------ Peruvian Pesca Peru 379 498 513 Private sector 755 782 853 Total 1,134 1,280 1,366 ------------------------------------------------------ Chilean 1,550 1,210 ------------------------------------------------------ Source: Peruvian National Fishing Society (SNP). ------------------------------------------------------

PE Peru, South America P0919 Miscellaneous Marine Products MKTS Production P0919 The Financial Times London Page 26 772
Commodities and Agriculture: Malaysia 'cannot understand' rubber pact opposition Publication 930416FT Processed by FT 930416 By KIERAN COOKE KUALA LUMPUR

MALAYSIA SAYS it cannot understand the refusal of the world's natural rubber consuming countries to renegotiate the International Natural Rubber Agreement.

Mr Ahmad Farouk, chairman of the the Malaysian rubber research and development board and the country's spokesman at meetings of the International Natural Rubber Organisation, says that the consumer countries have been inflexible and have mistakenly linked a renegotiation of Inra with a revision of the Inro reference price mechanism.

The present agreement expires at the end of this year. Last month the main natural rubber consumer countries - the European Community, the US and Japan - voted against a renegotiation saying that such a move would only be considered if a dispute over a downward revision of Inro's reference price was resolved.

Earlier this year producing countries - mainly Thailand, Indonesia and Malaysia - opposed a 5 per cent cut in the reference price because prices were then in an uptrend. The reference price guides the organisation's buffer stock manager in his buying and selling of stockpiled rubber.

'I do not understand the consumers,' says Mr Ahmad. 'They insisted that the reference price be revised first. But they know that there will be new proposals on reference price if we go into a renegotiation of Inra.'

The Malaysian cabinet has this week been discussing what measures to take if, as expected, the agreement collapses at the end of the year. Mr Lim Keng Yaik, the primary industries minister, has accused the consumer countries of not caring whether price levels are remunerative for producer countries. Mr Lim said the consumers wanted to keep the price locked in the present low range.

'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 nations.'

A last attempt to save the pact will probably be made when the organisation's council meets here next month. Producers say if Inra collapses they will bring in their own supply curbs and alternative pricing mechanisms.

MY Malaysia, Asia P0831 Forest Products COSTS Commodity prices P0831 The Financial Times London Page 26 374
Commodities and Agriculture: Ukraine may export grain Publication 930416FT Processed by FT 930416 By CHRYSTIA FREELAND KIEV

UKRAINE'S MINISTER of Agriculture yesterday announced that he expects Ukraine, which last year had to import grain, to export at least 2.2m tonnes of grain and 500,000 tonnes of sugar this year.

Seeding is drawing to a close in Ukraine and Mr Karasyk said that the combination of good weather and the beginning of economic reforms in the agricultural sector would lead to a good harvest.

'It has been a very beautiful spring,' Mr Karasyk said. 'The weather is working for our independence.'

Mr Karasyk predicted that a harvest of between 42m and 45m tonnes of grain would be gathered this year, up from last year's yield of 40m tonnes, He forecast a Ukrainian sugar beet crop of 40m tonnes, compared with the 33m tonnes harvested last year, when the yield was sharply reduced by drought.

The agriculture minister vowed to resign if Ukraine imported any grain this year and said the country needed foreign investments in the agricultural infrastructure, not credits with which to buy western grain.

Mr Karasyk said that agricultural reforms were beginning to take root with 400,000 hectares already owned by private farmers. He said that 200,000 ha were being cultivated jointly with western investors.

UA Ukraine, East Europe P0119 Cash Grains, NEC P0133 Sugarcane and Sugar Beets MKTS Foreign trade P0119 P0133 The Financial Times London Page 26 239
Commodities and Agriculture: BP Norway's crude output 'to plunge' Publication 930416FT Processed by FT 930416 By KAREN FOSSLI OSLO

BRITISH PETROLEUM Norway will see its crude oil production plunge by 36 per cent over the next three years, according to the second annual Norwegian oil and gas league table soon to be published by Edinburgh-based analyst Wood Mackenzie.

Total Norwegian crude oil production is forecast to increase by 6 per cent over the same period.

WoodMac's league table, which ranks the top 20 oil companies in Norway by the total value of their oil and gas assets, including pipelines, also reveals that BP Norway has dropped out of the top ten - its NKr6.553bn (Pounds 625m) valuation having been overtaken by Conoco Norway, valued at NKr6.743bn.

Statoil, the Norwegian state oil company, remains the undisputed leader with a valuation at NKr49.204bn, more than twice that of second-placed Norsk Hydro. According to WoodMac, Statoil's most valuable assets include the Statfjord, Gullfaks, Oseberg, Snorre and Sleipner East fields. Also included are the Statpipe and Ulapipe pipelines, which between them contribute some NKr9bn, or about 18 per cent, to Statoil's asset base value.

Of the foreign oil companies operating in Norway, Elf Petroleum retains the highest ranking at number three overall, valued at NKr13.987bn, followed closely by Esso Norge, valued at NKr13.321bn and Phillips Petroleum Norway, at NKr11.848bn. Saga Petroleum, Norway's biggest independent, retained sixth place, valued at NKr9.960bn, thanks to last year's acquisitions of DNO Olje and Norminal, two tiny domestic independents.

British Petroleum Norway NO Norway, West Europe P6231 Security and Commodity Exchanges P1311 Crude Petroleum and Natural Gas MKTS Production P6231 P1311 The Financial Times London Page 26 278
Commodities and Agriculture: Cotton output down 20% Publication 930416FT Processed by FT 930416 By GILLIAN TETT MOSCOW

COTTON OUTPUT in the former Soviet republics dropped by almost 20 per cent last year to 6.47m tonnes, the lowest level for 15 years, according to the Commonwealth of Independent States' central statistical office. Raw cotton production totalled 7.79m tonnes in 1991 and 9.1m tonnes in 1980.

Two-thirds of last year's total came from the central Asian republic of Uzbekistan, with Turkmenistan, Tadzhikistan and Azerbaijan supplying most of the rest.

The CIS statistical office cited shortages of agricultural equipment as the key reason for falling production. Productivity was relatively inefficient with only 2.24 tonnes of cotton collected from each hectare cultivated. However, the collapse of trade links between the former Soviet republics and the political unrest in Azerbaijan and Tadzhikistan have also drastically affected the harvesting and processing of cotton.

With the former Soviet republics now increasingly determined to boost their supplies of hard currency, exports of raw cotton have risen significantly - last year Uzbekistan increased its overseas sales by 130 per cent to 600,000 tonnes.

At the same time trade with Russia, previously the main receiver of raw cotton in the Soviet Union, has dropped, leaving its textile industry in growing crisis.

XV Commonwealth of Independent States P0131 Cotton COSTS Commodity prices P0131 The Financial Times London Page 26 227
Commodities and Agriculture: LME postpones pre-market trading session Publication 930416FT Processed by FT 930416 By DAVID BLACKWELL

THE LONDON Metal Exchange has postponed the introduction of a pre-market trading session on the floor to mop up early morning business now carried out between traders' offices, writes David Blackwell.

The decision to put off the move was widely expected following the outraged reaction of several ring-dealing members. 'I don't think there is any LME ring-dealing member who sees any sense in it at all,' said one prominent trader at the time.

The LME wanted to introduce pre-market ring trading before the end of the year in order to give a better service to Far Eastern and Australasian clients.

'Following extensive consultation the board has decided to postpone for the time being the implementation of its proposal for the experimental introduction of a pre-market ring,' LME members were told yesterday.

The original proposal sprang from a study by an LME working party into the exchange's membership structure. The study itself was set up after complaints by ring-dealing members that they were carrying a greater share of the burden of running the exchange. They felt that they were facing more risks than the non-ring dealing members, and not reaping commensurate rewards.

The LME said yesterday that 'the board continues to examine the external directors report on market structure'.

GB United Kingdom, EC P6221 Commodity Contracts Brokers, Dealers NEWS General News P6221 The Financial Times London Page 26 243
World Commodities Prices: Fruit and Vegetables Publication 930416FT Processed by FT 930416

Pineapples at Pounds 1.00-1.30 each (Pounds 1.00-1.30) are an excellent buy this week, along with Bramley apples at 35-45p a lb (35-45p), Shamouti oranges at 12-35p each (12-35p) and outdoor rhubarb at 25-35p a lb (25-35p), reports FFVIB. Supplies of cauliflower are increasing and are in the shops at 45-55p each (65-85p). Other good vegetable choices include Spring greens at 35-40p a lb (35-40p), broccoli at 45-55p per 8oz pre-pack, English potatoes at 10-14p a lb (10-14p) and carrots at 20-25p a lb (20-25p). English and Dutch cucumbers are currently priced at 50-70p each (50-70p) depending on size. Tomatoes are 60-99p a lb (55-90p).

GB United Kingdom, EC P6231 Security and Commodity Exchanges P0179 Fruits and Tree Nuts, NEC P0161 Vegetables and Melons COSTS Commodity prices P6231 P0179 P0161 The Financial Times London Page 26 146
World Commodities Prices: Market Report Publication 930416FT Processed by FT 930416 By REUTER

Three-month COPPER moved below Dollars 2,000 a tonne on the LME yesterday morning, stimulating waves of liquidation and putting other prices under pressure. Late bouts of bargain hunting and short covering cushioned the earlier sharp fall. Dealers said that further losses towards recent 5 1/2 -year lows of Dollars 1,965 were likely, but should be punctuated by short covering rallies. Copper ended the kerb at Dollars 1,979, just above the low of Dollars 1,975. Three-month NICKEL fell below Dollars 6,000 a tonne, triggering sell-stops. The market drifted lower on sprees of commission house and merchant selling, before late short covering stemmed the fall. Three-month ZINC showed some resilience in the wake of copper's decline and looks poised to test levels above Dollars 1,030 a tonne. Three-month ALUMINIUM clawed back some of its earlier losses after encountering solid support near Dollars 1,130. On the London bullion market GOLD, SILVER and PLATINUM were softer across the board, but further gains could arise today as traders cover short positions ahead of any weekend developments in South Africa following the murder of black leader Chris Hani.

Compiled from Reuters

GB United Kingdom, EC US United States of America P6231 Security and Commodity Exchanges P1021 Copper Ores P1031 Lead and Zinc Ores P1099 Metal Ores, NEC P1044 Silver Ores P1061 Ferroalloy Ores, Ex Vanadium COSTS Commodity prices P6231 P1021 P1031 P1099 P1044 P1061 The Financial Times London Page 26 246
Government Bonds: Treasuries rally after jobs data prompts setback Publication 930416FT Processed by FT 930416 By PATRICK HARVERSON and SARA WEBB NEW YORK, LONDON

AFTER losing ground in early trading on news of a bigger-than-expected decline in weekly jobless claims, US Treasury prices rallied on the news that President Clinton is willing to make compromises over his economic plans.

In late trading the benchmark 30-year government bond was up 13/32 at 105 3/16 , yielding 6.717 per cent, the lowest since the Treasury began issuing 30-years in the early 1970s. At the short end, the two-year note was little changed, up 1/32 at 100 7/32 to yield 3.741 per cent.

Prices weakened early on after the Labor department announced that claims for state unemployment insurance fell 38,000 during the first full week of April. Analysts had been looking for a decline of somewhere between 9,000 and 15,000, so the announcement prompted a rapid, if not particularly substantial, sell-off.

Treasuries recovered their lost ground later in the day, however, on news of the president's willingness to compromise on his plans to help the economy. Fixed-income investors had worried that the Clinton stimulus package might lead to an overheated economy, and rising inflation.

SPANISH government bonds gained about a quarter of a point, shrugging off unfavourable comments from Mr Helmut Schlesinger, the Bundesbank president.

Mr Schlesinger was reported as saying that if high interest rates cannot support the weaker currencies in the European exchange rate mechanism, a devaluation may be the only solution.

'The weaker currencies, in particular, are more prone to inflationary expectations and must, therefore, offer higher interest rates to avoid coming under greater pressure,' Mr Schlesinger said.

'But if the tensions become too strong, only a devaluation of their own currencies may be of help, as has happened with respect to a number of currencies between September 1992 and February 1993.'

Dealers interpreted the comments as a reference to the peseta which has come under pressure since Spain called an early election.

The currency weakened slightly yesterday despite intervention by the Bank of Spain. The bond market edged up with the Meff futures contract rising from 85.88 to 86.11.

GERMAN government bonds slipped lower, with much of the selling concentrated in the five-year area.

Dealers said market participants expect the Bundesbank to continue with its policy of allowing small cuts in interest rates. Mr Helmut Schlesinger, the Bundesbank president, warned that fast rate cuts could damage investor faith in the Bundesbank's anti-inflation policy.

In addition, the market expects to see further supply next week with a new Treuhand bond issue. Dealers expect between DM6bn and DM10bn of 10-year bonds to be issued.

The Liffe bund futures contract, which opened at 96.24, rose to a high of 96.47 and ended the day at around 96.21.

TRADING in UK government bonds was volatile yesterday, and prices ended lower or unchanged on a combination of supply and economic factors.

After a strong start, gilt prices fell back quite sharply. The Liffe gilt futures contract opened at 106.15, rose to a high of 106.31, and then fell back to 106.05 before ending at 106.10.

Dealers said few investors wanted to buy before the release of today's inflation figures. In addition, the market expects the Bank of England to announce plans for its next gilt auction this afternoon, with the five-to-seven year maturities seen as a likely area for new issuance. However, some dealers have suggested that the Bank may choose to auction a 10-year stock next.

JAPANESE government bonds closed lower, having traded in a relatively narrow range yesterday.

The benchmark No 145 issue opened with a yield of 4.195 per cent and traded in a range of 4.19 - 4.265 per cent before ending at 4.22 per cent. The June futures contract ended at 108.61, compared with its previous close of 108.63.

The yen continued to strengthen against the dollar yesterday, prompted by a Washington Post report that prime minister Kiichi Miyazawa favours allowing the yen to rise further.

ES Spain, EC DE Germany, EC GB United Kingdom, EC JP Japan, Asia P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 25 694
International Capital Markets: Austrian stock market reform plan approved Publication 930416FT Processed by FT 930416 By IAN RODGER ZURICH

THE AUSTRIAN stock market, which has been sullied by several insider trading scandals in recent years, is about to receive a strong dose of reform.

Within the next few months, insider trading is to be made a criminal offence, punishable by up to two years in prison.

This, and other reforms aimed at making the country's capital markets more transparent and efficient, were agreed yesterday by a strategy group chaired by Mr Ferdinand Lacina, the finance minister.

The reform process has acquired urgency in recent months as investor confidence in the Austrian stock market has continued to ebb. The Austrian market has underperformed most leading world markets since early 1990, even though the country's economy has been one of the most buoyant in Europe.

Mr Klaus Liebscher, president of the Borse, said yesterday that all his priorities for improving the credibility and liquidity of the capital markets had been accepted.

The first step will be an amendment to the Borse Law making insider trading a criminal offence. It is expected to pass parliament in a few weeks and be introduced during the summer. It will also oblige the police to take action if Borse officials report a suspicious case, and will require banks to reveal the identity of account holders if requested by a judge.

Mr Liebscher said the Borse would soon introduce a code of behaviour for its own members aimed at preventing insider abuses, including so-called front running, the practice of placing a house order in advance of a client order that is expected to move the price.

The Borse would also raise listed companies' disclosure requirements, notably to include interim and ultimately quarterly reports. And it would set minimum levels of shares that companies must make available to the public to maintain their listing. Measures to improve the rights of minority shareholders were being discussed.

It hoped to have a fully computerised trading system in place by mid-1994. Then a market-making system, in which brokers' own account and client orders were clearly identified, could be established.

The committee agreed to set up a securities industry supervisory body, and will spend the next few months studying experience in other countries.

AT Austria, West Europe P6231 Security and Commodity Exchanges NEWS General News P6231 The Financial Times London Page 25 399
International Capital Markets: UK engineering group in Dollars 40m private placement Publication 930416FT Processed by FT 930416 By RICHARD WATERS

VINTEN, a small UK-based engineering company, has raised Dollars 40m of 10-year money through the US private placement market to refinance all its outstanding debt.

The deal is the latest from a growing line of small European companies which have secured long-term dollar finance privately from US insurance companies at rates below those available elsewhere.

Mr Malcolm Baggott, chief executive, said that the company had refinanced its entire short and medium-term debt, a large part of it taken on as a result of two acquisitions this year, as well as raising additional cash. The money has been provided by a single unnamed US insurance company.

The 10-year notes issued by Vinten pay a yield of 6.72 per cent, 120 basis points above Treasuries. Vinten turned to the US private placement market in part because it could not secure such long-term finance any other way.

'Our view is that now is as good a time as any to fix long-term borrowing,' Mr Baggott said.

Vinten Group GB United Kingdom, EC P3669 Communications Equipment, NEC P3829 Measuring and Controlling Devices, NEC COMP Company News P3669 P3829 The Financial Times London Page 25 210
International Bonds: New issues focus on continental European currencies Publication 930416FT Processed by FT 930416 By TRACY CORRIGAN

NEW EUROBOND issues yesterday were concentrated on continental European currencies, as volatile conditions in the gilts and US Treasuries market held activity in the sterling and dollar sectors at bay.

Positive sentiment on the French bond market encouraged buying of a FFr2bn long-dated issue for Electricite de France (EDF), the French electricity utility. The deal, which matures in 2012, took advantage of stronger demand for long-dated paper following the steepening of the French government bond yield curve.

Following the French election and the latest money-market rate cuts on Tuesday, the French yield curve is now positive, except at the short end, with 20-year yields at 7.40, compared with 7.12 per cent for 10-year bonds. The yield curve is expected to steepen further, but additional rate cuts are likely to benefit the long end of the market, if less markedly than shorter-dated bonds.

The EDF deal was launched at a yield spread of 33 basis points over the comparable OAT yield, but strong buying by European institutions, which are mostly bullish on the bond and currency markets, helped the spread tighten to 31 basis points.

In the D-Mark sector, a DM200m issue for McDonald's Corporation, the US fast-food chain, caught retail investors' attention. Although the spread of 30 basis points above the Bobl 105 series German government bond did not appear unusually generous for a double-A-rated credit, the rarity of McDonald's debt, and its status as a household name, sparked a rush for paper.

The issue traded as tight as seven basis points over the Bobl, before easing back to 14 basis points, according to lead-manager Deutsche Bank.

The deal was snapped up by retail investors in Belgium, Luxembourg and Switzerland, dealers said.

A DM200m five-year deal for Bancomext, the Mexican bank, was also targetted at retail investors, but was considered rather aggressively priced for a Latin American credit.

In the dollar sector, a debut Dollars 100m issue for Corporacion Andina De Fomento (CAF), the Latin-American supranational agency which finances trade and infrastructure, was also the first straight offering by a Latin American borrower with an investment-grade rating. CAF was rated triple-B by Standard & Poor's, the US rating agency, last month.

Previously, CAF, which is jointly owned by the Andean pact countries, funded itself through the syndicated loans market, but now plans to diversify its investor base. A small dollar offering in the domestic Colombian market is also being prepared.

Lead-manager Chemical Investment Bank reported good demand from institutional investors, encouraged by the investment-grade credit.

A further Latin American deal, for Loma Negra, Argentina's largest cement company, is expected to be launched today. The Dollars 85m issue of five-year bonds is expected to be priced to yield 480 basis points over the comparable US Treasury issue.

US United States of America JP Japan, Asia DE Germany, EC FR France, EC XC Latin America AR Argentina, South America P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 25 509
International Company News: Weyerhaeuser advances 55% Publication 930416FT Processed by FT 930416 By MARTIN DICKSON

RECORD US prices for timber helped Weyerhaeuser, the forest products group based in the Pacific Northwest, produce a 55 per cent increase in first quarter earnings, excluding special one-time gains.

Environmental constraints on logging in the Pacific Northwest, to help preserve an endangered species of owl, have sent prices for logs, lumber and plywood soaring this year, benefiting companies such as Weyerhaeuser with good supplies of timber.

The company reported earnings of Dollars 229m, or Dollars 1.12 a share, compared with Dollars 86.6m, or 43 cents a share, in the same period of last year. Net sales rose 6 per cent, from Dollars 2.2bn to Dollars 2.3bn.

However, some Dollars 44m, or 22 cents a share, of the earnings were due to a gain on the sale of the company's nappy business, while a further Dollars 52m, or 25 cents a share, was due to the extinguishment of debt.

The company's timberlands and wood products business produced Dollars 226m of earnings, up from Dollars 111m in the same period of 1992.

However, this contrasted sharply with a drop in profits at the company's pulp and paper business, from Dollars 75m to Dollars 35m, due to low prices and an excess of global production capacity relative to demand.

The company said that during the quarter prices continued to erode in pulp, containerboard packaging and bleached paperboard.

Weyerhaeuser US United States of America P2411 Logging P2611 Pulp Mills FIN Interim results P2411 P2611 The Financial Times London Page 24 262
International Company News: Delta seeks approval for NY-Heathrow service Publication 930416FT Processed by FT 930416 By NIKKI TAIT and PAUL BETTS, Aerospace Correspondent NEW YORK

DELTA Air Lines, one of the 'big three' US carriers, yesterday submitted a request to fly daily between New York's JFK and London's Heathrow airports - just four days before Mr John MacGregor, the UK transport secretary, is due to meet his US counterpart, Mr Federico Pena, in London.

The current US-UK bilateral aviation accord gives only two US carriers - American and United Airlines - the right to fly into Heathrow. United acquired Pan Am's Heathrow route authorities for Dollars 290m, while American paid Dollars 445m for routes between three US cities and Heathrow from TWA.

Greater access for US carriers to Heathrow was one of the most contentious issues raised last year, when possible revisions to the US-UK aviation agreement were being proposed in the context of British Airways' planned investment in USAir, a smaller US airline. These talks ended in deadlock, and BA went ahead with a scaled-down investment in the US carrier.

However, the question of liberalising the accord remains on the table. Aside from the meeting between the two ministers, formal talks on possible revisions to the agreement are tentatively scheduled for next month.

Delta made its request in a filing with the US Department of Transportation yesterday. It said it was prepared to begin the one-flight-a-day service by July 15. It also claimed that 'prompt British approval of the New York-London application would be a good-faith gesture by the British toward the full liberalisation (of air services) which the US government must require'.

Delta enlarged its presence at New York's JFK when it acquired Pan Am's transatlantic route authorities, along with its terminal at the US airport, in 1991. However, because Pan Am's Heathrow access had already been sold to United, Delta did not acquire any New York-London authorities as part of the deal.

Paul Betts, Aerospace Correspondent, adds: The UK government will insist on establishing new rules to ensure large airlines do not abuse their market power by squeezing out smaller competitors as a prerequisite of any further liberalisation of air services between the UK and the US.

Mr MacGregor is expected to discuss this proposal as well as renewing demands for an easing of existing US restrictions on foreign ownership of US airlines during his talks with Mr Pena.

Both ministers appear anxious to revive negotiations to liberalise air services between the two countries, interrupted after the US presidential elections last year.

Delta Air Lines US United States of America GB United Kingdom, EC P9621 Regulation, Administration of Transportation P4512 Air Transportation, Scheduled TECH Services & Services use P9621 P4512 The Financial Times London Page 24 459
International Company News: Price war behind 18% fall in Apple net Publication 930416FT Processed by FT 930416 By MARTIN DICKSON NEW YORK

A FEROCIOUS price war in the US personal computer industry led Apple Computer yesterday to report an 18 per cent drop in second-quarter net income, despite strong demand for its products.

The company said net income totalled Dollars 110.9m, or 92 cents a share, compared to Dollars 135.1m, or Dollars 1.09 a share, in the same period of last year.

Revenues, however, rose 15 per cent to Dollars 1.97bn from Dollars 1.72bn.

The company's gross profit margin dropped to 38.5 per cent of net sales, compared with 44 per cent in the second quarter of 1992. It blamed this on new product introductions and 'pricing actions aimed at aggressively positioning Apple for faster unit growth'.

The company has been suffering a shortage of products because of the introduction of new machines and short supplies of strategic components.

But it said these problems eased toward the end of the quarter and it believed it was 'well positioned for revenue and unit growth in the second half'.

Mr John Sculley, chairman, said that 'demand for Apple systems remains strong, our revenue growth accelerated during the quarter, and we are growing market share'.

Sales volume of the company's Macintosh PC products rose 38 per cent in the second quarter relative to last year, with US sales up more than 50 per cent.

For the first six months Apple reported net income of Dollars 272.2m, or Dollars 2.25 a share, compared with Dollars 301.1m, or Dollars 2.45 a share, on revenues up from Dollars 3.58bn to Dollars 3.97bn.

Domestic net revenues grew more than 23 per cent in the second quarter, compared with the same period of 1992, and the company said net international revenues were also growing.

Apple Computer Inc US United States of America P3571 Electronic Computers FIN Interim results P3571 The Financial Times London Page 24 327
International Company News: Lippo's HK arm climbs 1,202% Publication 930416FT Processed by FT 930416 By SIMON DAVIES HONG KONG

LIPPO Ltd, the listed holding company of Indonesian tycoon Mr Mochtar Riady's Hong Kong empire, announced a 1,202 per cent increase in net profits to HKDollars 211.02m (USDollars 27.29m) in 1992, up from HKDollars 16.2m in 1991.

During the year, the group underwent heavy restructuring. It hived off the Hong Kong Chinese Bank as a separate listing, and purchased controlling stakes in four other Hong Kong-listed companies, Hong Kong China, Asia Securities, Morning Star and Hong Kong Building and Loan.

Expansion was funded primarily through the issue of new shares. Mr Li Ka-shing's Cheung Kong group was issued with HKDollars 300m in convertible loan stock during the year. Further equity or convertible placements were made to the Riady family, to China Resources, the mainland group, and to outside investors.

Lippo Group ID Indonesia, Asia P6719 Holding Companies, NEC FIN Annual report P6719 The Financial Times London Page 24 167
International Company News: Brooke Bond India acquisition Publication 930416FT Processed by FT 930416 By RC MURTHY BOMBAY

BROOKE Bond India, a subsidiary of Unilever, the Anglo-Dutch food-to-detergents combine, is to acquire Kissan Products, an Indian food products company, from UB Group, a local conglomerate formerly known as United Breweries, for Rs250m (Dollars 8m), writes RC Murthy in Bombay.

Brooke Bond India Kissan Products UB Group IN India, Asia P2099 Food Preparations, NEC COMP Mergers & acquisitions P2099 The Financial Times London Page 24 83
International Company News: Color Line plans to raise NKr250m Publication 930416FT Processed by FT 930416 By KAREN FOSSLI OSLO

COLOR LINE, the Norwegian cruise and ferry group, plans to raise NKr250m (Dollars 36.8m) through a convertible bond issue to help finance expansion of its fleet, writes Karen Fossli in Oslo. The board will seek authority on April 26 at the annual general meeting to float the loan.

Color Line NO Norway, West Europe P4481 Deep Sea Passenger Transportation, Ex Ferry P4482 Ferries FIN Share issues P4481 P4482 The Financial Times London Page 24 93
International Company News: Moody's cuts AMR rating to Baa3 Publication 930416FT Processed by FT 930416 BY NIKKI TAIT

MOODY'S, the US credit rating agency, yesterday downgraded the various debt securities of AMR and its American Airlines subsidiary, writes Nikki Tait. The rating on the senior unsecured debt issues slipped from Baa2 to Baa3.

AMR Corp American Airlines Inc US United States of America P4512 Air Transportation, Scheduled CMMT Comment & Analysis P4512 The Financial Times London Page 24 78
International Company News: Talisman raises offer for Encor shares Publication 930416FT Processed by FT 930416 By ROBERT GIBBENS MONTREAL

TALISMAN Energy, formerly BP Canada, has raised its offer for the common shares of Encor, an oil and gas development company, writes Robert Gibbens in Montreal.

Talisman is offering one common share, worth around CDollars 20 (USDollars 15.80) in the market, for 45 Encor common shares, instead of 60 Encor previously.

This values Encor common stock at 44 cents a share, or just below current market levels.

BCE will receive about 11m Talisman shares for its 29.9m Encor convertible preferred shares now held. BCE, Canada's biggest telecommunications group, has now completely divested its energy interests.

Talisman Energy Inc Encor Inc CA Canada P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining COMP Mergers & acquisitions P1311 P2911 The Financial Times London Page 24 142
International Company News: Australian miner to sell oil unit Publication 930416FT Processed by FT 930416 By BRUCE JACQUES SYDNEY

NORMANDY Poseidon, the diversified Australian gold mining house, has proposed the sale of its controlling 42.8 per cent shareholding in Command Petroleum, its petroleum offshoot, to Snyder Oil, a US oil group, for ADollars 25.7m (USDollars 18.3m), writes Bruce Jacques in Sydney.

The transaction - at ADollars 28 cents a share, against yesterday's closing price of ADollars 27 cents on the Australian stock exchange - needs the approval of Command shareholders.

Normandy Poseidon Command Petroleum Snyder Oil AU Australia US United States of America P1041 Gold Ores P1311 Crude Petroleum and Natural Gas P2711 Newspapers COMP Shareholding COMP Disposals P1041 P1311 P2711 The Financial Times London Page 24 127
International Company News: Gannett reports Dollars 66m earnings Publication 930416FT Processed by FT 930416 By ALAN FRIEDMAN NEW YORK

IMPROVED newspaper advertising revenues helped Gannett, the US publisher of 82 daily newspapers - including USA Today - to achieve a first-quarter 1993 net profit of Dollars 66.3m, or 46 cents a share, compared with a loss in the same quarter of 1992 of Dollars 91.4m, or 63 cents a share.

The company's 1992 first-quarter loss occurred after Dollars 146m of accounting charges. With these stripped out, the 1993 first-quarter net profit was 22 per cent higher than the level a year before.

Gannett's group operating revenues grew by 7 per cent to Dollars 844.7m year-on-year, while operating income was Dollars 120.1m in the first quarter, some 16 per cent higher than a year ago.

Newspaper advertising revenues were 9 per cent higher in the 1993 first quarter, at Dollars 465m. Classified advertising volume was nearly 6 per cent better in the quarter.

Signs that the US media industry is emerging from the worst of the recession were apparent at USA Today, the popular national daily paper. USA Today's paid advertising pages rose by 29 per cent year-on-year, while advertising revenues were 21 per cent better.

Broadcasting revenues at Gannett, which includes 10 television and 15 radio stations in the US, grew by 5 per cent, to Dollars 82.9m.

Outdoor advertising revenues, a Gannett speciality, declined by 8 per cent, to Dollars 47.8m. This reflected in part the sale of a business in Arizona.

Gannett Co Inc US United States of America P2711 Newspapers FIN Interim results P2711 The Financial Times London Page 24 273
International Company News: Microsoft leaps 35.8% to Dollars 243m for quarter Publication 930416FT Processed by FT 930416 By KAREN ZAGOR NEW YORK

MICROSOFT, the leading US personal computer software company, beat analysts' expectations with a 35.8 per cent jump in third-quarter net profits to Dollars 243m, or 80 cents a share, helped by the popularity of its Microsoft Windows and MS-DOS operating systems.

A year earlier, Microsoft earned Dollars 179m, or 69 cents. Revenues in the three months to March 31 soared nearly 41 per to Dollars 958m. Most analysts had expected earnings of about 78 cents a share.

For the first nine months, Microsoft earned Dollars 688m, or Dollars 2.28 a share, up 38.1 per cent from Dollars 498m, or Dollars 1.70, a year earlier. Nine-month revenues grew nearly 40 per cent, to Dollars 2.71bn from Dollars 1.94bn.

Mr Frank Gaudette, chief financial officer, said: 'We have expanded core businesses, introduced new product lines and maintained our emphasis on operating efficiencies.'

Microsoft has licensed more than 25m copies of its Windows operating system since its debut in 1990. Windows is pre-installed in about 60 per cent of personal computers.

Earlier, Microsoft announced an agreement to work with Compaq Computer to make personal computers which are easier to use.

Microsoft Corp US United States of America P7372 Prepackaged Software FIN Interim results P7372 The Financial Times London Page 24 229
International Company News: Profits down at SA Gold Fields' mines despite price rise Publication 930416FT Processed by FT 930416 By PHILIP GAWITH JOHANNESBURG

GOLD mines in the South African Gold Fields group performed disappointingly during the March quarter, with net profits slightly lower despite a firmer gold price and successful containment of costs. After-tax profits fell to R267.4m (Dollars 84m) from R270.2m in the December quarter.

At the operating level, however, the group improved, with operating profits rising by 9.5 per cent to R330.8m from R302m.

The quantity of gold produced was largely unchanged at 30,575kg compared with 30,661kg, but sales revenue rose to R1bn from R981.9m due to a better average gold price of R32,716 per kg, up from R31,988 per kg. Production costs fell to R21,934 per kg from 22,175 per kg.

The group results suffered, however, from a fall in net sundry revenue to R13.98m from R42.5m in the previous quarter, when the figure was boosted by seasonal dividend payments and fire insurance pay-outs.

Driefontein, the group's largest mine, had a better working quarter, with East Driefontein recovering from a poor December performance. Mr Alan Munro, executive director, said West Driefontein had shown an improvement, 'but not enough'. Net profits rose to R139.7m from R137.4m.

At the Kloof mine, a good performance from the Kloof division was offset by a R10.5m operating loss at the recently-integrated Libanon division. This was the result of disruption to production caused by a fire. Mr Munro said he was determined and confident that the division would soon be paying its own way.

Fires also affected production at Deelkraal, which, in Mr Munro's words, had 'a very poor quarter'. A 20 per cent decline in the ore milled fed through to the bottom line, with after-tax profit falling to R3.4m from R13.7m the previous quarter. This compares to capital expenditure during the quarter of R10.6m.

The marginal Doornfontein mine turned a R6m loss the previous quarter into a R3.4m profit thanks to clean-up operations. The mine is heading towards becoming a surface dump operation, in which old waste dumps are reworked to extract residual gold, and Mr Munro said the possibility of closure remained strong.

South African Gold Fields Driefontein Consolidated Kloof Gold Mining Deelkraal Gold Mining Doornfontein Gold Mining ZA South Africa, Africa P1041 Gold Ores FIN Interim results P1041 The Financial Times London Page 24 395
International Company News: Moody's downgrades Matsushita debt rating Publication 930416FT Processed by FT 930416 By MICHIYO NAKAMOTO TOKYO

MOODY'S has downgraded the long-term debt ratings of Matsushita Electric Industrial, the world's largest consumer electronics manufacturer. It was one of just two Japanese companies which had held a triple-A rating from the US credit rating agency.

Matsushita's rating, as well as that of three of its subsidiaries, was downgraded to Aa2 from Aaa. The subsidiaries are MCA Funding, Panasonic Capital and Panasonic Finance.

Moody's also downgraded the long-term debt rating of MCA, the US entertainment group owned by Matsushita but not financially supported by it, to A2 from A1.

The revised ratings reflect Moody's concern about weakening fundamentals in Matsushita's core consumer electronics business. Sluggish retail demand in Japan is expected to continue to put pressure on this business, while the depressed capital expenditure is likely to hit the group's information, communication and industrial equipment businesses, Moody's said.

Japan's consumer electronics market has been further depressed by a lack of new products.

In November, Matsushita reported a 66 per cent drop in pre-tax profits for the first half of the year to March 1993.

Matsushita Electric Industrial JP Japan, Asia P3639 Household Appliances, NEC P3571 Electronic Computers CMMT Comment & Analysis P3639 P3571 The Financial Times London Page 24 218
International Company News: George Weston Foods up 5.6% Publication 930416FT Processed by FT 930416 By BRUCE JACQUES

GEORGE Weston Foods, the Australian biscuit-maker, has declared a steady interim dividend of 9.5 cents a share after a modest earnings rise in the six months to January, writes Bruce Jacques.

The company, a subsidiary of Associated British Foods, lifted net profits by 5.6 per cent to ADollars 25.7m (USDollars 18m) from ADollars 24.3m on a 4.5 per cent rise in revenue to ADollars 502.5m.

The result included a ADollars 623m abnormal gain from the sale of freehold properties.

George Weston Foods AU Australia P2052 Cookies and Crackers FIN Interim results P2052 The Financial Times London Page 24 115
International Company News: Alcan stays in red with loss of Dollars 20m Publication 930416FT Processed by FT 930416 By ROBERT GIBBENS MONTREAL

ALCAN Aluminium, the Canadian aluminium producer, has fallen deeper into the red with net losses of USDollars 20m, or 11 cents a share, for the first quarter of 1993, compared with losses of Dollars 15m, or 9 cents, a year earlier.

The group's first-quarter sales fell by 6 per cent to Dollars 1.73bn, due to depressed fabricated metal prices.

The recession in Japan affected Alcan's results. Its share of equity-accounted companies, including Nippon Light Metal, the Japanese associate, resulted in a Dollars 2m loss, against a Dollars 22m profit.

In Canada, where Alcan produces most of its ingot, the group's losses were substantially lower. US operations, which include primary, fabricated and rolled products, showed a small loss against a slight profit, but Brazil improved.

The European units weakened, especially in Italy and France, because of the recession.

Shipments of fabricated products were down 3 per cent and average realised prices slipped 12 per cent. Ingot shipments were lower, but average prices received gained a little.

Mr David Morton, chairman, said aluminium was likely to remain over-supplied in the near term, with depressed prices. Cost reduction and productivity gains remained the top priority.

Alcan Aluminium CA Canada P1099 Metal Ores, NEC P3334 Primary Aluminum FIN Interim results P1099 P3334 The Financial Times London Page 24 236
International Company News: Tax uncertainty delays dividends Publication 930416FT Processed by FT 930416 By PHILIP GAWITH

THREE investment holding companies in South Africa's Anglo American group - Anamint, Amgold and New Central Wits - have delayed announcing results and dividends for the latest financial year due to lack of clarity over the application of a new tax, Philip Gawith reports.

Directors said dividend declarations should await clarification of secondary tax on companies introduced in South Africa's budget last month.

Anglo American Gold New Central Witwatersrand Areas Anglo American Investment Trust ZA South Africa, Africa P6719 Holding Companies, NEC COMP Company News P6719 The Financial Times London Page 24 108
International Company News: South African bank buys Midlantic for Dollars 15m Publication 930416FT Processed by FT 930416 By PHILIP GAWITH

FIRST National Bank (FNB), South Africa's third-largest bank, has paid Dollars 15m to acquire the Hong Kong-based bank Midlantic (Asia).

This follows the FNB's recent purchase of Henry Ansbacher Holdings, the UK merchant bank, and its move to set up a branch in Zurich.

Mr Barry Swart, FNB managing director, commenting on the Midlantic acquisition, said: 'With increasing trading opportunities between South Africa and Asia, this acquisition forms a key component of FNB's internationalisation strategy.'

The primary focus of Midlantic's Asian activities is trade finance. It has an asset base of Dollars 75m, is profitable, and has customers in Hong Kong's main manufacturing and trading industries.

FNB says Midlantic's activities will shift more towards South African trade finance than in the past.

The deal, which takes immediate effect, was paid for through the financial rand.

The name and corporated identity of the Hong Kong bank - previously owned by Midlantic National Bank of Edison, New Jersey - will be changed to reflect the new parentage.

First National Bank Midlantic (Asia) ZA South Africa, Africa HK Hong Kong, Asia P6081 Foreign Banking and Branches and Agencies COMP Mergers & acquisitions P6081 The Financial Times London Page 24 216
International Company News: Bronfman companies alter their financial relationship Publication 930416FT Processed by FT 930416 By BERNARD SIMON TORONTO

SEVERAL senior holding companies controlled by Toronto's Bronfman family have announced a restructuring of their financial arrangements with one another.

The changes, the start of an effort to simplify their web of interlocking private and public companies, will relieve Edper Enterprises and Hees International Bancorp of contingent obligations relating to Brascan Holdings.

Brascan is a private company which holds 49 per cent of Brascan Ltd, a publicly-listed Bronfman holding company.

The changes are complex, reflecting the intricate cross-holdings and financing arrangements within the Bronfman empire.

As a first step, Edper will contribute CDollars 279m (USDollars 221.40m) of junior preferred shares to Brascan Holdings. Edper will also have the right over five years to require Hees to buy its common share holdings in Brascan for Hees common shares or an equivalent security.

Hees, which owns CDollars 765m of Brascan senior preferred shares, will be released from an obligation to buy Brascan preferred shares to fund future purchases of Brascan equity securities.

Hees will also be assured of a more stable earnings and dividend flow from its investment in Brascan.

The complex structure of the Bronfman empire has made it difficult for outsiders to judge the extent of recent financial pressures on the group. This year it has disposed of some of its most prized assets, including controlling stakes in John Labatt, the brewer and entertainment group, and MacMillan Bloedel, the forestry company.

As a result of the latest changes, Edper has reduced the carrying value of its 50.1 per cent stake in Brascan. The CDollars 140m charge pushed Edper to a CDollars 298.6m loss in 1992, compared with net earnings of CDollars 19.4m the previous year.

On completion of the transaction, expected in early May, Hees will record a corresponding gain.

Edper Enterprises Hees International Bancorp Brascan CA Canada P6722 Management Investment, Open-End P6719 Holding Companies, NEC P6081 Foreign Banking and Branches and Agencies COMP Company News COMP Shareholding P6722 P6719 P6081 The Financial Times London Page 24 346
International Company News: Record quarter at Charles Schwab Publication 930416FT Processed by FT 930416 By PATRICK HARVERSON

CHARLES Schwab, the biggest discount brokerage firm in the US, yesterday announced record first-quarter profits of Dollars 35.4m, up from Dollars 29.7m a year earlier.

The company continues to benefit from a trend in which individual investors have moved money out of low-yielding assets and into the stock markets.

Net revenues rose 7 per cent in the quarter to Dollars 236.3m, the highest in the firm's history. Revenues from brokerage commissions climbed 5 per cent to Dollars 143.5m, and earnings from mutual fund service fees jumped 54 per cent to Dollars 20.6m as customer assets in the company's funds more than doubled to Dollars 15.3bn.

The total amount of assets in client accounts at Schwab soared 43 per cent to Dollars 73bn, with a record 183,000 new accounts opened during the three-month period.

The company's total expenses rose 5 per cent to Dollars 174.9m in line with the increase in customer activity.

Despite the record figures, shares in Schwab fell Dollars 3 1/8 to Dollars 35 1/8 by the close on the New York Stock Exchange as investors took profits in a wide range of brokerage stocks, which had risen sharply earlier in the week.

Bear Stearns, the Wall Street securities house, is opening an office in Shanghai, the financial capital of China, where it will advise local companies and investors in financings. Bear Stearns is the second US securities firm to open a Shanghai office.

Charles Schwab Bear Stearns Companies US United States of America P6211 Security Brokers and Dealers FIN Interim results RES Facilities P6211 The Financial Times London Page 23 280
International Company News: Posco may face anti-trust rules Publication 930416FT Processed by FT 930416 By JOHN BURTON SEOUL

POHANG Iron and Steel (Posco), South Korea's largest steel company, may become subject to anti-trust restrictions, a government official said yesterday.

Posco is exempt from the anti-trust rules because it is state-run. The government recently introduced regulations limiting cross-holdings among subsidiaries belonging to chaebol, the country's 30 biggest business groups.

It also imposed a ceiling on mutual loan guarantees among chaebol subsidiaries as part of its policy to limit the expansion of the business groups and reduce their dominance in the nation's economy.

Mr Han Lee-huan, chairman of the Fair Trade Commission, said there was little reason to exempt Posco from these restrictions since it was the fifth or sixth-largest Korean company in terms of assets, with 20 subsidiaries.

Posco, which enjoyed strong backing from previous governments, has come under official scrutiny recently after its founder, Mr Park Tae-joon, opposed the election of the country's new president, Mr Kim Young-sam.

The government recently launched a tax investigation of Posco for possible illegal use of company funds for political purposes. The tax audit, which has not been completed, has already forced the resignation of Mr Park and other senior executives from Posco.

Pohang Iron and Steel KR South Korea, Asia P3313 Electrometallurgical Products COMP Company News P3313 The Financial Times London Page 23 230
International Company News: CSX to take Dollars 93m charge Publication 930416FT Processed by FT 930416 By REUTER

CSX, the US transportation group, is to take a pre-tax charge of about Dollars 93m, equal to Dollars 61m after tax, to reflect restructuring costs incurred by its container-shipping subsidiary, Sea-Land Service, Reuter reports. The group said Sea-Land was taking 'decisive steps to lower its costs in the challenging Atlantic trade, while further streamlining operations and functions throughout the company.' The plans include the elimination of up to 600 jobs.

CSX Corp Sea-Land Service US United States of America P4011 Railroads, Line-Haul Operating P4499 Water Transportation Services, NEC PEOP Labour COMP Company News P4011 P4499 The Financial Times London Page 23 118
International Company News: American Barrick defies market trend Publication 930416FT Processed by FT 930416 By BERNARD SIMON TORONTO

AMERICAN Barrick, the North American gold producer, has again defied the lacklustre bullion market by doubling first-quarter earnings.

Net income jumped to USDollars 46.1m, or 16 cents a share, from Dollars 23.2m, or 8 cents, a year earlier. The per-share figures have been adjusted for a two-for-one share split last month.

Revenues rose to Dollars 144.1m from Dollars 81.5m.

The continued surge in profits was due largely to rising production at Barrick's flagship Goldstrike mine in Nevada. Goldstrike produced 307,800 ounces in the latest period, up from 151,800 ounces a year earlier. The company ascribed the advance to higher-grade sulphide ores.

The higher output and improved grade pushed down operating costs to Dollars 174 an ounce from Dollars 199 an ounce.

Barrick also continues to benefit from its active hedging programme. It realised an average gold price of Dollars 410 in the first quarter, slightly below the previous year but still above the average Comex price of Dollars 330 an ounce.

The company said it was on track to meet its 1993 production target of 1.5m ounces. Its five mines produced a total of 354,800 ounces in the quarter.

American Barrick CA Canada P1041 Gold Ores FIN Interim results P1041 The Financial Times London Page 23 224
International Company News: Upjohn ahead 9.8% despite flat US sales Publication 930416FT Processed by FT 930416 By KAREN ZAGOR NEW YORK

UPJOHN, the US pharma-ceuticals group, yesterday posted a 9.8 per cent improvement in underlying first-quarter earnings to Dollars 199.2m from Dollars 181.5m a year earlier. Operating revenues rose 7.2 per cent to Dollars 932.7m from Dollars 875.8m.

Net income, including the cumulative effect of accounting changes and other special items, was Dollars 144.6m, or 81 cents a primary share, against a net deficit of Dollars 85.3m, or 50 cents, a year ago.

Operating income rose to Dollars 184.1m from Dollars 177.6m, with a strong performance from agricultural operations offsetting a slight decline in health care.

Mr Ley Smith, chief operating officer said: 'We await the resolution of the debate over the reform of the US healthcare system, confident that the strength of our product pipeline and the flexibility of our organisation will result in a respectable ongoing performance.'

On Wednesday, the company said Mr Smith had assumed the responsibilities of chief executive because of the deteriorating health of Mr Theodore Cooper, Upjohn's chairman and chief executive.

Upjohn's R&D expenditure was steady at 16 per cent of sales, but the company trimmed marketing and administrative costs to 36 per cent from 37 per cent of sales.

Healthcare sales were flat in the US and up 1 per cent worldwide, with growth led by antibiotics.

However, several of Upjohn's traditional money-spinners had slower sales in the quarter.

Upjohn US United States of America P2834 Pharmaceutical Preparations FIN Interim results P2834 The Financial Times London Page 23 265
International Company News: Small earthquake in US financial services - FASB rule may not be as damaging as opponents claim Publication 930416FT Processed by FT 930416 By ALAN FRIEDMAN and NIKKI TAIT

RARELY has there been an accountancy rule as controversial in the US financial services industry as the decision this week by the Financial Accounting Standards Board to force the nation's banks, insurers and other financial institutions to value more of their bond holdings at current market prices.

The ruling, which takes effect with 1994 financial statements, triggered an outcry from banking and insurance industry executives, who claimed the rule would create volatility in earnings, policyholder surpluses and equity accounts.

The bankers' argument is that by forcing them to revalue their bond holdings each quarter, their financial results will become more confusing. Insurers maintain the new rule could force them to shorten the maturities of the Treasury bonds they hold.

But a closer examination of the rule shows it may not pose as much of a threat as its opponents claim.

Mr Richard Breeden, chairman of the Securities and Exchange Commission, has had nothing but praise for the new rule. He said it would clarify 'the rules of the road' and lessen the number of enforcement actions needed by the SEC.

Mr Edward Markey, the Democratic member of Congress from Massachusetts who chairs the House Finance Committee, argued that had the mark-to-market rule been in effect a decade ago it might have helped prevent some of the savings and loan scandals of the 1980s by giving investors a more accurate picture of bank values.

Banks have reason, at least at the political level, to be nervous about a rule that affects their Treasury bond holdings.

Since 1990, US banks have increased their holdings of Treasury paper substantially. Three years ago, such paper represented an average of 10 per cent of US bank assets; by the middle of last year, the proportion had jumped to 17 per cent, meaning that US banks held Dollars 281bn of Treasury paper.

Politicians have blamed bankers for causing the credit crunch by reducing business lending while building up Treasury holdings.

In fairness to the banks, the trend was exacerbated by new capital ratio guidelines that acted as a disincentive to lenders, who were already wary because of the commercial property loan crisis that faced US banks between 1990 and 1992.

Mr Tom Jones, senior Citicorp executive in charge of finance, said he could see no real impact on bank earnings. But he added that one result of the new rule might be to cause banks to reduce their overall bond holdings to avoid having to reclassify the values every three months. 'In a pragmatic sense I can't see why we should bother holding long-term securities at all,' said Mr Jones.

Another aspect of the rule - causing banks to classify bonds as available for sale rather than as long-term investments - could force some to move from longer to shorter term bond maturities.

Ms Kathleen Camilli, chief economist at Maria Fiorini Ramirez, the bond market analysts, noted that 'many banks have already been preparing for the eventuality of having to mark to market by moving to shorter term maturities. So there should not be an inordinate volatility as a result of this rule.'

Mr James McDermott, president of Keefe Bruyette, the bank analysts, said most analysts 'consider this a bogus issue because we already take into account the real market value of such holdings.'

Insurers' hostility towards greater current cost accounting of their investment portfolios is just as deep-rooted. Repeatedly, the insurance community has argued it was misleading - even dangerous - to value assets at market levels, but not liabilities.

Furthermore, it has protested that a considerable portion of insurers' investment portfolios were not readily marketable. 'Current' valuations, therefore, will be subjective.

However, the narrower FASB ruling has prompted critics of the move to highlight two specific practical implications.

The first is that the new FASB rule will add even more volatility to insurers' earnings. If there were to be a period of high inflation, and a sharp jump in interest rates, for example, it might even create 'technical' insolvencies, requiring regulators to intervene and take over these temporarily 'ailing' companies.

Second, some in the industry think that insurers will be increasingly anxious to invest in shorter-term securities to minimise their exposure to interest-rate-related volatility and improve liquidity.

The numbers involved are not small: life companies alone have assets of about Dollars 1,700bn. About 60 per cent of this - about Dollars 1,000bn - is currently invested in bonds, and perhaps three-quarters of that amount in longer-term bonds.

The counter-argument is that marking more of the bond portfolios to market will prove a valuable discipline, and the industry's reaction is unnecessarily alarmist.

'I think the response from the industry is way overdone,' comments Mr Ernest Jacobs, insurance analyst at Furman Selz. 'Some companies have effectively already adopted this treatment - and, frankly, I'd be hard-pressed to say that they've been scarred as a result.'

Arguments can clearly be made from both sides of the issue. What seems clear is that insurers have more at stake in overall money terms than do banks.

But few people, opponents of the rule included, would be so bold as to claim mark-to-market is likely to trigger a financial nightmare. The main impact looks like creating still more bureaucracy for accountants.

US United States of America P6081 Foreign Banking and Branches and Agencies P6211 Security Brokers and Dealers P6411 Insurance Agents, Brokers, and Service CMMT Comment & Analysis P6081 P6211 P6411 The Financial Times London Page 23 938
International Company News: Texas Instruments doubles net income Publication 930416FT Processed by FT 930416 By MARTIN DICKSON NEW YORK

TEXAS Instruments, the US semiconductor and electronics manufacturer, yesterday reported a more than doubling of first-quarter net income, due to strong growth in its semiconductor business.

The company reported net income of Dollars 85m, or 89 cents a share, before accounting changes, compared with Dollars 40m, or 35 cents, in the same period of last year. Revenues totalled Dollars 1.88bn, up from Dollars 1.69bn.

Profits from operations totalled Dollars 140m, compared with Dollars 63m. The company said this rise was 'driven by faster-than-market revenue growth in application-specific products' in the semiconductor business.

The company's defence electronics business had maintained stable margins at levels that met TI's goals for return on assets, the company added. Its information technology business operated at a small loss for the quarter.

Mr Jerry Junkins, chairman, said the company expected 25 per cent growth in US semiconductor demand, 28 per cent growth in Asian-Pacific, and 13 per cent growth in Europe.

The world semiconductor market could reach at least Dollars 70bn in 1993, up 17 per cent from 1992, and 'it could go higher based on the current strength of orders in the US'.

In view of this, the company planned capital spending of Dollars 650m in 1993, about Dollars 220m more than in 1992, with the emphasis on equipment to support the manufacture of differentiated products.

Mr Junkins said a key element of the company's semiconductor strategy was to increase the percentage of differentiated products in the portfolio, which would make its product mix better aligned with growth markets.

In the first quarter, the company's results included royalty revenues of Dollars 94m, including one-time royalties of Dollars 22m from previously announced agreements with personal computer manufacturers.

Texas Instruments US United States of America P3674 Semiconductors and Related Devices P3679 Electronic Components, NEC FIN Interim results P3674 P3679 The Financial Times London Page 23 327
International Company News: Gillette raises earnings before account changes Publication 930416FT Processed by FT 930416 By NIKKI TAIT NEW YORK

GILLETTE, the shaving and consumer products group, yesterday announced that after-tax profits rose to Dollars 142.3m in the first quarter of 1993 before accounting-related changes. This compared with Dollars 129.4m last year.

After a Dollars 138.6m charge, mainly stemming from the new accounting treatment of post-retirement benefits, net profits in the first quarter of 1993 fell to Dollars 3.7m. Earnings per share, ahead of accounting changes, increased by 10.3 per cent, at 64 cents. Gillette also announced a 16.7 per cent increase in the company's dividend.

Gillette's first-quarter sales showed little change year-on-year at Dollars 1.22bn. Operating profits were up by Dollars 262.4m, a 6 per cent rise.

The company said the first quarter reflected strong blade and razor sales in the US and in Latin America, but continued weakness in Europe and expenses related to the launch of its new Gillette Series male toiletries line.

Gillette US United States of America P3421 Cutlery P2844 Toilet Preparations FIN Interim results P3421 P2844 The Financial Times London Page 23 188
International Company News: Fortis dampens sale speculation Publication 930416FT Processed by FT 930416 By ANDREW HILL BRUSSELS

FORTIS, the Belgian-Dutch banking and insurance group, yesterday tried to dampen speculation about a likely reshuffle of its banking assets in Belgium.

The group, which announced a 4.4 per cent increase in net profits last year, to Ecu419m (Dollars 513m) from Ecu402m, wants to sell part of its 14.7 per cent holding in Generale de Banque, Belgium's largest bank.

But Mr Maurice Lippens, joint chairman, said yesterday that Fortis would take its time and did not want to 'destabilise' Generale de Banque. 'We believe the price (of the bank shares) today is a good price, but it still could be a little higher,' he said.

Fortis - which groups together the activities of AG of Belgium and Amev of the Netherlands - decided to reduce its stake in the bank after failing to agree terms on which it could sell its insurance products through Generale de Banque's branch network.

Societe Generale de Belgique, Belgium's largest holding company and a prominent shareholder in both AG and Generale de Banque, has expressed an interest in buying the shares.

Fortis is now considering whether to bid for a stake in CGER-ASLK, a Belgian state-owned savings bank, which is part of the government's privatisation programme.

Mr Lippens said Fortis was not selling the Generale de Banque stake to raise funds for a stake in CGER-ASLK, which he described as 'an outstanding example of 'bancassurance' in Belgium'.

Fortis Generale de Banque BE Belgium, EC NL Netherlands, EC P6081 Foreign Banking and Branches and Agencies P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance COMP Company News P6081 P6331 P6311 The Financial Times London Page 22 287
International Company News: KIO launches writs in UK in effort to recover Dollars 500m Publication 930416FT Processed by FT 930416 By PETER BRUCE and ROBERT PESTON MADRID, LONDON

THE KUWAIT Investment Office, the external investment arm of the Kuwaiti government, yesterday launched writs in the UK seeking recovery of more than Dollars 500m. The KIO alleges this sum was misappropriated from Grupo Torras, its Spanish business which is in receivership, and a London offshoot, Torras Hostench London.

It named 22 defendants in the proceedings, including some of the former managers of Grupo Torras and Torras Hostench London.

The actions are civil claims, based upon conspiracy to defraud, breach of directors' duties and breaches of trust.

The writs come after the failure of the new management of the KIO to convince courts in Spain that their complaints warranted investigation and criminal proceedings. Both efforts were dismissed earlier this year in Madrid for lack of evidence of criminal acts.

The writs issued in London yesterday draw in many more defendants than the Spanish proceedings.

The new KIO management has claimed that all Dollars 5bn invested by Kuwait in its Spanish industrial empire since 1986 has been lost due to gross mismanagement by former KIO executives and Spanish managers.

The writs name Sheikh Fahad al-Sabah, the former KIO chairman and a cousin of the emir of Kuwait, Mr Richard Robinson, a former head of the KIO's direct investments department, who left KIO in 1989, Mr Fouad Jaffar, the former KIO managing director, Mr Walid Makezou, a director of Torras Hostench London, and Mr Plinio Coll Gutierrez, Grupo Torras' former internal auditor.

In addition, they name Mr Javier de la Rosa, the financier who managed the KIO's Spanish investments until May last year, and a number of his associates, Mr Miguel Soler Sala, former finance director of Grupo Torras, Mr Jorge Nunez, former managing director of Grupo Torras, Mr Narciso de Mir, a director of Quail Espana, Mr De la Rosa's investment company, which had a management contract with Torras, and Mr Juan Jose Folchi and Mr Joan Pique, two lawyers close to Mr De la Rosa.

The writs also name Mr Michael Russell, a Jersey lawyer, and his firm Russell Limebeer, in addition to eight offshore companies apparently established in Jersey by the KIO and used in the financing of its Spanish investments. The companies named are Croesus International, Wardbase, Oakthorn, Westow, Anslow, Wantley Development, Coggia and Riquel.

If the writs are successful and lead to a trial in the UK, vast amounts of information on the once highly-secret management of Kuwait's oil fortunes is likely to be made public.

Kuwait Investment Office Torras Hostench Grupo Torras KW Kuwait, Middle East GB United Kingdom, EC P6719 Holding Companies, NEC P6726 Investment Offices, NEC COMP Company News PEOP Appointments P6719 P6726 The Financial Times London Page 22 473
International Company News: Lyonnaise to put FFr500m into Dumez Publication 930416FT Processed by FT 930416 By ALICE RAWSTHORN

LYONNAISE des Eaux-Dumez, the French industrial and utility group which this week announced a sharp fall in last year's profits, plans to invest FFr500m (Dollars 93m) in Dumez, its troubled construction subsidiary, through a capital increase.

The recapitalisation, which has been triggered by the need to repair Dumez' balance sheet after its heavy losses last year, is expected to take place within the next few weeks.

Lyonnaise said yesterday that the transaction would raise Dumez' shareholders' funds to between FFr1bn and FFr1.5bn.

Dumez, one of France's largest construction companies, was taken over three years ago by Lyonnaise, which has extensive interests in water distribution and property.

The European construction industry has since suffered severely in the economic slowdown. Lyonnaise' construction interests, of which Dumez forms the largest part, almost doubled its losses from FFr276m in 1991 to FFr461m on static sales of FFr45.9bn in 1992.

Lyonnaise des Eaux Dumez Dumez FR France, EC P6719 Holding Companies, NEC P4941 Water Supply P1521 Single-Family Housing Construction P1629 Heavy Construction, NEC FIN Share issues P6719 P4941 P1521 P1629 The Financial Times London Page 22 199
International Company News: Cockerill posts BFr1.4bn loss Publication 930416FT Processed by FT 930416 By ANDREW HILL

COCKERILL Sambre, the Belgian steelmaker, yesterday reported it had lost BFr1.4bn (Dollars 42m) in 1992, and said there would be little improvement during 1993. The group made a net profit of BFr3.6bn in 1991.

The group's consolidated operating profit was only BFr308m, against BFr4.41bn in 1991, on turnover down from BFr174bn to BFr168bn. Cockerill, like other European steelmakers, has been hit by the sharp economic downturn.

Cockerill Sambre BE Belgium, EC P3313 Electrometallurgical Products FIN Annual report P3313 The Financial Times London Page 22 100
International Company News: Ilva outlines restructuring plans Publication 930416FT Processed by FT 930416 By HAIG SIMONIAN MILAN

ILVA, the Italian steel group controlled by the IRI state holding company, yesterday outlined long-awaited restructuring plans to lower its debts and restore earnings.

The news came as Ilva announced a L2,309bn (Dollars 1.46bn) loss for 1992 on sales of L10,087bn, down from L10,923bn the previous year. In 1991, the group lost L504bn after minority interests and after setting aside L411bn in extraordinary gains in a restructuring fund. Net debts rose to L7,583bn last year.

Although financial details of the restructuring were not revealed, it is clear the proposals, to be submitted to the European Commission by the end of this month, could prompt a clash with officials and big European steelmakers.

Ilva crossed swords with the Commission over two capital increases, amounting to L650bn, authorised by IRI. The opening of a formal procedure by the Commission has been postponed pending details of the restructuring.

The plan envisages the creation of a company specialising in flat laminates. Although IRI will be sole shareholder, it will aim gradually to lower its stake below 50 per cent. Other Ilva operations, not deemed to be strategic but which cannot be sold immediately, will be handled directly by IRI.

Ilva IT Italy, EC P3313 Electrometallurgical Products FIN Annual report P3313 The Financial Times London Page 22 229
International Company News: Daf blames bankers for company's collapse Publication 930416FT Processed by FT 930416 By RONALD VAN DE KROL EINDHOVEN

DAF, the Dutch truckmaker which collapsed under the weight of its debt in February, yesterday said it had been pushed into receivership by a 'minority' of unnamed bankers who demanded up to 10 weeks to study the company's last-ditch restructuring plan drawn up in January.

Mr Cor Baan, chairman of the 'old' Daf as well as of the successor company which was formed last month, also said it was 'particularly unfortunate' that the company's bankers had demanded that Daf's attempt to form a strategic partnership with Mercedes-Benz of Germany in 1992 should include a form of equity participation.

Mr Baan, who was speaking at the company's extraordinary shareholders' meeting, said: 'This limited the freedom to develop alternative scenarios.'

The meeting, which lasted nearly six hours, was dominated by Mr Baan's explanation of the company's fortunes since its merger with Leyland, the UK commercial vehicle maker, in 1987.

It was also marked by angry recriminations from shareholders who have been told that they will received nothing for their shares, as well as by criticism from Daf employees who lost their jobs when the company was revived in slimmed-down form in March.

The new company, Daf Trucks, includes the core of the old company's operations in the Netherlands and Belgium but excludes the UK operations, Leyland Daf.

Daf released figures for 1992 showing that its net loss narrowed to Fl 257m (Dollars 143m) from Fl 395m in 1991, taking cumulative losses since 1990 to Fl 880m.

Mr Baan said the figures demonstrated that Daf was making progress in cutting costs when it ran into difficulties. Operating results swung into a profit of Fl 22m from a loss of Fl 98m the year before.

DAF NL Netherlands, EC P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories FIN Annual report P3713 P3714 The Financial Times London Page 22 328
International Company News: Dutch insurer lifted by banking side Publication 930416FT Processed by FT 930416 By RONALD VAN DE KROL

INTERNATIONALE Nederlanden Groep, the Dutch banking and insurance group, said net profit rose by 6.5 per cent to Fl 1.68bn (Dollars 933m) in 1992, as a strong increase in banking profits more than compensated for a slight decline in insurance results, writes Ronald van de Krol.

In banking, ING saw an 11.9 per cent rise in pre-tax profits to Fl 1.05bn and a strong increase in international lending, which was up more than 25 per cent over 1991.

ING's insurance operations faced depressed results in non-life and reinsurance activities, though life insurance developed favourably. Overall, pre-tax profits from insurance dropped by 1 per cent to Fl 1.14bn. In early 1993, the company said it was withdrawing from general reinsurance of large risks such as ships, aircraft and natural disasters.

The 1992 dividend is to be raised 3.6 per cent to Fl 3.20 per share, with a choice offered between payment in cash or preference shares.

International Nederlanden Groep NL Netherlands, EC P6081 Foreign Banking and Branches and Agencies P6331 Fire, Marine, and Casualty Insurance P6311 Life Insurance FIN Annual report P6081 P6331 P6311 The Financial Times London Page 22 209
International Company News: Bid talk boosts Petrofina shares Publication 930416FT Processed by FT 930416 By ANDREW HILL and ALICE RAWSTHORN BRUSSELS, PARIS

SHARES in Petrofina, the Belgian oil and gas company, rose 6 per cent yesterday morning in heavy trading on the Brussels bourse, amid speculation about a possible takeover bid for the group.

After reaching a peak of BFr9,750 at 2pm, the shares slipped back to close at BFr9,400, an increase of 2 per cent on the opening price of BFr9,200.

The group's share price has risen nearly 25 per since Petrofina announced poor 1992 results in February, and traders have speculated that Elf-Aquitaine, the French state-controlled oil company, may be a suitor for the company.

Elf said yesterday that it owned a small stake in Petrofina - less than the 5 per cent threshold for declaration - but said it had not bought stock in yesterday's heavy trading, which saw turnover reach nearly 74,000 shares.

The group said it held the shares as a financial rather than an industrial investment, and as a means of maintaining a presence in the north European market.

Petrofina is in the process of strengthening its defences against a takeover. However, the company says this is not a reaction to recent speculation, but the implementation of plans mapped out after Belgium reformed its stock exchange rules two years ago.

The group hopes to improve the transparency of its share register by making it obligatory for investors to declare stakes of over 3 per cent. It also wants to be able to buy in its own shares without obtaining shareholder permission in advance. Shareholders will vote on the proposals at an extraordinary meeting on April 27.

The share price of Petrofina, one of Belgium's largest quoted companies, suffered last year after doubts were raised about the group's investment in the Ekofisk oil field, and investors realised that the group's main divisions - refining and marketing, and petrochemicals - were both experiencing a downturn. The stock fell from a high of BFr11,750 in May to BFr7,010 in mid-October.

In practice, however, it would be impossible to bid for the company without the support of Belgium's two largest holding companies, Groupe Bruxelles Lambert, which controls some 28 per cent, and Societe Generale de Belgique which owns a further 11 per cent.

Consolidated profit at Petrofina dropped by 72 per cent last year, to BFr4.6bn (Dollars 195m).

Petrofina BE Belgium, EC P1311 Crude Petroleum and Natural Gas CMMT Comment & Analysis P1311 The Financial Times London Page 22 421
International Company News: Lanvin chairman replaced after concern over costs Publication 930416FT Processed by FT 930416 By ALICE RAWSTHORN

MR MICHEL Pietrini has been ousted as chairman of Lanvin, the French luxury goods group, just six months after the multi-million dollar relaunch of the company.

He has been replaced by Mr Lois Armand, 41, a senior executive at L'Oreal, the French cosmetics company. L'Oreal three years ago bought Lanvin for over FFr400m (Dollars 74.38m at current exchange rates) in a joint venture with Orcofi, the investment consortium founded by Mr Henry Recamier, former head of the Louis Vuitton luggage business following his defeat in the battle for control of the LVMH group.

L'Oreal and Orcofi are believed to have become concerned both about the cost of the relaunch and Lanvin's mounting losses. The luxury goods market has suffered severely in the world recession. Lanvin is believed to have lost FFr120m in each of 1991 and 1992.

Lanvin FR France, EC P2844 Toilet Preparations PEOP People P2844 The Financial Times London Page 22 172
UK Company News: Radamec recovery continues Publication 930416FT Processed by FT 930416

Radamec Group, which is engaged in electronics and precision mechanical engineering, continued its recovery in the year to December 31 1992, and increased its pre-tax profit from Pounds 345,000 to Pounds 832,000.

It also reduced gearing from 39 per cent to 20 per cent and, at the year-end, had turned an overdraft of Pounds 456,000 into cash of Pounds 460,000.

The profit was achieved on a turnover ahead only 16 per cent to Pounds 11.9m (Pounds 10.3m) and took account of reorganisation costs of Pounds 111,000.

Interest charges were reduced from Pounds 300,000 to Pounds 244,000.

Earnings per share surged to 4.6p (1.9p) and the dividend for the year is lifted from 0.5p to 1.5p with a proposed final of 1p.

Radamec Group GB United Kingdom, EC P3669 Communications Equipment, NEC FIN Annual report P3669 The Financial Times London Page 21 153
UK Company News: US withdrawal costs leave Alex Russell in red Publication 930416FT Processed by FT 930416 By NATHALIE LEMOINE

The cost of its final withdrawal from US coal production put Alexander Russell, the Scottish quarrying, concrete and coal group, into a Pounds 1.93m pre-tax loss in 1992, against a Pounds 1.66m profit previously.

A one-off charge of Pounds 2.56m related to closure of the coal operation in Southern Illinois and any foreseeable costs linked to the withdrawal.

The final dividend was passed, restricting the total to 1p (2.15p).

Turnover fell to Pounds 36.5m (Pounds 37.6m) including Pounds 802,000 (Pounds 1.49m) from discontinued operations.

Losses per share were 11.86p basic (2.59p earnings) and 8.26p (3.32p earnings) diluted.

Alexander Russell GB United Kingdom, EC P1222 Bituminous Coal-Underground P1442 Construction Sand and Gravel FIN Annual report P1222 P1442 The Financial Times London Page 21 142
UK Company News: Risky contract helps Cradley reach Pounds 1.14m Publication 930416FT Processed by FT 930416

Interim pre-tax profits of Cradley Group, the lithographic printer, surged from Pounds 487,000 to Pounds 1.14m, but the result benefited from a large one-off contract in a 'disappointing half year'.

Mr Donald Jordan, chairman, said the period to December 31 saw a shrinking market for print, with profit margins virtually zero.

He said the one-off contract for Europe resulted in a considerable over-recovery of costs. In terms of production schedule it was a high risk contract, but the very tight schedule had been met.

The magazine printing business, he said, returned a loss of some Pounds 400,000 after tax.

Sales increased to Pounds 17.2m (Pounds 13.7m). Earnings per share were 2.3p (1p).

Cradley Group Holdings GB United Kingdom, EC P2752 Commercial Printing, Lithographic FIN Annual report P2752 The Financial Times London Page 21 149
UK Company News: A scheme designed for better times - Queens Moat's difficulties relate in part to its incentives plan Publication 930416FT Processed by FT 930416 By ANGUS FOSTER

QUEENS Moat Houses' share suspension shocked the City last month as details emerged of the company's financial difficulties, which were partly caused by a controversial incentive scheme. But according to some managers within the scheme, problems were apparent nine months ago.

Several managers said their annual renegotiations of incentive fees suddenly became tense from last summer. The company started pushing for higher fees even though hotel revenues were falling. In some cases, Queens Moat tried to impose shorter contracts which would have squeezed hotel profitability during the quieter winter months.

One manager, who said he was treated 'bloody well' during his 10 years with the company, was shocked when Queens Moat turned nasty after negotiations on fees broke down.

'They knew I was away, but they phoned my wife at home late on Sunday to say the hotel was coming out of the incentive scheme the next morning. It was not nice, especially since they were usually quite friendly,' he said.

In retrospect, managers like these were shocked but not surprised when Queens Moat's shares were suspended last month as it emerged that the company was expected to announce a loss instead of a profit for the year to December 31.

According to one manager, the incentive schemes were 'fair but unscientific. No-one really knew the true story of the profits so everything was done on trust. Queens Moat couldn't have known what was going on in many cases'.

The incentive scheme, which is now being partly blamed for Queens Moat's financial troubles, had been running for nearly 20 years and is remarkably simple. At its peak, the scheme covered 65 of the company's 103 British hotels, although about half have since come out of the scheme and returned to direct management.

Each manager agrees in advance their incentive fee, often equal to about a quarter of annual turnover, and signs a promissory note guaranteeing to pay Queens Moat. The fee is paid in 13 four-weekly instalments. At the end of the year, the manager keeps any money outstanding as profit or makes up any shortfall.

The scheme was designed to give managers greater autonomy to improve their profits, as well as reduce central management overheads.

But the lax financial controls upon which the scheme thrived were to prove its downfall as recession mounted. Queens Moat appears to have persuaded its auditors, Bird Luckin, that promissory notes from managers allowed the company to book profits early. For example, if the company signed an incentive contract for Pounds 1m in November, the full benefit of that guaranteed payment was taken in that year's accounts.

'They appear to have been using next year's profits to meet this year's forecasts,' according to one manager. In order for growth to be maintained, the company needed to keep increasing incentive fees, or bring in more incentive managers.

But as the effects of recession escalated following the Gulf War, more and more managers found they could not meet Queens Moat's fees. 'I just knew I could not achieve the levels they were asking,' said another manager, who came out of the scheme last year.

By some estimates, Queens Moat may have to make provisions of up to Pounds 20m to cover incentive fees which have been booked as profits but not been paid. One manager, who has since left the company, said he knew of six other managers who owed Queens Moat fees from two years ago yet are continuing to manage the company's hotels.

Since Queens Moat's suspension, a veil of silence has fallen over the company pending a report from accountants Grant Thornton, expected next month. Mr John Bairstow, the company's founder and chairman, has agreed to a request from Queens Moat's banks not to talk publicly about the situation.

A meeting was held last week for the company's hotel managers at the Elstree Moat House. It was led by Mr Gerald Bell, group operations director, who told managers to deny that any meeting took place if asked. Of about 15 managers spoken to by the Financial Times, none was prepared to be identified.

Despite uncertainty about Queens Moat's financial position, most managers report that trading and morale have not suffered unduly. A few managers cancelled holidays because of the crisis, some said suppliers had called to check all was well and staff have been reassured about the viability of individual hotels.

Even managers who have since left retain a sense of loyalty to the company and to Mr Bairstow. 'I made more money and ran a better hotel because of those incentives. They should have realised things were wrong earlier, but they were super people to work with,' one former manager said.

'Quite a few hotels are still trading well,' another manager said. 'We had a successful Easter and May is looking busy. It was Queens Moat's borrowings and financial side which went wrong, not the hotels,' he said.

Queens Moat Houses GB United Kingdom, EC P7011 Hotels and Motels CMMT Comment & Analysis P7011 The Financial Times London Page 21 867
UK Company News: Acquisitions help Meggitt rise to Pounds 23m Publication 930416FT Processed by FT 930416 By RICHARD GOURLAY

MEGGITT, the Dorset based engineering company, yesterday reported a 4 per cent increase in operating profits, helped by acquisitions, but a fall in earnings per share.

Operating profits rose from Pounds 24.4m to Pounds 25.3m, including losses of Pounds 493,000 from discontinued operations. Sales improved by 8.5 per cent, from Pounds 302m to Pounds 328m.

At the pre-tax level, profits rose from Pounds 18.7m to Pounds 23m, helped by a Pounds 3.5m swing from an interest charge to a receipt of Pounds 929,000 from the proceeds of the 1991 rights issue. This was struck after taking a higher loss on disposal of discontinued operations.

Earnings per share fell from 6.9p to 6.6p, based on the new FRS 3 accounting standards. Stripping out the loss on discontinued businesses, earnings fell from 8.4p to 8.1p.

The board is proposing a 2.53p final dividend, giving a total of 3.78p, a 5 per cent increase for the year.

Mr Ken Coates, executive chairman, said he was very confident about the future and that the company had had a good first quarter. 'We have had, and still have, a difficult environment but we have performed better than our peers,' he said.

In aerospace, margins remained about the same and profits would have been almost unchanged before acquisitions.

The electronics and controls divisions reported profits broadly maintained. Profits from the energy division halved to Pounds 1.2m on sales of Pounds 45m.

The group finished the year with gearing of 14 per cent.

COMMENT

Meggitt has been viewed warily by the market because of its failed 1990 bid for USH, its sometimes opaque acquisition policy and the 1991 rights issue. With Tweedie focusing on the provisioning habits of acquisitive companies, the market might be expected to remain cautious. But Meggitt now looks set for a period of consolidating what it has acquired and is already showing quite considerable cash generating powers. The oil business, hit by a lower oil price, and aerospace, which will be affected in the second half by cuts at Boeing, might restrict any advances from here. But there seems little downside at current levels. The company is forecast to make profits of at least Pounds 30m this year on a normalised basis, helped by currency and the inclusion of a full year's contribution from Endevco. This gives earnings of 8.8p and a prospective multiple of an undemanding 12.

Meggitt GB United Kingdom, EC P3559 Special Industry Machinery, NEC P3625 Relays and Industrial Controls FIN Annual report CMMT Comment & Analysis P3559 P3625 The Financial Times London Page 21 444
UK Company News: Alex Russell Pounds 2m in red after US withdrawal costs Publication 930416FT Processed by FT 930416 By NATHALIE LEMOINE

THE COST of its final withdrawal from US coal production put Alexander Russell, the Scottish quarrying, concrete and coal group, into a Pounds 1.93m pre-tax loss in 1992, against a Pounds 1.66m profit previously.

A one-off charge of Pounds 2.56m related to closure of the coal operation in Southern Illinois and any foreseeable costs linked to the withdrawal.

The final dividend was passed, restricting the total to 1p (2.15p). The board hopes to return to normal dividends this year.

Trading profit was reduced from Pounds 1.72m to Pounds 625,000.

Turnover fell to Pounds 36.5m (Pounds 37.6m) including Pounds 802,000 (Pounds 1.49m) from discontinued operations.

'It is the second loss in our history, which, as with the first in 1925, arose through terrible coal trading conditions,' Mr Russell Nicolson, chairman, said.

The quarrying side recorded a 41 per cent decline in profit to Pounds 1.6m (Pounds 2.7m), and in concrete, profits fell to Pounds 513,000 (Pounds 805,000) . However UK coal operations showed a substantial increase to Pounds 548,000.

There were signs of recovery in the company's markets.

'With the closure of our loss-making US coal operations, an overall reduction of Pounds 500,000 in labour costs through early retirement and 50 redundancies, and the effects of reduced interest rates, we are confident of a return to profit this year.'

Losses per share were 11.86p basic (2.59p earnings) and 8.26p (3.32p earnings) fully diluted.

Alexander Russell GB United Kingdom, EC P1222 Bituminous Coal-Underground P1442 Construction Sand and Gravel FIN Annual report P1222 P1442 The Financial Times London Page 21 279
UK Company News: Old masters sales boost Parambe Publication 930416FT Processed by FT 930416

Parambe, which deals in investments and works of art, lifted its pre-tax profit from Pounds 66,000 to Pounds 114,000 in 1992. The growth in asset value - the company's principal objective - was 6.3 per cent to 60.8p per share.

Dealing income from works of art doubled to Pounds 170,000 in a sluggish market. That was largely the result of sales of old master drawings to a US museum, which was unlikely to be repeated in 1993.

However, there were further write-downs of investments in art dealers and a sharp reduction in investment income from that source.

Earnings per share rose to 1.27p (0.79p) and the dividend is again 1.1p with a final of 0.55p.

Parambe GB United Kingdom, EC P6159 Miscellaneous Business Credit Institutions P5199 Nondurable Goods, NEC FIN Annual report P6159 P5199 The Financial Times London Page 21 154
UK Company News: Brooks Service falls Pounds 392,000 into loss Publication 930416FT Processed by FT 930416

LOSSES CONTINUED into the second half at Brooks Service Group, and for the full 1992 year the pre-tax figure was Pounds 392,000, against profits of Pounds 587,000. As forecast, there is no dividend.

Last year the group, which provides textile care and rental services, paid a total of 4.05p from earnings per share of 3.25p. Losses this time came to 1.76p.

Mr Simon Brooks, chairman, said the group faced unprecedented trading conditions and the upturn in sales usually experienced in the second half failed to materialise. The year's turnover was Pounds 24.2m (Pounds 23.8m) but operating profits slumped to Pounds 117,000 (Pounds 1.11m).

He added that there had been tentative signs since the year-end that the group's markets were improving.

The drop in operating profit was exacerbated by restructuring costs of Pounds 208,000 (Pounds 151,000) and higher interest charges of Pounds 532,000 (Pounds 490,000).

The figures have been produced under FRS 3. Last year's reported pre-tax profit was Pounds 645,000.

Brooks Service Group GB United Kingdom, EC P7211 Power Laundries, Family and Commercial P7213 Linen Supply FIN Annual report P7211 P7213 The Financial Times London Page 21 203
UK Company News: Midland chief sold shares Publication 930416FT Processed by FT 930416 By ROBERT PESTON

MR BRIAN Pearse, the chief executive of HSBC's Midland Bank subsidiary, sold most of his Midland Bank shares last year for an estimated Pounds 1.3m, rather than accept the offer of new HSBC securities, it emerged yesterday, writes Robert Peston.

Midland was acquired last year by HSBC. The annual report of HSBC, which also owns Hongkong and Shanghai Bank and Marine Midland in the US, discloses that in August 1992, Mr Pearse exercised options granted in 1991 to acquire 300,000 Midland Bank ordinary shares.

Of these, he sold 290,000 shares and transferred the balance to a member of his family, who accepted the HSBC takeover offer.

The annual report also discloses that Sir William Purves, HSBC's chairman, was paid HKDollars 10.6m (Pounds 883,000) last year, up 14 per cent on the previous year.

Midland Bank GB United Kingdom, EC P6021 National Commercial Banks COMP Shareholding P6021 The Financial Times London Page 20 168
UK Company News: Kingspan tumbles to IPounds 1.17m Publication 930416FT Processed by FT 930416

Kingspan Group, the Co Cavan-based building components manufacturer, saw pre-tax profits drop from IPounds 2.56m to IPounds 1.17m over the year to December 31.

Turnover was IPounds 53.1m (IPounds 56m). Earnings per share fell from 7.5p to 3p, but the final dividend is held at 1.2p for a maintained total of 2.2p.

Kingspan Group IE Ireland, EC P1541 Industrial Buildings and Warehouses FIN Annual report P1541 The Financial Times London Page 20 86
UK Company News: Tudor showing improving trend Publication 930416FT Processed by FT 930416

Tudor, the USM-quoted homewares company, made a small profit in the second half of 1992 cutting the year's loss to Pounds 104,000 after exceptional charges of Pounds 74,000. In the previous year there was a profit of Pounds 23,000. Turnover amounted to Pounds 16.7m (Pounds 12.5m).

In view of the prospects a single dividend of 0.25p is being paid, against an interim of 0.5p in 1991. Cost of the payment is virtually unchanged following the acquisition of MGB Tiles which represented 48 per cent of the enlarged capital. Losses per share were 1.16p (earnings 0.72p).

Tudor GB United Kingdom, EC P5712 Furniture Stores FIN Annual report P5712 The Financial Times London Page 20 126
UK Company News: Aspen sells its 13% stake in GWR Publication 930416FT Processed by FT 930416

Aspen Communications has sold its 13 per cent stake in GWR Group for about Pounds 1.9m. The holding, of 386,838 ordinary 20p shares, has been placed with a number of institutions.

The proceeds, of about Pounds 730,000, will be used for expansion of Aspen's core printing, marketing and media activities, and will be shown as an exceptional credit in Aspen's 1993 results.

Aspen Communications GWR Group GB United Kingdom, EC P3663 Radio and TV Communications Equipment P4832 Radio Broadcasting Stations COMP Disposals COMP Shareholding P3663 P4832 The Financial Times London Page 20 108
UK Company News: Ashley to sell Spanish food arm Publication 930416FT Processed by FT 930416

Ashley Group is selling Digsa, the Spanish food retailing operation, to Parafax, for a deferred cash consideration of Pounds 20m and the assumption of net debt of Pounds 33m.

Parafax is a Hong Kong company formed for the purpose of acquiring retail companies by a consortium of investors, among whom are Sir Ralph Halpern and Sir Michael Sandberg.

Ashley does not expect to pay a final dividend. It said the level of activity across the group's non-food businesses remained encouraging.

Ashley Group Digsa Parafax GB United Kingdom, EC ES Spain, EC HK Hong Kong, Asia P6719 Holding Companies, NEC P2435 Hardwood Veneer and Plywood P5411 Grocery Stores COMP Disposals COMP Mergers & acquisitions P6719 P2435 P5411 The Financial Times London Page 20 137
UK Company News: BP chief defends predecessor's pay-off Publication 930416FT Processed by FT 930416

Lord Ashburton, chairman of BP, has defended the Pounds 1.5m package of compensation and pension payments made to Mr Robert Horton, his predecessor who was ousted in a boardroom coup last summer.

He told the annual meeting that 'the figures are in absolute terms large, and perhaps larger than are easily understood'. But, he said, the Pounds 780,000 paid in compensation was what Mr Horton could have expected to receive in court proceedings if the company had not agreed to pay.

Some Pounds 723,000 was also made to the pension fund to ensure his pension rights were fully funded.

British Petroleum GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining COMP Company News P1311 P2911 The Financial Times London Page 20 139
UK Company News: Siebe in Pounds 25m expansion Publication 930416FT Processed by FT 930416

SIEBE, the UK-based engineering company, is paying Pounds 25m for two European manufacturers of controls equipment. Their combined total assets were Pounds 26m.

The companies acquired are Eberle, an electronic controls company based in Germany, and Schmidt Amaturen, an Austrian manufacturer and distributor of actuators and control valves.

Eberle has annual sales of Pounds 56m while Schmidt recorded turnover of Pounds 12m.

Siebe Eberle Schmidt Amaturen GB United Kingdom, EC DE Germany, EC AT Austria, West Europe P3494 Valves and Pipe Fittings, NEC P3569 General Industrial Machinery, NEC COMP Mergers & acquisitions P3494 P3569 The Financial Times London Page 20 114
UK Company News: Blue Circle Industries slips 4.9% to Pounds 93.8m Publication 930416FT Processed by FT 930416 By PAUL TAYLOR

BLUE CIRCLE Industries, the cement, central heating and bathroom products group, yesterday reported a 4.9 per cent decline in full year pre-tax profit and a sharp drop in earnings because of higher tax charges.

Mr Keith Orrell-Jones, group managing director, said the results showed BCI's 'resilience during adverse trading conditions,' but added 'we as a board are not satisfied with them.'

Pre-tax profits at the group, which has adopted the new FRS 3 accounting standard, fell from a restated Pounds 98.6m to Pounds 93.8m on turnover which grew by 19.2 per cent to Pounds 1.37bn (Pounds 1.15bn). The 1991 pre-tax figure was previously reported as Pounds 124.2m.

After a substantially higher tax charge of Pounds 53.1m (Pounds 35.9m) earnings fell to 4p (8.6p). Nevertheless, as promised at the time of the group's Pounds 241.6m rights issue last year, the final dividend is being maintaining at 7.5p, giving an unchanged total of 11.25p.

Operating profits, before exceptional costs of Pounds 11.8m (Pounds 42.1m) and net interest of Pounds 25.8m (Pounds 22.8m), fell to Pounds 131.4m (Pounds 163.5m).

Profits from the group's cement, concrete and aggregates businesses slipped by 8 per cent to Pounds 98.1m (Pounds 106.5m) on turnover of Pounds 611.2m (Pounds 619.8m). Although the recession in the UK hit demand and profits and the group's South African operations were sold in March, other overseas operations, particularly those in the US and Chile, increased their profit contributions significantly.

Operating profits from the fast growing home products division which had a turnover of Pounds 657.8m (Pounds 422.2m) increased to Pounds 60.2m (Pounds 51.1m) including a Pounds 12.2m second-half contribution from the recently acquired Celsius French and German central heating businesses.

The property division made an operating loss of Pounds 13.6m (Pounds 11.6m profits) largely as a result of a write-down of its 50 per cent investment in the Chafford Hundred new town project in Essex.

The Pounds 11.8m exceptional charge comprised Pounds 62.1m in reorganisation costs in the UK cement business and a Pounds 9.4m property write-down, partly offset by Pounds 59.7m in profits and provision release from the sale of businesses in South Africa and the UK.

The group's net debt was largely unchanged at Pounds 404.5m (Pounds 396.3m), representing gearing of 40.1 per cent.

See Lex

Blue Circle Industries GB United Kingdom, EC P3272 Concrete Products, NEC P3273 Ready-Mixed Concrete FIN Annual report P3272 P3273 The Financial Times London Page 20 421
UK Company News: GPA agrees leases for 203 aircraft Publication 930416FT Processed by FT 930416 By ROLAND RUDD

GPA Group, the aircraft leasing company, yesterday said that in the 12 months to March 31 it had agreed leases for 203 aircraft, up from 161 the previous year.

Twenty aircraft had been returned because the lessee had defaulted or the lease had expired.

Mr Colm Barrington, GPA's commercial director, said there had been fewer repossessions of aircraft than in the previous year.

Last year, to help lessees in difficulty, GPA rescheduled some lease rentals for periods of four to 24 months.

For the three months to June 30 1992 - the latest publicly available figures - profits from aircraft leasing fell to Dollars 11m, (Pounds 7.2m) against Dollars 24m.

The group said that 58 new aircraft were purchased for Dollars 1.5bn and at March 31 it had 483 aircraft in its portfolio.

GPA Group IE Ireland, EC P7359 Equipment Rental and Leasing, NEC COMP Company News P7359 The Financial Times London Page 20 172
UK Company News: German side steadies RMC at Pounds 167m Publication 930416FT Processed by FT 930416 By MAGGIE URRY

STRONG GROWTH in profits from Germany almost offset reductions in RMC Group's other locations to leave pre-tax profits for 1992 at Pounds 166.6m, barely changed from the previous Pounds 167.4m.

The ready-mixed concrete group has benefited from high levels of house building, reflecting immigration to western Germany and the improvement in infrastructure in eastern Germany.

RMC also announced that Mr Jim Owen, group managing director, will become executive chairman on May 1. Mr John Camden, the current chairman who has been with the group since 1952, is retiring because of ill health but will become president. Mr Peter Young, deputy managing director, will step up to Mr Owen's job.

Mr Owen said the high level of demand for housing in Germany would continue to support the operations there, although margins of 9.7 per cent were already high. Possibilities in eastern Germany were 'very exciting indeed'.

Operating profits from Germany rose 36 per cent to Pounds 123.2m, making up two-thirds of the group total of Pounds 186.9m, down 4 per cent from Pounds 194.6m in 1991. The rise in profits from associates, which includes RMC's Berlin operation, from Pounds 6.7m to Pounds 14.1m, also reflected strong demand in Germany.

Figures also gained from translation at lower sterling rates. RMC uses year-end exchange rates, and the effect of the pound's fall was to add 4p to earnings per share of 31.2p (36p), down 13 per cent. Earnings also suffered through a rise in minority interests to Pounds 46.1m (Pounds 38.5m), again reflecting the strength of German profits.

The three other geographical areas suffered falls. In the UK operating profits fell 71 per cent to Pounds 10.2m (Pounds 34.9m) although turnover was only 5 per cent lower at Pounds 859.6m. In 1989 UK profits were Pounds 132m.

Mr John Cooper, head of the UK concrete operations, said since the market peak RMC had taken 352 truck mixers off the road, cutting capacity by about 30 per cent.

Operating profits from other EC countries dropped 28 per cent to Pounds 39.7m (Pounds 55.1m). The completion of large projects in Spain had cut volumes by 14-15 per cent and a further fall was expected in 1993. Demand in France had weakened too.

Profits from outside the EC fell to Pounds 13.8m (Pounds 14.2m).

Mr Derek Jenkins, finance director, said that gearing at 31 per cent (35 per cent) was not a problem. Interest charges of Pounds 34.4m (Pounds 33.9m) were covered 5.8 times by operating profits. He said that capital expenditure had been cut to Pounds 114.2m from Pounds 248m in 1991 and Pounds 311m in 1990. In 1993 it will be about Pounds 125m. The depreciation charge was Pounds 131.7m (Pounds 117.5m).

An unchanged final dividend of 13.4p is proposed to give a maintained total of 20p.

See Lex

RMC Group GB United Kingdom, EC P3272 Concrete Products, NEC P3273 Ready-Mixed Concrete FIN Annual report PEOP People P3272 P3273 The Financial Times London Page 20 510
UK Company News: Accounting change at TI Publication 930416FT Processed by FT 930416 By RICHARD GOURLAY

SHARES in TI fell 2p to 301p yesterday as the market pondered the change in the specialist engineer's accounting policies which its annual report revealed this week.

Analysts said there was also concern about the possible affect on acquisitive companies from the Accounting Standards Board's proposed changes to fair value provisioning.

TI said it had capitalised Pounds 7.7m of research and development costs in its Dowty arm. It said the policy of writing R&D off through the P&L account remained unchanged elsewhere in the group. Dowty was, however, developing new landing gear for the Airbus A330 and A340. The capitalised R&D was in the accounts within work in progress.

TI Group GB United Kingdom, EC P3317 Steel Pipe and Tubes P3751 Motorcycles, Bicycles, and Parts P3714 Motor Vehicle Parts and Accessories CMMT Comment & Analysis P3317 P3751 P3714 The Financial Times London Page 20 160
UK Company News: Glaxo to pay SmithKline Beecham for use of drug Publication 930416FT Processed by FT 930416 By PAUL ABRAHAMS

GLAXO and SmithKline Beecham have settled a patents dispute over Zofran, one of Glaxo's fastest growing drugs. Glaxo has agreed to pay a royalty to SmithKline Beecham for the use of Zofran in its treatments for all forms of nausea and vomiting.

Neither company would give the size of the royalty, but both said it was likely to be a single percentage figure of sales which were Pounds 163m for the last six months of 1992.

'This is a very good deal for SmithKline Beecham. The royalties will fall straight through to the bottom line,' said Mr Jonathan de Pass, analyst at BZW.

SmithKline Beecham has recently been issued European patents for the use of a class of drugs called 5HT3-antagonists - of which Zofran is a member - for the treatment of nausea and vomiting associated with cancer therapy.

The agreement is particularly good for SmithKline Beecham because it covers all types of nausea, including post-operative nausea. Glaxo's patents for Zofran are not affected.

Meanwhile, Glaxo yesterday sought to play down the significance of a trial suggesting that two cheap generic drugs in combination were more effective than Zofran.

The trial, published in the New England Journal of Medicine, suggested patients on the two drugs, metoclopramide and dexamethasone, had significantly less nausea and vomiting during the first 24 hours than those on Zofran.

Glaxo said the study was in patients receiving weak chemotherapy and up to 50 per cent of patients would not experience nausea anyway.

Mr James Culverwell, analyst at Hoare Govett, said all customers were looking at the cost-effectiveness of drugs. The trial suggested the two drugs might be used in preference to Zofran where weak chemotherapy was involved. Glaxo's shares closed 8p higher at 562p.

Glaxo Holdings SmithKline Beecham GB United Kingdom, EC US United States of America P2834 Pharmaceutical Preparations TECH Patents & Licences CMMT Comment & Analysis P2834 The Financial Times London Page 20 341
UK Company News: Campari just passes Pounds 1m mark Publication 930416FT Processed by FT 930416 By CATHERINE MILTON

CAMPARI International, the sporting leisure wear group, saw its pre-tax profits drop to Pounds 1.11m in 1992, compared with Pounds 5.27m in the previous 13 months.

A final dividend of 8.75p maintains the total at 12p, although earnings per share slumped from 39.24p to 0.79p.

The group wrote down stock worth Pounds 2m and in future plans to write down stock by 25 per cent per season. It was hit by the devaluation of sterling.

Analysts said the write down was a response to the trend for retailers to operate just-in-time-stocking systems as well as the drop in inflation.

One said: 'There was a time when companies could simply carry stock over, and perhaps even get away with selling it at a higher price the following year.

'With retailers turning to demand-driven, just-in-time stocking systems and inflation more stable, that just isn't on any more,' he said.

Mr Kit Maunsell, chief executive at Campari, said: 'We are taking a different view of the spread at which we sell stock.'

Turnover rose to Pounds 54.2m (Pounds 53.7m). However, 71 per cent of sales were made overseas, and in terms of local currencies turnover was about 4 per cent below 1991.

The net interest charge dropped to Pounds 205,000 (Pounds 424,000). The company had Pounds 4m cash, but a Pounds 1m overdraft on a UK subsidiary.

Campari International GB United Kingdom, EC P3949 Sporting and Athletic Goods, NEC FIN Annual report CMMT Comment & Analysis P3949 The Financial Times London Page 20 268
UK Company News: Laura Ashley back with Pounds 1.8m but passes dividend Publication 930416FT Processed by FT 930416 By NEIL BUCKLEY

LAURA ASHLEY, the international clothing and home furnishings group, yesterday reported its first pre-tax profit since 1989, in spite of a management shake-up which resulted in a large operating loss in its US division.

The group, which sees itself as a 'lifestyle brand' rather than a retailer, made a profit of Pounds 1.8m before tax for the year to January 30, compared with a Pounds 9.1m loss after restructuring costs last time.

Earnings were 0.34p (3.86p losses) but the company once again decided that it was 'prudent' to pass its dividend.

'Whilst it's only a modest profit, it's obviously a milestone,' said Mr Jim Maxmin, the American who became chief executive in 1991.

But Mr Maxmin said Laura Ashley's performance did not reflect a general pick-up in high street sales, where he claimed the improvement experienced by some retailers was due to heavy discounting.

Turnover fell to Pounds 248m (Pounds 263m), but Mr Maxmin said this reflected the group's concentration on building gross margins rather than turnover.

A reorganisation of its US division, including cutting buying to reduce a large stock surplus, led to the virtual collapse of its haphazard distribution system, and the division plunged to a Pounds 6.9m operating loss.

But Mr Maxmin insisted yesterday that the problems in the US were operational, rather than problems with the Laura Ashley brand. He was determined to bring them under control by the end of the year, using the same 'Simplify, Focus, Act' formula employed in the UK and Europe.

The US loss contributed to a Pounds 2m reduction in group operating profits to Pounds 1.1m.

Profits from associated businesses also declined from Pounds 1.9m to Pounds 1.5m, reflecting the high costs of opening shops in Asia, which are carried by Laura Ashley's Japanese joint venture. But interest payments fell from Pounds 2.4m to Pounds 0.8m.

Operating profits in the UK retail business improved from Pounds 1.4m to Pounds 5.6m. A strong turnround in the second half saw garment sales increase 3 per cent, following a 14 per cent fall in the first half. Sales in the current year were running some 30 per cent ahead of last year, Mr Maxmin said.

Furnishings sales grew in the second half for the first time since 1988, and were currently 9 per cent ahead.

In Europe, like-for-like sales - which exclude those in newly-opened stores - improved 12 per cent for garments and 4 per cent for furnishings.

See Lex

Laura Ashley Holdings GB United Kingdom, EC P5621 Women's Clothing Stores P5714 Drapery and Upholstery Stores FIN Annual report P5621 P5714 The Financial Times London Page 20 456
Debt-laden USAir asks for cash with Dollars 260m new shares offer Publication 930416FT Processed by FT 930416 By NIKKI TAIT NEW YORK

USAIR, the US airline in which British Airways invested Dollars 300m for a potential 19.9 per cent voting interest earlier this year, is continuing efforts to improve its debt-laden balance sheet with an offering of up to Dollars 260m-worth of ordinary shares.

The company said yesterday it plans to sell 10m new shares to investors - or up to 11.5m, if underwriters' overallotment options are added in. Hampered by its poor financial condition and uncertainty over its future, USAir has not tapped the equity market since 1987 - in contrast to larger US competitors like American, United and Delta Air Lines - although it has sold debt securities.

USAir filed with the Securities and Exchange Commission yesterday. The document suggested the maximum offering price for the new shares would be Dollars 22.50. At this price and assuming the full 11.5m shares are taken up, the issue could raise just under Dollars 260m.

Yesterday, USAir shares - which were suspended briefly on the New York Stock Exchange - closed down Dollars 1 at Dollars 21 3/4 .

USAir's filing was vague about the reasons for the offering, saying only the proceeds would be used for 'general corporate purposes'. But most of the Dollars 300m which the carrier received from BA went towards paying down its Dollars 600m revolving credit facility. USAir's long-term debt at end-1992 stood at over Dollars 2bn.

Under its investment agreement with USAir, British Airways has certain rights to buy shares of preferred stock, convertible into USAir common stock, to maintain its underlying interest when the US carrier goes ahead with an equity issue. But yesterday morning the UK-based airline was considering how to respond to USAir's announcement and had no comment on whether those rights would be exercised.

USAir's offering comes in the wake of a rally in US airline stocks and amid much new stock offering in the US. In the first quarter, for example, corporate America raised around Dollars 22bn in new equity issues - slightly more than in the same period of 1992.

The fillip in airline shares reflects hopes that the US government's attention to the industry's problems and the absence of savage domestic price-wars may allow stronger carriers to return to profitability this year.

USAir Group Inc US United States of America P4512 Air Transportation, Scheduled FIN Share issues P4512 The Financial Times London Page 19 416
Companies in this issue Publication 930416FT Processed by FT 930416

--------------------------------------------- UK --------------------------------------------- Alexander Russell 21 Ashley (Laura) 20 BA 19 BP 20 BT 1 Blue Circle 20, 19, 18 Boots 12 British Rail 18 British Steel 36 Brooks Service 21 Campari 20 Cradley 21 Forte 19, 18 GPA 20 Gibbs Mew 36 Glaxo 36, 20 Grosvenor Dev Cap 12 HSBC 20 ICI 36, 12

Laura Ashley 18 Marion Merrell Dow 12 Meggitt 21 Mercury 1 Parambe 21 Queens Moat Houses 21 RMC 20, 19, 18 S'Kline Beecham 36, 20, 12 TI Group 20 Wellcome 36 Woolwich 18 Zeneca 12 --------------------------------------------- Overseas --------------------------------------------- AT&T 1 Abitibi-Price 19 American Barrick 23 Apple Computer 24 Argentaria 19 CSX 23

Charles Schwab 23 Cockerill Sambre 22 Daf 22 Delta Air Lines 24 First Nat Bank 24 Fortis 22 George Weston Foods 24 Gillette 23 Gulf Canada 19 ING 22 IRI 22 Ilva 22 JP Morgan 23 KIO 22 Lanvin 22 Lippo 24 Lyonnaise des Eaux 22 L'Oreal 22 Matsushita Electric 24 Normandy Poseidon 24 Olympia & York 19 Petrofina 22 Posco 23 SA Goldfields 24 Texas Instrument 23 USAir 19 Upjohn 23 Weyerhaeuser 24 ---------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 19 206
Forte cuts dividend, sees no green shoots Publication 930416FT Processed by FT 930416 By MICHAEL SKAPINKER, Leisure Industries Correspondent

FORTE, the hotel and restaurants group, yesterday cut its dividend for the first time in two decades, warned that there were few signs of a business upturn and said it would be reducing US operations.

Forte reported pre-tax profits for the 12 months to January 31 of Pounds 164m after exceptional items, using the FRS 3 standard. This compared with a restated Pounds 59m for 1991-92. Pre-tax profits before its share in Savoy Hotel, exceptional items and property revaluations were Pounds 72m, compared with Pounds 70m last time. Earnings per share were 14.1p (4.3p).

The final dividend of 4.75p produced a total of 7.5p (9.91p). Mr Rocco Forte, chairman, said: 'We feel it prudent to set the dividend at a level which would be sustainable even if there is no upturn in trading conditions and which will provide a basis for future growth.'

The group is offering shareholders the alternative of an enhanced scrip dividend with a value 50 per cent higher than the cash payout.

Mr Forte said trading conditions deteriorated last year and that the situation had not improved. 'The green shoots that seem to be appearing are not appearing in our business yet,' he said.

He said, however, that the group's cost reduction programme should produce improved profits even without a rapid recovery in demand. Over the past two years, total staff numbers have been reduced by 7,000 to 38,500.

Forte says it is putting 15 of its US Travelodge hotels up for sale, allowing it to concentrate on the remaining motel operations, which might be floated off in 18 months' time. Mr Forte said plans to expand on the Continent would be postponed, since better deals would be available in a year's time.

There were exceptional charges of Pounds 73m for reorganisation, rebranding and software. The intended disposal of the Travelodge hotels and other property losses produced an exceptional charge of Pounds 91m. The sale of the Gardner Merchant contract catering business produced an exceptional gain of Pounds 257m.

A revaluation of the entire property portfolio produced a reduction in the revaluation surplus of Pounds 344m. As a result, gearing rose to 48.4 per cent.

Lex, Page 18; Queens Moat, Page 21

Forte GB United Kingdom, EC P7011 Hotels and Motels FIN Annual report P7011 The Financial Times London Page 19 404
RMC and Blue Circle set to raise prices Publication 930416FT Processed by FT 930416 By MAGGIE URRY and PAUL TAYLOR

TWO leading building material suppliers, RMC Group, the ready-mixed concrete company, and Blue Circle, the UK's largest cement maker, indicated that they would increase prices in the UK in the next few weeks.

Both companies reported results for 1992 yesterday, showing sharp falls in UK profits. Each said they expected price rises to be effective, in spite of likely further volume falls. RMC's shares rose 21p to 629p and Blue Circle's were up 3 1/2 p to 241p.

Mr Jim Owen, managing director of RMC, the UK's leading ready mixed concrete supplier and the largest buyer of cement, said 1992 'was a damned difficult year, particularly in the UK'. He said the timing of any recovery was uncertain, but took hope from a pick-up in housing activity. He added that price increases 'will be a very important factor in a recovery in UK profits'. RMC's UK operating profits have fallen from Pounds 132m in 1989 to Pounds 10.2m in 1992.

RMC is putting up sand and gravel prices by between 6 per cent and 7 per cent on May 1, and is considering a concrete price rise. Analysts said RMC is such a large customer of Blue Circle that the latter's price rise would depend on RMC raising its concrete prices.

Mr Ian McKenzie, chief executive of Blue Circle Cement, said 'we believe the majority of our customers are ready to support a price increase'. He said customers will be notified about the size of the increase - likely to average between 2 and 3 1/2 per cent - 'very shortly'.

BCC said UK cement volumes fell 12 per cent in 1992 and prices fell 2 per cent. It expected a further volume decline of about 5 per cent in 1993.

Mr John Cooper, head of RMC's UK concrete operations, said its volumes fell 8 per cent in 1992 and the business barely broke even. 1993 would be 'tricky' with further volume falls, but, he added, 'the worst is behind us'.

Both groups have cut capacity in response to falling demand. BCC is in the middle of a Pounds 58m restructuring programme aimed at reducing capacity and cutting costs. RMC said the ready-mix concrete industry had rationalised with many smaller players failing, withdrawing or being taken over.

Lex, Page 18; Details, Page 20

RMC Group Blue Circle Industries GB United Kingdom, EC P3272 Concrete Products, NEC P3273 Ready-Mixed Concrete FIN Annual report COSTS Product costs & Product prices P3272 P3273 The Financial Times London Page 19 436
Wings of song bring Argentaria to market: Spain's big privatisation, overshadowed only by the coming election Publication 930416FT Processed by FT 930416 By TOM BURNS

OPERA lovers recognise the swirling music as the Slaves' Chorus from Verdi's Nabucco. Spaniards, who now hear it incessantly on their radio stations, are being roused by the chant into becoming shareholders of a state-controlled banking corporation.

With just a week to go before the subscription period opens in the Dollars 1bn (Pounds 600m) partial privatisation of Argentaria, well over 300,000 members of the domestic public have, in less than a month, telephoned to register their readiness to invest in its equity.

Argentaria's chairman, Mr Francisco Luzon, said in February that he hoped to have 200,000 shareholders in the planned placement of up to 25 per cent of the banking corporation's stock. He could now have double that number.

Around 12m Argentaria shares, representing some 42 per cent of the equity being privatised, are being offered to the home retail market.

Spaniards may invest a minimum of Pta25,000 (Pounds 143) and a maximum of Pta8m (Pounds 45,700) in the shares which will be priced, within a range of Pta3,500 to Pta3,950, on or around April 23.

There is a second Spanish tranche aimed at the institutional market, a third for Argentaria's employees and a further four tranches, totalling some 8m shares, to be placed in the US, the UK, continental Europe and the rest of the world.

Spain's would-be shareholders seem undeterred by the snap general election on June 6, which was called after the share offering was announced. Should it be won by the opposition centre right - currently neck and neck with the ruling socialists - the new government could in theory replace Argentaria's present management team.

Following the placement, the group will make up as much as 7 per cent of the capitalisation of the Madrid stock market, making it the biggest stock after Telefonica, the state-controlled telecommunications group.

Argentaria, a federation of state-controlled financial institutions with 14 core business units, reported net profits of Pta67.4bn in 1992, its first full financial year, and average total assets of Pta9,717bn, the second largest among Spain's banking groups.

Analysts expect it to overtake Banco Bilbao Vizcaya, currently ranked eighth among financial institutions in the FT's European Top 500, to become Spain's leading bank group.

Created in May 1991, Argentaria is the only Spanish financial institution with both commercial bank and savings bank subsidiaries. This gives it a strong domestic customer base, enhanced by the fact that Caja Postal, its saving bank unit, is the only caja in the country that is not tied to a specific region.

Argentaria is run in a strikingly decentralised fashion. At the centre is Mr Luzon, with a staff of 40, setting group strategy and co-ordinating the individual business units.

These include a merchant bank, a bank dealing with local government financing and another serving the agri-business sector, three 'para-banking' companies dealing with brokerage and fund management and a further four non-banking ones that provide insurance and property services. Each unit has its own board of directors and its own profit and loss account.

In the long run, the test will be whether Argentaria is able to combine this decentralised management with the cross-selling opportunities it hopes for. As an example, the group points to the way Banco Hipotecario Espanol (BHE), Argentaria's property financing unit and the only specialist mortgage bank in Spain, has got together with Caja Postal to offer savings accounts to home buyers.

BHE has only 50 offices; until now, most of its 800,000 mortgage holders have held their accounts elsewhere. Last year 85 per cent of BHE's 40,000 new clients opened accounts with Caja Postal.

Argentaria hopes to make gains on costs, too, citing the way it has trimmed its seven information systems down to two, saving Pta2bn a year in capital spending and a further Pta2bn a year in running costs.

In the short run, the biggest influence on Argentaria's results will be the extent to which it can extend across the group the gains in efficiency already achieved by Banco Exterior, its flagship.

Mr Luzon, formerly managing director at the merged Banco Bilbao Vizcaya, was appointed to run Banco Exterior in 1988.

His brief from the government was to convert Exterior from an export credit agency into an aggressive international bank. Mr Luzon raised the bank's return on assets from 0.33 per cent in 1988 to 0.75 per cent in 1990 and 0.83 per cent in 1992, a figure on a par with its private sector rivals.

Those gains achieved, analysts are now forecasting modest growth for Exterior, which provided 49 per cent of Argentaria's pre-tax profits in 1992.

The task of rapid profits growth now falls to the group's other units, which only came under Mr Luzon's aegis in May 1991.

Likely priorities include:

Argentaria Bolsa, the group's broking unit. The size and strength of the group's balance sheet should allow this unit to boost its derivatives and capital markets activities. Trading volumes at Argentaria Bolsa rose 40 per cent last year.

The mutual funds managed by the insurance unit. Argentaria is currently ranked only fifth among Spanish banks in the volume of mutual funds under management. It plans to raise these funds by 40-45 per cent this year, from their current level of Pta330bn.

Mr Luzon is a Socialist government appointee and a close friend of Mr Carlos Solchaga, the finance minister. Though he has strengthened the group's management by hiring more than 70 former Vizcaya executives, he remains the key to Argentaria's future.

It is ironic, therefore, that the flotation coincides with an election that could cost him his job. Moral: companies that link their fate to opera must expect a little last-act melodrama.

Corporacion Bancaria de Espana (Argentaria) ES Spain, EC P6081 Foreign Banking and Branches and Agencies P9611 Administration of General Economic Programs CMMT Comment & Analysis FIN Share issues P6081 P9611 The Financial Times London Page 19 1000
Banks may sell O&Y stakes Publication 930416FT Processed by FT 930416 By BERNARD SIMON TORONTO

AN INTERNATIONAL group of banks is examining ways to dispose of the majority shareholdings, worth more than CDollars 1bn (Pounds 512m), which they control in Abitibi-Price, one of the world's biggest newsprint producers, and Gulf Canada Resources, the Canadian energy group.

The shares are nominally owned by Olympia & York, the crippled property developer, which pledged them as collateral for a USDollars 2.5bn (Pounds 1.6bn) syndicated loan from the banks. But under a debt-restructuring plan which took effect last month, the lenders have effective control of almost all O&Y's shares.

Options being considered include seeking new 'strategic' shareholders willing to buy a substantial block of shares in either company, and a distribution of shares through an international public offering.

The banks, led by Hongkong & Shanghai Banking Corp, have appointed Salomon Brothers of New York and RBC Dominion Securities of Toronto to advise them on the best way of maximising the value of their collateral.

Representatives of the two investment banks have already interviewed Abitibi and Gulf executives and are expected to submit a report to the banks within the next month.

The timing of a sale is uncertain. At current share prices, the banks would fall far short of recouping the full amount of their loan. The 79 per cent stake in Abitibi pledged to the banks is worth about CDollars 780m. Of O&Y's 75 per cent interest in Gulf Canada, the 70 per cent stake provided as security is valued at just over CDollars 520m. Abitibi is gradually recovering from a deep slump in the North American forestry industry.

However, Gulf Canada continues to experience severe financial problems. Gulf, which has a debt load of CDollars 1.6bn, lost CDollars 252m from continuing operations last year and has suspended dividends.

HSBC provided Dollars 750m of the syndicated loan. Other participants were Credit Lyonnais, Commerzbank, Royal Bank of Canada and Dai-Ichi Kangyo.

In anticipation of a change in ownership, Abitibi and Gulf - in consultation with the banks - have each named three new directors to replace members of O&Y's Reichmann family and their nominees. The same three people have been appointed to each board.

Abitibi Price Inc Gulf Canada Resources Olympia and York Developments CA Canada P6552 Subdividers and Developers, Ex Cemeteries P2611 Pulp Mills P1311 Crude Petroleum and Natural Gas P6081 Foreign Banking and Branches and Agencies COMP Shareholding P6552 P2611 P1311 P6081 The Financial Times London Page 19 416
Rail strike will close network after union rejects BR's plea Publication 930416FT Processed by FT 930416 By ROBERT TAYLOR, Labour Correspondent

BRITAIN'S railway network faces shutdown today in the second 24-hour strike in a fortnight, in spite of last-minute efforts by British Rail management urging staff to work as normal.

BR says the strike will cost a further Pounds 10m in lost gross revenue and will threaten long-term business contracts.

The action follows the acrimonious breakdown of talks on Wednesday between BR and the main RMT rail union which is demanding a guarantee of no compulsory redundancies and a moratorium on contract work ahead of the industry's privatisation.

Yesterday BR management encouraged staff to reconsider their strike action.

The RMT commented last night: 'They tried that tactic last time and it did not work. And it will not work now.'

Members of Aslef, the drivers' union, are also on strike today over changes in their national agreement, in spite of talks with BR last night that were described as 'constructive'.

The BR-Aslef negotiations were adjourned after 75 minutes and will be resumed on Monday. Mr Paul Watkinson, BR's personnel director, said there was a 'willingness on both sides to find a solution', but Aslef said it was too late to call off its 24-hour strike.

In the Commons, Mr John Major, the prime minister, denounced the strike as 'utterly futile' and a 'throwback to the 1960s'.

The government and the Confederation of British Industry urged people to try and work as normal, although car parking restrictions will not be lifted. Many people will work from home. In London, the Underground and the buses are running as normal.

BR fears that many business customers and individual travellers will stop using the railway network.

The Royal Mail said it was hiring four extra flights capable of carrying 400,000 letters to boost the network of 32 chartered aircraft that already carry mail around Britain.

National Express, the coach company, said extra coaches were being laid on for cross-Pennine routes; those linking London with Scotland; and the main commuter routes into London from the south coast, Cambridge and Milton Keynes. Gatwick airport is providing extra coaches for the link between the airport and Victoria station in London.

BR-union talks derailed, Page 12

British Rail GB United Kingdom, EC P4011 Railroads, Line-Haul Operating PEOP Labour P4011 The Financial Times London Page 18 397
Review of English fuels education row Publication 930416FT Processed by FT 930416 By JOHN AUTHERS

STRICTER standards for spoken English in schools and tougher requirements for teaching Shakespeare are features of radical revisions proposed for the English national curriculum.

The proposals, announced yesterday by the National Curriculum Council, could affect all teaching of English in England and Wales. They streamline the curriculum currently in place and include exhaustive lists of recommended reading for children up to the age of 16. The number of attainment targets, or requirements, that children must satisfy during their schooling has been cut from 159 to 99.

However, the review has added fuel to the confrontation between the government and teachers' unions over tests for the national curriculum, which are due to start in June. Opposition politicians attacked the timing of the proposals, which come only a week after Mr John Patten, the education secretary, announced a review of the full national curriculum.

All pupils will now be required to read one Shakespeare play between the ages of 11 and 14 and another by the age of 16. Teachers complained that that was unrealistic for less able pupils.

There were also doubts about the rules for spoken English. Under the proposals, primary school teachers would be expected to correct pupils at Key Stage One (between the ages of five and seven) for making ungrammatical comments such as: 'We was robbed', and 'We winned at football'.

By Key Stage Two (for 11-year-olds), pupils should be proficient in 'standard English' and should not make mistakes such as: 'Pass me them books', and 'We haven't seen nobody'.

Mr David Pascall, chairman of the NCC, said: 'By standard English we mean correct vocabulary and grammar spoken in any accent, with clear diction.'

He added that a command of such English would benefit children in their 'social and professional development', and that the move had been made necessary by falling standards.

'Does anyone have any serious doubt if we listen to the English in the playground, in the street and sometimes in the media that we have to raise standards?' he asked.

Mr Patten said: 'The new proposals will simplify the present English curriculum by reducing the number of requirements to be satisfied. But they will increase rigour by making those statements more precise and amenable to assessment.'

But Ms Ann Taylor, Labour's education spokesman, called for a moratorium on all changes to the curriculum until the full review had been completed.

There will now be three months of public consultation, and the resulting guidelines will be introduced in schools between 1994 and 1995.

GB United Kingdom, EC P8299 Schools and Educational Services, NEC NEWS General News P8299 The Financial Times London Page 18 452
Boost for hopes of upturn as house sales show rise of 40%: Caution urged over optimistic reports by some estate agents Publication 930416FT Processed by FT 930416 By SCHEHERAZADE DANESHKHU

FURTHER evidence of an upturn in the UK housing market came yesterday as estate agencies owned by leading building societies reported increases of up to 40 per cent in house sales in the first quarter of the year, reinforcing hopes of a brighter economic outlook.

The rises, compared with the same period last year, were announced on the day one of the main bodies in the estate agency industry reported a 36.4 per cent increase in the number of contracts exchanged in March compared with February.

Mr John Wriglesworth, housing market analyst at UBS, warned against talking up the market. 'We are seeing a return to 1992 levels of activity before the reintroduction of stamp duty and no one thought that 1992 was wonderful for the market,' he said.

A further caution against over optimism at signs of 'green shoots' in the economy was signalled yesterday by the engineering industry which said the fragile recovery in UK engineering output was being threatened by deepening recession in vital European export markets.

Mr Peter Constable, chairman of the Ombudsman for Corporate Estate Agents, an industry-appointed body, said confidence was strengthening in the housing market.

The organisation said the contract exchanges reported by its members in March totalled 35,285, a 36.4 per cent increase on February, compared with a low last year of 19,027 in September. The March figure represented a more modest 12.5 per cent increase on March 1992, when the exchanges reported were 31,351.

Some of the largest building societies also reported increased sales by their estate agencies. Mr Alan McLintock, chairman of the Woolwich building society, the fourth largest lender, said yesterday that its estate agency arm, Woolwich Property Services, had reported an increase in sales of 40 per cent in the first quarter of the year compared with the same period last year.

'There are concrete signs of the long awaited revival in the housing market,' said Mr McLintock at the society's annual general meeting in London.

Alliance & Leicester Property Services said it had seen a year-on-year increase of 38 per cent in sales, while Nationwide Estate Agents reported a 33 per cent increase in sales in the first quarter of the year compared with last year. Abbey National's Cornerstone estate agency reported a 20 per cent first quarter increase in sales compared with last year.

Mr John St. Lawrence, chairman of Crest Nicholson, the Surrey-based housebuilder, was also optimistic at the company's annual general meeting yesterday. He said visitor levels across the company's sites and open market reservations since mid-February were above the same period in 1992.

But Halifax Property Services, the estate agency arm of the largest lender, said it had seen a rise of 7 per cent in year-on-year sales. This was in line with OCEA figures for gross monthly sales - offers accepted - which were up 7 per cent last year compared with March 1992.

Estate agent fails, Page 10

Engineering industry recovery 'threatened', Page 10

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries P6531 Real Estate Agents and Managers P1521 Single-Family Housing Construction MKTS Sales CMMT Comment & Analysis P6552 P6531 P1521 The Financial Times London Page 18 557
The Lex Column: Laura Ashley Publication 930416FT Processed by FT 930416

Laura Ashley's new company doctors are clearly learning retailing on the job. The grievous self-inflicted wound in the US - where the board started surgery before properly diagnosing the problem - shows that clearly enough. The Pounds 6.9m loss is all the more painful because it could have been avoided if the working capital problems of the US shops had been properly understood. It is also a shock that the company's internal controls were so poor. The main board seems to have had no idea that the US distribution system had been a complete shambles for years.

At least the problem is now under control. Mr Jim Maxmin, the new chief executive, is taking some sensible basic steps to improve the performance of the stores. In particular, the move away from discounting towards managing the brand is surely right. Despite the company's best efforts, the Laura Ashley image has proved resilient. Many of its remaining problems can be tackled by managers rather than retailing geniuses.

If the retailing operations need only a firm hand and common sense, the future of the manufacturing operations is more murky. Indeed, investors might be more prepared to back the company's recovery story with hard cash if they had a clearer view of what was going on in that area. The hope is that Mr Maxmin is in a position to tell them.

Laura Ashley Holdings GB United Kingdom, EC P5621 Women's Clothing Stores P5714 Drapery and Upholstery Stores CMMT Comment & Analysis FIN Annual report P5621 P5714 The Financial Times London Page 18 270
The Lex Column: Building materials Publication 930416FT Processed by FT 930416

An attempt by building materials companies to force through higher prices is a sure sign of spring. Having been disappointed so often in the past, yesterday's aggressive noises from Blue Circle and RMC might seem like hot air. Yet both have a fair chance of making higher prices stick this time. Capacity has been taken out of both cement and concrete - witness Blue Circle's Pounds 62m restructuring charge. RMC barely broke even in UK concrete last year, so it can hardly stand by and watch prices erode further. RMC is also Blue Circle's biggest customer; that both companies are talking tough suggests a degree of common purpose.

That does not guarantee an immediate profits recovery for either company. Volumes are likely to be lower this year. Even if the housing market comes back from the dead, commercial building remains in the doldrums. By reducing capacity and fixed costs, Blue Circle may be better geared to price increases, but the full benefits of restructuring will not flow through until 1994. RMC may have to live with undisciplined competition in the fragmented concrete market.

With a stronger balance sheet, a covered dividend and profitable German operations, though, RMC is in better shape to live with another disappointment. Housing the influx of immigrants into Germany is big business for concrete producers even while the wider economy is sliding. In contrast Blue Circle's acquisition of French boiler-maker Celsius looks badly-timed. Yesterday's uncovered pay-out and asset revaluation eat into a balance sheet damaged by goodwill write-offs. A 6 per cent yield on the shares should provide some support, but Blue Circle needs a smart recovery in UK profits to justify the dividend.

RMC Group Blue Circle Industries GB United Kingdom, EC P3272 Concrete Products, NEC P3273 Ready-Mixed Concrete CMMT Comment & Analysis COSTS Product costs & Product prices P3272 P3273 The Financial Times London Page 18 323
The Lex Column: Scrip dividends Publication 930416FT Processed by FT 930416

Forte was not alone in slipping in an enhanced scrip dividend yesterday. Having mulled the option since its results last month, Redland did the same. The two cases are different, but they do suggest the fashion is becoming worryingly popular. One way of looking at Forte's decision, for example, is that, far from just cutting its dividend, it is trying to avoid paying one in cash at all. A feature of the scheme is that the requirements of those shareholders who do want cash are met by the placement of fresh shares in the market.

In Forte's case, the decision looks suspiciously like a response to its cash-flow constraints. The company points to the contribution the savings will make to finance its acquisition of the Relais motorway service areas in France on which it expects a return of 15 per cent. But it had acquired those anyway last year.

Redland's geographically uneven earnings flow has given it an acute ACT problem. The enhanced scrip dividend reduces its tax obligations and transfers financial benefit from the government to shareholders. From that perspective the move will enhance earnings in the short run. Even so, one wonders whether, after all the shares it issued to pay for Steetley, Redland really deserves the extra capital. It is a pity the ACT system has encouraged the market to forget the discipline inherent in the need to pay cash dividends.

Redland Forte GB United Kingdom, EC P7011 Hotels and Motels P5039 Construction Materials, NEC CMMT Comment & Analysis P7011 P5039 The Financial Times London Page 18 271
The Lex Column: Rocco in a hard place Publication 930416FT Processed by FT 930416

If business is as bad as Forte claims, it must regret that the Grosvenor House is unlikely to host another Christmas party for the EBRD this year. By and large it is getting no benefit from recovery and almost all the trading profit improvement during the second half reflected cost savings. That gives a certain intellectual justification for cutting the dividend. The practical reason is even more compelling. Forte's balance sheet looks strained despite the Gardner Merchant sale. At some stage it will still need a rights issue.

With the dividend cut to a level that should allow room for growth as earnings recover, Forte will have a more encouraging story to tell when the moment for the rights issue eventually comes. It has also used the Gardner Merchant disposal profits to shield a kitchen sink approach to exceptional charges. That will boost the chances of an earnings recovery whatever happens to the economy. Similarly, the rigour applied to property valuations will maximise the disposal profit allowable under the new accounting rules from any hotels that are sold.

In the midst of this, Mr Rocco Forte looks surprisingly cheerful. Perhaps the new non-executive directors have strengthened his determination to break with the traditions established by his father, but that does not give him a free hand with strategy. Talk of further expansion in Europe is muted now, and the emphasis is on further disposals, starting with the loss-making Travelodge hotels. All in all, the company is talking of eventual disposals worth Pounds 500m to Pounds 600m. That is a measure of the extent to which Forte must shrink before it can grow again.

Forte GB United Kingdom, EC P7011 Hotels and Motels CMMT Comment & Analysis FIN Annual report P7011 The Financial Times London Page 18 310
Leading Article: Italy's big bang Publication 930416FT Processed by FT 930416

FOR SEVERAL months now, next Sunday when Italians are called on to vote in eight referendums - has been virtually the only fixed point in a rapidly disintegrating Italian political universe. Not surprisingly, therefore, politicians and the media have seized on the occasion as the starting point of a new era. It is no good imagining, however, that the following days will reveal a ready-furnished political landscape. Whatever the voting figures, the scene next week will resemble the scene this week. The parties and the men who dominated Italian politics since the second world war have been demolished. New ones have yet to emerge.

Most of the eight questions on the ballot papers are best described as populist-nihilist.

The one that comes nearest to expressing the popular mood is that which seeks to end state subsidies to political parties - and may thereby drive them to rely even more in future on unorthodox sources of funds. But the one that is seen as providing the key to Italy's political future is that which would replace, for two-thirds of the seats in the upper house, the traditional party-list proportional electoral system with a British-style majority one.

All parties have now rallied to this proposal, which in the present atmosphere may be enough to sink it. But if it does pass with a thumping majority, as expected, it is assumed that parliament will feel obliged to enact the same system for the lower house, too, and that new elections would then soon be held.

The effect of such a change in 'normal' times would be to give an overall majority to the largest party - until now, always the Christian Democrats. In these abnormal times the outcome is much harder to predict, but one effect would almost certainly be to increase the strength of parties whose support is regionally concentrated, such as the Lombard League, thereby increasing the danger that Italy will fragment.

Whatever the electoral system, democratic politics require strong parties with clear programmes; and effective government will probably require constitutional as well as electoral reform. An upheaval as revolutionary as that now sweeping through Italian politics calls for an elected assembly with a mandate to revise the constitution, while day-to-day affairs are managed by a broad-based caretaker government under a non-party figure commanding general respect. Mr Giuliano Amato, the current prime minister, can hardly be that figure, though he has done a remarkable job considering the circumstances.

Meanwhile the investigation into corruption, and into the even worse allegations now surfacing against veteran political leaders, must be carried through. When the full truth is known there may be a case for clemency. But the Italian people would be rightly intolerant of further attempts to keep any part of the truth a secret from them.

IT Italy, EC P9199 General Government, NEC P8651 Political Organizations CMMT Comment & Analysis P9199 P8651 The Financial Times London Page 17 495
Observer: Marble halls Publication 930416FT Processed by FT 930416

From the vaults of an anonymous commercial bank comes this topical snippet:

'Knock, knock'

'Who's there?'

'Attali'

'Attali over the top'.

GB United Kingdom, EC P6021 National Commercial Banks NEWS General News P6021 The Financial Times London Page 17 47
Observer: Unsung hero Publication 930416FT Processed by FT 930416

It is hard to imagine a fund manager as a heroic figure, but Robert Cottrell, who used to pen this column, has fingered one in his book on The End of Hong Kong.

John Greenwood, chief economist of the GT fund management group, gets a special mention in dispatches for his sterling work during a particularly nasty run on the Hong Kong dollar 10 years ago. Local shops had begun posting signs that they would accept only US dollars and nobody had much of a clue how to solve the crisis.

No one, that is, apart from Greenwood who had published a paper on 'How to rescue the Hong Kong dollar', which he had circulated to economists such as Milton Friedman and Alan Walters. One Saturday afternoon, at the height of the crisis, he was invited to the Hong Kong monetary affairs department to discuss his plan. Greenwood came away thinking that he hadn't convinced the officials of his case.

However, a few days later, HK followed his advice, pegged its exchange rate, and the HK government won all the credit. 'For my money Greenwood deserved a knighthood,' says Cottrell, who is already researching his next tome, a biography of President Mitterrand.

HK Hong Kong, Asia P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 17 230
Observer: Scottish clones Publication 930416FT Processed by FT 930416

Giving Lord Younger the chairmanship of the four main investment trusts in the Murray Johnstone stable may be good for Scotland Inc, but what message does it send to small shareholders?

Lord Younger is a decent chap. A former secretary of state for Scotland and Tory party big-wig, he is starting to make his mark in business as chairman of the Royal Bank of Scotland. Since quitting politics, he has been acquiring a portfolio, such as directorships of Scottish Equitable Life and Murray Johnstone Holdings itself, that one has come to expect of Scotland's establishment financiers.

Murray Johnstone, controlled by the four trusts Lord Younger chairs, does not put its fund managers on the boards of the trusts it manages. So the non-execs can theoretically fire the managers. True, the arguments are tangled because firing the managers would damage the trust's investment in the management company.

Even so, having the same chairman and several of the same non-execs sitting on the different trust boards as well as the parent of the fund manager, seems a trifle incestuous especially when investment trusts are trying to sell themselves to small shareholders as independent companies.

One investment trust chairmanship should have been quite enough for Lord Younger. Or is it a case of the more the murrayer?

Murray Johnstone GB United Kingdom, EC P6722 Management Investment, Open-End COMP Company News PEOP People P6722 The Financial Times London Page 17 245
Observer: Pique time? Publication 930416FT Processed by FT 930416

Judging by Lady Thatcher's performance this week, the former prime minister's ability to catch the public mood is as uncanny as ever. But is her high-level access to world leaders just as assured?

Certainly, she can still pull the big crowds on the international lecture circuit, and her schedule in Warsaw, where she opens one of her Foundation's offices tomorrow, sounds as hectic as ever. But there is some surprise that President Lech Walesa is not on the Thatcher itinerary.

True, the Polish president tends to go home to Gdansk at weekends. But he still likes to receive foreign big-wigs at his shipyard in order to underline Poland's industrial possibilities. Indeed, Lady T popped in there during her 1988 visit, much to the consternation of the ruling communists.

But it's understood that Walesa is too busy to see the Iron Lady this time round. A sign that she - or Walesa - are past their prime?

PL Poland, East Europe P6732 Educational, Religious, etc Trusts NEWS General News P6732 The Financial Times London Page 17 183
Observer: Designer meals Publication 930416FT Processed by FT 930416

Why does design minister Baroness Denton have a camping stove and pull-along frog in her office? This tempting question opens a DTI press release which crossed Observer's desk yesterday.

Maybe the baroness just never knows when she's going to have to cook lunch.

GB United Kingdom, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 17 68
Observer: Up to the job Publication 930416FT Processed by FT 930416

Yesterday's annual meeting of British Petroleum and the turn-out of the company's top brass raises a mischievous question. Does BP's new board contain both Britain's tallest Footsie company director (Lord Ashburton, the chairman) and its shortest (John Browne, managing director of exploration)?

You wouldn't know it from BP's annual report; careful picture cropping has been a great leveller. But Observer is certain that the BP board is living testimony to the fact that height is no guide to ability.

British Petroleum GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas COMP Company News P1311 The Financial Times London Page 17 112
Observer: Flagging enthusiasm Publication 930416FT Processed by FT 930416

Reconciliation is in the air in the Anglo-French fishing dispute. French fishermen have sent the Royal Navy a flag to replace the one they burned.

Observer can exclusively reveal that Admiral Sir Benjamin Bathurst, the First Sea Lord, has been sent a new Union Jack by Jean Le Boucher, president of the Basse-Normandie regional fisheries committee.

The original from the patrol craft HMS Blazer, mistakenly reported at the time to be a White Ensign, was set alight during a protest in Cherbourg marina on March 28.

The new one will be given to Blazer's commander, who is expected to frame it for display rather than assign it to the flag locker. However, sensitivities are still raw enough for the Navy to have decided against publicising the French gesture. Gotcha]-style headlines might just set tempers ablaze again.

GB United Kingdom, EC FR France, EC P0912 Finfish NEWS General News P0912 The Financial Times London Page 17 163
Pioneer looks east for profit: The challenges facing ABB's engineering ventures in the former communist bloc Publication 930416FT Processed by FT 930416 By TONY JACKSON

Four years after the fall of the Berlin wall, western industry has still not quite made up its mind about eastern Europe. The opportunities are plainly there. But, as most of the pioneers have found, so are the problems.

An excellent case study is provided by one of the most successful of these pioneers, the Swiss-Swedish electrical engineer Asea Brown Boveri. ABB now controls about 20 companies across eastern Europe, mostly former state monopolies. They make money, if not yet enough to cover the cost of buying them. They employ some 20,000 people in the region. In five years, ABB aims to double that.

Talking to those employees today produces a striking story of a clash of cultures: one driven by production, the other by marketing and finance. In the old socialist system, says the head of ABB's Hungarian operation, 'people had no feeling for money'. But the system also produced a proud tradition of engineering. ABB's new workers were mostly eager to embrace western techniques of management, if only to secure their jobs in a capitalist world. When it came to their technical skills, they were less ready to be pushed around.

The German head of ABB Lummus Chemoprojekt, an engineering firm based in the Czech city of Brno, says: 'You need to be sensitive to what people have done for the past 25 years, which is to be good engineers.' The second in command at ABB's Prague head office, an Americanised Czech, puts it more bluntly: 'You can't just say 'wake up guys, everything you've been doing is crap; let's start from the beginning.' '

But the implied antithesis between eastern engineering skill and western business methods is essentially false. ABB's western managers agree in their respect for the technical competence produced by the old system. But when it came to advanced technology, ABB's new eastern companies had nothing to offer. Even the turbines and switchgear they turned out were mostly old-style ABB products made under licences signed in the old communist days.

Updating that technology took time. 'From the beginning', says a director of ABB's Polish business, 'our approach was to transfer the software first, the hardware second. We began with a lot of training, for instance in marketing and sales. Then we started the technological transfer. You don't give a kid an expensive toy before he knows how to play with it.'

There was a similar gap in factory management. A Polish manager at ABB's huge Zamech plant, at Elblag in northern Poland, recalls the old days. 'We were extremely centralised here. We had one manufacturing plant for everything, with one manufacturing director in charge. Every product was designed in one central design office: turbines, ship's propellers, gearboxes. In one process office, they prepared production sheets for marine products and turbines. We had central purchasing. We had huge overheads. It was a stupid way of doing things.'

By another quirk of the system, Zamech had to take raw materials in huge bulk simply to ensure supply - 'minimum deliveries of 10 tonnes of a raw material, even when we needed only 200kg', the manager says. Since ABB took over in 1991, inventories have been slashed from over 200 days' sales to less than 60. The factory area, meanwhile, has been halved for the same level of output.

The ABB revolution involved other sensitivities. Mr Pavel Olechnowicz, chief executive of the Zamech plant, says: 'We can change at the top quickly, and we can then educate the shop floor through training programmes. The big problem is those in the middle.'

Significantly, Mr Olechnowicz comes new to the job. Shortly before the ABB takeover, the Zamech workers' council decided to get rid of the old chief executive and elect a new one. Mr Olechnowicz was plucked from the humble job of foundry manager to run the whole plant. 'I find it easier to change my mentality than some of my colleagues,' he says. 'I had limited experience of the old system.'

Others are less fortunate. Across ABB's eastern empire, one meets senior managers who are clearly struggling to adjust. These men had spent their lives working their way to the top of huge organisations, responsible not just for output but for social life and the surrounding infrastructure. They are now mere production managers, subject to whippersnappers at head office who are young enough to master the new skills of finance, marketing and the English language.

But at least the whippersnappers are mostly local in origin. The alternative, imposing western management, seems more problematic again. One of ABB's Hungarian managers spent some months working for a Hungarian-Italian joint venture, and did not relish the experience. 'There were 40 Italians in charge, with 40 interpreters', he says. 'No decision could be taken without at least two Italian signatures. They didn't trust their own staff.' He draws a blunt conclusion. 'Foreign managers don't understand the Hungarian way of life. The workers don't accept them.'

Local sensibilities can be offended in other ways. An example much quoted in Hungary is the 1990 takeover of the lighting manufacturer Tungsram by General Electric of the US. The deal proved disastrous, with GE sinking Dollars 500m in a venture which is still heavily loss-making. More important for GE's local reputation, it was also obliged to axe 18,000 jobs from a workforce of 28,000.

ABB has proved more adroit. Its method was to negotiate in advance precisely how much of the business it wanted to take on. The ancillary services, down to the works canteen, the barber shop or the haulage business, were left with the state or hived off to management buyouts. Manufacturing employees, from top management down, were picked individually by interview. As an ABB executive puts it, 'we don't take the lazy ones, or the ones who are set in their ways. We leave them to the state.'

It might be asked what ABB gets in return for all this effort. That involves a strategic question which goes to the heart of the whole issue of investment in eastern Europe. Is ABB there to develop the local market, or to switch production from its high-cost plants in the west?

Mr David Hunter, the American president of ABB's Polish operation, says: 'Originally, much of the idea was that Poland could become the Taiwan of Europe. That's still part of ABB's thinking. But as we get smarter about the Polish market, we see the potential here.'

What Mr Hunter has in mind is the rebuilding of Poland's infrastructure, its power industry in particular. 'In power generation, if you include the modernisation of obsolete plant and cleaning up the rest, there's 10 or 20 years of business.'

Who will fund that is another question. The problem, Mr Hunter says, is Russia. 'There's a big black hole to the east of us, and if nothing is done about it that could be catastrophic. In that context, Poland has a very low priority. The soft loans from the west will go clear over our heads.'

Ultimately, ABB clearly still hopes to switch some production to the east. The process will be slow. With the power generation industry still in recession worldwide and ABB's western plants suffering from idle capacity, now is not the time to make matters worse.

Despite that, it is hard not to be impressed by the high spirits of ABB's eastern management. They have seen the western future, and it works. ABB's western competitors might also ponder a simple fact. ABB Zamech made a net profit margin in 1991-92 - on ABB's accounting principles - of some 9 per cent on about Dollars 100m of turnover. Next year's margin is expected to be higher. If that can be achieved when the region is in chaotic transition, ABB could be on to something.

--------------------------------------------------------------------- ESTONIA Employees: 30 --------------------------------------------------------------------- ABB Harju Eiekter Installation ABB Flakt Estonia Environment --------------------------------------------------------------------- RUSSIA Employees: 600 --------------------------------------------------------------------- Several joint ventures --------------------------------------------------------------------- POLAND Employees: 8,400 --------------------------------------------------------------------- ABB Zamech Turbines ABB Dolmel Generators Dolmel Drives Drives ABB Elta Transformers --------------------------------------------------------------------- CZECH REPUBLIC Employees: 6,600 --------------------------------------------------------------------- ABB Chemoproject Process engineering ABB ZPA Protection relays ABB PBS Boiler & turbines ABB EJF Medium voltage switchgear --------------------------------------------------------------------- HUNGARY Employees: 700 --------------------------------------------------------------------- ABB Lang Turbines ABB Szerviz Service ABB Energir Network control --------------------------------------------------------------------- CROATIA Employees: 450 --------------------------------------------------------------------- ABB Power Plant Turbines --------------------------------------------------------------------- ROMANIA Employees: 1,700 --------------------------------------------------------------------- Energoreparatii Power plant service ---------------------------------------------------------------------

ABB Asea Brown Boveri SE Sweden, West Europe CH Switzerland, West Europe XL East Europe P3532 Mining Machinery P3536 Hoists, Cranes and Monorails P3629 Electric Industrial Apparatus, NEC CMMT Comment & Analysis P3532 P3536 P3629 The Financial Times London Page 17 1459
Sainsbury cleans up: A supermarket's detergent is leaving the market leaders on the shelf Publication 930416FT Processed by FT 930416 By GUY DE JONQUIERES

In few consumer markets is the battle for shelf space as ferocious as in household detergents, and in fewer still are the protagonists as powerful as Procter & Gamble and Unilever. The two companies dominate the business in most countries except Japan and spend huge sums on research, product development and marketing.

But recently an upstart has contested their supremacy in Britain's Pounds 800m-a-year laundry detergents market, where their combined share of more than 80 per cent is among the highest in the world.

The success of the new arrival, Novon, not only challenges recent trends in the detergents industry; if its initial momentum is sustained, it could herald a serious longer-term threat to the market power of P&G and Unilever.

The Novon range was launched last autumn, not by a manufacturer but by J. Sainsbury, the grocery chain, which sells a fifth of all detergents bought in Britain.

Sainsbury says Novon, which undercuts prices of established brands by as much as 25 per cent, now accounts for more than a quarter of its total laundry detergent sales by volume, a fifth of basic powders and 40 per cent of concentrated powders and liquids.

Own-label products are common in many grocery lines and provide two-thirds of Sainsbury's total sales. However, they have made few inroads until now in detergents, partly because P&G and Unilever have invested heavily to support their brands. Last year, they spent about Pounds 80m on advertising in Britain.

Since the mid-1980s the two companies have further raised the competitive stakes through sharply increased investment in technology and new products. Persil, Unilever's flagship brand, which was available in only two versions a decade ago, now comes in 25.

Sainsbury knew it was taking on daunting odds. It had already launched an unsuccessful own-label line, Wash and Care, in the late 1980s. It tried again, it says, because it was keen to widen the chain's strong brand image beyond food sales - and because of the juicy profit margins available on detergents.

This time, the company left little to chance. Novon is its most ambitious product development and involved unusually extensive market research. However, the 18-month programme cost less than Pounds 2m, a pittance by the standards of P&G and Unilever.

Sainsbury began by analysing why Wash and Care had failed and concluded it had underestimated the importance of product features such as particle size, colour and fragrance. These were given much closer attention in the new range. Novon was chosen from a short-list of 20 names drawn up by an outside agency, while a design consultancy was brought in to develop packaging intended to evoke the imagery of P&G's Ariel and Unilever's Persil.

To ensure uniform quality and regular delivery, production of Novon was entrusted to a single manufacturer - believed to be McBride, a BP subsidiary.

Though backed by less than Pounds 200,000 in newspaper advertising to date, Novon has been strongly promoted in Sainsbury stores, where it is displayed separately from competing products.

Publicly, P&G and Unilever profess not to be worried by Novon - though both have recently responded with leaflet campaigns warning against 'cheap imitations'. Privately, they have good reason to be concerned.

Novon's success shows that, for all the companies' recent emphasis on high-technology and rapid product innovation as competitive weapons, the detergent market remains open to new entrants with slender research and development budgets.

'Though P&G and Unilever may obtain an advantage from a new idea for a short period, everyone will be working on it. These are areas where patenting is difficult,' says Mr Michael Rosen, Sainsbury's director of non-foods and Novon's main sponsor. 'Some of Unilever's raw materials suppliers are independent, so we can get supplies.'

An even more delicate problem for the two companies is how to gauge their commercial response. They cannot afford to unleash the full force of their market power against Sainsbury, because it is no ordinary competitor - it is also their biggest and most powerful UK customer. 'It is obviously a complex relationship to manage,' admits Mr Andrew Seth, managing director of Lever Brothers, Unilever's British detergents subsidiary.

The growing power of supermarkets generally has obliged P&G and Unilever to tone down their formerly high-handed approach to the retail trade. These days they, and other big manufacturers, talk of the need for constructive co-operation and a relationship of equals.

However, Mr Rosen does not sound like a man in a mood to compromise. There are already too many detergent brands on supermarket shelves, he says, and manufacturers are 'storing up a lot of trouble for themselves' by flooding the market with new products. 'Someone will have to decide on storage space,' he says, adding pointedly: 'Retailers are making decisions today that they would not have felt strong or courageous enough to make five years ago.'

Novon, of course, has increased the squeeze on shelf space, while its sales success promises to strengthen Sainsbury's bargaining power with P&G and Unilever by countering the power of their expensively supported brands.

For the moment, the big detergent manufacturers are watching and waiting to see whether their precocious new rival stays the course. If it does - and if its example is emulated by other supermarkets in the UK and the rest of Europe - P&G and Unilever may have to fight much harder to remain the consumer's choice.

J Sainsbury GB United Kingdom, EC P2841 Soap and Other Detergents CMMT Comment & Analysis MKTS Market shares P2841 The Financial Times London Page 17 941
Leading Article: Market power Publication 930416FT Processed by FT 930416

LAST NOVEMBER'S green paper on reforming the law on abuse of market power was welcome evidence of the UK government's intention to sharpen up competition policy. There were compelling reasons for change. The government was committed to reforming restrictive practices legislation in line with EC law. Leaving the law on abuse of market power unchanged would have been inherently contradictory - and would have left UK competition policy more obviously at odds with the rest of the Community than at present.

There was also genuine concern that the present UK system was not working. It was weak on deterrence as well as slow and cumbersome. What was needed, it seemed, was what already existed at EC level: clear prohibitions, backed by substantial fines, full rights for third party redress, enforced by an agency with strong investigatory powers.

The government's announcement that it intends just to tinker with the present legislation is therefore a disappointment. It has been persuaded by industry that the costs of complying with a prohibition-based system, together with the uncertainty it would create, would outweigh any benefits to the consumer.

There is some merit to the uncertainty argument. The handful of European decisions and court judgments on abuse of market power underline the difficulty in drawing lessons from the application of the EC's prohibition regime. Industry is right to be concerned about the prospect of being fined for behaviour which at the time it was undertaken was believed to be legal. But the argument on the cost of compliance has been overdone. Most companies of a size to be caught by abuse of market power laws are active in Europe, and have already borne the costs of introducing sophisticated competition compliance programmes.

The government's decision will leave the UK increasingly isolated in Europe. Brussels has recently indicated that in future it intends to leave run-of-the-mill competition cases to national authorities. Its condition for this exercise in subsidiarity is that EC states should adopt competition regimes based on EC rules. Most member states have already done so. Britain runs the risk of being the odd one out.

This may not matter in the short term, but in the long run could affect its ability to influence other areas of Community competition policy. Along with Germany and France, Britain is used to making itself heard in Brussels on such matters as EC merger policy. That will be harder to do if it is out on a limb.

Meanwhile, if the government's present approach is to be effective, the Office of Fair Trading will have to take a more pro-active role in rooting out abuses of market power. For that, it will require more than the extra powers which the government seems for the moment inclined to grant.

QR European Economic Community (EC) P6211 Security Brokers and Dealers CMMT Comment & Analysis P6211 The Financial Times London Page 17 488
Leading Article: G7 response to Yeltsin Publication 930416FT Processed by FT 930416

IF NOTHING else, the two-day meeting of finance and foreign ministers of the group of seven industrial countries in Tokyo has underlined the west's interest in Russian reform. But the G7 can only propose. It now must wait to see how Mr Yeltsin fares in the referendum due on April 25. Unhappily, even this seems unlikely to resolve doubts about Russia's willingness and ability to implement radical reform.

The immediate question, however, is how much of the announced offer of Dollars 43bn is new. The answer is that there is less to it than meets the eye, since it consists mainly of known commitments from institutions like the World Bank and the International Monetary Fund.

One relatively new ingredient is an innovative Dollars 3bn IMF loan facility to help Russia start to curb inflation and the budget deficit. There will also be a Dollars 300m small business development fund mainly financed by the European Bank for Reconstruction and Development. Meanwhile, the US, Japan and the UK have announced what seem to be additional bilateral loans of Dollars 4bn. Nevertheless, most elements were well known. Some, notably the Dollars 15bn in debt relief agreed earlier this month, will add no new resources, since Russia was failing to service its debts in any case.

The second question is whether offers of assistance are in the right form. In a recent report, the United Nations Economic Commission for Europe called on the G7 to commit itself to a long-term reform programme on the scale of the post-war Marshall plan. 'One of the worst outcomes,' it argued, 'would be . . . a list of short-term measures hastily put together with a maximum of publicity.'

It is far from clear that the G7 has avoided that outcome. But it has committed itself so far that it would have to go further, should that be justified by a serious Russian effort. The imaginative American proposal for a Dollars 4bn fund to promote privatisation of large state-run enterprises may yet be agreed in coming months.

The fundamental question, however, is whether there will be a Russian programme to support. The problem is partly that there is limited agreement in Russia on either the ends or the modalities of reform. But it is also that the constitution is perfectly designed to prevent the emergence of coherent structures of authority, both within Moscow and, as important, between Moscow and the rest of this vast country.

The G7 has at least provided the moral support for Mr Yeltsin that he wanted. The tragedy is that the G7 is at last showing serious commitment, as Russia sinks into ever greater disarray. Mr Fyodorov, the deputy prime minister, notes that Russia may remain unready for months. In the meantime, the G7 should not forget that some other countries of eastern Europe and the former Soviet Union deserve assistance no less, although they too would be greatly helped by a successful Russian reform.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy GOVT Government News CMMT Comment & Analysis P9311 The Financial Times London Page 17 526
Personal View: Japan must now say 'no' Publication 930416FT Processed by FT 930416 By JAGDISH BHAGWATI

When Shintaro Ishihara, the maverick Japanese politician and noted literary figure, wrote in anguish an essay asking the Japanese to learn to say 'no' to America's unceasing trade demands, it touched off a storm in the US.

Many in the US display symptoms of a 'diminished giant' syndrome in the face of Japan's rise as an economic superpower, just as the British did when Germany and the US emerged as rivals at the end of the 19th century. These symptoms are so severe that rational discourse about Japan has become nearly impossible.

The time has come for Japan to draw its line in the sand in response to the Clinton administration's plans to muscle its way to a new, tough-minded trade policy on Japan. This would set quantitative import shares (similar to those for semiconductors) as targets for Japanese industries and so seek 'results' in place of rules.

Japan needs to say 'no' to such demands, which rest on fallacious economics and are destructive of the rules-based world trading system that America's presidents have nurtured since the second world war. But this negative response needs to be combined with positive actions to establish Japanese leadership of the multilateral trading system.

The present US drive to expand 'managed' or 'results-oriented' trade with Japan, by setting quantitative import targets, derives from the conjunction of a false premise with an unpleasant fact.

The false premise is that Japan's persistent trade surplus is proof that its markets are closed: if manufactured goods could be sold to Japan, it is argued, the surplus would not exist.

The unpleasant fact is that the Japanese market for manufactured goods is open. It is even more open than those of the US and the European Community, both of which have made copious use of voluntary export restrictions (VERs) and anti-dumping and countervailing duties, the favoured instruments of protectionists today. Japan has largely abstained from using such measures.

This combination of the false premise with the unpleasant fact implies that Japan's imports must be restrained 'somehow'. The Bush administration, in principle sensible in trade matters, decided that the problem lay in Japan's unique cultural and institutional characteristics. The Clinton administration, generally intemperate about trade questions, has decided that Japan is incorrigible. Its preferred solution is to impose import targets.

Yet the underlying premise is wrong. It is wrong even though President Bill Clinton embraced it in his untutored remarks about Japan at his first press conference.

Students of economics should hardly need reminding that trade barriers, as distinct from macroeconomic policies, do not determine trade balances. But this is not an argument that can be easily sold to politicians. Where abstract arguments fail, examples might work instead. A graph of Japanese trade deficits and surpluses since the second world war would show an oscillation, as is true of most countries, even though its trade policies have become steadily more liberal. Americans should also recall that the US itself ran a trade surplus for many years after the second world war, even though the US was not particularly protectionist at the time.

Japan is being unjustifiably blamed. But its acceptance of import targets in response to a charge that is flawed in conception would be a still greater folly. As the semiconductor case has shown, such targets would be inherently arbitrary. There would also be no effective way for Japan to ensure that its private industries would fulfil them. The targets would also be seen as 'export protectionism', allowing any industry with political clout to secure guaranteed shares of foreign markets.

If the US were to obtain Japanese agreement to such targets, the EC would not be far behind. Soon, Japan's trade would be governed by politics, not by competition and rules. Success with an economically powerful country such as Japan would whet the appetite for use of the same policy vis-a-vis other, less powerful countries. The practice would spread as businesses, seeking guaranteed market shares abroad, pressured a complacent administration towards ever more managed trade.

Japan needs to be firmly 'rejectionist' when the Clinton administration makes a push for managed trade. It should learn from its semiconductor experience and heed the adage that if one gives way once, one will be asked to yield again. But Japan should also be positive. It should propose an international process to assess complaints of 'nullification and impairment' of trade obligations. Such a procedure should serve as a substitute for the establishment of import targets in industries where the US possesses only prima facie complaints, which it too readily treats as final proof.

The suggested process could be bilateral, as in the US-Canada Free Trade Agreement, or, better still, multilateral, as in the General Agreement on Tariffs and Trade. The process would, in turn, be available symmetrically to Japan as a complainant, a feature that is absent from the US Congress's favourite weapon: the 301 and Super 301 legislation of the Omnibus Trade and Competitiveness Act of 1988. The chance of such a role reversal would itself moderate the Clinton administration's enthusiasm for what would otherwise be one-way demands on Japan.

The Gatt is the right institution because it is based on symmetrical rights and obligations among its contracting parties. The Gatt has to be Japan's, and indeed the world's, ultimate defence against managed trade imposed by - and for the interests of - strong nations.

Japan's prime minister, Kiichi Miyazawa, has not, contrary to some assertions, held up the conclusion of the Uruguay Round. It was the EC's unwillingness to make agricultural concessions acceptable to the Cairns Group of agricultural exporting countries that was the main early stumbling block. At the same time, Japan has not given an energetic push towards concluding the Round either. Mr Miyazawa should use today's summit to proclaim that he is willing to compromise on opening rice markets.

Mr Miyazawa should also announce that his strategy would be to close the Round within the year and immediately have a new Round to pursue unfinished business, such as the interaction between liberal trade and environmental protection. On this issue Japan is already at the centre of the stage with its success at the Rio Earth summit.

Japan should say 'no' to the unreasonable and unwise demands for managed trade. But it needs also to say 'full speed ahead' to finishing the Round, to starting a new one and to strengthening the multilateral trading system, now in severe jeopardy.

The author is Arthur Lehman professor of economics at Columbia University, New York.

JP Japan, Asia US United States of America P9721 International Affairs P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs CMMT Comment & Analysis MKTS Foreign trade P9721 P9311 P9611 The Financial Times London Page 16 1137
Letter: GEC is also on British Rail's track Publication 930416FT Processed by FT 930416 From Mr DOUGLAS GADD

Sir, In his letter, 'BR should use leasing finance to buy British' (April 13), Mr Hugh Bayley MP says that ABB is the only British company that has the ability to produce modern aluminium bodied railway carriages.

This is incorrect. GEC Alsthom is currently building aluminium bodied trains for British Rail. These trains are being supplied to Network SouthEast where priority is being given to replacing old rolling stock.

GEC Alsthom does not itself manufacture aluminium body shells, which represent only about 10 per cent of the cost of the trains, preferring to source these from outside suppliers, including ABB's factory located in Mr Bayley's York constituency.

If GEC Alsthom secures orders for either InterCity or Network SouthEast trains, ABB will be given the opportunity to compete for the supply of body shells and other equipment.

On the other hand, if British Rail asks ABB to supply new trains, GEC Alsthom will offer to supply traction drives and power supplies which ABB does not manufacture in the UK.

Like Mr Bayley, I am hopeful that British Rail will soon be allowed to acquire new rolling stock to help underpin the future of the British Rail transportation manufacturing industry.

Douglas Gadd,

GEC Alsthom,

PO Box 70,

Mill Road,

Rugby,

Warwickshire

GB United Kingdom, EC P3743 Railroad Equipment NEWS General News P3743 The Financial Times London Page 16 243
Letter: Accomplices to Bosnia massacre Publication 930416FT Processed by FT 930416 From L HATFIELD

Sir, At last a leading political figure has come out publicly saying what many of us feel ('Thatcher attacks Hurd on Bosnia', April 14). Since the Bosnian crisis began, more than a year ago, we have seen a totally pusillanimous lack of response from this government - one excuse after another to do nothing. Yet to do nothing in the face of the daily overwhelming evidence of genocide is to be accomplices to this massacre.

To deny people the means to defend themselves is utterly unbelievable. We have the means to do much, yet we do virtually nothing - and absolutely nothing that works. Picking up the wounded, maimed and tortured people of Bosnia after the Serbs have done their worst is not an adequate response. We have a moral duty to do more, much more. Seldom can there have been such a blindingly obvious case of right and wrong.

What has this government done? We have a silence from John Major, a vacuous smile that echoes his total lack of policy across the board and will in this matter. And we have a foreign secretary, Douglas Hurd, whose utterances are truly disgusting, and a 'defence' secretary, Malcolm Rifkind, who sees scoring debating points as a substitute for action.

L Hatfield,

13 Armitage Court,

Sunninghill, Berkshire

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 16 246
Letter: EBRD: striking a wrong chord and reluctant to lend (2) Publication 930416FT Processed by FT 930416 From C R PEER and M COSTELLO

Sir, We refer to your timely article drawing attention to the low level of lending by the EBRD.

Many of our contacts in the Ukraine are convinced that the EBRD does not really wish to assist the Ukraine to develop its economy. Their conclusions are based on:

The reluctance of the EBRD to allow this republic to sell the products where it has a real economic advantage - eg agricultural produce and steel - in the EC;

The extreme difficulty in obtaining loans from EBRD.

We have already had meetings with the director of two Ukrainian factories which have had dealings with the EBRD and which feel that the bank has not given them any assistance. Indeed, in the case of the Black Sea Shipyard in Nikolaev, according to your article 'Old ways dull the call to a new Ukraine' (January 5), the EBRD justified its refusal to make loans to the shipyard on the grounds that Mr Yuri Makarov, the yard's director general, did not wish to build oil tankers instead of aircraft carriers; this cannot be true as the yard was already building oil tankers of 45,000 tonne dead weight and Mr Makarov pointed this out to us on our subsequent visit to his yard.

It appears that the EBRD is insisting on unrealistic conditions in particular on total privatisation at breakneck speed, before agreeing to make loans. If it maintains its present inflexible and bureaucratic approach, we fear that its overheads will exceed its loans for many years to come.

C R Peer,

Maritime House,

M Costello,

Costello Trading Consultancy,

Suite C, Office 6,

The Priory,

Haywards Heath,

West Sussex RH16 3SU

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 16 319
Letter: EBRD: striking a wrong chord and reluctant to lend (1) Publication 930416FT Processed by FT 930416 From Mr PETER BEDDOWES

Sir, We have learned to live with many of the excesses of the 'conspicuous consumption' society over the years, but the latest outbreak at the European Bank for Reconstruction and Development strikes a really inappropriate chord in these difficult times ('Spending at the European Bank', April 13). Such examples of apparent gross abuse of money supposedly destined for aid and re-development bring the whole process of international aid and development into question yet again.

It is particularly sickening for those of us who are conscientiously and carefully trying to help in the rebuilding of eastern Europe. For example, for the price of half a marble wall, Ashridge has provided in-depth management development for more than 200 top and senior managers from Czech and Slovakian companies and supported them in turning their visions into practical business plans and actions. The work is funded on a shoestring and thus, for example, can involve travel across Europe by road in order to save travel funds. Perhaps in future the bank might like to offer any spare seats in its executive jet to support development efforts like ours]

Peter Beddowes,

dean,

Ashridge Management College,

Berkhamsted, Herts HP4 1NS

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 16 235
Letter: Print claim Publication 930416FT Processed by FT 930416 From Mr COLIN STANLEY

Sir, Your attention-grabbing headline, 'Printers win 3.7 per cent rise' (April 14), hides the true facts.

Since national negotiations in this industry broke down on February 26, our member companies have been free to effect their own settlements in line with their own level of affordability. After six weeks of campaigning by the GPMU print union, only 20 printing companies have 'settled' at the level of the union's latest standard claim. There are several thousand other printing companies where no such settlement has been reached. Indeed, of those settlements recorded by the federation, more than two-thirds are below the level of the union's so-called 'minimum terms of settlement'.

Colin Stanley,

director general,

British Printing Industries

Federation,

11 Bedford Row,

London WC1R 4DX

GB United Kingdom, EC P2759 Commercial Printing, NEC NEWS General News P2759 The Financial Times London Page 16 152
Bosnia waits for Clinton Publication 930416FT Processed by FT 930416 By JOE ROGALY

ONLY President Clinton can stop the Serbs. If the job is impossible, at least he - and only he - is in a position to try. It is up to the United States to decide whether the artillery used against women and children in Srebrenica and elsewhere should be bombed. If - when - it does, its Nato allies will participate or acquiesce. Even the importunate Russians may do little more than protest. If a policy of arming the Bosnian Moslems is agreed in Washington it will not easily pass through the Security Council, but in the end it too may prevail.

In such circumstances there would be much wringing of hands in London. Grey-faced emissaries would be sent to Washington. Consider the dangers, they would cry. A rational response would be: yes, we accept that the immediate result is likely to be an addition to the Serbs' stores of munitions. So be it. They are already ample. We understand the exposed position of British troops who are bravely engaged in escorting the convoys that distribute food and medical supplies and extricate refugees. Very well, withdraw the troops. We agree that the medium-term effect might be the resurgence of Russian hostility towards the west. That is a serious risk. But the murders are taking place now, on network news, at peak hours. The possible worst consequence of intervening to stop them may never happen, or can be faced.

Lady Thatcher is aware of Mr Clinton's dilemma. When she was prime minister she soothed President Reagan as her task force steamed towards the Falklands. Two election victories later she strengthened the resolve of President Bush as he assembled his coalition in the Gulf. Thrown out, she taunted her successor from the sidelines until he evolved the plan to provide safe havens for the Kurds. Now, freed from the constraints of office, she is engaged in a passionate attempt to start a war to end the war in former Yugoslavia.

She has run her campaign on television - including, for good measure, breakfast TV in the United States. We cannot yet assess the strength of her appeal to American public opinion, but a fair assumption is that her clarity and evident strength of character will have won her at least some converts, especially in a week in which most of the world has been horrified by TV pictures of dead, dying and wounded youngsters. As to British opinion, the evidence is that there was support for her view before she uttered a word; it can only have increased since she spoke.

Her intervention this week has been magnificent. It has forced us to ask ourselves, 'where do I stand?' My answer is: 'full of dread, trembling at unpredictable consequences, but in the end nervously on the side of giving the Moslems the means with which to defend themselves.' For the former prime minister is right. We must not accept that no military counterforce can be deployed when a gang of warriors, acting in the name of national identity, commits every atrocity, every slaughter, in order to gain lebensraum on European soil. If we do, we are nothing.

It should be admitted at once that there is compromise and perhaps self-delusion in this stance just as there is falsity in the British government's pretence that a 'tightening noose' of sanctions will force Serbia to accept the Vance-Owen plan. For there is no serious call anywhere - not in the White House, not in Lady Thatcher's message, certainly not in Downing Street - for the deployment of active British or French or American troops on the ground. We may give the Bosnian Muslims the arms they need and we may risk our pilots in air strikes, but that, rightly, is as far as we are prepared to go.

It is for this reason that we should consider the 'do nothing' option before rejecting it. The case runs like this: short of a huge expenditure of outsiders' lives there is no power on earth that will prevent the Serbians from winning. There is no justification for piling up body-bags containing west European and American young men and women by taking one side in an ancient Balkan conflict. Such wars occur all over the world. They always have and always will. The greatest saving in human life will be achieved by standing aside and allowing the natural victors to achieve their ambitions in the swiftest possible manner.

That case was best put when hostilities first broke out. If there were to be injustices then, they would at least be the consequence of actions by the parties directly involved. The case was weakened when, at German insistence, Croatia was recognised. It was further diminished when, driven by public opinion, the arms embargo was imposed. That favoured Serbia, which commands the great bulk of the former Yugoslavian military force, plus equipment. The 'do nothing' argument was finally destroyed by the 'humanitarian aid' initiative, which assigned the task of assistant-in-chief to ethnic cleansing to the United Nations.

The initial American response, which was to regard the entire conflict as a European responsibility, allowed the European Community to blunder in, wreaking almost as much havoc with its unenforceable good intentions as the former Yugoslavs managed to create on their own. We outsiders are already involved. It is too late to pack up and go home.

This is not to say that Mr John Major's approach is, as Lady Thatcher implies, contemptible. The prime minister and the foreign secretary are painfully conscious of their responsibility for the safety of British troops. A parable retailed to me at second hand has Sir Peter Harding, the chief of the defence staff, warning the Cabinet of the logistical difficulties of sending troops to the Balkans. Mr Major is said to have leaned back and remarked 'you have thrown a grenade in my lap.' I cannot vouch for the anecdote, but its spirit reflects the prime minister's legitimate and understandable concerns.

Lady Thatcher would not have responded thus. So what? A petty squabble between the present and former leaders of the British Conservative party is insignificant when set against the screaming emergency in Bosnia. Mr Major is doing the job he is cut out to do. That does not embrace leadership of the Nato alliance or the western world. For such a task it is necessary to catch the public mood, or correct it. It is up to Mr Clinton to pick up the challenge, or deflect it with better arguments than have yet been put.

BA Bosnia-Hercegovina, East Europe US United States of America P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 16 1126
Letter: 'Guaranteed' means one thing and one thing only Publication 930416FT Processed by FT 930416 From Mr DAVID BUTLER

Sir, In her article 'Guarantees: are they worthless?' (Finance and the Family, April 3), Scheherazade Daneshkhu looked at building society 'promises' and concluded that many were either worthless or meaningless.

The loose manner in which 'guaranteed' has been scattered about financial advertising has also given us some concern here at National Savings. We pride ourselves that we pioneered non-risk, guaranteed rate products when we introduced National Savings certificates as far back as 1916. Ever since then we have used the word 'guaranteed' to mean one thing and one thing only - interest rates fixed and unchangeable for a specified period of time.

This is how we apply it in relation not only to savings certificates, but also capital bonds, children's bonus bonds, yearly plan and the recently revived first option bond.

The use of the term to mean a rate differential above another variable rate account (usually paying very low interest) is, in our view, a debasement of the language of finance.

Its use in relation to products where the interest rate is fixed but the capital is not guaranteed is also disturbing. The various different meanings assigned to the term can only serve to confuse and may actually mislead savers, who may be bewildered enough already as the institutions play musical chairs with their products.

National Savings will continue to use the term 'guaranteed' in the single sense of rates which are fixed for at least a year. We believe that other institutions would be doing a service to the public if they were to standardise their own usage to mean fixed rates offered on capitally secure products for a set period of time.

David Butler,

director of savings,

National Savings,

Charles House,

375 Kensington High Street,

London

W14 8SD

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 16 329
Arts: Today's Television Publication 930416FT Processed by FT 930416 By CHRISTOPHER DUNKLEY

Someone should write a PhD on connections between the age of television staff and the subject matter of comedies. In the 1960s when television was full of young people there were lots of comedies about young people sharing flats. As the broadcasters matured the popular subject became young families with children. Now, with a log-jam of 50-somethings in television, series are about dealing with senile parents, grown up children, and marriage breakdown. Whether ITV's new comedy, Conjugal Rites, fits into this pattern we shall see. We are told it is about a couple's struggle to stay together after 21 years of marriage. Gwen Taylor and Michael Williams play the husband and wife (8.00). Anglia's police series The Chief deservedly gets another series. In the first batch Tim Piggott-Smith played, not a detective up against city hall, but a chief constable up against the conservative Establishment. At the start of the new series (9.00 ITV) he is about to accept a post with Europol in Brussels. Also starting another run is BBC2's Have I Got News For You, an idea pinched from Radio 4's 'News Quiz'(10.00 BBC2).

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services & Services use P7812 The Financial Times London Page 15 219
Arts: 'Real Time' from Israel - Theatre Publication 930416FT Processed by FT 930416 By MALCOLM RUTHERFORD

The Tmu-Na Theatre of Israel has arrived in Hammersmith and confirms the company's reputation for passionate intensity. The acting is also full of conviction. If you want to see writhing bodies against a musical background in a bar in Tel Aviv on the eve of the Yom Kippur war, here is the opportunity.

You may see something else besides: an excellent company groping for a play. Possibly one is too far outside the culture to appreciate them, in which case I apologise. I saw some wonderful productions in Israel last year, but my impression even then was that the Israelis have developed a talent for acting and directing without producing the scripts to match. It was explained to me that the Israeli theatre suffers from self-censorship: it is unable to write directly about contemporary questions, such as relations between Jews and Arabs and what is happening on the West Bank. What it can just about do is to write about relations between Israelis: newcomers and old hands.

Real Time has a shot in that direction. Almost the first line is the best. 'I didn't talk for a year after I came to Israel,' says a Russian immigrant working as the caretaker of Eva's Bar. He was afraid of saying the wrong thing, making mistakes in the language or generally being misunderstood. 'All countries hate foreigners,' he adds.

The rest never lives up to that. The fact that it is set on the eve of the Yom Kippur war is about as trite as another play on the night that Kennedy died: more nostalgia than comment. There is a lot of quite attractive sexual sleaze: four women to two slightly decrepit men. Some of it takes place on and around a lavatory bowl, prominently set backstage centre. One wondered why. If it is satire, it is heavily coded. It looks like outmoded trendiness.

Tmu-Na is Hebrew for images in motion. The company was founded in 1982 by Nava Zukerman who wrote and co-directs Real Time. If the company had a real play, it could be terrific.

Lyric Studio, Hammersmith until May 1 (081) 741 2311. Then on to Glasgow Mayfest

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 15 393
Arts: Ohana and Dutilleux - Wigmore Hall recitals Publication 930416FT Processed by FT 930416 By MAX LOPPERT

Paul Roberts's latest London piano recital, at the Wigmore Hall on Tuesday, was given in memory of the composer Maurice Ohana, who died last year at the age of 78. The tribute was richly deserved.

Born in Casablanca of Andalucian ancestry, a British passport-holder (his father had once been resident in Gibraltar) who spent his adult life in France, Ohana produced a mature compositional voice which, while not disguising the marks of his exotic upbringing nor denying the potent influences of Debussy and Falla, remained singularly and fascinatingly his own. The New Grove calls him a 'fiercely independent figure' - rightly so, since he steered rigorously clear of the cliques and fashions that dominated French music in the postwar period and yet managed never to fall prey to backwater obsessiveness, smallness of vision, or eccentricity.

Roberts, a noted Debussyan who became Ohana's favoured pianist in the last decade of his life, played here six of the Etudes d'interpretation that Ohana wrote for him. Each of these is brilliantly written to exploit - as are Debussy's late Etudes, the obvious starting-point - a particular facet of pianistic technique; each transports the listener into a world of Mediterranean air, light and artistic perception, clean, sensually unabashed, on occasion bracingly harsh.

Melodic lines emerge sharply profiled, often curlicued with the ornate tracery of North African cantillation or Andalucian folk song. (In the most striking Study of Roberts's selection, 'Main gauche seul', a sinuously weaving line for the left hand preserves its independence through all manner of decorative impositions.) There is a constant sense of Ohana's hard-edged, non-European, sometimes jazzy vitality extending and developing the Debussy pianistic canvas.

Roberts, a superbly under-the skin interpreter of these pieces, also played selections of Debussy, including glittering yet firmly ordered performances of three Studies, and a bold one of Falla's magnificent Fantasia baetica. The programme was satisfying both in parts and as a whole, above all because of the intelligence and precise sense of style with which it was delivered.

Another distinctive senior figure of French music, Henri Dutilleux (b. 1916), figured in the recital of the Ysaye Quartet at the Wigmore the following evening. His 1977 string quartet - subtitled 'Ainsi la nuit', a short (17 minutes), tightly packed piece - speaks the languages of Bartok and Webern yet with a highly 'personal' mode of utterance.

Minute cells, flourishes pile up; the virtuosity of the string writing is remarkable both for its firmness of purpose and for its lack of ostentation. The young French quartet, who since their victory in the 1988 Evian competition have picked up an international career and a Decca recording contract, played 'Ainsi la nuit' with a devotion sadly missing in their brusque, jerky accounts of Haydn (Op. 74 no. 1) and Beethoven (the F minor, Op. 95) earlier in the concert. Even their Mendelssohn A minor, more suavely disciplined, seemed oddly airless and unloving.

The Ysaye Quartet concert was sponsored by Banque Paribas

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 15 527
Arts: Wilde's 'Happy Prince' to music - Theatre Publication 930416FT Processed by FT 930416 By ANDREW ST GEORGE

Oscar Fingal O'Flahertie Wills Wilde (1854-1900) also wrote short stories. The Happy Prince is the subject of an enchanting musical at the Old Fire Station, Oxford. A cast of four, a small band, minimal scenery, it is the quintessence of Wilde's apercu that art should aim to conceal the artist while revealing itself. It makes a fine evening: no sex, no violence, no reality.

Sue Casson's light score loosely follows Wilde's story. A statue prince and a migrating swallow help relieve the poverty of a town outside a regal palace; the swallow distributes fragments of gold and gems from the statue, pecks out its sapphire eyes to give away, and the two fall in love as the swallow freezes to death in winter. Wilde left the moral open.

The musical flickers between Wilde's fable and musical-verite, of the City of Angels type, where the show draws attention to its own construction. The first number, 'Warm-Up', and the later 'The Tricks of the Trade' are about theatrical illusion; and since Wilde has been modernised, there are sharp contemporary jokes, including Dorothy Parker's line about running the whole gamut of emotions from A to B.

Director Tom Blackmore and the cast (John Herriman, Mina Anwar, Andrew Bolton, Sue Casson) produce strong performances, but the voices sometimes fail to meet the demands of Casson's wordy, witty score. The finest numbers are the lulling 'Twilight City' where the swallow circles down en route to warmer climes, and the beautiful soaring 'Swallow's Lament' duet between the statue and the bird. Act two opens with a superb 'The Crowd Scene' which peoples the theatre musically rather than bodily, four different melodies making the stage teem with life.

The Old Fire Station, Oxford until April 24 (0865 794494)

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 15 327
Arts: Ian McQueen's 'Fortunato' - Opera in Scandinavia Publication 930416FT Processed by FT 930416 By PAUL DRIVER

Ian McQueen, though celebrated in Sweden, remains a relatively little known composer in his native Britain. Born in Glasgow in 1954, he studied at the Royal College of Music, then with Maxwell Davies and in Denmark, where his Scandinavian connections began, with Per Norgard. He wrote a one-act opera - Judit och Holofernes - for the season at Vadstena Castle, Sweden, in 1987. The success of this hard-hitting but lyrical piece led to a commission for a three-act opera in Swedish from Norrlandsoperan. Several years in gestation, Fortunato is now completing a triumphant run of (21) premiere performances at the converted fire-station in Umea which houses this most northerly of opera companies and one of the most enterprising.

Umea is a medium-sized university and medical town (average age, 35) that culturally serves an area extending up to and beyond the Arctic Circle. That it has an opera company at all, never mind one that commissions new work from foreigners, is due firstly to a central government decision of 1974 to spread artistic goodness to the regions. But Umea's specific success is the boldly imaginative spirit of its successive chiefs, Arnold Ostman and, since 1988, Per-Erik Ohrn.

Ohrn receives a total of Pounds 3.6m in central, regional and civic subsidies, with which he stages two major productions a year and undertakes a substantial amount of touring. An all-round man of the opera-theatre he has pursued enlightened creative aims, and no-one could be less provincial in attitude. British directors such as Clare Venables (Figaro) and Matthew Richardson (Midsummer Night's Dream) have worked at Umea. Richardson returns as Fortunato's director; its designer, Jon Morrell, is also British; its conductor, Gary Berkson, is American; and its librettist, Vanda Monaco-Westerhal, Italian.

Ohrn's current ambition is to expand Norrlandsoperan into a four-town federation along the lines of Opera du Rhin in Alsace, thus engendering an annual total of eight new productions for the region, which would be swapped around. Meanwhile, activity is concentrated inside the metal-fronted, unpretty but versatile Umea building, with its shoebox auditorium seating 250 and its single admission price of Pounds 20.

At the performance of Fortunato which I attended the house was full, the average age half that of the town, and the final acclamation was overwhelming. Foreigners though they be, McQueen with his music and Monaco-Westerhal with her story and text have evidently found a way of speaking to their Swedish audiences with vibrant directness. So much so that the critic of one national newspaper has pleaded for this work to be chosen to open the new opera house in Gothenberg. The story, with its Peer Gynt-like protagonist and his picaresque experiences in a medieval world of sleaze, violence and opportunism has a message no doubt for the Sweden of today; but it is a thoroughly archetypal brew, susceptible of any number of interpretations, religious, sexual, political.

Both creators have been able to sustain their epic - their 'comedy beset with tragedy' - without narrowing its focus to specific issues but without ever losing our interest. Fortunato is, in short, a true work of art, at once ambiguous and inevitable-seeming. McQueen's musical language blossoms here as never before. He is a composer who has survived early exposure to ravaging post-war stylistic complexity and achieved a most personal and mettled directness of utterance. His manner is eclectic but not essentially allusive: he uses a great variety of means, from the tonal to the electronic, but only in order to say what he has to say, never in a spirit of irony or cultural tourism. Even when he writes for Handelian coloratura soprano, it is with the purpose of thus expressing the icy detachment of a mysterious 'Woman on the Mountain' (Monica Sjoholm,) not to provide a parodistic knees-up.

This and most of the other solo lines are sensitively devised for the voice. His ensembles, of which there is a generous supply, are richly textured; the tutti finales of the first two acts have an astonishing sureness of touch, a genuinely cumulative power. His choral writing is zestful and catchy. But it is his orchestral writing that marks out the opera's high points: the extraordinary declamation for unison high violins which accompanies conscience-stricken Fortunato (confined by Richardson in a coffin-sized box) at the outset of Act 2; the wordless love duet for the semi-supernatural couple Voland and Mariella, which has the frankness of a pop-song and the lyrical afflatus of later Tippett.

If the creative team was foreign, the singing strength was powerfully Swedish. The remarkable Mikael Bellini in the title role had an easy vigour which intimated a whole new world of operatic naturalness for the counter-tenor voice. Mezzo Carina Strandberg gave us a sumptuously impassioned Mariella. Baritone Peter Mattei's Voland was simply bursting with vocal vitality and stage presence. Morrell's endlessly adaptable stony box-set was admirable and Richardson's direction signally assured. Berkson conducted a performance that was all fluidity, confidence, and glowing happiness. Fortunato simply has to be staged in Britain.

SE Sweden, West Europe P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 15 865
Arts: Royal views of Windsor Castle - Susan Moore reviews the work of Thomas and Paul Sandby Publication 930416FT Processed by FT 930416 By SUSAN MOORE

One of the major consequences of the Queen's 'annus horribilis' has been an increase in public debate abut the Royal Collection. The ill-informed have been tempted to speculate that the Queen might start selling off works of art to pay the tax man. Yet a splendid if unassuming exhibition at Windsor comes as a timely reminder that the collection is growing, albeit modestly.

Since the number of paintings, drawings and watercolours is an awesome 10,000, 20,000 and 30,000 respectively, some say that the collection is big enough, while others press for contemporary acquisitions. As it happens, portraits of the current holders of the Order of Merit are in the process of being commissioned, and recent additions to the already rich holding of Sandby drawings of Windsor represent a special case.

Amid the throng of tourists gripped by the Changing of the Guard and the burnt-out shells of rooms ravaged by the recent fire, the new drawings gallery is a haven of tranquility. It has been formed out of a Georgian Gothick lobby that led to the Grand Staircase before Wyattville remodelled the castle for William IV. A gallery has been there since the 1960s, but it has been transformed by the designs of Alec Cobbe into an environment that is both intimate and grand. Drawings are shown to striking advantage on Gothic screens against dark burgundy damask.

As a topographical draughtsman to the Duke of Cumberland, and then Deputy Ranger of Windsor Great Park, Thomas Sandby was resident at Windsor for much of his life. His views of the castle and its environs, along with those made by or in collaboration with his younger brother Paul, constitute an unparallelled record of Windsor and the development of the Great Park in the second half of the 18th century.

Grand, showy gouaches by Paul open the show. Three out of the four are relatively recent acquisitions and, given their fragile condition, may never be exhibited elsewhere. The clarity of light and artfully casual distribution of figures in his delightful 'The North Terrace looking east', suggest why Canaletto should have been so readily collected by the British - and bring to mind the gouaches of his fellow Venetian Marco Ricci.

Thereafter, we move between Paul and Thomas, and sheets that can only be read as a combination of their talents. Few works are signed and even signatures need not always tell the whole truth, but it seems reasonably clear that the most ravishing of all the sheets, those carefully pencil-drawn and subtlely washed prospects of the castle and the untroubled landscape beyond, are the work of Thomas. Their meticulous mapping of every tree, field, turn in the Thames - almost every roof tile - mark them out as the productions of the trained military topographer who was to become the first Professor of Architecture at the Royal Academy of Arts. In one masterly panorama, a sign undecipherable to the naked eye offers 'Coffie and Tea' in the old guardroom.

Figures appear to have been largely Paul's responsibility. Here are one or two larger-scale studies of the personalities found in the Duke of Cumberland's household in the 1750s. Thus we find Bob Dun, one of the Duke's gardeners, 'a most facetious fellow', Voules the bailiff, the steward and an un-named negro servant. More usually, however, the figures are simply staffage, there to be busy in the Moat Garden wielding watering cans or to stand guard in immaculate and picturesque uniforms.

Even in this small selection, numbering a slim 28 sheets and representing perhaps a tenth of the collection, there is considerable evidence of unevenness. Thomas is seen to best advantage in a series of masterly panoramas, and more modestly at work designing various rustic structures like the root house and the rockwork bridge for the Great Park. Paul is shown capable of bravura gouaches but also of a coarseness of touch which is even more pronounced beside the precision and delicacy of Thomas.

It is not easy to judge this show purely on its artistic merits, or on its historical interest. It is impossible not to be seduced by what comes across as a cloudless golden age before the castle was troubled by the Heathrow flight path and the bad weather John Piper found there during the war.

One note of high drama reminds us of the present more than the past: Paul's spectacular watercolour and gouache of 'Windsor Castle on a Rejoicing Night'. Shooting fireworks confected out of flecks of gold paint light up the night sky and a massive gold and pink-tinged bonfire ominously silhouettes the Winchester Tower and sends out billowing black smoke. And the presence of a drunken man being half-carried away from the revelry suggests that Saturday nights have not really changed all that much.

The exhibition continues at Windsor Castle until October 3

GB United Kingdom, EC P8412 Museums and Art Galleries NEWS General News P8412 The Financial Times London Page 15 849
The Property Market: Farmers' barren landscape - The long-term outlook for agricultural land values remain uncertain Publication 930416FT Processed by FT 930416 By VANESSA HOULDER

Have Agricultural land prices in the UK hit bottom? After three dismal years, some agents believe the land market is set for a tentative recovery.

'The feeling is that we are at a turning point,' says Mr Jim Ward, head of research at Savills, the chartered surveyors.

Farm values have dropped by as much as 50 per cent in real terms since their 1980s peak but as the Royal Institution of Chartered Surveyors says, 'there are signs that the recent decline in farm values is coming to an end, as lower interest rates relieve the burden on hard-pressed farmers.'

Any recovery will be from a low base. Values are at their lowest for a decade and, in real terms, at their lowest for 30 years. But the decline has been far from steady: agricultural land has been a particularly volatile sector of the property market.

In the 1970s, land values rose steeply as a result of a large increase in farm profitability, stemming from increased production yields and higher EC support for farm prices. Land values were forced up by greater demand for land from financial institutions, largely in the belief that property was a good hedge against inflation.

But by the early 1980s, the EC's Common Agricultural Policy was producing food mountains - and a constant stream of criticism. Brussels instigated reforms in an effort to control production and curb costs, leading to progressive cuts in the prices of farm produce. The resulting constraints on farm income, coupled with lower inflation, sharply reduced potential investors' appetite for land.

This decline in demand for land was briefly reversed in 1988, when land values shared in the general inflation of asset prices. Values were boosted by new investors who relished the prospect of life in the country. Prices paid for residential farms in the south and west of England rose by 40 per cent between 1987 and 1989.

But once recession took hold in 1989, drying up the supply of new investment, prices began to nosedive. At first, this decline was reinforced by further pressure on farm incomes. But in 1991, there was a modest improvement in incomes; the Ministry of Agriculture calculates that in 1991 farm incomes rose by 1.1 per cent, a drastic revision of its earlier estimate that incomes had fallen by 14 per cent to their lowest level since 1945.

Farmers' fortunes again improved last year. Poor weather, uncertainty about CAP reforms and the stalled talks on liberalising world trade under the Gatt Uruguay Round resulted in a mood of despondency among farmers.

The gloom was, in part, ill-founded. Farmers' incomes rose by 23.6 per cent as a result of a devaluation of the 'green pound' - the currency used in EC farm trade - following the UK's exit from the European exchange rate mechanism in September and the subsequent easing of British interest rates. A lower interest burden transformed the profitability of many farms.

But the respite may be temporary. The agricultural land market is still in the throes of immense uncertainty and change. The benefits from the devaluation will be eroded in the next few years as inflationary pressures on imports drive up costs.

Longer term, there is concern about the level of subsidies to farmers. The set-aside scheme introduced last year by the EC (designed to take 1.5m acres of farmland out of production, an area slightly larger than Lincolnshire) involves large subsidies to compensate farmers. In the long term, some farmers are concerned about how long this official support can be sustained.

The future of farming subsidies is a complex issue concerning EC policy, international trade negotiations and public finances. Any possibility of withdrawing support creates alarm in the farming lobby, which argues that falling prices could make farming uneconomic in some areas and lead to its abandonment over large parts of the country.

'Agriculture cannot be turned on and off like a tap,' says the Royal Institution of Chartered Surveyors. Once farming has been run down and farmland abandoned, it would be difficult to reverse the situation in the event of an upswing in demand.'

But critics of the set-aside subsidy believe that falling land values would merely cause temporary hardship while the removal of subsidies could lead to less intensive and more environmentally-friendly farming. Cheaper land would reduce farmers' needs for such high returns, according to the Council for Protection of Rural England.

Likewise, Friends of the Earth, the environmental lobby group, argues that the real problem is not a surplus of land but rather that land is farmed too intensively.

Friends of the Earth is opposed to taking land out of production because of uncertainty about climatic change, the possibility of a national emergency, and the likelihood that intensive methods of production may be severely eroding topsoil and contaminating ground water. 'We do not believe we should be relaxing strategic reserve of land in the UK,' says Mr Robin Maynard, countryside campaigner for FoE.

Conservationists are also concerned about the alternative uses to which land is put once taken out of production. They are fearful that allowing more development in the countryside would create a knock-on demand for new roads, housing and shops.

But others believe that agricultural land can be put to better use. 'Are we right to agonise over every last acre of rural land when, after the CAP reform package is implemented, so much will lay idle?' asked Mr Christopher Jonas, president of RICS in a speech in the House of Lords in December. Mr Jonas criticised the 'almost pathological fear of development in the countryside.

'All evidence points to the fact that most of us would prefer to work in a more rural environment. With improved transport links and new technology, this is increasingly practicable,' he said. The trend is to permit more uses for agricultural land as businesses and people move to the countryside. This view won official support early last year when the government told local authorities that 'little weight need normally be given' to the loss of farm land of moderate or poor quality - which makes up two-thirds of Britain's agriculture land - when councils draw up their development blueprints.

The government's attitude to development in the countryside shows that the value of agricultural land is not wholly dependent on the state of the agricultural industry. This, together with brighter prospects for farm profits over the next few years, might give some support to land values.

But hopes of a revival are tentative. And looking ahead, there is immense uncertainty about the prospects for rural land values.

GB United Kingdom, EC P6552 Subdividers and Developers, Ex Cemeteries CMMT Comment & Analysis P6552 The Financial Times London Page 14 1140
Technology: How to disable a virus Publication 930416FT Processed by FT 930416 By CLIVE COOKSON

Researchers in the UK unveiled a new approach to vaccination at a medical conference in the US last month.

The scientists from Cambridge and Sheffield Universities and Cantab, a Cambridge biotechnology company, have discovered how to disable a virus in such a way that it can activate a full immune response but not spread within its host.

The DISC (Disabled Infectious Single Cycle) approach is being developed first for herpes. By deleting one gene (for glycoprotein H) the scientists have created a virus which is capable of only one complete round of replication but which looks normal to the host cells.

Animal studies show that the DISC herpes virus can protect successfully against infection. It induces protective immunity much more effectively than vaccination with conventional inactivated virus.

Now Cantab plans to move on to human clinical trials, probably starting next year.

Alan Munro, Cantab research director, says the company wants to produce a vaccine against HSV-2, the virus that causes genital herpes. It could prevent infection in the first place or it could stop the symptoms recurring in people who had already become infected.

Although there are competing technologies for making vaccines by disabling or attenuating viruses, the Cantab scientists believe DISC gives the fullest range of immune responses - and therefore the best protection against infection.

In principle, it should be possible to extend the DISC approach to vaccines against other viruses.

'We're thinking about other potential targets,' Munro says.

'Selecting targets is always a combination of assessing clinical need and technical feasibility.

'Unfortunately the technical problems with the viruses where the need is greatest, such as HIV, are quite substantial.'

Cantab GB United Kingdom, EC P2834 Pharmaceutical Preparations P8734 Testing Laboratories P8731 Commercial Physical Research TECH Products & Product use P2834 P8734 P8731 The Financial Times London Page 13 316
Management: An antidote to high health costs - Increased claims are the latest threat to insurers battling to contain medical bills Publication 930416FT Processed by FT 930416 By ALAN PIKE

Cost increases are the biggest potential killer of private healthcare in Britain. Controlling them is now as important an issue for private health insurance managers as generating new business. But just as the insurers were congratulating themselves on their progress in containing hospital costs another problem has arisen.

'Cost increases are not now being driven by rises in healthcare prices, but by the increased frequency with which insured people are having treatment,' explains Arthur Large, managing director in charge of membership at Bupa, the biggest private healthcare group. Last year Bupa's average claim costs rose by 9.6 per cent - 7.2 per cent resulting from an increased frequency of claims.

The latest trend is in contrast with the recent improvement which has been made in curtailing actual medical bills. Recent tough negotiations with hospital operators have begun to pay off. Innovations such as procedure pricing - hospitals agreeing to perform all operations of a particular type, such as hip replacements, at a single set price - have broken the traditional pattern of medical costs rising faster than general inflation.

Roy Forman, managing director of Private Patients Plan, the second biggest medical insurer, said when announcing his annual results last month that PPP had 'made more progress in the important area of claims cost management last year than we did in the whole of the previous decade.'

The striking growth in claims has many possible explanations, not all directly clinical. People with private medical insurance sometimes still use the National Health Service for routine treatment; this seems to be happening less, however, after several years of publicity about waiting lists and funding problems in the public sector.

Fundholding GPs, who finance their patients' NHS care from overall set budgets, have an incentive to encourage individuals with private health insurance to use it. Last year's sharp growth in claims will have included some employees who feared redundancy and sought treatment while still members of their employers' schemes.

Despite these factors, though, Bupa managed to reverse the industry trend in its corporate business sector - covering bigger companies - where the frequency of claims showed a slight fall.

The stabilising of corporate claims reflects attempts by Bupa to persuade client companies to manage healthcare schemes more actively. Companies are advised to appoint a specific manager to administer schemes and handle employees' claims. They are urged to consider levying excess charges on employees - people may think twice about opting for treatment if they have to pay part of the cost themselves.

Bupa has now advanced from this package of common sense advice to a more sophisticated Care Support Service for corporate clients and their employees. It offers Bupa a hope of managing costs by discussing possible options with patients before treatment begins.

Employees of companies in the Care Support scheme telephone a helpline staffed by Bupa nurses once they have been referred to consultants by their GPs. This gives Bupa the option, in appropriate cases, of suggesting that patients consider day-case surgery, one of the biggest cost-saving measures currently available in hospitals. Day-case surgery saves around 30 per cent on typical costs by avoiding the need to keep patients in hospital beds overnight.

Hospital accommodation and nursing charges amount to more than 40 per cent of total insurance claims - a night in a private hospital room will usually cost between Pounds 180 and Pounds 280. When an in-patient stay is necessary Bupa nurses will, with patients' permission, discuss home-care needs with their consultants and organise nursing and domestic support to meet them.

Around one-third of large companies insured by Bupa are already enrolled in Care Support. It treads delicate ground - Large and his colleagues know patients want to be sure decisions about treatment are made on medical grounds, rather than to meet the cost-control desires of an insurance company. To help provide reassurance, the scheme contains provision for a second specialist opinion for patients undergoing surgery.

But there are prospects of schemes such as Care Support turning everyone into winners. Health managers like day surgery because it is cheaper. Companies will like it if it helps keep premium increases down (premium increases for Bupa's company schemes have been 7 per cent during the past year - half the level of increase for individual customers). Patients like it because it avoids having to stay in hospital unnecessarily. And many doctors say that, for appropriate procedures, day surgery results are better those of conventional methods.

GB United Kingdom, EC P6321 Accident and Health Insurance P6324 Hospital and Medical Service Plans P6331 Fire, Marine, and Casualty Insurance P8062 General Medical and Surgical Hospitals COSTS Service costs & Service prices P6321 P6324 P6331 P8062 The Financial Times London Page 13 814
Technology (Worth Watching): Producing every golfer's dream Publication 930416FT Processed by FT 930416 By DELLA BRADSHAW

The latest in computer-aided design technology has been combined with some of the most novel research in polymers to produce every golfer's dream - a more accurate golf ball.

Developed by Spalding in the US, the 'Magna' ball is 2 per cent larger than traditional balls but complies with the game's weight rules. The Magna has a softer core and a thicker covering of Spalding's 'Zylin' polymer and larger dimples on its surface. Spalding says these changes give the golf ball an advantage of 11 to 17 extra yards on a drive. Spalding: US, 413 536 1200; UK, 0954 781672.

Spalding US United States of America P3949 Sporting and Athletic Goods, NEC TECH Products & Product use P3949 The Financial Times London Page 13 140
Technology (Worth Watching): Fewer dealers upgrade technology Publication 930416FT Processed by FT 930416 By DELLA BRADSHAW

The overall demand for dealing room technology is showing little signs of recovery, according to Kimsey Consulting's annual survey of the UK market. Twenty per cent fewer firms than this year are expected to upgrade or replace their systems in the next 12 months. Despite this, the market for dealer boards will increase substantially to be worth more than Pounds 30m this year.

When asked to rate information vendors, dealing room managers placed Reuters at the top of the list, displacing Quick which has held the top position for the past four years. Kimsey Consulting: UK, 081 429 2450.

GB United Kingdom, EC P7375 Information Retrieval Services P7373 Computer Integrated Systems Design RES Facilities P7375 P7373 The Financial Times London Page 13 137
Technology (Worth Watching): Engineering an efficient car Publication 930416FT Processed by FT 930416 By DELLA BRADSHAW

With increasing environmental pressures on the motor car, engine makers are trying to improve the efficiency of the internal combustion engine while reducing emissions.

Ricardo Consulting Engineers, the engine and transmission specialist, has developed a combustion system for engines which, it claims, reduces fuel consumption by up to 12 per cent while radically reducing the levels of waste oxides of nitrogen.

The CCVS (combustion control by vortex stratification) system recycles inert exhaust gases back into the system. Previously, exhaust gas recirculation resulted in an increase of emitted hydrocarbons and high fuel consumption. CCVS keeps the waste gases separate from the fuel and air mix, which means the air and fuel burn cleanly. Ricardo: UK, 0273 455611.

Ricardo Consulting Engineers GB United Kingdom, EC P3519 Internal Combustion Engines, NEC TECH Products & Product use P3519 The Financial Times London Page 13 156
Technology (Worth Watching): From sludge to compost Publication 930416FT Processed by FT 930416 By DELLA BRADSHAW

A method of turning sludge from sewage treatment plants into agricultural compost has been developed by the French company Leas, of Saint-Ismier.

The first phase of the process is to extract the sludge and remove most of the water and then add this to bark, sawdust and household waste to improve the consistency and increase the proportion of carbon. Air is then circulated through the mixture to create oxidation so that the organic matter breaks down. The mixing and oxidation process is computer-controlled and can be remotely monitored using a modem and telephone line. Leas: France, 76 52 13 30.

Leas FR France, EC P2875 Fertilizers, Mixing Only TECH Products & Product use P2875 The Financial Times London Page 13 136
Technology (Worth Watching): A testing mix for the drinks industry Publication 930416FT Processed by FT 930416 By DELLA BRADSHAW

Many people have ordered an expensive brand of whisky or brandy in a bar only to suspect that the bottle has been topped up with a lesser - and cheaper - brand. What is bad news for the customer can be catastrophic news for the drinks maker, as such tactics reduce its credibility.

To help traders ensure only their products are sold under their name, Biocode of Nottingham has developed a marking system which can be added to the liquor in just three or four parts per billion. Antibodies to these markers are then developed which react with it - by changing colour. By removing a trace of the liquor and mixing it with the antibodies it is possible to tell if the drink has been tampered with. Biocode: UK, 0904 430616.

Biocode GB United Kingdom, EC P2899 Chemical Preparations, NEC TECH Products & Product use P2899 The Financial Times London Page 13 172
Management: Banking on satisfaction - How Lloyds is trying to improve service standards Publication 930416FT Processed by FT 930416 By JOHN GAPPER

If you telephone a branch of Lloyds Bank and it rings five times before there is a reply; if the person who answers does not introduce him or herself by name during the conversation; if you are standing in a queue with more people in it than the number of open tills, then something is wrong.

If any of these things happen, then the branch is breaching standards of customer service set by the bank since last July. The idea of a British bank having such mechanistic measures of customer service is far from traditional. Yet Lloyds feels it has little choice but to change its ways.

As banks try to devise new charges to raise income from customers, they are confronted with increasing alienation. An internal survey at Lloyds found that while 73 per cent of bank customers were happy with their bank in 1987, the figure had dropped to 61 per cent by last year. This is a dangerous trend because many banks have invested in subsidiaries such as life insurance operations companies to try to sell more to their customers. 'It is a truism that you can only sell to a customer who is satisfied with the service he is getting,' says Clive Kenyon of Lloyds.

Kenyon is trying to ensure customers are more satisfied with Lloyds than in the past. He is in charge of the 'service challenge', which was launched in the bank's 1,888 branches last summer after being tested in 55 branches in 1990. The initiative will be developed throughout this year.

The reasoning behind it is simple. The bank hopes to raise the level of service by setting 'core' standards every branch must meet and supplementing them with local targets. These standards are being measured by a range of methods including customer surveys and staff questionnaires.

Kenyon argues that Lloyds underestimated the impact of poor service before because it could not measure service as easily as the loan mistakes that appear as debt provisions in annual accounts. 'A bad loan is a very obvious cost, but a mistake in a pamphlet can be just as damaging,' he says.

The emphasis on measurement means the bank's new standards are deliberately unexotic. Things such as the speed at which calls are answered can be quantified fairly easily. 'We just want to encourage polite, efficient service,' says Kenyon.

The bank has tried to encourage participation from staff by allowing groups of employees working in teams in branches to set their own additional standards. 'They can choose, but it has to be something that has an impact on customers, not just watering the plants twice a day,' he says.

Lloyds already has evidence of the impact. Customers were more satisfied with pilot branches in 1991 than with others. Furthermore, since the initiative was launched nationally in the summer, average satisfaction with branch service has risen five points on a 100-point scale to 81 points.

The bank is monitoring the impact using four methods, two of which are customer surveys. There is a 'first impressions' survey of all new customers. There is also a general survey carried out every six months which seeks the views of a weighted sample of 350 customers per branch.

The other two methods are more eclectic. A survey company telephones each branch anonymously twice a month to test how staff respond to inquiries about products. Finally, a quarter of each branch's staff answer a monthly questionnaire about the bank's products to test their knowledge.

Kenyon says this is not intended to create competition among branches. But it is watching branches that underperform, helped by 24 managers who monitor the initiative. It is not only angry customers who are keeping Lloyds' staff under closer scrutiny than ever before.

Lloyds Bank GB United Kingdom, EC P6021 National Commercial Banks MGMT Management & Marketing TECH Services & Services use P6021 The Financial Times London Page 13 672
Technology: Chasing the current - A new engine that outperforms standard induction motors across the board Publication 930416FT Processed by FT 930416 By ANDREW BAXTER

There can be no tougher challenge for inventors than to break into an industrial market with established players worldwide and a mature product that has been refined and improved over many years of development.

It is hard enough persuading manufacturers that your invention both works, and works better than the existing product, says Peter Lawrenson. But getting them to change their product line is even harder.

Lawrenson is founder, chairman and chief executive of Switched Reluctance Drives, a small Leeds-based company which is trying to penetrate one of the oldest and most mature product sectors in engineering - electric motors.

Over the past 25 years, Lawrenson and his team have had an uphill battle convincing the electric motor industry that the so-called switched reluctance (SR) motor can outperform standard induction motors across the board - in efficiency, speed, torque, reliability and robustness.

Now, after spending Pounds 35m, an academic idea has been turned into a business whose managers can begin to foresee - through licensing, joint ventures and other deals - the taking of substantial shares in several parts of the world electric motor market, worth Dollars 30bn-Dollars 40bn (Pounds 20bn-Pounds 26bn) a year in total.

'There are several areas where SR drives could get a 20 per cent market share,' says Lawrenson. 'Ultimately, when SR drives are totally established, the share could be as high as 50 per cent.'

Standard electric motors work through the inter-relationship of two magnetic fields generated by electric current passing through coils in the rotor (rotating part) and stator (static part) of the motor.

An SR drive, too, has a rotor and a stator, but the rotor is, effectively, a solid piece of iron - it is made of a large number of laminations of iron - and does not carry a current.

The idea, says Lawrenson, is to exploit the fact that the forces from a magnetic field on the iron in the rotor can be many times greater than those on currents. Unfortunately, though, they can normally be used only for a short movement, and then stop.

The SR drive makes these forces continuous by switching the current in the stator on and off - ensuring the poles on the rotor are continually 'chasing' the current. Controlling this process requires semiconductors, which means that for the first time electronic control is inherent in an electric motor rather than auxiliary to it.

The result is a motor that, size for size, produces up to three times as much power as a standard AC or DC motor. Duty for duty, the SR motor costs half as much to manufacture as its standard rivals, due mainly to the much simpler rotor, yet uses conventional materials and the same manufacturing processes - just fewer of them.

It is the falling price of semiconductors - coupled with rising prices for copper, iron and labour - that is increasingly making SR drives a commercial proposition, says Lawrenson.

'Until the last year or two,' he says, 'the semiconductors would cost three times as much as the motors, and that didn't add up.

'So we had to get the semiconductor companies to realise that we were offering them potentially the largest market they ever had - through automotive auxiliaries (generators, windscreen wipers etc) and household appliances.'

Now, in a typical application such as a washing machine, an SR motor would cost Pounds 16 in total - Pounds 8 each for the motor and the electronics - against Pounds 16 for a conventional motor and Pounds 2 for its associated electronics.

SR Drives has spent the past 25 years building up its knowledge of the new type of motor and has become the acknowledged world leader in all aspects of the technology, manufacturing and commercial exploitation of SR drives.

Having initially believed that the motor would work best at smaller power outputs, the company has discovered that there is no theoretical upper size limit. It has successfully developed motors at sizes approaching 1MW, and has paper designs for motors of 5-10MW, big enough to power a locomotive.

The company decided some years ago that licensing was the best approach to exploiting the technology, but has found that the electric motor industry's customers in a wide range of businesses from washing machines and mining equipment to aerospace pumps and compressors have been more receptive than the motor producers themselves.

Some of the latter, says Lawrenson, have considered the SR drive to be 'ivory tower rhubarb' and seem also to have found the prospect of switching to SR drives too disturbing psychologically.

In Europe, four companies are producing SR drives for general industrial uses, under licence from the Leeds company, and Sole, a subsidiary of Zanussi, is expected to be producing an SR motor for white goods within two years. In Sweden, Besam, one of the world's leading automatic door producers, is using SR motors - their high torque eliminates the need for a gearbox and thus saves space.

Now Lawrenson is considering taking SR Drives into manufacturing. It already sources key electronic components for its licensees and may within a year or so begin producing one or two motors on a modest scale.

Two leading US companies, General Electric and Hewlett-Packard, are using SR drives independently of the Leeds company in some of their products. Lawrenson takes their involvement as a compliment: 'We don't mind, it authenticates all that we've been saying for the past 20 years.'

Switched Reluctance Drives GB United Kingdom, EC P3621 Motors and Generators P3674 Semiconductors and Related Devices TECH Products & Product use CMMT Comment & Analysis P3621 P3674 The Financial Times London Page 13 963
Management: An organised US alternative Publication 930416FT Processed by FT 930416 By VICTORIA GRIFFITH

Surging health care costs have forced some US companies, such as Glazer Steel in New Orleans, to drop health insurance benefits altogether. But eliminating the perk is not easy. Most unions demand healthcare packages for workers as part of labour deals; failing to offer them can put non-union companies at a severe disadvantage when competing for talented personnel.

Soon, eliminating employee health benefits may no longer be an option for any US company, since the Clinton administration is working on healthcare reform which will probably require all employers to cover workers' insurance payments. If they are to remain competitive, companies must find ways of curbing health costs.

Until recently, most US companies offered benefits under the traditional 'indemnity' system. Under this system, employers pay workers' insurance premiums. When the workers suffer illness, the insurance company covers most of the cost. Many companies have found indemnity insurance expensive and inefficient and have turned to 'managed health care'.

Under managed care, companies join forces with other groups in large-scale organisations known as 'health maintenance organisations'.

HMOs claim to be cheaper than indemnity insurance. Their size means they hold substantial bargaining power with physicians, pharmacies and other healthcare providers.

Many HMOs cover millions of employees, usually concentrated in one region, and this gives the organisation a great deal of influence on pricing.

Economies of scale help keep a lid on costs at the HMOs. 'Doctors and nurses often spend an inordinate amount of time on administrative work,' said Alan Raymond, a spokesman for Harvard Community Health Plan, one of the largest HMOs in the country. 'If they join our network, we take care of all that for them and everyone benefits.'

HMOs emphasise preventive medicine. Unlike indemnity plans, HMOs cover regular check-ups, vaccinations and other benefits. Over the last few years, many HMOs have extended their coverage to work-site health educational programmes, diet workshops and fitness clubs.

There are some 550 HMOs in the US, covering about 15 per cent of the population. According to health benefits consultants Foster Higgins, more than half of all US corporations now offer HMO options to their employees. HMO coverage is also extending to smaller companies. This is because many small companies have joined forces through associations which agree to handle the small companies' administrative work.

HMO plans are starting to pay dividends to the US private sector. A study by Foster Higgins noted that the increase in health costs for HMOs rose 8.8 per cent in 1992, compared with a 14.2 per cent surge for traditional indemnity plans.

US United States of America P6321 Accident and Health Insurance P6331 Fire, Marine, and Casualty Insurance P6324 Hospital and Medical Service Plans P8062 General Medical and Surgical Hospitals COSTS Service costs & Service prices P6321 P6331 P6324 P8062 The Financial Times London Page 13 479
Parliament and Politics: Heseltine to give details of further DTI changes Publication 930416FT Processed by FT 930416 By DAVID OWEN

MR MICHAEL Heseltine will next week unveil fresh details of his plans to revamp the Department of Trade and Industry to develop a closer partnership between the government and business.

The trade and industry secretary is expected to use a keynote report to outline the conclusions of his review of the department's structure and to explain how he intends to refine it. He is also likely to give a summary of the changes he has made so far.

Completion of the exercise has been delayed by the length of time Mr Heseltine has had to devote to resolving the coal crisis.

In his first year in the job Mr Heseltine has taken a number of steps - including reorganising the DTI's industrial divisions along sectoral lines - which have been designed to make the department a more effective advocate of the interests of British industry.

Recent moves have added to suspicions that he might be preparing to give his interventionist instincts a more free rein. He is likely to emphasise in public that his notion of intervention does not entail spending large sums of money, however.

Earlier this month Mr Richard Needham, a trade and industry minister, announced plans to encourage British companies to work more closely together in bidding for large projects in foreign markets as part of a wide-ranging effort to boost UK exports.

Mr Heseltine recently started recruiting some of the UK's biggest companies to help with an initiative to monitor economic activity independently of the Treasury.

The group of about 20 companies would give Mr Heseltine confidential information about their sales trends in the critical period as Britain attempts to move into an upturn, as well as advising him on long-term industrial goals.

The move has been portrayed as an attempt to turn his department into an economic powerhouse to rival the Treasury.

GB United Kingdom, EC P9611 Administration of General Economic Programs P9199 General Government, NEC GOVT Government News P9611 P9199 The Financial Times London Page 12 351
Parliament and Politics: Fowler leads effort to hold Newbury for Conservatives Publication 930416FT Processed by FT 930416 By PHILIP STEPHENS, Political Editor

THE Conservatives yesterday fired their opening shots in the Newbury by-election campaign with a concerted attack on the Liberal Democrats' record as 'natural allies' of the Labour party.

Underlining a key theme of its efforts to hold Newbury, Sir Norman Fowler, the Tory party chairman, produced a list of examples where Mr Paddy Ashdown's Liberal Democrats were consistent supporters of minority Labour councils. He cited seven councils in which the two opposition parties had combined to share power.

Linking the by-election with the county council elections which are being held simultaneously on May 6, Sir Norman said a vote for the Liberal Democrats was one not for a 'lighter shade of blue' but for a 'deeper shade of red'.

As Mr David Rendel, the Liberal Democrat challenger, started his campaign in the once-safe Tory seat, Sir Norman made it clear that the Conservative strategy was to convince voters in both sets of elections that two main opposition parties were indistinguishable.

The party chairman also signalled that the government's claims that economic recovery was under way were likely to grow stronger and louder as the campaign progressed. That strategy was echoed by Mr Julian Davidson, the Conservative candidate, in a speech last night arguing that Newbury was 'uniquely placed' to profit from the move out of recession.

But the Liberal Democrats produced a Tory party document pointing out the growing threat that the Liberal Democrats posed to the government.

GB United Kingdom, EC P8651 Political Organizations GOVT Government News P8651 The Financial Times London Page 12 276
Parliament and Politics: Price for BTG sale is agreed Publication 930416FT Processed by FT 930416 By ALISON SMITH

THE government has been unable to agree the completion accounts for the sale last year of the British Technology Group to a management-led consortium, but has split the difference with the purchasers so that the initial proceeds of the sale remain unchanged at Pounds 27.75m.

The decision is likely to lead to criticism that the government did not maximise its profits from the privatisation of the agency for backing inventors.

Mr Edward Leigh, the junior trade and industry minister, told MPs yesterday that although the two sides had been unable to agree the accounts they had agreed that no payment should be made either way.

The government insists that the arrangement represents the best deal available, because there was a strong case on both sides of the argument, and by agreeing to differ, both parties have saved the cost of taking the disagreement to an independent arbitrator.

The arrangement does not affect the further payments - that could reach several millions of pounds - that will be made for the technology-transfer organisation over the five years after the sale if BTG's net income from patent royalties exceeds a base level agreed with the Department of Trade and Industry.

GB United Kingdom, EC P8734 Testing Laboratories GOVT Government News COMP Company News P8734 The Financial Times London Page 12 235
Parliament and Politics: Major firm on need for school tests Publication 930416FT Processed by FT 930416 By IVOR OWEN

COMPULSORY tests to check the progress of children attending schools in England and Wales must go ahead, Mr John Major insisted in the Commons yesterday, Ivor Owen writes.

He condemned as a 'disgrace' the statement made by Ms Marion Darke, president of the National Union of Teachers, that its aim was to annihilate the tests'.

The prime minister said: 'There is no doubt tests are the key to raising standards, as our main competitors around the world have shown.'

Mr Peter Hardy (Lab Wentworth), a former teacher, claimed that the English tests proposed for this year were 'outrageously flawed' and called for their withdrawal along with that of Mr John Patten, the education secretary.

GB United Kingdom, EC P8299 Schools and Educational Services, NEC P9411 Administration of Educational Programs NEWS General News P8299 P9411 The Financial Times London Page 12 158
People: The knife that heals Publication 930416FT Processed by FT 930416

Mark Homan, head of corporate reconstruction and insolvency at accountants Price Waterhouse, is slipping on his surgeon's gloves to take up his position as the new president of the Society of Practitioners of Insolvency.

Homan is particularly sensitive to the portrayal of insolvency practitioners as corporate undertakers, and prefers to see them described as surgeons helping companies to recover. With a year behind him as the society's elected deputy president, he has had plenty of time to contemplate his plan of action.

He says he has two main priorities during his year in office: to improve the image of the insolvency profession, and to consolidate the position of the recently-created society.

'Insolvency has been unjustly treated by the media,' he says. 'The press on the whole is somewhat unthinking and uncaring in its comments. There is a touch of the journalism of envy about it.'

A down-to-earth man of considerable height, he is well-equipped to take on the press, though he says his preference is to be out in the field rescuing companies. He says he will be speaking to journalists and encouraging his colleagues to do the same, emphasising the strides made by the profession after the introduction of tough entry requirements since the 1986 Insolvency Act.

His second priority will be to achieve close liaison with the society's regional organisations, and he places great emphasis on fostering the involvement of smaller firms.

He will have to tread a careful path to avoid sensitive toes in the relationship between the society - founded less than two years ago as a trade association and proving increasingly active - and the Insolvency Practitioners Association, which retains its role as a regulator and licensor.

Homan joined Price Waterhouse as a trainee accountant in 1963 fresh from a degree in industrial economics, with accountancy and law subsidiary subjects. In the late 1960s he was seconded to work with Monty Eckman, the firm's head of insolvency, and found himself effectively taking over the job shortly after Eckman died unexpectedly in 1972.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services PEOP Appointments P8721 The Financial Times London Page 12 366
Parliament and Politics: Climbdown over Maastricht Publication 930416FT Processed by FT 930416 By DAVID OWEN

TWO IMPORTANT procedural decisions on the Maastricht bill yesterday sparked chaotic scenes in the Commons as MPs pleaded with Mr Michael Morris, the deputy speaker, to reconsider his ruling not to allow a vote on a potentially crucial Labour amendment.

Proceedings eventually ended with the government accepting an embarrassing but not disastrous reverse by declining to challenge a Labour motion that the day's debate be brought to an early close to afford time for 'a cooling-off period'.

Mr George Robertson, Labour's Europe spokesman, immediately hailed the government's climbdown as a tactical victory, saying it showed it was in a minority and without authority.

Mr Morris's ruling - delivered amid rowdy scenes on government and opposition benches - had been followed by no less than an hour of varied and sometimes heatedly expressed points of order.

The ruling confirmed that MPs would not be given a chance to vote on Labour's amendment 27 that would remove the protocol containing Britain's opt-out from Maastricht's social chapter.

His announcement came half an hour after the government indicated it would accept a separate Labour clause - new clause 75 - that would make final ratification contingent on a subsequent debate on this opt-out.

The conjunction of events suggested MPs would have no opportunity to vote on the controversial social provisions of the treaty during the Maastricht bill's committee stage.

Leading the cross-party chorus of dissent, Mr Jack Cunningham, shadow foreign secretary, provoked loud cheers from the Tory back benches when he said the ruling set 'a very odd and dangerous procedural precedent'.

The case for a vote on amendment 27 remained 'as overwhelming as it always has been'. Many would feel the house had been 'cheated'.

Mr Cunningham made clear that Labour would 'demand' the right to reintroduce the matter at the report stage, which is due to follow the completion of deliberations in committee and which will be presided over by Miss Betty Boothroyd, the speaker.

There were particularly angry exchanges when Mr Cunningham said ministers were briefing reporters that they proposed to ignore the vote triggered by new clause 75 after it eventually took place.

Mr Tristan Garel-Jones, Europe minister, challenged him to name the ministers concerned or withdraw the remark.

Mr Garel-Jones later prompted hilarity when he said he found it 'an extraordinary proposition' that it should be a majority which decided whether or not there was a vote on any given issue. One Labour MP commented that such a remark would 'look good on the 6 o'clock news'.

Announcing his intention to take votes on a total of four amendments, Mr Morris said the 'easy' option for him would have been to accept amendment 27.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 12 479
Parliament and Politics: PM voices impatience over Serbia sanctions Publication 930416FT Processed by FT 930416 By IVOR OWEN, Parliamentary Correspondent

BRITAIN'S impatience to secure the UN Security Council's approval for action to 'widen and deepen' sanctions against Serbia was underlined by Mr John Major, the prime minister, in the Commons yesterday.

He said Britain wanted the necessary resolution passed as speedily as possible - 'we would have welcomed it today,' he said - and indicated that the delay reflected concern about the implications for President Yeltsin in the referendum in Russia next week.

Without naming Russia or its president, Mr Major explained that one of the permanent members of the Security Council would be unlikely to support the resolution at present although would do so later in the month.

Downing Street officials later re-affirmed that Russia could be expected to vote for the UN Security Council resolution on April 26.

Mr Major came under strong pressure from Mr John Smith, the Labour leader, to act with greater urgency. Mr Smith said a 'leisurely diplomatic pace' was unacceptable given the daily slaughter in Srebrenica.

Mr Smith said Britain should be urging the security council to bring the resolution forward so the international community could take effective action.

The prime minister defended Britain's attempts to secure an end to the fighting in Bosnia and distanced himself from the demands by Baroness Thatcher, his predecessor, that the Bosnian Moslems should be allowed to secure more weapons.

Mr Major stressed the need to 'damp down and not increase the supply of arms'. He said Britain was looking for a diplomatic way to end the fighting as the only 'credible way forward'.

GB United Kingdom, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 12 293
Parliament and Politics: BR-union talks derailed - How unions and British Rail are locked in a fight over the future of the railways and who runs them Publication 930416FT Processed by FT 930416 By ROBERT TAYLOR

TODAY's 24 hour railway strike, the second in a fortnight, is ostensibly over the issues of compulsory redundancies and the use of contract work.

But as the conflict drags on, punctuated by interminable exchanges of documents and arguments over semantics, it may precipitate a final showdown in the industry on the issue of who runs the railways.

British Rail, the last of the old nationalised enterprises with a trade union dominated work culture based on regulation and arcane procedure, is having to adapt rapidly to the approaching challenge of privatisation and increased competition.

This change will be painful for everybody in BR but most of all for the rail unions who have exercised virtual joint control over the industry for the past 45 years.

Faced with the prospect of an upheaval that will destroy their entrenched positions, they appear intent on fighting a rearguard action that looks self-destructive as commuters and business learn to live without railways.

BR chairman Sir Bob Reid claims the main rail union the RMT is 'living in a different world' than the rest of Britain and demands it faces up to change.

Mr Jimmy Knapp, RMT's general secretary, says he is appalled by the way he and his union is being treated by Sir Bob. The union's left-leaning executive seems ready to stiffen his resolve.

But from the outside, the conflict looks like a squabble over words.

Documents and letters have gone back and forth in recent weeks over the quarter of a mile separating RMT headquarters and BR head office which have often done more to muddy the issue of compulsory redundancies than clarify it.

A total of 23 hours has been consumed in detailed discussions between the rail unions and BR since November 19 when BR told the unions its trading position required staff cutbacks, though every effort would be made to reach these by voluntary means.

At the first meeting BR executive John Welsby assured the unions 'in the final analysis staff would have the protection of the industry's existing arrangements for redeployment and redundancy'. That meant BR would guarantee no compulsory redundancies on the railways as enshrined in an agreement signed in 1985 and known in the esoteric language of the industry as RT and R 464.

This gives a clear 'assurance' that nobody will be dismissed from BR's employment 'on grounds of redundancy' subject to the proviso they are 'prepared, if necessary, to accept an offer of alternative employment which might involve a change of work or might require them to move to another place of employment'.

Confusingly, BR management has not been ready to spell out that commitment explicitly in its present dealings with the unions, at least on paper.

It was only under pressure from the media at a BR briefing two days ago that the wording of the 1985 guarantee was finally revealed.

BR management say they cannot give any guarantee of 'jobs for life' but eight years ago they made a commitment to the unions there would be no compulsory redundancies on the railways.

This was not a new departure for BR. Three years earlier it accepted there would be no compulsory redundancies when introduced flexible rostering for train drivers and staffless stations.

Both sides are trapped by their history of joint regulation.

The RMT even quoted from a 1947 report earlier this week to justify its position.

Every twist and turn is enshrined in written agreements and letters that BR and the rail unions throw at each other with liturgical precision. It is this often pedantic and time-consuming system that is now under threat as the industry approaches the bracing world of privatisation.

'We are trying to prepare the railways for the next century', says Sir Bob Reid. But the RMT and ASLEF seem ready to fight against radical change at a heavy cost both to themselves and the travelling public.

By battling over a form of words the unions threaten Pounds 1bn worth of business contracts at present under negotiation and Pounds 10m in lost gross revenue to BR.

As Sir Bob Reid explains: 'Every time we have a shutdown of the railways, people get used to living without us.'

British Rail GB United Kingdom, EC P4011 Railroads, Line-Haul Operating P8631 Labor Organizations PEOP Labour P4011 P8631 The Financial Times London Page 12 755
People: Bodies politic Publication 930416FT Processed by FT 930416

Sir Roland Smith (below right), who at one stage had a record number of directorships of public companies but has been shedding his responsibilities of late, has been appointed an additional independent director of the MEDICAL DEFENCE UNION.

GB United Kingdom, EC P8631 Labor Organizations PEOP Appointments P8631 The Financial Times London Page 12 62
People: Bodies politic Publication 930416FT Processed by FT 930416

Sir Anthony Cleaver (below left), chairman of IBM United Kingdom Holdings, has been appointed a member of the DTI's Industrial Development Advisory Board for a period of two years.

GB United Kingdom, EC P9532 Urban and Community Development PEOP Appointments P9532 The Financial Times London Page 12 55
People: Bodies politic Publication 930416FT Processed by FT 930416

Colin Ford has been appointed director of the National Museum of Wales. Currently head of the National Museum of Photography, Film and Television in Bradford, Ford will take over in Cardiff in October when a Pounds 26m building programme has been completed. James Roe, chairman of Equity Consort Investment Trust and of CST Emerging Asia Trust, and a director of Rothschild Trust Corporation, has been appointed a reserve member of the MONOPOLIES AND MERGERS COMMISSION.

GB United Kingdom, EC P8412 Museums and Art Galleries PEOP Appointments P8412 The Financial Times London Page 12 101
People: Bodies politic Publication 930416FT Processed by FT 930416

Michael Heron, chairman of the Post Office, Sir Duncan Nichol, chief executive of the NHS Management Executive, Bryan Rigby, chairman of BASF plc, Ed Wallis, chief executive of PowerGen, and Sir David Walker, deputy chairman of Lloyds Bank, have been appointed governors to the court of HENLEY MANAGEMENT COLLEGE.

GB United Kingdom, EC P822 Colleges and Universities PEOP Appointments P822 The Financial Times London Page 12 74
People: Bodies politic Publication 930416FT Processed by FT 930416

Miles Middleton, a former president of the Association of British Chambers of Commerce and a senior partner of Coopers & Lybrand (north east), has been appointed a member of the RURAL DEVELOPMENT COMMISSION.

GB United Kingdom, EC P9532 Urban and Community Development PEOP Appointments P9532 The Financial Times London Page 12 59
People: Bodies politic Publication 930416FT Processed by FT 930416

Susan Elizabeth, deputy director of the National Council for One Parent Families, has been appointed director of grants for the KING EDWARD's HOSPITAL FUND FOR LONDON.

GB United Kingdom, EC P6733 Trusts, NEC PEOP Appointments P6733 The Financial Times London Page 12 50
People: Bodies politic Publication 930416FT Processed by FT 930416

Michael Johnson, recently retired head of information technology at Unilever, and a current member of the IT standards, security and quality committee, has been appointed a member of the MONOPOLIES AND MERGERS COMMISSION with reference to telecommunications.

GB United Kingdom, EC P9131 Executive and Legislative Combined PEOP Appointments P9131 The Financial Times London Page 12 63
People: Bodies politic Publication 930416FT Processed by FT 930416

Richard Ottaway MP, PPS to the secretary of state for trade and industry, has been appointed parliamentary adviser to The BALTIC EXCHANGE; he is a maritime lawyer.

GB United Kingdom, EC P6231 Security and Commodity Exchanges PEOP Appointments P6231 The Financial Times London Page 12 53
People: Party time Publication 930416FT Processed by FT 930416

Paul Judge, who staged a highly successful buy-out of Cadbury Schweppes food interests under the Premier Brands label, is severing his formal links with the venture capital industry to concentrate on his new task of reorganising the Tory Party.

Judge, 43, has resigned as non-executive director of Grosvenor Development Capital, the Slough-based venture capital group which featured, not always to its advantage, in the recent BBC2 Series The Adventurers.

The Grosvenor link resulted from Judge's friendship with Grosvenor's late chairman, David Beattie, from their time at Cadbury. Beattie was a one-time managing director of Cadbury's speciality foods division while Judge was group planning director.

Judge, who is also chairman of the food promotion organisation Food from Britain, led a Pounds 97m buy-out of Premier Brands in 1986. He subsequently resigned when a planned flotation did not go ahead and Premier was bought by Hillsdown, a food conglomerate, for Pounds 182m in May 1989.

Appointed director general of the Tory Party last November, Judge has since been engaged in a restructuring of the party organisation to reduce staff levels and cut costs.

Grosvenor Development Capital GB United Kingdom, EC P6799 Investors, NEC P8651 Political Organizations PEOP People P6799 P8651 The Financial Times London Page 12 213
People: SmithKline Beecham Publication 930416FT Processed by FT 930416

Ignace Goethals, director and senior vice-president of business development and biologicals at SmithKline Beecham's pharmaceuticals division, has been appointed president, SmithKline Beecham animal health. His position as director of business development has been given to Tamar Howson.

Jorge Valls, acting president, SmithKline Beecham animal health, has been appointed senior vice president and director of worldwide commercial operations of SmithKline Beecham animal health.

SmithKline Beecham GB United Kingdom, EC US United States of America P2834 Pharmaceutical Preparations PEOP Appointments P2834 The Financial Times London Page 12 94
People: Marion Merrell Dow Publication 930416FT Processed by FT 930416

Paul Cannon has been appointed managing director of Marion Merrell Dow in the UK, with additional responsibility for Ireland, the Netherlands and Scandinavia. The promotion, from director of marketing for MMD in the UK, follows 22 years with MMD.

Marion Merrell Dow GB United Kingdom, EC P2834 Pharmaceutical Preparations P2899 Chemical Preparations, NEC PEOP Appointments P2834 P2899 The Financial Times London Page 12 73
People: Boots Healthcare International Publication 930416FT Processed by FT 930416

Phillip Davey is forsaking booze for drugs. He is leaving Allied-Lyons, where he was a director of the wines and spirits division, to become marketing director at Boots Healthcare International. The post is a new one.

At Boots, he will be responsible for the marketing strategies behind the group's new product development, as well as existing healthcare products, such as Nurofen, Strepsils, Optrex and the E45 range which, in the UK, sell under the Crookes Healthcare label.

Boots Healthcare International GB United Kingdom, EC P2834 Pharmaceutical Preparations PEOP Appointments P2834 The Financial Times London Page 12 106
People: ICI Publication 930416FT Processed by FT 930416

John Charlton is slowly wending his way home. After three and a half years as ICI finance director in India and two years in Brussels as chief financial officer of ICI's materials division, he is returning from Belgium to the UK with his Brazilian wife. He has been appointed controller of ICI, reporting to Alan Spall, general manager finance. He will be based at Millbank and says he has a house for sale in Altrincham, Cheshire.

Charlton, 49, replaces Ivan Marshall who is to become controller of Zeneca, ICI's soon-to-be separated bioscience subsidiary. Helmut Radder, chief financial officer of ICI Americas at Wilmington, Delaware, succeeds Charlton.

Zeneca has appointed Derrick Nicholson chief financial officer of its agrochemicals and seeds division. He was previously general manager finance. Nicholson replaces Gordon Barker who becomes deputy chief executive of Zeneca agrochemicals and seeds. Barker will concentrate on wider strategic issues, but retains overall responsibility for finance.

Imperial Chemical Industries Zeneca GB United Kingdom, EC P2834 Pharmaceutical Preparations P2899 Chemical Preparations, NEC PEOP Appointments P2834 P2899 The Financial Times London Page 12 186
Parliament and Politics: Inland Revenue blocks unit trust capital gains loophole Publication 930416FT Processed by FT 930416 By NORMA COHEN, Investments Correspondent

THE INLAND Revenue has closed a loophole which in effect allowed life insurance companies to avoid paying capital gains tax on a portion of their portfolios by investing in internally managed unit trusts.

The tax change, in the Finance Bill released on Tuesday, will force insurance companies to deem one seventh of their unit trust holdings to have been disposed of in any one year. If gains have occurred, capital gains tax must be paid.

Some of Britain's largest unit trust companies are life insurers which sell relatively few units to the public but use the trusts as internal investment vehicles for their own life funds. Unit trusts do not incur capital gains tax on disposals although unit trust holders must pay the tax on their gains when their units are sold.

Mr Philip Warland, director-general of the Unit Trust Association, said: 'The implications for ordinary people are not huge. They may at the margin reduce the after-tax returns of some life funds.'

The insurance industry, which has known of the change for two years, initially objected but has resigned itself to the additional taxation. The Inland Revenue has taken the view that the life insurance industry is under-taxed and has moved to close a variety of loopholes in recent years.

The Revenue has, however, met a central concern of the insurance industry by exempting from the legislation unit-linked contracts - where individual policy holders would directly bear the costs of capital gains tax. The change had been mooted two years ago but had been delayed pending repeal of Stamp Duty.

The Association of British Insurers had lobbied the Revenue to ensure that unit-linked policyholders were not subject to the additional tax burden.

The association expressed relief at the wording of the bill but said it remained concerned that new rules on advance corporation tax on unit trusts had unfairly penalised life insurers.

Life insurers, unlike other investors in unit trusts, classify dividends as interest payments and will lose some tax advantages intended to offset a reduction in the advance corporation tax which can be reclaimed by tax-exempt investors.

GB United Kingdom, EC P6311 Life Insurance P6726 Investment Offices, NEC NEWS General News GOVT Taxes P6311 P6726 The Financial Times London Page 12 394
Parliament and Politics: Assisted area map delayed Publication 930416FT Processed by FT 930416 By RALPH ATKINS

THE GOVERNMENT is delaying until after next month's local elections an announcement on the redrawn assisted-area map that will determine which UK regions qualify for government and European Community aid.

The Department of Trade and Industry announcement this month, as previously expected, would break informal Civil Service rules on announcements during local election campaigns.

The re-drawing of the map - the first since 1984 - will provoke a political row as parts of inner London and south-east England benefit at the expense of areas in Wales, the Midlands and north-east England.

European Community rules mean the total area covered by the map cannot be increased.

The plan had to await the outcome of the government's energy review after a promise by Mr Michael Heseltine, trade and industry secretary, that some regions hit by coal pit closures would be helped.

The Civil Service has tough guidelines on politic-ally sensitive government announcements during general elections.

GB United Kingdom, EC P9199 General Government, NEC GOVT Government News P9199 The Financial Times London Page 12 186
Move to simplify power trading Publication 930416FT Processed by FT 930416 By MICHAEL SMITH

THE ELECTRICITY industry will try to simplify controversial methods of trading power as part of a wide-ranging review of the electricity wholesale pool.

The decision yesterday by the electricity pool executive will be welcomed by intensive energy users which say the trading system is understood by few and is open to abuse.

In a three-pronged approach to reform, the executive, comprising representatives from the electricity generators and regional power companies, will also focus on 'demand-side participation' and transmission services.

Supporters of demand-side participation argue that intensive users should be rewarded more for flexibility over when and how they take electricity.

Examination of transmission services could include a look at whether pool participants should pay varying prices depending on where they are located.

The reform of the pool was launched last year amid widespread complaints from intensive energy users that they were paying too much for their electricity following privatisation of the industry three years ago.

The pool was set up during privatisation. In last month's white paper on coal, the government said it was considering whether to allow large users to bypass the pool.

Some companies, including Imperial Chemical Industries, have been pressing to be allowed to buy electricity directly from generators.

Other pool participants say the effect of this would be to put up prices for other consumers.

The white paper also noted suggestions that demand-side participation should be introduced and said it would consult on whether this would be beneficial.

GB United Kingdom, EC P4911 Electric Services NEWS General News P4911 The Financial Times London Page 11 272
Revenue computer staff vote for strike action Publication 930416FT Processed by FT 930416 By LISA WOOD, Labour Staff

INLAND REVENUE computer staff have voted to take industrial action, including a one-day strike, in protest at their division being contracted-out to the private sector.

Industrial action by the traditionally moderate Inland Revenue Staff Federation could disrupt the transfer of tax payments of up to Pounds 500m a day to the Bank of England.

The Revenue said its management would take 'whatever action was necessary' to maintain services so that a strike would have a minimal effect, if any, on the national taxation system.

The information technology division, which employs 2,700 computer staff, is the largest division to be contracted out within the Revenue.

Other smaller parts of the Revenue have been contracted out following market testing, the first step in a process that can lead to the contracting-out of services provided in-house. This year more than 44,000 civil servants are having to compete against outside contractors to keep their jobs.

In-house bids are not being invited for the information technology division. Invitations to tender for what unions claim is a privatisation are being made at present with a rolling programme of contracting-out to begin next January.

The federation, which represents about 2,000 of the staff, is opposed to the move and is particularly concerned that staff should not be be adversely affect.

A detailed 20-point claim has been submitted to management, including demands for staff to be seconded to the new enterprise with an option to transfer back to the Civil Service. Other demands include an employee involvement scheme in the private company, full guarantees on terms and conditions and pensions to be topped up on transfer.

Mr Clive Brooke, general secretary of the federation, said that if the contracting-out went ahead his members wanted real choices about their future and guarantees should be given about their pensions. He said that confidential information about every taxpayer and business in the country was being put at risk by the privatisation.

He added: 'Every week we hear of misuse of personal information by finance companies and yet the government insists on putting everyone's tax affairs at risk by this move.'

Two ballots calling for protection of terms and conditions should privatisation occur were held with 937 voting for a one-day strike with 407 opposed. Some 1,086 voted for industrial action short of a strike with 253 against.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy PEOP Labour P9311 The Financial Times London Page 11 422
Commercial role for Radio 1 studied Publication 930416FT Processed by FT 930416 By GUY DE JONQUIERES

THE Radio Authority, which regulates the independent radio sector, is to commission research into the economic feasibility of turning BBC Radio 1 into a commercial channel financed entirely by advertising revenue.

The authority disclosed this yesterday in a response to the green paper on the future of the BBC. It also demanded that the BBC be required to transfer to commercial radio some of its existing FM frequency capacity and proposed that the present system of separate regulation of commercial and public-service radio and television broadcasting be ended.

The authority said that if any present BBC services were permitted to carry advertising or sponsorship, they should not remain within the organisation. It was unsure of the impact on independent national radio operators of turning Radio 1 into a commercial operation and was commissioning independent research, to be completed by the end of the year.

However, the authority suggested that if Radio 1 were to be funded entirely by advertising, it should be subjected to temporary restrictions to prevent it draining revenue from the three planned independent national radio broadcasters.

The authority estimated that Radio 1 would need, and could expect, to generate annual advertising revenue of at least Pounds 30m to be commercially viable. At present commercial radio generated Pounds 53m annually from national advertisers.

That figure excluded the revenues of the two independent national services so far granted licences, Classic FM and Virgin, which needed together to earn between Pounds 20m and Pounds 25m annually to break even.

The authority said: 'It is reasonable to assume that the entry of a Radio 1 type of service into the commercial sector would expand the advertiser base of radio and that a commercial Radio 1 . . . would break even within two years.' Soon after that happened, the three independent national services should return to profit.

It added that the existing distribution of national FM frequencies unfairly favoured the BBC and damaged the ability of independent national radio to compete. It called for frequencies to be reallocated, but recognised that such a change was unlikely to happen during the existing licences of independent national radio broadcasters.

The authority also urged that, in the longer term, BBC and commercial broadcasting should be regulated by the same bodies, one for radio and one for television.

British Broadcasting Corp GB United Kingdom, EC P4832 Radio Broadcasting Stations P7319 Advertising, NEC COMP Company News TECH Services & Services use P4832 P7319 The Financial Times London Page 11 429
Caution over next prison contract Publication 930416FT Processed by FT 930416 By ALAN PIKE, Social Affairs Correspondent and IVOR OWEN

THE NEXT private-sector contract to provide prison escort services will be introduced on a phased basis, Mr Derek Lewis, director-general of the Prison Service, said yesterday.

Switching the entire east Midlands, Humberside and Yorkshire contract to Group 4 Court Services on a single day was a significant cause of subsequent problems, Mr Lewis and directors of the security company decided at a meeting yesterday.

During Group 4's first week of running the contract four prisoners escaped or were wrongly released, and others were delivered late for court appearances.

Tendering for the next contract, covering the London area, will begin soon with Group 4 among the bidders. Companies submitting bids will now be asked to plan for a gradual switch from the public sector to the private sector.

Yesterday's meeting ended with Mr Lewis saying that only one of last week's four disappearances by prisoners could be attributed to Group 4.

Two resulted from design flaws in vehicles which had been built to Home Office specifications, while a local magistrates court had confirmed that Group 4 was not at fault in the release of the fourth pris-oner.

The government's five-year contract with Group 4, worth Pounds 9.5m a year, allows for financial penalties but none will be imposed over last week's problems.

There will, however, be another meeting between the Prison Service and Group 4 in a month to review the operation of the contract.

It requires Group 4 to collect and return a different number of prisoners each day from 71 police stations, 20 prisons, 72 magistrates courts and 10 Crown courts. Prison Service and Group 4 officials say that last week's start-up was complicated by a number of unscheduled court sessions.

Mr Lewis stressed that escapes by prisoners under police or Prison Service escort were not uncommon. 'It is very regrettable and we intend to reduce them, but the experience of last week needs to be seen in that context.'

Mr Jim Harrower, managing director of Group 4, said the company had been hurt badly and embarrassed by last week's problems. He was convinced, however, that 'with all agencies playing their part we will meet the terms of the contract'.

Mr Kenneth Clarke, home secretary, yesterday brushed aside Commons attacks by Labour and Liberal Democrat MPs on the Group 4 contract, insisting that the number of escapes was 'not out of the ordinary,' Ivor Owen writes.

To laughter and cheers from the opposition benches Mr Tony Blair, the shadow home secretary, claimed Group 4's performance could have graced one of Ealing Studios' comedy films.

Mr Clarke maintained that the use of private-sector companies for such duties freed police officers for their primary role of tackling crime.

Group 4 Court Services GB United Kingdom, EC P7381 Detective and Armored Car Services P9223 Correctional Institutions COMP Company News P7381 P9223 The Financial Times London Page 11 495
Lloyd's faces new criticism on regulation Publication 930416FT Processed by FT 930416 By RICHARD LAPPER

MANAGERS of four lossmaking Gooda Walker syndicates artificially inflated their profits in the 1980s through the improper use of specialised reinsurance policies, a detailed report alleges.

A 200-page report prepared by GW Run Off, which is now handling the affairs of the syndicates, was passed to the Serious Fraud Office earlier this week, and has prompted fresh criticisms of regulation at Lloyd's.

Mr Michael Deeny, chairman of the Gooda Walker Names Action Group, which is co-ordinating the Names' own legal action said: 'It reveals an appalling state of affairs. It shows a total failure of regulation by Lloyd's'

One agency manager said the events showed that the system had failed Gooda Names completely. 'We have to recognise that.'

The report's findings have also been sent to the insurance market's investigation committee, which has been examining the syndicates for some months. The report could also be used as evidence in the legal action being taken by more than 2,000 Gooda Walker Names against their agents.

Members of the Gooda Walker syndicates are among the worst-hit of the insurance market's Names - the individuals who supply its capital. Their losses amount to more than Pounds 900m, with many individuals facing losses of more than Pounds 1m.

The report focuses on the use by Gooda Walker syndicates of 'time and distance' policies - reinsurance policies which allow Lloyd's syndicates to manage their reserves against long-tail claims - which emerge many years after the inception of policies - more effectively.

Such deals allow insurers to 'discount' their reserves against future claims. Policyholders pay a reinsurance premium which is then invested by the reinsurer, with the proceeds - less a profit for the reinsurer - repaid at an agreed future date to meet claims.

Insurers are allowed to credit future benefits from such policies in the year in which they buy the policy. The report shows that between 1980 and 1988 the profits of four syndicates - numbers 164, 290, 295 and 298 - were increased by some Pounds 37m as a result.

In some years in the early 1980s virtually all profits were generated from such policies. But few details of the policies were included in syndicate accounts.

During these same years the profitability of Gooda Walker syndicates attracted many Names to join, with each of the syndicates' capacity - or capital base - expanding significantly.

The report says that the re-insurers of some of the policies in turn reinsured their exposures with the same Gooda Walker syndicates.

The investigators were unable to find any evidence that the Gooda Walker syndicates had prepared formal cashflow forecasts which would detail when they expect future claims to emerge. These are essential for the controlled use of 'time and distance' policies.

Warnings from Lloyd's regulators that 'there could be no question of (a Gooda Walker syndicate) reinsuring its own risk back to another Gooda Walker syndicate' were apparently ignored, the report adds.

Investigators have identified three policies purchased from Pinnacle (the Bermuda-based company which provided reinsurance to the Gooda Walker syndicates), elements of which were reinsured to other Gooda Walker syndicates.

Gooda Walker Lloyd's of London GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service COMP Company News P6411 The Financial Times London Page 11 554
Government to provide Pounds 5.5m for 'one-stop shops' Publication 930416FT Processed by FT 930416 By CHARLES BATCHELOR

A TOTAL of 23 business advice centres will be set up in the six areas which have won official government approval for their 'one-stop shop' programmes.

The six areas will receive Pounds 5.57m of government funding over the first three years, Mr Michael Heseltine, trade and industry secretary, said in a written parliamentary answer yesterday. The areas are: Birmingham, Halton (north and mid-Cheshire), Hertfordshire, Manchester, south and east Cheshire, and Tyneside.

Birmingham will have just one centrally located advice centre. Hertfordshire and Manchester will each have six; Halton will have two, in Widnes and Runcorn; Tyneside will have five; and south and east Cheshire will have three.

The first 'one-stop shops' are expected to open in July starting with three in Manchester and one each in Birmingham, Newcastle upon Tyne and Gateshead.

A further nine areas have been allocated 'one-stop shops' provided they modify their business plans.

The government said it hoped they would be able to establish their centres within the next 12 months. The nine areas are Chester and the Wirral, south Derbyshire, Shropshire, Merseyside, Hereford and Worcestershire, Doncaster, Leicestershire, Surrey and Dorset.

In addition, government funds will be provided to allow Training and Enterprise Councils and other support organisations in London to prepare plans for a London-wide network of one-stop shops.

GB United Kingdom, EC P8748 Business Consulting, NEC NEWS General News P8748 The Financial Times London Page 11 248
Electronic games enter a new level: What a US court victory for two giant-slayers means for Nintendo and Sega Publication 930416FT Processed by FT 930416 By GARY MEAD

THE electronic games market is a battlefield, both on and off-screen. On-screen, Sonic the Hedgehog or Mario the plumber exchange fisticuffs with a host of enemies. Off-screen, the large manufacturers wage multi-million-dollar court actions in an effort to protect copyrights. Most take place in the US, the most lucrative market.

Sometimes the giant-slayers win. Brothers Richard and David Darling, who own Codemasters, a software publisher, heard last month that the US Supreme Court declined to hear an appeal from Nintendo in an action against Lewis Galoob Toys, Codemasters' US licensee, giving them a clear victory after a two-year case.

Nintendo and Sega, another Japanese company, dominate the international Pounds 9.2bn electronic games market. Nintendo was required to deposit a Dollars 15m (Pounds 9.7m) bond in the US courts. It may now be required to forfeit that bond to Lewis Galoob, Codemasters, and Camerica, a Canadian licensee of Codemasters' products.

In the US case Nintendo acted against one of Codemasters' best-selling products, a copyrighted enhancer called Game Genie, which Codemasters claims has achieved international sales of Dollars 100m.

It is an important victory. The managing director of one of the UK's leading retailers of electronic games is convinced that opening the door to the development of independent makers of games peripherals will be good news for both consumers and retailers. He said: 'For us, peripheral products are very important. Nintendo have always been able to fix their prices and it's really been a take-it-or-leave-it situation. Their success was due to their controlling hardware and software 100 per cent.'

Nintendo is appealing against forfeiting its Dollars 15m bond, of which Dollars 3.4m is due to the Darlings, and may take their appeal all the way back to the US Supreme Court. It could be another year before the Darlings see any cash from the case. By that time legal fees, which US lawyers involved in the case say may reach Dollars 1.5m, will have eroded the final pot.

But what really counts is the go-ahead in the US for Codemasters' business. The stakes in this game are high. Mr Philip Ley, marketing director of Sega Europe, says 40 per cent of homes in Japan and 30 per cent in the US have a games console. In the UK alone the electronic games market in 1992 was worth some Pounds 500m and some industry analysts estimate that could double in 1993.

At the heart of the off-screen conflict are problems of definition concerning peripherals - a broad category including everything from joysticks and screen-magnifiers to game 'enhancers', which clip on to game cassettes and give the player extras, such as additional 'lives' for the central characters.

The vast majority of the peripherals market is occupied by Sega and Nintendo products, so independents represent a threat to their grip on an increasingly important segment of the electronic games market. One UK retailer said: 'The only way the giants can combat the independent makers of peripherals is in the courts - and you try and find a jury which understands the technicalities of computer programming.'

The main question is when is something proprietary - exclusive to the original system manufacturer - and when not? It's a very grey area and some main figures in the industry see Nintendo and Sega eventually losing their control. They expect other big Japanese electronics companies, such as Sony and Matshushita to get into games software.

Both independent software producers and the large manufacturers run into conflicts because copyright laws, both in the EC and the US, are thought inadequate by some legal experts.

A London-based lawyer said yesterday: 'You have difficulties applying copyright law to computer programs. When copyright law was first designed computers had never been heard of. Copyright is intended to protect an expression, not an idea. You get into very difficult questions with computer programs about what is an expression and what exactly is an idea, where the two coincide. That is what has caused a lot of the controversy.'

To some extent, Nintendo and Sega have been able to grow by introducing technologically advanced hardware and feeding an apparently insatiable demand for new games. But the importance of software peripherals is set to expand.

It is, industry sources say, impossible to estimate the scale of potential market, such is the rapid growth in electronic games.

Nintendo Sega Enterprises US United States of America P3571 Electronic Computers P3944 Games, Toys, and Children's Vehicles P7372 Prepackaged Software COMP Company News TECH Patents & Licences P3571 P3944 P7372 The Financial Times London Page 11 784
Video cameras 'help to cut crime' Publication 930416FT Processed by FT 930416

THE USE of security video cameras has helped to cut crime in two towns, police said yesterday.

In Airdrie, Lanarkshire, the equipment had helped to reduce crimes by more than 75 per cent in the first five months of operation. Detection rates had grown from 35.5 per cent to more than 70 per cent.

And Mr Barrie Loftus, project officer for King's Lynn, Norfolk, said car thefts were down by 91 per cent and thefts from vehicles by 97 per cent.

GB United Kingdom, EC P7382 Security Systems Services P9229 Public Order and Safety, NEC NEWS General News P7382 P9229 The Financial Times London Page 11 117
Union discovers vote discrepancies Publication 930416FT Processed by FT 930416

AN INITIAL internal inquiry by the Association of University Teachers into the recent election of its general secretary has uncovered discrepancies, the union has told the government's Certification Office.

Mr Alan Waton, AUT president, says in a letter to the office that a number of significant differences had been found in eight local associations between 'the number of members paying dues last September and the number of labels received in the general secretary and recent officer elections'.

He added: 'We have immediately put in hand investigations to ascertain the reasons for these differences.'

The inquiry follows a formal complaint from Dr Peter Borchards who was defeated by Mr David Triesman, the executive's preferred candidate, by 7,088 votes to 6,812 for the top post in the union in the postal ballot in December.

A final report on the election is to be made to the AUT executive on July 2.

GB United Kingdom, EC P8631 Labor Organizations PEOP Labour P8631 The Financial Times London Page 11 174
Pounds 5,052m capital issues in March Publication 930416FT Processed by FT 930416

ANNOUNCEMENTS of new capital issues by UK borrowers in March were Pounds 5,052m, of which Pounds 4,122m was denominated in sterling. This was the largest monthly figure for total new issues since the series began in 1986.

The Bank of England said the biggest sterling issue announced in March was the fixed-rate bond issue by Abbey National Treasury Services for Pounds 650m, which set a new record for a single euro-sterling transaction.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 11 103
Warning over state of beaches Publication 930416FT Processed by FT 930416

HOLIDAYMAKERS will stay away from resorts unless action is taken to clean up UK beaches, says a study led by the World Health Organisation.

The report, published in the British Medical Journal, says a variety of litter and medical waste including plastic fishing gear, polystyrene foam, clothing, glass and syringes, was found by volunteers in an investigation in 1991 by the Norwich Union Coastwatch UK.

The findings were checked by Dr Robin Phillipp, director of the World Health Organisation Collaborating Centre for Environmental Health Promotion and Ecology, and a team from Farnborough College of Technology.

The report says: 'If our personal and collective efforts for litter and pollution control are not improved, the findings reported here suggest that at least in south-western England, a very popular area for summer tourists, there could be considerable consequences from adhering to the British Medical Journal's recent advice that 'if a beach looks filthy, don't swim in the sea'.'

GB United Kingdom, EC P7999 Amusement and Recreation, NEC RES Pollution NEWS General News P7999 The Financial Times London Page 11 186
Shell cuts gallon of petrol by 13.6p Publication 930416FT Processed by FT 930416 By DAVID LASCELLES

SHELL last night cut the maximum price of its petrol by 13.6p a gallon, in effect wiping out the increase caused by the increase in fuel tax in the Budget, David Lascelles writes.

Shell's move follows price cuts two weeks ago by Esso and BP. However Shell said many of its stations were already selling petrol at the lower price because of local competition.

Falling petrol prices have been made possible by the strength of sterling against the dollar and the resulting drop in the sterling price of oil.

Shell's new maximum recommended prices are 226.9p for a gallon of unleaded and 249.6p for 4-star leaded.

BP said last night that it intended to remain competitive, although no decision on a further price cut had been taken.

Shell Transport and Trading GB United Kingdom, EC P5541 Gasoline Service Stations COSTS Product costs & Product prices P5541 The Financial Times London Page 11 168
Miners defy NUM on pit closure Publication 930416FT Processed by FT 930416 By CHRIS TIGHE

MINERS at Easington colliery in County Durham have voted overwhelmingly not to challenge the closure of their pit in order to safeguard their redundancy payments.

In defiance of National Union of Mineworkers national policy, the men have decided their colliery - flashpoint of some of the biggest confrontations in the 1984-85 miners' strike - should not be put into the consultative colliery review procedure.

British Coal announced yesterday that Easington and the Westoe colliery, in South Shields, Tyne and Wear, will cease production on May 7. Both are to be mothballed in case there is interest from the private sector in taking them over.

Mr Alan Cummings, Easington NUM secretary, said a mass meeting had instructed union officials to negotiate the best possible redundancy payments with British Coal. The miners had turned Easington around from loss to profit but felt it was futile to challenge closure.

He added: 'They've recognised what's happened since 1985, no pit which has gone through the procedure has been saved. People have said, why pile on the agony?'

Behind the decision lies the fear that, should the pit go to review, the miners would be kept on the payroll on basic pay. This could affect their redundancy payments, since they are calculated on the final 12 weeks' pay. Productivity bonuses can boost earnings by as much as 30 per cent. Redundancy payments for workers with long service could reach Pounds 37,000.

Easington, which now has 1,050 workers, dates back to 1899. Mr Cummings said geological problems had caused some production problems recently.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground PEOP Labour P1222 The Financial Times London Page 11 291
Reading list that turns new leaves Publication 930416FT Processed by FT 930416 By JOHN AUTHERS

MARK Twain and Ray Bradbury rub shoulders with Charlotte Bronte and Susan Hill, and Dickens and Shakespeare jostle with Alexander Solzhenitsyn and Henrik Ibsen in the National Curriculum Council's suggested English literature reading list for 16-year-olds in England and Wales. Even Philip Larkin gets a mention.

One immediate effect of the list will be to boost sales for writers not yet widely read in schools, according to Penguin, the publishers owned by the Pearson Group, which also owns the Financial Times.

Mr Patrick Hutchinson, Penguin's marketing and sales director, described the list as mainly 'safe and traditional'. But he added that inclusion on the list would help sales of some of the lesser-known modern authors.

He said: 'When the list for primary schools came out three years ago, many schools didn't have the resources to buy all the books. Parents then rushed out to the shops and bought copies for the children, so this is going to propel authors on to shelves where they may not have been before.'

Appearances on reading lists reliably increase book sales.

The proposals prescribe that children between 11 and 14 (Key Stage Three) should read at least one Shakespeare play, then read another between 14 and 16 (Key Stage Four). These must come from separate categories - the histories, tragedies and comedies.

Beyond this, 11-to-14-year-olds should read drama 'appropriate for their age' - one suggestion is Dylan Thomas' Under Milk Wood - while 14-to-16-year-olds have to read at least one play by an author from a list that includes Arthur Miller, J B Priestley, Oscar Wilde, Robert Bolt, Tom Stoppard, Alan Bennett and Henrik Ibsen.

Requirements for poetry include more imaginative choices. At both key stages, children must read works by at least five poets, of whom at least two should have been published before 1900.

The list at Key Stage Four includes a number of writers less well-exposed. In addition to Blake, Coleridge, Tennyson, Wordsworth, Keats, Shelley, Donne and Chaucer, modern poets such as Brian Patten, Derek Walcott, Sylvia Plath, Dannie Abse and Norman MacCaig are included.

Modern writers who might hope for a boost from sales include Jan Mark, Rukshana Smith, Michelle Magorian, Beverly Naidoo, Anne Holm, Berlie Doherty, Joan Lingard, Katherine Paterson, Rosa Guy, Marjorie Darke and Gwyn Thomas.

Teachers reacted with alarm to the amount of Shakespeare prescribed, regardless of childrens' ability. Ms Judith Rowley, an English teacher from the Morton School in Carlisle, said: 'I'm certainly not against Shakespeare, and I would expect to read one of his plays with a top set by the age of 12 or 13, but as far as the lower groups are concerned I would be doubtful about it.'

She also voiced concern about the inclusion of Ibsen and Solzhenitsyn.

GB United Kingdom, EC P9411 Administration of Educational Programs P8299 Schools and Educational Services, NEC NEWS General News P9411 P8299 The Financial Times London Page 10 497
Charity shops 'make 27% profit' on small turnover Publication 930416FT Processed by FT 930416 By ANDREW JACK

THE TYPICAL high-street charity shop made a profit of 27 per cent on weekly sales and donations of Pounds 963, a survey published today shows.

Oxfam has the largest sales and profits of any charity, followed by Imperial Cancer Research Fund, the Spastics Society and Barnados.

The survey, by NGO Finance, a magazine for finance staff in the non-governmental sector, covered the most recent accounts of 2,760 shops run by 26 charities - there are estimated to be 4,671 shops run by 41 charities around the country.

The most profitable shops were the Alzheimer's shop in Teesside, the Earl Mountbatten Hospice and Age Concern in Sevenoaks, Kent. This partly reflects low overheads because of the use of volunteer staff.

Cash donations in shops made up just 1 per cent of income, with 85 per cent from donated goods and 14 per cent from bought-in goods.

The information is particularly important because Sorp 2, the new draft recommended accounting standard for charities, will require trading operations to be consolidated into organisations' group accounts.

A number of large charities did not respond to the survey, or provided incomplete information, including the National Trust, Age Concern, the British Red Cross and the Salvation Army.

There was a wide range of accounting treatments adopted, with the People's Dispensary for Sick Animals charging against profits all capital expenditure in shops in the year in which it is made.

Few shops provided information on return on capital employed or similar measures of performance.

------------------------------------------------------ TEN MOST PROFITABLE CHARITY SHOPS ------------------------------------------------------ Charity Net surplus Pounds ------------------------------------------------------ Oxfam 18,312,000 Imperial Cancer Research Fund 6,631,000 Spastics Society 4,584,000 Barnardo's 2,721,848 Save the Children 1,879,922 Children's Society 1,077,000 Cancer Research Campaign 858,000 British Heart Foundation 842,000 Help the Aged 697,000 Princess Alice Hospital 408,117 ------------------------------------------------------

GB United Kingdom, EC P5932 Used Merchandise Stores MKTS Sales P5932 The Financial Times London Page 10 328
NAO urges better advice on benefits Publication 930416FT Processed by FT 930416 By ALAN PIKE, Social Affairs Correspondent

SELF-EMPLOYED people on low incomes often mistakenly believe they do not qualify for social security support, the National Audit Office says in a report today.

Sir John Bourn, comptroller and auditor-general, calls on the Benefits Agency to improve the supply of information for self-employed people working part-time.

Last year people who were or had been self-employed received Pounds 700m in social security income support. Almost all the claimants - 250,000 - were completely dependent on benefit, with only 8,000 still in part-time self-employment.

The report says that the office, the public spending watchdog, found a widespread but mistaken perception that, because the self-employed did not qualify for unemployment benefit, they could not receive other help from the social security system. If the option of continuing to work were better publicised, more people might remain in self-employment and top up modest earnings with benefits.

The report says Benefits Agency offices in southern England faced pressure from the large numbers of formerly self-employed people now claiming income support.

The agency recognised the difficulties faced by these customers and was taking 'strong remedial action' to improve services.

Income support for self- employed and formerly self- employed people. HMSO. Pounds 6.70.

GB United Kingdom, EC P8399 Social Services, NEC NEWS General News P8399 The Financial Times London Page 10 232
Steel users warn over price increases Publication 930416FT Processed by FT 930416 By MICHAEL CASSELL

STEEL USERS yesterday warned that they would be forced to pass on to their customers the second round of price rises to be announced this year by British Steel.

The company this week notified customers of further price increases of up to 9 per cent which will be imposed during the next three months on a range of products.

Increases of between 4 per cent and 13 per cent announced in January have been fully implemented in recent weeks.

British Steel, which recorded a pre-tax loss of Pounds 51m in the six months to last October, said the planned rises would only partly reverse the severe reductions in steel prices experienced over the past two years.

Some prices had dropped by up to 35 per cent since 1990. British Steel said continuing inadequate levels of return meant further price rises appeared likely over the next six months.

The British Constructional Steelwork Association, whose members supply fabricated steelwork to the construction sector, said that it acknowledged the need for British Steel to raise prices, given increases in the company's own costs. But it said its members could not absorb higher prices.

The association said: 'We have cut down to the bone and beyond in terms of prices. The last British Steel price rises were all passed on and we will have to do the same again.'

British Steel said that it would reduce rebates available on the majority of its structural section products from May 1, representing increases of between 6 per cent and 8 per cent.

A cut in rebates for steel plate, representing rises of 6 per cent, will take effect on June 1. Strip products will rise in price from July 1 by up to 9 per cent.

British Steel said that the past six weeks had provided evidence of a marked improvement in sales, largely because customers appeared to be rebuilding stocks.

British Steel GB United Kingdom, EC P3313 Electrometallurgical Products COSTS Product costs & Product prices P3313 The Financial Times London Page 10 352
Hope for improved language skills Publication 930416FT Processed by FT 930416 By LISA WOOD, Labour Staff

EMPLOYERS yesterday welcomed the new national curriculum for English, saying industry was demanding better communication skills from recruits.

Mr Eric Dancer, managing director of Dartington Crystal, one of the largest employers in Cornwall, said: 'Many young people coming into industry do not have a fully developed command of the English language and I welcome any steps that seek to remedy that.'

Mr Dancer, like other employers, said young people who were not able to express themselves adequately were at a particular disadvantage in the jobs market.

Inability to speak or write English was not only a disadvantage to recruitment on the shop floor but would disqualify an individual from a job which involved contact with the public. 'People who are communicating externally have to enhance, not detract from a company's image,' said Mr Dancer.

Cadbury, the Birmingham-based confectionery company, said it did not believe standards of written and spoken English had deteriorated - rather, companies such as itself were demanding more from recruits, both school-leavers and graduates.

Mr Neil Makin, Cadbury's personnel director, said five years ago the company had recruited most of its school leavers through the Youth Training Scheme. 'It did not matter if applications were made in writing that was not joined up or grammar was shoddy in interviews.'

But the company now aimed to recruit more school-leavers who had the potential for a full career path, which could take them as high as management.

'We are now looking for the best, rather than recruiting from an unemployment scheme,' said Mr Makin. The ability to express oneself fluently in standard English was important, he said.

GB United Kingdom, EC P8331 Job Training and Related Services P9411 Administration of Educational Programs NEWS General News P8331 P9411 The Financial Times London Page 10 309
Fishermen meet to decide next step Publication 930416FT Processed by FT 930416 By CHRIS TIGHE

FISHERMEN from ports throughout England and Wales meet tomorrow to decide the next phase of their campaign against the government's fisheries policy.

Some of the representatives - between 30 and 40 - attending the special meeting of the National Federation of Fishermen's Organisations executive in Derby are expected to favour more blockades, which in the past four weeks have disrupted shipping in and out of Teesport, Plymouth, and the Mersey estuary ports.

Executive member Mr Bill Madine, chairman of the group's West Coast committee and organiser of Wednesday's Mersey blockade, has predicted the meeting will back further similar action.

Protests would continue, he said, until the men received satisfaction from the government.

'The resolve of MAFF (the Ministry of Agriculture, Fisheries and Food) is starting to melt,' said Mr Madine, a trawler fisherman from Whitehaven, Cumbria. 'I would think some members will be saying, we have a roll on, let's keep it going.'

Yesterday Mr Richard Banks, chief executive of the organisation said: 'Nothing is ruled out.'

But he added he felt the maximum publicity may have been obtained from blockades considering three had been held, and suggested the meeting may decide on other action, saying: 'It ranges from non-compliance with the new regulations to doing other things.'

He declined to elaborate further.

The fishermen's blockades hoped to raise public awareness of their opposition to cheap fish imports and the new Sea Fish Conservation Act, which will restrict the number of days UK fishing boats can put to sea. The order allocating the days is to be placed before parliament shortly.

GB United Kingdom, EC P0912 Finfish NEWS General News P0912 The Financial Times London Page 10 291
London estate agency fails Publication 930416FT Processed by FT 930416 By VANESSA HOULDER, Property Correspondent

FOLKARD & HAYWARD Services, one of London's largest independent estate agents, and its sister company Phillip Charles, yesterday went into administrative receivership with debts of Pounds 1.3m.

The failure reflects the continued pressure on estate agents' incomes resulting from the collapse in the housing market over the past three years.

In spite of expectations that lower interest rates would feed through into an improvement in the housing market, an increased level of interest from buyers had not been translated into sales. 'The hit rate was not as high as anticipated,' said Mr Jason Elles of Ernst & Young, who was appointed administrative receiver.

Folkard & Hayward has 11 offices in London that sell properties valued up to Pounds 500,000. Phillip Charles, which caters for first-time buyers, has nine offices in the home counties. Its turnover was about Pounds 2m a year.

Mr Elles said the businesses would continue to trade while they sought other buyers. There were Pounds 500,000 of deals in the pipeline which he hoped would go ahead.

Mr Elles said he expected to find a buyer for most shops in the next week. A number of potential buyers, including some building societies and individuals, had expressed interest. 'I have already held discussions with a number of interested parties and am optimistic that any early sale of the businesses will be achieved,' Mr Elles added.

Folkard & Hayward, founded in 1899, has been through several changes of ownership. The latest owners, Mr Roger Stanley and his wife, bought the business five months ago. The previous owner was Birmingham Midshires, the building society, which was the main lender, together with Provident Life.

London estate agents have reported a surge in interest from potential buyers in recent weeks, although the activity over the bank holiday weekend was widely found to be disappointing.

Folkard and Hayward Services Phillip Charles GB United Kingdom, EC P6531 Real Estate Agents and Managers COMP Company News P6531 The Financial Times London Page 10 343
Teachers 'will need more support' Publication 930416FT Processed by FT 930416

THE chairman of the National Curriculum Council warned last night that some teachers will need to be coached to teach standard English in their classrooms.

Mr David Pascall said English was the most important of the 10 national curriculum subjects. The new proposals were not just for the children's benefit, but the aim was to improve standards for teachers too, he said.

Proper pronunciation, for example, was defined in the rules produced yesterday.

The council said that reform of the English curriculum was essential if standards of written and spoken English were to be improved.

Mr Pascall said: 'Some teachers will need more support because they will find things within this new order which would be outside their competence.

'We are redressing the balance and we have to do it sensibly.'

Mr Pascall also said that the producers of children's television programmes would have to take their part in improving standards of English.

'I am appalled by the standard of children's television programmes. Producers should accept their responsibilities by trying to improve standards mainly for young children,' Mr Pascall said.

'Producers need to take seriously the content of programmes in order to complement what we are trying to do.'

GB United Kingdom, EC P9411 Administration of Educational Programs NEWS General News P9411 The Financial Times London Page 10 228
Auditors seek to limit legal actions Publication 930416FT Processed by FT 930416 By ANDREW JACK

THE LARGEST eight UK accounting firms are planning to launch a campaign to protect themselves from increasing litigation against auditors.

They have hired consultants and are considering a range of options including legal reform to limit court damages which can be awarded against them.

They are likely to call for changes to Section 310 of the 1985 Companies Act, which forbids accountants from being able to contractually limit their liability.

Their concern follows a rise in the number and value of law suits brought particularly in the US by investors and other users of audited accounts.

Many firms say litigation is rising to levels where it will either drive them into insolvency or force them to cease acting as auditors.

The campaign follows lobbying in the US by a pressure group of accounting groups.

The informal gathering last week of the heads of the 'Big Eight' accounting firms received a report commissioned from a political lobbying group.

It is believed to have suggested that many lawyers, politicians, academics and accountants were sympathetic to reform.

Mr Roy Chapman, senior partner of Arthur Andersen in London, is co-ordinating the Big Eight's campaign in the UK. The other firms are Coopers & Lybrand, KPMG Peat Marwick, Ernst & Young, Price Waterhouse, Touche Ross, Grant Thornton and BDO Binder Hamlyn.

GB United Kingdom, EC P8721 Accounting, Auditing, and Bookkeeping Services NEWS General News P8721 The Financial Times London Page 10 250
Better services demanded by Child Poverty Action Group Publication 930416FT Processed by FT 930416

Better services for claimants and efforts to increase the take-up of benefits are demanded today by the Child Poverty Action Group.

It says Pounds 1.5bn a year in means-tested benefits is unclaimed, and that claimants had experienced 'appalling delays' in getting new disability benefits in spite of undertakings in the Benefits Agency's customer charter.

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs NEWS General News P9441 The Financial Times London Page 10 88
Engineering recovery 'threatened' Publication 930416FT Processed by FT 930416 By MICHAEL CASSELL, Business Correspondent

A FRAGILE recovery in UK engineering output is being threatened by deepening recession in vital European export markets, according to the Engineering Employers' Federation.

The federation said yesterday in its latest economic trends report that all the main engineering sectors, except aerospace equipment and metal goods, could expect higher sales over the months ahead.

Forecast engineering sales for 1993 of Pounds 130bn represent a modest improvement over the 1992 total of Pounds 128bn and will only restore industry sales to the level achieved in 1980. Total engineering output by the first half of 1994 is expected to be 3 per cent up on the level recorded in the second half of last year, with electronics and components for the motor vehicle industry showing most growth.

In spite of a calculation by the federation of a 7 per cent improvement in the cost competitiveness of UK manufactured goods over the last four years, it forecasts a continuing imbalance between engineering exports and imports. While exports in the next 18 months are expected to rise 5 per cent, imports are forecast to increase 10 per cent.

It also warned there will be no significant recovery in engineering activity until EC markets - which account for 55 per cent of UK engineering exports - also improve.

Mr Neil Johnson, federation director-general, predicted a 'very slow and difficult recovery'. He said EC customers were of critical importance and that the weakness of European markets was restricting the scope for an export-led UK recovery.

He warned that the continuing political upheaval over the future shape of European development was 'becoming dangerous and damaging to UK interests'. Failure to ratify the Maastricht treaty, he added, would have serious consequences for the engineering industry, just as it began to detect signs of growth.

Unemployment in the engineering industries represents another continuing blackspot. According to federation estimates, the average level of engineering employment in the first half of 1993 is about 1.7m, compared with just over 2m at the start of 1990. Employment is expected to fall another 45,000 over the next 12 months.

The federation also points to continuing under-investment in the engineering sector, with investment levels forecast to be lower at the end of 1994 than in 1989.

Engineering Economic Trends. Broadway House, Tothill St, London SW1H 9NQ. Pounds 35 (Free to members)

GB United Kingdom, EC P8711 Engineering Services P3999 Manufacturing Industries, NEC P3679 Electronic Components, NEC P3714 Motor Vehicle Parts and Accessories NEWS General News ECON Economic Indicators P8711 P3999 P3679 P3714 The Financial Times London Page 10 437
Customers could be the winners in AT&T and BT battle Publication 930416FT Processed by FT 930416 By ALAN CANE and MARTIN DICKSON LONDON, NEW YORK

WHAT DO AT&T's plans to challenge BT in the UK telecommunications market mean for its customers?

Cheaper calls for a start, as competition erodes the cosy 'correspondent' arrangements where national carriers co-operate rather than compete across national boundaries. Instead there could be head-to-head rivalry in international and domestic markets.

There is the prospect of cost-effective, 'seamless' international communications services with only one company and one set of bills.

AT&T says it intends to offer British business customers virtual network services and digital private lines for high-speed data and voice communications.

Assuming AT&T's request is granted, what effect will new competition have on the UK telecommunications market? Analysts yesterday argued that Mercury was more likely than BT to suffer from AT&T's presence in its home market.

BT, for example, intends to offer similar services in the US to those AT&T plans to offer in the UK. It believes that access to the lucrative US market will give it advantages well worth the risk of extra competition from AT&T in the UK.

Mercury, on the other hand, is much smaller and has specialised in the business market where AT&T is focusing its efforts.

AT&T's application is the latest move in a complex regulatory game of give and take being played across global telecommunications markets.

It is no surprise that AT&T is trying to use its influence with the Federal Communications Commission - the US watchdog - and the Clinton administration to block BT's application as a bargaining measure. AT&T's stand is similar to that of the large US airlines, which recently tried to prevent British Airways buying a stake in USAir on the grounds that US carriers should first have greater access to the UK market.

It would offer business customers with locations in the UK and US a variety of 'competitively priced, seamless services' between the two countries.

The principal telecommunications carriers such as AT&T and BT are resigned to these changes and are preparing themselves for the battle for customers that will ensue. What remains to be thrashed out are the terms on which the various players will have access to each other's networks and markets. This is what lies behind calls for 'equivalence' or reciprocal access arrangements, guaranteeing a level playing field. For BT and AT&T to fulfil their goals of becoming global 'supercarriers', they must have access to each other's markets. Both complain about the regulatory regimes they have to surmount.

Mr John Berndt, president of AT&T business services, said the greatest challenge in providing advanced services in the UK was that BT in effect controlled the local distribution of almost all phone services in the UK and dominated the British long-distance market.

'As a result, in order to terminate calls to customers, would-be competitors not only have to invest substantial time and money in building their own networks, they also have no alternative but to negotiate with BT for access to customers.'

He said this contrasted with the US where years of pro-competition regulatory policies had given competitors such as BT the opportunity to enter the market with limited investment. Mr Berndt added that the US regulator's approval of BT's plan could adversely affect the US balance of payments, as more calls are made from the US to the UK than vice versa. US carriers paid BT more than Dollars 65m last year.

American Telephone and Telegraph British Telecommunications Mercury Communications GB United Kingdom, EC P4813 Telephone Communications, Ex Radio P4822 Telegraph and Other Communications CMMT Comment & Analysis P4813 P4822 The Financial Times London Page 10 615
Venture-backed companies upbeat Publication 930416FT Processed by FT 930416 By CHARLES BATCHELOR

COMPANIES which have received financial backing from the venture capital industry have performed well over the past six months and are very optimistic about future prospects, a survey has found.

The British Venture Capital Association found that 79 per cent of venture-backed companies expect sales to increase over the next six months while 49 per cent expect profit margins to improve and 33 per cent expect their average selling prices to rise.

Forty-eight per cent expect to increase the size of their workforce.

The survey of just over 200 companies carried out last month was the first of what is intended to be a six-monthly review of business trends among companies backed by venture capital.

In the preceding six months 61 per cent of companies surveyed reported higher sales, 49 per cent increased profit margins and 30 per cent higher average selling prices. A total of 42 per cent increased the size of their workforce.

Asked which change in the business environment which would benefit their company most, 59 per cent of respondents said a recovery in economic confidence, while 14 per cent mentioned lower interest rates.

A lack of demand for their products or services was given as the principal obstacle to taking on more employees by 46 per cent of businesses, followed by 16 per cent which mentioned wages and other costs.

Forty-one per cent of respondents said they expected to need additional finance in the next six months.

Of these, venture capitalists and the banks were joint favourite sources of funding and each was mentioned by 59 per cent of respondents.

The Sensor, BVCA, 3 Catherine Place, London SW1E 6DX. Free.

GB United Kingdom, EC P6799 Investors, NEC P6211 Security Brokers and Dealers NEWS General News P6799 P6211 The Financial Times London Page 10 308
IAD receivers confident of sale Publication 930416FT Processed by FT 930416 By KEVIN DONE, Motor Industry Correspondent

THE administrative receivers for International Automotive Design (UK), the design and engineering consultancy, hope to agree to a sale of the company within days.

The company, one of Europe's biggest automotive design and engineering companies, went into administrative receivership last week with debts of about Pounds 13.5m.

Mr Maurice Withall of accountants Grant Thornton, one of the joint administrative receivers, said offers for IAD had been received from several UK companies. 'We are very hopeful and expect to be successful in selling the business as a going concern.'

Mr Godfrey Harker, group finance director, said the company's debts included bank debt of Pounds 7m, trade debt of Pounds 4m and Pounds 2.5m owed to the Inland Revenue. It expected to make a loss of Pounds 2m to Pounds 2.5m on turnover of up to Pounds 52m in the year to the end of this month. Turnover had begun to fall sharply since mid-1992.

The strain on the company's finances was increased by the financial collapse in February of Daf, the Dutch truckmaker, which owed it around Pounds 500,000.

The company, based at Worthing, West Sussex, has carried out contracts for many of the world's leading vehicle makers since it was formed in 1976 by Mr John Shute. Mr Shute and his family owns 77.5 per cent while 22.5 per cent is held by Cinven, the UK's second largest venture capital investor.

International Automotive Design GB United Kingdom, EC P8711 Engineering Services COMP Company News P8711 The Financial Times London Page 10 268
World Trade News: Brussels alleges ship cartel Publication 930416FT Processed by FT 930416 By REUTER BRUSSELS

THE European Commission has accused a group of shipping companies of operating an illegal cartel to push up prices for transatlantic cargo and is telling them to sever all ties, Commission officials said, Reuter reports from Brussels.

They said the Commission had opened proceedings and was giving those involved in the cargo-shipping pact - the Transatlantic Agreement - three weeks to disband the cartel. The companies had broken EC rules on competition by teaming up on pricing for US-bound cargo shipments from European ports, they said.

The agreement involves the Danish Maersk line, Atlantic Container Line of Sweden, Germany's Hapag-Lloyd and DSR-Senator Joint service, Dutch Nedlloyd Lijnen, P&O Containers of Britain, Swiss Mediterranean Shipping and Polish Ocean Lines. Others are Korean Cho Yang Shipping, Hong Kong's Orient Overseas Container Line, Singapore's NOL, Japan's NYK, and Sea Land Services of the US.

One official said the case was sensitive because EC action against Maersk could touch a raw nerve in the run-up to Denmark's referendum on the Maastricht treaty on May 18.

QR European Economic Community (EC) P4412 Deep Sea Foreign Transportation of Freight P9621 Regulation, Administration of Transportation COSTS Service costs & Service prices P4412 P9621 The Financial Times London Page 8 217
World Trade News: Nafta trio narrow gaps on side-pacts Publication 930416FT Processed by FT 930416 By DAMIAN FRASER MEXICO CITY

TALKS on side-accords for the proposed North American Free Trade Agreements showed signs of progress yesterday as differences appeared to narrow between the three countries - Mexico, Canada and the US.

Mr Rufus Yerxa, chief US negotiator, confirmed that Washington was not pursuing an ambitious side-agreement on controlling import surges. The existing Nafta chapter on such safeguards would not be reopened. Instead, the US was looking for ways to improve consultation and procedures in the detection of surges.

Likewise, Mr Yerxa seemingly confirmed recent reports that the US would not push for the establishment of special commissions with direct powers to penalise violators of labour and environmental laws.

He said he thought there a 'distinction to be drawn between the powers that a supranational commission itself would have and the enforceability of commitments the three governments undertake to ensure enforcement of their laws.'

The side-agreements on labour, the environment and import surges have been demanded by the Clinton administration before it submits Nafta, formally signed last December, to the US Congress.

While the administration, under pressure from a Congress with doubts about Nafta, is committed to mechanisms that would enforce these agreements on labour and the environment, Mexico and Canada are concerned that such rules would violate their sovereignty and become tools of protectionism.

Mr Yerxa said that the three sides had to 'overcome differences over what might be the best means to achieve the objectives' of the side-agreements - that was to protect the environment and labour rights in the North American economy. He left open the possibility that the three sides would not reach agreement.

MX Mexico CA Canada US United States of America P9721 International Affairs NEWS General News P9721 The Financial Times London Page 8 308
Prospect of hung jury looms over LA trial Publication 930416FT Processed by FT 930416 By LOUISE KEHOE LOS ANGELES

JURORS yesterday ended without a decision their sixth day of deliberations in the trial of four white Los Angeles police officers charged with violating the civil rights of a black motorist, Mr Rodney King, in a beating incident that was recorded on videotape.

Fears that the illness of one of the jurors on Wednesday might delay a verdict in the closely watched trial proved unfounded as all 12 jurors returned to the federal courthouse yesterday morning.

However, there was rising speculation that the jury might be having difficulty in reaching a consensus on the civil rights charges and that the two-month trial could end with a hung jury on some of the charges.

The officer's acquittal 12 months ago in a state court, where they were charged with using excessive force in the arrest of Mr King, sparked riots in Los Angeles and exposed to world-wide attention some of the city's most deprived districts, including South Central Los Angeles, an area that few of the city's affluent residents, and most of its many visitors, ever see.

The scene of some of the worst violence in last year's riots, South Central is the focus of attention once more. There are widespread fears that it might again erupt in burning and looting if the men are acquitted. Police, the national guard and US marines at nearby Camp Pendleton are all preparing for the worst.

Yet on the streets of South Central there is an eerie calm. The area seemed to have been almost deserted yesterday, with few people on the streets and only light traffic.

Everywhere the ugly hulks of last year's fires remain. Many burnt-out buildings have been torn down, the empty lots surrounded by fences scrawled with graffiti - the trademark of local gangs.

At intersections there are vacant lots where petrol stations once stood. It was at one such that Mr Reginald Denny, a truck driver, was dragged from his cab and brutally beaten in the full view of television cameras.

Most depressing are the blocks and blocks of tiny boarded-up, metal-barred shops and businesses, most of them closed since last year's riots. Of those that remain in business, most seem to have been fortified and closed.

Yet only yards away, on the side streets of South Central, life goes on behind locked and grilled doors in row upon row of tiny bungalows. For most residents of this ethnically mixed community, there is no escape. As businesses close, unemployment rises, and property values decline. In Crenshaw, known as one of the toughest parts of the city, the bungalows give way to four-storey apartment buildings and a large shopping centre.

Although there are fewer visible signs of last year's riots in this part of the city, it was the scene of numerous shootings and large-scale looting of department stores and supermarkets. Further north, in Korea Town, target of attacks by roving gangs a year ago, uniformed security guards now stand on the pavement outside fortified electronics shops. Additional metal grids are being installed over the windows of other shops.

The heavy police presence, so widely publicised by city officials, is not visible in these parts of Los Angeles. In two hours of touring, this reporter saw only four squad cars - moving in pairs - as well as a few 'undercover' police, not very well disguised, in unmarked cars, apparently going about their business of searching for drug dealers.

While the 12 jurors in the Rodney King beating trial continue their deliberations in the federal court downtown, it is on the streets of South Central, Crenshaw, Korea Town and other poor neighbourhoods of Los Angeles that the verdict on civil rights and social injustice will ultimately be cast.

The efforts of community leaders - black, Asian and hispanic - may be successful in preventing an uprising of the devastating proportions seen a year ago. More pragmatically, people who live in South Central say simply: 'There is nothing left to burn.'

US United States of America P9211 Courts P9221 Police Protection NEWS General News P9211 P9221 The Financial Times London Page 8 699
World Trade News: US trade barriers criticised - European report pinpoints discrimination against foreigners Publication 930416FT Processed by FT 930416 By LIONEL BARBER BRUSSELS

US rhetoric about free trade contrasts with its own significant barriers to trade and investment, according to a new study by the European Commission released yesterday.

The Commission's annual report on US trade barriers pinpoints protectionist trade legislation, discrimination against foreign investors, high tariffs and 'Buy American' laws in the US. 'The number of such impediments has not decreased since last year's report was published,' the study concludes.

The 90-page Commission study comes as Sir Leon Brittan, EC commissioner for external economic relations, is preparing to visit Washington for talks early next week with the Clinton administration. The aim is to head off US sanctions in the dispute over US/EC procurement legislation and to make progress in the Gatt world trade talks.

A Commission spokesman stressed yesterday that criticism of US trade practices did not amount to proof that the new Democratic administration was more protectionist than its Republican predecessor. 'We continue to give them the benefit of the doubt.'

The chief barriers cited in the report are:

US tariffs of 20-50 per cent on textiles, ceramics, glassware, vegetables and footwear.

'Buy American' legislation at federal and state level which shuts out foreign suppliers, or sets down local content requirements of 50-65 per cent. Telecommunications equipment remains excluded from the Gatt procurement code.

Unilateral US legislation such as the 'Super 301' law which, though lapsed, may be revived by the US Congress. The clause provides wide discretion to retaliate against trading practices deemed unfair or burdensome to US commerce.

New extra-territorial legislation such as the Cuban Democracy Act (1992) which restricts trade with Cuba to humanitarian and food aid operations. It also extends to US-owned or controlled foreign companies.

The US failure to renew favourable tariffs on dozens of farm and industrial products valued at Dollars 1.27bn (Pounds 841m). Some of the duties currently applicable are as high as 38 per cent, the report says.

Mr Ove Jorgensen, the Commission's North America director, said yesterday most of the Dollars 200bn annual two-way trade was 'largely trouble-free'.

The report however raises concerns about the new US preoccupation with national economic security - an apparent shift from the old national security considerations often used to justify trade barriers.

US United States of America P9721 International Affairs MKTS Shipments MKTS Foreign trade P9721 The Financial Times London Page 8 409
World Trade News: Fiat plans new car in S America Publication 930416FT Processed by FT 930416 By JOHN BARHAM BUENOS AIRES

FIAT'S subsidiaries in Brazil and Argentina are planning a cross-border venture to build a replacement for its Uno compact model, currently made in both countries.

Mr Franco Macri, whose Argentine company Sevel builds Fiats and Peugeots under licence, said planning was still at a very early stage.

However, the new project already figured in Fiat's L40bn (Pounds 16m) long-term investment planning up to the year 2000. Fiat owns its Brazilian subsidiary outright, but only 15 per cent of Sevel.

Production will maximise available industrial capacity in Argentina and Brazil. The two companies will buy components from suppliers on both sides of the frontier, and to a lesser extent from elsewhere.

As well as selling in Brazil and Argentina, the car would be exported to Italy and other markets. Both countries' car industries have developed strong trade links in recent years. Sevel already swaps vehicles, motors and gearboxes with Brazil and its parent company's factories in the rest of the world.

Fiat Sevel Argentina AR Argentina, South America BR Brazil, South America P3711 Motor Vehicles and Car Bodies P3714 Motor Vehicle Parts and Accessories COMP Company News COMP Strategic links & Joint venture RES Facilities P3711 P3714 The Financial Times London Page 8 223
World Trade News: US tires of waiting for bite of Japanese apple market Publication 930416FT Processed by FT 930416 By EMIKO TERAZONO TOKYO

'EMPTY boxes, empty promises' reads a sign hanging from empty apple crates displayed at an American food fair in Osaka this week. The display by the Washington Apple Commission, which represents growers producing 60 per cent of the US apple crop, reflects mounting frustration at Japan's reluctance to open its market.

Although Japan officially liberalised this market in 1971, it has been rejecting imports through strict quarantine rules about pests and diseases. Such import restrictions are viewed as a structural trade barrier by foreign agricultural exporters, although the Japanese contend the matter is purely technical.

The US took action to meet Japan's rules for pest control in 1975. However, after 18 years of waiting, it is accusing Japan of dragging its feet. Last week, the US embassy in Tokyo filed an official complaint claiming the technical aspects had been resolved and that Japan's slow processing was a non-tariff barrier.

'Apples are symbolic of Japan's attitude,' says Mr Tom Hale, president of the Washington state group. 'We've been patient and thorough with the Japanese, and it's not a matter of science any more, but of politics.' The US wants the market open by next January.

The US has spent considerable sums trying to meet Japanese requirements for controlling the codling moth pest and fireblight disease. However, when the US Agriculture Department sent data on treatments, Japan then raised concern about another pest.

A Japanese official warned the US not to treat the matter as a trade issue. 'We still haven't received a proper explanation from the US why it does not allow Japan to export mandarins to orange-producing American states,' he said.

US United States of America JP Japan, Asia P0175 Deciduous Tree Fruits MKTS Foreign trade P0175 The Financial Times London Page 8 315
US may sign Rio accord next week Publication 930416FT Processed by FT 930416 By GEORGE GRAHAM WASHINGTON

THE US may announce its backing for the bio-diversity convention, which it refused to sign at last year's Earth Summit in Rio de Janeiro, as early as next week, according to US officials.

President Bill Clinton is expected to deliver a speech on environmental policy next Wednesday, and some officials believe he may be ready by then to announce the US's intention to sign the convention, which lays down obligations to list, monitor and protect endangered species.

But the US wants to add an interpretative statement to its signature, clarifying its view of ambiguities in the treaty on intellectual property and financing mechanisms, and is keen to have the European Community and other members of the Organisation for Economic Co-operation and Development sign on to this statement.

The treaty is open for signature until June 3.

White House environmental advisers last week gave a list of concerns to Mr Svend Auken of Denmark, the current president of the EC council of environment ministers, and are circulating a draft interpretative statement they hope other governments might sign.

Many developed countries share US concerns about the vagueness of the treaty language, and the EC had been planning to lodge its own statement. Nevertheless, some of the proposed US language will need reworking if it is to attract support.

At the heart of the US objections was the possibility that ambiguities in the treaty could weaken the intellectual property rights of biotechnology companies by forcing them to share the benefits of their research and patents with the countries in which they found genetic material.

The US also objected to what it saw as an open-ended commitment to fund bio-diversity protection in developing countries.

US United States of America P9511 Air, Water, and Solid Waste Management P9532 Urban and Community Development NEWS General News RES Pollution P9511 P9532 The Financial Times London Page 8 326
Soaring dollar hopes come down to earth: Why the currency has failed to live up to forex dealers' expectations Publication 930416FT Processed by FT 930416 By JAMES BLITZ, Economics Staff

MANY FOREIGN exchange dealers predicted that this would be the year of the soaring dollar. But, nearly four months into 1993, investors in the US currency are still waiting for it to make its next big move upwards.

Last September, the dollar hit a historic low of 1.3860 against the D-Mark, the world's second most traded currency. In the next four months, it rose some 29 pfennigs against the German currency, boosted by the election of President Bill Clinton and a sharp upturn in the US economy.

But New Year predictions that the dollar would break through the DM1.70 level by April have been dashed. Yesterday, it was trading at around DM1.5970, some two pfennigs below its level at the start of January - and some people in the currency market are predicting that it will go even lower.

'The dollar is at an interesting turning point,' says Mr Avinash Persaud, an economist at UBS in London. 'At these levels, fund managers are comfortable holding dollars. But if the currency were to slip further from here, we could see a large scale shedding of their dollar positions.'

The dollar has been capped because short-term interest rates in the US remain nearly 5 percentage points below those in Germany, providing a smaller return for investors in the US currency. This makes it expensive for investors to hold dollars for long.

Several factors have ensured that this differential has remained so wide.

Growth in the US economy was more sluggish than expected in the first quarter of this year. Currency investors bought dollars in large quantities at the start of the year following US gross domestic product growth in the fourth quarter of 1992 at an annualised 4.7 per cent. The comparable figure for the first quarter of this year is expected to be down to 3 per cent. This slowdown in growth suggests that the Federal Reserve will refrain from raising interest rates in the near term.

The Bundesbank's cuts in official interest rates have been more modest than expected. Germany's discount rate has been reduced by 75 basis points so far this year. But the central bank has cut rates in 'salami-sized slices' rather than introducing the aggressive easing of policy that had been foreseen.

The yen, the third most traded currency in the world, has risen to historic highs against the dollar in recent weeks amid speculation that Japanese leaders would promote a strong yen to reduce the country's huge trade surplus with the US. The new Japanese fiscal package of Y13,200bn announced this week has led to a slight strengthening of the dollar in recent days, however, in the belief that the package will help to reduce Japan's trade surplus.

There is speculation that the Bundesbank is selling dollars on the foreign exchange market as a means of rebalancing its reserves. The Bundesbank acquired an estimated Dollars 20bn in foreign currencies during last autumn's crisis in the exchange rate mechanism. These funds are thought to be being sold back to the market, supporting the D-Mark.

Views differ sharply over whether the US currency will go up or down from here.

Mr Persaud of UBS believes the dollar has bottomed out at its current level and that it will be at around DM1.63 by the end of the month.

He believes US growth will look increasingly favourable compared to that of Germany. He also thinks that the Bundesbank has proved that it will cut rates for domestic reasons, and that this is a good augury for more policy easing.

However, Mr Jim O'Neill, head of research at Swiss Banking Corporation in London, believes there is some chance that the dollar could move as low as DM1.30. He points to 'disturbingly weak' US money supply growth and poor consumer confidence figures as signs that the economic slowdown is set to continue.

He also believes that the current holding of Dollars 500bn of reserves by the world's central banks is far more than is justified by the economic performance of the US; and that a reaffirmation of French and German central banking ties in Europe could lead to greater cross-holdings of francs and D-Marks by the Bundesbank and the Bank of France.

'In these circumstances, there would be little point in major central banks continuing to have such large holdings of US dollars,' he said.

US United States of America DE Germany, EC JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 8 781
World Trade News: Problems for Nafta seen in Congress Publication 930416FT Processed by FT 930416 By ANTHONY MCDERMOTT

THE North American Free Trade Agreement, linking the US, Canada and Mexico, could run into difficulties in the US House of Representatives, Mr Julius Katz, former deputy US trade representative, said yesterday in London.

President Bill Clinton would need to persuade his party, the Democrats, to accept the key measures on labour and the environment, particularly on the US-Mexico front. The second round of talks on such issues has been going on this week in Mexico City.

Nevertheless, Mr Katz, who now works as a trade consultant for his former boss, Mrs Carla Hills, the erstwhile US trade representative, told a conference that Nafta, signed last December, 'represents one of the most important achievements of the Bush administration'. It would be 'of great significance to the further development of the Mexican economy'.

Mr Katz said that at the outset of the Bush administration priority had been given to the Uruguay Round of trade liberalisation talks. Bilateral free trade agreements 'were second order priorities'.

The initiative taken by President Carlos Salinas in February 1990 to join Nafta had been his, not that of the US. It had been motivated by the development of the European Community's Single Market and growing attention to the emerging democracies of central and eastern Europe.

Nafta, because of its health and cleanliness provisions in particular, had been described as 'the greenest' trade agreement ever negotiated, he said.

He saw continuity in US trade policy under the Clinton administration in that there had been commitment to negotiate with Chile to expand Nafta.

But, he said, 'a more immediate problem for President Clinton is to secure the approval of Nafta by the Congress, something which is widely assumed, but is not assured.'

US United States of America MX Mexico CA Canada P9721 International Affairs NEWS General News P9721 The Financial Times London Page 8 323
World Trade News: East Europe calls EC's bluff over free trade - Community proposals are short on specifics where it matters Publication 930416FT Processed by FT 930416 By LIONEL BARBER

DURING this week's international conference in Copenhagen on economic development in central and eastern Europe, ministers from the former communist bloc served notice on the EC that it was time to put up or shut up.

Dropping diplomatic niceties, the east Europeans pressed hard for further trade liberalisation with the EC and early membership of the Community. Mr Geza Jeszenszky, Hungary's foreign minister, compared their struggle to that of ancient gladiators fighting wild beasts in the Circus Maximus in front of an indifferent (western) Caesar.

The Community's response was less dramatic. Looking sheepish, Mr Niels Helveg Petersen, Danish foreign minister, trotted out the standard EC line that there was no point in setting a firm date on membership. Other free trade-minded delegations pledged to dismantle trade barriers, but were short on specifics where it matters most: agriculture, fertilisers, steel and textiles.

It was left to Sir Leon Brittan, EC commissioner for external economic relations, to raise the free trade flag. He warned western ministers not to use the recession as an excuse for delaying trade concessions, saying the EC enjoyed a Dollars 1.3bn (Pounds 861m) trade surplus with the chief east and central European economies of the former Soviet bloc.

Sir Leon is eastern Europe's standard-bearer in the battle for accelerated trade liberalisation to be considered at the EC summit in Copenhagen in June. Political steam for a more generous approach is building - if only because at some point the EC will have to confront the contradiction between its political desire to help the former communist countries and the economic reality that so far its concessions on market access have been niggardly.

There are signs of a new approach. In Copenhagen, several western delegations said it was time for the eastern Europeans to rebuild commercial ties among themselves and with the former Soviet republics as part of a grand design to strengthen trade liberalisation across the continent, including eventually Russia.

Mr Alain Lamassoure, the new French minister for European affairs, said greater commercial integration in the east would offset the loss of markets caused by the collapse of the Soviet bloc, but it would also serve a broader aim: to teach the east Europeans 'la vie communautaire', just as France and Germany learnt to overcome their old enmities after the second world war.

More bluntly, Mr Lamassoure spoke of the 'absurd paradox' that east Europeans were demanding free trade with the west while continuing to put barriers to trade with their eastern neighbours.

Mr Tristan Garel-Jones, British foreign minister, was more cautious. Regional co-operation was no substitute for market access to the EC, but it made sense to forge closer trade links between the Visegrad Four - Poland, the Czech Republic, Hungary and Slovakia - and Romania and Bulgaria. 'Ways too should be found to revitalise trade with neighbouring states in the former Soviet Union.'

Yet all the east European countries are wary of being pushed back into the orbit of the former Soviet Union. Their fears are not only political. Mr Jeszenszky, colourful as ever, recalled that Lada car models built with Fiat spare parts in the east bloc never worked properly. East-west trade was simply superior to east-east trade, he said.

Nor is it clear how Mr Lamassoure's ideas fit into the new patterns of trade which have sprung up since the fall of the Berlin Wall: the EC's single market, the European Economic Area (between the EC and Efta countries); free trade agreements between Efta and the Visegrad Four, between the Visegrads themselves, and between the EC and the six 'associate' EC countries (Bulgaria, Romania, and the Visegrad Four).

Confusing the picture still further, the Baltic states have free trade agreements with Norway, Sweden, and Finland but not with the EC - a tricky subject which remains to be tackled during the Nordic countries' accession negotiations to the EC this year.

The eastern European queue for membership is equally tangled. By extending association agreements to Bulgaria and Romania, the EC has offered the same privileges to the Visegrad Four and undermined its claim to be a privileged club. At the same time, the aggressively free-market Czech republic is sprinting ahead; Slovenia, the former Yugoslav republic, is also making rapid progress. Germany is quietly pushing both countries' cause.

EC leaders will soon have to offer clearer priorities, even if this conflicts with the ad-hoc approach favoured by the Community. In the meantime, it is clear that the east Europeans are less willing to play a supplicant role toward their rich western neighbours. The EC's temporary ban on meat and dairy products because of suspected foot and mouth disease in the region unleashed prompt retaliation and howls of rage in Copenhagen.

Mr Pavel Bratinka, Czech foreign minister, noting that there had been no foot and mouth disease in his country since 1974, uttered what could be a prophetic warning: 'From now on, the almost automatic support given hitherto by the Czech republic to anything bearing the label EC will exist no more.'

QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page 8 881
Argentina fixes new sale date Publication 930416FT Processed by FT 930416 By JOHN BARHAM BUENOS AIRES

ARGENTINA is to begin privatising YPF, its national oil company, in June or July, instead of October as planned.

YPF's net worth is estimated at Dollars 8bn (Pounds 5.2bn) and is to be floated on local and international equity markets. The sale will be the country's biggest privatisation.

Mr Daniel Marx, Argentina's chief financial negotiator, said yesterday: 'We feel the opportunity (of) markets being receptive generally to stocks, particularly oil and Latin American stocks. The stars have not been aligned like this for a long time.'

He denied the new timing was due to domestic political factors or to worsening government cash-flow. He said the privatisation's detailed planning and marketing strategy would have to await appointment of advisers.

However, he said the government had already decided to sell as much of the company as quickly as possible. It holds 100 per cent of YPF stock and is legally required to retain a 20 per cent stake.

Yacimentos Peroliferos Fiscales Sociedad Del Estato YPF AR Argentina, South America P9611 Administration of General Economic Programs P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining COMP Company News P9611 P1311 P2911 The Financial Times London Page 8 210
Indian business welcomes move on further trade liberalisation Publication 930416FT Processed by FT 930416 By STEFAN WAGSTYL NEW DELHI

INDIAN industrial organisations yesterday welcomed government moves to liberalise investment in the motor, white goods and leather industries.

The measures, which were announced late on Wednesday, are a significant extension of the economic reforms of Mr P V Narasimha Rao, the prime minister, who is trying to deregulate the economy and integrate it with the global trading network.

The changes will permit companies, including foreign groups, to enter the motor, white goods and leather industries without the need for government licences which, until recently, have been used to limit competition and keep out foreign competitors.

The Confederation of Indian Industry said yesterday that the measures were a step in the right direction.

However, they are unlikely to prompt an immediate rush into the newly-liberalised sectors, since much of Indian industry has been suffering from weak demand for the past year.

Foreign car makers have held talks with Indian vehicle makers, but have yet to commit themselves to any large projects until the outlook for the economy is clearer. They have also been held back by the global economic slow down.

In separate moves, the government approved state-sector investments totalling Rs35bn (Pounds 737m), including the expansion of import facilities for natural gas, the modernisation of the Digoil refinery in Assam, power station construction, and the building of a new passenger terminal at Bombay airport.

Ministers also approved the award of an oil and gas exploration contract for an onshore area in Gujarat, north western India, to a consortium of US, Australian and Indian companies.

A parliamentary Committee probing the Rs40bn Bombay securities market scandal is considering recommending tough penalties for foreign banks involved in the affair.

According to the Economic Times, India's leading business daily, the committee's draft report recommends that the Reserve Bank of India, the central bank, should consider banning the offending banks from repatriating profits earned from irregular transactions. The committee's final report is due to be published next month.

The scandal erupted when fake and unrecorded transactions were discovered in the inter-bank securities market.

Investigators established that money had been siphoned out of the market in contravention of central bank rules for investment in the stock market.

Four foreign banks were found to have been particularly active in the securities market - Citibank and Bank of America of the US, ANZ Grindlays of Australia and the UK's Standard Chartered.

IN India, Asia P3711 Motor Vehicles and Car Bodies P3639 Household Appliances, NEC P3199 Leather Goods, NEC P1311 Crude Petroleum and Natural Gas P6081 Foreign Banking and Branches and Agencies P6231 Security and Commodity Exchanges NEWS General News MKTS Foreign trade P3711 P3639 P3199 P1311 P6081 P6231 The Financial Times London Page 6 463
Nigeria reverses 90-day ruling on letters of credit Publication 930416FT Processed by FT 930416 By PAUL ADAMS LAGOS

THE Central Bank of Nigeria has withdrawn its 90-day moratorium on payment of all letters of credit, a ruling introduced on March 1 which drew strong criticism from the business community and damaged Nigeria's credibility with foreign suppliers.

A circular issued by the central bank says that payment for transactions under confirmed and irrevocable letters of credit at sight is again permissible.

The change of policy is back-dated to March 1 enabling suppliers to be credited without further delay.

The private sector in Nigeria has welcomed the decision, which is seen as an admission of error by the bank.

One banker said: 'The 90-day rule showed a serious lack of understanding of commercial procedures on the part of leading central bankers.'

The bank's justification for the 90-day ruling in March was to stop abuses of the exchange rate system.

Bankers believe that the real motive was to delay payment of scarce hard currency for as long as possible.

The effect was quite different, as importers in Nigeria bore the 90 days financing costs, passed on by their suppliers, resulting in higher import prices.

The only beneficiaries of the bank's previous ruling were the suppliers' banks, outside Nigeria, who were able to have use of the money for an extra 90 days.

The central bank has yet to reverse last month's the other directive in March which blocked payment of an estimated Dollars 1bn to suppliers who have allowed Nigerian importers delayed payment terms.

NG Nigeria, Africa P6081 Foreign Banking and Branches and Agencies P9611 Administration of General Economic Programs NEWS General News P6081 P9611 The Financial Times London Page 6 287
Kenyans suspend operations of leading local bank Publication 930416FT Processed by FT 930416 By Our Foreign Staff and REUTER

KENYA HAS suspended operations of a leading local bank hit by severe cash problems and arrested several of its officials, the state-run Kenya News Agency said yesterday.

The agency quoted Mr Musalia Mudavadi, the finance minister, as saying the central bank had taken over the affairs of the Trade Bank of Kenya pending further investigations.

In a statement last month the minister denied allegations that several banks had been allowed by the central bank to run up overdrafts because of their connections with the political establishment.

Mr Mudavadi acknowledged that a 'few banks have run overdrafts with the Central Bank,' but he stressed that they were not insolvent.

Yesterday Mr Mudavadi told the Kenyan parliament that 'auditors appointed to the bank had reported liquidity constraints, poor asset quality, weak internal controls and violations of the banking act.'

He said that a manager from the Central Bank had been appointed to run the trade bank, owned by a group of powerful local Asians 'in order to protect depositors and creditors and restore public confidence,' Kenya News Agency reported.

It said several trade bank officials had been arrested. The Asian managing director was being sought.

An opposition member of parliament told the house on Wednesday that the central bank was forced to loan the trade bank up to Sh1.6bn (Pounds 23m) to enable the bank to pay off its debts.

The bank was set up in 1984 with a paid-up capital of Sh230m. It listed cash reserves of up to Sh212m in February this year.

Trade Bank of Kenya KE Kenya, Africa P6081 Foreign Banking and Branches and Agencies COMP Company News P6081 The Financial Times London Page 6 296
International group in Vietnam oil deal Publication 930416FT Processed by FT 930416 By REUTER HANOI

A CONSORTIUM of companies led by Australia's BHP Petroleum signed contracts yesterday to exploit Vietnam's Dai Hung (Big Bear) offshore oil field, the biggest undeveloped field in Asia, Reuter reports from Hanoi.

The contract, calling for total investment of about Dollars 1.5bn (Pounds 966m) over more than 20 years, is one of the biggest business deals in communist Vietnam since it started building a market economy in the late 1980s.

BHP Petroleum is the operator for the field, about 250 km (155 miles) off the coast of southern Vietnam, with a 43.75 per cent stake.

Its partners are Malaysia's state-owned Petronas, with 20 per cent, VietsovPetro, a Vietnamese-Russian joint venture, with 15 per cent, and Total of France and Sumitomo of Japan with 10.625 per cent each.

Bringing the Big Bear field on stream in mid-1994 will boost Vietnam's oil exports, currently coming from the Bach Ho (White Tiger) field further north. VietsovPetro pumped about 5m tonnes of crude from Bach Ho last year.

BHP Petroleum Petronas Vietsovpetro Total Sumitomo Corp VN Vietnam, Asia P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining P5051 Metals Service Centers and Offices P5052 Coal and Other Minerals and Ores MKTS Contracts RES Natural resources P1311 P2911 P5051 P5052 The Financial Times London Page 6 226
S Africa counts the cost of mass action Publication 930416FT Processed by FT 930416 By PATTI WALDMEIR JOHANNESBURG

SOUTH AFRICA was yesterday counting the political and economic cost of Wednesday's national protest strike which left 17 people dead.

Yesterday an angry mob attacked two whites in the black homeland of Transkei less than 48 hours after the slaying of two white South African tourists, police said.

The death toll from Wednesday's protest rose to 17 after 11 people were massacred in Natal province following a commemoration rally for slain African National Congress leader Chris Hani.

However, it was not clear how closely the deaths were related to the ANC protest, given that such massacres have become a regular occurrence in Natal.

There were further violent incidents in Port Elizabeth, Cape Town and on the East Rand near Johannesburg. The black township of Soweto was reported quiet.

Further mass protests are planned for tomorrow, Sunday and Monday, raising the risk of further violence.

The ANC has called another national protest strike for Monday, the day Mr Hani will be buried.

Yesterday it appeared the political impact of the Hani assassination might prove positive, as the South African government announced it would drop crucial preconditions to the establishment of the first phase of a multi-racial interim government, the Transitional Executive Council.

The council would include representatives of all the main parties, and would have sub-councils to advise and monitor government actions in areas such as law and order, defence, finance and foreign affairs.

Mr Roelf Meyer, the ANC's chief negotiator, said the government would no longer insist that the 26 parties to the multi-party negotiating forum agree a transitional constitution before this council could be formed. This removes a big obstacle to formation of the Council, which Mr Meyer said could be agreed by May.

However, he cautioned that some parties, such as the Inkatha Freedom Party, might object, causing further delays. Inkatha believes there should be no extended transition to full democracy.

Meanwhile, the US state department advised Americans to stay away from black homelands and townships in South Africa. Transkei leader Major-General Bantu Holomisa said armed police were being sent to protect tourists in the homeland's popular coastal resorts, but South Africans were advised to avoid Transkei.

Ms Michelle Cohen, executive director of the US chamber of commerce, said she knew of businessmen, representing US companies which stuck with South Africa through sanctions, curtailing visits to the country because of the turmoil.

She expected a hefty rise in the cost of insurance on trade with South Africa. 'We'll be on the same list as Vietnam. . . Sarajevo.'

ZA South Africa, Africa P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 454
Russia and The G7: Doubts on aid disbursement Publication 930416FT Processed by FT 930416 By JOHN LLOYD

THE AID package announced by the Group of Seven ministers yesterday gave a strong message of western support to Russia, but it may not have removed the obstacles to aid disbursement.

Mr David Roche, head of global strategy at Morgan Stanley International, said that only between Dollars 3bn and Dollars 6bn would be available relatively quickly.

'This is far short of the mega sums in the plan's headlines,' he said.

'Just as hyperinflation is part of the Russian scene, so hyperbole is a part of the western aid package to save Yeltsin.'

This assessment was borne out by economic commentators in Moscow.

One said that the package risked duplicating the mistake made last year, when the headline sum of Dollars 24bn remained partly unspent because of IMF conditionality, and the remainder - about half - was given in the form of tied credits, further increasing the overall Russian debt.

As these funds went in, an estimated Dollars 15bn-Dollars 25bn was illegally squirrelled away by Russian companies and individuals in western bank accounts.

Further, the success of the package is, as ever, dependent on the politics within Russia.

Only if Mr Boris Yeltsin, the Russian president, wins the referendum on April 25 and, more important, acts on that victory by giving the go-ahead to his government to restrain credit and create the conditions for a stable currency, can the 'black hole' of Russian reform be closed and the reforms be implemented.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 4 276
Russia and The G7: Something old, something new for embattled Yeltsin Publication 930416FT Processed by FT 930416 By CHARLES LEADBEATER TOKYO

WITH something old, something new, something borrowed and something blue, the finance and foreign ministers from the Group of Seven industrialised nations yesterday pulled together a package of financial support for Russia with the impressive price tag of Dollars 43bn.

The package to bolster Russian economic reforms has three main components. About Dollars 14bn has been earmarked for macro-economic stabilisation, particularly to help bring inflation under control. A similar amount will be spent on structural reform, mainly trade assistance, aid to develop the energy sector and small and medium-sized businesses. About Dollars 15bn will be debt rescheduling.

The package thrashed out during two days of talks at a Tokyo hotel dwarfs the much derided Dollars 24bn plan agreed last year. It is on top of bilateral commitments of more than Dollars 4bn announced during the meeting by the US, Japan and the UK.

According to the plan's authors it is designed to deliver practical and visible help to hard-pressed Russian consumers and unemployed workers who are bearing the brunt of the dislocations of reform.

With President Boris Yeltsin preparing for a critical referendum on his political reform plans on April 25, the G7 leaders yesterday claimed to have met the historic challenge they set themselves, to throw their weight and money decisively behind the embattled Russian leader.

Yet, on closer inspection, the G7's achievements are less impressive than they seem. The new multilateral money committed in Tokyo was well short of Dollars 43bn. The immediate benefits for men and women in Russian streets will be even less.

Much of the package drawn up in Tokyo was already in the pipeline. The Dollars 15bn debt rescheduling had already been agreed by 19 creditor countries in Paris on April 2.

About Dollars 10bn is in the form of export credits, much of which G7 countries have already offered bilaterally. A further Dollars 10bn is in the form of a Dollars 4bn IMF standby loan and a Dollars 6bn rouble stabilisation fund. These loans were offered last year but not taken up. The G7 is simply reaffirming that the facilities are still available.

About Dollars 5bn is due to come from World Bank loans to promote structural reform in industry. Many of these loans have been under negotiation for months.

So the only new multilateral initiatives taken by the G7 in the past two days amount to Dollars 3.3bn. The main element is an innovative Dollars 3bn IMF loan dubbed a systemic transformation facility designed to help economies undergoing sweeping reform.

The remainder is a Dollars 300m European Bank for Reconstruction and Development fund to promote the development of small businesses, in part through planning a Russian bank for small and medium-sized enterprises.

Indeed the boldest initiative, a US proposal for a Dollars 4bn fund to promote large-scale privatisation, met a cool response. Ministers agreed to study the idea in the run-up to the July G7 summit of heads of state.

The protagonists, including Russia's Mr Boris Fyodorov, the deputy prime minister, and Mr Andrei Kozyrev, the foreign minister, dismissed such calculations of their achievements as crude underestimates. They make four main claims for the Tokyo agreement:

It marks a more credible western commitment to the process of reform. The special Dollars 3bn IMF facility - which is conditional on Russian pledges that it will tackle inflation and reduce its budget deficit - is designed to kick-start macro-economic stabilisation.

That should make it easier for Russia to negotiate the Dollars 4bn stand-by arrangement with the IMF. The meeting set an October deadline for concluding those talks. As Mr Fyodorov remarked: 'This puts us in a stronger bargaining position with the IMF.'

If the stand-by arrangement is agreed Russia will be in a better position to take up the additional Dollars 6bn IMF rouble stabilisation fund.

The G7 will make it easier for Russia to take up assistance from international financial institutions such as the World Bank.

The west is adopting a more practical approach in an effort to make sure aid makes a tangible and visible difference to everyday life in Russia. The main symbol of that is the small business fund. As Mr Fyodorov put it: 'The whole process is better co-ordinated and more practical then before.'

According to the Russians, the political value of the G7 being seen pulling together its support into a single package at such a critical time should not be underestimated.

In time, Mr Kozyrev's desire that ordinary citizens should see some of the fruits of foreign assistance in their daily lives may come true. In the meantime the main effect of the Tokyo talks on daily Russian life will be the headlines generated in this morning's newspapers.

Editorial Comment, Page 17

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Government News ECON Economic Indicators P9311 P9611 The Financial Times London Page 4 835
Russia and The G7: Russians convinced they have made advances Publication 930416FT Processed by FT 930416 By ROBERT THOMSON TOKYO

WHEN Mr Boris Fyodorov, Russian deputy premier, and Mr Andrei Kozyrev, foreign minister, took the stage at the end of the two-day Group of Seven meeting, they were convinced Russia had done well from the gathering.

Mr Kozyrev suggested that the get-together was evidence that 'democratic forces on both sides won the cold war', although that assertion will be put to the test by the Russian referendum on April 25, a date which inspired the hurriedly arranged meeting.

That date was also on the mind of Mr Warren Christopher, US secretary of state, who explained that 'we simply could not wait for our annual summit in July to act decisively on behalf of the reform government in Moscow.' If the 'forces of reform' were to be defeated, he said, 'we would face increased instability' and the 'necessity to continue to invest dollars in defence of and not in the urgent domestic needs of our people'.

Mr Kozyrev said the aid programme would certainly help the 'day-to-day lives' of the Russian people, and suggested the international support shown for Mr Yeltsin would 'give him more authority and more strength'.

Mr Fyodorov said the aid programme was now better linked to the economic reforms under way in Russia. He said the support promised for small business was 'very important', as were the 'clear mechanisms' for the implementation of the aid programme.

His reference to 'clear mechanisms' reflects Russian disappointment that funds from past programmes have been slow to flow because of international agencies' strict conditions.

He also cautioned that some detail was yet to be determined: 'There are many aspects which will require further study. There is much more detail to be decided.'

Mr Fyodorov said it was understandable that a US proposal for a Dollars 4bn (Pounds 2.6bn) privatisation fund was not immediately supported by other G7 countries. The fund is designed to help big companies, and the US has pledged Dollars 500m and expects fellow G7 members to supply at least Dollars 1.5bn.

'The question of privatisation will be analysed. By the time of the G7 summit in July we will have a better idea of whether it will be supported,' Mr Fyodorov said.

US officials also said they were not disheartened by the unenthusiastic response to the privatisation proposal, but made clear the US would be disappointed if its G7 partners failed to commit funds by the time of the summit.

RU Russia, East Europe P9611 Administration of General Economic Programs GOVT Government News P9611 The Financial Times London Page 4 441
Russia and The G7: French commercial banks oppose rescheduling of Russian debt Publication 930416FT Processed by FT 930416 By ALICE RAWSTHORN PARIS

France's commercial banks plan to oppose attempts to reschedule Russia's Dollars 20bn private debt until the Russian financial system is more stable and corruption has been curbed, Alice Rawsthorn writes from Paris.

French banks, which account for between Dollars 3.7bn and Dollars 4.6bn of Russia's private debt, will put their case this weekend to the London Club meeting of western banks. Gallic banks with heaviest exposure are Credit Lyonnais, Banque Nationale de Paris and Societe Generale.

Mr Michel Freyche, president of the French banking association, said they would not agree to Russian proposals that commercial lenders should reschedule loans along the same lines as official creditors agreed earlier this month with their Dollars 38bn debt. He said they should wait until proper exchange controls were in place and corruption stamped out.

RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy ECON Balance of payments P9311 The Financial Times London Page 4 173
Russia and The G7: Referendum battle starts to hot up Publication 930416FT Processed by FT 930416 By JOHN LLOYD and DMITRI VOLKOV MOSCOW

PRESIDENT Boris Yeltsin of Russia changed gear sharply yesterday in his lackadaisical campaign to win backing for his presidency in a referendum on April 25.

He told a meeting of supporters he would not obey the rules for the referendum set by his rivals in the Russian parliament, and he ordered a drastic cut in the privileges and duties of his rebellious vice president General Alexander Rutskoi.

He also named Mr Oleg Lobov - a trusted associate who is close to industrial enterprise managers - as first deputy premier to oversee the economy, in a move designed to reassure the important industrial lobby. Mr Lobov outranks deputy premier Boris Fyodorov, who is in charge of economic reform.

At the same time, Mr Yeltstin is working on a decree which would give massive privileges to Russia's autonomous republics in exchange for their support in the campaign. The decree would convert the Russian federation into a confederation, with each of the 21 separate republics acceding to a new union treaty in a distinctly different way.

The referendum rules set by parliament lay down that any proposition needs to be approved by more than 50 per cent of the total electorate - an all but impossible margin. But Mr Yeltsin said he would issue a decree on April 20 to bring these rules into line with the referendum law, which lays down that only a majority of those voting is required.

He said he had yesterday met Mr Valery Zorkin, chairman of the Constitutional Court, to remind him that the court was due to issue a judgment on the constitutionality of the referendum rules by April 20. Mr Zorkin, whose pronouncements have become increasingly anti-presidential, forecast on Wednesday night that Mr Yeltsin's determination to press ahead with the introduction of a new constitution would bring civil war between rightist and leftist forces. This came even though Mr Zorkin helped prepare the draft constitution Mr Yeltsin wishes to introduce.

The president's move against Gen Rutskoi means the vice president's armour-plated Mercedes has been replaced with a Volga, the middle managers' workhorse; his bodyguards have been cut to two; and he is relieved of responsibility for agricultural reforms - an area where, like so many of his predecessors, he made little mark.

Gen Rutskoi, whose support was crucial to Mr Yeltsin on his accession to power two years ago and who was chosen because of his military (air force) background and influence among reformist communists, is now close to being Mr Yeltsin's main contender for the presidency.

He is a powerful and emotional speaker, has a record of physical courage in action and is the head of a relatively large party, the Free Russia party - part of the Civic Union bloc.

Mr Yeltsin, still supported by the dwindling number of radical democrats in the political class, appears to have plumped for the heads of republics within Russia as the biggest source of his support. They have called on voters to turn out on April 25 - though they refused to explicitly endorse Mr Yeltsin - and they have agreed the referendum may go ahead in all of their territories.

RU Russia, East Europe P9199 General Government, NEC P8651 Political Organizations GOVT Government News P9199 P8651 The Financial Times London Page 4 569
Russia and The G7: West foresees more close co-operation - Summit Communique Publication 930416FT Processed by FT 930416

Introduction

At the request of heads of state and government of the seven major industrialised countries and of the president of the EC Commission, and in the process of preparation of the Tokyo summit, foreign and finance ministers of G7 countries and representatives of the European Community met in Tokyo April 14, 1993 to discuss support for reform in the Russian Federation. Prime Minister Kiichi Miyazawa of Japan opened the meeting, which was chaired jointly by Mr Kabun Muto, minister for foreign affairs and Mr Yoshiro Hayashi, minister of finance.

On April 15 1993, the ministers met with Mr Boris Fyodorov, deputy prime minister and finance minister of Russia, and Mr Andrei Kozyrev, foreign minister, for an extended discussion of the economic and political situation in Russia and to review how the international community could best support Russia's reform programme. Our Russian colleagues reaffirmed the determination of President Yeltsin and his government to move forward with reform. They welcomed our determination to support the reform process.

2 Support for Russia's Reform

Russia has embarked on a far reaching transformation process with the aim of building a democratic society, establishing a market economy and improving the welfare of its people under the leadership of President Yeltsin.

Russia has made courageous and extraordinary progress in the last two years. Russian reform and progress towards democratisation are essential to world peace. We want to see a democratic, stable and economically strong Russia, firmly integrated into the community of democratic states and into the world economy. We are confident that the G7 and Russia will continue to co-operate constructively and responsibly in international affairs.

The Russian people themselves must bear primary responsibility for economic and political reform. The development of a market economy in Russia will be a long, arduous undertaking which will require difficult adjustments by the Russian people. We assure them of our support in coping with the inevitable hardships of the transition period. We remain resolved to work with Russia to develop lasting co-operation based on the principles of partnership and help for self-help laid out at the Munich Summit. Our assistance will be pragmatic, visible, tangible and effective, tailored to Russian absorptive capacity and phased with the progress of reform.

We welcome the recognition by the Russian government that both monetary stabilisation and further structural reform. including privatisation, are critical. A positive environment for private initiatives and investment, including a proper legal and administrative framework, is crucial for the transformation of the economy. Better access to export markets is indispensable to structural reform in Russia.

3 Bilateral and Multilateral Actions

We have agreed on a series of multilateral actions closely linked with our bilateral efforts as described in the Annex. Close co-ordination among our countries and international organisations as well as close contacts with the Russian authorities will be necessary.

Russia is currently experiencing a particularly difficult situation. We are also mindful of the challenging tasks facing other economies in transition. The success of the Russian reform programme is in the interest of all countries. . .

4. Next Steps

Our meeting in Tokyo has helped lay the foundation for the meeting to be held with President Yeltsin in July in Tokyo. The heads of state and government of the G7 democracies and the president of the EC Commission will continue to pay close attention to developments in Russia. They look forward to a fruitful review in July.

RU Russia, East Europe QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy P9611 Administration of General Economic Programs GOVT Government News P9311 P9611 The Financial Times London Page 4 617
Russia and The G7: Tight rules set out for foreign banks Publication 930416FT Processed by FT 930416 By JOHN LLOYD MOSCOW

TIGHT new rules on foreign banks intending to operate in Russia have been published by the central bank, in a move seen as part of a policy to protect fledgling Russian industries and financial institutions from foreign competition.

Mr Dmitri Tulin, a central bank deputy chairman, said in an interview with the Interfax agency that foreign banks could open only one branch office besides their Russian head office, while the total capital of all foreign banks operating in Russia could not exceed 12 per cent of the aggregate capital of the Russian commercial banks this year.

Already, according to the central bank, aggregate capital of foreign banks represents 6 per cent of the Russian total. This is even though only two western banks - Z-Landerbank of Austria and Credit Lyonnais of France - have received banking licences.

Mr Geert D'Haese, chief representative of the Inter Alpha Group of banks - which include Spain's Banco Bilbao Vizcaya, Belgium's Kredietbank and the UK's Royal Bank of Scotland - said the rules were a compromise with conservatives in the Russian parliament, who tried to ban foreign bank operations entirely.

RU Russia, East Europe P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 4 227
Russia and The G7: Moscow given notice on Bosnia Publication 930416FT Processed by FT 930416 By ROBERT THOMSON

THE Group of Seven yesterday backed the Russian leadership of President Boris Yeltsin and his reforms but also put Russia on notice that its full support is expected in handling the conflict in Bosnia.

G7 foreign ministers attending the two-day meeting in Tokyo were agreed that much tougher sanctions should be imposed on Serbia through the United Nations unless there is a settlement in coming days.

The ministers made clear to Mr Andrei Kozyrev, Russian foreign minister, that Moscow, a traditional ally of the Serbs, must use its influence to end violence and should vote in favour of tougher sanctions if a vote is held at the UN.

A UN vote has been delayed until after Russia's April 25 plebiscite as Mr Yeltsin is under pressure from conservatives and could be embarrassed by a vote in favour of action against the Serbs. In recent weeks, Russian officials have said tougher sanctions would be 'unhelpful'.

Mr Warren Christopher, US secretary of state, said the vote was delayed out of deference to Russia and its apparent attempts to quell the violence, but Moscow's full co-operation would be expected in the UN after April 25.

He said Russian officials had indicated a settlement may be possible and insisted they must make genuine efforts to see it was reached. If there was no settlement, he said, the US would vote for sanctions and Russia should too.

RU Russia, East Europe BA Bosnia-Hercegovina, East Europe P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 4 270
The Italian Upheaval: Heading off into uncertainty - As the corruption scandal deepens, Italians vote on Sunday to consider the first steps to fundamental political reform. But the shape of this is unclear Publication 930416FT Processed by FT 930416 By HAIG SIMONIAN

AS Italians prepare to vote on Sunday in their country's latest referendums, what was designed by its sponsors as a protest against the political establishment has turned into a much more confused affair.

Of the eight separate referendums, two in particular should have been barometers of the political mood in a country rocked by almost daily revelations of political corruption and, more recently, allegations of collusion between leading politicians and organised crime.

But since the proposal to reform the system for electing members of the Senate, the upper house of parliament, was first mooted by Mr Mario Segni, the breakaway Christian Democrat who has led the referendum movement, most of the main political parties have jumped on the reform bandwagon.

Similarly, every political group in parliament has endorsed the referendum calling for the abolition of state funding for parties. After the exposure of massive kickbacks to politicians on a stream of public-sector contracts in recent years, opposing the move would be little more than political suicide. The alternative to the current system has not yet been outlined but will have to offer greater transparency and be more rigidly enforceable.

By contrast, some smaller political parties are calling on their supporters to oppose the call for electoral reform. Their arguments are based on principle, but with a strong element of self-preservation.

Sunday's referendum only calls on voters to voice their opinion on replacing the electoral system in the Senate, the upper house of parliament. The present method, based on proportional representation, would make way for one whereby 238 of the 315 seats in the Senate would be elected by a majority vote. It is expected that backing for the change will oblige politicians to extend the reform to the Chamber of Deputies, the lower house.

Less certain is the type of majority voting system politicians will prefer when it comes to approving a replacement.

According to the opponents of change, shifting to an electoral system based on a majority vote will strengthen the position of established parties, such as the Christian Democrats, which have traditionally blocked change in Italy and are now being revealed as deeply involved in the corruption scandals.

Hence opponents of the referendum, such as La Rete, the small party headed by Mr Leoluca Orlando, the former mayor of Palermo, and a majority of the environmentalist Green lobby, say the call for electoral reform is counter-productive, as it will only enshrine the entrenched position of the bigger parties, while smaller groups militating for reform will be penalised in future polls. The opponents of referendum say new elections should be held now, rather than waiting for a new system to be introduced by a parliament they claim largely composed of parties shown to be corrupt.

A sizeable Yes vote in favour of reforming the electoral system and party financing is no longer in doubt after polling booths shut on Monday afternoon. How politicians will react remains uncertain.

Before the parties backed the two main issues, it was widely expected that the 'protest' registered by the referendum would trigger the formation of a new government. The latter, probably headed by an 'institutional' figure such as the leader of the upper or lower house of parliament, would have remained in office just long enough to steer through electoral reform.

Once the changes were approved, it was assumed the caretaker government would call early elections, probably for September. That would allow voters to elect a parliament, based on the new rules, which would reflect popular opinion and be better placed to push through tough economic measures.

However, the prospect of an 'institutional' post-referendum government has waned in recent weeks after growing signs of friction between the Christian Democrats, the biggest political party, and the Democratic Party of the Left (PDS), the former Communists.

Earlier this month, the two parties, which would form the main elements of an 'institutional' post-referendum coalition, appeared unable to agree on sharing power. The likely price for support by the PDS - having the government led by Mr Giorgio Napolitano - appeared too high for the Christian Democrats. Mr Napolitano is the leader of the Chamber of Deputies and a PDS politician. Meanwhile, the PDS appeared unwilling to back a more broadly-based government unless strongly represented.

Given the impasse, it now looks more likely that Mr Giuliano Amato, the Socialist prime minister, will soldier on. It will be up to his tarnished coalition, which has seen the departure of five ministers on account of the corruption investigations, to see electoral reform through parliament and then prompt a formal government crisis which would trigger an early poll.

The Amato government could be 'refreshed' after the referendums by a reshuffle, albeit one short of bringing in other parties to broaden its support. The present coalition is based on a flimsy 16-seat majority.

Party leaders may also informally reconfirm their support for Mr Amato, who has regained some stature after stumbling earlier this year after backing an amnesty for politicians accused of taking bribes on behalf of their parties.

------------------------------------------------------------------------ THE VOTE ON ELECTORAL REFORM ------------------------------------------------------------------------ What the reformers want to scrap ..... ------------------------------------------------------------------------ ITALY A several-faceted, shifting coalition ------------------------------------------------------------------------ The spring 1992 Amato cabinet, which has since been altered dramatically because of resignations due to the ongoing corruption scandal CHRISTAIN DEMOCRATS 11 SOCIALISTS 8 SOCIAL DEMOCRATS 2 LIBERALS 2 TECHNOCRATS 4 ------------------------------------------------------------------------ Changing partners - Parliamentary elections must be held every five years. However, in a country now on its 51st government since the Second World War, legislatures have seldom lasted their full course. The elections of April 1992 marked one of the very few occasions that a parliament had served its full term. ------------------------------------------------------------------------

- Early elections can be triggered through a formal government 'crisis,' which occurs when a government no longer commands the support of parliament. The crisis can lead to the creation of a new government, without elections, or, failing that, new polls after the president of the republic (the head of state) dissolves parliament. ------------------------------------------------------------------------ - There is no fixed duration for the election campaign. ------------------------------------------------------------------------ - Given that the electoral system is based on a very pure form of proportional representation, elections tend to return a large number of parties to parliament. Sixteen parties are represented in the current Chamber of Deputies. ------------------------------------------------------------------------ - The president nominates a prime minister, who then seeks to put together a government. Given the consensual nature of Italian politics and the ubiquity of coalitions, the process of naming a prime minister and assembling a coalition is usually very lengthy, involving contacts with different party leaders. A new government has to be approved by parliament through a vote of confidence. ------------------------------------------------------------------------

.and the models they are looking at ------------------------------------------------------------------------ FRANCE A colaition of like-minded parties ------------------------------------------------------------------------ The current cabinet formed after last month's conservative landslide in National Assembly elections UDF (centre-right) 16 RPR (Gaullists) 13 ------------------------------------------------------------------------ - Parliamentary elections must be called every five years. The president is elected separately every seven years. Early parliamentary elections can be called by the government itself, triggered by a parliamentary vote of no confidence, or by the timing of the presidential elections. ------------------------------------------------------------------------ - There are two rounds of voting in a parliamentary election. The official campaign lasts for three weeks before the first vote, during which time the parties broadcast their political messages. There are strict controls over political advertising for six months before the vote, and opinion polls are banned in the campaign's final week. ------------------------------------------------------------------------ - In the first round, candidates winning 50 per cent or more of the vote in their constituencies win outright. All other candidates winning more than 12.5 per cent go on to the second round a week later. Then, the candidate winning the most votes is elected. ------------------------------------------------------------------------ - The president chooses the prime minister, normally from the party which has won the most seats, although the constitution does not require this. The prime minister appoints the cabinet, but the president is empowered to object to individuals. ------------------------------------------------------------------------ - Every French government is influenced by its relationship with the president, whether or not the president's party is represented in the government. The constitution is vague on the division of power, but presidents tend to claim authority over foreign affairs and defence policy. ------------------------------------------------------------------------

UK A single-party administration ------------------------------------------------------------------------ The cabinet formed after the April 1992 general election, except for the replacement of one minister CONSERVATIVES 22 ------------------------------------------------------------------------ - Elections to the House of Commons must be held within five years of a government's coming to power, but governments can call early elections and often do. Or they can be forced to the polls by losing a parlimentary vote of confidence on an important issue, although it is possible for the Queen (the head of state) to ask someone in parliament to form a government without an election provided the new administration can command a parliamentary majority. ------------------------------------------------------------------------ - The minimum period between an election being called and polling day is three weeks, although convention usually dictates a period of about four weeks. ------------------------------------------------------------------------ - There is a single round of voting. The candidate winning the most votes in a constituency is elected (known as 'the first past the post' system), even though the candidate may have received considerably less than 50 per cent of the vote. ------------------------------------------------------------------------ - The party winning the most seats in the House of Commons generally forms the government, with the party's leader as prime minister. The prime minister chooses the other ministers. Two seats in the cabinet go to the Leader of the Lords, who is a member of the governing party, and the Lord Chancellor, who is the chief law officer in the country. ------------------------------------------------------------------------ - If the party with the most seats does not command an overall majority, which rarely happens, it will seek to form a coalition government or effect an electoral pact with a smaller party or parties to command an overall majority. ------------------------------------------------------------------------

IT Italy, EC FR France, EC GB United Kingdom, EC P9199 General Government, NEC P9111 Executive Offices GOVT Government News P9199 P9111 The Financial Times London Page 3 1727
The Italian Upheaval: Segni, the quiet Sardinian on a collision course - The leaders of the Yes and No campaigns Publication 930416FT Processed by FT 930416 By HAIG SIMONIAN

MR Mario Segni, the 'quiet Sardinian' who is the figurehead of the referendum movement, is an unlikely candidate for the limelight. Though he is the son of a former president of Italy, early exposure to the world of politics has done nothing to alter the character of a profoundly shy man. He is the champion of using referendums to promote political change, but Mr Segni conforms closely to the popular image of the reticent Sardinian: saying little, thinking hard, and taking years to get to know properly.

His rise began two years ago, when he organised a referendum on abolishing the multiple preference ballot system in some elections, which was widely believed to be subject to abuse. Popular support for the initiative, in spite of the indifference or hostility of many established politicians, created a bandwagon effect in which Mr Segni helped to convince Italians they could change an ossified political system. The referendum movement he created has attracted reform-minded politicians calling for more honest and transparent government.

But Mr Segni's belief in the need for radical reform in Italian politics, and his growing lack of faith in the willingness of the main governing parties to promote it, has taken him on an accelerating collision course with much of the political establishment.

Matters reached a head last month when Mr Segni announced he was leaving the Christian Democrat party, which he has represented as a Sardinia MP for 17 years.

His move reflected frustration with the party's apparent inability to appreciate the new mood sweeping Italy and get to grips with reform. Having at first tried to promote change from within Italy's biggest political grouping, after months of friction with the party nomenklatura, he broke free.

The move could trigger a deep split in the Catholic vote and further weaken a party which has traditionally represented a broad spread of views. By leaving just as investigations into prominent politicians have switched from allegations of graft and financial irregularities to links with organised crime, Mr Segni dealt a crushing blow to the image of the Christian Democrats at a time when they are struggling to show a new, reform-minded face.

Still only 53, Mr Segni has often been tipped as a man who could lead a new, cross-party government after the referendums, or, more likely, the elections that could follow this year. How much support he could gain, given his ructions with the rump of his party, remains unclear. Though he is widely seen as one of Italy's men of the future, his immediate prospects are likely to be coloured by his strained relations with those of the past.

IT Italy, EC P9199 General Government, NEC P9111 Executive Offices GOVT Government News PEOP People P9199 P9111 The Financial Times London Page 3 489
The Italian Upheaval: Naples learns to do without 'jobs' - How Naples shows the strain Publication 930416FT Processed by FT 930416 By ROBERT GRAHAM

A Naples businessman recounts angrily how he was obliged to employ someone 'recommended' by one of the city's political bosses. Getting a call from the politician after three weeks, he expected to be thanked for taking on a person he didn't need.

'I told you to give him a job: not make him work]' the politician complained.

In this endearing metropolis, the most chaotic and crowded in Italy, jobs and work are not synonymous. The adage goes: 'Jobs you have; work you do.'

Yet the system which has permitted people to have 'jobs' without working is now under siege in a way unimaginable even a month ago.

All the top Christian Democrat, Socialist and Liberal politicians who have run the city for the past decade face charges which begin with corruption and extend to maintaining links with the Camorra, the local Mafia.

The once untouchable big names - Gava, Pomicino, Scotti, de Lorenzo, Di Donato - have had their reputations destroyed. One of their own political class, the Christian Democrat deputy, Mr Alfredo Vito, decided to talk; and explosive evidence came from Mr Pasquale Galasso, a key figure in the Camorra. As the financial brains behind the L1,500bn (Pounds 630m) empire of Alfiero Carmine, the most powerful Camorra boss, Mr Galasso knows intimately how things worked in Naples.

He has talked of vote-buying and of the 'business committee' formed by the politicians, businessmen and Camorra to carve up the big contracts. The revelations are breaking a year behind the corruption scandals in the north; but the pace has snowballed much faster in Naples as people lose their fear of retribution and confess to magistrates who in turn are dusting off files. The confessions are laying bare what has long been publicly assumed: the largest economy in southern Italy has thrived thanks to abusive use of state funds and official tolerance of organised crime.

An array of criminal activity has been tolerated, ranging from extortion, gaming, lotteries, recycling stolen goods and drugs to contraband cigarettes, arms dealing, importing illegal immigrants and an extensive counterfeit trade. This illicit activity expanded in the 1980s on the back of a booming drugs trade.

The other economic prop has been the politician's exploitation of assistenzialismo - the helping hand of the state. A large public sector pay-roll in Naples combined with a steady stream of financial transfers from Rome and a big programme of public works have been fertile ground for patronage.

The Naples municipality has more than 20,000 employees, excess labour has been stacked into the local health authorities, fictitious jobs found in the port.

The public works programme has been sustained by inflated and fake reconstruction contracts after the 1980 Irpinia earthquake and the 1990 World Cup football preparations or by spinning out projects such as new hospitals or the metro (after 17 years work only one tranche is complete).

Public-sector spending, coupled with criminal activity in its various forms, is reckoned to generate two-thirds of the income in the Naples area. But now the flow of public funds is cut because of budgetary constraints in Rome; the big contracts have ended and the large industrial groups are shedding labour at a time when unemployment is touching 25 per cent, among the highest rates Italy.

The drama of disinvestment is symbolised by the recent plight of SME, the state-run agribusiness group due to be privatised.

SME occupies the sole fully-used building in an ambitious downtown commercial property development of a dozen glass skyscrapers. On January 25, SME's offices were taken over by the workforce in an attempt to block privatisation or at least prevent this from being an an excuse to move the headquarters from Naples and reduce jobs.

The main computer was switched off causing delays in privatisation. Even so, the authorities did not dare to remove the protesters by force.

This week after lengthy secret negotiations between management and employees, the workers occupying the building agreed to leave in return for some concessions on employment.

The sense of anger over rising unemployment concerns the authorities. 'Naples is the Italian city most at risk from an explosion of social protest,' observes a senior policeman.

Indeed, one reason why the illicit economy has been tolerated and justified is because it has provided a safety valve.

However, most Neapolitans regard the cleansing process as temporary. No new party like the Lombard League in the north is ready to emerge, either on the right or left. The Naples council, renewed this month after half the members were compromised by corruption scandals (the only place for a quorum was in jail), is based on the same Christian Democrat-Socialist axis. It merely contains the names of lesser figures who have ridden on the coat-tails of the former bosses.

IT Italy, EC P9199 General Government, NEC P9111 Executive Offices GOVT Government News ECON Employment & unemployment P9199 P9111 The Financial Times London Page 3 839
The Italian Upheaval: Orlando, more respect abroad than at home - The leaders of the Yes and No campaigns Publication 930416FT Processed by FT 930416 By HAIG SIMONIAN

MR Leoluca Orlando, the heavily-built ex-mayor of Palermo and founder of La Rete (The Network), is, like Mr Segni, an unlikely figure on the Italian political scene. And at first glance he is an unlikely leader of those arguing against electoral reform. A former prominent Christian Democrat who split with his party in 1990, he commands a much better press abroad than at home. A fluent German speaker, educated partly at the University of Heidelberg, Mr Orlando, 45, is for many foreigners a model for a new breed of Italian politicians.

His harsh attacks on leading politicians, whom he accuses of corruption and collusion with organised crime, have won him an audience among those who see the Mafia around every corner.

The focus of his tirades has been on his former party, notably Mr Giulio Andreotti, seven times prime minister, and Mr Arnaldo Forlani, the previous leader of the Christian Democrats. This week's allegations of links between Mr Andreotti and the Mafia have given Mr Orlando's claims added vigour.

A self-confessed rebel since his youth, Mr Orlando, the son of a university lecturer, has been accused of using the battle against criminal organisations as a form of self-advancement. With his escort of bodyguards, frequently-changing programme to foil potential assassins, and an image of tireless energy, however, he tends to evoke mixed feelings among fellow Italians.

Mr Orlando has earned the respect of foreigners. But in spite of his image as a Mafia-fighter, many voters, especially in the north, feel uncomfortable about his lengthy political career in Sicily, the heartland of the Mafia.

Elected mayor of Palermo in 1985, he scored immense personal successes in a stream of subsequent polls. At administrative elections in 1990, he gained over 71,000 preference votes; in regional elections in 1991, he gained more votes than any other politician in Sicilian history.

For his supporters, Mr Orlando is a tough and courageous leader, not afraid of speaking out, even at risk to his life. The party he founded, officially called the Movement for Democracy, started advocating political reform and clean government well before the revelations of corruption started to shake Italy's political fabric last year.

But critics portray him as a demagogue. They accuse him of being self-centred, making controversial statements without facts to back them up, and secretly hankering for a more presidential type of government in Italy - perhaps eventually under his leadership.

Suggestions of opportunism are lent weight by Mr Segni's claim that Mr Orlando originally supported the call for electoral reform, but had second thoughts. But then, for a small, if growing, party such as La Rete, moving to any form of voting system which would erode proportional representation in favour of reinforcing the bigger parties is bound to lead to second thoughts.

IT Italy, EC P9111 Executive Offices P9199 General Government, NEC GOVT Government News PEOP People P9111 P9199 The Financial Times London Page 3 511
The Italian Upheaval: From the banks to drugs, Yes or No Publication 930416FT Processed by FT 930416 By HAIG SIMONIAN MILAN

WHILE electoral reform and party financing are the main issues on which Italians will vote on Sunday, six other questions require their attention.

Voters will be helped to distinguish between them as each question will be on a different coloured voting slip. The six 'other' issues in the rainbow referendum comprise a mixed bag touching on constitutional matters such as the balance of power between state and regional government and specialised issues such as reform of the drugs laws.

The balance of power: Three referendums concern curtailing the role of central government in favour of devolving power to the regions. They involve abolishing the ministries of agriculture and of tourism and the performing arts, and removing the Treasury's right to appoint the heads of municipal and regional savings banks.

In each case, regional interests claim the tasks can be performed better if responsibility is handed down from Rome. Regional and local authorities already have some role regarding tourism and the performing arts. However, the most important decisions have to be taken in the capital.

Reducing the role of the central government is also the aim of the vote on bank chairmanships. Foreign bankers find it hard to believe that Italy's Treasury minister has to choose the chairmen of the country's savings banks.

The shift would mark a step towards de-politicising the highly political savings bank system, say the referendum's supporters.

Similar arguments surround the vote on abolishing the Farm Ministry. However, here the case against centralisation is harder to sustain in view of the integration of European farming in the Common Agricultural Policy and the need for co-ordinated national positions in Brussels. This explains the strong opposition by some parties to the initiatives to abolish both ministries.

By contrast, the fourth referendum on the abolition of the Ministry of State Shareholdings has been made largely redundant following the decision by the Amato government to merge the portfolio with that of the industry minister.

The Ministry of State Shareholdings was traditionally a source of power for the governing parties. However, with privatisation a central part of the Amato government's policy, its function has been eroded. Environment and drugs. The two other referendums are a mixed bag. The one seeking to strip local health authorities of responsibility for environmental controls is something of an attempt to transfer power back to the state from local level. The powers would probably end up with the Environment Ministry.

Instances of local health authorities being unable to discharge environmental responsibilities abound. In the marble quarries of Carrara in Tuscany, union representatives complain that the local health authority does not police quarrying or pollution controls.

Lastly, Italians must vote on abolishing a law which makes the possession of drugs a criminal offence. The motive is not to create a junkie free-for-all but to reinstate an earlier law, now in abeyance, which tried to distinguish between drug possession for personal use, which was not a crime, from holding larger quantities of narcotics, presumably for sale.

See editorial comment

IT Italy, EC P6081 Foreign Banking and Branches and Agencies P9641 Regulation of Agricultural Marketing P0291 General Farms, Primarily Animal P0191 General Farms, Primarily Crop P2834 Pharmaceutical Preparations GOVT Government News P6081 P9641 P0291 P0191 P2834 The Financial Times London Page 3 562
EC calls for full telecoms competition Publication 930416FT Processed by FT 930416 By ANDREW HILL BRUSSELS

THE European Community should open all international and domestic telephone calls to full competition by 1998, according to one of the two EC commissioners responsible for telecommunications liberalisation.

In a speech to post and telecoms representatives in Brussels yesterday, Mr Karel Van Miert, competition commissioner, said he favoured the controversial combination of a set target and short timetable for full telecoms liberalisation.

He ruled out an 'immediate big bang' to open up the telecoms market, but he said a longer transition period - for example, up to the end of this century - 'would restrict the development of the single market without justification', and impede technical advances.

Mr Van Miert and Mr Martin Bangemann, the industry commissioner, are expected to submit formal proposals to their Commission colleagues within the next two weeks in the hope that EC telecoms ministers will be able to discuss the Commission plans at their meeting on May 10.

If approved, the plans will trigger a long and possibly acrimonious debate between member states, some of which are fiercely protective of their national telephone monopolies. France, Belgium and Germany, for example, think it will be difficult to achieve full liberalisation within five years, while Britain and Denmark have already made moves to open their markets to competition.

Mr Van Miert tried to soothe potential opposition yesterday by making clear that liberalisation had to be accompanied by important safeguards to preserve benefits for all users. 'What I am aiming for is not a change from the current highly regulated monopolies based on member states to an unbridled free-for-all,' he explained.

But he ruled out an intermediate stage during which only telephone calls between EC member states would be opened to competition. Mr Van Miert said that most telecoms operators and regulators consulted by the Commission over the last six months had opposed the suggestion, which was originally favoured by Brussels.

Liberalisation would give all potential operators, including those from outside the EC, access to European telephone networks. But Mr Van Miert hinted in his speech that the Commission should press for equal access to third-country markets in return.

According to Mr Van Miert, the Community should first reinforce existing EC measures which open up specialised telecoms services representing 20 per cent of the market, before preparing full liberalisation of the remaining 80 per cent.

QR European Economic Community (EC) P4813 Telephone Communications, Ex Radio P9631 Regulation, Administration of Utilities NEWS General News P4813 P9631 The Financial Times London Page 2 428
UK currency plan likely to be vetoed Publication 930416FT Processed by FT 930416 By PETER MARSH, Economics Correspondent

PROPOSALS by Britain to increase support for weak currencies in the European exchange rate mechanism seem likely to be vetoed by other countries in a move which could add a further barrier to the UK's eventual re-entry into the system.

The suggestion was made during discussions by the European Community's committee of central bank governors. The group is meeting early next week in Basle, Switzerland, to finalise a report on possible ERM reforms.

Under the UK's proposal, weak currencies in the system could be helped by joint efforts by several ERM countries, rather than the single country with the strongest currency.

These technical moves would be a mixture of both interventions on currency markets and changes in interest rates. Profits and losses on purchases of weak currencies to increase their value would be shared by all the nations in the system.

The UK suggestion, which comes close to following a policy idea from the opposition Labour party, has received only limited support from the other 11 nations represented on the governors' committee.

One objection, voiced in particular by the German Bundesbank, is that the proposal might reduce the pressures on countries with weak currencies to devalue in order to remove currency strains.

However, some support for the concept of sharing out the burden of supporting weak currencies is believed to have come from nations such as Spain, Portugal and Ireland.

GB United Kingdom, EC QR European Economic Community (EC) P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 2 272
EBRD chairman to question Attali on spending Publication 930416FT Processed by FT 930416 By CHARLES LEADBEATER TOKYO

GERMAN Finance Minister Theo Waigel, who is chairman of the European Bank for Reconstruction and Development, will question Mr Jacques Attali, the bank's president, within the next few days over allegations of excessive spending at the bank.

Mr Waigel will raise the concerns over the bank's expenditure during a meeting with Mr Attali in Bonn before next week's annual meeting of the bank's governors.

The controversy over the bank follows the disclosure that it has spent more than Pounds 200m in the past two years on fitting out its London offices, travel for executives, entertainment, and other running costs. During that period the bank has disbursed loans worth about Pounds 125m.

Mr Waigel, in Tokyo for the emergency meeting of the Group of Seven foreign and finance ministers, referring to questions about the bank's spending, said: 'These may be points we will discuss at next week's meeting. I will do my duty as chairman of the bank to test the validity of these allegations.'

Mr Waigel said he had already asked the bank for a report on allegations of excessive spending on private jets to take Mr Attali around Europe, the fitting out of the bank's London headquarters and its Christmas party in the ballroom of a London hotel.

Mr Waigel said: 'If we find any unjustified expenditures we will draw the appropriate consequences.'

The EBRD last night gave a breakdown of the money it spent on its previous headquarters in Leadenhall Street, London, which it occupied for 20 months until last December. Of Pounds 18m, Pounds 11.4m was paid in rent and Pounds 6.6m on fitting out the offices. It said half the Pounds 6.6m was spent on furniture and equipment, which it is now using at its new headquarters in Broadgate in the City of London. It added that 1,200 people attended its Christmas party, which cost Pounds 52,000, so the cost per head was Pounds 40.

It is understood that Britain, the US and Canada have led criticism of Mr Attali's management of the bank.

The US has been particularly critical of the slow rate at which the bank has extended loans.

The US was at the centre of recent changes in the bank's management designed to speed up disbursement of loans, according to senior European officials.

XG Europe P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 2 415
Major and Owen reject Bosnia arms call Publication 930416FT Processed by FT 930416 By ROBERT MAUTHNER

MR John Major, the British prime minister, and Lord Owen, one of the international mediators for a peace agreement in Bosnia, yesterday rejected suggestions that supplying arms to the Moslems would help resolve the year-old conflict there.

Mr Major, answering a parliamentary question, said the weapons flow to all sides should be cut off rather than increased. The US has said that a partial lifting of the United Nations arms ban to help the Moslems defend themselves against Serb attacks was under consideration to put pressure on the Bosnian Serbs to sign the peace plan drawn up by Mr Cyrus Vance and Lord Owen.

The public endorsement of such a step earlier this week by the former British prime minister, Lady Thatcher, has provoked a political debate in Britain about the need for the international community to take more decisive action to stop Serb aggression.

Escalation of the debate came as Serbs last night launched a heavy assault on the besieged Moslem town of Srebrenica in east Bosnia, according to Bosnian radio. The defenders were said to have been pushed to within 2km of the town.

Lord Owen said in a BBC radio interview: 'The whole European Community takes the view that lifting the arms embargo is not the right priority at this stage and that the fundamental thing is tightening sanctions' against the rump Yugoslav federation of Serbia and Montenegro,

Speaking after talks in London with Mr Reginald Bartholomew, the US special envoy to the peace talks, Lord Owen said the danger of arming the Moslems was that it would unleash an armaments race.

At a meeting later yesterday with Mr Douglas Hogg, a British Foreign Office Minister, Mr Bartholomew was understood to have accepted that a decision to lift sanctions would inevitably increase the fighting.

Mr Bartholomew, who later had talks with Mr Malcolm Rifkind, the Defence Secretary, and Mr Hogg agreed that everything possible should be done to ensure that a resolution to tighten economic sanctions against Serbia should be pushed through the Security Council later this month, if the Bosnian Serbs had still not signed the Vance-Owen plan.

QR European Economic Community (EC) BA Bosnia-Hercegovina, East Europe P9711 National Security NEWS General News P9711 The Financial Times London Page 2 389
Party may fire heads of Spanish companies Publication 930416FT Processed by FT 930416 By PETER BRUCE and TOM BURNS MADRID

SPAIN'S conservative opposition party, the Partido Popular, which is believed to be slightly ahead of the ruling Socialist party in opinion polls, is raising doubts about whether the chairmen of some of Spain's largest companies would keep their jobs if the PP won the general election on June 6.

The party has said it would leave until after the election any decision on the future shape of the boards of public and semi-public companies. The uncertainty could upset a partial privatisation programme of public companies drawn up by the Socialist government.

It includes flotations of shares in Repsol, oil and energy group, sale of up to 24.9 per cent of Argentaria, the state-owned banking group, and, possibly, a further reduction of the stake in the tobacco monopoly Tabacalera and Endesa, the electricity utility.

In the case of Repsol and Argentaria, institutions leading the flotations have relied heavily on the experience and capabilities of their respective chairmen - Mr Oscar Fanjul and Mr Francisco Luzon, founding chiefs of the companies - to generate interest among foreign investors.

Both men are closely identified with the Socialist government, particularly the finance ministry. Repsol has just rushed through a flotation of 13 per cent of its stock.

Wings of song, Page 19

Tabacalera Empresa Nacional de Electricidad Respol Corporacion Bancaria De Espana (Argentaria) ES Spain, EC P6081 Foreign Banking and Branches and Agencies P2111 Cigarettes P4911 Electric Services P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining PEOP People COMP Company News P6081 P2111 P4911 P1311 P2911 The Financial Times London Page 2 279
No early end to bloodshed: Proposals for outside military intervention all have their risks Publication 930416FT Processed by FT 930416 By DAVID WHITE, Defence Correspondent

OUTSIDE military intervention to stop the bombardment of civilians in Bosnia is a daunting prospect for a number of reasons, but the sophistication of Bosnian Serb forces is certainly not among them.

Strong on heavy weapons but low on manpower, they have lacked the infantry strength for decisive territorial advances. Their numbers, reckoned to have shrunk in the past year, are put at 40,000-60,000, against about 40,000 Moslem and 45,000 Croat forces. Serb positions are stretched over a long front, with long lines of communications. The morale of the average soldier is questionable.

Western military experts see the evidence of high-quality officer training dwindling below senior levels. Local commanders are loosely controlled.

With crude siege tactics focusing on civilian targets, Serb units have generally had to do little but protect their gun positions. Their M84 tanks, versions of Russian T-72s, are employed less in their intended role than as artillery pieces. Using high positions, Serb gunners can maintain terror even with a low rate of fire.

This dismal picture fuels the widespread frustration felt by UN troops now involved in relief efforts. But none of the proposals for more forceful military engagement under UN authority promises an early end to the bloodshed.

The main proposals are:

Tighter enforcement of sanctions. This is feasible but would not directly affect Serb forces' firepower. They have no shortage of weapons or munitions, even though parts of the former Yugoslav arms industry are in Moslem or Croat-areas of Bosnia. Current stockpiles could sustain the war at least through this year and some experts say up to six years.

Air strikes. Among others, Lord Owen, the EC mediator, has said air power should be considered as a means of pressure on the Serbs. However, the demonstration of western technology in 1991 Gulf war has led to exaggerated expectations. Conditions there were ideal: open country, good visibility, large targets, wide international backing. Bosnia presents a very different picture.

Strikes on artillery positions would destroy some weapons and force the Serbs to move others. But the wooded mountain terrain would make identifying targets difficult. Munitions are not kept in huge dumps like Iraq's.

The risks are that air strikes would force the UN to call off the humanitarian supply effort - which has arguably saved more lives than have been lost in the fighting - and would stiffen Serb determination.

To meet Russian objections, the recently-launched Operation Deny Flight, enforcing the no-fly zone, precludes attacks on ground targets, except in self-defence. The flight ban is generally seen as more political than military inpurpose.

If it succeeds in stopping the use of Mi-8 Hip and Gazelle helicopters to support forward Serb positions it will hamper current Serb tactics. Nato aircraft could also be given authority to attack anti-aircraft facilities.

Safe havens. Broadly modelled on the successful initiative in northern Iraq, this would again be more complex in the Bosnian context, and would require substantial forces. The risk is creating Moslem ghettoes and abetting Serb war aims.

A full-scale peacekeeping force. Nato has provisional plans for putting together a force of perhaps 65,000-75,000, with air support, which could be sent once a genuine ceasefire was established. Going beyond traditional lightly-armed UN peacekeeping, it would be prepared to tackle flare-ups, but not a total ceasefire breakdown.

Nato commanders believe Russian participation alongside the main US, French and British contingents could be crucial to the success of such an operation, both for even-handedness and as means of exercising a moderating influence on Serbs.

Tasks would include ensuring the withdrawal, demilitarisation and disarming of warring militias and the establishment of an effective police. But the record of UN forces trying to do just this in Serb-controlled parts of Croatia does not augur well. It is also a role in which the US, which would be relied on to provide up to 25,000 of the troops, has relatively little experience.

BA Bosnia-Hercegovina, East Europe P9711 National Security NEWS General News P9711 The Financial Times London Page 2 688
East Europe looks askance at bank: But the Attali row is not top of the region's agenda Publication 930416FT Processed by FT 930416 By JUDY DEMPSEY

THE amount of money disbursed by the EBRD compared with amounts it has spent on its staff and officials is just one of many financial issues preoccupying east European officials. But it is hardly top of their agenda.

'We are in the middle of debating the budget,' one Bulgarian official said. 'We are in the middle of what could be described as a kind of trade war,' said a Hungarian official. He was referring to a one-month ban imposed by the European Community on some meat imports, provoking retaliatory action from east European countries. A Czech official said: 'We are trying to get much closer to the Community. The EBRD is not what you call top of our agenda.'

Despite these other concerns, several east European officials have reservations and anecdotes about the organisation of the EBRD.

'I'm not that surprised to read about the way the bank spends its money,' one Bulgarian official said. 'Look, I was told that when the bank set up its office in Sofia, it bought everything from abroad. It didn't even buy the nails from Bulgaria. If the bank wants to do business with us, why not at least make some sort of gesture?'

Another Bulgarian official remarked: 'The nails came from Britain.' He went on: 'The other complaint we have about the bank is that it is too slow in investing in the private sector. The bank, until recently, has supported big projects. But we are not looking for big loans. We want to build up small-scale industry. When we told the bank this, it said the people to implement these projects did not exist in Bulgaria. That's bull-shit.'

But he and other east European officials believe the bank has enough vision under Mr Jacques Attali to push through a plan drawn up by Mr Ronald Freeman, head of the bank's merchant banking division. 'Mr Freeman's argument is that if the west is going to provide aid to Russia, why doesn't the west pay the countries of eastern Europe to supply the food, commodities and machinery,' said an east European diplomat.

A senior Hungarian official said the bank had 'done some good deals here. Not all are first class, but we are quite satified.' Yet the official, in common with other officials from central Europe, admitted the bank was slow in disbursing money. 'Since April 1991 until the end of last year, the bank has committed Ecu250m (Pounds 198m) for investment in 11 Hungarian enterprises. But only Ecu20m has been disbursed. The bank could be a lot faster. But we appreciate its efforts,' another Hungarian official added.

'I suppose if you are going to criticise the bank, you should not raise the question of its survival. Instead, the issue of accountability should be raised - you know, making it more open. Looking at how decisions are made. That sort of thing,' she added. Similar views about slow disbursement and decisions were echoed by Czech and Polish officials. A Czech official wanted the bank to take more risks, despite the limitations of its mandate. A Polish official said: 'Maybe the bank could be a bit more open.'

But Mr Attali is open when it comes to getting invitations, says a diplomat. 'Whenever there is a state visit or a prominent official coming to London, Mr Attali insists on getting invited to dinner or receptions. . . He is very pushy and often very condescending to the east Europeans. But he has put eastern Europe high on the agenda.'

XG Europe P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 2 628
Mladic scorns western threats Publication 930416FT Processed by FT 930416 By LAURA SILBER BELGRADE

GENERAL Ratko Mladic, the commander of Bosnian Serb forces, is unfazed by threats from the international community to punish Serbs for the war in Bosnia-Hercegovina.

Instead, he simply insists Serbs will never cave in to western demands. 'They can negotiate everything with us but will never achieve anything through pressure,' he said last week.

The stocky 51-year-old is a mass of contradictions. He had a reputation for brutality even before the war erupted in former Yugoslavia and the US last year named him as a potential war criminal. But he has been described by some UN officials as a 'soldier's soldier', while others view him as an intelligent officer and a skilled strategist.

Gen Mladic was born in Kalinovik, southern Bosnia, in the second world war. The death of his father, fighting with Tito's communist partisans, appears to have instilled in his son a hatred for Germany.

When the war in Croatia erupted in 1991, Gen Mladic was transferred to Knin, the mountain stronghold of Croatia's rebel Serbs, where he was adored by his soldiers and the local population. A career officer in the Yugoslav People's Army, he was picked by Serbian President Slobodan Milosevic over the objections of senior officers. 'He was intentionally installed by Milosevic to supervise the war in Bosnia,' one diplomat says.

Last week's attack on Srebrenica, the eastern enclave, was described by the UN commander as an 'atrocity'. The attack came in spite of a promise by Gen Mladic that Serb forces around Srebrenica would not respond to 'Moslem provocations'.

He has called the onslaught 'protection of Serbian villages under attack by Moslem soldiers'. He has denied that Moslem villagers are starving. 'They have plenty of food and what they lacked was delivered by the US air drops,' he said. But last month he gave the go-ahead to evacuate women and children from Srebrenica.

Local Moslem authorities initially tried to stop the evacuation on the grounds it was helping Serbs in their drive to expel all Moslems from eastern Bosnia. But Gen Mladic told Mr Laurens Jolles, a senior official of the UN High Commissioner for Refugees: 'You should have come with 300 trucks, I am happy if they can all get out.'

He allowed a single Moslem man pleading, 'Sir, sir' to pass with the convoy of women and children. He said: 'I am not sir, I am General Mladic.' He turned to Mr Jolles and said. 'You see I've given this man back his life.'

'He is constantly contradicting himself. He can be extremely charming and extremely brutal,' says a senior UN official.

When Gen Mladic is in an area, convoys pass through check points without a hitch. UN officials and diplomats believe he is in control in spite of speculation to the contrary.

BA Bosnia-Hercegovina, East Europe P9711 National Security NEWS General News P9711 The Financial Times London Page 2 491
Heads may roll in Spanish companies Publication 930416FT Processed by FT 930416 By PETER BRUCE and TOM BURNS MADRID

SPAIN'S conservative opposition party, the Partido Popular, which is believed to be slightly ahead of the ruling Socialist party in opinion polls, is raising doubts about whether the chairmen of some of Spain's largest companies would keep their jobs if the PP won the general election on June 6.

The party has said it would leave until after the election any decision on the future shape of the boards of public and semi-public companies. The uncertainty could upset a partial privatisation programme of public companies drawn up by the socialist government.

It includes flotations of shares in the Repsol oil and energy group, the sale of up to 24.9 per cent of Argentaria, the state-owned banking group and, possibly, a further reduction of the state's stake in the tobacco monopoly, Tabacalera and Endesa, the electricity utility.

In the case of Repsol and Argentaria, institutions leading the flotations have relied heavily on the experience and capabilities of their respective chairmen - Mr Oscar Fanjul and Mr Francisco Luzon, founding chiefs of the companies - to generate interest among foreign investors.

Both men are closely identified with the socialist government, particularly the finance ministry. Repsol has just rushed through a flotation of 13 per cent of its stock.

The state now owns 41 per cent of Repsol, and all of Argentaria.

Argentaria, which has just announced a pricing range for its flotation, could be particularly exposed by the timing of the election.

Asked how the boards of public and semi-public companies would be affected by a PP victory in June, Mr Jose Maria Aznar, PP leader said earlier this week that 'it is something I will decide after the election'.

It is widely expected in Madrid that the PP would place people of its own choosing at the heads of companies that fall under government control. The socialists did exactly that when they came to power in 1982 under Prime Minister Felipe Gonzalez.

Controlling these companies - especially those, such as Telefonica, Repsol and Endesa, whose stock trades in markets outside Spain - are regarded as part of the prize of winning an election.

Officials at groups such as Repsol and Argentaria, say the loss of their chairmen would not necessarily affect the businesses, since both companies have in place strong management structures that would function whoever was in charge.

One leading broker in Madrid said yesterday: 'Luzon is central to Argentaria but the strategy has been laid down and a good replacement would surely continue with the group's growth.'

Tabacalera Empresa Nacional de Electricidad Repsol Corporacion Bancaria De Espana (Argentaria) ES Spain, EC P6081 Foreign Banking and Branches and Agencies P2111 Cigarettes P4911 Electric Services P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining PEOP People COMP Company News P6081 P2111 P4911 P1311 P2911 The Financial Times London Page 2 488
AT&T intends to compete with BT and Mercury in UK Publication 930416FT Processed by FT 930416 By ALAN CANE

A MOVE BY America's largest telephone operator to challenge BT and Mercury on their home ground by offering international businesses their own private networks was yesterday welcomed by the British government.

The Department of Trade and Industry, which favours opening up the UK's Pounds 15bn telephone market to foreign competition, said the application by American Telephone & Telegraph would be considered on its merits.

Moves to liberalise the European Community telephone service by 1998 were backed by Mr Karel Van Miert, EC Commissioner, in Brussels yesterday.

Mr Van Miert's comments were the first clear indication that the Commission, the EC's executive body, is likely to endorse a policy paper calling for full deregulation of national telephone monopolies by 1998.

The AT&T application is direct retaliation for BT's application to the US Federal Communications Commission (FCC) for a licence enabling it to sell international customers a broad range of voice, data and video services.

The UK company said it welcomed AT&T's application and the prospect of competition, but argued that its success should be dependent on the success of its own application to the FCC.

Mercury Communications' response, however, reflected its difficulties in negotiating access to BT's UK network. The UK's other licensed carrier said it welcomed AT&T's recognition that BT's dominance of the local distribution of telephone calls was the main bottleneck to the growth of effective competition in the UK.

AT&T's initial intention is to offer international business customers a range of services based on the resale of telephone lines purchased from BT or Mercury.

It made clear, however, that the aim was eventually to compete comprehensively in the UK, selling services to both business and domestic customers and creating its own network.

AT&T said it was aware its plans needed the approval of both the UK and US governments. The DTI said yesterday that it welcomed the application as evidence that AT&T believed there were equivalent opportunities for US companies in the UK as for UK telecommunications operators in the US.

AT&T said yesterday that it had been urging the FCC and the Clinton administration to withhold approval of BT's application until US carriers had comparable access to the British market.

It said once equivalent access had been achieved, it would support BT's request.

EC calls for full telecoms competition, Page 2

Customers could be winners in telecoms battle, Page 10

British Telecommunications American Telephone and Telegraph Mercury Communications US United States of America GB United Kingdom, EC P4813 Telephone Communications, Ex Radio P4822 Telegraph and Other Communications COMP Company News TECH Services & Services use P4813 P4822 The Financial Times London Page 1 455
G7 backs Yeltsin with Pounds 28bn: Package tied to continued economic and political reforms in Russia Publication 930416FT Processed by FT 930416 By CHARLES LEADBEATER and ROBERT THOMSON TOKYO

THE Group of Seven leading industrialised nations yesterday threw their weight behind President Boris Yeltsin and his economic reforms ahead of the Russian referendum with a financial package worth Dollars 43bn (Pounds 28bn).

Although the bigger-than-expected package includes some existing commitments, it is explicitly tied to continued economic and political reform in Russia, strengthening Mr Yeltsin's hand against his opponents.

The G7 package is also tacitly linked to continued Russian co-operation on foreign policy issues.

It seeks particularly to ensure that Moscow does not stand in the way of western plans to implement tougher sanctions against Serbia in the attempt to resolve the deepening crisis in former Yugoslavia.

'Russian reform and progress towards democratisation are essential to world peace,' the G7 said. 'We assure the Russian people of our support in coping with the inevitable hardships of the transition period.'

Mr Warren Christopher, the US secretary of state, warned that the 'world will be a considerably more dangerous place' if Mr Yeltsin and his reforms did not prevail. The package was 'in no way a programme of charity', he said.

The latest effort by the G7 to prop up Mr Yeltsin came as the Russian leader went on the offensive in Moscow in his efforts to win popular support for his presidency in a referendum on April 25.

He told supporters he would not obey the strict rules for the referendum set by his rivals in the Russian parliament and ordered a drastic cut in the privileges and duties of his rebellious vice president, General Alexander Rutskoi.

The bulk of the multilateral aid package comprises existing commitments of assistance from international financial institutions such as the World Bank and the International Monetary Fund which have been brought together for the first time.

The main new ingredients are confirmation of an innovative Dollars 3bn IMF loan facility which will be available in two tranches as Russia adopts policies designed to curb inflation and its budget deficit.

In addition there will be a Dollars 300m small business development fund mainly financed by the European Bank for Reconstruction and Development. The EBRD will also prepare plans for a Russian bank for small business development.

The other main ingredients of the package are:

A Dollars 15bn debt rescheduling deal agreed by Russia's 19 creditor countries in Paris on April 2.

About Dollars 10bn in longer term loans from the IMF which were originally offered last year but not taken up by the Russians.

The US, Japan and the UK between them made new bilateral pledges of aid worth more than Dollars 4bn. Much of this is expected to form part of a commitment from G7 countries to provide export credits totalling about Dollars 10bn.

Loans from the World Bank to restructure Russian industry worth about Dollars 5bn, most of which will be made available over the next 15 months.

The ministers also agreed to study a US proposal for a Dollars 4bn fund to promote the privatisation of large state run enterprises.

US officials said they were not disappointed that the fund had not been agreed but they made it clear the US expects such a fund to be approved at the G7 heads of state summit due to be held in Tokyo in July.

Mr Boris Fyodorov, the Russian deputy prime minister who attended the two days of talks with G7 foreign and finance ministers, said Russia was satisfied with the outcome.

Russia and the G7: more reports and analysis, Page 4

Editorial Comment, Page 17

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Major squares up to social chapter challenge Publication 930416FT Processed by FT 930416 By PHILIP STEPHENS, Political Editor

THE GOVERNMENT embarked on a high-risk strategy to outflank Tory opponents of the Maastricht treaty last night by meeting head on a Labour challenge for an explicit vote by MPs on Britain's exclusion of the social chapter.

Mr John Major signalled a new effort to speed up the pace of the legislation when he agreed to a Labour demand to make final ratification contingent on a separate debate on the opt-out from its social provisions.

Amid chaotic scenes in the House of Commons, the decision was immediately followed by an embarrassing, if temporary, retreat by the government on the bill's timetable.

The opposition failed to reverse a decision by Mr Michael Morris, the deputy speaker, to block a vote on an earlier amendment covering the social chapter.

Under the Byzantine procedures of Westminster, the second proposed change to the bill - known as amendment 27 - is seen by Labour and by Tory Euro-sceptics as their strongest hope of derailing the ratification process.

Labour responded to Mr Morris's ruling with a tactical device that forced the government to curtail debate on the legislation until next week. It said the government's failure to muster enough votes against the move demonstrated that it was no longer in control of the Commons.

Mr Major's decision not to contest the first Labour amendment - known as new clause 75 - means MPs will have the opportunity to vote later in the summer on whether they want to preserve the social-chapter opt-out. That vote, though, will come only after the Maastricht bill has passed all its parliamentary hurdles and received royal assent.

The timing left ministers free to float the possibility - fiercely rejected by the opposition parties - that at this late stage in the ratification process the government might simply ignore a defeat and press on regardless. Senior ministers said their aim in accepting the new clause 75 was to 'disentangle' the social chapter from the wider issue of whether Britain should ratify Maastricht. They admitted the underlying strategy was to detach the Tory Euro-sceptics from their alliance with the opposition parties.

The judgment in Downing Street is that even the strongest opponents of the treaty on the Tory back benches will not be able to back inclusion of the social chapter once the rest of the treaty has been enacted into law.

Mr Major's aides refused to speculate on what course the government would take if the Conservative Euro-sceptics did combine with the opposition to include the social chapter.

Senior ministers voiced confidence that the present committee stage of legislation would now be completed within weeks - possibly as early as next week, when MPs will debate it on three days. The government would then be free to start its shorter final stage in the Commons immediately after the Danish referendum next month. Royal assent would follow before the summer recess at the end of July.

Optimism in Downing Street that the prime minister is now poised for a breakthrough in his 18-month battle to secure ratification was dismissed by Labour.

Mr George Robertson, the opposition spokesman on Europe, said Labour was determined to press its case for a vote on amendment 27 when the legislation reached its report stage. He insisted that the case for such a vote was 'unanswerable'.

Parliament, Page 12

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Andreotti condemns allegations of links with Mafia as 'shameless lies' Publication 930416FT Processed by FT 930416

Former Italian premier Giulio Andreotti (centre) is escorted by bodyguards as he leaves the Rome senate committee hearing into allegations that he had links with the Mafia. Mr Andreotti told the hearing that the accusations were 'shameless lies'. Earlier this month two Mafia informers told Sicilian magistrates in the US that Mr Andreotti had met Cosa Nostra godfathers and asked the Mafia to carry out two political murders. Italian upheaval, Page 3; Editorial Comment, Page 17

IT Italy, EC P9222 Legal Counsel and Prosecution GOVT Government News P9222 The Financial Times London Page 1 109
Stock and Currency Markets Publication 930416FT Processed by FT 930416

------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------ FT-SE 100: 2839.7 (-2.4) Yield 4.01 FT-SE Eurotrack 100 1156.40 (-4.23) FT-A All-Share 1392.08 (-0.1%) FT-A World Index 156.75 (-0.1%) Nikkei 20,675.84 (+142.26) New York: Dow Jones Ind Ave 3455.92 (+0.28) S&P Composite 448.4 (-0.26) ------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------ Federal Funds: 3 1/4% (same) 3-mo Treas Bills: Yld 2.89% (2.859%) Long Bond 105 5/32 (104 23/32) Yield 6.719% (6.752%) ------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------

3-mo Interbank 6% (same) Liffe long gilt future: Jun 106 11/32 (Jun 106 7/16) ------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------ Brent 15-day (May) dollars 18.81 (18.945) ------------------------------------------------------------ Gold ------------------------------------------------------------ New York Comex June dollars 338.3 (340.8) London dollars 338.15 (339.2) ------------------------------------------------------------ STERLING ------------------------------------------------------------ New York: Dollar 1.541 (1.5525) London: Dollar 1.5465 (1.5525) DM 2.4775 (2.47) FFr 8.37 (8.3475) SFr 2.26 (same)

Y 175.0 (177.0) Pound Index 80.8 (same) ------------------------------------------------------------ DOLLAR ------------------------------------------------------------ New York: DM 1.606 (1.59205) FFr 5.4275 (5.3885) SFr 1.46665 (1.4583) Y 113.115 (113.78) London: DM 1.6025 (1.5915) FFr 5.4125 (5.3775) SFr 1.462 (1.456) Y 113.2 (113.95) Dollar Index 64.3 (64.4) Tokyo open: Y 113.20 ------------------------------------------------------------

US United States of America GB United Kingdom, EC DE Germany, EC FR France, EC SE Sweden, West Europe JP Japan, Asia P1311 Crude Petroleum and Natural Gas P3339 Primary Nonferrous Metals, NEC P6231 Security and Commodity Exchanges P9311 Finance, Taxation, and Monetary Policy COSTS Commodity prices COSTS Equity prices P1311 P3339 P6231 P9311 The Financial Times London Page 1 245
World News in Brief: Diet advice Publication 930416FT Processed by FT 930416

Advice to eat a low-fat diet to counter heart disease may not apply to women, according to a 15-year study of more than 15,000 adults in Scotland. The study found women were more likely than men to have high blood fat levels but less likely to die of heart attacks.

GB United Kingdom, EC P8099 Health and Allied Services, NEC NEWS General News P8099 The Financial Times London Page 1 81
World News in Brief: Bogota bomb blast Publication 930416FT Processed by FT 930416

At least 15 people were killed and more than 100 injured when a car bomb exploded in the Colombian capital, Bogota.

CO Colombia, South America P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 53
World News in Brief: No penalty Publication 930416FT Processed by FT 930416

Private security company Group 4 will not suffer penalties for escapes during the first week of privatised prisoner escort services, the head of the prison service said. Moments after he spoke, another prisoner in Group 4 custody escaped from a Derbyshire magistrates' court. Caution over next contract, Page 11

Group 4 Court Services GB United Kingdom, EC P7381 Detective and Armored Car Services P8744 Facilities Support Services P9223 Correctional Institutions COMP Company News P7381 P8744 P9223 The Financial Times London Page 1 94
World News in Brief: Britons found safe Publication 930416FT Processed by FT 930416

Four British climbers and their Russian guide were found safe and well almost a week after disappearing on Mount Elbrus in the Caucasus. They said they owed their survival to luck, Mars bars and a cigarette lighter which enabled them to make fires.

RU Russia, East Europe P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 75
World News in Brief: Srebrenica bombarded Publication 930416FT Processed by FT 930416

Serb artillery and infantry pounded the besieged town of Srebrenica and radio hams reported that Moslem defenders had been driven back to within 1 1/4 miles of the town. Earlier a UN convoy left with only five elderly women on board after local leaders blocked a mass refugee evacuation. Major and Owen reject arms call, Page 2; PM pressed, Page 12; Bosnia waits, Page 16

BA Bosnia-Hercegovina, East Europe P9721 International Affairs P9711 National Security NEWS General News P9721 P9711 The Financial Times London Page 1 97
World News in Brief: German workers demonstrate Publication 930416FT Processed by FT 930416

About 91,000 German steel and engineering workers protested in the former East German town of Erfurt against employers' cancellation of a pledge to raise wages by 26 per cent from April 1. The employers say the 1991 pay pact is no longer realistic.

DE Germany, EC P8631 Labor Organizations PEOP Labour P8631 The Financial Times London Page 1 70
Post Office sell-off postponed until 1994 at earliest Publication 930416FT Processed by FT 930416 By RALPH ATKINS

CABINET MINISTERS have agreed to delay privatising the Post Office because of pressure on the government's legislative programme and a dispute over the best form for the sell-off.

The cabinet is expected to agree next Thursday on an outline programme for legislation in the parliamentary session starting in the autumn that includes the privatisation of British Coal but not the Post Office.

Mr Michael Heseltine, trade and industry secretary, has still to decide whether to sell the Post Office as one unit or break it into three - the Royal Mail, Post Office Counters and Parcelforce.

The sale is sensitive among Conservative MPs because of worries about the impact on the postal service in Tory-held rural constituencies.

No clear option has emerged that will break the Royal Mail's monopoly, increase competition and keep the government's commitment to a nationwide delivery service with uniform prices. The Treasury also wants to ensure maximum revenue from the sale, which could still take place before the next general election.

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 agree with the FLG (future legislation) cabinet committee, chaired by Mr Tony Newton, leader of the house, that the measure should be delayed until at least next year.

Within Whitehall, there is no expectation that the full cabinet will overturn that decision.

The sale of Parcelforce could still proceed without legislation. Under the British Telecommunications Act 1981, Mr Heseltine has the power to sell Post Office subsidiaries. But he is unlikely to take a decision on this part of the privatisation until he has decided on the overall form of the sale.

Mr John Major, prime minister, wants to draw up a distinctive legislative programme that will rally the Conservative party after a bruising parliamentary year dominated by the Maastricht bill. The next session is expected to include a substantial criminal justice bill and the restructuring of the police force.

The Department of Education wants to end the obligation of students to join the National Union of Students and reform the training of teachers. The Department of Trade and Industry plans a deregulation bill and the environment department a 'green' bill, setting up an environmental protection agency. Legislation is also expected from the social security department on reforming - and cutting the cost of - invalidity benefit.

However, it remains unclear whether two politically sensitive bills will be included: on equalising the male and female state retirement ages and on Sunday trading. The cabinet may not make a final decision of these for some time.

The Home Office hopes to publish a draft bill on Sunday trading before MPs begin their summer recess, probably in late July. That will set out three options for MPs and ministers hope the bill will proceed in the next session.

Pensions equalisation is a weaker contender because Mr Peter Lilley, social security secretary, has still to decide formally on whether to raise the retirement age for women from 60 to 65 - the same as men.

With the decision to make women work longer likely to be politically unpopular, some ministers see a strong argument for waiting another year.

Post Office Counters Parcelforce GB United Kingdom, EC P9611 Administration of General Economic Programs P7389 Business Services, NEC P9411 Administration of Educational Programs NEWS General News GOVT Government News P9611 P7389 P9411 The Financial Times London Page 1 591
UK Company News: Anglo-Eastern rises to Pounds 1.32m Publication 930415FT Processed by FT 930714

Anglo-Eastern Plantations continued to progress through the second half and for the full 1992 year achieved a rise in profits from Pounds 471,000 to Pounds 1.32m pre-tax.

Having returned to the dividend list at the midway stage the rubber, cocoa and palm oil estates company is now recommending a 1p final for a 1.375p total.

Turnover totalled Pounds 4.93m (Pounds 3.73m). Earnings per share rose to 3.4p (1.1p).

The directors said the improved results reflected the first full year of operation of the palm oil mill and a strong palm oil price throughout 1992.

Anglo-Eastern is owned 49.2 per cent by Chillington.

Anglo-Eastern Plantations GB United Kingdom, EC P0831 Forest Products FIN Annual report P0831 The Financial Times London Page 27 134
Veba chief killed Publication 930415FT Processed by FT 930608 By CHRISTOPHER PARKES FRANKFURT

MR Klaus Piltz, chairman of Veba, Germany's fourth-largest industrial group, was killed in an avalanche on Easter Monday, the company said yesterday. Two of his three children, Uta and Klaus, and a family friend also died in the accident in Oetztal, Austria, Christopher Parkes reports from Frankfurt.

Mr Piltz, 57, took control of the energy-to-retailing conglomerate less than four years ago after the death of Mr Rudolf von Bennigsen-Foerder.

His main contribution to the Dusseldorf-based company was to restructure his predecessor's acquisitions, rather than sell them off as expected. He moulded a group with distinct but interlocking interests in energy, chemicals, petrol stations, retailing, transport and distribution.

Veba DE Germany, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 2 140
International Company News: Sega links with cable TV groups Publication 930415FT Processed by FT 930511 By MICHIYO NAKAMOTO TOKYO

SEGA, the Japanese video games and entertainment company, is linking with Time Warner and Tele-Communications (TCI), two of the largest US cable television companies, to deliver video games software directly to US homes.

The three companies are setting up a joint venture company in the US that will use satellite broadcasting to send Sega video games software to subscribers of Time Warner and TCI's cable television.

They will take equal shares in the new company, which is due to be established in the US this summer.

Details of the video games service have not yet been finalised, but the subscription fee is expected to be between Dollars 15 and Dollars 20.

Subscribers will need a Sega Genesis video games machine, selling for about Dollars 100 in the US, and an adaptor, unless they own one of the 7.5m Genesis machines sold in the US.

Sega said the large base of Genesis users was expected to provide the first subscribers. It believes the service could attract most of the 20m subscribers to Time Warner and TCI's cable television service.

The deal places Sega a step ahead of Nintendo, the largest video games manufacturer and Sega's arch-rival, which has been planning to launch a similar service.

Sega Enterprises Time Warner Inc Tele-Communications US United States of America JP Japan, Asia P4841 Cable and Other Pay Television Services P7372 Prepackaged Software COMP Strategic links & Joint venture P4841 P7372 The Financial Times London Page 29 260
Britain in approach to India on environment Publication 930415FT Processed by FT 930427 By BRONWEN MADDOX, Environment Correspondent

THE UK government has asked India to form an environmental alliance to help unblock international 'green' negotiations in the follow-up to the Rio Earth Summit.

Mr Michael Howard, environment secretary, who proposed the initiative in a letter on April 6 to Mr Kamal Nath, the Indian Environment and Forestries minister, said yesterday: 'We both have a good deal of influence at our disposal, the UK as part of the developed nations group and India as part of the developing nations.'

He added that 'without some political will behind it' there was 'a great danger' that the Commission for Sustainable Development, the body that will follow up Rio's ambitious agenda set in Rio last June, would become 'just another bureaucratic arm of the United Nations.'

A pact could have con-siderable impact on discussions on how to put last June's Rio agreements into practice, which have been handicapped by north-south divisions, in particular over financing.

However, an alliance would have to bridge the wide differences between the UK and India on many 'green' issues.

Their past disagreements include the future of forests and the role for the global environment facility, the fund administered by the World Bank and the United Nations to help the Third World to finance projects which help the global environment.

Mr Howard said 'we have not established a total identity of view but we have established a common approach.'

IN India, Asia GB United Kingdom, EC P9721 International Affairs P9511 Air, Water and Solid Management NEWS General News P9721 P9511 The Financial Times London Page 4 268
International Company News: Banco Central Hispano nears marketing accord with SocGen Publication 930415FT Processed by FT 930416 By TOM BURNS MADRID

BANCO Central Hispano, one of Spain's leading banks, is close to reaching an agreement with France's Societe Generale which will allow the two banks to pool their marketing resources outside their domestic bases. The agreement will also enable the banks to use each other's branch networks.

The pact, which is likely to be signed next week, is seen by the Spanish bank as an important part of an attempt to restart Europartners, a consortium that pooled BCH with Credit Lyonnais of France, Banco di Roma of Italy and Commerzbank of Germany.

The German bank maintains its links with BCH through a 4.7 per cent stake that it owns in the Spanish bank's equity, but the Europartners initiative was abandoned after Credit Lyonnais started building up its own branch network in Spain at the beginning of the 1990s.

Societe Generale, which is poised to replace Credit Lyonnais as BCH's partner in France, is in the meantime exploring possible joint initiatives with Commerzbank and with National Westminster of the UK.

A spokeswoman for BCH said that Societe Generale's potential links in the UK and in Germany were separate from the French bank's forthcoming agreement in Spain. BCH is seeking a UK partner with which to forge a similar commercial pact, but this is unlikely to be National Westminster, Barclays or Lloyds, all of which already have branch networks in Spain.

Last month, BCH exchanged 2 per cent of its equity for a 10 per cent stake in Banco Commercial Portugues, BCP, in the biggest share-swap agreement to date between Spanish and Portuguese banking institutions.

Banco Central Hispano Societe Generale ES Spain, EC FR France, EC P6081 Foreign Banking and Branches and Agencies COMP Strategic links & Joint venture P6081 The Financial Times International Page 18 314
International Company News: BolsWessanen considers selling stake in baby-food subsidiary Publication 930415FT Processed by FT 930416

BolsWessanen, the newly-merged Dutch foods and beverages group, said it was considering selling a 50 per cent stake in a baby-food subsidiary to Nutricia, a leading Dutch producer of food for infants.

The subsidiary, Lyempf, which had 1992 sales of Fl 110m (Dollars 60.7m), sells baby foods and milk powder under the Bebelac brand name. It has two production sites in the Netherlands and employs 175 people.

The companies said discussions had begun and that details would be released when an agreement was reached.

BolsWessanen Nutricia NL Netherlands, EC P2023 Dry, Condensed, Evaporated Products P2099 Food Preparations, NEC COMP Disposals P2023 P2099 The Financial Times International Page 18 124
Interagra applies to court for bankruptcy protection Publication 930415FT Processed by FT 930416 By ALICE RAWSTHORN PARIS

INTERAGRA, the French farming products business which was one of the most prominent western suppliers of grain and food to eastern Europe during the cold war, yesterday filed for bankruptcy protection.

The company, founded in 1955 by the late Jean-Baptiste Doumeng, known as le milliardaire rouge, the red billionaire, has applied to the Paris commercial court for protection. The court will announce its judgment on Tuesday.

In its heyday Interagra made annual sales of up to FFr20bn (Dollars 3.7bn) by selling the European Community's 'food mountain' - surplus supplies of subsidised grain, meat, dairy products and powdered milk - to communist countries.

Mr Doumeng built up the business by exploiting his personal connections with eastern bloc leaders. He was one of the handful of western businessmen, alongside Mr Armand Hammer, the US-based oil trader, and Mr Robert Maxwell, the disgraced British media tycoon, to operate successfully in the old communist bloc.

But Interagra has floundered since Mr Doumeng's death in 1987. His sons, Michel and Jean-Baptiste, who took over the business, did not have the advantage of their father's contacts. The final blows were the collapse of the Soviet Union and the UN embargo on trading with Iraq during the Gulf war, which sealed off one of its main markets for wheat and meat.

Interagra's annual sales have fallen to just FFr5bn a year and its debts have risen rapidly to the present level of FFr500m.

The management has for some months been in discussion with its banks, which include the Credit Lyonnais and Banque Nationale de Paris, the French state-controlled banks, in an unsuccessful attempt to secure new finance.

Four of the old Doumeng businesses, including the Seav Interagra tractor company and Silos du Sud-Oest farm machinery maker, are already under court administration. Sepromec, the Interagra parent company, and SCIII, one of its trading subsidiaries, have also applied for bankruptcy protection.

Interagra FR France, EC P5153 Grain and Field Beans P5147 Meats and Meat Products P5143 Dairy Products, Ex Dried or Canned COMP Company News P5153 P5147 P5143 The Financial Times International Page 16 362
Party puts policies before perks: Emiko Terazono on the group trying to clean up Japanese politics Publication 930415FT Processed by FT 930416 By EMIKO TERAZONO

ON THE MAIN street of Nagata-cho, Japan's political centre, a group of middle-aged women climb into a tour bus to complete a day of politics and sightseeing with a boat ride around the Tokyo Bay and an evening variety show with the compliments of their local MP.

Mr Yoshio Terasawa, a member of the Japan New Party, is still shocked at such sights. 'These practices have to go,' he says. As revelations of political corruption have heightened discontent towards the ruling Liberal Democratic party and existing opposition parties, the JNP has presented itself as the party which can clean up politics.

He also points a finger at Japanese voters. 'Japanese politics has deteriorated because people choose politicians who give out the best perks,' says Mr Terasawa, ex-vice president of Nomura Securities and former executive vice president of the Multilateral Investment Guarantee Agency.

The party is quickly winning support. According to a poll by the Nikkei Shimbun 6.7 per cent of 10,000 registered voters supported the JNP, up from 0.7 per cent last June, and 2.8 per cent in December, pushing it to the third most popular party. The tax evasion scandal involving Mr Shin Kanemaru, the former kingmaker of the LDP, has given impetus to public support for the party, which calls for a more transparent political system.

It also calls for free trade, including the opening up of rice markets, and advocates curbing powers of the bureacracy. However, in spite of its different outlook on politics, the JNP faces the same problems as other parties - lack of funds. The JNP is at a disadvantage since it lacks of connections with corporations and labour unions which exisisting parties have.

Donations from companies and individuals, which constitute over 50 per cent of revenues for the LDP, are also sparse for the newest opposition party. Companies are reluctant to provide funds due to falling profits.

The JNP has raised Y300m by selling party hankies and T-shirts, but will have to market a lot more if it is going to support at least 60 candidates in the next general election slated for the second half of the year. Mr Terasawa is now trying to woo wealthy individuals and owners of small companies for donations.

A single LDP candidate would need about Y300m, paying for flashy campaign cars, posters and payouts. 'It's shocking but it happens,' says Mr Terasawa, describing a case where Y10,000 notes, were distributed hidden in onigiri - Japanese rice ball snacks.

But Japanese politics is slowly changing, says the 62 year old Mr Terasawa. 'We have the wind behind us, and we must not miss it,' he says. He adds attitudes of younger people are slowly changing old ways.

However, some old ways die hard. Some voters still expect favours from a candidate. 'In the provinces, a good politician is someone who can build the extra bridge or a bullet train station,' says Mr Terasawa.

JP Japan, Asia P8651 Political Organizations NEWS General News P8651 The Financial Times International Page 4 526
Berlin stores attacked by arsonists Publication 930415FT Processed by FT 930416 By REUTER

ARSONISTS set fire to two Berlin department stores overnight yesterday but caused little damage and no injuries, according to the police, Reuter reports.

A police spokesman could not say whether the fires, started by incendiary devices hidden in the stories and set off by timers, were related to protests against Berlin's campaign to hold the Olympic Games in 2000.

Several banks supporting the Olympic campaign have been damaged by protesters this year, and the Hertie department store chain, owner of the two stores affected on Tuesday night, has also come out for holding the games in Berlin.

DE Germany, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 2 128
Pasqua stance on crime dismays Mitterrand Publication 930415FT Processed by FT 930416 By ALICE RAWSTHORN

THE first serious split emerged yesterday between France's Socialist President Francois Mitterrand and the new centre-right government when the president objected to a report on law and order by Mr Charles Pasqua, the hardline interior minister.

Officials close to the president said Mr Mitterrand had 'expressed reservations' about Mr Pasqua's presentation at a cabinet meeting of proposals to crack down on France's rising crime rate.

The president is believed to have been concerned about Mr Pasqua's failure to refer specifically to last week's incidents when French police killed three youths suspected of petty crimes.

The controversy over the deaths was stoked yesterday when two police motorcyclists in Cherbourg fired shots at a 15-year-old boy suspected of driving a stolen car. The boy was seriously injured when one policeman, claiming to have aimed at a car tyre, shot him in the back.

The policeman was last night under guard pending an investigation. Last week's police killings triggered violent riots in Paris and the northern town of Tourcoing.

Mr Pasqua, one of the most vociferously right-wing members of the new cabinet, last weekend issued an official apology to the victims' families. The police have begun an official inquiry into the tragedies.

However, Mr Nicolas Sarkozy, government spokesman, said that the interior minister referred implicitly to the incidents at yesterday's cabinet meeting by saying that the police must 'respect individual rights'. Mr Pasqua then stressed the need to give police the means to curb the rise in crime.

Mr Pasqua later sought to calm the controversy. Speaking in parliament, he repeated his apology to the bereaved families and described the police action as 'unjustifiable'.

FR France, EC P9121 Legislative Bodies P9111 Executive Offices NEWS General News P9121 P9111 The Financial Times International Page 2 305
London Stock Exchange: New highs and lows for 1993 Publication 930415FT Processed by FT 930415 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

NEW HIGHS AND LOWS FOR 1993

NEW HIGHS (109).

BRITISH FUNDS (1) Treas. 2 1/2 pc, CANADIANS (1) Gulf Canada, BANKS (3) Allied Irish, Anglo Irish, Bank Ireland, BREWERS (2) Kirin, Mansfield, BLDG MATLS (2) Baggeridge Brick, Epwin, BUSINESS SERVS (1) Wills, CHEMS (1) Croda, CONTG & CONSTRCN (10) Bellway, Berkeley, Hewden-Stuart, Higgs & Hill, McAlpine (A), Persimmon, Sheriff, Taylor Woodrow, Westbury, Wilson Bowden, ELECTRICALS (3) Delta, Fujitsu, Motorola, ELECTRICITY (1) Manweb, ELECTRONICS (3) P & P, Pegasus, TDS Circuits, ENG AERO (1) Westland, ENG GEN (1) Bogod, FOOD MANUF (3) Barr (AG), Greencore, Treatt, HOTELS & LEIS (2) Granada 7 1/2 pc Pf., Sunleigh, INSCE BROKERS (1) Hogg, INSCE LIFE (1) Transatlantic, INV TRUSTS (28) Abtrust New Dawn, Do Wts., Do Wts B, Albany, British Assets IL '05, Drayton Far East, EFM Japan Wts., First Ireland, First Philippine, Flmg. Far Eastern, Flmg. Intl. High Zero Pf., Flmg. Japanese, Do Wts., For. & Colonial Pacific, For. & Colonial High Inc., Genesis Malaysia Maju, Govett Oriental, JF Fledgeling Wts., JF Pacific Wrt., Do Prf., Martin Currie Pac., Do Wts., Morgan Greenfell Equity Inc., Do Wts., Pacific Horizon, Scottish Asian, St David's Inv., South East Asian Wts., MEDIA (4) HTV, Independent, Mirror, News Intl., MERCHANT BANKS (2) Warburg (SG), Do 6pc Pf., MTL & MTL FORMING (1) Utd. Industries, MISC (2) BLP, Headlam, MOTORS (1) Gowrings, OTHER FINCL (10) Cater Allen, Gerrard & Natl., Govett & Co., LOF's, Oceana, Prov. Financial, Rathbone Bros., Smith New Court, Do Pf., Tyndall Australia, PACKG, PAPER & PRINTG (5) Bemrose, Gibbon Lyons, Intereurope Tech., Jarvis Porter, Wace 8pc Pf., PROP (8) Barlows, Bilton, Chesterfield 5 1/4 pc Pf., London Merchant, Merivale Moore, St Mowden, Wood (JD), YRM, STORES (3) Amber Day, Tie Rack, Wyevale, TELE NETWORKS (1) Cable & Wireless, TEXTS (1) Honeysuckle, TRANSPORT (2) Bergesen, Norish, MINES (4) Anglo-Dominion, Monarch Res., Do Cv. '93, Sons Gwalia.

NEW LOWS (41).

BRITISH FUNDS (3) Treas. 12 1/2 pc '93, Treas. 14 1/2 pc '94, Exch. 13 1/2 pc '94, AMERICANS (4) Amer. Cyanamid, CPC, Data General, Sun Inc., CANADIANS (1) Breakwater Res., BANKS (1) Espirito Santo, BREWERS (2) Burn Stewart, Macallan-Glenlivet, BUSINESS SERVS (1) Welpac, CONGLOMERATES (1) Hanson, CONTG & CONSTRCN (2) Dunton, Raine, ELECTRICALS (1) LPA, ELECTRONICS (1) Indl. Control Servs., ENG GEN (1) Plasmec, FOOD RETAILING (1) Thorntons, HEALTH & HSEHOLD (6) AAH, Baxter, Haemocell, Lilly (E), Smith & Nephew, UniChem, HOTELS & LEIS (2) BCE, Chrysalis, INSCE LIFE (1) Liberty Life Africa, INV TRUSTS (1) Spanish Smllr. Wts., MEDIA (1) Radio Clyde, MISC (3) Le Creuset, Toye, Waste Mngmt., OIL & GAS (1) Ranger, PACKG, PAPER & PRINTG (1) Sappi, STORES (2) Dixons, Oriflame, TELE NETWORKS (3) Nth. Telecom, Securicor, Do N/V, MINES (1) Northam Platinum.

Other market statistics, Page 31.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 498
London Stock Exchange: ICI recovers Publication 930415FT Processed by FT 930415 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Reports that a US brokerage had raised earnings estimates for ICI helped the shares recover from recent sharp falls and lift 24 to 1167p yesterday.

UK analysts said PaineWebber increased its first quarter and 1993 earnings estimates for the group. The shift was apparently on expectations that cost cutting efforts would help to improve margins and on improved sentiment about the UK economy.

The share price rise coincided with news that ICI's Zeneca division is to invest Pounds 26.5m in a new production facility for its low fat protein food Quorn. Also investors were digesting research from brokers involved in the Zeneca hive-off ahead of the publication of the pathfinder prospectus next Wednesday.

Word that Whitbread had revalued its property portfolio, with consequent write-downs, weakened the shares 5 to 459p. International drinks stocks continued to strengthen as recovery talk was heard again and brand names worries faded. Grand Metropolitan gained 5 to 433p on turnover of 4.2m, Guinness added 4 at 486p and Allied Lyons was steady at 562p.

Holiday tour group Owners Abroad reported that 78 per cent of ordinary shareholders had applied for the Thomas Cook 12.5 per cent tender offer of 150p per share. In the market, the shares retreated 4 to 110p. Ironically, arch rival Airtours gained 10 1/2 to 289 1/2 p following a statement earlier in the week that holiday bookings at Owners were ahead of expectations.

Thorn EMI responded to talk of strong US music results. Kleinwort Benson was also reported positive. The shares climbed 9 to 875p.

National Westminster shed 7 1/2 to 447p on profit-taking. However, HSBC extended gains on the back of an overnight surge in the Hong Kong stock market to record highs. The Hang Seng index was up 360 points, 5.62 per cent, on the announcement that China and Britain have agreed to hold talks to resolve the bitter row over local political reforms. HSBC was up 14 in London pre-trading, although the gain was trimmed later and HSBC ordinaries closed 8 up at 631p.

A gloomy trading statement from the chairman prompted British Vita to fall 6 to 223p.

Waste Management International lifted 30 to 544p, boosted by a trading statement from its US parent late on Tuesday. Waste Management Inc said it was comfortable that first quarter earnings and those of its publicly traded subsidiaries would be in line with analysts' estimates. It expects to report first quarter net earnings next week in the range of Dollars 0.40 to Dollars 0.41 per share.

Nervousness over impending first quarter results in the oil sector combined with the declining price of Brent crude impacted on the majors. BP fell 3 1/2 to 301p while Shell lost 2 at 582p.

Shares in Mirror Group Newspapers, which was floated almost two years ago, held comfortably above their 125p issue price consolidating Tuesday's breakthrough to close 4 up at 131p.

The electricity and water sectors were the worst performers in the market as the move out of defensive and into recovery stocks continued. Waters were also suffering from their all-time relative high rating and consequent take profit advice from brokers.

In waters, Anglian declined 11 to 527p and Severn Trent 9 to 515p. Among the RECs, London tumbled 15 to 484p and Yorkshire 13 to 539p.

Food group Cadbury-Schweppes surged 10 to 480p as Smith New Court reiterated its buy recommendation, believing the stock to have been left behind and on the back of good figures from Coca-Cola.

The patchy recovery in food retail stocks continued, Argyll Group leading the charge. The shares jumped 11 to 334p. Elsewhere, Iceland Frozen Foods added 11 to 680p and Kwik Save 6 to 750p.

Sparkling figures from Tie Rack sent the shares forward 10 to 126p. A positive Mr Paul Deakin at Goldman Sachs said: 'On my earnings forecasts for next year, the stock stands at a 15 per cent discount to the market - but it should really be at a significant premium.'

Coats Viyella was 3 firmer at 240p as UBS reiterated its buy stance.

Alexandra Workwear jumped 9 to 128p after the company announced improved profits. for the year to January 31 of Pounds 1.7m against a Pounds 0.5m. loss previously. The manufacturer and supplier of overalls, medical and office clothing also announced a raised dividend. Alexandra said it had cut staff closed a factory and frozen prices.

Concern about the accountancy practices at TI Group following the Tuesday's publication of the its annual report and accounts prompted the shares to retreat 7 to 303p.

Bargain-hunting continued to drive Siebe forward and the shares put on 10 at 475p. General investment demand boosted both Smiths Industries and Glynwed International. The former put on 4 at 328p, while the latter added 3 at 292p.

Trafalgar House ordinaries edged a halfpenny forward to 79 1/2 and the 'A's put on 2 at 79p after Hongkong Land said it had increased its holding in Trafalgar to 25.1 per cent rather than its previously indicated figure of around 29 per cent.

Recommendations from Kleinwort Benson and Robert Fleming boosted international trading group Inchcape and the shares rose 4 to 605p.

Bargain hunters and vague talk of a predator helped Morgan Crucible bounce 7 to 269p.

Imperial Chemical Industries Thorn EMI Cadbury-Schweppes Tie Rack Coats Viyella Inchcape GB United Kingdom, EC P6231 Security and Commodity Exchanges P2869 Industrial Organic Chemicals, NEC P3651 Household Audio and Video Equipment P2086 Bottled and Canned Soft Drinks P5699 Miscellaneous Apparel and Accessory Stores P2399 Fabric Textile Products, NEC P5511 New and Used Car Dealers CMMT Comment & Analysis P6231 P2869 P3651 P2086 P5699 P2399 P5511 The Financial Times London Page 42 960
London Stock Exchange: BOC tumbles Publication 930415FT Processed by FT 930415 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

Industrial gases and healthcare group BOC saw its shares fall on worries that a US competitor is poised to grab market share following January's expiry of BOC's patent in the US on Forane anaesthetic gas.

Investment bank BZW was telling clients that Abbott Laboratories of the US had developed a version of the BOC product which was rapidly penetrating Forane's US market. The house has left its forecasts unchanged but is expected to reduce them over the next few days.

However, Mr Charles Lambert of Smith New Court said: 'Even if they lost half the market share to generics it would only reduce earnings per share by 2p to 48p. The effect is pretty well in the share price by now.' BOC is expected to fight for its old Forane market share with a new product, Suprane, which received FDA approval in September and is now in the early stage of marketing. BOC shares closed 16 lower at 707p with 2.5m traded.

BOC Group GB United Kingdom, EC P2813 Industrial Gases CMMT Comment & Analysis MKTS Market shares P2813 The Financial Times London Page 42 204
London Stock Exchange: Al-Fayeds sell Sears stake Publication 930415FT Processed by FT 930415 By CHRISTOPHER PRICE, JOEL KIBAZO and PETER JOHN

THE Al-Fayed brothers set the seal on weeks of speculation yesterday as they unloaded their stake in stores group Sears. Market analysts put losses to the House of Fraser owners at over Pounds 60m on a 10.6 per cent stake they first began building five years ago at an average price said to be around 140p a share.

The 156m shares were bought by Goldman Sachs at around 100p and sold into the market at 101p a share in a bought deal. The Sears share price ticked off slowly during the day, opening at 105p and slipping to the major placing price of 101p by the close.

However, it was unclear whether the broker had sold the entire stake. Some dealers suggested that Goldman was still holding around 10m Sears shares. A spokeswoman for the house said the placing was oversubscribed and the bulk of the shares got away successfully. The final total recorded on SEAQ, taking into account both sides of the deal was 309m.

The deal had been hinted in the market for several weeks as talk of various brokers involved in pre-placing exercises did the rounds, suggesting stiff competition for the business. The shares were said by dealers to have been placed with institutions, although it will not be known whether any other group has taken the opportunity to acquire a large chunk of the stock.

Sears GB United Kingdom, EC P5311 Department Stores CMMT Comment & Analysis COMP Shareholding P5311 The Financial Times London Page 42 271
London Stock Exchange: Equity futures and options trading Publication 930415FT Processed by FT 930415 By JOEL KIBAZO

STOCK INDEX futures traded in a tight 21-point range as hopes of a cut in interest rates began to fade, writes Joel Kibazo.

The first trade in the June contract on the FT-SE 100 was struck at 2,869, 4 points ahead of its previous close, and was quickly driven higher. It was trading at 2,874 within half an hour of the opening.

However, that early demand soon faded leaving the June contract to drift lower. By 11am it had fallen to 2,860. The release of favourable manufacturing output figures helped steady it but there was no advance as dealers came to the view there may after all be no immediate lowering of interest rates.

A weak gilts sector saw the contract retreat further during the afternoon and it closed at the day's low of 2,853, some 12 points below Tuesday's close. Volume remained thin and closed at 5,210 down on the previous total of 6,328.

The expiry of the April stock options was the main feature in the traded options and it contributed to the day's total turnover of 37,899 lots. The FT-SE 100 option traded 6,851 lots and the Euro FT-SE 100 option 4,527 contracts.

British Gas was the busiest stock option with 3,117 lots, though it had no April series due for expiry. The rest of the days main trades did. Some 2,680 lots were dealt in Asda and 2,145 in Marks and Spencer. Trafalgar House and Boots were also busy.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page 42 282
London Stock Exchange: Market struggles after large placing Publication 930415FT Processed by FT 930415 By STEVE THOMPSON

THE PLACING of a large stake in Sears, one of the UK market's most important retailing groups, proved the high point in an otherwise subdued London equity market.

Apart from a burst of interest triggered by the Sears placing the wider market did little more than mark time. Senior traders pointing out another session of low attendance, attributed to many dealers taking an extended Easter holiday break.

The probability of another nationwide rail strike on Friday did little to encourage enthusiasm in the market. 'Many of the important trading houses have written off the week and will not open any sizeable positions until next week,' said the head of trading at one of the big international dealing houses.

The FT-SE 100 Index ended the session a net 4.7 lower at 2,842.1, again outperforming the FT-SE Mid 250 index which closed 8.6 down at 3,092.7.

Turnover on the London market was substantially inflated by the placing of the 10.6 per cent stake in Sears, which, allowing for double counting, spoke for more than 300m of the market's 822m shares traded yesterday. The Sears stake, built up by the Al-Fayed brothers in 1987 was acquired and then sold on to a number of institutions, by Goldman Sachs, the US investment bank via a bought deal thought to have netted the US investment bank a profit of around Pounds 1.5m. Despite the low attendance levels on Tuesday, the value of customer business in the equity managed to top the crucial Pounds 1bn mark, reaching a creditable Pounds 1.026bn.

The equity market began the trading session in good form, with dealers hoisting opening prices after the latest improvement on Wall Street which followed up Tuesday's 31 points surge with a rise of almost 16 points.

However, dealers said the Sears placing, which they described as the equivalent of a Pounds 150m rights issue, took the steam out of the market which, having improved over nine points within the first hour of trading, came under pressure for the rest of the day.

Another strong opening by Wall Street, which which was a good 11 points higher soon after it opened, failed to galvanise a London market looking increasingly weary as the session wore on. At its worst, the Footsie 100 was down 8.5 points at 2,838.3.

Marketmakers said the slide was not wholly down to the big Sears placing. 'There were a number of big lines of stock on offer, and that unsettled the market nearly as much as the placing of Sears,' said one trader. He added that despite the generally good news on European interest rates there was a feeling that the equity market would now struggle to make any further headway.

The utilities areas of the market continued to attract strong selling pressure with the big institutions said to have switched out of the water and electricity areas and back into the food manufacturing, retailing and brewing areas of the market.

Drug stocks, mauled in recent weeks by a succession of bad news, staged a good recovery led by ICI.

Hong Kong-related stocks, which continued to surge ahead on Hong Kong markets after the agreement between the Chinese and British governments to resume talks about the 1995 elections, remained in the forefront of the Footsie 100 index.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page 42 584
World Stock Markets: South Africa Publication 930415FT Processed by FT 930415

JOHANNESBURG marked gold shares down in relatively thin trade, anticipating US selling after yesterday's mass stayaway. The gold index lost 51, or 4.2 per cent, to 1,167 in spite of a stronger gold price and a weaker financial rand. The overall index was 31 points lower at 3,498 with industrials, finding support from rand-hedge shares, losing only 13 to 4,340.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 89
World Stock Markets (Asia Pacific): Hang Seng surges 5.8% to record close Publication 930415FT Processed by FT 930415 By WAYNE APONTE TOKYO

EQUITIES settled lower as institutional investors and dealers took profits in the afternoon amid active trading, writes Wayne Aponte in Tokyo.

The Nikkei average retreated 206.91 to 20,533.38 after a high of 20,874.71 and a low of 20,470.33. The broader Topix index of all first section issues shed 15.96 to settle at 1,592,80 and, in London, the ISE/Nikkei 50 index rose 3.6 to 1,260.88. Most investors remain bullish, and describe the decline as a temporary break.

Volume was estimated at 850m shares, compared with Tuesday's 784.6m.

Advances edged declines by 539 to 535, with 121 issues unchanged. The Nikkei average is expected to retain its upward trend until it reaches 21,500, which is seen as a resistance level by some chart analysts.

Beyond this level, said Mr Yuichi Matsushita, senior market strategist at Nikko Securities, selling pressure is likely to come from Japanese corporations which invested in tokkin funds, or specified money trusts, which declined in value last year. Companies, including leading trading houses, are also said to be offloading their 'zaiteku' or financial engineering investments.

Large capitalisations stocks lost ground with Nippon Steel, the day's most active issue, easing Y7 to Y402.

Nippon Telegraph and Telephone lost Y30,000 to close at an intraday low of Y1.04m.

The financial sector suffered broad losses on profit-taking: Sakura Bank shed Y70 to Y1,440, Industrial Bank of Japan slipped Y60 to Y2,640 and the Bank of Tokyo declined Y30 to Y1,310.

Profit-taking also pushed the export sector lower with Sony declining Y20 to Y4,980 and TDK settling down Y20 to Y4,100.

In spite of the session's losses, the government's plan to strengthen its telecommunications infrastructure gave a boost to Tamura Electric Works, the telecom equipment maker, which gained Y50 to Y794.

Suzuki Motor benefited from motorcycle demand in China, finishing Y12 higher at Y986.

In Osaka, the OSE average rose 39.72 to close at 22,153.10 in volume of 39.4m shares.

Roundup

SENIOR Pacific Rim markets turned in record performances. Bombay was closed for a holiday.

HONG KONG surged to a record closing high, with investors taking the view that a resumption of Sino-British talks on the colony's future was nothing but good news.

The Hang Seng index rose 371.53 or 5.79 per cent to finish at 6,789.74, after an intraday peak of 6,805.66. In subsequent London trading, prices closed at the equivalent of a further 50 point rise in the index.

Hong Kong turnover was also at a record, reaching HKDollars 7.7bn, compared with a previous high of HKDollars 6.4bn set last May.

Mr David Bates of Asia Equity in London believes that the market is now poised to breach the 7,000 level on the Hang Seng, and that a successful conclusion to the Beijing talks would take the index up to 7,200.

Among blue chips leading the rise, Jardine Matheson rose HKDollars 7, or 15 per cent, to HKDollars 55. The British-controlled trading group has lagged behind the market since Beijing criticised it late last year for supporting the governor's democratic reform drive. HSBC Holdings was the most active stock, adding HKDollars 4 to HKDollars 73.50 while Cheung Kong, the property group, rose HKDollars 1.20 to HKDollars 23.70.

AUSTRALIAN stocks finished at a three-year high with the All Ordinaries index adding 15.7 to 1,704.4 in turnover of ADollars 310.1m.

Hong Kong's strong showing provided some stimulus while metal stocks came to the fore on hopes that Japan's economic recovery package would improve demand. Among mining stocks, MIM gained 7 cents to ADollars 2.24 and BHP climbed 14 cents to ADollars 15.08.

SINGAPORE closed higher in record volume of 431.79m shares. The Straits Times industrial index rose 15.10 to 1,708.61 in brisk trading of Malaysian shares.

SEOUL, however, saw aggressive profit-taking across the board after the recent bull run and the composite index fell 15.60 to 704.92 in turnover of Won887bn.

The mood was unsettled by the resignation of the president's top aide which triggered concern that discontent in the ruling party might lead to political unrest.

JP Japan, Asia HK Hong Kong, Asia AU Australia SG Singapore, Asia KR South Korea, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 716
World Stock Markets (America): Dow consolidated by good company results Publication 930415FT Processed by FT 930415 By PATRICK HARVERSON NEW YORK

Wall Street

US share prices firmed slightly in moderate trading yesterday, as more companies reported their first quarter earnings, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 11.61 at 3,455.64. The more broadly based Standard & Poor's 500 finished down 0.56 at 448.66, while the Amex composite ended up 0.01 at 420.52 and the Nasdaq composite 0.11 higher at 673.94. Trading volume on the NYSE was relatively light at 257m shares, and rises outnumbered declines by 1,022 to 881.

In the absence of fresh economic data, and with Treasury prices mostly flat, equity investors looked to quarterly corporate earnings for a lead. Although the reporting season has only just got under way, the early indications are that first quarter profits will be in line with, or slightly better than, analysts' forecasts, with a few notable exceptions.

A good set of first quarter reports is vital to ensure that stock market sentiment remains positive. Recent economic figures, if anything, have indicated that the pace of the recovery may be slowing down. This may be good news on the inflation front, but it suggests that corporate earnings, which have been steadily improving over the past year, might tail off later in 1993.

Companies manufacturing well-known consumer products ran into selling after Procter&Gamble announced late on Tuesday that it planned to slash prices on its most popular brand of disposable diapers.

Coming on the heels of Philip Morris' recent decision to cut prices on its famous Marlboro cigarette brand, the Procter&Gamble move revived fears that competition for consumer loyalty could hurt once seemingly price-insensitive brand-name products.

Procter&Gamble shares fell more than Dollars 1 at the opening, before recovering to end Dollars 1/4 higher at Dollars 48 1/4 . Kimberly-Clark, which is Procter&Gamble's main competitor in the disposable diaper market, dropped Dollars 1 7/8 to Dollars 51 1/2 .

Other consumer stocks were mixed, with Colgate-Palmolive ending unchanged at Dollars 62 1/8 , Gillette down Dollars 7/8 at Dollars 56, and RJR Nabisco Dollars 1/4 lower at Dollars 5 3/4 .

Several large cyclical stocks fared well. Minnesota Mining & Manufacturing climbed Dollars 2 5/8 to Dollars 113 3/8 , International Paper added Dollars 5/8 at Dollars 63 1/8 , Allied Signal firmed Dollars 3/4 to Dollars 67 3/4 and General Electric rose Dollars 1 1/4 to Dollars 94 1/4 .

Wal-Mart dropped another Dollars 2 to Dollars 27 1/4 in volume of 10.3m shares after analysts were disappointed by the retailer's projections of future sales growth at a meeting in New York. Marriott firmed Dollars 3/8 to Dollars 26 after reporting a sharp rise in net income to Dollars 49m, while Hilton fell Dollars 1 7/8 to Dollars 46 1/8 after reporting essentially flat first quarter profits. Canada

TORONTO prices closed slightly higher in heavy trading helped by a strong showing among gold stocks. According to preliminary figures, the TSE 300 composite index rose 5.01 points, or 0.14 per cent, to close at 3,629.85. Advancing issues outnumbered declines 361 to 311.

Newbridge Networks jumped 1 5/8 to CDollars 77 5/8 as the company said it received a contract to supply intelligent digital networking equipment for New York Telephone's new NYNEX Enterprise Services network.

Brascan said a group of banks led by Chemical Bank has asked a British court to rule whether its recent secondary offering of shares of John Labatt violated the terms of the USDollars 500m of debentures held by the banks.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 620
World Stock Markets: Bermuda plans focus on Hong Kong and insurers - Much play is being made of its possibilities as an offshore equity market Publication 930415FT Processed by FT 930415 By RICHARD LAPPER

Financiers in the tiny island of Bermuda are moving ahead with plans to upgrade operations at the local stock exchange, in a bid to establish a new centre for international equity trading.

Local banks, which still own the exchange, are hoping to develop the island as a shadow of the Hong Kong stock market, taking advantage of the fact that over 100 Hong Kong companies have already registered there.

Much play, too, is being made of the island's possibilities as a centre for trading in the shares of new offshore international insurance companies, which have made their domicile in Bermuda in recent years.

'We would be the only international offshore stock exchange in the western hemisphere,' says Mr Charles Vaughan-Johnson, executive vice-president at the Bank of Bermuda. 'You can see the potential if it becomes fully modernised. For those who don't want to be in Luxembourg (a rival international centre) it will have enormous appeal.'

Mr Vaughan-Johnson's vision is an ambitious one. Only 26 equity issues (including common and preference shares), and four note and bond issues are currently traded on the exchange. Over a dozen other mutual funds are listed but not traded. Capitalisation amounts to a respectable Dollars 802m according to Mr Bill Dolan, a manager at the Bank of Bermuda, who has been co-ordinating the modernisation effort.

But a handful of stocks, notably the Banks of Bermuda and Butterfield, Bermuda Telephone and Bermuda Electric Light, account for the lion's share. The two banks alone have a capitalisation of more than Dollars 485m between them.

Nevertheless the banks are optimistic and can point to real progress in the last few months. In February this year Bermuda finally scrapped its system of weekly trading. This had centred on the 'open cryer' method involving the three banks that own the exchange: the Banks of Butterfield and Bermuda, and the smaller Bermuda Commercial Bank.

Each Tuesday three numbered ping pong balls were drawn by bank representatives to establish the order in which they would make their bids that week.

The banks are still the only members but screen-based trading, conducted over the telephone, was introduced on February 24, with the index rebased to 1,000. Two months on the index has dipped to 982.69, with trading generally within a narrow range.

Mr Dolan is currently reviewing the exchange's constitution, with a view to establishing a new incorporated entity, easing membership rules and bringing the exchange within the supervisory authority of the Bermuda Monetary Authority.

Immediate objectives include efforts to persuade managers of over a hundred mutual funds currently registered in Bermuda to list on the exchange. In the medium term Mr Dolan is aiming to introduce an electronic settlement system, in order to increase efficiency.

In the long-term, however, prospects are closely linked to the island's future as the favoured offshore centre for both Hong Kong companies and the insurance business.

Jardine Mattheson, the trading company, was one of the first Hong Kong companies to register in Bermuda in 1984, and some 130 Hong Kong companies have followed suit. More recently the growth of a number of offshore insurance and reinsurance companies has opened up another opportunity.

Since 1985 three companies which between them have net assets of over Dollars 2bn have been established in Bermuda. Of these, ACE and EXEL were originally owned by the large US corporations whose liability risks they insure, but both have launched successful share issues in New York within the last two years while a third, Centre Re, is planning to follow suit. Within the last six months two more companies - Mid Ocean and Underwriting Capital (Merrett) - have also been formed in Bermuda, and more new ventures are expected.

BM Bermuda, Caribbean P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P6231 The Financial Times London Page 39 670
World Stock Markets (Europe): Sentiment varies as Swiss exporters decline Publication 930415FT Processed by FT 930415 By Our Markets Staff

MOODS varied among bourses yesterday, as strategists continued to look for a new theme after the strong European performance in the first quarter, writes Our Markets Staff.

ZURICH was led lower by exporters in response to the weak dollar. The SMI index shed 16.10 to 2,165.7 with the fall limited by a firm financial sector, still hoping for lower interest rates.

'The decline does seem to be rather an over-reaction to the weaker dollar,' said Miss Felicity Smith at Hoare Govett in London. 'But trading volume was fairly low, which may indicate that prices were being marked down by local traders rather than as a result of institutional selling.'

Among exporters, Ciba-Geigy bearers, SFr10 lower at SFr637, were actively traded. Analysts suggested that the fall had more to do with currency considerations than the group's announcement of a 4 per cent fall in first quarter sales.

Sandoz, the chemical and pharmaceutical group, shed SFr40 to SFr2,910, the uncertain outlook for US sales continuing to weigh on the shares. Nestle, still suffering from US doubts about the value of brands, saw its bearers fall SFr20 to SFr1,145.

PARIS took time off after Tuesday's strong performance, although leading banks shaved 25 basis points off base rates following an easing in the repo rate. The CAC-40 index eased 2.65 to 2,015.43 in turnover of FFr2.06bn.

There were mixed feelings in the financial sector, with Paribas gaining FFr1.40 to FFr426.20 and Societe Generale losing FFr4 to FFr640.

Lyonnaise Dumez lost FFr2.00 to FFr486.70 after reporting lower 1992 profits and plans for a capital increase for its construction division later this year.

FRANKFURT saw its post-holiday torpor evaporate a little around the construction sector, although the statements which provoked this were a few days old.

Turnover fell from DM4.7bn to DM4bn as the DAX index rose 1.39 to 1,672.44. Mr Michael Geiger at NatWest Securities pointed to a positive statement on housing development from Germany's construction minister. Meanwhile, Philipp Holzmann, up DM17 to DM1,074, was also lifted by a good interim report; and a leak that forthcoming results will be better than expected left Heidelberger Zement DM35 higher at DM1,090.

AMSTERDAM witnessed another startling performance from Begemann, the industrial conglomerate, which put on nearly 20 per cent to close Fl 8.50 higher at Fl 51.50. Analysts could cite no particular reason for the rise, although some short covering was noted. The CBS Tendency index gained 0.6 to 109.2.

MILAN marked time in largely technical trade ahead of the end of the account on Friday and as options contracts expired yesterday. The Comit index dipped 0.70 to 512.31 as volume declined ahead of this weekend's political reform referendum.

Fiat, planning temporary lay-offs next month in response to sluggish sales, fell L59 to fix at L6,261 before L6,270 after hours.

Among privatisation candidates, banks were easier but Sme, the foods group, picked up L156 to L6,130 as employees, protesting against the sell-off, ended their occupation of the group's headquarters allowing managers to collect together the information necessary for the auction.

Mondadori, Italy's largest publisher, rose L100 to L10,900 after reports that Mr Silvio Berlusconi's Fininvest is considering the merger and flotation of its main publishing activities.

VIENNA lost 1.2 per cent with the ATX index closing down 9.33 at 779.86.

COPENHAGEN was encouraged by hopes of a cut in the domestic repo rate and the KFX index gained 1.40 or 1.8 per cent to 83.51. Unidanmark led the risers with a rise of DKr12 or 8.3 per cent to DKr157.

DUBLIN continued its upward career with the ISEQ overall index rising another 21.15 to 1,572.51.

------------------------------------------------------------------------ FT-SE ACTUARIES SHARE INDICES ------------------------------------------------------------------------ April 14 THE EUROPEAN SERIES ------------------------------------------------------------------------ Hourly changes Open 10.30 11.00 12.00 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1158.97 1159.22 1160.35 1160.35 FT-SE Eurotrack 100 1160.33 1160.83 1159.90 1160.63 ------------------------------------------------------------------------ Hourly changes 13.00 14.00 15.00 Close ------------------------------------------------------------------------ FT-SE Eurotrack 200 1223.09 1220.94 1222.77 1226.41 FT-SE Eurotrack 200 1224.13 1224.36 1224.07 1223.50 ------------------------------------------------------------------------ Apr 13 Apr 8 Apr 7 Apr 6 Apr 5 ------------------------------------------------------------------------ FT-SE Eurotrack 100 1157.54 1151.40 1144.36 1147.43 1136.15 FT-SE Eurotrack 200 1220.72 1211.28 1206.25 1210.05 1202.24 ------------------------------------------------------------------------ Base value 1000 (26/10/90) ------------------------------------------------------------------------ High/day: 100 - 1161.37; 200 - 1226.41 Low/day: 100 - 1158.46 200 - 1220.89. ------------------------------------------------------------------------

CH Switzerland, West Europe FR France, EC DE Germany, EC NL Netherlands, EC IT Italy, EC AT Austria, West Europe DK Denmark, EC IE Ireland, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 762
Money Markets: Sterling futures tumble Publication 930415FT Processed by FT 930415 By JAMES BLITZ

SHORT-DATED sterling futures fell sharply yesterday after better-than-expected figures for UK industrial production quashed fledgling hopes of another cut in UK base rates, writes James Blitz.

There had been slight optimism at the start of the week about a near-term rate cut following sterling's strong performance on the foreign exchange markets.

However, yesterday's industrial production figures for February, which showed a 1.6 per cent rise in the month came as a complete surprise to the market.

There was an especially strong focus on the figure for manufacturing output, which showed a 1.2 per cent rise against forecasts of 0.2 per cent.

As a result, the June short sterling contract fell 12 basis points from its opening level to bottom out at 94.13, before closing at 94.15. The September contract fell even more heavily, by some 19 basis points, to a low of 94.20 before closing at 94.22.

The 94.22 figure was the high point of the futures yield curve. Dealers were effectively pricing in no moves in base rates below 6 per cent.

Rates in the cash market firmed by around 1/16 of a percentage point in the wake of the UK data. Three-month sterling deposit rates closed at around 5 15/16 per cent from around 5 27/32 per cent on Tuesday night.

The rise in cash rates was remarkable considering the very small shortage of Pounds 450m forecast by the Bank of England at the start of the day.

One dealer said that the raft of recent good news on the UK economy had removed any hope of another cut in base rates. The deposit rate yield curve closed flat last night with the bid rate at 6 per cent from 1 month out to 1 year.

Another dealer suggested that bullishness could re-emerge if sterling breaks through the DM2.50 level against the D-Mark. He said that conditions in the discount market would make it unlikely that deposit rates would rise far above 6 per cent.

In Europe, the 2 basis point cut in the Bundesbank's repo rate depressed sentiment in French and German futures markets.

With the rate for 14-day funds reduced to 8.11 per cent, the June Euromark contract fell 7 basis points to close at 92.77. The September contract fell 9 basis points to close at 93.65.

GB United Kingdom, EC DE Germany, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 416
Foreign Exchanges: Pound rallies against D-Mark Publication 930415FT Processed by FT 930415 By JAMES BLITZ

STERLING rose one-and-a-half pfennigs against the D-Mark in yesterday's European trading, following the release of more strong data for the UK economy, writes James Blitz.

After rising 1 1/4 pfennigs against the D-Mark on Tuesday, yesterday's industrial production figures, showing a 1.6 per cent rise in February after a fall of 0.1 per cent in January, enhanced the bullish mood.

The pound rose from about DM2.4650 to peak at about DM2.4775 at lunchtime in London, immediately after the figures were released. Sterling later closed at DM2.4700, a net rise of 3/4 of a pfennig on the day. The currency's trade weighted index, which compares sterling with its 1985 value against a basket of currencies closed at 80.8 per cent, up 0.4 percentage points on the day.

Several dealers suggested the pound could move higher from current levels. However, Mr Mike Gallagher, Director of Economic Research at IDEA in London, cautioned that sterling may be capped by the Bank of England's purchase of currencies in the foreign exchange market.

He noted that UK reserves had fallen by Dollars 1.7bn in March when the Bank is thought to have repaid loans received to support its currency in the run-up to Black Wednesday last year. Mr Gallagher said there were rumours that the Bank had been buying foreign currencies in recent days to make up the loss.

Mr Jeremy Hawkins, economic adviser at Bank of America in London, also cautioned that the pound might fall back today when the Maastricht treaty is debated in the House of Commons. After several weeks of consistent strength, the yen weakened against the dollar yesterday following Tuesday's announcement of a Y13,200bn economic package aimed at reviving Japan's troubled economy.

After hitting a new record high of Y112.58 against the US currency on Monday morning, the yen depreciated to a close of Y113.95 in Europe last night.

According to Mr Hawkins of Bank of America, this week's fiscal stimulus is the first indication from the Japanese that they will reduce their huge trade surplus with the US by boosting their economy and sucking in American imports rather than by letting the yen appreciate.

The yen may also have weakened with the passing of the financial year-end in Japan, which saw much repatriation of the Japanese currency.

The dollar gained a pfennig against the D-Mark yesterday, despite a very small cut in the interest rate at which the Bundesbank offers wholesale funds to commercial banks.

The cut in the repo rate by 2 basis points to 8.11 per cent failed to stop the dollar rising to a close of DM1.5915 from a previous DM1.5790. One analyst said there had been profit- taking by dealers with short dollar positions following the recent sell-off of the US currency.

GB United Kingdom, EC DE Germany, EC JP Japan, Asia US United States of America P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 33 501
World Commodities Prices: Wool Publication 930415FT Processed by FT 930415

Although no wool sales are being held this week, the last ones held in all main markets, including British wool itself, show that 'the crippling imbalance between supply and demand' remains the dominant feature. Prices are weak and tended to ease at closing auctions. Business further down the wool textile manufacturing line inevitably takes this into account, and small covering orders are held till the last minute. Recession in Europe is damaging and enhances competition, and signs of recovery in the UK are not of sufficient strength to counteract wider weakness.

XA World P0214 Sheep and Goats COSTS Commodity prices P0214 The Financial Times London Page 32 116
World Commodities Prices: Market Report Publication 930415FT Processed by FT 930415 By REUTER

Three-month COPPER prices fell sharply in late LME trading, closing weak and just above Dollars 2,000 a tonne, with the decline pulling other metals lower. New York's Comex copper futures were more than 2 cents a lb down by midday. London dealers said late selling pressure and liquidation appeared to be a fresh attempt to push the market below Dollars 2,000 and trigger lurking sell stops. Although the market held above this level in initial after-hours trading, traders were wary of a downward break, as all the signs suggested that the Dollars 2,000-Dollars 2,050 range was unlikely to hold. LME ZINC also fell away during late afternoon trading. Overhead resistance above Dollars 1,050 a tonne for three-month metal eventually proved too strong, dealers said. The market was also correcting downwards after rising some Dollars 50 in a straight line on Tuesday, while the Chinese production cuts which emerged overnight were not as large as many traders had expected. Production at two Chinese zinc-lead smelters is to be cut by 10,000 tonnes of zinc and 20,000 tonnes of lead per year. New York COTTON prices were sharply ahead by midday on fund buying.

Compiled from Reuters

GB United Kingdom, EC CN China, Asia US United States of America P1021 Copper Ores P0131 Cotton P1031 Lead and Zinc Ores COSTS Commodity prices P1021 P0131 P1031 The Financial Times London Page 32 241
Commodities and Agriculture: CIS smelters marshal their defences Publication 930415FT Processed by FT 930415 By KENNETH GOODING, Mining Correspondent HELSINKI

THE ALUMINIUM industry of the Commonwealth of Independent States yesterday set up an organisation to promote and defend its operations internationally.

Several western companies are represented on the International Aluminium Committee, which will be based in St Petersburg and have liaison offices in Brussels and New York. One of its most urgent tasks will be to put the CIS industry's case to the European Commission, which is considering whether it should set draconian quotas for CIS aluminium imports.

Virtually all the CIS smelters are represented on the new committee as well as Concern Aluminiy, the central holding company, whose president, Mr Igor Prokopov is chairman of the new organisation. Among the western companies, all of them suppliers to the CIS industry, are the AIOC Corporation, a New York-based trading company; Granges, the Swedish aluminium group; Joseph Muller of Switzerland; Kaiser, the US aluminium group; the Kumera Corporation, a Finnish equipment supplier; and Reynolds Metals, another big US group.

Mr Sam Manaktala, a Kaiser director who has been appointed a director of the new organisation, said the western companies' role was to act as advisers to an organisation which would in concept be similar to the European Aluminium Association or the American Aluminium Association. 'It will consist of people with similar objectives, working together. If the Russian aluminium industry can organise itself in a structured way it will be good for them and good for the rest of the world's aluminium industry.'

The IAC aims to help attract more foreign investment in the CIS industry, both at the smelters and in downstream operations. In the longer term the committee will help the integration of the CIS into the world industry.

Some of the Russian members said they were concerned about the poor image of the CIS industry being projected internationally and recognised that they needed an organisation to put their industry's case.

The new organisation has only a few weeks in which to influence the European Commission's inquiry. Some western aluminium producers have complained that their smelters have been operating unprofitably for two years and their very existence is threatened because of a surge in CIS aluminium exports since 1991. They estimate that 600,000 tonnes of CIS aluminium entered the EC last year and 450,000 tonnes in 1991 compared with an annual average of 82,000 tonnes before 1990.

The commission is inquiring into their complaints under rules that allow measures to 'safeguard' EC industry. These rules permit the imposition of quotas or tariffs. The European Aluminium Association is understood to be pressing for an annual quota of 82,000 tonnes to be imposed, the 'normal' level before the collapse of the Soviet Union.

XV Commonwealth of Independent States P3339 Primary Nonferrous Metals, NEC NEWS General News P3339 The Financial Times London Page 32 480
Commodities and Agriculture: Genetically improved pig comes to market Publication 930415FT Processed by FT 930415 By DAVID BLACKWELL

A BOAR guaranteed to be free from a gene that can lead to poor quality pork was launched on to the market in London yesterday by the Lincolnshire-based Cotswold Pig Development Company.

The company claims that the UK pig industry would benefit by Pounds 52m a year if it switched to the new pig. British pig production is worth about Pounds 1bn a year at the farm gate.

The so-called halothane gene has been known about since the 1920s. It could be detected only through a pig's reaction to halothane, a human anaesthetic, until the University of Toronto published a DNA genetic fingerprint in 1991.

Mr John Webb, director of genetics at Cotswold, said yesterday that the company since 1983 had been breeding a line of pigs in an attempt to eliminate the gene. It had succeeded in reducing the percentage showing a positive reaction to the halothane test from nearly 90 per cent in 1983 to just 3 per cent by 1991, when the company was perfectly poised to take advantage of the DNA test and eliminate it entirely.

The halothane gene had become widespread because carriers produced leaner meat than non-carriers, he said. However, it could lead to stress in the animal, whose meat then became what is known as pale, soft and exudative (PSE) after slaughter. This made it unattractive to supermarkets and reduced its shelf life.

Mr Webb claimed that the new boar - the Cotswold 30 - would benefit producers and processors by providing a better yield, retailers and consumers by providing better quality meat, and the pig by reducing stress. Its production did not involve genetic engineering but used genetic breeding simply to eliminate a problem.

Cotswold has an annual turnover of Pounds 20m and is the second biggest pig breeding company in the UK industry, which is a world leader. Mr Robin Shannon, managing director, said yesterday that half the company's production was exported, mainly to the EC, North America and Japan.

The company has plans to sell about 500 Cotswold 30 boars this year.

Cotswold Pig Development Co GB United Kingdom, EC P0213 Hogs TECH Products & Product use P0213 The Financial Times London Page 32 382
Commodities and Agriculture: Platinum prices up Publication 930415FT Processed by FT 930415 By Our Commodities Staff

The increasing tension in South African cities pushed platinum prices up in both London and New York yesterday, writes Our Commodities Staff. In London speculative buying and short covering took the price to more than Dollars 370 a troy ounce in late trading, the highest since early February. Nymex July futures jumped Dollars 9.60 to Dollars 372 in early trading. 'The market is a bit thin and small parcels can exaggerate price moves,' one dealer said. South Africa supplies about 75 per cent of western world platinum, which is used principally in jewellery, autocatalysts and electronics.

ZA South Africa, Africa GB United Kingdom, EC US United States of America P1099 Metal Ores, NEC MKTS Market data P1099 The Financial Times London Page 32 138
Commodities and Agriculture: Retaliation to livestock import ban angers EC Publication 930415FT Processed by FT 930415 By ANDREW HILL BRUSSELS

CENTRAL EUROPEAN countries' attempts to ban imports of livestock and dairy products from the European Community were condemned as 'unacceptable' yesterday by Mr Rene Steichen, the EC's agriculture commissioner.

The community last week imposed a one-month ban on imports of live animals, meat, milk and dairy products from 18 central and east European countries following the discovery of foot-and-mouth disease in Italy, allegedly spread from Croatian imports.

Mr Steichen told his fellow commissioners yesterday that restrictions imposed by certain central European countries - including Poland, Hungary, Bulgaria, Slovakia and the Czech republic - amounted to an unacceptable political reaction to what was essentially a veterinary matter.

Hungary promptly denied that the imposition of restrictions on EC imports was retaliation for the community ban, arguing that foot-and-mouth disease was still present on EC territory.

EC veterinary experts, who meet on April 20 to review the ban, are satisfied that foot-and-mouth disease has been eradicated in some ex-communist countries.

But a commission official said yesterday that the EC was worried about east and central European controls on exports. Fears were aroused when 200 out of 450 Czech and Slovak cattle imported into Britain were found to have been vaccinated against foot-and-mouth disease.

Vaccinated animals cannot be exported, in case they develop the disease itself. The British imports arrived with false certificates giving them a clear bill of health.

Commission officials said that the veterinary certificates could have been falsified as many as three times as the cattle were transported across eastern Europe.

QR European Economic Community (EC) P0291 General Farms, Primarily Animal MKTS Foreign trade TECH Safety & Standards P0291 The Financial Times London Page 32 293
Commodities and Agriculture: Rand fall brings shine back to S African gold - A much-needed revenue windfall Publication 930415FT Processed by FT 930415 By PHILIP GAWITH

THE DAYS when South African mining houses served crayfish tails at their results presentations are remembered only by the senior generation of journalists and analysts. There should, however, at least be smiles on offer when the release of the March quarterly results of the gold mining industry commences today.

Following five years in which the rand gold price averaged less than R1,000 a troy ounce, the past six months have finally seen it break through this barrier. Although the average price in 1992 fell by 2 per cent to R979.70 an ounce from R999.50 in 1991 the fourth quarter average rose sharply to R1,002 an ounce from R962 in the third quarter. During the first quarter of 1993 the average price advanced further to R1,029 an ounce.

For an industry in which many producers are marginal - defined by the Chamber of Mines as having a profit/revenue ratio of less than 5 per cent - this revenue windfall can translate into an exponential increase in profits. Using the 1992 average price, the Chamber of Mines estimates that 11 mines, producing about 90 tonnes of gold - 15 per cent of the country's annual production of 608.5 tonnes - and employing about 80,000 workers, were marginal. At present prices, these figures will be slightly lower.

Ironically, at an industry level, the recent price strength is unlikely to translate into significantly better profits. This is due to the increasing portion of South African production that is hedged - about 16.5 per cent in the December quarter according to estimates made by Ms Robinn Yale Kearney, gold analyst at brokers Silvis Barnard Jacobs and Mellet. She points out that the impact of the higher prices of the past quarter will be to crimp the premium derived from hedging from 2.7 per cent during the December quarter. If costs rise by 2 per the profit margin at the operating level, which 20 years ago was well above 50 per cent, will remain flat at 21 per cent, notwithstanding the 17 per cent increase in the spot rand gold price over the past six months.

Although producers will gratefully accept improved revenue from wherever it comes, they would clearly have preferred an improvement in the gold price to a deterioration in the rand/dollar exchange rate. In fact, based on London fixings, the bullion price has weakened in recent quarters - from an average Dollars 347 an ounce in the third quarter of 1992 to Dollars 338 in the fourth quarter and Dollars 329.4 in the first quarter of 1993. Over the same period, however, this 5 per cent weakening in the price has been more than offset by a 13 per cent depreciation of the rand/dollar exchange rate from 2.77, to 3.12.

The depreciation of the rand - which is expected to continue, albeit at a slower pace - should not, however, be allowed to disguise fundamental improvements in the health of the gold industry. A year ago Mr Gary Maude, managing director of the Gengold group, one of the main producers, was characterising the mood as one of 'grim determination' with survival the watchword for many marginal mines. Now Mr Maude argues that 'the industry is in much better shape. It is more efficient now than it was a year ago. Changes that needed to be made have been made and unions have supported these changes'.

Mr Maude is referring to not only to wage restraint, which has been important, but to changes in working practices. He cites, for example, giving responsibility to smaller working groups at the stope-face. Another innovation, at the managerial level, being practised at Gengold's Buffelsfontein mine is giving responsibility for the management of different shafts to different personnel - including administrative and technical managers. The aim is to foster improved productivity.

Such innovation is not specific to Gengold, although it has a strong claim to being the industry leader in this respect. As a general rule, innovation has been most forthcoming where the need has been greatest - that is, at the marginal mines.

One of the features of the industry's performance has been the extent to which it has contained costs. Chamber of Mines figures reveal that industry unit costs rose by only 0.91 per cent in 1992. Consumer price inflation, by comparison, was 14 per cent in 1992. The nagging question is whether such improvements can be sustained without jeopardising production. One person not in doubt is Mr Maude who comments: 'The feeling amongst my general managers is that we haven't scratched the surface yet. We haven't really taken advantage yet of the fact that apartheid has gone. We're a very, very inefficient industry because we haven't used our people properly'.

An important aspect of cost control has been the introduction of profit-sharing schemes as a quid pro quo for workers receiving low basic wage increases. Wages account for 50 to 55 per cent of mine working costs. Some observers, however, have reservations about the present shape of profit-sharing arrangements which are - with notable exceptions like Randfontein and Harmony - a function of profits, not productivity.

Some argue that this is only proper given that workers had been forced to accept low increases because the weak gold price didn't allow for any more. Critics respond by asking what compensation shareholders are being offered for their sacrifices. Chamber of Mines figures show that dividend payments from the industry fell to R1.39bn in 1992 from R2.2bn in 1988 - a decline of about 70 per cent in real terms.

Tough times are also reflected in capital expenditure which Ms Kearney estimates has fallen, as a percentage of working capital, to 14.4 per cent in December 1992 from 26 per cent five years previously. This level needs to rise to secure future production and the improved price should aid this.

ZA South Africa, Africa P1041 Gold Ores CMMT Comment & Analysis P1041 The Financial Times London Page 32 1014
Commodities and Agriculture: Investment climate in PNG 'still favourable' Publication 930415FT Processed by FT 930415 By KEVIN BROWN SYDNEY

PAPUA NEW Guinea was yesterday given a much-needed endorsement by MIM Holdings, the Australian mining group, in spite of the government's interventionist approach to foreign investment in resource projects.

Mr Norm Fussell, the MIM chief executive, said the government's recent insistence on renegotiating major projects had provided 'ammunition to those who believe the risk of doing business in PNG is too great'. But investment in PNG remained attractive, especially for major projects, for which the government had introduced a favourable economic and regulatory climate.

Mr Fussell said overseas companies' anxieties about the risks of investing in PNG had been increased by disputes over the Porgera and Mount Kare gold mines, secessionist fighting on Bougainville island, and law and order problems on the mainland.

Highlands Gold, a PNG-registered subsidiary of MIM, was one of three Australian companies forced to reduce their shareholdings in the Porgera project last month after the government insisted on renegotiating its joint venture contract. Mr Fussell said the three companies involved in the Porgera venture 'were reluctant to cede a significant part of a profitable investment after having carried the risk, the exploration, and the workload'. But MIM was not reconsidering its attitude to investment in PNG, which also includes a commitment to oil exploration and development in the South East Gobe oilfield.

'Once the political reality of the sale was accepted, the final negotiations with the government resulted in a reasonable commercial outcome. And the government itself, now with a substantial stake in the operation, is committed to making it work well,' he said.

Mr Fussell also said that PNG's natural resources, part of the so-called Pacific Rim of Fire, had been barely explored, in spite of the large number of major minerals projects under way in the country. 'The geology is highly prospective, and the gold, copper, and oil which have been revealed to date are indicative of much more to follow,' he said.

The MIM chief executive's comments will be welcomed by the coalition government, headed by Mr Paiais Wingti, which has adopted an aggressive approach to PNG participation in major projects.

MIM Holdings Highlands Gold PG Papua and New Guinea, Oceania P1311 Crude Petroleum and Natural Gas P1021 Copper Ores P1041 Gold Ores RES Natural resources COMP Company News P1311 P1021 P1041 The Financial Times London Page 32 404
International Bonds: Norway exploits good name with ambitious DM1.5bn issue Publication 930415FT Processed by FT 930415 By RICHARD WATERS

NORWAY launched an ambitious DM1.5bn bond issue yesterday at a yield of just 12 basis points over five-year German government bonds in the face of a falling market. But support from lead-manager Deutsche Bank helped to keep the spread at its launch level by the close, despite widening at one point in the afternoon.

Norway, with a AA1/AAA rating, has traditionally been one of the best-regarded names in the German market, according to one banker involved in the deal. But he added this may not have been enough to justify such a tight spread for a large transaction.

The bonds were launched at an indicated yield spread of 12 to 14 basis points over the Bobl series 105, and were priced at the tight end in the morning.

As the government market fell with the meagre cut in the German repo rate, the spread widened to 14 or more basis points at one stage. But, according to Deutsche, this was because brokers were failing to update prices on their screens as the market moved.

Two Pounds 300m five-year deals from Japanese electricity companies came as expected, though they met different initial responses. With so much paper due, Kansai Electric Power benefited from being launched first, with SG Warburg and BZW as joint lead managers. The bonds had a yield spread of 47 basis points over gilts - wider than expected - and were reported to have sold well in the Far East and continental Europe. The issue moved in line with the gilts market, which fell by half a point on signs of strengthening in the UK economy.

Tokyo Electric Power (Tepco) followed with its own Pounds 300m, five-year transaction, but at a spread of 40 basis points over the 7 1/4 per cent gilt due 1998. The pricing difference reflected Tepco's stronger credit standing. Tepco has a triple-A rating from both main US agencies, compared with the sole triple-A from Moody's for Kansai. And, as Japan's largest electricity company, Tepco has stronger name recognition among retail investors.

But, coming after the Kansai issue and against a background of rumours that a gilt auction in the five to 10-year maturity range would be announced at the end of this week, the Tepco bonds found less support.

During the day, the yield spread on the bonds - Pounds 200m of which were underwritten by lead-manager CSFB - widened to about 45 basis points, eradicating much of the difference with Kansai. Given the traditional pricing differential between the two companies in the bond markets, however, the gap was thought likely to widen again over time.

With five-year sterling swap spreads at just under 50 basis points yesterday, both issuers are thought to have swapped into floating rate dollars at just over Libor, after taking fees into account. The Tepco swap was handled by Sakura Bank, while Kansai's involved BZW. The proceeds of both deals were then swapped into fixed-rate yen.

XA World P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 524
Government Bonds: Gilts lose ground as signs of recovery dash rate-cut hopes Publication 930415FT Processed by FT 930415 By SARA WEBB and PATRICK HARVERSON LONDON, NEW YORK

THE UK government bond market lost nearly a point yesterday as the latest indications of recovery in the UK economy dashed hopes of further interest rate cuts.

Yesterday saw the release of better-than-expected manufacturing output figures and a relatively favourable Treasury report on the economy.

Manufacturing output rose 1.2 per cent in February after a revised 1.3 per cent rise in January, whereas economists had forecast a much smaller rise of only 0.2 per cent. Industrial output rose 1.6 per cent in February, following a 0.1 per cent fall in the previous month, whereas a rise of 0.5 per cent had been expected.

The Treasury report pointed to an improvement in demand and activity, while adding that inflationary pressures remained subdued.

Sterling remained strong yesterday, trading at DM2.4723 to DM2.4733, against DM2.4616 to DM2.4648 the previous day. Among short-dated issues, the 7 1/4 per cent gilt due 1998 fell 21/32 to 101 3/4 , while at the long end of the market the 8 per cent gilt due 2013 fell 29/32 to 46 7/8 .

Dealers said the market expected the Bank of England to announce its next gilt auction tomorrow.

THE Bundesbank disappointed the German government bond market as it allowed only a small easing in its repo rate yesterday, leading to a fall in bund prices.

The rate was lowered from 8.13 per cent to 8.11 per cent at the central bank's latest allocation of 14-day securities repurchase agreements, whereas many bond market participants had hoped for a more generous easing.

The Liffe bund futures contract opened at 96.52 and, after reaching a high of 96.60, it gradually fell back to a low of 96.21, ending the day at about 96.23.

The weaker German government bond market helped to pull down other main European bond markets, including France and Italy.

Dealers reported profit-taking in the Italian market, despite the relative strength of the lira. The BTP futures contract fell from 95.36 to 94.90.

SPANISH government bonds recovered recent losses, with the yield on the 10-year benchmark bond falling from 11.71 per cent to 11.61 per cent.

IN THE absence of fresh economic statistics, US Treasury prices traded firmer yesterday after the Federal Reserve completed the coupon pass dealers had been hoping for.

In late trading, the benchmark 30-year government bond was up 3/8 at 104 23/32 , yielding 6.752 per cent. At the short end of the market, the two-year note was up 1/32 at 100 3/16 , to yield 3.757 per cent.

At the opening, prices drew strength from buying on foreign markets overnight, but failed to match the gains earned on Monday and early Tuesday, when the market advanced strongly in response to good inflation news. The main focus of the day was the possibility that the Fed might go into the market and purchase coupon securities outright (in a manoeuvre known as a coupon pass) to bolster the banking system's reserves.

In the event, the Fed did take some supply out of the market, by buying coupons with maturities of November 1993 and beyond. Although prices fluctuated temporarily after the coupon pass, the market eventually settled down.

JAPANESE government bond prices rose in futures-driven trading yesterday, prompted by signs of profit-taking in the stock market.

The futures contract opened at 108.29 and rallied to a high of 108.75. The contract ended in Tokyo at 108.63, but picked up again in the London session to trade at 108.68. Dealers are waiting to see if the futures contract will test the next resistance point of 109.01 soon.

The yield on the benchmark No 145 JGB opened at 4.25 per cent and moved in a range of 4.195-4.265 per cent, before ending the day at 4.205 per cent.

Dealers said the bond market took its cue from falling stock prices, as the Nikkei average index closed down 206.01 points, or 1.00 per cent, at 20,533.38 after Tuesday's strong rally.

GB United Kingdom, EC DE Germany, EC ES Spain, EC US United States of America JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 711
International Capital Markets: Derivative portfolios held by UK banks up sharply in year Publication 930415FT Processed by FT 930415 By RICHARD WATERS

FOREIGN exchange and interest-rate related derivatives operations of UK clearing banks grew rapidly last year, with total portfolios growing more than 50 per cent, according to banks' annual reports.

The derivative markets also provided the only significant growth in UK banks' credit exposures: those banks to disclose details recorded a jump of nearly Pounds 4bn in their risk-weighted assets as a result of their off-balance sheet derivatives operations.

By comparison, three of the four main clearing banks - Barclays, Lloyds and Midland - saw a decline in risk-weighted assets recorded on their balance sheets as they continued to reel from heavy provisions from their UK lending. Barclays showed the sharpest decline, from Pounds 86.3bn to Pounds 84.9bn.

The growth in derivatives portfolios stemmed both from doing more business with institutional and corporate customers and from using derivatives more for internal position-taking, said Mr Barry Hamilton, head of risk management in Barclays' treasury division. Interest rate swaps, for instance, are a less capital-intensive way of hedging or increasing interest rate exposure than the traditional money markets, he said.

The nominal amounts involved in the contracts, though not indicating true exposures, give the clearest indication of growth in the banks' derivatives businesses. These show a jump both in exchange-rate and interest-rate related instruments, though the UK commercial banks remain behind their US counterparts.

The risk-weighted amounts, calculated according to Bank for International Settlements guidelines, reflect the mark-to-market value of derivatives portfolios. Their faster growth rate suggests the banks were not running balanced portfolios last year, but have benefited from falling interest rates or from foreign exchange movements.

------------------------------------------------------------------------ UK BANKS' OFF-BALANCE SHEET FINANCIAL INSTRUMENTS ------------------------------------------------------------------------ 1992 1991 Nominal Risk-weighted Nominal Risk-weighted amount amount amount amount ------------------------------------------------------------------------ Exchange-rate related ------------------------------------------------------------------------ Pounds Pounds Pounds Pounds Barclays 219.9bn 2.5bn 148.9bn 1.0bn NatWest 169.9 2.1 112.1 1.3 Lloyds 141.9 1.4 94.9 1.0 ------------------------------------------------------------------------ Interest-rate related ------------------------------------------------------------------------ Pounds Pounds Pounds Pounds Barclays 248.7bn 1.8bn 152.1bn 1.3bn NatWest 182.7 0.7 120.0 0.4 Lloyds 165.9 0.4 94.5 0.2 ------------------------------------------------------------------------

GB United Kingdom, EC P6221 Commodity Contracts Brokers, Dealers P6021 National Commercial Banks MKTS Market data P6221 P6021 The Financial Times London Page 31 375
International Capital Markets: Japanese surplus flows back into Euromarket Publication 930415FT Processed by FT 930415 By REUTER TOKYO

JAPAN'S current account surplus has been flowing back into the global money market, with short-term funds going mainly to the Euromarket, says the Bank of Japan (BOJ), Reuter reports from Tokyo.

Japan's current account surplus rose to Dollars 117.6bn in 1992, from Dollars 72.9bn in 1991. Long-term capital outlays showed a deficit of Dollars 28.5bn in 1992, against a surplus of Dollars 37.1bn the previous year.

The change in long-term capital outlays was due to a change in the ratio of inward and outward investment in stocks and bonds, BOJ said.

Inward and outward investment in stocks and bonds showed a Dollars 26.2bn net deficit in 1992 against a Dollars 41.0bn surplus in 1991. Capital flows such as short-term capital flows and private banking accounts had a Dollars 78.6bn deficit last year against Dollars 102.2bn in 1991.

JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 173
International Company News: Gannett lifted by increased advertising Publication 930415FT Processed by FT 930415 By ALAN FRIEDMAN and DAMIAN FRASER NEW YORK, MEXICO CITY

IMPROVED newspaper advertising revenues helped Gannett, the US publisher of 82 daily newspapers including USA Today, to achieve a first-quarter 1993 net profit of Dollars 66.3m, or 46 cents a share, compared with a loss in the same quarter of 1992 of Dollars 91.4m, or 63 cents a share.

The company's 1992 first-quarter loss occurred after Dollars 146m of accounting charges. With these stripped out, the 1993 first-quarter net profit was 22 per cent higher than the level a year before.

Gannett's group operating revenues grew by 7 per cent to Dollars 844.7m year-on-year, while operating income was Dollars 120.1m in the first quarter, some 16 per cent higher than the level a year ago.

Newspaper advertising revenues were 9 per cent higher in the 1993 first quarter, at Dollars 465m. Classified advertising volume was nearly 6 per cent better in the quarter.

Signs that the US media industry is emerging from the worst of recession were apparent at USA Today, the popular national daily paper. Its paid advertising pages rose by 29 per cent year-on-year while advertising revenues were 21 per cent better.

Broadcasting revenues at Gannett, which includes 10 television and 15 radio stations in the US, grew by 5 per cent, to Dollars 82.9m.

Outdoor advertising revenues, a Gannett specialty, declined by 8 per cent, to Dollars 47.8m. This reflected in part the sale of a business in Arizona. On Wall Street, the share price of Gannett yesterday closed Dollars 1 3/8 lower at Dollars 53 3/8 .

City Grupo Financiero Banamex-Accival (Banacci), Mexico's largest financial institution, lifted first-quarter results to 858m new pesos (Dollars 277m), a 24 per cent increase on the same period in 1992, writes Damian Fraser in Mexico City.

Gannett Co Inc City Grupo Financiero Banamex-Accival US United States of America MX Mexico P2711 Newspapers P6211 Security Brokers and Dealers FIN Interim results P2711 P6211 The Financial Times London Page 30 342
International Company News: Alcan deficit deepens to Dollars 20m in the first quarter Publication 930415FT Processed by FT 930415 By ROBERT GIBBENS MONTREAL

ALCAN Aluminium, which suffered a 6 per cent decline in first-quarter sales to USDollars 1.73bn due to depressed fabricated metal prices, reported a net loss of Dollars 20m, or 11 cents a share, for the term, compared with a loss of Dollars 15m, or 9 cents, a year ago.

The recession in Japan also affected Alcan's results. Its share of equity-accounted companies, including Nippon Light Metal, the Japanese associate, resulted in a Dollars 2m loss against a Dollars 22m profit.

In Canada, where Alcan produces most of its ingot, losses were substantially lower. US operations, which include primary, fabricated and rolled products, showed a small loss against a slight profit. However, Brazil improved.

The European units weakened, especially in Italy and France, because of the recession. Shipments of fabricated products were down 3 per cent and average realised prices slipped 12 per cent. Ingot shipments were lower but average prices received gained a little.

Mr David Morton, chairman, said aluminium was likely to remain over-supplied in the near term, with depressed prices. Cost reduction and productivity gains remained the top priority.

Alcan Aluminium Corp US United States of America P3365 Aluminum Foundries P3353 Aluminum Sheet, Plate and Foil FIN Annual report P3365 P3353 The Financial Times London Page 30 232
International Company News: Bronfman groups simplify their financial web Publication 930415FT Processed by FT 930415 By BERNARD SIMON TORONTO

SEVERAL senior holding companies controlled by Toronto's Bronfman family have announced a restructuring of their financial arrangements with one another.

The changes, the start of an effort to simplify the web of interlocking private and public companies, will relieve Edper Enterprises and Hees International Bancorp of contingent obligations relating to Brascan Holdings. Brascan is a private company which holds 49 per cent of Brascan Ltd, a publicly-listed Bronfman holding company.

The changes are complex, reflecting the intricate cross-holdings and financing arrangements within the Bronfman empire. As a first step, Edper will contribute CDollars 279m (USDollars 221.40m) of junior preferred shares to Brascan Holdings. Edper will also have the right over five years to require Hees to buy its common share holdings in Brascan for Hees common shares or an equivalent security.

Hees, which owns CDollars 765m of Brascan senior preferred shares, will be released from an obligation to buy Brascan preferred shares to fund future purchases of Brascan equity securities. Hees will also be assured of a more stable earnings and dividend flow from its investment in Brascan.

The complex structure of the Bronfman empire has made it difficult for outsiders to judge the extent of recent financial pressures on the group. But the group has this year disposed of some of its most prized assets, including controlling stakes in John Labatt, the brewer and entertainment group, and MacMillan Bloedel, the forestry company.

As a result of the latest changes, Edper has reduced the carrying value of its 50.1 per cent stake in Brascan. The CDollars 140m charge pushed Edper to a CDollars 298.6m loss in 1992, compared with net earnings of CDollars 19.4m the previous year.

On completion of the transaction, expected in early May, Hees will record a corresponding gain.

Edper Enterprises Hees International Bancorp Brascan Holdings CA Canada P6719 Holding Companies, NEC COMP Company News P6719 The Financial Times London Page 30 334
International Company News: Court approves TWA plan to lease aircraft Publication 930415FT Processed by FT 930415 By Our Financial Staff

A US bankruptcy court judge granted preliminary approval to Trans World Airlines for a Dollars 315m plan that includes the lease of six new McDonnell Douglas MD-80 aircraft, Our Financial Staff writes.

TWA is expected to take delivery of the new jets by the end of July. Approval of the plan will mark the addition of new aircraft to TWA's fleet for the first time since the early 1980s. The package includes the lease of 12 used DC9-15 aircraft, from June 30, and the renegotiation of terms on other aircraft leases

Trans World Airlines Inc US United States of America P4512 Air Transportation, Scheduled P7359 Equipment Rental and Leasing, NEC RES Facilities P4512 P7359 The Financial Times London Page 30 140
International Company News: Cooper's ill-health prompts board reshuffle at Upjohn Publication 930415FT Processed by FT 930415 By KAREN ZAGOR NEW YORK

UPJOHN, the US pharma-ceuticals group, announced a reshuffling of its top management yesterday following the unexpected deterioration in the health of its chief executive, Mr Theodore Cooper.

The company named Mr Ley Smith as president and chief operating officer with the responsibilities of the chief executive in Mr Cooper's absence. Mr Smith was previously vice-chairman.

Mr William Parfet, the son of Mr Cooper's predecessor, was named vice-chairman. He was previously president of the company.

Mr Cooper, 64, discovered he had bone marrow cancer in January. The cancer was diagnosed at an early stage and Upjohn had hoped it would not affect Mr Cooper's ability to lead the company.

Upjohn's board held a special meeting yesterday after Mr Cooper was moved into intensive care as a result of a lung infection and respiratory failure. His condition was described as critical but stable.

Mr Cooper joined Upjohn in 1980 and succeeded Mr Ray Parfet as chairman in 1987.

Upjohn US United States of America P2834 Pharmaceutical Preparations PEOP People P2834 The Financial Times London Page 30 195
International Company News: General Electric climbs 10% in quarter Publication 930415FT Processed by FT 930415 By NIKKI TAIT

GENERAL Electric of the US has reported a 10 per cent increase in first-quarter profits to Dollars 1.16bn after tax, helped by strong earnings advances in most divisions other than aircraft engines and technical products and services.

The improvement translated into earnings per share of Dollars 1.36, up by 11 per cent on Dollars 1.23 reported for the first quarter of 1992. If the discontinued aerospace operations are excluded from the comparisons, after-tax profits from continuing businesses would have risen by 13 per cent, to Dollars 1.08bn.

First-quarter revenues from the continuing interests increased by 3 per cent, to Dollars 12.9bn, year-on-year.

Mr Jack Welch, GE's chairman, said the earnings growth was 'broad-based as double-digit increases were reported by GE Capital Services, transportation systems, motors, NBC, power systems, appliances and plastics'. The lower profits in the aircraft engines division, which produces Pratt & Whitney engines, 'reflected an increase in product development costs and restructuring costs necessary to meet market conditions', he said.

Mr Welch also suggested that the first-quarter results 'positioned the company for another strong year of earnings growth'.

Within its various operating divisions, GE said that GE Capital Services had seen net earnings advance by 22 per cent, with the sharpest advances coming in its speciality insurance and speciality financing units.

Mr Michael Goldstein, vice-chairman of Toys R Us, said he was pleased with business so far this year.

He said sales had been particularly strong in computer games, although bad weather had hurt sales of warm-weather products.

General Electric Toys R Us US United States of America P3612 Transformers, Ex Electronic P3511 Turbines and Turbine Generator Sets FIN Interim results MKTS Sales P3612 P3511 The Financial Times London Page 30 301
International Company News: Japanese 'mini-bubble' set to catch a train - A rail group is about to test the strength of Tokyo's rebound Publication 930415FT Processed by FT 930415 By EMIKO TERAZONO

THE rebound of the Tokyo stock market, already termed by some investors as the 'mini bubble', spells relief for the Japanese government, forced over the past two years to postpone floating off its holdings in Japanese companies by falling share prices.

This week, the government is due to decide to go ahead with the listing of East Japan Railway (JR East), one of the seven regional companies created in 1987 by the break-up of Japan National Railways (JNR), the national railway operator.

JNR was split up in order to tackle its mounting losses resulting from inefficient operations and rising debt. A government-owned company, JNR Settlement Corp, was set up to hold the shares in the resulting six passenger companies and one freight company, thereby removing them from direct government control, but not government ownership.

JR East is ready to file a preliminary application to the Tokyo stock exchange for a listing in October. Half of the company's 4m shares are expected to be offered in the first tranche, with 500,000 shares to be auctioned.

JNR Settlement needs to sell the shares to raise funds to reduce JR East's mounting debt. Initially, the holding company had planned to reduce the debt by selling railway property.

However, the government introduced restrictions on land sales in the 1980s after a sharp rise of Japanese property prices prompted fears that railway company land sales would fuel the surge in property prices.

Meanwhile, Japanese stockbrokers are eager to promote JR East shares, hoping that low-priced stock will bring retail investors back to the market.

A recent survey by Okasan Economic Research Institute, the research arm of Okasan Securities, a second-tier Japanese broker, showed that 66 per cent of 1,200 investors surveyed were interested in buying JR East shares.

At the same time, an 82 per cent surge so far this year in the share price of Nippon Telegraph and Telephone (NTT), the privatised telecommunications group in which the government still holds a 65.7 per cent stake, has helped lift retail investor confidence.

The earlier plunge in NTT shares, the most widely held stock in Japan, disillusioned individual investors and sparked distrust in the government which sold the NTT shares at a high price.

Last August, the NTT stock had fallen 80 per cent from its peak, prompting the government to postpone offering additional tranches in NTT shares as well as the listing of JR East. Although some investors are still cautious, the recovery in NTT shares has set the stage for the JR East listing.

Japanese brokers have already embraced the flotation and are promoting companies related to the JR group, such as rolling stock manufacturers and railway construction companies as a new 'theme' for the stock market.

According to the Okasan survey, investors said they were willing to buy the shares if they were priced at about Y200,000 each.

A figure now mooted in the Japanese press is Y250,000, which, if JR East decides to maintain its previous year's dividend of Y5,000 a share, would mean the stock would yield 2 per cent. 'As a stock it's good value,' says Mr Graeme McDonald, analyst at James Capel in Tokyo.

However, the company is unlikely to grow quickly, and is expected to be burdened by heavy capital expenditure for the 1998 Olympics in Nagano. The company reported a 0.9 per cent rise in pre-tax profits to Y109bn (Dollars 956.14m) for its last financial year and estimates pre-tax profits will fall 7.1 per cent for the current year to March 1994.

Moreover, unlike other private railway companies that have diversified into land development and retail businesses, JR East has only its railways operations to rely on. Ms Kumiko Takase, analyst at Barclays de Zoete Wedd in Tokyo, says: 'JR has nothing to fall back on when the railway business does badly.'

The Tokyo stock market has rebounded on government support measures, the recovery in NTT's share price, an increase in liquidity due to low interest rates, and the release of positive economic news.

Since the outcome of JR East's listing will decide the fate of other semi-privatised corporations - such as Japan Tobacco, and the remaining Japanese railway companies - government officials are keeping their fingers crossed that the 'mini bubble' does not burst before October.

East Japan Railway JNR Settlement Corp Nippon Telegraph and Telephone JP Japan, Asia P4011 Railroads, Line-Haul Operating P4813 Telephone Communications, Ex Radio P9611 Administration of General Economic Programs CMMT Comment & Analysis P4011 P4813 P9611 The Financial Times London Page 30 783
International Company News: Waste Management sees flat term Publication 930415FT Processed by FT 930415 By LAURIE MORSE CHICAGO

WASTE Management, the world's largest rubbish hauler, said that it expected to report flat earnings in the first quarter.

The Illinois-based company's stock tumbled to a 52-week low this week as investors became disillusioned with the company's growth potential.

Waste Management issued the earnings estimates in response to adverse Wall Street projections earlier this week. It will release official results next week.

In spite of adding more than 400 salespeople in North America last year, Waste Management forecast first-quarter earnings of 40 to 41 cents per share.

This was little changed from last year's first-quarter result of 39 cents per share.

The group's publicly-traded subsidiary, Chemical Waste Management, is also expecting flat results for the first quarter, at Dollars 29m, or 15 cents per share.

Waste Management's Wheelabrator Technologies subsidiary is expected to earn between 17 and 18 cents per share in the quarter, down sharply from last year's 29 cents per share.

Earnings at Waste Management International, the group's UK subsidiary, were projected at between 13 and 15 cents per American depositary share.

The company said that first-quarter results for its newly-formed Rust International subsidiary were expected to meet internal expectations, but the company did not provide details.

Waste Management, which had been expected to benefit from the new American administration's interest in the environment, plans to change its name to WMX Technologies at its annual meeting on May 14.

Waste Management Inc Chemical Waste Management Inc Waste Management International Inc US United States of America GB United Kingdom, EC P4953 Refuse Systems COMP Company News P4953 The Financial Times London Page 30 282
International Company News: Salomon debt downgraded by Standard & Poor's Publication 930415FT Processed by FT 930415 By KAREN ZAGOR NEW YORK

SALOMON, the US securities house, has had about Dollars 8bn of outstanding debt downgraded by Standard & Poor's, the US credit rating agency. The downgrade, which could push up the cost of Salomon's borrowings, reflected the firm's reliance on proprietary trading activity 'which has increased its vulnerability to quarterly earnings volatility,' S&P said.

Salomon's longer-term senior debt rating was cut to single A minus from single A. Its subordinated debt rating fell to triple B plus from single A minus. Preferred stock received a rating of triple B from triple B plus, and the commercial paper rating was cut to A-2 from A-1.

Mr Donald Howard, chief financial officer said: 'Some rating agencies focus too heavily on the short-term volatility of Salomon's earnings and give inadequate weight to our results measured over longer time-frames and to the exceptional quality and liquidity of our assets.'

Salomon Inc US United States of America P6211 Security Brokers and Dealers CMMT Comment & Analysis P6211 The Financial Times London Page 30 188
International Company News: Qatari bank returns to black after BCCI loss a year ago Publication 930415FT Processed by FT 930415 By REUTER MANAMA

QATAR'S Doha Bank, which lost Dollars 28.6m in 1991 mainly because of a deposit with the failed Bank of Credit and Commerce International (BCCI), said it returned to profit in 1992, Reuter reports from Manama.

Doha Bank, which is owned by Qatari shareholders, announced a QR38m (Dollars 10.5m) net profit for last year. It made a Dollars 65m deposit with BCCI in 1991 but expected to get back only 40 per cent of the sum.

The bank, with branches in Pakistan and New York, plans to raise its paid-up capital by 50 per cent to QR78.5m by issuing shares worth QR26.25m. It said it had won approval from the Qatari authorities to increase its capital, and the issue would be put before a shareholders' meeting next week. New shares would be offered to shareholders at a face value of QR100.

Assets rose to QR2.73bn in 1992 from QR2.64bn the previous year. Shareholders' equity rose to QR200m from QR172m. Earnings per share stood at QR72.42 in 1992. The bank has an 11.11 per cent capital adequacy ratio, higher than the 8 per cent required by the Bank of International Settlements.

Doha Bank QA Qatar, Middle East P6081 Foreign Banking and Branches and Agencies FIN Annual report P6081 The Financial Times London Page 30 235
International Company News: Nabisco modifies scheme to create two types of share Publication 930415FT Processed by FT 930415 By NIKKI TAIT NEW YORK

RJR NABISCO, the large food and cigarettes manufacturer, is to proceed with its 'targeted stock' scheme - which will create two classes of shares, one pegged to the fortunes of its tobacco division and one to the performance of its food operations - in spite of the cigarette price war begun by Philip Morris, a rival manufacturer, earlier this month.

RJR Nabisco says its scheme will be modified in two important respects. First, the group will simply proceed with the sale of 93m RN-Nabisco shares to new investors. These shares will be pegged to the food operations' performance and represent a 25 per cent interest in the food group's equity.

RJR Nabisco will not issue RN-Nabisco shares to existing investors in the company at this stage. Instead, the existing RJR Nabisco shares will be renamed as RN-Reynolds shares once the RN-Nabisco flotation has gone ahead, and Reynolds group will retain the remaining 75 per cent interest in the food group's equity.

This contrasts with the original targeted stock scheme, which envisaged that another 142m RN-Nabisco shares would be issued to existing RJR Nabisco shareholders about six months after the flotation of RN-Nabisco shares.

Secondly, the company will delay declaring any dividends on the renamed RN-Reynolds shares until 'there is a clear assessment of the domestic tobacco operating environment and the company can initiate a dividend policy that is consistent with its capital structure and credit rating targets'.

This group of shares will carry a 'pass-through' dividend of about three cents a share from the third quarter of 1993 onwards, reflecting this stock's retained interest in the dividend-paying food interests.

The scheme retains the all-important fund-raising elements of the original package. The flotation of the RN-Nabisco shares is scheduled to raise about Dollars 1.5bn - a valuable contribution to RJR Nabisco's ongoing effort to pay down the heavy debts dating back to the Dollars 25bn leveraged buyout of the company in 1989.

It will also let the company report the performance of its food side - likely to be in better shape than tobacco in the immediate future - separately.

RJR Nabisco Holdings Inc RN-Nabisco RN-Reynolds US United States of America P2111 Cigarettes P2099 Food Preparations, NEC COMP Company News P2111 P2099 The Financial Times London Page 30 400
International Company News: Mixed results at Marriott and Hilton Publication 930415FT Processed by FT 930415 By NIKKI TAIT NEW YORK

MARRIOTT and Hilton Hotels, two of the largest quoted US hotel groups, unveiled first-quarter results yesterday which reflected mixed experiences in the lodging market.

Marriott's lodging operations saw a 17 per cent rise in operating profits in the quarter, although revenues were up by only 3 per cent.

In the full-service hotel sector, the group saw a gain of 3 percentage points in occupancy levels, while room-rates were generally static.

But, in the mid-price and economy segment, Marriott reported higher room-rates. Occupancy at the Courtyard and Residence Inn chains improved, while Fairfield Inn, the economy chain, saw a one percentage point drop in occupancy levels.

The profits advances in the lodging division helped Marriott to a net profit before accounting-related changes of Dollars 19m, up from Dollars 11m last time. Sales were Dollars 2.08bn compared with Dollars 1.95bn. Contract services, the group's other large division, saw a 25 per cent gain in operating profits.

Hilton said its hotels division saw a 3 per cent decline in operating profits in the first quarter. Occupancy rose by 4 percentage points, but room rates remained flat and dipped in some important markets.

In Hilton's gaming division, business was more encouraging, leading to an 18 per cent advance in operating profits. That left the group overall posting a 4 per cent increase in after-tax profits, at Dollars 23.1m, before accounting-related changes. Total revenues were up by one-fifth at Dollars 331.6m.

Marriott Corp Hilton Hotels US United States of America P7011 Hotels and Motels FIN Interim results P7011 The Financial Times London Page 29 279
International Company News: American Home gains 11% in first period Publication 930415FT Processed by FT 930415 By KAREN ZAGOR

AMERICAN Home Products, the US pharmaceutical company, yesterday posted first-quarter net income of Dollars 401.5m, or Dollars 1.29 a share, on sales of Dollars 2.11bn.

A year earlier, the company's results were muddied by a number of special items which cumulatively added Dollars 90.1m to earnings and brought net income to Dollars 453.4m, or Dollars 1.43, on sales of Dollars 2bn.

Stripping out a one-time items in 1992, American Home Products's net income advanced 11 per cent in the latest quarter.

The company's pharmaceuticals business saw the biggest sales gain in the quarter, rising 8 per cent to Dollars 1.26bn on the back of strong sales of anti-inflammatory drugs and drugs for women.

In consumer healthcare, sales rose 2 per cent to Dollars 448.5m, reflecting a less severe cold and 'flu season. Food products sales were flat.

American Home Products US United States of America P2834 Pharmaceutical Preparations FIN Interim results P2834 The Financial Times London Page 29 177
International Company News: Strong quarter at PaineWebber Publication 930415FT Processed by FT 930415 By PATRICK HARVERSON NEW YORK

PAINEWEBBER, the US securities house, announced another strong set of quarterly earnings yesterday, although increased taxes left net income for the first three months of the year lower than a year ago at Dollars 70.9m against Dollars 74.3m.

The higher tax rate aside, PaineWebber reported record net revenues of Dollars 696.8m, up 6 per cent on 1992 and the highest in the firm's 114-year history. Earnings per share of Dollars 1.26, fully diluted, were also a record.

The PaineWebber results ensure that the securities industry, buoyed by large interest in equities from individual investors and heavy demand for underwriting services from corporations, is on course for its third consecutive year of record earnings.

Analysts estimated that Wall Street firms would earn more than Dollars 2bn between them in the first quarter alone.

Revenues from all of PaineWebber's main business segments were higher than a year ago, mirroring the performance of Merrill Lynch, another big Wall Street securities house, which reported record profits on Tuesday.

Earnings from brokerage commissions rose 5 per cent to Dollars 242m, while revenues from principal transactions and investment banking rose slightly, to Dollars 203.7m and Dollars 100.6m, respectively.

The fastest-growing business, was asset management, where earnings jumped 17 per cent in the quarter to Dollars 73.3m as mutual fund assets rose 24 per cent and total assets under management climbed to about Dollars 37.5bn.

Interest revenues advanced 9 per cent to Dollars 289.5m.

Within the different business segments, Mr Donald Marron, PaineWebber's chairman, singled out the performance of the institutional sales and trading business, which reported 13 per cent growth in revenues, led by client-driven fixed income and equity sales.

Retail sales and marketing, part of the firm's traditional securities brokerage business, also fared especially well, said Mr Marron.

About 250 new brokers were added to the workforce during the quarter, taking the total to 5,150.

PaineWebber's expenses climbed almost 7 per cent to Dollars 580.5m in the quarter, mostly because of higher performance-related employee compensation.

The company's shares rose Dollars 1/2 in early trading on Wall Street, the highest level the stock has been in the past year, but closed unchanged on the day at Dollars 27 1/4.

PaineWebber Group Inc US United States of America P6211 Security Brokers and Dealers FIN Interim results P6211 The Financial Times London Page 29 404
International Company News: Royal Trustco deep in red as provisions almost treble Publication 930415FT Processed by FT 930415 By BERNARD SIMON TORONTO

ROYAL Trustco, the crippled financial services group controlled by Toronto's Bronfman family, has disclosed the severity of the financial problems which led to the pending takeover of its operations by Royal Bank of Canada.

The group yesterday reported a record net loss in 1992 of CDollars 852m (USDollars 676.1m), or CDollars 5.93 a share, compared with earnings in 1991 of CDollars 107m, or 25 cents a share.

Loan-loss provisions almost trebled to CDollars 421m from CDollars 155m.

Much of the increase was blamed on a significant deterioration in its commercial real estate portfolio in the fourth quarter, especially in Canada.

The company also took a CDollars 93m write-down of goodwill in the fourth quarter, while assets fell to CDollars 25.1bn from CDollars 37.5bn.

Royal Trustco was for years one of Canada's most venerable financial institutions, specialising in home mortgages and fiduciary services. But ill-advised forays into Europe and the US, compounded by the North American recession, resulted in heavy losses in recent years.

Trilon Financial, a Bronfman holding company, earlier this year began seeking an outside investor to inject equity into Royal Trustco. Trilon Financial last month agreed to sell all Royal Trustco's operations to Royal Bank of Canada for CDollars 1.65bn.

Royal Trustco will be left as little more than a shell to recoup what it can from a loan portfolio of CDollars 4.5bn.

The company expects the deal with Royal Bank to close either in the late summer or autumn.

Several outside shareholders have accused Royal Trustco's management of not providing timely disclosure of the company's financial problems.

Royal Trustco's share price has plummeted from CDollars 18.25 in 1990 to 40 cents yesterday, down 7 cents on the day.

Royal Trustco CA Canada P6552 Subdividers and Developers, Ex Cemeteries P6141 Personal Credit Institutions FIN Annual report P6552 P6141 The Financial Times London Page 29 328
International Company News: Goodrich shares hit by poor figures Publication 930415FT Processed by FT 930415 By REUTER

SHARES in B. F. Goodrich, the US plastics group and specialty chemicals group, dropped after the company posted first-quarter financial results that were much lower than expected, Reuter reports.

The Ohio-based company lost Dollars 7.6m, or 38 cents a share, in the first quarter, while analysts had expected a profit of about 1 cent a share. For the same period last year, the company made a loss of Dollars 1.9m, or 16 cents a share, before accounting adjustment.

On Wall Street, Goodrich shares closed Dollars 1 1/8 lower at Dollars 46 7/8 .

Goodrich said its aerospace businesses continued to meet expectations during the quarter and that many of its speciality chemicals businesses performed well in the quarter.

'But results for the segment overall continue to be hurt by weak demand in construction-related markets and by generally poor economic conditions in Canada and Europe,' said Mr John Ong, chairman.

Goodrich has said that it planned to spin off its Geon Viny division as a wholly-owned subsidiary, offering about 50 per cent of the new company's stock to the public.

BF Goodrich US United States of America P3089 Plastics Products, NEC P2869 Industrial Organic Chemicals, NEC FIN Interim results P3089 P2869 The Financial Times London Page 29 223
International Company News: Bank of New York earnings jump 52% Publication 930415FT Processed by FT 930415 By ALAN FRIEDMAN and REUTER NEW YORK

BANK of New York, which last year agreed to buy 62 branches from the US subsidiary of Barclays Bank, yesterday unveiled a healthy 56 per cent jump in its first-quarter net earnings, to Dollars 125m.

The first-quarter profit translates into fully-diluted earnings per share of Dollars 1.37, up from 97 cents in the same quarter of 1992.

The result was achieved on the back of wider interest margins, higher fee income, lower non-performing assets and better earnings resulting from a continuing shift in the bank's mix of assets.

The bank, with total assets of Dollars 40bn, said fee income rose by 14 per cent year-on-year, to Dollars 108m, thanks largely to credit card processing.

Total non-performing assets dropped by 33 per cent, to Dollars 860m, while bad debt provisions in the quarter declined to Dollars 100m from Dollars 157m in the first quarter of 1992.

Net interest income was Dollars 334m in the quarter, compared with Dollars 308m a year before. Non-interest income increased by 11 per cent to Dollars 320m in the quarter.

The adoption of new accounting standards resulted in a Dollars 46m charge to retained earnings for prior periods, but the bank said the charge would have no future impact. Its return on assets in the quarter was 1.2 per cent, up from 0.77 per cent.

On Wall Street, the Bank of New York's shares closed Dollars 1 1/4 lower at Dollars 60 1/2 .

Wachovia, the North Carolina-based bank, reported that its first-quarter net income rose by 14.6 per cent to Dollars 121.6m, or 69 cents a share.

First of America Bank realised first-quarter securities gains of Dollars 7.2m, pushing earnings for the period to Dollars 58.6m, or 98 cents, Reuter reports. It earned Dollars 26m, or 41 cents, in the first quarter of 1992.

Bank of New York Wachovia Corp First of America Bank US United States of America P6081 Foreign Banking and Branches and Agencies FIN Interim results P6081 The Financial Times London Page 29 354
International Company News: Microsoft up 35.8% at Dollars 243m Publication 930415FT Processed by FT 930415 By KAREN ZAGOR NEW YORK

MICROSOFT, the leading personal computer software company, yesterday beat analysts' expectations by unveiling a 35.8 per cent jump in third-quarter net income to Dollars 243m, or 80 cents a share, helped by the continuing popularity of its Microsoft Windows and MS-DOS operating systems.

A year earlier, Microsoft earned Dollars 179m, or 69 cents. Revenues in the three months to March 31 soared nearly 41 per cent to Dollars 958m from Dollars 681m.

On Wall Street, Microsoft shares added to Dollars 89. The results were released after the close of trading. Most analysts had expected earnings of about 78 cents a share.

For the first nine months of the company's 1993 fiscal year, Microsoft earned Dollars 688m, or Dollars 2.28a share, up 38.1 per cent from Dollars 498m, or Dollars 1.70, the previous year. Revenues grew 39.7 per cent to Dollars 2.71bn from Dollars 1.94bn.

Mr Frank Gaudette, chief financial officer, said: 'We have expanded core businesses, introduced new product lines and maintained our emphasis on operating efficiencies.'

Microsoft has licensed more than 25m copies of its Windows operating system since its debut in 1990. The company said Windows is now pre-installed in about 60 per cent of personal computers.

Earlier this week, Microsoft announced an agreement to work with Compaq Computer to make personal computers easier to use and to develop new products and markets.

The company is expected to launch its Windows NT (New Technology) in May.

Microsoft Corp US United States of America P7372 Prepackaged Software P3577 Computer Peripheral Equipment, NEC FIN Interim results P7372 P3577 The Financial Times London Page 29 284
International Company News: Pratt & Whitney to cut 9,000 jobs Publication 930415FT Processed by FT 930415 By NIKKI TAIT

PRATT & Whitney, the aero-engine manufacturing division of United Technologies, plans to eliminate 9,000 jobs in Connecticut by the end of 1994 - 2,300 more than it had previously announced.

The year-end worldwide employment target remains at 30,000 people.

The company is to close manufacturing at its East Hartford and Southington facilities, and half its operations at North Haven. Production will move to Georgia and Maine.

Pratt and Whitney US United States of America P3724 Aircraft Engines and Engine Parts PEOP Labour P3724 The Financial Times London Page 29 108
International Company News: Banacci up 24% after revaluation Publication 930415FT Processed by FT 930415 By DAMIAN FRASER MEXICO CITY

CITY Grupo Financiero Banamex-Accival (Banacci), Mexico's largest financial institution, lifted its results to 858m new pesos (Dollars 277m) for the first quarter, a 24 per cent increase on the first quarter of 1992.

The results include a 183m peso revaluation of subsidiary assets. Excluding the revaluation, profits were 675m pesos, a 12.5 per cent increase on 1992.

Banamex, the recently-privatised bank and the group's largest subsidiary, contributed 570m pesos to profits, a 14 per cent increase on the first quarter last year. Mexican banks, unlike other Mexican companies, do not adjust results for inflation, which in March was 10.4 per cent on an annual rate.

Mr Jorge Hierro, director of investor relations at Banamex, attributed the profits increase to the growth in the bank's loan portfolio of 29 per cent and in retail loans of 62 per cent. In addition, it improved margins and benefited from cost controls.

Accival, the group's brokerage, had profits of 41m pesos, a 19.5 per cent return on equity, against the bank's return on equity of 26.8 per cent.

Cit Grupo Financiero Banamex-Accival MX Mexico P6081 Foreign Banking and Branches and Agencies FIN Interim results P6081 The Financial Times London Page 29 216
International Company News: Mixed results at US hotel chains Publication 930415FT Processed by FT 930415 By NIKKI TAIT NEW YORK

MARRIOTT and Hilton Hotels, two of the largest quoted hotels groups in the US, unveiled first-quarter results yesterday which reflected mixed experiences in the lodging market.

Marriott's lodging operations saw a 17 per cent increase in operating profits during the three-month period, although revenues were up by only 3 per cent.

In the full-service hotel sector, the group saw a gain of 3 percentage points in occupancy levels, while room-rates were generally static.

However, in the mid-price and economy segment Marriott reported higher room-rates. Occupancy levels at the Courtyard and Residence Inn chains improved while the Fairfield Inn, the economy chain, saw a one percentage point drop in occupancy levels, to about 75 per cent.

The profits advances in the lodging division helped Marriott to a net profit before accounting-related changes of Dollars 19m, up from Dollars 11m last time.

Total sales were Dollars 2.08bn compared with Dollars 1.95bn. Contract services, the group's other large division, saw a 25 per cent gain in operating profits and an 11 per cent sales advance.

Marriott is attempting to demerge its financially-healthy lodging and contract services operations into a separately-quoted company, leaving behind its property assets and the bulk of the group's heavy debts.

It said the plan, opposed by some bondholders, would be voted on by shareholders at the 1993 annual meeting on June 22.

'Despite the mixed signals in the economic environment, we are optimistic about the rest of the year,' said Mr J. W. Marriott, chairman.

Hilton said its hotels division saw a 3 per cent decline in operating profits in the first quarter. Occupancy rose by 4 percentage points, but room rates remained flat, and dipped in some important markets.

In Hilton's gaming division, business was more encouraging, leading to an 18 per cent advance in operating profits. That left the group overall posting a 4 per cent increase in after-tax profits, at Dollars 23.1m, before accounting-related changes. Total revenues were up by one-fifth at Dollars 331.6m.

Marriott Corp Hilton Hotels US United States of America P7011 Hotels and Motels FIN Interim results P7011 The Financial Times London Page 29 371
International Company News: Banques Populaires falls 21% Publication 930415FT Processed by FT 930415 By ALICE RAWSTHORN

BANQUES Populaires, the French banking group, yesterday added to the gloomy mood of France's financial sector by announcing a 21 per cent fall in net profits to FFr1.28bn (Dollars 239m) in 1992 from FFr1.64bn the previous year.

The decline at Banques Populaires is the latest in a stream of bad news to have come from French banks. They have been hit by a downturn in demand for credit and by the need to make steep provisions on their property portfolios and industrial investments.

Societe Generale, one of the largest private-sector banks, last week announced static net profits of FFr3.3bn for 1992. This followed a 26 per cent decline in net profits for Banque Nationale de Paris, the state-controlled bank which is a prime candidate for privatisation, to FFr2.2bn and of a FFr1.85bn loss for Credit Lyonnais, also scheduled for sale.

Banques Populaires, which operates a number of regional commercial banking networks across France, has been affected by the impact of the economic slowdown on the industry.

Despite the competitive credit market, the bank managed to raise net banking income by 8 per cent to FFr17.7bn in 1992 from FFr16.5bn in 1991. It also increased operating profits by 26 per cent to FFr4.6bn from FFr3.6bn over the same period.

However, the group was forced to make a steep increase in provisions on sour loans and dubious investments.

Banques Populaires FR France, EC P6081 Foreign Banking and Branches and Agencies FIN Annual report P6081 The Financial Times London Page 28 264
International Company News: Ahold fixes price for rights issue Publication 930415FT Processed by FT 930415 By RONALD VAN DE KROL

AHOLD, the Dutch-based food retailer, has fixed the issue price of its previously-announced one-for-10 rights issue at Fl 89 per share. The proceeds of slightly more than Fl 450m (Dollars 253.6m) will be used to strengthen shareholders' equity after a string of acquisitions in 1991 and 1992.

The rights issue, announced last month when the company unveiled its 1992 results, had come as a surprise because Ahold had not been expected to issue new shares until it made its next big acquisition.

Ahold's shares closed down Fl 0.80 at Fl 96 in Amsterdam yesterday.

Trading in the rights to the 5.1m new common shares is due to start on April 19 and end on April 29, with payment on May 13. The rights issue has been underwritten by a banking syndicate led by ABN Amro of the Netherlands.

Ahold NL Netherlands, EC P5411 Grocery Stores FIN Share issues P5411 The Financial Times London Page 28 175
International Company News: Outokumpu to raise FM500m Publication 930415FT Processed by FT 930415 By CHRISTOPHER BROWN-HUMES STOCKHOLM

OUTOKUMPU, the Finnish mining and metals group, is planning a FM500m (Dollars 88.69m) rights issue this year to strengthen its balance sheet and help finance its investment programme.

The Finnish state has already indicated that it would support the issue in line with its 57.5 per cent direct stake in the company.

The timing of the move has yet to be decided, but could come as early as the late spring to exploit improved stock market conditions in Finland following the sharp depreciation of the markka and the fall in domestic interest rates. The issue will carry preferential subscription rights for current shareholders.

Mr Pentti Hakkarainen, a vice-president, said proceeds from the issue would help the group move closer to its target of a 30 per cent equity/total asset ratio from its current level of around 17 per cent.

It would also enable the company to maintain its annual capital expenditure at the FM1.3bn to FM1.5bn level, he stated.

Outokumpu has been encouraged to proceed with the plan by its own improving financial performance, with losses before extraordinary items narrowing last year to FM360m from FM768m in 1991. A further improvement in its result is expected this year.

Outokumpu was one of five Finnish state-owned groups earmarked for possible privatisation last November. The government said it was looking to expand the ownership base of the companies and to ensure they had adequate financial resources for their development.

Outokumpu FI Finland, West Europe P1021 Copper Ores P1061 Ferroalloy Ores, Ex Vanadium FIN Share issues P1021 P1061 The Financial Times London Page 28 278
International Company News: Holders of Daf bonds plan lawsuit Publication 930415FT Processed by FT 930415 By RONALD VAN DE KROL AMSTERDAM

A GROUP of investors who hold bonds issued in 1988 by Daf, the liquidated Dutch truckmaker that has recently been re-established as Daf Trucks, said yesterday they plan to sue the issue's lead-manager, ABN Amro Bank, as well as its trustee, Nederlandsche Trust Maatschappij.

Mr Gary Klesch, chairman of London-based Klesch & Co, said that ABN Amro's 1988 prospectus had been 'misleading,' while the trustee company had neglected to protect bondholders' rights when Daf was restructured in 1992.

A spokesman for ABN Amro said the bank was aware of Mr Klesch's charges but rejected them.

The investors, who belong to the newly-formed Association for the Promotion of the Interests of Daf NV Bondholders, will be seeking damages of Fl 150m (Dollars 83m), which is equivalent to the total value of the 1988 issue of 6 3/4 per cent bonds.

The bonds have a nominal value of Fl 1,000 but are trading at just Fl 7 following the collapse of the original Daf company and the formation of its successor. Mr Klesch said that, so far, the association represented investors holding Daf bonds worth Fl 30m and that discussions were taking place with other bondholders.

At issue is the prospectus's wording on the subject of equal treatment of current and future creditors. Mr Klesch said holders of the bond issued by Daf NV, a holding company, were given to understand that they would be accorded equal treatment if the company provided security to any future lenders. In the 1992 restructuring, security was furnished to Daf's bankers by the company's operating subsidiaries, not the holding company itself, he said.

DAF Trucks ABN Amro Bank Nederlandsche Trust Maatschappij DAF NV NL Netherlands, EC P3713 Truck and Bus Bodies P6211 Security Brokers and Dealers P6081 Foreign Banking and Branches and Agencies COMP Company News P3713 P6211 P6081 The Financial Times London Page 28 330
International Company News: Dasa hit by cuts in military spending Publication 930415FT Processed by FT 930415 By CHRISTOPHER PARKES FRANKFURT

X:DEUTSCHE Aerospace, the aircraft and space technology division of Daimler-Benz, suffered a 17 per cent drop in new orders last year as civil and military spending cuts took effect.

The company, which lost a net DM341m (Dollars 216m) on sales of DM17.3bn in 1992, was still on course to return to profit by 1995, Mr Jurgen Schrempp, chairman, said yesterday.

However, planning would be eased and potential capacity problems could be avoided if the Bonn government made clear decisions now on its future strategy. Further cancellations of public contracts threatened the whole defence industry, he warned.

Total new orders fell to DM12.5bn last year from DM15bn. Defence contracts fell more than expected to DM2.4bn from DM2.7bn.

The company, which made a net profit of DM50m in 1991, would have been in the black last year had it not been obliged to take extraordinary charges for personnel and strategic measures, the company said.

Only two of its six divisions - space systems and aircraft, which includes Deutsche Airbus - made an operating profit last year. Defence and civil systems alone lost DM264m.

Dasa, a core business within Daimler-Benz, which recently forecast a further fall in group earnings of up to 30 per cent this year, expects sales for the year to be little changed from last year's DM17.3bn.

It has been hard hit by the combination of recession and the slump in defence markets since the ending of the cold war, and first warned several months ago that it faced the most difficult two years in its history.

Meanwhile, the management has pressed ahead with plans to develop its interests in civil aircraft.

Deutsche Aerospace DE Germany, EC P3721 Aircraft COMP Company News FIN Annual report P3721 The Financial Times London Page 28 312
International Company News: Woolworths plans ADollars 2bn flotation Publication 930415FT Processed by FT 930415 By KEVIN BROWN SYDNEY

INDUSTRIAL Equity, formerly part of Mr John Spalvins failed Adelaide Steamship group, yesterday announced a second attempt to float its Woolworths supermarket chain on the Australian stock exchange.

Woolworths is expected to raise up to ADollars 2bn (USDollars 1.43m) if the offer goes ahead, which would make it Australia's biggest flotation.

IEL abandoned its first attempt in the face of market jitters last year.

IEL said the flotation would proceed unless there was 'a serious deterioration in the market which significantly reduces the price obtainable for Woolworths relative to its earnings and value'.

The Australian market has rallied since the last attempted flotation was abandoned in September. The ASX All Ordinaries index closed at a three-year high of 1704.4 after the announcement.

IEL said the prospectus would be ready by June, but the exact timing would depend on market conditions.

It said the offer would be made via a book building process under which institutional investors would be invited to apply for shares within a nominated price range. The offer will not be underwritten.

Woolworths, which made an operating profit of ADollars 247m last year, is the biggest asset remaining in the Adsteam group, which has been controlled by its bankers since Mr Spalvins was fired by the board two years ago.

IEL is jointly owned by Adelaide Steamship, David Jones and Tooth, the group's three main companies. IEL has already spun off its National Foods subsidiary as part of the financial restructuring of Adsteam, which has debts of about ADollars 6bn.

IEL reported an improvement in net profit to ADollars 79m last year from ADollars 27m in the previous year, compared with substantial losses incurred by its parent companies. It said the improvement would have been larger but for the ADollars 19m cost of deferring the flotation of Woolworths.

The Woolworths flotation is expected to be followed over the next 12 months by the privatisation of the government's remaining 75 per cent stake in Qantas, the sale of a further 19 per cent of the government-controlled Commonwealth Bank, and the flotation of the Channel Seven television network.

Industrial Equity Woolworths AU Australia P5411 Grocery Stores FIN Share issues COMP Company News P5411 The Financial Times London Page 28 387
International Company News: Lyonnaise annual profits tumble 67.5% to FFr379m Publication 930415FT Processed by FT 930415 By ALICE RAWSTHORN PARIS

LYONNAISE des Eaux-Dumez, one of France's largest industrial groups, yesterday announced a sharp fall in net profits of 67.5 per cent to just FFr379m (Dollars 71m) last year from FFr1.17bn in 1991. The company also said it was considering the flotation of Dumez, its troubled construction subsidiary.

Mr Jerome Monod, chairman, described 1992 as an 'unfavourable' year for the group's public sector building interests, 'dreadful' for property, and 'good' for its service sector activities, which include water and energy.

'We will do everything we can to ensure that 1993 will be better than 1992,' he said, 'but the economic environment is so uncertain that no company chairman can be very accurate in their forecasts.'

Mr Monod announced the appointment of Mr Guy de Panafieu as deputy chairman and head of its construction and property interests, leaving him well-placed to take over as chairman. Mr de Panafieu, 50, succeeds Mr Jean-Paul Payrare, former head of Dumez, who left last summer, apparently after a row with Mr Monod.

Dumez was one of Lyonnaise's main problems last year. The company has been badly affected by the downturn in the European construction sector. Mr Monod said he hoped to recapitalise Dumez before the end of this year and may eventually float it on the stock market.

Lyonnaise is also considering plans to float M6, its television station. In the meantime, it intends to raise around FFr2bn in cash this year by selling peripheral interests, including its minority stake in Havas, the French media group, and its German radio interests.

The group managed to increase overall sales to FFr90.4bn in 1992 from FFr87.5bn in 1991. It also mustered a slight increase in operating profits to FFr2.69bn from FFr2.59bn. However, it was hit by an exceptional loss of FFr198m, against a FFr428m credit. It was also forced to raise provisions to FFr13bn from FFr10.5bn.

Lyonnaise, which has held its 1992 dividend at FFr10, saw sales increase in its service interests to FFr32.9bn in 1992 from FFr28.9bn in 1991, although profits slipped to FFr1.65bn from FFr1.78bn.

By contrast, the construction division posted static sales of FFr45.9bn and made a loss of FFr461m. The worst area was property, where sales fell to FFr11.6bn from FFr13.5bn.

Lyonnaise des Eaux Dumez FR France, EC P4941 Water Supply FIN Annual report P4941 The Financial Times London Page 28 407
International Company News: Ciba sales slide 4% to SFr5.69bn Publication 930415FT Processed by FT 930415 By IAN RODGER ZURICH

CIBA, the Swiss pharma-ceuticals and chemicals group, has reported a 4 per cent slide in consolidated sales in the first quarter to SFr5.69bn (Dollars 3.93bn).

Sales in the healthcare sector grew 5 per cent to SFr2.07bn, but this was not enough to offset continuing weakness in the agricultural and industrial chemical sectors.

Sales of plant protection products, for example, were down 15 per cent to SFr1.2bn and sales of textile dyes dropped 6 per cent to SFr359m.

Sales in the agricultural sector as a whole were down 13 per cent to SFr1.4bn, partly due to seasonal factors, but Ciba said there was a perceptible rise towards the end of the quarter.

The growth of sales in the healthcare sector was substantially lower than the levels achieved a year ago. Ciba said it was not possible to repeat the extraordinarily high introductory sales of Habitrol, its nicotine patch to help people stop smoking, achieved during the first quarter of 1992.

The group said it still looked for a modest increase in sales in the year as a whole.

Ciba CH Switzerland, West Europe P2834 Pharmaceutical Preparations P2879 Agricultural Chemicals, NEC FIN Interim results P2834 P2879 The Financial Times London Page 28 219
UK Company News: Tinplate takes the pressure - An important division for British Steel Publication 930415FT Processed by FT 930415 By ANDREW BAXTER

IN THE year since Mr Don Turner switched from running British Steel's narrow strip business to become managing director of the South Wales-based tinplate division, he has been putting his new colleagues' welcoming remarks to the test.

'When I came here they said this isn't a cyclical business,' he says. If anything it was viewed as anticyclical - because people are supposed to eat more canned food in a recession.

That has not been demonstrated totally in the current recession, he says, but the cycle is much less pronounced than in the general steel industry.

'It's nothing like what you find in steel markets such as construction and automobile manufacture,' says Mr John May, marketing manager.

The relative stability of the tinplate business is important for British Steel, whose other products have taken the full blast of the downturn.

Tinplate - which is 99.75 per cent steel - accounts for about 10 per cent of the company's finished products and at about Pounds 500 a tonne generates annual revenues of some Pounds 400m.

Overall, the European can market is showing 'static to slow growth,' says Mr May - not exciting, perhaps, but a contrast to some general steel markets which are in structural decline.

In some ways, though, the tinplate business has problems similar to those of general steel. 'Prices are not what they should be, there is a continuing cost/price squeeze and there is overcapacity,' says Mr Turner.

Demand in Europe is about 3.5m tonnes, compared with capacity of between 4.5m and 5m tonnes. Consequently, profitability is hardly sparkling, but is better than average for a steel business. Actual profits are not disclosed.

And, just as in the general steel business, rationalisation within the industry has left its mark on British Steel Tinplate. A workforce of 14,000 in the early 1970s - including basic steelmaking at the old Ebbw Vale works in Gwent - fell to 5,000 three years ago.

Then, the Velindre works near Swansea was closed, and employment is now about 3,200, most of whom are at the two remaining plants, Trostrey near Llanelli and Ebbw Vale.

But there the similarity with the rest of British Steel ends. The tinplate business is really part of the packaging industry, says Mr May, and over the past decade has become much more European in outlook as the structure of its customer industries has changed.

'There has been pressure on the tinplate industry to concentrate. That has come from downstream where there has been great concentration in the packaging industry - and this has happened among the retailers too.'

So the number of can-making customers is much smaller than the huge variety of customers for general steel. Unfortunately, though, direct customers are only part of the picture.

Tinplate is also involved in a very public and occasionally acrimonious battle with the aluminium industry for the hearts and minds of the beverage industry and its customers - which ultimately means the shopper.

The claims and counterclaims about the relative environmental friendliness, recyclability, and aesthetic qualities of steel versus aluminium put the marketing of tinplate on a different plane to that of, say, steel beams for the construction industry.

The battle to persuade a brewer, for example, to switch from aluminium to steel cans could start with Mr May's marketing team convincing a London design house that the can design would work best in steel.

Over the past four years, British Steel Tinplate has spent Pounds 100m to ensure it maintains its position against its big tinplate rivals and fight the materials battle effectively. The investment culminates in July with the opening of a new tinning line at Trostrey.

The company is one of four big tinplate producers in Europe, along with Rasselstein - part of German group Thyssen - Hoogovens of the Netherlands and Sollac, part of France's Usinor Sacilor.

Each hold a strong share of their home market, but are trying to boost sales elsewhere. There are nine other producers, but these lack the full product lines of the big four.

Most of the investment at British Steel Tinplate has gone towards productivity improvements, maximising product quality and reducing cycle times in the manufacture of thousands of tinplate grades.

The biggest single investment was a Pounds 50m continuous annealing plant, commissioned in 1988. A Pounds 38m line has also been introduced, allowing the company to offer tinplate strip up to 1200mm wide, initially for the beverage industry.

Much smaller investments - although no less important in the long term - have been made in a Packaging Steels Development Centre at British Steel's main Port Talbot site.

This is the focus of efforts to capitalise on what Mr Turner sees as steel's USP (unique selling point) - its greater strength compared with aluminium, allowing the development of steel cans with ever-thinner walls.

Developments such as the Ecotop, a dual button all-steel can end now being test marketed in Europe, are particularly important in areas such as the UK beverage sector, says Mr Turner.

Overall, 12bn steel cans are used in the UK every year, but only 3bn go to beverage producers - and even those have aluminium tops.

While steel is dominant in food cans, aluminium leads the 7bn-can beverage market. 'It is important to attack that market,' says Mr May.

The most important development could come next year when British Steel unveils the all-steel Ultimate Can, made from a new steel allowing for a 30 per cent weight reduction on previous steel cans.

The can is being developed jointly by British Steel Tinplate, Hoogovens and Rasselstein - a sign that the big groups are prepared to unite against a common enemy.

British Steel British Steel Tinplate GB United Kingdom, EC P3312 Blast Furnaces and Steel Mills CMMT Comment & Analysis MKTS Production P3312 The Financial Times London Page 27 992
UK Company News: Whitecroft sells Wallcote companies Publication 930415FT Processed by FT 930415

Whitecroft, the building products, lighting and textiles company, has sold its Wallcote subsidiaries and has now largely withdrawn from home improvement activities.

Purchaser was Wallcote Group, a company set up for the purpose of the acquisition by Mr Barry Beck, managing director and one of the founders of the business.

Whitecroft Wallcote Group GB United Kingdom, EC P3299 Nonmetallic Mineral Products, NEC P2399 Fabric Textile Products, NEC P3648 Lighting Equipment, NEC COMP Disposals COMP Mergers & acquisitions P3299 P2399 P3648 The Financial Times London Page 27 99
UK Company News: Plateau Mining advises rejection Publication 930415FT Processed by FT 930415

Directors of Plateau Mining, the former natural resources company which is now a shell, consider the all-share offer worth Pounds 1.2m from Kingstream Resources of Australia to be 'without merit', and advise shareholders to ignore any documents they may receive.

They said the offer was priced at a discount to the cash resources (stated to be more than Pounds 1m) of the company and was denominated in Australian shares.

Plateau Mining Kingstream Resources GB United Kingdom, EC AU Australia P1099 Metal Ores, NEC COMP Mergers & acquisitions P1099 The Financial Times London Page 27 107
UK Company News: Australian sale by Smith & Nephew Publication 930415FT Processed by FT 930415

Smith & Nephew has completed the sale of its interest in Smith & Nephew Plastics Pty for ADollars 37.5m (Pounds 17.4m) cash. This accords with its strategy of concentrating on the core worldwide healthcare businesses.

The purchaser is a subsidiary of Pacific Cup (Hong Kong), which makes disposable food containers.

Sales and operating profit of Smith & Nephew Plastics in 1992 were ADollars 40m and ADollars 5.6m respectively. Net assets at end-1992 came to ADollars 17m.

Smith and Nephew Smith and Nephew Plastics Pacific Cup (Hong Kong) GB United Kingdom, EC HK Hong Kong, Asia AU Australia P3089 Plastics Products, NEC COMP Disposals COMP Mergers & acquisitions P3089 The Financial Times London Page 27 129
UK Company News: Friendly Hotels falls 35% Publication 930415FT Processed by FT 930415

INCREASED administrative costs and interest charges resulted in a 35 per cent downturn in annual profits at Friendly Hotels.

On turnover of Pounds 29.6m (Pounds 28.7m), the pre-tax line for the 12 months to December 27 amounted to Pounds 2.54m (Pounds 3.89m), struck after administrative costs of Pounds 14.5m (Pounds 12.7m) and interest payable of Pounds 1.55m (Pounds 1.19m).

Nevertheless, Mr Henry Edwards, chairman of the hotel, catering and serviced offices group, said the outcome was a 'creditable performance' given the difficult trading conditions during the year.

He said, however, that trading had improved in the early part of the current year. The level of advance bookings had shown an 'encouraging' increase recently. The 17 serviced office complexes achieved 'satisfactory' profits but margins remained under pressure.

A provision of Pounds 2.16m (Pounds 2.44m) was taken below the line in respect of further disposals of quick service restaurants and Care Homes; one of each remain to be sold and no further provisions are anticipated.

The recommended final dividend is raised to 3.5p bringing the total for the year to 5.7p (5.5p), covered twice by fully diluted earnings of 11.4p (15.5p) per share.

Friendly Hotels GB United Kingdom, EC P7011 Hotels and Motels FIN Annual report P7011 The Financial Times London Page 27 224
UK Company News: Enlarged Yule Catto edges ahead to Pounds 22m Publication 930415FT Processed by FT 930415 By RICHARD GOURLAY

YULE CATTO, the industrial chemicals and building products group, yesterday reported a slight rise in 1992 profits and an improvement in earnings for the 12th successive year.

The earnings record sets Yule Catto apart from most other chemical companies which have not sufficiently controlled costs during the recession.

Pre-tax profits rose from Pounds 21.8m to Pounds 22.2m on sales up 1 per cent at Pounds 267.4m. Earnings per share rose from 16.1p to 16.4p and the company is proposing a final dividend of 3.4p, giving a total of 5.9p - up 9.3 per cent.

Profits in the speciality chemicals division rose 5.6 per cent to Pounds 18.8m and were poised to benefit any cyclical upturn that emerges, according to Mr Allister McLeish, finance director.

The company is likely to benefit from the decline of sterling and from a strong position in Malaysia, further strengthened by two acquisitions.

Profits in the building materials side, however, fell 11.8 per cent to Pounds 7.5m. Improvements in the UK companies were offset by weakness in the Netherlands and France. Half of the divisions's sales are in the UK and half in continental Europe. The company sells products specified by architects, like office space glazing and roof lighting, and is not exposed to the domestic house building market.

In spite of the weakening German market, Yule Catto's companies were doing reasonably well and would continue to benefit from exposure in the eastern part of the country.

Mr McLeish said the company would obviously benefit from any increase in sales that might emerge from the improved sentiment. But it had succeeded in maintaining earnings growth through the introduction of new products which enjoyed higher margins.

Net debt over the year fell from Pounds 11.5m to Pounds 10m, bringing gearing down to 20 per cent and leaving interest more than 11 times covered.

Yule Catto GB United Kingdom, EC P2869 Industrial Organic Chemicals, NEC P3299 Nonmetallic Mineral Products, NEC FIN Annual report P2869 P3299 The Financial Times London Page 27 353
UK Company News: Alexandra in the black with Pounds 1.7m Publication 930415FT Processed by FT 930415 By CATHERINE MILTON

ALEXANDRA Workwear, a manufacturer and distributor of work clothes, yesterday announced a return to profits for the year to January 30 1993, reporting Pounds 1.7m before tax against losses of Pounds 500,000 previously.

The comparison is, however, distorted by a Pounds 1.5m exceptional provision last time resulting from the closure of a factory in Scotland and associated redundancies.

Mr Gerald Dennis, chairman, said: 'The group's strategy for the year was to significantly improve its balance sheet and restore profitability. We were successful in both in the past year.'

Borrowings were reduced to Pounds 10.1m (Pounds 16m) cutting gearing from 73 to 46 per cent, and the company believes its debt will be halved by the next year end. Interest charges fell from Pounds 2.6m to Pounds 1.7m.

The high level of stock was reduced to Pounds 12.9m (Pounds 16.6m), with a further Pounds 2m of cuts planned for the current year. Stock turnover was about four months.

Mr Dennis said past investment in a computer meant the company would meet customers orders should demand pick up suddenly.

One analyst said that 'the company outperformed during the 1980s but when demand fell it didn't take control of its stock levels. This is evidence that it is repairing that damage and that they are back on track.'

Turnover was virtually flat at Pounds 57m (Pounds 57.2m).

Mr Dennis said that during the first half it had sold 'selected' goods at less-than-profitable prices to keep its factories occupied and prevent redundancies.

This had reduced operating profits by about Pounds 900,000 and affected gross margins, which fell to 42.4 per cent (43.9 per cent).

New 'stylishly personalised' merchandise had given the retail operations a fillip.

Sales in France advanced 12 per cent and overseas sales were up 3.8 per cent at Pounds 5.5m (Pounds 5.3m) in total.

A recommended final dividend of 2p gives a total for the year of 3.8p (3.6p), payable from earnings per share of 3.5p against losses of 0.8p.

Alexandra Workwear GB United Kingdom, EC P2326 Men's and Boys' Work Clothing P5136 Men's and Boys' Clothing FIN Annual report CMMT Comment & Analysis P2326 P5136 The Financial Times London Page 27 380
UK Company News: Hongkong Land has 25.1% of Trafalgar Publication 930415FT Processed by FT 930415 By ROLAND RUDD

HONGKONG LAND, the Jard-ine Matheson-controlled property company, has tightened its grip over Trafalgar House by taking its stake in the UK-based company above 25 per cent.

It negotiated the early exercise by the Swiss Bank Corporation of its put option which may have required Hongkong Land taking its stake in Trafalgar above 27 per cent.

Mr Rodney Leach, a director of Hongkong Land, said it had decided to 'end the uncertainty in the market' by winding up the option rather than waiting until it expired on May 3.

'We have now got to a level that we are happy with,' he added.

It is to acquire 23.5m ordinary and 28.74m A shares, bringing its total to 25.1 per cent of Trafalgar's capital.

Trafalgar's ordinary shares rose by 1/2 p to 79 1/2 p while the A shares gained 2p to 79p.

Hongkong Land is expected to drift up, over several years, towards acquiring its stated intention of 29.9 per cent by taking scrip dividends.

It is expected to press Trafalgar's board, when it meets on April 28, to appoint its chairman, Mr Simon Keswick, as head of the UK construction, engineering and property group.

Mr Alan Clements, Trafalgar's non-executive chairman, took over the position last year as a temporary measure.

Mr Allan Gormly, Trafalgar's chief executive, said: 'Hongkong Land's decision to negotiate an early end to the exercise creates useful headroom towards reaching its medium term objective by taking scrip dividends instead of cash.'

This is expected to help Trafalgar's cash flow and its utilisation of excess advance corporation tax.

Hongkong Land has undertaken not to lift its stake above 29.9 per cent or make a full bid until April 1 1994, unless a third party offer or tender is made or a third party acquires 15 per cent.

Hongkong Land Holdings Trafalgar House GB United Kingdom, EC HK Hong Kong, Asia P6552 Subdividers and Developers, Ex Cemeteries COMP Shareholding P6552 The Financial Times London Page 26 345
UK Company News: Standard Chartered chairman's pay rises 29% Publication 930415FT Processed by FT 930415 By ROBERT PESTON, Banking Editor

MR RODNEY Galpin, chairman of Standard Chartered, the international bank, received a 29 per cent pay increase to Pounds 393,000 last year even though the bank's pre-tax profits fell slightly.

Standard said the rise was justifiable because 'underlying' profits had risen sharply - profits before bad debts rose 25 per cent to Pounds 436.5m.

However, the financial performance was hurt by a Pounds 366m charge for bad and doubtful debts, including a Pounds 272m provision to cover possible losses from Standard's involvement in an Indian stock market scandal.

Pre-tax profits fell from Pounds 205.3m to Pounds 202m.

In its annual report Standard also disclosed that it had set up Standard Chartered Holdings (International), a Dutch holding company that would hold the majority of the group's overseas subsidiaries and associate undertakings.

The bulk of Standard's operations are in the Far East and Africa.

The bank said the new corporate structure was intended to be more tax efficient than existing arrangements, but did not disclose further details.

Mr Galpin is retiring at the annual meeting in May, to be replaced by Mr Patrick Gillam, deputy chairman.

Standard Chartered GB United Kingdom, EC P6021 National Commercial Banks FIN Annual report MGMT Management & Marketing P6021 The Financial Times London Page 26 228
UK Company News: Walker Greenbank acquisition Publication 930415FT Processed by FT 930415 By PAUL TAYLOR

WALKER GREENBANK, the restructured wallcoverings group, yesterday reported higher full-year profits and bolstered its office seating and screening fabrics business through the Pounds 1.6m acquisition of John Hartley (Cowling).

The Hartley purchase, which included the assumption of Pounds 700,000 in debt, was financed through a placing yesterday of 4.32m new shares at 70p a share. The surplus Pounds 2.17m proceeds will be used to develop the Hartley business and pay down the assumed debt. The shares closed unchanged at 75p yesterday.

Greenbank, which has undergone a substantial reorganisation over the last couple of years under a new management led by Mr Charles Wightman, chief executive, yesterday reported a 4.1 per cent increase in pre-tax profits from Pounds 5.43m to Pounds 5.65m in the year to January 31.

The pre-tax growth was held back by higher interest charges of Pounds 520,000 (Pounds 236,000). Earnings per share increased by 3.6 per cent to 4.29p (4.14p) and the final dividend is unchanged at 1.9p for a maintained total of 3.1p.

Turnover declined marginally to Pounds 56.2m (Pounds 56.8m) reflecting the sale of businesses, including loss-making Bloom Signs. Turnover from ongoing businesses rose to Pounds 51.9m (Pounds 47.9m) including a significant increase in overseas sales to Pounds 12m (Pounds 8.5m).

Operating profits increased 6 per cent to Pounds 6.23m (Pounds 5.88m) before exceptional charges of Pounds 60,000 (Pounds 212,000) including reorganisation and closure costs of Pounds 156,000 (Pounds 1.43m) and a Pounds 489,000 property write-down offset by a Pounds 585,000 (Pounds 1.16m) profit on the disposal of two properties. The property write-down followed a January revaluation which also led to a Pounds 2.2m write-off against revaluation reserves.

The results also included an extraordinary gain of Pounds 1.47m comprising the Pounds 3.56m in net proceeds from out-of-court settlement of its dispute arising from the 1987 acquisition of Alkar, partly offset by a Pounds 2.1m loss on the disposal of businesses.

Group borrowings at the end of the year were marginally higher at Pounds 1.6m representing gearing of 6 per cent but have since been reduced to 'negligible levels.'

COMMENT

Greenbank's management team must hope that with the favourable settlement of their Alkar litigation, the worst is behind them. The group is now focused on its core commercial and consumer wallcoverings businesses, the balance sheet is solid and acquisitions like Hartley look sensible. Raw material costs are rising and will probably trim gross margins this year by about 1 per cent but this should be offset by growing exports, particularly to continental Europe. Pre-tax profits should reach about Pounds 7m this year producing earnings of some 5p and a prospective p/e of 15. The shares have risen sharply since September, but could still go higher.

Walker Greenbank GB United Kingdom, EC P2679 Converted Paper Products, NEC FIN Annual report CMMT Comment & Analysis P2679 The Financial Times London Page 26 489
UK Company News: Thos Cook ends up with 21% of Owners - Tender offer ties up loose ends in Pounds 285m travel industry bid battle Publication 930415FT Processed by FT 930415 By RICHARD GOURLAY

THOMAS COOK, the travel agency and financial services company, has ended up with a 21 per cent stake in Owners Abroad, the holiday group it helped defend against a hostile bid from rival Airtours.

Owners' shareholders rushed to offer stock to satisfy the 150p a share tender offer made by Thomas Cook at a crucial stage in the Pounds 285m Airtours' bid.

When the offer closed on Tuesday, Thomas Cook had received tenders from shareholders representing 76 per cent of Owners' shares.

In line with the terms, which limited Thomas Cook's offer to 12.5 per cent of the equity, Owners shareholders have been scaled down to about 16 per cent of what they tendered.

Thomas Cook and its sister company, LTU, the German tour company, will now forge closer ties with Owners Abroad and will be anxious to see the savings its new partner promised during the bid.

Owners Abroad's share price closed 4p lower yesterday at 110p, down 37p from its highest level during the bid.

Owners Abroad's current share price would tend to underline the wisdom of Airtours' decision to sell in the market the 7 per cent stake it acquired during the bid.

Airtours is understood to have received about 118p a share, when Owners' share price was 123p, generating at least 10p a share above the average price it might have received had it tendered to Thomas Cook and then sold the balance in the market.

Airtours' share price has also fallen sharply since its 339p high during the bid. Yesterday it closed up 10 1/2 p at 289 1/2 p.

Only part of this fall reflects the Pounds 9.5m cost of the bid, including the loss on sale of its stake in Owners.

Thomas Cook's tender ties up the loose ends of the bid which gripped the travel industry for the first quarter of the year.

Investors and competitors will now be watching with interest to see what Owners can do with its independence and what Airtours does now that it has failed to leap into a position to challenge Thomson, the market leader.

The company has already indicated it will spend some of its Pounds 180m war chest - part of which was raised during the bid through an issue of convertible preference shares - to increase the size of its retail chain.

Its purchase last October of Pickfords was its first step in this vertical integration.

While Airtours believes it can continue to grow organically, it also accepts it cannot continue to grow at the breakneck speed of recent years and is considering the acquisition of brands.

See Lex

Thomas Cook and Sons Owners Abroad Group GB United Kingdom, EC P4725 Tour Operators COMP Shareholding P4725 The Financial Times London Page 26 493
UK Company News: AT&T buys wireless phone group Publication 930415FT Processed by FT 930415 By ALAN CANE

SHAYE Communications, a small, privately-held UK company which is a world leader in wireless telephone technology, has been bought by AT&T, the US telecommunications group.

The consideration was disclosed, but is thought to be some tens of millions of pounds. Mr Bill Jeffrey, the founder, will remain chief executive.

Shaye will remain in Winchester and no change of employment is envisaged for its 60 staff, most of whom are involved in research and development,

The purchase fills a gap in the US company's international portfolio of wireless telephone products.

Shaye specialises in a form of wireless telephony - CT2 - which has been unsuccessful in the UK, but looks like being a sizeable success abroad.

Known as Telepoint in Britain, the technology depends on a network of base stations, or transceivers, in public places which transmit calls from portable telephones.

Shaye Communications American Telephone and Telegraph GB United Kingdom, EC US United States of America P3661 Telephone and Telegraph Apparatus COMP Mergers & acquisitions P3661 The Financial Times London Page 26 188
UK Company News: Irish Life lower but free of exposure to GPA Publication 930415FT Processed by FT 930415 By TIM COONE DUBLIN

IRISH LIFE, Ireland's largest fund manager in the life and pensions market, reported an 8 per cent drop in embedded value for 1992, from IPounds 540m to IPounds 494m.

That was better than market expectations which anticipated a fall to IPounds 475m. Funds under management at the year-end amounted to IPounds 4.81bn (IPounds 5bn).

Principal causes of the fall were adverse tax changes, and losses on investments of IPounds 40m, of which IPounds 24m was accounted for by the write-down of the interest in GPA, the aircraft leasing group.

Policyholder funds suffered an additional write-down of IPounds 46m attributable to the group's shareholding in GPA, but as a result 'neither our policyholder nor our shareholder funds carry any remaining material exposure to GPA'.

Overall premium income in the core Irish market fell 8 per cent to IPounds 412m. Individual single premium business, plunged 45 per cent to IPounds 55.7m.

The associated business, Irish Life Finance Group, saw a 29 per cent rise in its home loans portfolio to Pounds 276m and a 53 per cent increase in its finance loan portfolio to IPounds 61m.

Premium income in the UK improved 6 per cent in sterling terms, but turned into an 8 per cent drop on conversion into punts. A drop in dollar premium income translated into an almost unchanged IPounds 77.7m.

Net profit was IPounds 31.7m (IPounds 30.7m) and earnings 10.54p (10.23p). The final dividend is 5.44p for a total of 8.44p; last year's payment of 5.44p was the first since privatisation.

Irish Life IE Ireland, EC P6726 Investment Offices, NEC FIN Annual report P6726 The Financial Times London Page 26 293
UK Company News: Prior placing for Pounds 2.37m Publication 930415FT Processed by FT 930415

PRIOR, the property trading and investment group, is proposing to raise about Pounds 2.37m through an issue of new shares at 2 1/2 p each. The shares are being conditionally placed by Paribas, but there is an open offer to shareholders on a 7-for-2 basis at 2 1/2 p.

In addition, it is proposed that the balance of a loan of Pounds 300,000 made to the company by Ardenbell, controlled by the family trust of Mr James Prior, chairman, be converted into 12m new shares at the placing price. As Mr Prior and a company associated with him will not be taking up their full entitlement under the offer, their holding will fall from 61 to 34.74 per cent of the capital.

It is also proposed to convert each 10p share into one ordinary 1p share and one 9p deferred share, which will be cancelled.

Agreements have been reached with the group's banks to restructure its Pounds 4.93m debt. Syndicate banks have agreed to release Prior from its guarantee of a Pounds 12m loan to a former subsidiary, for Pounds 100,000.

Prior GB United Kingdom, EC P6512 Nonresidential Buildings Operators P6513 Apartment Building Operators FIN Share issues P6512 P6513 The Financial Times London Page 26 219
UK Company News: Gowrings gets lift from its leisure division Publication 930415FT Processed by FT 930415

Gowrings, which operates motor dealerships, food services and residential parks, recorded profit of Pounds 100,000 pre-tax for 1992 after taking in exceptional credits of Pounds 75,000.

Mr John Fowles, chairman, said there was continued improvement from the two Ford dealerships and a significant recovery from losses of Pounds 236,000 to trading profits of Pounds 318,000 for the leisure division - Burger King restaurants and Rocco's, and Park Homes. Group turnover rose to Pounds 51.9m (Pounds 48m) and trading profit surged to Pounds 743,000 (Pounds 78,000).

In the previous year there was a loss of Pounds 953,000 after exceptional charges of Pounds 342,000. The dividend is held at 2p with a final of 1p. Earnings were 0.61p (losses 10.6p).

Gowrings GB United Kingdom, EC P5511 New and Used Car Dealers P5812 Eating Places P7999 Amusement and Recreation, NEC FIN Annual report P5511 P5812 P7999 The Financial Times London Page 26 165
UK Company News: Improved margins help Golden Vale rise 13.5% Publication 930415FT Processed by FT 930415 By TIM COONE

GOLDEN VALE, the Irish dairy group, yesterday reported a 13.5 per cent increase to IPounds 16.7m in 1992 pre-tax profits on turnover marginally ahead at IPounds 298m, writes Tim Coone.

The company said the increase was due to increases in volume and margins in the consumer products and food ingredients markets and reduced volume in the lower-margin primary dairy products markets.

Strong cash flow and working capital management reduced net borrowings to IPounds 7.5m (IPounds 20.6m), leaving gearing at 8.8 per cent (27.9 per cent). Mr Liam Irvine, finance director, said that allowed the company to spend 'another IPounds 30-40m on acquisitions without having to go to the market'.

The Cork-based company is the largest milk processor in Ireland, processing 700m litres annually - or 11 per cent of the national quota.

Furthermore, through its 74.9 per cent stake in DPP in Northern Ireland, it is also the fourth largest processed cheese producer in the EC. It intends to exercise an option to acquire the outstanding stake in 1993. Last month it made a recommended Pounds 21.7m bid for Leckpatrick, a dairy processor.

Mr Jim O'Mahony, chief executive, anticipated significant growth in 1993 'based on achieving further development of new products in the consumer products and food ingredients markets and the expansion of operations in the UK and Europe'.

A final dividend of 1.13p makes a 1.63p (1.36p) total.

Golden Vale IE Ireland, EC P2026 Fluid Milk FIN Annual report P2026 The Financial Times London Page 26 266
UK Company News: Zeneca boosts its Quorn production Publication 930415FT Processed by FT 930415 By PAUL ABRAHAMS

ZENECA, the bioscience wing of Imperial Chemical Industries, is beefing up production of Quorn, its vegetarian low-fat protein food.

Marlow Foods, Zeneca's wholly owned subsidiary, yesterday announced it is to invest Pounds 26.5m in new production facilities for its fake flesh food. The mycoprotein biotechnologically manufacturered product is based on the micro-fungus fusarium graminearum, a distant relation of mushrooms and truffles.

The High-Wycombe-based company intends to build two plants, a fermenter at Belasis, Cleveland, and a processing facility at nearby Stokesley which should be fully running by 1995. ICI's UK capital expenditure last year was Pounds 328m.

The plants will increase Marlow's Quorn capacity to 14,000 tonnes a year. Production is presently less than 7,000 tonnes a year, as a Pounds 37m plant at Stokesley announced in November 1991 is yet to come fully on stream.

The group refused to give sales figures for Quorn. Two years ago, it claimed UK sales had increased fivefold from Pounds 3m to Pounds 15m over the previous five years. Mr David Barnes, Zeneca's chief executive, believes the product is a wild card in the company's hand, capable of eventually generating annual sales of anything between Pounds 200m and Pounds 2bn.

Marlow is part of Zeneca's speciality division, which BZW, one of ICI's brokers, predicts will increase operating profits from Pounds 26m last year to Pounds 65m next year on sales up 9.9 per cent. BZW forecasts the division's profits at Pounds 136m by 1996.

Quorn is commercially available in the UK, Ireland and Belgium. Zeneca said demand is outstripping supply, and advertising in the UK is being limited to the London area.

The company aims to capture part of the growing vegetarian food market. Meat eating is declining in all UK social groups, according to the Vegetarian Society. More than 5.6m Britons, equivalent to about 10 per cent of the population, have eliminated red meat from their diets in recent years.

Zeneca said market research suggested 19 per cent of UK households were willing to try Quorn, and 55 per cent of those were likely to repurchase.

Most of the new capacity will be sold in the Netherlands and Germany and it will also be marketed in France and Italy. Pilot trials in Amsterdam and Munich suggests significant potential markets in those countries.

Quorn is available as a fresh ingredient either minced or in chunks and escalopes. It is also supplied as ready-made casseroles and curries.

Zeneca Marlow Foods GB United Kingdom, EC P2099 Food Preparations, NEC RES Capital expenditures RES Facilities MKTS Production P2099 The Financial Times London Page 26 445
Digital losses fail to deter as income and costs improve Publication 930415FT Processed by FT 930415 By LOUISE KEHOE SAN FRANCISCO

DIGITAL Equipment reported larger than expected losses for its third fiscal quarter, but revenues increased and costs fell, suggesting that the second largest US computer company is on the way to recovery.

Net losses for the quarter were Dollars 30.1m (Pounds 19.9m), or 23 cents per share, compared with a net loss of Dollars 311.3m, or Dollars 2.50 per share, in the same quarter last year. Revenues rose 6 per cent to Dollars 3.5bn from Dollars 3.3bn, boosted by favourable foreign exchange trends.

Wall Street had been expecting losses of around 16 cents per share, but reacted favourably to Digital's financial report. Digital's stock gained Dollars 1 7/8 at Dollars 41 3/4 yesterday.

'We are meeting the goals we have set for ourselves in returning Digital to profitability and growth,' said Mr Robert Palmer, president and chief executive. 'For the first time in six quarters, we generated positive cashflow from operations and investments, even with restructuring activities and the loss.'

Mr William Steul, chief financial officer said: 'Our personal computer business doubled year over year, and service revenues grew 12 per cent.' He noted however, that without the favourable impact of foreign exchange rates, revenue would have been flat in the third quarter.

Digital said it shed 4,000 jobs during the quarter, bringing total job losses to almost 16,000 since the beginning of the fiscal year.

For the nine-month period, revenues were Dollars 10.5bn, up 4 per cent. Net loss for the nine months was Dollars 364.5m (Dollars 940.4m).

Digital Equipment Corp US United States of America P3571 Electronic Computers FIN Interim results P3571 The Financial Times London Page 25 291
Tie Rack increases fivefold to Pounds 5.1m Publication 930415FT Processed by FT 930415 By MAGGIE URRY

TIE RACK, the retailer whose neckwear designs range from discreet paisley patterns to Mickey Mouse, recorded a fivefold increase in profits in the financial year to January 31.

Pre-tax profits were Pounds 5.1m, up from Pounds 1m in the previous year when there was an exceptional charge of Pounds 504,000, and the group doubled its dividend to 1p. Earnings per share rose from 1.99p to 6.1p.

The record results marked Tie Rack's recovery from its dark days in 1989 and 1990 when some commentators predicted it would share the fate of many 'niche retailers' who failed as the 1980s consumer boom fizzled out.

Tie Rack had come to the stock market in 1987 at a price of 145p. The shares hit a low of 15p in November 1990, and closed yesterday at 126p, up 10p.

Mr Roy Bishko, chairman, said the group had learnt from mistakes, such as the uncontrolled expansion into the US, and predicted a year of 'solid progress'. Mr Nigel McGinley, chief executive, said 'it's a marathon, not a sprint'.

He said the profit rise reflected tighter cost control, a rise in sales volumes, and closing unprofitable shops and opening new ones. Group sales rose 23 per cent to Pounds 67m, and operating profits by 155 per cent to Pounds 4.5m.

Mr Bishko said the group's policy was to run shops itself, rather than to franchise them, except in particular circumstances. Less than 20 per cent of the 272 shops are now franchised compared with more than 50 per cent three years ago.

UK profits were Pounds 4.2m, up 46.4 per cent, and continental Europe and the Irish Republic made Pounds 1.5m, up 43.3 per cent. Losses in the US fell from Pounds 856,000 to Pounds 53,000, after the restructuring provided for the 1991-92 accounts, although losses in Canada rose from Pounds 1,000 to Pounds 84,000.

Australian profits rose from Pounds 88,000 to Pounds 396,000. Associated profits from the joint venture in France, were up from Pounds 316,000 to Pounds 333,000 in spite of a weakening of the French economy.

Net cash of Pounds 7.4m at the year-end led to interest receivable of Pounds 292,000, a swing from interest payable of Pounds 539,000. Mr McGinley said that capital expenditure this financial year would double to Pounds 3m.

Tie Rack GB United Kingdom, EC P5699 Miscellaneous Apparel and Accessory Stores FIN Annual report P5699 The Financial Times London Page 25 418
An industry in great need of a holiday: Queens Moat has upset the UK hotel sector Publication 930415FT Processed by FT 930415 By MICHAEL SKAPINKER

Mr Rocco Forte will today present the results of another miserable year for the UK's biggest hotel and restaurants group. Analysts who follow the Forte group expect him to announce a cut in the company's dividend. Expected profits of just over Pounds 70m compare with Pounds 190m two years ago.

That most City analysts and journalists will be preoccupied with the financial crisis at the rival Queens Moat Houses will be a mixed blessing for Mr Forte, who took over from his father as Forte chairman last October.

The positive side of the Queens Moat saga, from Forte's point of view, is that a dividend cut would now look like a financially prudent step at a difficult time for the hotel industry. The negative is that the Queens Moat crisis has cast a pall over the whole sector.

Leisure sector analysts, many of whom had been positive about Queens Moat until the suspension of its shares on March 31, say investors are likely to steer clear of the sector. 'Hotels are in bad odour with the City,' says Mr Paul Slattery of Kleinwort Benson. 'I can't think of another issue in my career that's had the effect that Queens Moat has had.'

Buoyed by rising asset values throughout the 1980s, many hotel groups expanded on the back of borrowed money. Whatever the outcome of the investigation being conducted at Queens Moat by accountants Grant Thornton, lenders and investors are likely to be wary about hotel groups' future growth ambitions, particularly with balance sheets weakened by diminished property values.

That disillusionment, while intensified by the Queens Moat crisis, has been evident for a while. Groups with hotel interests, such as Forte, Queens Moat, Friendly Hotels and Ladbroke, outperformed the FT-Actuaries All-Share index for much of the late 1980s and early 1990s, before plunging last year.

Hotels have performed significantly worse during the recession than other parts of the leisure sector, such as foreign holidays. While the number of holidays taken abroad last year by UK residents rose to an all-time record of 21.75m, British hotels suffered the lowest occupancies in living memory.

Mr Andrew Duncan of leisure consultants Pannell Kerr Forster Associates, says that while occupancy in London hotels rose 3.8 percentage points to 68.3 per cent last year, this compares with figures in the mid-70s in the 15 years to 1990. Although London occupancies rose as the year went on, the average room rate fell 3.9 per cent to Pounds 76.97.

In the English provinces, occupancies rose slightly to 56.1 per cent from 55.9 per cent in 1991, but average room rates fell from Pounds 46.24 to Pounds 44.11. In Scotland, occupancy rose 2 percentage points to 63.1 per cent, while average room rates remained more or less constant at just above Pounds 46. When inflation is taken into account, all regions saw substantial real decreases in room rates. Even last year's occupancy increases are less impressive than they look, as 1991 figures were blighted by the Gulf war.

Mr Duncan adds that hotel customers who have become accustomed to demanding discounts are unlikely to drop the habit as economic recovery gains pace. 'The discount culture is very widespread now. The buyers have got used to value for money over the past few years and it's going to be difficult to go back on that,' he says.

On the positive side, Mr Duncan says that hotel groups have cut operating costs during the downturn and that any increase in business will quickly be reflected in profits. But while occupancies will continue to rise, the hotel sector's recovery will be slower than many in the industry think. 'It's difficult to see glimmers of hope,' he says.

Even some hoteliers appear to find it hard to summon up much optimism. Mr Giles Shepard, managing director of the Savoy Group, which earlier this month announced a pre-tax loss of Pounds 1.43m in 1992, said only that 'there is a reasonable chance that 1993 will be a better year than 1992'.

Some operators are more upbeat. The devaluation of the pound is bringing back American visitors, they say. British hotels are of far higher quality than they were a decade ago. Mr Michael Hirst, chairman of Hilton International, part of the Ladbroke group, says that unlike some consumer goods, hotels do not go out of fashion for good. When travel picks up, hotels do too.

One of the most encouraging features of recent months, he says, is the increase in UK companies booking hotel premises for training programmes. 'Whenever companies start to accentuate training, it shows they're getting ready for an increase in business.'

Mr John Jarvis, chairman of the privately-owned Jarvis Hotels group, says he sees no reason to revise his plans to take his company public within two years. He says gloom surrounding the industry in the wake of the Queens Moat saga will lift as summer approaches.

Mr Jarvis says: 'I believe in six months time it will be considered a blip. This is a high profile industry and it gets far more than its share of attention compared to industries like engineering or chemicals. I can see us looking back on this time and saying, 'what was that all about?''

Mr Jarvis says his company's bookings by foreign visitors are up 28 per cent on last year for the period between now and September. Bookings by short-break holidaymakers in the UK are up 32 per cent.

Mr Hirst argues that the level of discounting at any time is a reflection of the balance between supply and demand. When rooms are filled, hoteliers can afford to reject demands for discounting.

If the tentative recovery in other sectors of the UK economy continues, hotels are likely to gain from the upturn. While the fax machine and the telephone have, to some extent, replaced the need to travel, the search for new customers and the re-establishment of links with old ones requires face-to-face contact.

Even if the memory of empty rooms fades, however, the shock of the rapid financial reversal at Queens Moat is likely to linger on.

Forte Queens Moat Houses GB United Kingdom, EC P7011 Hotels and Motels FIN Annual report CMMT Comment & Analysis P7011 The Financial Times London Page 25 1066
Companies in this issue Publication 930415FT Processed by FT 930415

---------------------------------------------- Companies in this issue ---------------------------------------------- UK ---------------------------------------------- Airtours 42,26 Alexandra Workwear 27 Allied Lyons 42 Anglo-Eastern 27 BOC 42 British Steel 27 Forte 25 Friendly Hotels 27 Golden Vale 26 Gowrings 26 Grand Metropolitan 42 Guinness 42 HSBC 42 House of Fraser 25 ICI 42,26 Irish Life 26 Murray Johnstone 20 Nat & Provincial BS 25 National Westminster 42 Overseas ABroad 42 Owners Abroad 26 Plateau Mining 27 Prior 26 Queens Moat Houses 25 Sears 42,25 Shaye Communications 26 Smith & Nephew 27 Standard Chartered 26 TSB 25 Thomas Cook 26 Thorn EMI 42 Tie Rack 25 Trafalgar House 26 Walker Greenbank 26 Whitbread 42 Whitecroft 27 Yule Catto 27 Zeneca 26

---------------------------------------------- Overseas ---------------------------------------------- ABN Amro Bank 28 AT&T 26 Ahold 28 Alcan 30 American Home Prods 29 BF Goodrich 29 Bank of New York 29 Banques Populaires 28 Brascan 30 Ciba 28 Daf 28 Dasa 28 Digital 25 Gannett 30 Hilton Hotels 29 Hongkong Land 26 JR East 30 Kingstream Resources 27 Lyonnaise Des Eaux 28 Marriott 29 Mircrsoft 29 Outokumpu 28 PaineWebber 29 Pratt & Whitney 29 Royal Trustco 29 Sega 29 TWA 30 Upjohn 30 Woolworths 28 ----------------------------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 25 217
House of Fraser sells Sears stake for Pounds 60m loss Publication 930415FT Processed by FT 930415 By NEIL BUCKLEY

HOUSE of Fraser, the department stores group owned by the Fayed brothers, yesterday sold its 10.6 per cent stake in the Sears retailing group for a book loss of about Pounds 60m.

The sale came less than two weeks before Sears was expected to reveal an improvement in pre-tax profits, and amid reports - firmly denied by House of Fraser - that the Fayeds have recently been considering a Pounds 300m management buy-out offer for the House of Fraser stores, excluding the flagship, Harrods.

Goldman Sachs, the US investment bank, placed the 156m shares at 101p with a broad range of international institutional investors, having bought them for 100p - a 4p discount to Tuesday's closing price of 104p.

The Fayed brothers have retained a small personal shareholding in Sears.

Mr Michael Cole, a House of Fraser director, said suggestions from City analysts that the sale indicated the group was in financial difficulties were 'entirely untrue'. 'Our financial arrangements are entirely satisfactory,' he said.

Mr Cole confirmed that the Fayeds paid an average of 140p for the Sears shares in December 1987, making a total of Pounds 218m. Yesterday's sale represented a book loss of more than Pounds 60m, but Mr Cole insisted the investment had been 'worthwhile', and had fostered a close relationship with Sears, including opening concessions within each other's stores.

He said the decision to sell the Sears stake was taken only late on Tuesday night. The Fayed brothers wanted to realise assets through the sale 'to give them the flexibility to further their own business plans in the future', although Mr Cole admitted that some of the money may be used to reduce gearing.

House of Fraser Holdings' last published accounts, for the year to January 1992, show gross debt of Pounds 776m, with the group due to repay unsecured bank loans of Pounds 100m and secured loans of Pounds 50m in 1993-4, and a further Pounds 50m of secured loans in 1994-95.

Mr Cole said yesterday group debt was currently just under Pounds 650m.

Analysts said they were surprised by the timing of the sale.

'I would have thought they would allow themselves the luxury of letting Sears get their results away before selling the shares,' said Mr Nick Bubb, retailing analyst at Morgan Stanley. 'The obvious implication is that they are under financial pressure.'

Lex, Page 24

House of Fraser Holdings Sears GB United Kingdom, EC P5311 Department Stores COMP Shareholding CMMT Comment & Analysis P5311 The Financial Times London Page 25 437
TSB to withdraw from estate agents through N&P deal Publication 930415FT Processed by FT 930415 By SCHEHERAZADE DANESHKHU

THE BANKING group TSB is to withdraw from the estate agency business. The controlled withdrawal will be made by the establishment of a joint venture company with National & Provincial building society that will manage TSB's estate agency business and provide a range of financial services.

Mr John Wriglesworth, building society analyst at UBS estimates that the deal will cost National & Provincial between Pounds 5m and Pounds 10m, although neither the society nor TSB confirmed the figures.

TSB's chain of 133 residential estate agents has been making losses and in January the group said it would concentrate on its core businesses of banking and insurance.

The group made a pre-tax profit of Pounds 43m in 1992 compared with a loss of Pounds 47m in 1991. However, there has been little recovery in its property services division which lost Pounds 6m in 1992 and Pounds 7m in 1991.

TSB is expected initially to retain a 50 per cent share of the estate agency business, viewing the joint venture as 'an interim step that will lead eventually to our withdrawal from estate agency business, whilst allowing us to take advantage of the improving market'.

One analyst estimated that TSB may have invested up to Pounds 50m in its estate agency chain.

National & Provincial, the UK's eighth largest society, said that it would be inviting equity participation in the local estate agency groups and is expected to buy up the business at the end of the joint venture period.

N&P will be able to use the estate agencies as an outlet for the sale of its financial services products. The society's branch network is limited and it is keen to expand its presence in the community. 'The deal suits the complementarity of each side's strategy,' said Mr Wriglesworth.

A large number of building societies acquired estate agency chains in the 1980s as a defensive measure. They believed that their share of mortgage lending was threatened by new lenders.

Abbey National last month disclosed that it had lost a total of Pounds 226m on its Cornerstone residential estate agency.

Woolwich building society disclosed in February that its Woolwich Property Services estate agency business, which has 257 offices and is the UK's seventh largest corporate estate agent, incurred a trading loss of Pounds 11m during 1992.

TSB Group National and Provincial Building Society GB United Kingdom, EC P6531 Real Estate Agents and Managers COMP Strategic links & Joint venture CMMT Comment & Analysis FIN Annual report P6531 The Financial Times London Page 25 438
US proposes Dollars 4bn fund for Russia Publication 930415FT Processed by FT 930415 By ROBERT THOMSON and CHARLES LEADBEATER TOKYO

THE US tried to assert its leadership of international efforts to bolster Russian reforms yesterday in launching a plan for a Dollars 4bn (Pounds 2.6bn) multilateral fund to promote privatisation.

The Clinton administration made the proposal at the opening of a two-day emergency meeting in Tokyo of the Group of Seven leading industrialised countries, convened to help strengthen President Boris Yeltsin, the embattled Russian leader.

Mr Andrei Kozyrev, the Russian foreign minister, who will attend the talks today, delivered a warning that the world might 'slide back to cold war' without continued western financial assistance to promote reform.

The US proposal is aimed at easing the privatisation of large state enterprises, which are the most difficult to privatise.

Mr Lloyd Bentsen, the US Treasury secretary, said the scheme would free Russia's central bank of some of the burden of converting the huge oil, gas and other leading industries to private control; save thousands of jobs; and reduce inflation caused by the bank's issuing of easy credits to state industries. Mr Bentsen and Mr Warren Christopher, US secretary of state, said the US would provide Dollars 500m for the scheme if other G7 countries provided a total Dollars 1.5bn. The rest would come from international instititutions such as the World Bank and the International Monetary Fund.

However, German officials indicated that further large pledges of money were unlikely, as it had already contributed huge sums to Russian reform. A senior Japanese official said: 'We have already made our best efforts and we do not expect to be asked for further money.'

Mr Norman Lamont, Britain's chancellor of the exchequer, said that although the UK agreed with the emphasis on privatisation, 'all G7 members would want to consider further how best to pursue that aim'. Canadian officials said the proposal would require more study, while the Italians emphasised that the privatisation plan was still a US idea.

Details of the plan will be developed during this morning's closing session, which will be attended by the Russian representatives Mr Kozyrev and Mr Boris Fyodorov, the deputy prime minister.

The G7 meeting is expected to approve aid worth about Dollars 30bn. Most of this assistance will be in the form of debt relief and credit extensions from the IMF that have already been agreed.

Several countries announced new country-to-country assistance yesterday. Japan confirmed that it was offering Dollars 1.8bn in bilateral assistance, mainly trade credits.

The UK said it would provide an additional Pounds 383m, while the US said its contribution to the privatisation fund would be drawn from a Dollars 1.8bn package, details of which are due to be announced today.

Germany, France and Canada said they would not add to existing bilateral aid. Some ministers complained that 'one-upmanship' was encouraging G7 members to announce ever larger offers, of decreasing effectiveness. One minister said: 'Our emphasis must be on quality, not quantity.'

Russian and G7, Page 3

RU Russia, East Europe US United States of America GB United Kingdom, EC JP Japan, Asia IT Italy, EC CA Canada FR France, EC DE Germany, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs NEWS General News P9311 P9721 The Financial Times London Page 24 550
Government climbs down over changes to competition law Publication 930415FT Processed by FT 930415 By ALISON SMITH and ROBERT RICE

THE GOVERNMENT has backed away from radical changes to the law on anti-competitive behaviour, such as the introduction of large fines on companies.

Mr Neil Hamilton, corporate affairs minister, said yesterday that ministers had rejected the idea of a prohibition on abuse of market power by an individual company, and had decided that the best way forward was to strengthen the existing law.

The climbdown follows intensive lobbying by the CBI and other industry representatives, which had expressed deep opposition to the prospect of fines for practices such as deliberately pricing goods too cheaply and refusing to supply certain outlets.

When the green paper outlining options for reform was published in November, the government indicated that introducing a European-style prohibition on anti-competitive behaviour deserved 'serious consideration'.

But Mr Hamilton told the House of Commons that consultation had made it clear that any benefit prohibition might bring to the consumer would be outweighed by the additional regulatory burden on business. It could even inhibit rather than promote competition because of the uncertainty it would create.

He also argued that a prohibition would apply in fewer market situations than the present law, since to define in legislation what constituted anti-competitive practices would be less flexible than the existing regime.

Instead, the government plans to strengthen the law in four areas. The director-general of fair trading will have greater investigative powers, such as limited rights of entry and seizure. The areas in which he can accept undertakings enforceable in the courts will be expanded.

The director-general will also be able to make interim orders prohibiting specific actions by a company while an investigation is carried out by the Monopolies and Mergers Commission.

Ministers will discuss how to deal with cases where specific property rights are exercised in an anti-competitive way, for example rights of access.

Opposition MPs, who had welcomed the consultation paper, accused the government of choosing the 'soft option', and expressed concern that ministers had rejected the call from the Consumers' Association for tougher action.

Mr Hamilton denied that the government had 'caved in to industry'. It was a fallacy to believe that opting for a prohibition system would have been in the consumer's interest.

Not all companies were pleased by yesterday's announcement. Mercury Communications, which has 11 years' experience of living with a dominant competitor, BT, said it was 'very disappointed' that the government had not chosen a more radical option.

Mr Terry Rhodes, Mercury's director of competition policy, said: 'The costs argument has been overstated and has been used as an excuse for going for the option that avoided addressing the real issues.'

Government tinkers with legislation, Page 8

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors GOVT Government News P9651 The Financial Times London Page 24 479
Tory tensions rise over Bosnia: Attack by Baroness Thatcher puts British government on defensive Publication 930415FT Processed by FT 930415 By RALPH ATKINS, Our Foreign Staff and ANDREW HILL BRUSSELS

THE UK GOVERNMENT was forced to defend its policy towards Bosnia yesterday as a fierce attack by Baroness Thatcher heightened tension among Tory MPs over the scale of Britain's involvement.

Mr Malcolm Rifkind, defence secretary, strongly rejected the former prime minister's call for the Bosnian Moslems to be allowed to arm themselves - possibly setting the UK on a collision course with the US.

Mr Reginald Bartholomew, the US special envoy to the Bosnian peace talks, said yesterday that although the US was pursuing 'the diplomatic track', it was not prepared to wait much longer for Serbia to endorse the peace plan. Failing that, Washington would soon press its allies for a partial lifting of the UN arms embargo.

Mr Rifkind said tougher sanctions against Serbia need not be delayed through Russia's postponement of a UN security council meeting this month - implying that the 15-day warning period before imposing sanctions could be cut.

He also left open the possibility of Britain's supporting air strikes to enforce a peace settlement - although such a move would bring the UN into the conflict as a combatant.

Lady Thatcher continued her attacks yesterday in US television interviews and in the House of Lords, where she said there was 'nothing moral or right about leaving a people defenceless in the path of a determined dictator-aggressor'.

Ministers appeared taken aback by the ferocity of the former prime minister's words. Although her outburst provoked some ridicule because of its emotional tone, it found support among some MPs.

Baroness Chalker, overseas development minister, told Lady Thatcher in the Lords that her proposals might cause 'all-out war' in Bosnia.

An opinion poll today suggests that she also partly reflected public opinion. A Gallup survey for The Daily Telegraph shows that 61 per cent back sending an international force to Bosnia to enforce a peace settlement. Two thirds of those polled said British troops should form part of any such force.

In Belgrade, the Moslem-led Bosnian government said it would withdraw support for the international peace plan if Srebrenica, the besieged town near the Serbian border, was captured by Bosnian Serb forces.

Andrew Hill in Brussels writes: The European Commission will be asked at its meeting next Wednesday to approve Ecu150m (Pounds 119.55m) of additional humanitarian aid for victims of the conflict in former Yugoslavia.

Mr Manuel Marin, EC commissioner responsible for aid, will submit a formal proposal to his fellow commissioners, with the support of colleagues responsible for trade, foreign affairs and the EC budget.

If approved, it will bring to Ecu500m the amount of aid granted to the former Yugoslav republics from the EC's central budget since December 1991. The Commission approved a first contribution of Ecu60m of aid for victims of the conflict at the beginning of March.

Threat by Bosnia, Page 2

Editorial Comment, Page 23

BA Bosnia-Hercegovina, East Europe GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 24 522
The Lex Column: Tour operators Publication 930415FT Processed by FT 930415

The 20 per cent fall in Owners Abroad's share price since it escaped the clutches of Airtours amounts to an unusually swift judgment. The shares are still higher than before the bid was launched, but the scramble to accept Thomas Cook's 150p tender offer hardly amounts to a vote of confidence in the long-term prospects. Since Airtours has also suffered a bout of post-bid depression, the conclusion must be that some of the mud thrown during the fight has stuck.

Yet the prospects look brighter than at the turn of the year. The odds on a recovery in consumer spending have improved and both report good early-season bookings. Since the government declined to refer the bid to a monopolies inquiry, both are free to squeeze independent operators and improve vertical integration by buying more travel agents. That leaves plenty of scope for organic growth and piecemeal acquisitions. During the bid, Owners also promised more savings from its alliance with Thomas Cook.

Bid costs - anything up to Pounds 10m for Airtours, less than half that for Owners - might take the shine off the shares. More importantly, by highlighting the scope for price competition the bid did no favours to the sector. An all-out price war looks unlikely this year while bookings are well up with expectations and Thomson's market leadership is unchallenged. Whether the same holds true of next year remains open. The market has recognised as much.

Owners Abroad Group Thomas Cook and Sons GB United Kingdom, EC P4725 Tour Operators CMMT Comment & Analysis COMP Shareholding P4725 The Financial Times London Page 24 277
The Lex Column: Whitbread Publication 930415FT Processed by FT 930415

Whitbread's plan to revalue its property holdings has started to generate nervous anticipation as next month's results draw near. But the move is less frightening than it looks. Whitbread's south-east presence and its hotels mean the write-down could be proportionately larger than that of other brewers. If hints at the interim stage are right, it should amount to around 15 per cent of the Pounds 2.5bn retail property portfolio or Pounds 375m. But with current gearing of only 16 per cent Whitbread can afford the hit.

That leaves the broader question of the connection between the write-down and the new accounting standards. Till now companies which sold property could credit the entire difference between the price and the original cost to profits. In future, only the difference between price and book value will count. It thus pays companies like brewers with large property holdings to reduce the book value of their assets as far as possible, if only to reduce the risk of having to declare a loss on property sales.

It would be churlish to accuse Whitbread of setting itself up to flatter future profits. Although property disposals accounted for 17 per cent of pre-tax profits in 1991-92, sophisticated investors automatically strip them out. Whitbread's plan for regular property revaluations anyway mean property profits should largely disappear. The new accounting standards will then have scored a double hit: stated earnings will be more a reflection of its basic business and the balance sheet will have become more reliable into the bargain.

Whitbread GB United Kingdom, EC P2082 Malt Beverages P7011 Hotels and Motels CMMT Comment & Analysis P2082 P7011 The Financial Times London Page 24 286
The Lex Column: Hong Kong Publication 930415FT Processed by FT 930415

Whitehall's spin doctors give the impression that only their sensitivity to Chinese feelings prevents them from crowing about a complete climbdown by Beijing. The truth is naturally a little more muddy, and the concessions by both sides show that everyone wants an agreement. There remains a risk that the talks on democracy in Hong Kong may get bogged down, but a common interest in success should at least give the discussions some momentum.

Once round the negotiating table, however, it may become clear that the two sides want very different agreements and are prepared to hold out until they get them. The enthusiasm of the Hong Kong stock market has thus to be treated with a little caution. While the tug of war between a strong economy and poor politics has been temporarily resolved by one side dropping the rope, the struggle may be resumed. Hong Kong's stock market tends to peak at a price/earnings ratio of around 12.5. Currently it is trading at around 12 times expected 1993 earnings. Sentiment may pull shares somewhat higher, but then the rally will be fed by a heavy diet of new issues.

The best of the current rise may thus have passed. Yet unless politics turns very ugly, the longer-term arguments for Hong Kong are hard to fault. The economy may grow by 6 per cent in 1993, and a similar amount next year. Fears that the Chinese economy might overheat are also subsiding. Steady and sustainable Chinese expansion provides the ideal fuel for Hong Kong's equities.

CN China, Asia GB United Kingdom, EC HK Hong Kong, Asia P9721 International Affairs P6231 Security and Commodity Exchanges CMMT Comment & Analysis P9721 P6231 The Financial Times London Page 24 296
The Lex Column: Searing pain Publication 930415FT Processed by FT 930415

About the best that can be said of House of Fraser's investment in Sears is that the stake was not sold when the shares slumped to 63p. Still, a capital loss of over Pounds 60m and a similarly painful cost of carrying the shares leave plenty of room for reflection by all concerned. At present one can only wonder why House of Fraser has sat with the holding for over five years only to sell on the eve of a rebound in the economy. Admittedly, Sears is not the most convincing of the retailing recovery stories. Yet after enduring the horror of the past few years this hardly seems the moment to bale out.

Perhaps the answer lies with House of Fraser's very substantial borrowings, some of which are due for repayment shortly. If the company needs to raise cash its options are limited. Department stores are not the most saleable of retailing assets, and the company would struggle to find buyers at anything like book value. Even putting Harrods on the block might not attract the kind of clientele which was interested a few years ago.

The company is not alone in its philosophical reflections. Bankers feeling uncomfortable might also consider that their lending to House of Fraser looked aggressive even by the standards of the mid-1980s.

For Sears the sale has fewer implications. Sears has to manage the rather different problem of earning a decent return from its sprawling asset base. It appears that the new chief executive, Mr Liam Strong, is having some success with the British Shoe Corporation. Whether he can keep all of the company's other plates spinning at the same time remains to be proved.

House of Fraser Holdings Sears GB United Kingdom, EC P5311 Department Stores COMP Shareholding CMMT Comment & Analysis P5311 The Financial Times London Page 24 317
Observer: 'Austile Publication 930415FT Processed by FT 930415

Observer's note on the sometimes strained relations between New Zealand and its big neighbour reminded a reader of how Sir Robert Muldoon, a famous NZ premier, once dealt with complaints about the large number of his countrymen emigrating to Australia.

'At least it raises the average IQ in both countries,' was the elder statesman's verdict.

NZ New Zealand AU Australia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 23 80
Observer: Just desserts Publication 930415FT Processed by FT 930415

It seems that Russians who smuggled Iraqi asylum-seekers across the Baltic Sea to Sweden were seeking their own kind of asylum. Life in Swedish jails, they thought, was better than their cash and job-starved existences back home.

Prisoners in Sweden are paid allowances of up to 60 crowns a day even for attending a training course and may be eligible for travel grants when on parole. So now officials are considering changing the allowances to make a prison term less attractive for people from countries with a lower standard of living than Sweden.

SE Sweden, West Europe RU Russia, East Europe IQ Iraq, Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 23 126
Observer: Shaw thing Publication 930415FT Processed by FT 930415

Remember, George Bernard Shaw got there first. During the very cold winter of 1947, when he was 91, he wrote a letter to The Times, urging engineers to study ways of harnessing the 'monstrous excess of power' in the currents in the Pentland Firth, which he reckoned could 'electrify half of Europe'. Now the DTI is catching up. Yesterday's engineering study identified fast-flowing tidal currents, especially those in the Pentland Firth, between Caithness and Orkney, as a potential energy source.

GB United Kingdom, EC P4911 Electric Services P1629 Heavy Construction, NEC NEWS General News P4911 P1629 The Financial Times London Page 23 110
Observer: Taxing question Publication 930415FT Processed by FT 930415

John Birt is seldom floored by an awkward question. But the BBC's director-general met his match yesterday at a lunchtime meeting of the International Press Institute hosted by the FT. He had just been asked about his relationship with the BBC's board of governors when an FT tea-lady marched in, fixed him squarely in her gaze and inquired in booming tones: 'Mind if I clear away the lunch, dear?'

Lost for words, Birt gulped and stared blankly until the intruder retreated. 'It's all right,' he muttered. 'That sort of thing used to happen all the time at the BBC.'

British Broadcasting Corp GB United Kingdom, EC P4833 Television Broadcasting Stations P4832 Radio Broadcasting Stations NEWS General News P4833 P4832 The Financial Times London Page 23 134
Observer: Departure time Publication 930415FT Processed by FT 930415

The Bank of England is set to lose one of its more cerebral influences. Tony Coleby, at 57 the eldest of the Bank's four executive directors, is planning to bow out early next year, thus clearing the way for Eddie George, the governor-in-waiting, to put his own men into positions of power.

Coleby, the director in charge of monetary issues, intends to go when his four-year term ends and he turns 58. His replacement in the executive suite is likely to be 49-year-old Ian Plenderleith, a chain-smoking workaholic who is 'Hard Eddie's' closest disciple within Threadneedle Street and currently in charge of market operations.

George, who takes over from Robin Leigh-Pemberton in less than three months, wants to make sure - whatever the political considerations - that the government sticks to its inflation target. To help him deal with the inevitable flak, he will need the help of a similarly hard-boiled colleague.

Assuming Plenderleith makes it into the Bank's top layer, he will join a team which includes the new deputy governor Rupert Pennant-Rea, 47, chief economist Mervyn King, 45, international supremo Andrew Crockett, 50, and banking supervisor Brian Quinn, 56.

Coleby, who joined the Bank in 1961, will be missed at Threadneedle Street for his erudite approach to economic affairs and a keen interest in choral singing. He has often brushed with George about the finer points of monetary policy - a tendency that has not always found favour with the new governor.

GB United Kingdom, EC P6021 National Commercial Banks PEOP People P6021 The Financial Times London Page 23 269
Observer: Refurbishing the cabinet Publication 930415FT Processed by FT 930415

What better way to celebrate the start of parliament's new term than to dabble in Westminster's favourite sport of picking the winners and losers in the next reshuffle?

Young hopefuls on the Tory backbenches will be ever more effusive in their public praise of the prime minister, ever more rude about rival aspirants.

The word is that John Major has yet to decide whether his game plan will be a grand reconstruction, or a cautious refurbishment. But the latter looks more likely.

Whatever else the PM does, he has to replace Tristan Garel-Jones at the Foreign Office; he bows out after the Maastricht treaty is ratified. And there is persistent talk that one cabinet minister is ready to step aside. But friends of Douglas Hurd dismiss speculation that their man is a quitter. The foreign secretary will stay at least until mid-1994 before departing for a lucrative writing and business career.

Michael Heseltine's aides are equally dismissive of talk that their man has been irreparably damaged by the coal industry debacle and is going to call it a day. Norman Lamont, meanwhile, has told friends he is convinced he's safe at the Treasury until next year.

None of that has dented Observer's confidence in presenting a list of front-runners for promotion. Stephen Dorrell at the Treasury is favourite to take the first vacant seat in the cabinet, but Jonathan Aitken at defence, Sir George Young at environment and Roger Freeman at transport are also showing good form.

Slightly lower down the scale, David Heathcoat-Amory is a strong candidate for the Garel-Jones job, while Tim Yeo at health and Alastair Burt at social security are among others who have earned promotion. And if Major does opt for cabinet reconstruction, watch out for David Hunt, the Welsh secretary. He deserves grander things than the principality.

GB United Kingdom, EC P9121 Legislative Bodies PEOP People P9121 The Financial Times London Page 23 328
Leading Article: Bosnia's agony Publication 930415FT Processed by FT 930415

BARONESS Thatcher's impassion-ed attack on western strategy towards the carnage in Bosnia has struck a resonant chord. Few who heard can have failed to empathise with her frustration over the horrors beamed daily to western television screens and the apparent helplessness of the international community to do anything about them. Few will have disagreed with her thesis that the west's current policy of 'feeding people but leaving them to be massacred' has long ceased to be tenable. It is thus not good enough for British ministers simply to dismiss Baroness Thatcher's words as 'emotional nonsense'. The fact is, first, that western policy over the past 12 months has been worse than ineffective. By making threats against the aggressors without the will or means to back them up with force, it has encouraged Serbian territorial expansionism. Second, if the international community continues to stand aside, seeking to cover its dignity with the increasingly tattered figleaf of the Vance-Owen peace plan, the land-grabbing will continue until the vast majority of Bosnia's Moslems have been uprooted from their homes.

Baroness Thatcher's suggestion is that the UN give the Serbs an ultimatum - sign up to the Vance-Owen plan, which, though flawed, remains the only framework for a settlement on the table, or we will selectively lift our arms embargo on the former Yugoslavia in order to arm the Moslems, while providing them with air cover.

The merit of this plan is that it would answer the growing moral pressure in the west for 'something to be done', without entailing the sort of commitment of ground forces that the US and its allies correctly argue their domestic public opinion will not wear. Its drawbacks are equally easy to identify. Apart from prolonging the conflict, it would hopelessly compromise the existing UN humanitarian relief operation. Even if the Serbs bowed to such pressure and agreed to Vance-Owen, it would encourage the Moslems to prevaricate in the hope of western intervention. More importantly, it would risk provoking a serious split in the UN Security Council as Russia lined up with Serbia against the west. Far from containing the conflict, it could help to turn it into a bone of contention on a much larger international scale.

That danger is what makes this such a delicate moment - especially in Washington, which is where the important decisions, if any, will be made. Thus far, the Clinton administration has seemed as uncertain as any of its allies as to how to handle Bosnia. It appears increasingly tempted to contemplate lifting the arms embargo on the Moslems - and equally worried about keeping the Russians and its allies on board. If the pressure for direct intervention in the war becomes irresistible in Washington, the challenge will be to square that circle. President Clinton will need all the cool advice he can muster.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 23 500
Convenient cracks in the wall: Edward Mortimer analyses the dilemmas and contradictions of European immigration policy Publication 930415FT Processed by FT 930415 By EDWARD MORTIMER

Few subjects are more intensively discussed between European governments than immigration, asylum and refugees. There are at least 10 intergovernmental bodies dealing with those issues - 12, if one counts separately the three sponsored by the Council of Europe. Between them, they held well over 100 meetings at ministerial or official level in the course of 1992. Yet most went entirely unpublicised, and very few were front-page news. Migration is an issue that governments are anxious to talk about among themselves, but preferably without being overheard.

It is a doubly embarrassing subject. Governments dare not admit to their electorates that immigration into western Europe has not only increased steadily (roughly tripling between 1985 and 1992), but will almost certainly continue to do so. Nor do they like to talk about the methods by which they try to control it, since these are often hard to reconcile with the human rights they are pledged to uphold.

Governments are sensitive to public pressure for more restrictive policies - if possible for the door to be closed completely. They know, however, that this could only be done, if at all, by methods which would be repugnant to much of that same public opinion.

Most west European countries stopped recruiting guest workers and introduced restrictive immigration policies as long ago as the early 1970s. Yet 'regular immigration of foreigners' is now running at 1.3m a year, according to Jonas Widgren, co-ordinator of the Intergovernmental Consultations on Asylum, Refugee and Migration Policies in Europe, North America and Australia. The main source of this immigration is the arrival of family members joining guest workers who are already in Europe. And, as Doris Meissner, formerly a senior US immigration official, points out: 'The idea that a person would be denied the right to have family members with him if his stay is for long periods is simply unacceptable in many nations.'

Asylum seekers, a category which has recently had much more publicity, were still only just over half as numerous as 'regular' immigrants in 1992. In fact the notion of a Europe-wide 'asylum crisis' is highly misleading. The number of applications in France fell last year from 50,000 to 27,000, and in Britain, even more sharply, from 44,700 to 9,600. The real crisis is in Austria, Switzerland, and above all Germany, where nearly 440,000 asylum seekers arrived last year, and the number is still rising.

In 1992 Germany also took in 300,000 'ex-nationals having a constitutional right to immigrate' from eastern Europe and the former Soviet Union. And, according to the German government, about 310,000 people entered the country illegally - 'nearly 70 per cent of all illegal migrants to the European Community'.

The phrase 'illegal migrants' conjures up an image of people packed like sardines in small boats crossing the Mediterranean or container-trucks on Channel ferries. But much more typical, according to Clara Maria Bisegna, diplomatic adviser to the Italian immigration minister, is the cousin who comes quite legally on a family visit, then illegally finds a low-wage job in the black economy and overstays his visa. If unlucky he may be caught and deported. But in a free and open society, his chances of slipping through the net are good.

The problem is not a purely European one. The influx of people into western Europe is only a tiny fraction of the overall movement in the world. As Ms Meissner points out*, 'the vast majority of migrants move within their own countries, the next-largest share move across national boundaries within the less-developed world, and a relatively small share cross borders to developed countries'.

To Americans, accustomed to think of themselves as a nation of immigrants, European reactions seem unnecessarily defensive. Demetrios Papademetriou, himself an immigrant, was until recently director of immigration policy at the US Department of Labor. He argues that in the 'new' countries of the Americas and Australia 'the process of nation-building has never really stopped', and people therefore accept that 'national identities are inherently dynamic, and thus fundamentally mutable'. But this idea, he says, 'is strongly resisted by most intellectuals and publics in Europe', and therefore mass immigration, especially of people coming from a different cultural background, is seen as a serious threat to national identity.

Mr Papademetriou was the opening speaker earlier this month at a conference on 'the security dimensions of international migration in Europe', organised by an American think-tank, the Center for Strategic and International Studies (CSIS), but held at Taormina, in Sicily.

Western Europe, according to the American speakers at the conference, is failing to face up to the facts. It has become a region of immigration. This is not only the result of 'push factors' - demographic pressure in the south, war and economic upheaval in the east - but also of 'pull factors'. In spite of unemployment, there are many low-wage, difficult and socially undesirable jobs which need doing and which Europeans - along with North Americans and Japanese - are reluctant to do themselves. 'We must accept the fact,' said Mr Papademetriou, 'that immigration provides us with prospective members of our societies who use this complement of jobs as entry-points to our economies and as access routes to the full rewards of our social and political systems.' Moreover, the present generation of Europeans has not produced enough children to provide it with the comfortable old age it looks forward to; hard-working, youthful immigrants will be needed to make up the shortfall.

In short, Europe needs immigrants, and Europeans, according to Mr Papademetriou, are in any case too soft-hearted to keep them out. 'Advanced industrial countries cannot engage in measures draconian enough to control situations which have developed their own social and economic logic and structures without doing gross violence at least to the spirit of their constitutional order.'

So argue American critics of European immigration policy. Instead of trying to stop immigration governments should seek to manage it, choosing those with the needed skills and allowing them to come in legally so that they are not 'compelled' to pose as asylum-seekers in order to gain admission. This, supposedly, would give states the 'moral courage' to kick out those whom they do not want - 'ineligible immigration applicants' and 'fraudulent asylum claimants'. Eligible immigrants and bona fide refugees could then be made welcome and given 'full equality'. In due course, they would have the option of becoming naturalised citizens.

Clearly, European governments are failing in their stated objective of keeping immigration at, or close to, zero. But it is not obvious that aiming at a higher, more 'realistic' number would produce better results. The fact that some immigrants are let in legally will not stop others from trying to get in illegally. On the contrary, through family connections it will make it easier for them to do so. It seems quite likely that the number of immigrants coming in will always be the number allowed plus x. In which case, if x is the number you actually want, or can more or less cope with, zero would be the logical number to allow.

What no European government can publicly admit is that illegal immigration is actually more manageable, and economically more useful, than legal immigration. Legal immigrants, enjoying all the rights accorded by the law to indigenous workers, cannot be sent home, and will soon be just as reluctant as indigenous workers are to do those 'dirty, dangerous and demanding' jobs. They will naturally expect the same wages and conditions as indigenous workers, and thus lose their main attraction in the eyes of employers.

Also, most asylum seekers, even if they do not qualify in the eyes of the law, are not cynically 'fraudulent'. They are usually desperate people, escaping from what is by west European standards grinding poverty and oppression even if at home they were not the poorest or most oppressed. They are also usually enterprising people, willing to take risks and adapt to unfamiliar conditions. These might be the very skills an intelligently 'managed' immigration policy would look for. But, again, it is convenient to keep them in that limbo of 'temporary leave to remain', from which, along with their illegal brethren, they can be expelled if they cause trouble.

Those, however, are truths that no politician could tell in public. Offensive as it may be to the descendants of the Pilgrim fathers, a little old world hypocrisy may sometimes be very useful

*International Migrations: a new challenge for a new era. (Draft report to the Trilateral Commission, March 1993.)

----------------------------------------------------------------------- IMMIGRATION TO WESTERN EUROPE ----------------------------------------------------------------------- ('000) 1985 1986 1987 1988 ----------------------------------------------------------------------- Regular immigration 700 750 800 950 of foreigners Asylum seekers 170 200 180 220 Ex-Yugoslavs offered TPS* outside asylum ---- procedures Ex-nationals with 100 100 150 300 constitutional right to immigrate* Illegal entrants 50 50 50 100 ----------------------------------------------------------------------- Total 1,020 1,100 1,180 1,570 ----------------------------------------------------------------------- ('000) 1989 1990 1991 1992 -----------------------------------------------------------------------

Regular immigration 1,150 1,200 1,300 1,300 of foreigners Asylum seekers 310 430 550 690 Ex-Yugoslavs offered - - - 350 TPS* outside asylum procedures Ex-nationals with 800 450 300 300 constitutional right to immigrate* Illegal entrants 100 200 300 400 ----------------------------------------------------------------------- Total 2,360 2,280 2,450 3,040 ----------------------------------------------------------------------- *Temporary protected status **Mainly German ----------------------------------------------------------------------- Source: Jonas Widgren (co-ordinator, inter-governmental consultations on asylum, refugee and migration policies in Europe, North America and Australia) ----------------------------------------------------------------------- -----------------------------------------------------------------------

XG Europe P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 23 1592
Leading Article: Doubts about the EBRD Publication 930415FT Processed by FT 930415

THE CONTRAST between the grandeur of Mr Jacques Attali's self-styled 'European Bank' and disbursements of a mere Ecu200m (Pounds 125m) after two years of existence is bound to attract hostile comment. The institution is on trial. Yet it is too early to condemn it. The EBRD must be judged on whether it makes a useful contribution to reform of eastern Europe and the former Soviet Union, rather than on the magnificence of its offices or the flying arrangements of its president.

This does not mean that its housekeeping can be ignored. Some Pounds 200m was spent on its offices and overheads between April 1991 and the end of 1992. It is difficult to feel confident that the directors responsible for supervising its expenditures ensured these sums were all essential, since they are themselves beneficiaries of EBRD largesse.

In this and other respects, the problem lies more with the model on which it was founded than with the EBRD itself. Politicians complain incessantly about the 'fat cat' life-style of institutions such as the World Bank. To this charge, the latter reply that many of their employees enjoy alternative opportunities in the private sector; that they are not lavish by the standards of private-sector financial institutions; and that their performance has been at least as good as that of such institutions. Populists may dislike these answers, but they have force all the same.

What makes the questions about the EBRD's life-style more pointed is that many wondered whether it should have been established in the first place. Some argued that it would divert attention from the need to provide generous assistance and liberal market access to the newly liberated countries. To Mr Attali's credit, it is here that the EBRD has been most effective. His bank offers a fine pulpit. It may be made of Carrara marble, but he has used it well, particularly on the need for Continent-wide free trade.

Yet the EBRD cannot be justified by the ability of its president to say sensible things. The question is whether it can also become an effective lending institution.

Many believed that the EBRD's mandate to lend 60 per cent of its money to the private sector would prove a crippling handicap. Yet so far the more important obstacle to rapid disbursement has been the public sector. The EBRD is affected, like everything else, by the political chaos of most countries of the former eastern bloc. But lending to the public sector is not the EBRD's sole problem. Its desire to lend prudently clashes with the need to take risks in support of the fledgling private sector.

The EBRD has still to justify its creation. It needs to demonstrate control over its own spending, but above all it needs to lend effectively, without lending foolishly. This is a fine line to tread. It may never be possible to be sure that the EBRD serves a useful purpose. But it must make a serious effort to convince the world it does.

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies CMMT Comment & Analysis P6081 The Financial Times London Page 23 531
Personal View: Morning after the beer bungle Publication 930415FT Processed by FT 930415 By KIM WARREN

Five years ago, British consumers enjoyed a great diversity of domestic and imported beers and pub prices which were lower than in most other countries. A rich variety of suppliers served the market, none with a high market share. Yet the report by the Monopolies and Mergers Commission in 1989 found pub prices to be 'too high', consumer choice to be poor, and viewed the market as being dominated by big brewers.

The report attributed these problems to brewers owning most of the country's pubs, where their own products were favoured, and to their offering low-cost loans to independent pubs in exchange for beer supply guarantees. The European Commission had found in 1984 that this system benefited consumers, yet the MMC recommended that large brewers should dispose of most of their pubs and that supply contracts backed by cheap loans be banned. These measures would 'increase competition in brewing, wholesaling and retailing, encourage new entry, reduce prices and widen choice'. Otherwise, it believed, a few brewers would come to dominate the market.

The government partially enacted the MMC's proposals in 1989, but although beer supply continues to be competitive, retail beer prices have risen sharply, and several firms have quit brewing, including local producers whom the measures were designed to protect. Brand rationalisation continues and no new producers have entered the market. Indeed, the MMC cleared the largest brewing concentrations ever seen, involving Grand Metropolitan and Courage, and Allied Breweries and Carlsberg. Powerful pub groups are emerging, but independent pubs have closed in large numbers. Since leading brewers dominate beer markets in countries where tied houses are unknown, and leading suppliers dominate other UK consumer markets, such outcomes were always likely. So how did the inquiry produce such proposals?

The Fair Trading Act and Competition Act are both vague in defining the 'public interest'. MMC guidelines suggest that inquiries will focus on issues of industry structure 'that operate or may be expected to operate against the public interest'. No evidence of actual harm is needed. Furthermore, similar evidence may be treated as harmful in one case, but beneficial in another. Industry structure is presumed to explain and predict public outcomes. This is a dangerous assumption. Real markets are too complex to be understood by simple models, largely because they contain dynamic feed-back effects - a leading firm's market share creates higher profits that can be reinvested to drive its domination still higher. Such feedback is common in many social systems, and has unfortunate effects - the system behaves counter-intuitively and inconsistently, and resists simple policy changes. This alone may largely explain the unfortunate outcomes of the beer inquiry.

Problems originating in vague policy objectives and inadequate market models are compounded by the secrecy of inquiries. Inquiries into beer and petrol both spent three years collecting considerable data at great cost to firms and tax-payers. Yet most of this data has nothing to say about the practical interests of consumers. This omission leads to a largely false view of industry processes and (for beer) misdirected suggestions for change.

Yet these dangers are not beyond correction. Policy objectives need clarifying, with more attention being given to practical interests of consumers, such as choice, quality, service and availability, as well as price. The priority of inquiries needs to be reversed, placing the public interest at the forefront, and relegating industry structure to be one possible explanation of consumer harm, if such harm is proved. Data on consumers' experiences need greater attention, as does the role of firms other than those directly under investigation. Reports need to offer a clear description of industry dynamics for open debate, and explain when and how expected outcomes will occur, whether or not any change is proposed. An explicit forecast of how the industry will evolve would focus public debate on the realism of the assumptions behind the proposals. Finally, a post-report period for public debate, combined with an open process and balanced interim reporting, would allow the trade and industry secretary to arrive at considered changes, rather than having to react quickly to what might be poor-quality proposals.

The author, who is assistant professor of strategy at the London Business School, has produced a paper, 'Competition policy and the consumer interest - a comparison of recent MMC inquiries', available from the London Business School

GB United Kingdom, EC P5813 Drinking Places P2082 Malt Beverages CMMT Comment & Analysis COSTS Product costs & Product prices P5813 P2082 The Financial Times London Page 23 760
Leading Article: Finalising Nafta Publication 930415FT Processed by FT 930415

THE CLINTON administration may be right in believing that the new US Congress would throw out a North American Free Trade Agreement without the understandings it is now negotiating on the environment and labour standards. But if it wants a workable agreement, the US should be cautious about how far it pushes these additional conditions.

One reason for caution is that such side accords could have significant implications for sovereignty, not only for Mexico but for the US as well. The envisaged procedures would, after all, be usable not only against Mexico, as US lobbies desire, but by Mexicans against the US.

Furthermore, the whole point of Nafta is that all the three parties - the US, Canada and Mexico - should gain from the increased economic efficiency created by specialisation. Tough side agreements could so load the dice against Mexican companies that Nafta would become more trouble than it is worth. It would be wrong and self-defeating for the US to burden a developing country with the standards of a highly developed one, themselves rather recently acquired.

In addition, dispute resolution procedures must be transparent and speedy. Otherwise, they could simply become a way for aggrieved US businesses to obtain protection. US companies are already all too well practiced at exploiting such mechanisms, anti-dumping procedures being the chief example.

If it is to avoid these dangers, the Clinton administration needs to keep reminding itself of Nafta's purpose. True, the main direct beneficiary of Nafta would probably be the Mexican economy, which should enjoy higher investment, more jobs and faster growth. But these gains for Mexico would also bring important benefits to the US.

Pollution should be easier to control, for example, as the Mexican economy grows, while Mexican industry would also have less reason to cluster in the contaminated border areas. The differential between US and Mexican wages should fall, thereby slowing the flow of migrants across the border. A more dynamic and outward-looking Mexico would become an increasingly important market for US goods. Not least, the Mexican government would be rewarded for overturning years of animosity towards the US, while the political liberalisation of Mexico would be reinforced.

The most powerful economy in the world has little to fear from a free trade agreement with an economy one-twentieth its size. But it has much to gain from a stable and increasingly affluent neighbour to the south. The US may have to negotiate understandings on labour and environment in order to secure support for Nafta. But it must not deprive Mexico - and so itself - of the economic and political fruits of this agreement. The US should forget fair trade theology and remember its interests instead.

US United States of America P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 23 476
Letter: Contented consultants and their clients Publication 930415FT Processed by FT 930415 From Mr ADRIAN WILLIAMS

Sir, It was a pleasure to read, in your review of the Centre for Economic Performance's recent report (Management, April 5), such an elegant exposition of the guidelines that both clients and management consultants should follow to favour a productive and satisfying working relationship.

But the review's title, 'A very uneasy alliance', gives the impression that most relationships end in disappointment on both sides, because the guidelines are not followed. However, I do not think that the evidence supports such a conclusion.

For how do consultants go about developing their business pipeline? Doing new work for existing, satisfied clients is the way that effective consultants prefer; next comes getting a client's agreement to act as a reference when approaching new clients. The volume of management consultancy work that has been carried out in the UK for many years is not consistent with companies '. . .so often disappointed. . .' with consultants who '. . .often feel disappointed. . .'

Disgruntled clients and frustrated consultants can always find an audience. Discontent is more interesting to talk and write about than is satisfaction. The rest - clients and consultants - are getting on well together, in their quiet and effective way.

Adrian Williams,

president,

Institute of Management

Consultants,

32/33 Hatton Garden,

London EC1N 8DL

GB United Kingdom, EC P8742 Management Consulting Services NEWS General News P8742 The Financial Times London Page 22 246
Economic Viewpoint: The green shoots sprout again Publication 930415FT Processed by FT 930415 By SAMUEL BRITTAN

One reason for the UK Treasury's premature diagnosis of 'green shoots' recovery was that it took too much notice of surveys which reflected not hard data such as output, orders or sales, but businessmen's expectations or their state of confidence. Business expectations are just as much economic forecasts as computer printouts from the Treasury and have just as large a chance of being false.

Commentators who have been proved repeatedly wrong about the duration of the recession and the advent of recovery can grasp at a less ambitious alternative. This is to recognise the limits of economic prediction and concentrate on what is happening.

The best procedure is to focus one's attention on a comprehensive aggregate covering a reasonable period. In the UK context, this is non-oil real gross domestic product in the first quarter of this year.

The CBI March monthly survey gave a strong hint of an upturn in first quarter GDP by showing an improvement in reported orders, both overall and for exports. Even this was far from conclusive because the question is posed subjectively in terms of whether order books are above or below normal. They are still below normal but much less so than at any time for over two years.

But the figure I have been waiting for has been the February Index of Industrial Production which came out yesterday. Here I would concentrate not on total industrial production, which reflects the vagaries of North Sea oil output, but on the manufacturing component.

Taking the three months to February, manufacturing output is now estimated to be 1.2 per cent above both the previous quarter and 1.5 per cent above the same quarter a year ago. The chart suggests that the year-on-year movement of the manufacturing index is a good guide to what will afterwards be reported for GDP, excluding oil and gas, even though the movement in either direction is often magnified in manufacturing compared with the whole economy.

Demand indicators give a similar impression. Retail sales have for sometime been increasing at a moderate rate. The car market has also picked up, admittedly from a very low level. Construction is probably no longer declining, although it will take time for the improvement in the housing market to work its way through to the building sites.

The next question usually asked is whether the recovery can be sustained. This is wrongly posed. For the tendency in modern capitalist economies is for output to grow in most years - which enables the governing political party to make the fatuous boast of record output.

The appropriate question is whether anything is likely to go wrong to derail or slow down the recovery. The most vulnerable spot is overseas markets. The world recession came later to Continental Europe than to the US or Japan but is now quite virulent. The absence of trade figures, while EC recording methods are overhauled, is no help. Survey data suggests that devaluation has cushioned it quite a lot. But big feats of export-led growth are unlikely.

There is another possible leakage. Rising real incomes have been providing most of the motor for consumer spending, as is normal. But forecasters such as Gavyn Davies of Goldman Sachs expect growth in real personal disposable incomes to dwindle away under the influence of low pay settlements, rising unemployment and (next year) higher taxes.

They are looking, however, for a falling savings ratio to sustain consumer spending. The high personal sector debt ratio, which has been acting as a drag, shows no sign of declining. On the other hand mortgage interest payments are at their lowest for nearly a decade as a proportion of income. Too much is probably made of debt deflation and negative equity on the part of home buyers suffering from price falls. As time moves on the effect of low interest payments and comparatively low house prices on new buyers will begin to outweigh the cautionary influence of those who bought their homes near the top of the boom.

The pain of these earlier buyers will be eased now that house prices have stopped falling and have risen slightly in the past month. Indeed, looking ahead, there is more danger of the upturn being threatened by rising house prices than by any weakness in that sector.

The winter Budget would be a good time to reduce further the fiscal privileges enjoyed by home buyers. Nothing would do more to stabilise the economy by 2000 than a new type of housing market, where renting was normal and an owner-occupied house became a place to live rather than a speculation.

The most usual reason for pessimism is different; that the British economy will run into the balance of payments buffers. In fact a so-called payments deficit can only stop growth if it leads to a run on sterling, which the government has to counter by a steep increase in interest rates.

So far, on the contrary, sterling has been quite strong and recovered a little of the ground it lost after leaving the exchange rate mechanism in September. I would not be surprised if within a year we saw a repeat of the 1987 dilemma in which the government had to choose between letting sterling rise too far and letting interest rates fall too much.

In the likely circumstances I would let interest rates fall. The recovery of sterling is welcome as far - or a little further - as it has gone. It should do something to dampen the impact of rising import prices on inflation and also discourage the impression now widespread on the Continent that the UK has embarked on a policy of competitive depreciation. Given a stable pound, there is enough slack in the economy to take quite a substantial rise in home demand and still leave room for an increase in exports when the world economy recovers. Any required real depreciation can be brought about in slow motion through a lower inflation rate in Britain than in competitive countries.

This is not a pipe dream. UK unit costs are now falling relative to competitors - helped not only by low pay settlements but by a rate of productivity increase in manufacturing substantially exceeding that achieved at the corresponding stages of previous recoveries from recession.

The straw in the wind about which I do puzzle is the expectation shown in the Dun and Bradstreet survey that business will take on more workers. Does this mean that the unexpected fall in unemployment in February was not quite the freak indicator it seemed? If there really is to be an employment recovery at such an unusually early stage of the business cycle it may mean that productivity cannot go on increasing at recent rates. But it may mean that the upturn is more vigorous than generally supposed. Why back the more pessimistic alternative while waiting for more evidence?

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 22 1183
Letter: Price close and finance in place Publication 930415FT Processed by FT 930415 From Mr MICHAEL R HOFFMAN

Sir, You indicated ('Concerted action urged on exports', April 6) that Thames Water lost a contract in Buenos Aires because we had not arranged export finance in time.

The facts are that we came a very close second on price to our French competitors. Our bid was fully compliant and we had all of our financing agreed in detail.

International activities are tough enough without attempted own goals by newspapers.

Michael Hoffman,

group chief executive,

Thames Water,

14 Cavendish Place,

London W1M 9DJ

AR Argentina, South America P4941 Water Supply NEWS General News P4941 The Financial Times London Page 22 117
Letter: Technology crucial to debate on UK's economic renaissance Publication 930415FT Processed by FT 930415 From Prof IAN MACKINTOSH

Sir, In his review ('British culture in the clear', April 8) of W D Rubinstein's latest book, Capitalism, Culture and Decline in Britain, 1750-1990, Sir Geoffrey Owen once again contributes thoughtfully to the debate about the causes of the British industrial malaise. Unfortunately, however, neither he nor, so far as I could tell, Rubinstein pays due attention to the importance of exploiting technology.

In my experience, most analysts and historians - whether of an economic or sociological bent - overlook the salient role which technologies of many kinds have played in both the rise and fall of the British economy in relation to most of our international competitors.

For example, the period of Britain's greatest economic (and military) power was during the 19th century, when it was pre-eminent in its ability first, to conquer new, basic technologies such as steam and the manufacture of iron and steel. It then was successful in exploiting these technologies commercially in the form of artifacts such as bridges, ships, railways etc and the components (rolling stock and so forth) that went with them.

By comparison, in the most powerful and pervasive technology of the second half of this century - electronics - substantial British companies able to compete successfully in relatively free markets on a global scale are notable only by their scarcity. At the same time, the Japanese (and other Asian) industrial economies have risen from scratch to giddy heights largely on the skilful commercialisation of electronic goodies for the home and the office. And the US economy would be even closer to a sticky end were it not for its continuing strengths in this massive industrial sector comprising software, chips, information technology, computers and much else besides.

My main point, then, is that whereas the debate about Britain's elusive economic renaissance must obviously go on (until we either succeed or relax finally into a thatched cottage economy), the argument must - simply must - take technology, and its power to deliver jobs and economic growth, fully into account in both the analysis of Britain's past successes and failures, and in building new industrial policies for the future.

Ian Mackintosh,

director,

European Foundation for

Technical Innovation,

University College,

Gower Street,

London WC1E 6BT

GB United Kingdom, EC P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 22 408
Letter: No signal of brand's demise Publication 930415FT Processed by FT 930415 From P L STOBART

Sir, Philip Morris's decision to impose swingeing price cuts (UK Company News, April 13) on its Marlboro brand in the US to safeguard its huge market share in the face of increasing cut-price competition has led to massive reductions in the share prices of many of the world's leading branded goods businesses. Suddenly, and in spite of the strong performance of many of these businesses throughout the recession, some observers are predicting the demise of the brand.

Surprisingly, it seems that the markets have missed the point. Brand owners have always had to be highly sensitive to competition from unbranded products. In commodity areas such as sugar a brand may have no opportunity at all to establish a price premium while in an area such as fragrances a branded product may command a price five or six times above that of the so-called generic.

But the brand is never a licence to charge whatever the brand owner wishes. At some point the brand will always be susceptible to cut-price competition. Clearly. a process of readjustment is taking place in the US cigarette market. But this does not signal the demise of the brand.

P L Stobart,

director,

Interbrand Group,

40 Long Acre, London WC2

GB United Kingdom, EC P2111 Cigarettes NEWS General News P2111 The Financial Times London Page 22 235
Letter: Central Europe in need of confidence, not handouts Publication 930415FT Processed by FT 930415 From Mr JANSEN RAICHL

Sir, David Marsh's article, 'Caught out by a turning tide' (April 8) brilliantly highlights the EC's self-inflicted agonies. One has to bear in mind that the EC is a cold war structure meant to keep Europe divided. For this reason, central European nations share the wish of most Britons in seeing the Maastricht process fail.

The central European nations are not as poor and backward as commonly assumed, and are in fact significant markets. The purchasing power of the populations of the Czech Republic, Slovakia and Hungary at the current exchange rate is about twice that of Russia; and Poland's is five times as great. What these nations really need is a boost to their confidence, not cash or expertise. The foreign press can help in this.

Finally, if Nato becomes more efficient in keeping Russian expansionism at bay, central Europe will not need to tie itself to the west so desperately. The anticipated handouts by the Group of Seven nations to Yeltsin are certain to end up with the Red Army and entail another cold war.

Jansen Raichl,

Anglo-American College

in Prague,

PO Boc 524,

111 21 Prague

QR European Economic Community (EC) P9721 International Affairs NEWS General News P9721 The Financial Times London Page 22 225
Book Review: Pessimistic blast from the past Publication 930415FT Processed by FT 930415 By DAVID MARSH

HANDELN FUR DEUTSCHLAND By Helmut Schmidt Rowohlt Berlin, DM 34, 256 pp

When authors start thinking about Germany, they often lie awake at night. While preparing this passionate recitation of the challenges facing united Germany (featuring the subtext that, had a certain well-known snuff-taking statesman remained in charge, things would not be in such a mess), former Chancellor Helmut Schmidt did not, one suspects, enjoy much sleep.

He reveals that, during preparation of the manuscript, he dreamt a Nazi government came to power and banned publication of Die Zeit, the weekly newspaper of which he became co-proprietor after leaving office in 1982.

The nightmare seems to have strengthened Schmidt's conviction that, should unification go awry, Germany would be threatened by extremism: 'On no account should we ever again allow a rise of left or right-wing fundamentalism.'

Schmidt as chancellor between 1974 and 1982 won a worldwide reputation for brainpower and efficiency. This was, however, only one side of his character. In this book we glimpse Schmidt the moralist, the schoolmaster and the patriot.

His point of comparison for today's nation is the Germany of Hitler and the Germany of the Weimar republic. In view of the legacy of the past, and what he terms as the Germans' tendency to intolerance and ideological excess, Schmidt pointedly says that, even after unification, Germany is 'not normal'.

His central thesis is that reunification is a blessing, but the political establishment has failed to master the consequences. 'The German nation is in an infinitely better state than at any time since 1933. All Germans are free; all are equal before the law; we have elected our government and can vote for another one; we need fear neither violence by the state, nor secret police; our standard of living is high; our external security is not seriously under threat. At the same time our situation is in no way satisfactory. We have made serious errors, and we are placing ourselves in further danger through prejudice, egotism and sloth.'

Although his views sometimes appear over-pessimistic, the persistence and clarity with which Schmidt puts them forward are admirable.

It is a pity that he allows the contempt with which he regards his successor, Helmut Kohl, sometimes to cloud his judgment.

Kohl wins praise for having seized the chance of German unification in 1990. Otherwise, the chancellor is portrayed as a combination of knave and buffoon. 'Practically everything else which Kohl undertook after October 3 1990, the date of German unity, was partly wrong, partly mistaken, too hesitant and too late.'

Schmidt indulges in his leaning towards apocalyptic views when he writes in the opening chapter that missed chances since 1990 raise the risk that united Germany could have 'only a limited life'.

But his overall conclusion is surely correct. The passage of German unity has been made still more difficult by policy errors in Bonn, principally the government's underestimation of the hurdles facing economic recovery in the east. He believes that, unless Germans in east and west show a far greater willingness to share the burdens of reunification, Europe's pivotal nation will remain unsettled for a relatively long period.

In laborious detail, Schmidt sets out problems and solutions. He covers everything from asylum policy and the Bundeswehr to measures to reduce the budget deficit. In view of the recession, he is against tax increases for the moment. Schmidt calls on the Bundesbank - his bete noire - to cut interest rates substantially. And he takes the central bank heavily to task for obstructing the road to European monetary union. It is 'unhealthy', he says, that the Bundesbank president appears more powerful than the German foreign minister.

The best parts of the book are where Schmidt shows his more human side. There is a somewhat puritanical streak here. A fierce assailant of the debilitating influence of television, he suggests that schoolchildren hold regular classroom discussions on the nature and content of television programmes. Schmidt closes the book with an emotional and eloquent appeal for ordinary Germans to tighten their belts and show 'solidarity' to make unification a success.

For all the power of his arguments, the book has some shortcomings. One lacuna concerns his own previously held views on German unity. As late as summer 1990 he was on record as predicting East German unemployment would start to fall as recovery took place from 1992 onwards. Some hint of the fallibility of his earlier predictions would not have come amiss.

Schmidt also seems to hold fluctuating views on the political reliability of his countrymen. In connection with post-unity decision-making, he writes: 'I have no real confidence in the political constancy of our people.' Yet he also claims that the German electorate 'have understood our position and our difficulties better than the politicians'.

The most important contradiction involves Europe. Although a convinced supporter of European union, he indicates that a unified Europe will not be possible until his own country 'has brought the process of German unity, politically and economically, to a successful conclusion'.

By then, however, it may be too late. For Schmidt also records that if Europe does not adopt a single currency by 2000, 'the D-Mark will, with virtual certainty . . . dominate the whole of Europe'.

Because of the burdens of history, and his lack of faith in the political acumen of his compatriots, Schmidt does not want the D-Mark to rule Europe. His account none the less leaves the reader with the impression that this will be the most likely outcome.

GB United Kingdom, EC P2731 Book Publishing TECH Products & Product use P2731 The Financial Times London Page 22 952
Arts: Dustin Hoffman versus Our Lady of the Lingerie - Cinema Publication 930415FT Processed by FT 930415 By NIGEL ANDREWS

ACCIDENTAL HERO (15) Stephen Frears

BODY OF EVIDENCE (18) Uli Edel

Dustin Hoffman in Accidental Hero plays a petty crook seized by a sudden surge of selfless bravery. One rainy night he rescues 54 people from a burning plane.

There he is, juddering through outer Chicago in his noisy-wipered car, when the steel monster falls from the sky. Soon the passenger plane is lying across the road, its fuselage steaming, its drooping snout caricaturing Dustin's own. With a sigh our hero climbs from his car, doffs his Dollars 100 shoes, sloshes through the rain, does his bravest, then vanishes into the night.

This movie has everything. Comedy, drama, air crash, lovable superstar, script by David (Unforgiven) Peoples, and the wonderful Geena Davis as a survivor-newsreporter who sleuths after the 'accidental hero.' Yet we keep thinking, 'When is it going to start?'

Rhythm is the most elusive of movie qualities and it is missing-presumed-fled for most of Accidental Hero. Just when the story has begun to make sweet music with its contrapuntal portraits of Hoffman, the gutter-bred crook trading in secondhand patter and stolen credit cards, and Davis, the high-flying journo seeking a 'human interest' scoop, a third character ruinously interlopes. This is Andy Garcia, underscripted and underplayed as a sweetnatured hobo who claims a newspaper's Dollars 1m reward by claiming he was the phantom rescuer. (He has come into a vital piece of evidence).

And just when we think the story is dancing brightly, caustically to the themes of press-and-media folly and the paradoxes of heroism, in come disruptive stretches of andante (Garcia romancing Davis) or adagios of soggy folk wisdom exchanged between Hoffman and his young son.

British director Stephen Frears usually goes straight for the vernacular of human behaviour. His best films - My Beautiful Laundrette, The Hit, Dangerous Liaisons - present human beings demotically, sardonically, as chattering egos and appetites on legs. But a large-budget Hollywood project brings its own baggage of populist bet-hedging. Accidental Hero's cluttered plot and style testify not just to the three names in the 'original story' credit (Laura Ziskin and Alvin Sargent as well as Peoples) but to a desire to provide Something For Everyone. Schmaltz with the cynicism; romance with the misanthropy; young pretender (Garcia) with ageing superstar.

The result is less a healthy balance of ingredients than a recipe for frustration. By final reel the movie has become mercilessly multi-directional. Newshound Davis shuttles between her two hero suspects; Hoffman shimmies between anonymity and limelight; minor characters yell for their last two cents' worth of screen time (Chevy Chase's newspaper editor, Joan Cusack as ex-Mrs Dustin). And let us throw in a final suspense vignette with Hoffman and Garcia teetering on the high ledge of a skyscraper. It is at once too much and too little. As so often in cinema, 'something for everyone' means not enough for anyone.

The week's only other release is Body Of Evidence: a large, squishy, self-important object masquerading as a movie. The star is Madonna, whose screen career continues to take two steps backward for every one step forward (Dick Tracy, A League Of Their Own). Here Our Lady of the Lingerie is accused of using her body to murder a rich old man who died in the throes of sexual ecstasy.

True or not, she is soon doing much the same to defence counsel Willem Dafoe. He has no defence against a woman whose love techniques range from dripping hot wax on his genitals to coupling on a car bonnet strewn with glass from a smashed lightbulb. (We are in the courthouse's public car park at night).

Occasionally bits of plot break into the sex scenes, with the awkward diffidence of a butler asking if Moddom and the gentleman would like some tea. Joe Mantegna, Anne Archer and other worthies stand about the courtroom doing the where-were-you-on-the-night-of routines. Then it is back to the handcuffs, hot wax and car bonnets. If Mr Dafoe were a Chevrolet he would be in mint condition by the end of this film.

In a thin movie week - no, let us call it skeletal - you can always read about films rather than seeing them. My spring bookshelf is buckling under the new movie tomes: not least those representing that major modern trend, the 'So-And-So on Himself' monograph.

Best of these are Malle On Malle (Faber, Pounds 14.99) and Levinson On Levinson (Faber, Pounds 8.99). Both are short on preamble and long on substance. In the first, editor-interviewer Philip French gives us a brisk prefatorial trip through Malle's early life - born into the Beghin sugar dynasty, educated by Jesuits (see Au Revoir Les Enfants), baptised as a film-maker in Cousteau's deep-sea documentaries - and then plays Plato to Malle's Socrates as we movie into film publishing's answer to a Platonic dialogue.

Malle's talk is as good as his films, alive with supple details and sudden revelations. On the difference between cinema verite and cinema direct; on the Vuillard paintings he looked at as inspiration for Pretty Baby; on the knack for finding the right unknown actor for a lead role (Pierre Blaise in Lacombe Lucien); on the challenge of making an all-talk film 'cinematic' (My Dinner With Andre). His versatility of style and range of interests as a film-maker have made Malle outlast the New Wavers he grew up alongside (Godard, Chabrol, Rivette) and next to whose dry avant-gardism he seems a maverick humanist.

Barry Levinson's articulacy is more plainspun. This gifted social fabulist specialises in the underside of the American Dream: the lives of the dispossessed (Diner, Rain Man) or dispossessing (Bugsy). As a talker, his style can be as tousled and rambling as his characters'. (Editor David Thompson might have used a bit more scissorwork). But there are witty tales and revealing insights: especially about the constant war in film-making between perfect blueprint and brute reality.

For Memory Lane movie buffs, what better than Aljean Harmetz's Round Up The Usual Suspects (Weidenfeld & Nicolson, Pounds 15.99)?. Celebrating fifty years of Casablanca, the author rounds up some usual and unusual stories about the making of everyone's favourite Hollywood potboiler. You will read about a casting near-miss for Ronald Reagan, about just what Humphrey Bogart did say to Dooley Wilson at the piano (after Wilson came in as casting replacement for Ella Fitzgerald), about Paul Henreid and the 'white suit controversy', and about whether anyone knew what the film's ending would be before the day came to shoot it.

As for why the film has become a perennial, Harmetz lays out the choices: from those seeing a gay subtext in Rick/Bogart's friendship with Renault/Claude Rains to others claiming an allegory about President Roosevelt hesitating to commit America to the Second World War. Far-fetched? Ah, but Harmetz reminds us that 'Casablanca' is Spanish for 'White House.'

Casablanca goes unmentioned in Christopher Palmer's The Composer In Hollywood (Marion Boyars, Pounds 19.95): no doubt on the grounds that Max Steiner had to score the film around someone else's tune. But if 'As Time Goes By' robbed him of royalties, Steiner's Gone With The Wind theme made up. Who can ever see a poster or still picture from that film without mentally hearing those soaring strings?

These and other harmonic brainstorms are the subject of Palmer's book. Despite the odd solecism - The Snake Pit was hardly 'the first picture set in a lunatic asylum' ( The Cabinet Of Dr Caligari pre-dates it by 30 years) - this is a plain man's guide written without plainness. Read Palmer waxing eloquent on Miklos Rosza's Ben-Hur score, on Bernard Herrmann's screeching Psycho strings or on Franz Waxman's weaving of styles in the moody and marvellous Sunset Boulevard score. 'The theme is set in the Phrygian mode ..Hispanic overtones ..motoric rhythms ..nonchalantly syncopated.' Who says that scholarship and showbiz cannot live in productive harmony?

GB United Kingdom, EC P7812 Motion Picture and Video Production NEWS General News P7812 The Financial Times London Page 21 1349
Arts: Order and chaos in Arcadia - Theatre Publication 930415FT Processed by FT 930415 By MALCOLM RUTHERFORD

With the possible exception of Michael Frayn, Tom Stoppard has long been the wittiest of contemporary British playwrights and one of the longest running. His Rosencrantz and Guildenstern are Dead opened at the National Theatre over 25 years ago and has been an international success ever since. Of the British dramatists who came to the fore in the early 1960s, only Harold Pinter has kept up with him in terms of reputation.

Stoppard can cope with a complex brief, like the moral philosophy in Jumpers, which was reviewed in the Sunday Times not only by the theatre critic but also by the philosopher A J Ayer. It has been said that he regards writing a play as an examination: 'He spends ages on research, does all the necessary cramming, reads all the relevant books, and then gestates the results. Once he's passed the exam - with the public and the critics - he forgets all about it and moves on to the next subject.'

In Arcadia, his subject is higher mathematics, not forgetting his work on physics in Hapgood. The production, directed by Trevor Nunn, is faultless. The lighting by Paul Pyant is immaculate. There is nothing much wrong with the acting, but I wish I could say more for the play.

Stoppard has always written about the contradictions and apparent similarities between order and chaos. Here he takes on too much, some of which is not remotely theatrical. There is the love life of Lord Byron and landscape gardening. The presentation of non-linear mathematics will seem self-evident to anyone who tries, however distantly, to follow economics. Others will find it distracting in a play that wanders between the early 19th century and the present. Nothing is proved; not much happens.

Kenneth Tynan suggested a rule about Stoppard is that 'the shorter the play, the harder it is to summarise the plot without sounding unhinged'. Arcadia defies the Tynan dictum. It runs for over three hours, yet the plot is unclear. No-one knows who made love to whom, nor is there any reason to care. Byron never appears. Instead there is a minor poet called Chater who does not look or sound like a poet at all. There is also a landscape architect named Noakes who, played by Sidney Livingstone, might develop into an interesting character if allowed to do so. Stoppard cuts him off.

That is the 19th century bit. The modern bit is - to use a Stoppard word - no less a travesty. There is a don called Bernard Nightingale (played by Bill Nighy) who no more resembles a scholar than Chater resembles a poet. The name, so similar to that of the chief theatre critic of The Times, may be a private joke by Stoppard. It is not very funny. Bernard Nightingale is one of the weakest parts. Benedict Nightingale would have written the lines much better.

There is also Felicity Kendal who is a very good actress. She plays an author who has written about Byron. Why she is so cold to those about her is left, like so much else, uncertain. Possibly this is the cooling theory of the universe.

The paradox is that some of the lines and situations are very good, but none of them comes from Stoppard's erudition. Most belong to Ms Kendal, such as her response to the gardener advising her to advertise for a hermit to put in his hermitage in the newspaper: 'But surely a hermit who takes a newspaper ..?' This is the Stoppard of old, and there is not enough of it.

Still, do not be deterred. Here we have the National Theatre trying to be witty and serious at the same time and an audience willing it to succeed. It's a near miss. Tynan would have cut it. He wrote that 10 days before first night Jumpers was running close to four hours. Told by Lawrence Olivier that Stoppard would object, Tynan as dramaturge imposed the cuts unilaterally: no-one demurred and it became a much better play.

Lyttelton Theatre. Sponsored by Digital Equipment Co Limited.

GB United Kingdom, EC P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 21 715
Arts: Royal Opera House forecasts operational surplus of Pounds 266,000 for present financial year Publication 930415FT Processed by FT 930415 By MAX LOPPERT

The Royal Opera House is projecting an operational surplus of Pounds 266,000 for the financial year 1992-3.

At yesterday's press conference, Sir Angus Stirling, the ROH Chairman, was in a quietly bullish mood as he revealed how the house managed to confound gloomy forecasts for the period.

The sum had been achieved by a 'year of steely endeavour' - economies in night-work, Sunday rehearsal and overtime, a wage freeze from last September, and alteration of the performance schedule by means of production cancellations and extra performances.

The opera and dance companies have notched up an average 85 per cent capacity, more than the house's achievement previously, which compares very favourably with the West End's 64 per cent during the same period. The surplus, together with an anonymous donation of Pounds 500,00 (the first part of a gift of Pounds 2.5m, which is to be spread over the next three years), will go further toward reducing the accumulated deficit. Since the house is also budgeting for a surplus in 1993-4, they expect that deficit to be eliminated by the end of the next season.

At the same time as giving these figures, the ROH published a response to the recent Arts Council Appraisal under Baroness Warnock in the form of a point-by-point listing of the committee's recommendations - the majority accepted by the management - together with the steps that have already been taken to implement them. Among these is the decision to widen the constituency of the ROH Board so as to render it more accountable: in future, all appointments will be made with the approval of the Heritage Minister.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups FIN Annual report P7929 The Financial Times London Page 21 311
Arts: New York Philharmonic 150th anniversary season - Concert Publication 930415FT Processed by FT 930415 By DAVID MURRAY

Under their new(-ish) music director Kurt Masur, the NYP played the Royal Festival Hall on both Monday and Tuesday. Monday's was the solider programme ' Mozart, Strauss's Till Eulenspiegel and the Second Symphony of Brahms. On Tuesday, besides Samuel Barber's familiar Adagio we got only Dvorak's 'New World' Symphony (probably a bigger draw in the New World than in London now), and a wholly unfamiliar work by a Sino-American composer: plenty of room left for encores, and many seats going spare at Pounds 40.

In distinguished form for its 150th anniversary season, the NYP was a continual pleasure to hear. And not only in the departments where all the best American orchestras excel - brilliantly reliable brass, strong, thrusting cellos, ultra-precise rhythms all round; for in Masur the orchestra has found, after some post-Bernstein ups and downs, just the echt-European musician they needed and deserved ('at this point in time', as they might say).

Most of those other orchestras are happiest when loud and dazzling, and a few of them cultivate a dramatic pianissimo too. Masur, however, seems to have made the NYP sensibly, graciously at home with all the gradations in between. Even in their Strauss it wasn't the extremes that counted most, but the main argument - steady, temperate, scrupulously shaded, with each orchestral section contributing a unanimous voice. They seemed two or three times as well-rehearsed as our London orchestras do at home (but so do ours, often, when they're abroad).

The glory of these two concerts was beyond doubt the NYP's Brahms no. 2. It is not a personal favourite: many a music lover may think, as I usually do, that Brahms's towering academic ingenuity here was disproportionate to a fairly tame range of feeling, and would for choice hear his 1st or 3rd or 4th symphonies instead. While Masur's performance lasted, one couldn't have thought that. From top to bottom the polyphony sounded vital, fluent and pointed, at once densely expressive and sunnily transparent. To jaded ears it came as a tonic and a hugely professional revelation; it flowed cogently, glowed and convinced.

Strauss's Till was more 'interesting' than persuasive. Masur's natural sympathies do not run to unbuttoned fun. We had to be content with a vivid (but always coolly contrived) pounce-and-splash here and there, amidst the deliberate workings-out. There was an ace first horn, and for the violin solos the NYP leader's bright, sweet, fast-vibrato tone was just right. Less so in Mozart's Sinfonia Concertante, where he sounded tight and over-pretty - probably because his young co-soloist Cynthia Phelps, the NYP's new(ish) first viola, is a model of lovely, straight-speaking musicianship.

On Tuesday Dvorak's 'New World' seemed to aspire beyond its homely deserts ' ethnic cosiness is not Masur's forte ' toward a slightly fictitious grandeur, despite Thomas Stacy's dewy cor anglais solo in the Largo. 'Bright' Sheng's H'un (his American forename translates his Chinese 'Liang', and the title means something like 'wounds') proved to be a bitter epitaph for the Cultural Revolution, through which he lived in his teens before he fled to America in 1982. From a standpoint of Political Correctness his 20-minute piece is faultlessly sincere: first, variously shrill evocations of horror (with Chinese bass drum), and then numb, grievous reflections.

On first hearing, nonetheless, H'un struck me as short-breathed and under-composed. Further acquaintance might discover deeper patterns; or perhaps its patterns respond too closely to the folk-music of Qinghai Province on the Tibetan border, where Sheng spent his formative years, for Western ears to cotton on to them easily. While the passing sounds were pungent, the musical sense remained opaque, bitty and generalised.

GB United Kingdom, EC P7929 Entertainers and Entertainment Groups NEWS General News P7929 The Financial Times London Page 21 639
Arts: Today's Television Publication 930415FT Processed by FT 930415 By CHRISTOPHER DUNKLEY

How long before sexy Sister Gabriel gives up her nasty habits and starts strutting her stuff in patent stilettos and high sheen Lycra tights? Body And Soul is one of those splendidly slushy family sagas which we are no longer supposed to call 'women's stories', involving a nun who has been hidden away in an enclosed order for umpteen years and has emerged because her brother killed himself in Episode 1. Now (I am not making this up) there's trouble at t'mill. Mark my words, Sister Gabriel will turn out to have the business brains of a Getty under that wimple and the villainous Stan Beattie will find he has bitten off more than he can chew (9.00 ITV). Gratifyingly Joan Bakewell returns to the screen with a brand new series: Memento (8.00 C4) which admits to being inspired by 'Desert Island Discs'. The guests - today's is David Attenborough - choose their 10 most prized personal possessions. True Stories is a 1 3/4 hour documentary about Aileen Wuornos, a prostitute on America's death row who admits to killing seven men and has been called 'the first female serial killer' (9.30 C4).

GB United Kingdom, EC P7812 Motion Picture and Video Production TECH Services & Services use P7812 The Financial Times London Page 21 225
People: 1992 Veuve Clicquot Business Woman of the Year Publication 930415FT Processed by FT 930415

Patsy Bloom, managing director of Pet Plan, was yesterday named the 1992 Veuve Clicquot Business Woman of the Year.

Her company, which specialises in insuring small animals and horses, was set up 16 years ago with a Pounds 250 loan when Bloom discovered that no company would insure her dog. Pet Plan now holds 51 per cent of the small animal market and a large slice of the leisure horse market; the concept is franchised in Italy and Canada. Turnover has increased from Pounds 7.8m in 1989 to a projected Pounds 20m in 1992.

Previous winners of the award include Anita Roddick, founder of the Body Shop, and Ann Gloag, founder of Stagecoach.

Pet Plan GB United Kingdom, EC P6399 Insurance Carriers, NEC NEWS General News P6399 The Financial Times London Page 20 148
People: Cranfield School of Management Publication 930415FT Processed by FT 930415

Keith Ward has been appointed to the new post of professor of financial strategy at Cranfield School of Management.

GB United Kingdom, EC P8299 Schools and Educational Services, NEC PEOP Appointments P8299 The Financial Times London Page 20 48
People: Alas ..poor Warwick Publication 930415FT Processed by FT 930415

Colin Mayer is returning to Oxford for the second time since his undergraduate days, this time as Peter Moores professor of management studies, a flagship post for the university's new business school.

It was only at the beginning of this academic year that Mayer took up the chair of economics and finance at Warwick; but he says that the Oxford position was 'made available a bit earlier' than expected. There will be some overlap in the jobs, as he has agreed to see out his responsibilities at Warwick for the next academic year as well, while formally starting in Oxford next April.

As deputy director responsible for the school's academic development, he will report to the director of the School of Management Studies, Clark Brundin. The two have crossed paths before; when Mayer read engineering science and economics, Brundin was one of the lecturers; later, when Mayer was appointed to the Warwick job, Brundin was vice-chancellor.

Of the Warwick connection, Brundin comments: 'It was genuinely pure coincidence. I chaired the committee that appointed him to Warwick, but it is not proper to go headhunting in one's old institution.' Instead Mayer's name was put forward by a member of the electoral board.

Mayer, 39, worked in the Treasury for two years before taking up a fellowship at St Anne's College, Oxford. More recently he was professor of corporate finance at City University. He has researched extensively into the effect of financial systems on corporate activity, and says he is shifting focus now more towards relations between companies - cross-shareholdings and the like.

Aside from research, he sees his new role as 'attracting the very best academics and helping to design first-rate courses'.

Oxford is now looking for a deputy director in charge of the MBA programme, at Reader level.

GB United Kingdom, EC P8221 Colleges and Universities PEOP Appointments P8221 The Financial Times London Page 20 324
People: Investment Trust figurehead Publication 930415FT Processed by FT 930415

Murray Johnstone, the Glasgow fund manager, has reaffirmed its strong Scottish roots by appointing Royal Bank of Scotland chairman Lord Younger as its investment trust figurehead.

Lord Younger, 61, a member of the George Younger brewing family and former secretary of state for Scotland, has been appointed chairman of Murray Income Trust, Murray International Trust, Murray Smaller Markets Trust and Murray Ventures, the four main trusts which are managed by Murray Johnstone and which also control the firm. He takes over from Sir Ian Denholm, 65, the Scottish ship-owner, in the chair since 1985.

Nick McAndrew, Murray Johnstone's chairman, has known Lord Younger since their schooldays together. 'I asked him if he would like to have a job on the west coast as well as the east coast, and he accepted,' says McAndrew, who notes that Younger lives halfway between Murray Johnstone's base in Glasgow and the Royal Bank's Edinburgh headquarters.

Although it is relatively unusual for a fund manager to appoint the same chairman to all its investment trusts, McAndrew says that 'it is the way we have historically done it'. He did not think the practice raised any corporate governance issues and stressed that the boards of the Murray trusts were made up of independent non-executive directors. Unlike some competing trusts, his fund managers did not sit on the boards of the Murray trusts.

Murray Johnstone GB United Kingdom, EC P6726 Investment Offices, NEC PEOP Appointments P6726 The Financial Times London Page 20 255
People: Kleinwort Benson Ltd Publication 930415FT Processed by FT 930415

As from the beginning of this month John Baird, Oliver Farley, Nick Gaynor, David Hutchison, Richard Millward, Jonathan Flory, Mark Hyman, Jakob Kinde, Ben Morgan, Konstantin Von Klitzing, John Ball, Mahmood Jumabhoy, Allan McKenzie, Douglas Rouse, Victor Halle and Stephen Jack have been appointed directors of KLEINWORT BENSON Ltd.

Murray Davey, Bob Griffin and Simon White have been appointed directors of Kleinwort Benson Investment Management.

Kleinwort Benson Kleinwort Benson Investment Management GB United Kingdom, EC P6211 Security Brokers and Dealers PEOP Appointments P6211 The Financial Times London Page 20 99
People: Interventionist climbs Whitehall ladder Publication 930415FT Processed by FT 930415

Taking a further step up the Whitehall career ladder is Robin Mountfield, 53, who is to become the Treasury's new deputy secretary in charge of civil service pay and management. The job provides a broad perspective of the civil service and has been used in the past to train promising mandarins for the top Whitehall role of permanent secretary.

Mountfield, who has been at the Treasury for less than a year after a 19-year stint at the DTI, is currently head of the Treasury's industry division.

For most of his civil service career Mountfield has been known as an unashamed interventionist, who was thrilled by his 1970s job of taking the aerospace industry into state ownership. It is testimony to his flexibility of character and good nature that he continued to prosper during the laisser faire years of Lady Thatcher.

With the UK government now stepping up efforts to make Whitehall more sympathetic to the needs of industry, Mountfield probably feels his star is in the ascendancy. Taking over from him as head of the Treasury's industry division, which also carries the rank of deputy secretary, is Steve Robson, 49, who is currently in charge of the Treasury's public enterprises group and is an expert on public expenditure.

Mountfield replaces Michael Scholar who becomes permanent secretary at the Welsh Office. Scholar displaced Hayden Phillips, who left the Treasury to become permanent secretary at the Department of National Heritage.

GB United Kingdom, EC P9199 General Government, NEC PEOP Appointments P9199 The Financial Times London Page 20 265
Technology: Breathing life into the oilfields - The Brent field is making world oil history Publication 930415FT Processed by FT 930415 By JAMES BUXTON

Shell UK rolled out the superlatives last week when it announced a Pounds 1.3bn project to extend the life of the Brent field in the North Sea. It said the project was unique, a landmark in world oil history and the biggest single project undertaken in the history of the UK North Sea, with the possible exception of the development of Brent in the first place.

The scheme, which Shell and its subcontractors have already begun, is aimed at extracting more oil and a great deal more gas from the Brent field, already the biggest combined oil and gas field in the UK North Sea. It means Brent should still be in production by about 2010, instead of closing as originally planned in 1998.

The project entails reducing the pressure in the field, by making large modifications to three of its four production platforms. Depressurising an oilfield is almost unheard of, but depressurisation is standard practice in gas fields. What is happening is that Brent is gradually being converted from an oilfield into a gasfield.

Shell UK believes this operation has been carried out on an oilfield only once before, on a tiny scale in the US. The Brent redevelopment is unique because of its scale and because it is being carried out in the notoriously hostile waters of the northern North Sea - about 120 miles off the Shetland Islands. The field will remain in production at a reduced level during the five years the work goes on.

Though the work will be carried out on the vast steel platforms, its effect will be felt in the unseen world of the hydrocarbon reservoirs, lying between 8,700 and 9,400 feet below the seabed. The two reservoirs, one above the other, consist of porous sandstone which contains oil in which gas is dissolved.

In common with most reservoirs, pressure in Brent was high when Shell began producing in 1976. This helped the oil to flow through the wells up into the platforms, but so that pressure was maintained as oil was removed, water was pumped in, a standard oilfield method known as waterflood. The high pressure locks the gas into the oil and currently the gas is separated from the oil on the platforms, which are really offshore process plants. The theory behind depressurisation is that the gas is allowed to come out of the solution of oil and gas naturally.

The first stage of depressurisation, beginning in 1997, after two of the platforms have been converted to low pressure facilities, is to stop injecting water. The reservoir pressure will begin to fall, liberating increasing amounts of dissolved gas from the oil. However, to prevent the reservoir ceasing to produce oil at all, some gas will be injected into the wells to bring the fluid up to the platforms for separation.

The second stage - deep depressurisation - will begin early in the next century. This time, pressure will be allowed to drop further by limiting the flow of water into the reservoir from the aquifer which lies underneath it.

To do this the wells and pumps which were previously used for injection will be used to extract water, supplemented by submersible pumps.

By the end of the operation in about 2010 the pressure in the reservoir should have fallen to 1,000lb per square inch (70 times atmospheric pressure at sea level) from the 5,500lbs per sq inch in 1997.

To make the operation possible the Brent Bravo, Charlie and Delta platforms will each be shut down for a year to remove redundant gas separation and compression equipment and install new process modules. Brent Alpha will be upgraded but not converted to low-pressure operation. All four will be refurbished and upgraded for longer life and new safety standards.

By the time the Brent field is abandoned, some 55 per cent of all its oil and 80 per cent of its gas should have been recovered. Brent's recoverable gas reserves should have been boosted by 1,500bn cu ft to 5,400 bn cu ft, and its recoverable oil reserves increased by 34m barrels to almost 2bn barrels, the equivalent of adding a small oilfield and a medium-sized gasfield to the UK's hydrocarbon reserves.

Shell UK GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas RES Facilities TECH Technology P1311 The Financial Times London Page 20 747
Technology: Fax for advertisers Publication 930415FT Processed by FT 930415 By DELLA BRADSHAW

A perennial problem for advertisers is to ensure that readers, listeners or viewers of their commercials phone up for more information. Freefone telephone numbers are 'instant', but they are expensive to operate.

LBC, the independent London radio station, is pioneering a service in the UK which is considerably cheaper to operate than traditional 'phone-in inquiry services and is available to anyone with a facsimile machine.

Advertisers give a fax number at the end of their commercial and supply LBC with the documents to send to listeners. When the consumer telephones the number the document is automatically transmitted.

The cost to the advertiser is Pounds 25 per week for the telephone line plus 15p per minute for the calls. 'The advertisers have control of the costs,' says Bob Cole, chief sales manager for LBC. 'If they want to send 10 pages of information it's up to them. If they can squeeze all the information on to one sheet then it's much cheaper.' The caller pays the cost of an ordinary telephone call.

The Q-fax service works because almost every fax machine in the country has a little-used function known as 'polling'. During the transmission of a normal fax message the transmitting machine first sends out a message giving its identity. With polling, the other machine recognises this number and then sends back the required document.

Henry Fletcher, managing director of Eurofax Communications, which offers the Q-fax service, believes it could be used to support many kinds of advertising and promotion.

Cole believes the initial interest, however, will be for business-to-business advertisers. He cites the example of financial advisers who can use the radio to advertise generic services and then send details, including all the small print, by fax. 'It makes radio a much more measurable medium,' he says. 'It's existing technology but with a major twist.'

GB United Kingdom, EC P3661 Telephone and Telegraph Apparatus P7319 Advertising, NEC TECH Services & Services use P3661 P7319 The Financial Times London Page 20 342
Technology: A message about savings - The humble fax machine may be costing more than most companies think Publication 930415FT Processed by FT 930415 By DELLA BRADSHAW

In the office, at home, in the car, in a briefcase, the facsimile machine has crept into everyday life. But few companies have any policy on the way fax machines are used, or even know how much they cost to use.

'The true bottom line of running a fax machine is never known. There is no centralised control whatsoever in many companies,' says Meredith Fischer, vice-president of marketing at Pitney Bowes' fax division. 'It's time to start setting fax policies,' she continues. If not, she warns, companies 'will continue to bleed money'.

Companies which have set a fax policy have noted tremendous financial savings coupled with improved management control.

CT Bowring, one of the UK's largest Lloyd's insurance and reinsurance brokers, installed a centralised fax switch from Comwave. Clement Lim, UK director of Marsh and McLennan Information Services, which owns CT Bowring, reports substantial savings - Pounds 500,000 over five years is a 'conservative' estimate, he says. Nor does that take into account the tremendous increase in the number of faxes sent - up from 1.2m pages a year to 2m.

Although the boom years for fax equipment are over, the use of fax machines is spiralling upwards. A survey conducted by Gallup for Pitney-Bowes shows a remarkable surge over the past year. In 1991-92, Britain's top 1,000 companies reported sending an average 40 documents a day; this year, that figure was up to 93 documents. 'Unless something fundamentally changes in the way we use fax there is really no escaping that volumes will go up,' says Fischer.

Fischer argues that companies are slow to calculate the accumulating costs of faxed documents. She advocates analysing for each machine the number of pages received and sent and the proportion of those received on thermal paper which are then photocopied. 'If you don't go through this process you don't know what you're spending. The numbers get so huge, everybody laughs at you.'

At the most basic level, there is the decision about whether to swap cheaper thermal fax machines for machines which use photocopier paper. Recessionary times have forced down the price of plain paper faxes to around Pounds 2,000, scarcely more than thermal machines.

Savings can be made by switching to plain paper ones 'in the right application', says Andrew James, consultant at BIS Strategic Decision - that is, where lots of faxes need to be photocopied if a thermal fax machine is used. Taking secretarial costs and paper into account, Fischer reckons that it costs 60p to copy each document.

Steve Robinson, marketing manager for fax at Rank Xerox, believes that when the 1m thermal fax machines bought in the UK over the past four years are replaced, they will be ousted by plain paper machines. Such optimism is borne out by Dataquest, the IT research consultancy. 'The middle market of the high-end thermal machines has been killed off,' says industry analyst Jeffrey Goldberg.

Whereas 1992 saw the predomination of laser fax machines, which use laser printers to print out the document, Goldberg believes 1993 will be the year for inkjet fax machines, where tiny dots of ink are squirted on to the paper. Inkjet technology is cheaper than laser equipment, but each sheet received works out to be more expensive.

Other types of machines can produce greater savings, even if many of those are difficult to quantify. A fax card, fitted into the back of a PC, costs about Pounds 600 but enables the user to send a fax directly from the PC. There is no need to print out the document or hover over the fax machine to ensure it is sent.

Offices with larger PC networks can give users access to fax technology at their desktop. Some systems need an operator to guide each incoming fax to the correct recipient but others attach a code to the fax number to identify the individual PC.

One of the basic requirements for fax switch user CT Bowring was to have a centralised number for all faxes to prevent outsiders having to learn up to 60 different ones - for marine, aviation and so on. But many additional management controls have resulted.

The fax switch logs and saves all messages for two weeks, so that if a fax is mislaid a copy can be made. After two weeks all messages are copied on to optical disc and stored for 10 years.

'We have installed everything from mainframes to complicated PABXs. But the thanks and praise we got for installing the fax switch were out of all proportion,' reports Lim. The quality of the final fax, he believes, is what really impresses CT Bowring employees.

Other advantages accrue. 'Fax switches cut down maintenance costs dramatically and greatly reduce the cost of consumables (paper, toner),' reports Rank Xerox's Robinson.

However, for many companies the stand-alone fax is still the only answer. 'I think we're a long way from the one PC per desk scenario, and until then there will still be a need for stand-alone faxes,' points out Graham MacIntyre, fax marketing manager at Canon.

However, recognising that companies need centralised control of their fax machines in order to cut costs, manufacturers are looking at ways of controlling the desk-top machines centrally, says Keith Wright, national fax sales manager at Panasonic Business Systems.

Within the next 18 months, electronic wizardry will be available to filter out all outgoing faxes to popular locations - from the London office of a big corporation to the New York office, for example. They will then be stored and sent at off-peak times. 'What happens at the moment is that these documents are sent at peak times and there's no one there to see them anyway,' says Wright.

As well as using off-peak transmission times this service would cut down the length of the call because the 'handshake', which takes up valuable time at the beginning and the end of a call, would only be transmitted once. The calls could also be routed via cheaper data lines, or faxes could be sent via another office - from London to San Francisco via New York - if cheaper lines could be used.

Such centralised systems would greatly reduce the need for training - for many companies training today is minimal. As Fischer puts it: 'Most of the time training is left to the person who sits nearest to the machine.'

GB United Kingdom, EC P3661 Telephone and Telegraph Apparatus TECH Products & Product use P3661 The Financial Times London Page 20 1109
Management (Marketing and Advertising): The sound of cheap CDs Publication 930415FT Processed by FT 930415 By MICHAEL SKAPINKER

As the UK's national heritage select committee begins hearings today on the high price of compact discs, one Hong Kong-based company continues to sell CDs at less than half the price of the large groups while claiming to be twice as profitable.

Naxos, an independent classical label, says it sold 5m CDs worldwide last year for about Pounds 4.99 each. Although there is a wide range of prices in the UK, CDs featuring well-known performers can sell for nearly three times the Naxos price.

Klaus Heymann, Naxos's founder and owner, says the secret of cheaper CDs does not lie in reducing manufacturing costs. Although the company has its headquarters in Hong Kong, it manufactures in Germany, Japan and the US.

Heymann says to reduce costs by manufacturing in lower-wage countries would hurt Naxos's sales in Asia. 'The south-east Asian market will only buy CDs made in places like Japan and Europe - preferably Germany,' he says. It costs 80p to manufacture a CD, even in Japan and Germany. As the large music companies never tire of pointing out, manufacturing is a small part of the cost of producing a CD.

Heymann says he has some advantages over large companies when it comes to manufacturing. The company owns no factories. It contracts out all its manufacturing. Its repertoire is classical rather than popular, so that demand is more predictable.

But Heymann says he makes savings elsewhere. He does not use well-known performers such as Luciano Pavarotti and Herbert von Karajan. Instead he searches for artists who are keen to reach a wider public. Naxos orchestras include the UK's Northern Chamber Orchestra and the Budapest Symphony. Naxos performers are paid a flat fee rather than royalties.

Naxos, unlike the large record companies, does not produce more than one version of any particular piece of music.

With staff of only eight people in Hong Kong, Heymann estimates his overhead costs are 5p for each CD sold, compared, he says, with more than Pounds 1 for the large companies.

He sells his CDs to distributors around the world for Pounds 1.70 each. They sell them to retailers for an average of Pounds 2.78.

Heymann says that his net profit margin on sales of Dollars 20m (Pounds 13.2m) last year was 25-30 per cent.

Given public demand for well-known names and orchestras, many of Naxos's cost-savings could not be replicated by the large companies. But Heymann believes the big producers could still cut costs if they were less profligate. Naxos has no champagne signing ceremonies, he says.

'I'm not critical of the majors because of their prices,' he says. 'With the way they operate, they need those prices. I'm critical of the way they operate. Paying an artist a Pounds 50,000 advance for a recording that will sell 10,000 copies is crazy.'

HK Hong Kong, Asia P3652 Prerecorded Records and Tapes MGMT Management & Marketing COSTS Product costs & Product prices P3652 The Financial Times London Page 19 510
Management (Marketing and Advertising): Catering for the ethical shopper / A look at a growing consumer trend Publication 930415FT Processed by FT 930415 By NICOLE DICKENSON

Companies have long responded to green consciousness by making concern for the environment an important business objective. But a growing number of consumers claim to base their purchasing decisions on a much wider range of ethical issues.

David Grayson, managing director of the business strategy group at Business in the Community, uses the term vigilante consumer, coined by US trend-spotter Faith Popcorn, to describe consumers who are not just interested in the products or services they buy but the behaviour of the company behind the brand and the way the product or service is developed.

Vigilante consumers are a powerful force in the US, where the Council of Economic Priorities, a consumer group, has sold over 4m copies of its booklet Shopping For a Better World. This lists companies which have scored top marks on their record on issues ranging from animal testing to links with South Africa. The UK edition launched by the publishing house New Consumer in September 1991 has sold just 7,662 copies. But Grayson asserts that these consumers are a growing and vocal minority. A Mori survey showed that the number of consumers who rated a company's activities in the community as very important has grown from 33 per cent in 1991 to 35 per cent in 1992.

Sceptics say there are already signs that the prolonged recession has blunted the impact of green consumers. But proponents of the vigilante consumer argument maintain that ethical concerns will become integral to corporate decision-making in the 1990s.

Grand Metropolitan has long taken the view that corporate ethics affect consumers' purchasing decisions. Its public policy issues scan system in the US - a forward-looking data base of consumer concerns - tracks a wide range of issues that go beyond the food and drink industry. The most pertinent issues that are likely to arise in the next three to five years are sent to Grand Met's operating companies to assess their likely impact. Managers then decide whether to change policy, lobby government or direct efforts into re-educating the public.

Raymond Krause, senior vice-president of government and community affairs at Grand Met, believes the company's system is more sophisticated than its rivals. It is also expensive - updating the data every three years can cost Dollars 1m (Pounds 662,000) - but Krause claims there is a tangible benefit. He points to Grand Met subsidiary Green Giant which identified in 1989 that the use of CFCs in freezing vegetables was a legitimate issue of public concern. It began phasing them out that year before individual states imposed taxes on their use and public concern reached fever pitch.

Levi Strauss, the jeans manufacturer, believes companies must scrutinise their business practices and those of their suppliers, retailers and business partners. Last year Levi issued global sourcing guidelines setting out new terms of engagement with suppliers and retailers, excluding those operating in countries with 'oppressive' regimes.

The same principle is being tentatively taken up by Premier Beverages, a division of Premier Brands. Last year the company became aware of growing public and staff concern over the employment policies of its tea suppliers. In February Premier Beverages launched its fair trade initiative of selecting plantations on social and environmental criteria and placed the 'Caring for tea and our tea pickers' logo on all Typhoo tea packaging.

Dragon International, a London-based marketing design consultancy, says consumers are often unaware of companies' ethical policies, and that responsible companies can benefit from promoting their good deeds.

Last December, Timberland, the shoe manufacturer, ran an advertising campaign against racism in the US and Germany in partnership with charitable bodies. In the US, Timberland linked up with Boston-based organisation City Year which is campaigning for the public to help regenerate inner cities. The press ads did not just publicise Timberland's stance on racism but encouraged consumer support for the City Year project. It set up a phone line manned by employees and received 300-500 calls a week.

Companies which have been the target of consumer boycotts are increasingly on the defensive. Nestle has been the target of a long-running campaign by the International Baby Food Action Network over its practice of promoting bottle feeding in the developing world. Although Nestle says the campaign has not had a discernible impact on UK sales, figures from market research organisation Nielsen show that Nescafe's share of the instant coffee market dipped to 40 per cent in 1992 from 41 per cent in 1991 when the Church of England Synod lent its voice to the boycott.

Grand Metropolitan GB United Kingdom, EC P7011 Hotels and Motels P2082 Malt Beverages P731 Advertising MGMT Management & Marketing P7011 P2082 P731 The Financial Times London Page 19 805
Management (Marketing and Advertising): The man who would make kings - A campaign to sell royalty to the Brazilians Publication 930415FT Processed by FT 930415 By CHRISTINA LAMB

Helio Bloch is a kingmaker. Not, he hastens to explain, in the metaphorical sense used for US political consultants with presidents to sell, but with a real throne in his sights.

Next Wednesday Brazilians will vote in a plebiscite on whether to restore the monarchy. Bloch, from the Rio-based Meet advertising agency, is in charge of mustering the support of those disenchanted with the 104-year-old republic. 'It's the first time this century that anyone has tried to sell a real king,' he says.

The plebiscite, in which Brazilians must also vote on whether to change the current presidential system to a parliamentary model, is breathing life into Brazil's recession-hit advertising industry, with three leading agencies masterminding campaigns.

Every night for the last two months monarchists, presidentialists and parliamentarians have been trying to sell their wares in a fixed 20-minute slot of free airtime to Brazil's 85m voters.

The task for their creators is more challenging than most advertising campaigns, even of a political nature, because they are not marketing a product but a concept, one that is hard to grasp by a largely uneducated population.

Bloch explains: 'This is very different to traditional political campaigns where one is simply selling a new face or new platform for a party already established in the public mind. In the UK, for example, John Major could be sold as the new face of Conservatism without having to explain what being a Conservative means. I'm having to sell a whole new idea.'

Although latest polls show the monarchists registering only 17 per cent of the vote, Bloch is confident. His main selling point is the success of monarchy in modern world, using Spain and Japan as examples.

Brazil's history also plays an important part in Bloch's attempts to 'establish the credentials of monarchy'. 'Brazilians have a very good image of the last Emperor Dom Pedro II,' he says. 'He paid his own bills, the country had total liberty of speech and was very advanced with amongst the world's first railways and telephone systems.'

Bloch's third weapon is what he calls the 'collective subconscious'. He explains: 'Everything good in Brazil is royal, thus Pele is known as king of football, Roberto Carlos (a top singer) is the king of music and Xuxa (the leading children's presenter) is the queen of children.'

With less than Dollars 1m (Pounds 662,000) at his disposal, Bloch elected to spend most of the money on short commercials, concentrating on these three points. Under the slogan 'Help Brazil recover its majesty', recurring themes in these commercials are the absence of inflation and corruption during Brazil's 67-year-period as a monarchy compared with today's rapid inflation and rampant bribery.

Despite Bloch's well-acclaimed campaign, the republicans are far ahead. Surprisingly, support for presidentialism has not been dented by the corruption scandal which led to the impeachment of President Fernando Collor.

Sergio Amado from Denison, the Sao Paulo-based agency running the campaign, uses the national anthem and footage of important mass protests of the past to come over as the more patriotic choice. He uses the Collor scandal as a benefit of the system: 'We decided we must confront the issue so we used the theme 'You the people elected him and you the people took him away'.'

With more than Dollars 5m to spend, Amado hopes to get seven out of 10 votes, partly through attacks on the other systems, attacking the monarchy for slavery and blaming the disastrous experience of parliamentarianism in 1962-63 - when the country had three prime ministers in one year - for the subsequent military coup.

The big loser is parliamentarianism with a didactic campaign involving too many talking heads trying to explain the concept of parliamentarism and division of powers to a largely illiterate population. So desperate are the parliamentarians that they are offering voters the chance of another referendum after five years.

BR Brazil, South America P7319 Advertising, NEC MGMT Management & Marketing P7319 The Financial Times London Page 19 690
Accountancy Column: Profession opts for primacy of public interest - Andrew Colquhoun explains moves to define a regulatory body's future role in a fast-changing world Publication 930415FT Processed by FT 930415 By ANDREW COLQUHOUN

THE recent publication of the first ever mission statement from the Institute of Chartered Accountants in England and Wales highlights our primary commitment to the public interest above narrower members' interests.

Production of the statement, together with core objectives and policy priorities for the next 3-5 years, was the culmination of an 18-month debate about the institute's future role.

This debate has obliged the institute's council and the membership to remind themselves of the reasons why the Empress of India gave Royal Charters to private bodies like the institute: as the best available means for serving the public interest in areas where government expertise was limited, rather than primarily to further the narrow self-interests of their members.

In the intervening period, and particularly in the last 20 years, the accountancy profession has grown dramatically in size and complexity. As a consequence, it is totally legitimate for observers to ask whether the institute (and its fellow professional bodies) has the ability and the resources effectively to regulate multinational firms with global revenues in billions of dollars.

There is nothing predetermined which says the structures that served a social purpose in the regulation of accountancy in an earlier age are necessarily going to be relevant and effective in the last years of the twentieth century.

If members of professional bodies like the institute are to retain their rights and privileges (not least to benefit from the market premium associated with being a chartered accountant), then they must ensure that the social radar of their body is tuned to pick up changes in public expectations and that effective policies follow promptly.

That is why in its planning framework document, the institute's council has given primacy to the public interest. The council has explicitly restated a fundamental and enduring tenet: that it will not adopt or support policies that run counter to the public interest. But it also made an equally fundamental judgment: that there is a natural convergence over the longer term between the public interest and the interests of the institute's membership as a whole.

The key phrases here are 'over the longer term' and the 'membership as a whole'. In the short term, it is quite possible that the professional bodies should, and will, take decisions which have an adverse short-term impact on the commercial activities of some members. For example, the immediate effect of the tough ethical guidance on specialist valuations from the Chartered Accountants Joint Ethics Committee (Cajec) will be to reduce the fee income of some firms.

But Cajec had analysed the issue critically, had consulted widely inside and outside the profession, and formulated its view accordingly. The three member bodies believed that this was a necessary step to take in order to strengthen the independence of the auditor, and thereby enhance the long-term reputation of the profession as a whole.

Some institute members, particularly from small firms, have asked a different, but equally legitimate, question: 'If the institute is primarily motivated by long-term, public interest issues, how are the more immediate private interests of the members to be furthered?' Or to put the question more simply: 'Can the regulator also represent and serve the members?'

In answer to this question, the council would argue that policies which serve the public also serve the members over the longer term. It would also distinguish between the locus for decisions. In certain areas, the institute and its committees are the ultimate decision-makers. This applies to individual disciplinary and regulatory cases and at a corporate level to the formulation of disciplinary policy, ethical guidance and audit regulation.

In taking these decisions, it would be fundamentally wrong for the institute to take anything other than an enlightened approach to the public interest. More to the point, it would be dangerous and unsustainable, because the government or the courts would either force self-interested decisions to be overturned or, ultimately, would strip the institute of its decision-making powers.

In other areas, the institute and the other professional bodies are not the final decision-makers, but have the ability to make representations to those who are. Here, for example, the decision-makers are the Department of Trade and Industry, the Accounting Standards Board, the tax authorities, or the Securities and Investments Board.

It is an entirely proper role for professional bodies to bring the direct experience of their members to bear in the representations which it makes to those external decision-makers. Indeed, it would be strange, if not undesirable, if the views of the professions, as the greatest repositories of expertise in certain areas, were not expressed effectively.

In a pluralist society, those decision-makers will be exposed to a whole range of other views and will weigh them up accordingly. But the fact that the institute has regulatory functions in certain areas does not mean it need pull its punches in representing its views on related issues.

Some members of the profession would then pose a further question: 'If my institute is also my regulator, how can I get help from it with an ethical or regulatory problem without the institutes' Joint Monitoring Unit finding out and knocking on my door to inspect what I am doing?'

One could argue that these fears are exaggerated, that the unit does not work in that way, and that thousands of members are getting help of this sort from the institute every year. Nevertheless, the concerns are real, and are being addressed. For example, we are setting up a small firm support service around the country to assist individual members who want to raise their professional standards or who face ethical dilemmas.

We are also reviewing the application of a new bye-law which placed an obligation on members to report professional misconduct. The principle of this requirement is sound, but needs to be applied with sensitivity if it is not to deter members facing ethical dilemmas from seeking the proper help. Underlying these examples is the judgment that it must be fully consistent with the institute's mission to assist individual members who want to raise their professional standards or who face ethical dilemmas.

The institute's planning framework has provided it with a powerful tool. It will assist in deciding how to allocate resources and in communicating with members. More important, it will help to provide an enduring discipline by which the institute can ensure that all its important decisions have given the proper weight to the public interest, and thereby to the long-term reputation of the profession.

This will not be enough on its own. The process of greater openness which the council recently adopted for meetings should also help to convince observers that professional regulation is being effectively discharged by the institute. A more sensitive set of early warning radar for changes in public expectations will also need to be spinning, for example for disciplinary policy.

Taken together with the reform agenda for audit, financial reporting and associated issues, these changes will help to ensure that the accountancy profession keeps pace with the changing needs, both of the broader community and of chartered accountants themselves, to the benefit of all.

Andrew Colquhoun is secretary and chief executive of the Institute of Chartered Accountants in England and Wales

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P8721 Accounting, Auditing, and Bookkeeping Services TECH Safety & Standards CMMT Comment & Analysis P9651 P8721 The Financial Times London Page 16 1263
The Finance Bill: Bill to implement Lamont's Budget proposals - The Finance Bill was published yesterday. The Treasury issued the accompanying guidance, describing the intention of each of its 208 clauses and 23 schedules Publication 930415FT Processed by FT 930415

ALCOHOLIC LIQUOR DUTIES

Clause 1 and Schedule 1 introduce new rates of duty on beer, wine, made-wine and cider from 16 March 1993. The new rates of duty represent an increase of 5 per cent on the rates of duty previously charged. They also implement the requirement of Article 20 of EC directive 92/83/EEC in respect of wine and made-wine of an alcoholic strength exceeding 22 per cent by imposing a new increased rate of Pounds 19.81 per litre of alcohol in the wine and made-wine. *

Clause 2 provides for a new rate of duty for beer end product duty, when it is introduced. It replaces the duty rate of Pounds 10.60 per hectolitre per cent of alcohol in the beer (set by section 7(1) of the Finance Act 1991 for the new system) with Pounds 10.45. *

Clause 3 extends the definition of beer without changing its duty liability. The new definition of beer includes any liquor which is made or sold as beer or as a substitute for beer and is of a strength exceeding 0.5 per cent alcohol by volume. The previous definition had only included such drinks that exceeded 1.2 per cent alcohol by volume. Beers exceeding 0.5 per cent but not exceeding 1.2 per cent alcohol by volume will not be liable for excise duty. *

Clause 4 and Schedule 23(1)(1) provides for the repeal and amendment of certain sections of the Alcoholic Liquor Duties Act 1979 (ALDA), which allow for the refund of excise duty in specified circumstances. Repeals a requirement for brewers to produce certain records. *

Clause 5 and Schedule 23(1)(2) implement the requirements of the EC directives on the holding and movement of products subject to excise duty (92/12/EEC) and the harmonisation of the structures of excise duties on alcohol (92/83/EEC) by prohibiting the blending or mixing of two or more alcoholic liquors outside of an excise warehouse or permitted premises, except in specified circumstances. *

Clause 6 and Schedule 23(1)(3) implement a requirement of EC directive 92/83/EEC on the harmonisation of the structures of excise duties on alcohol by increasing the quantity of spirit which may be mixed with wine in an excise warehouse from six to 12 litres of alcohol and reducing the permitted upper strength limit of the resultant mixture to 22 per cent alcohol by volume. *

Clause 7 implements the requirements of Articles 8 and 12 of the EC directive on the harmonisation of the structures of excise duties on alcohol (92/83/EEC) by extending the definition of sparkling wine and made-wine in Schedule 1 of ALDA. *

Clause 8 implements a requirement of Article 27.1.(a) of the EC directive on the harmonisation of the structures of excise duties on alcohol (92/83/EEC) by extending the appropriate references to methylated spirits in ALDA to include 'denatured alcohol'. *

HYDROCARBON OIL DUTIES

Clause 9 increases by 10 per cent the rates of duty on hydrocarbon oils (including the rebates for certain oils) with effect from 6pm on 16 March 1993. *

Clause 10 applies hydrocarbon oil duty to mineral oil fuel substitutes, to be designated by order, at the duty rate of the equivalent hydrocarbon oil or road fuel gas. *

Clause 11 and Schedule 23(1)(4) introduce duty on other fuel substitutes, chargeable when they are set aside for use as motor fuel or as an additive or extender in motor fuel. *

Clauses 10 and 11 bring UK law into line with EC law, which provides a wider definition of chargeable oils and extends duty to non-hydrocarbon fuel substitutes. In both cases, chargeable substances will be designated by order (to be made shortly after royal assent), and the duty rate applicable will be that of the equivalent hydrocarbon oil or road fuel gas. The clauses supersede existing provisions charging petrol substitutes and power methylated spirits. *

Clause 12 and Schedule 23(1)(5) provide for excise duty to be charged on the volume of oils corrected to a temperature of 15 degrees centigrade, and for corresponding adjustments to duty rebates and refunds. This change is in line with EC law. Regulations made under the clause will prescribe the method of adjusting volume. The provisions will take effect on an appointed day, expected to be in October 1993. *

TOBACCO PRODUCTS DUTY

Clause 13 amends the rates of duty on tobacco products with effect from 6pm on 16 March 1993. *

Clause 14 amends the definition of hand-rolling tobacco for duty purposes, in line with EC law. The borderline between hand-rolling tobacco and pipe tobacco moves from a cut width of 0.6mm to 1.0mm; and for anti-avoidance reasons other tobacco of a kind used for making cigarettes is brought within the hand-rolling description. *

GAMING MACHINE LICENCE DUTY

Clause 15 increases by 20 per cent most rates of duty on gaming machines for licences for any period beginning on or after 1 May 1993. Rates for 10p and 20p-play small-prize machines and 5p jackpot machines rise from Pounds 375 to Pounds 450; and rates for 10p and 20p-play jackpot machines rise from Pounds 960 to Pounds 1,150. The clause makes no change to the Pounds 150 rate for 5p small-prize machines. *

Clause 16 abolishes the duty on 5p small-prize gaming machines for licences for any period beginning on or after 1 November 1993. The clause makes extensive consequential amendments to the Betting and Gaming Duties Act 1981, because small-prize machines will then be subject to only a single rate of duty (on machines costing more than 5p per play), and because 5p jackpot machines will remain liable to duty. *

VEHICLES EXCISE DUTY

Clause 17 raises the main VED rate for private and light-goods vehicles from Pounds 110 to Pounds 125 (Section (7) (b)). The other sections raise the related rates for motorbikes, taxis, some farmers' and showmen's vehicles, and vintage private and light goods vehicles in the same proportion, rounded to the nearest Pounds 5. *

Clause 18 raises the duty for heavy goods vehicles which carry exceptional loads in two stages, the first after 16 March 1993, to Pounds 4,250, and the second from a day which the secretary of state appoints. The intention is to raise the tax rate to Pounds 5,000 from the date of the first unified Budget.

Clause 19 links duty for trade plates for motorcycles, and for all other vehicles to the main duty rates for cars and motorcycles respectively. Trade plates duty will thus change automatically when these main rates change in future.

Clause 20 puts duty treatment of vintage (pre-1933) motorbikes on same basis as that of vintage (pre-1947) cars by dropping the engine capacity and weight restrictions. Around 1,000 vintage motorbikes will pay only Pounds 15 duty (previously Pounds 30).

Clause 21 provides powers to modify the current complex lorry VED legislation so as to simplify its presentation. An order will be published after royal assent showing the new presentational structure.

Rates for farmers' and showmens' lorries will be expressed as multipliers of main lorry rates, thereby obviating the need to produce several similar tables of rates. The clause does not permit any rate to be increased by the new order.

MISCELLANEOUS DUTIES

Clause 22 implements sections of EC directives 92/108/EEC and 92/12/EEC. In common with the other member states of the EC, the UK is introducing measures to extend to excise duties the provisions for mutual recovery of VAT debts, and for mutual assistance through the disclosure of information for VAT. *

Clause 23 enables the secretary of state for transport to refuse to issue a vehicle excise licence for an unregistered vehicle which has been brought into the UK unless he is satisfied that any VAT and customs duty due on the vehicle has been or will be paid or remitted. *

LOTTERY DUTY

Clause 24 introduces a new excise duty on lotteries, primarily intended to cover the National Lottery due to start in 1994. The clause establishes the normal chargeable event as the sale in the UK of a lottery ticket or chance; excludes bingo from the duty; and exempts existing lawful lotteries run for the benefit of charities, local authorities etc.*

Clause 25 sets the rate of duty at 12 per cent of the gross stake.

Clause 26 enables regulations to be made for deferred payment of duty, and for advance payments on account.

Clause 27 provides for duty payment by the lottery promoter, or under regulations by another responsible person (for the National Lottery this will be the main licensee). It also provides for recovery of unpaid duty; and creates a summary offence for failure to pay.

ADMINISTRATION AND ENFORCEMENT

Clause 28 gives responsibility for the care and management of the duty to the commissioners of Customs and Excise and provides for administrative regulations, and penalties for their breach.

Clause 29 defines the chargeable person (for the National Lottery this will be the main licensee) and requires them to register; provides for regulations on registration; and creates an indictable offence for running a dutiable lottery while unregistered.

Clause 30 applies the 'revenue trade' provisions of the Customs and Excise Management Act 1979, which include the power to estimate duty due and the obligation on traders to keep and preserve records.

Clause 31 creates indictable offences for fraudulent evasion of lottery duty and false declarations.

Clause 32 extends the offence provisions to directors and similar officers of bodies corporate that commit offences.

Clause 33 provides for forfeiture of any goods involved in fraudulent evasion.

Clause 34 provides immunity from lottery offences for any person acting on the instructions of the commissioners.

Clause 35 provides for evidence, by certificate of the commissioners, concerning registration, returns and payments.

Clause 36 makes lottery duty a preferential debt in insolvency.

Clause 37 provides for disclosure of information between the commissioners, the Gaming Board and the secretary of state (and through him, the director-general of the National Lottery).

Clause 38 permits regulations and orders to be made by statutory instrument.

Clause 39 excludes lotteries from the scope of pool betting duty.

Clause 40 contains definitions; applies the lottery duty provisions of the Act to lotteries promoted on behalf of the Crown; and ensures that the imposition of duty on an unlawful lottery does not legitimise the activity.

Clause 41 provides for commencement orders (the provisions are likely to come into effect in late 1993).

Schedule 23(1)(7) makes consequential repeals.

VALUE ADDED TAX

Clause 42 and Schedule 23(II)(1) provide that supplies of fuel and power for domestic, residential and charity non-business use shall cease to be zero-rated for VAT.

The clause also provides that from 1 April 1994 the rate of VAT applying to such supplies shall be 8 per cent and that from 1 April 1995 the standard rate shall apply. *

Clause 43 and Schedule 23(II)(2) abolish the discount for high business mileage in the fixed scales used for charging VAT on fuel supplied for private mileage in business cars. It ensures that the VAT scales remain the same as the income tax scales for taxing fuel as a benefit in kind. *

Clause 44 and Schedule 23(II)(3) allow the second supply of goods in a triangular transaction by a supplier belonging in an intermediate member state, and the supply of goods installed or assembled in the UK by a supplier belonging in another member state, to be treated as an acquisition by the UK customer, thereby relieving the supplier of the need to register for VAT in the UK. *

Clause 45 prevents fraud, by stipulating that a standard rated supply of gold will be treated as a taxable supply by the buyer as well as by the seller for the purposes of registration for VAT, and that the buyer must account to Customs and Excise for the output tax on behalf of the supplier. It also allows, by order, extension of this special system to other specified goods, and services related to these goods. *

Clause 46 amends the provisions covering appeals to the Value Added Tax tribunal concerning input tax recovery. It makes provision that such appeals are to succeed only if the commissioners have acted unreasonably in refusing tax recovery. *

Clause 47 changes the circumstances where the gift of a sample does not give rise to a supply for VAT purposes. It also expressly provides that where a number of identical or substantially similar items are given as samples to the same person, only one of the items is deemed not to be supplied.

It ensures that no output tax charge arises in respect of business assets which are put to a private or other non-business use, unless the taxpayer has been entitled to prior deduction of input tax in respect of them. *

Clause 48 reduces the qualifying waiting period for VAT bad debt relief to six months. *

Clause 49 and Schedule 2 (consequential repeals are listed in Schedule 23(II)(4)).

Misdeclaration penalty under section 14 of the 1985 Act (paragraph 1 of Schedule) revises the base and yard sticks against which a single misdeclaration made on a VAT return is measured. A new flexible penalty base capable of adjustment for misdeclarations and voluntary disclosures is introduced. It uses the total tax managed by the business (eg total VAT on purchases plus total VAT on sales in the period) instead of the net tax payable under the current arrangements. It provides for the commencement of the paragraph by Treasury order. *

Misdeclaration penalty under section 14A of the 1985 Act (paragraph 2 of Schedule) revises the base against which repeated misdeclarations made on a VAT return are measured. It also outlines the criteria which must be fulfilled before a penalty for repeated misdeclarations can be activated. It provides for a penalty of 15 per cent of the tax that would have been lost in the period that is subject to a penalty. The penalty base for repeated misdeclarations is the same as that to be used for single misdeclarations - the total tax managed by the business. It provides for commencement by Treasury order and termination of any outstanding penalty liability notices issued under the current regime. *

Mitigation of penalties (paragraph 3 of Schedule) outlines how Customs and the VAT tribunals are to mitigate penalties under the Finance Act 1985. It also entitles VAT tribunals to restore a penalty reduced by Customs. It defines those matters which are not to be taken into account in determining the level of mitigation*.

Interest on tax etc. recovered or recoverable by assessment (paragraph 4 of Schedule) amends the circumstances in which interest on underdeclared VAT is to be assessed. Interest is normally payable back to the date of the introduction of interest in April 1990 or to a later date if the misdeclaration was subsequent to it. The effect of this paragraph is to limit the interest liability to the latest three years only, where this period would otherwise have been exceeded. It provides for commencement of the paragraph by Treasury order. *

Default surcharge (paragraphs 5-7 of Schedule) provides from 1 October 1993, for the issue of a surcharge liability notice when a person first defaults on either furnishing a VAT return or paying the tax due; makes a person liable to surcharge in respect of the next payment default for an accounting period; removes the liability to surcharge where a person is in default for an accounting period but there is no tax outstanding for that period; provides for the rate of surcharge to increase only where there is a payment default; and introduces a new first rate of surcharge at 2 per cent. Surcharge assessments at the two lower rates will not be issued unless they are for Pounds 200 or more.

Also reduces from 1 April 1993 the highest rate of surcharge from 20 per cent to 15 per cent. *

Clause 50 and Schedule 23(II)(5) amend the Value Added Tax Act 1983 by deleting three references concerning the valuation and collection of car tax due on chargeable vehicles brought to the UK from other EC countries, following the introduction of the Single Market on 1 January 1993. Since car tax was abolished on 12 November 1992, the legislation was never needed.

INCOME TAX CHARGE, RATES AND ALLOWANCES

Clause 51 reimposes income tax for 1993-94 with the same rates as in 1992-93. The threshold for higher rate tax is unchanged, at Pounds 23,700 of taxable income, but the lower rate band is increased by Pounds 500, to Pounds 2,500 of taxable income. *

Clause 52 sets the personal and married couples' allowances for 1993-94 at the same level as for 1992-93. The additional personal allowance (mainly for single parents) and the widows' bereavement allowance, which are linked to the married couple's allowance for those aged under 65, are also unchanged. *

CORPORATION TAX CHARGE AND RATE

Clause 53 sets the main rate of corporation tax for the financial year 1993 at 33 per cent.

Clause 54 sets the small companies' rate of corporation tax for the financial year 1993 at 25 per cent. It also sets, at one fiftieth, the fraction used in calculating the marginal rate (currently 35 per cent) for companies with profits in a band above that to which the small companies' rate applies.

INTEREST: GENERAL

Clause 55 sets the limit on loans qualifying for mortgage interest relief at Pounds 30,000 for 1993-94 (the same as for 1992-93). The clause will have effect from 6 April 1993. *

Clause 56 gives entitlement to mortgage interest relief on a loan originally used to buy a borrower's old home as though the loan had been used to buy a new home if, when the borrower moves, the new home is substituted for the old home as security for the loan. The clause will have effect from 16 March 1993. *

Clause 57 gives entitlement to mortgage interest relief where a borrower leaves his home. Where the property is put up for sale, interest relief will be available on a loan used to buy it, or on a loan to an elderly person used to buy a life annuity, for up to 12 months after the property has ceased to be the borrower's only or main residence. In the case of a home purchase loan, the clause replaces rules that required the borrower to take out a loan to buy a new home. The clause will have effect from 16 March 1993. *

Clause 58 introduces specific powers for the Inland Revenue to recover amounts overclaimed by lenders operating the Miras (mortgage interest relief at source) scheme. *

Clause 59 makes a technical amendment to the tax deduction at source rules to ensure that all UK deposit-takers can pay interest without deduction of tax to people who are not ordinarily resident in the UK and who have made a declaration to that effect. An Inland Revenue press release was issued on 21 January 1993.

Clause 60 provides for extension of the circumstances in which the taxes acts prevent a deduction from profits for loan interest that exceeds a commercial rate of return.

This is linked to the new rules on foreign exchange gain and losses (Clauses 122-167 below). The clause will apply where a loan advanced in one currency is repayable by reference to another currency, and the interest charged is excessive by reference to the amount repayable. *

INTEREST ETC. ON DEBTS BETWEEN ASSOCIATED COMPANIES

Clause 61 begins a set of provisions which provide that interest (or equivalent return) payable within multinational groups to UK resident companies on certain loans made by UK resident companies will be taxable as it accrues rather than when it is paid and will apply to all interest accruing from midnight on 31 March 1993. The clause sets out the conditions (including in particular the relationships necessary between relevant parties) which if satisfied mean that a debt may become a qualifying debt and be subject to the provisions of the proposed legislation. *

Clause 62 details various conditions, relating primarily to the terms of the debt, which if satisfied may exempt a debt from these proposals. If interest is payable at intervals of 12 months or less, bears a constant fixed relationship to a standard published rate or published index of prices and the debt is either redeemed within 12 months of its creation or the amount payable on redemption (excluding interest) does not exceed the consideration given for it, then the debt will be exempt from these provisions. Alternatively, if it can be shown to the inspector's satisfaction that the charging to tax of interest on an arising as opposed to on an accrual basis was not a main motive for the arrangements and that those terms would have been agreed on an arm's-length basis, the debt may also be exempted. *

Clause 63 sets out provisions which will apply to qualifying debts which have the characteristics of debts on accrued income securities. By reference to the provisions of the accrued income scheme (Sections 710 to 728 of the Taxes Act 1988) it establishes both a time and a method for determining the quantum of chargeable income deemed to arise in relation to such debts. *

Clause 64 similarly sets out a time and a method for determining, by reference to Schedule 4 to the Taxes Act 1988 (deep discount securities), the chargeable income that will be deemed to arise in respect of qualifying debts which have the characteristics of deep discount securities. *

Clause 65 details the provisions which will apply to those qualifying debts having the characteristics of debts on deep gain securities, determining the chargeable income that will be deemed to arise by reference to the provisions of Schedule 11 to the Finance Act 1989 (deep gain securities). *

Clause 66 introduces measures to avoid any double charging which could result from the interaction of these provisions with existing arrangements relating to accrued income securities, deep discount securities and deep gain securities. *

CHARITABLE DONATIONS

Clause 67 reduces from Pounds 400 to Pounds 250 the minimum limit for charitable donations qualifying for tax relief under the Gift Aid scheme, from 16 March 1993. *

Clause 68 increases from Pounds 600 to Pounds 900 the annual limit for charitable donations qualifying for tax relief under the Payroll Giving Scheme, from 6 April 1993. *

Clause 69 gives relief for an employer's voluntary contributions to a charitable agency's costs of running the employer's payroll giving scheme when calculating the employer's business profits for tax purposes. An Inland Revenue extra-statutory concession currently ensures tax relief in these circumstances.

The statutory relief applies to expenditure incurred on or after 16 March 1993. The extra-statutory concession continues to cover expenditure up to that date. *

BENEFITS IN KIND

Clause 70 sets the car benefit scale charges for 1993-94. *

Clause 71 sets for 1993-94 the scales for assessing the benefit of fuel provided by employers for private use in company cars and removes for 1993-94 and subsequent years the reduction in the charge for 18,000 or more business miles a year. *

Clause 72 and Schedule 3 replace the car benefit scale charges by a new measure of the benefit of a car available for private use. This is 35 per cent of the price of the car, with discounts for business mileage and for older cars. The price of the car is defined as its published list price if it has one or, if not, the notional price which would have been published as the list price for the car. The price of the car is increased for accessories provided when the car was first made available. The price of certain classic cars is their market value. *

Clause 73 and Schedule 4 replace the existing rules for taxing employees' private use of a company van with a flat rate scale charge of Pounds 500 (Pounds 350 for vans which are four or more years old) on which employees will pay tax. The schedule contains provisions for allocating Pounds 500 (or Pounds 350) per van among employees who share a van or a number of vans. Employees sharing a van will be able to opt to pay tax on Pounds 5 a day for each day on which they use a shared van. These new arrangements are to come into effect on 6 April 1993. Inland Revenue press releases * and 14 April 1993.

Clause 74 exempts from tax from 6 April 1993 the benefit employees have from commercial vehicles weighing more than 3,500 kilogrammes unless the vehicle is used wholly or mainly for the employee's private purposes. *

Clause 75 exempts in-house sports and recreational facilities from tax as a benefit in kind. It exempts facilities provided by employers generally. The exemption is to take effect from 6 April 1993. *

Clause 76 and Schedule 5 introduce an exemption for removal expenses and benefits paid on behalf of, reimbursed to or provided for employees who are obliged to relocate with their job or in order to start a new job. The exemption is limited to Pounds 8,000 and applies to payments made and benefits provided before the end of the tax year following the year in which the job is changed or the new job started. The Treasury are given the power to increase the limit by order.

Employees are not required to dispose of their existing homes to qualify for exemption. The types of payments and benefits eligible for relief are set out in the Schedule.

The Treasury are given the power to amend by regulation the types of payments and benefits which can be eligible for relief. The exemption is available to employees who start their job at a new location after 5 April 1993. Inland Revenue press releases * and 14 April 1993.

TAXATION OF DISTRIBUTIONS

Clause 77 reduces the income tax charge on dividends (for dividends paid after 5 April 1993) from the basic rate of 25 per cent to the lower rate of 20 per cent, and brings in an ordering rule so that dividends are treated as the top part of a taxpayer's income, so that higher-rate taxpayers continue to be liable to tax at the higher rate of 40 per cent on dividends above the basic rate limit. These changes will also apply to foreign dividends and stock dividends (shares received as an alternative to a cash dividend).

Clause 78 sets the rate of advance corporation tax (ACT) for distributions made after 5 April 1993 and before 6 April 1994 at 22.5 per cent of the value of the distribution and the ACT payable on it. It provides for the rate subsequently to be linked to the lower rate of income tax. It also provides for the value of the tax credit accompanying a distribution to be reduced from 25 per cent of the value of the distribution and the tax credit to 20 per cent for distributions made after 5 April 1993.

Clause 79 provides that charities which receive dividends from UK companies and are entitled to claim payment of the accompanying tax credit will also be entitled to claim special payments on a sliding scale for a transitional period of four years from 1993-94. The special payments will ease the transition to the new reduced value of the tax credit. *

Clause 80 and Schedule 6 make consequential amendments to existing legislation to take account of the changes in the taxation of distributions.

Clause 81 stops a company from carrying back ACT to set against corporation tax liabilities of an earlier period in some circumstances when the ownership of a company changes. It applies to changes of ownership on or after 16 March 1993.

CHARGEABLE GAINS

Clause 82 provides for the annual exempt amount for 1993-94 to be held at Pounds 5,800: the annual exempt amount for most trustees will be Pounds 2,900. *

Clause 83 provides for the base month for indexation of the CGT annual exempt amount to be changed from December to September with effect from 1994-95. This follows the decision to move to a November Budget.

Clause 84 prevents capital gains falling out of charge where shares are exchanged for certain debentures which are outside the capital gains charge. It applies to exchanges on or after 16 March 1993. *

Clause 85 enables regulations to be made to modify the capital gains tax rules when people subscribe to a PEP by transferring newly issued shares, or shares emerging from an approved all-employee share scheme, into the PEP. The regulations, to be made shortly after royal assent, will apply where the shares transferred form part of a larger portfolio. They will make clear that the transfer does not affect the computation of future gains on shares which remain outside the PEP. *

Clause 86 adds two new EC agricultural quotas for ewe and suckler cow premium to the list of assets which qualify for capital gains tax rollover relief with effect from 1 January 1993. It also creates a new power for further assets to be added to the list of qualifying assets by Treasury order.

Clause 87 and Schedule 7 introduce a new relief which allows capital gains tax to be deferred where shares in an unquoted trading company are sold and the gains are re-invested in other qualifying unquoted trading companies. They also relax the qualifying conditions for capital gains tax retirement relief. The shareholding condition is reduced from (broadly) 25 per cent down to 5 per cent and some full time working employees are brought into the relief (previously restricted to directors). These measures will apply to disposals on or after 16 March 1993. *

Clause 88 and Schedule 8 restrict the set-off of capital losses brought into a group of companies as a result of a company joining the group.

The restriction will apply to losses set off against gains arising on or after 16 March 1993 where the losses came from a company which joined the group on or after 31 March 1987.

The changes will end the practice of 'capital loss buying' where by capital losses are bought in from other companies which have nothing to do with the purchasing group's own activities and where the purchasing group does not suffer the economic loss involved.*

Clause 89 allows a de-grouping charge which arises when a company leaves a group with assets on which there is a deferred charge to be treated as arising at the beginning of the accounting period in which the company left the group. It applies for accounting periods ending on or after 1 October 1993.

Clause 90 corrects an error that arose on the consolidation of the capital gains legislation in 1992. It will permit the special capital gains rules about the transfers of UK insurance business to operate as they did before consolidation if a non-resident company is involved. (Inland Revenue press release 17 July 1992.)

Clause 91 defers the starting date for the charge on annual deemed disposals by life assurance companies of holdings in unit trusts etc. The charge will now apply to periods beginning on or after 1 January 1993. It amends the transitional provisions under which assets otherwise caught by the charge can be exchanged without immediate tax consequences for other assets. It also amends the relief for assets which were held as backing for investment linked business on 1 April 1990. Inland Revenue press release 30 December 1992.

CORPORATION TAX: CURRENCY

Clause 92 contains the basic rules that a company's trading profits or losses are to be computed and expressed in sterling for tax purposes. This clause and clauses 93-96 are linked to the new rules on foreign exchange gains and losses (at Clauses 122-167 below). *

Clause 93 enables regulations to be made to allow the profits or losses of a trade to be computed and expressed in a currency other than sterling in certain circumstances. *

Clause 94 allows currencies other than sterling to be used in computing and expressing the profits or losses of different parts of a trade in certain circumstances. *

Clause 95 sets out how regulations on using a non-sterling currency for computing profits and losses are to be made and what they can include, and gives some related definitions. *

Clause 96 extends the use of currencies other than sterling for computing trading profits or losses to the controlled foreign company legislation which imposes UK tax on UK companies that control foreign companies in low-tax areas. *

OVERSEAS LIFE INSURANCE COMPANIES

Clause 97 and Schedule 9 amend, in the case of UK branches of overseas life companies, various provisions affecting their liability to corporation tax. They will be modelled more closely on the provisions generally applying to UK branches, but with special modifications which recognise the particular features of life insurance business. Double tax relief will be available for foreign tax paid on the income and gains arising on the life and other long-term business of the UK branch. (Inland Revenue press release of 16 December 1992).

Clause 98 amends in the case of UK branches of overseas life companies the rules according to which the assets of a life insurance company are categorised for tax purposes.

The assets of the UK branch will be separated from other assets of the company.

Clause 99 entitles overseas life companies to tax credits in respect of most dividends from UK companies, where the income forms part of the life assurance business of the UK branch.

Companies will also be able to make a claim to treat these distributions as though they were profits chargeable to corporation tax and so set off management expenses and various other deductions.

These provisions will apply for accounting periods beginning after 31 December 1992. Inland Revenue Press Release of 16 December 1992.

Clause 100 provides that in computing the UK branch income of overseas life companies, the exemption from tax usually available to non-residents on particular types of foreign source investment income is overridden.

Additionally, where income on Treasury securities which is free of tax to residents abroad arises to the UK branch, the tax deductible management expenses are restricted.

These provisions have effect for accounting periods beginning after 31 December 1992.

Clause 101 and Schedule 10 modify, in the case of UK branches of overseas life companies, the special rules for calculating life insurance company trading receipts, and the share of the profits attributable to the policyholders. The modifications ensure that only the income and gains related to the branch activities are taken into account and provide alternative rules where the necessary figures are not available in returns submitted to the Department of Trade and Industry. The changes take effect for accounting periods beginning after 31 December 1992.

Clause 102 and Schedule 11 modify, in the case of UK branches of overseas life companies, various provisions relating to the calculation of companies' chargeable gains.

These modifications are consequential on the changes to the scope of the charge on capital gains made under Clause 97 and on the changes in Clause 91 to the rules governing the deemed disposal of life insurance companies' holdings of unit trusts.

They apply for accounting periods beginning after 31 December 1992.

Clause 103 changes the definition of an overseas life insurance company so that it is tested according to where it is resident for tax purposes rather than where its head office is situated.

The clause, which applies for accounting periods beginning after 31 December 1992, also repeals the provisions which are made redundant by the measures in Clauses 97-102.

APPROVED SHARE OPTION SCHEMES

Clause 104 provides that the amount of the capital gain on which a company is chargeable to tax when it grants a share option to an employee under an approved share scheme will, with effect from Budget day 1993, be the amount, if any, actually paid for the option by the employee.*

Clause 105 prevents a double charge, to both income tax and capital gains tax, arising in certain circumstances when an employee sells shares which he received through a share option scheme set up by his employer. The clause takes effect from 1 January 1992, Inland Revenue press release of 14 April.

INDEXATION: MISCELLANEOUS

Clause 106 maintains at Pounds 75,000 for 1993-94 the maximum level of earnings for which pension provision may be made with tax relief. It disapplies the indexation provisions which would otherwise have operated.*

Clause 107 provides for the base month for indexation of the main income tax allowances, the basic and lower rate limits, and the earnings cap for pensions to be changed from December to September with effect from 1994-95.

This follows the decision to move to a November Budget. The clause also corrects a flaw in the indexation formula for the pensions earnings cap.

MISCELLANEOUS PROVISIONS ABOUT RELIEFS

Clause 108 provides an exemption from tax for outplacement services provided to employees who lose their jobs.

It also ensures that employers paying for counselling services get a tax deduction for their payments. The exemption is to take effect for employees made redundant on or after 16 March 1993 or, for employees made redundant before then, for services bought on or after 16 March 1993.*

Clause 109 extends from five years to seven the period for which businesses can claim relief for revenue expenditure incurred before the start of trading. It also brings within the scope of the relief certain expenditure by companies which is treated as a 'charge on income'.

This applies mainly to interest paid other than to a bank operating in the UK. These charges are not currently included in the category of expenditure which qualifies for pre-trading relief.

The extended time limit applies to those who start to trade on or after 1 April 1993. The changes on charges apply to charges paid on or after 1 April 1993.*

Clause 110 fills gaps in the existing relief available for the restoration and preparation of waste disposal sites.

The clause adds authorisations for the disposal of radioactive waste to the lists of relevant licences, which in turn determines who can qualify for the reliefs, and it extends the relief for site preparation to any expenditure which is incurred before trading starts.

For anyone starting to trade on or after 1 April 1993 such expenditure will be deemed to have been incurred on the first day of trading and in the course of carrying on the trade.*

Clause 111 denies entitlement to relief under the Business Expansion Scheme (BES) to individuals who obtain loans which are connected with shareholdings they acquire through the Scheme.

It applies for shares issued on or after 16 March 1993.

Clause 112 makes clear that with effect from periods of account ending after 5 April 1993 tax relief will be due only for sums actually paid by employers into occupational pension schemes and not for provisions or accruals in respect of such pay-ments.

It also ensures that no deduction can, in any event, be allowed for sums paid into schemes after 5 April 1993 to the extent that provisions in excess of contributions actually paid have already been allowed for tax purposes. Press release with draft clause 30 March 1993.*

CAPITAL ALLOWANCES

Clause 113 introduces the new temporary 20 per cent initial allowance for industrial buildings announced in the Autumn Statement. This will be available for new buildings contracted for in the year ending 31 October 1993 and brought into use by the end of 1994. Inland Revenue press releases of 12 November 1992, 21 December 1992 and 14 April 1993.

Clause 114 and Schedule 12 introduces the new 20 per cent initial allowance for agricultural buildings announced in the Autumn Statement. This will be available for new buildings contracted for in the year ending 31 October 1993 and brought into use by the end of 1994. Inland Revenue press releases 12 November 1992, 21 December 1992 and 14 April 1993.

Clause 115 and Schedule 13 introduces the 40 per cent first year allowance for machinery and plant announced in the Autumn Statement. This will be available for expenditure incurred in the year ending 31 October 1993. Inland Revenue press releases of 12 November 1992, 21 December 1992 and 14 April 1993.

Clause 116 clarifies two points in the provisions which limit allowances for machinery and plant leased within the first 10 years of its life to non-residents not liable to UK tax.

The changes make it clearer how the provisions operate and have effect from Budget day.*

Clause 117 amends existing provisions which allow connected persons to elect to treat the sale of certain assets as having taken place at tax written down value. It extends the scope of these provisions to qualifying hotels, commercial buildings in enterprise zones and scientific research assets; and allows elections only where both parties are entitled to capital allowances. The changes have effect from Budget day.*

MISCELLANEOUS

Clause 118 amends the rules for UK companies which control foreign companies. It provides that (subject to certain exclusions) such UK companies will be liable to UK tax on profits of the foreign company arising on or after 16 March 1993 where the overseas tax paid by that foreign company is less than three quarters (previously one half) of the tax that would be payable if it were resident in the UK.

Clause 119 and Schedule 14 make a number of changes to the legislation which introduces Pay and File for companies in October this year. The amendments relate to the transitional periods which straddle the change over date from the old system; the circumstances in which claims to relief may be made by members of groups; the payment of interest or repayment supplement where losses or Advance Corporation Tax are carried back to earlier years; and allow companies to authorise people other than the company secretary to sign documents for tax purposes.

Clause 120 provides a power to make regulations about the repayment to a friendly society of tax suffered on the investment income of its tax exempt activities. It applies only to societies which are not wholly exempt.

The first accounting period to which the regulations may apply is that commencing on or after 1 January 1994.*

Clause 121 amends the legislation requiring government departments to deduct tax from certain payments, most particularly PAYE from wages and salaries. It ensures that for 1993-94 onwards tax not deducted for earlier years, and not otherwise recoverable, can be obtained from the government department. It also brings government departments within the scope of interest and penalty legislation where relevant.

EXCHANGE GAINS AND LOSSES

Clause 122 and Clauses 123 to 167, with Schedules 15 to 18 introduce new rules for the taxation of companies' foreign exchange gains and losses. Exchange differences on qualifying assets and liabilities and forward contracts to buy and sell currency are to be recognised for tax purposes as they accrue (the translation basis) and taxed or relieved as income receipts or deductions.

Clause 122 sets out how exchange gains and losses on qualifying assets (broadly monetary assets - currency, debts and certain shares) and liabilities are to be calculated.*

Clause 123 sets out how exchange gains and losses are to be calculated on a forward contract to buy or sell currency.*

Clause 124 sets out modified rules for calculating exchange gains and losses on a debt which varies in amount. A debt may vary in amount when part is repaid, or when an additional tranche is borrowed.*

TRADING GAINS AND LOSSES

Clause 125 provides for exchange gains and losses on assets, liabilities and currency contracts used for the purposes of a trade to be taken into account as receipts and expenses of that trade.*

NON-TRADING GAINS AND LOSSES

Clause 126 and Clauses 127 to 130 contain the rules for dealing with non-trading exchange gains and losses.*

Clause 127 includes the charging provision for net non-trading exchange gains.*

Clause 128 sets out the rules for relief of any excess of non-trading exchange losses over non-trading exchange gains.*

Clause 129 ensures that net exchange losses carried forward to a later accounting period are available for relief in that later period only against exchange gains.*

Clause 130 sets out how relief for excess non-trading exchange losses under clause 128 interacts with other provisions of the Taxes Act 1988.*

ALTERNATIVE CALCULATION

Clause 131 and Schedule 15 provide for the amount of an initial exchange gain or loss to be found in accordance with a method of calculation (the 'alternative method') which allows exchange differences to be left out of account to the extent that they arise on assets, liabilities or contracts held or owed in exempt circumstances, debts or currency representing income that cannot be remitted to the UK or liabilities which are matched with certain non-monetary assets under a matching election.*

MAIN BENEFIT TEST

Clause 132 denies relief for exchange losses on a foreign currency loan where the accrual of an exchange loss is the main benefit, or one of the main benefits, that might be expected to arise from borrowing or lending in the particular currency.*

ARM'S-LENGTH TEST

Clause 133 provides for the 'ring-fencing' of exchange losses on a loan made or received by a company which is entered into otherwise than on arm's-length terms. Such losses will in general be available for relief only against future exchange gains arising on the same loan. The application of the clause is however limited in certain circumstances.*

Clause 134 provides for the ring-fencing of exchange losses on a forward currency contract which is entered into otherwise than on arm's-length terms.*

Clause 135 deals with the situation where exchange losses are carried forward, under Clause 133 or 134, for set-off against future gains on an asset, liability or contract, and there is a change in the local currency of the trade.

The clause provides for the losses to be translated into the new currency.*

DEFERRAL OF UNREALISED GAINS

Clause 136, together with Clauses 137 to 140, allows companies to defer taxation of unrealised exchange gains on long-term capital borrowings and advances where those gains form a significant proportion of the taxable profit.*

Clause 137 sets out the rules for deferral of unrealised gains which are the subject of a claim under clause 136 above.*

Clause 138 defines the 'amount available for relief', which determines the maximum amount in respect of which deferral can be claimed under clause 136.*

Clause 139 deals with the situation where deferral is or has been claimed in relation to an asset or liability used for the purposes of a trade or part of a trade whose basic profits and losses are computed in a currency or currencies other than sterling.*

Clause 140 provides supplementary rules relating to the deferral provisions in clauses 136 to 139.*

IRRECOVERABLE DEBTS

Clause 141 deals with the situation where all or part of a debt owed to or by a company is regarded as irrecoverable.

The nominal amount of the debt is deemed to be reduced by the irrecoverable amount.*

Clause 142 deals with the situation where a debt has been treated as reduced under clause 141 because all or part of the amount previously regarded as irrecoverable becomes recoverable. The amount which becomes recoverable is to be treated as a new debt or as an increase in the nominal amount of an existing debt.*

CURRENCY CONTRACTS: SPECIAL CASES

Clause 143 deals with the situation where a currency contract is terminated early, so that there is no acquisition or disposal of currency under the contract. It provides for a balancing adjustment to be made to recover or give relief, depending on the circumstances.*

Clause 144 ensures that where a currency contract is closed out by means of a reciprocal currency contract, no exchange gains and losses are recognised from the closing out date on either contract, and the first contract is treated as having been terminated, without delivery or acquisition of the underlying currency, at that date.*

EXCESS GAINS OR LOSSES

Clause 145 provides for a balancing adjustment to be made on an asset or liability ceasing to exist where net exchange gains have been taxed but there is an overall loss, not otherwise taken into account for tax purposes, on the asset or liability, or net exchange losses have been relieved but there is an overall gain, not otherwise taken into account for tax purposes, on the asset or liability. The detailed rules are to be set out in Treasury regulations.*

LOCAL CURRENCY TO BE USED

Clause 146 defines 'local currency' for the purposes of computing exchange gains and losses under Clauses 122 to 125.*

EXCHANGE RATE TO BE USED

Clause 147 sets out rules for determining the exchange rate to be used in translating amounts or values into a company's local currency.*

Clause 148 adapts the rules for determining exchange rate in Clause 147 to cover debts which vary in amount.*

INTERPRETATION: COMPANIES

Clause 149 identifies the companies ('qualifying companies') to which the new rules on taxation of foreign exchange gains and losses apply.*

INTERPRETATION: ASSETS, LIABILITIES AND CONTRACTS

Clause 150 defines the assets and liabilities ('qualifying assets and liabilities') which are within the scope of the new provisions on exchange gains and losses.*

Clause 151 sets out rules to determine when a company becomes or ceases to be entitled to an asset for the purpose of calculating exchange gains and losses on the asset.*

Clause 152 sets out rules to determine when a company becomes or ceases to be subject to a liability for the purpose of calculating exchange gains and losses on the liability.*

Clause 153 contains explanatory provisions to identify debts by reference to the facts and to deal with debts that do not legally come into existence.*

Clause 154 explains when a company is treated as holding a forward contract to buy or sell currency for the purpose of calculating exchange gains and losses on the currencies to be exchanged under the contract.*

INTERPRETATION: OTHER PROVISIONS

Clause 155 defines translation times and accrual periods, by reference to which exchange gains and losses are calculated under clauses 122 to 124.*

Clause 156 defines the 'basic valuation' of an asset or liability which is within the scope of the new provisions on exchange gains and losses.*

Clause 157 defines the nominal currency of each type of asset and liability to which the new provisions apply.*

Clause 158 sets out rules to determine the settlement currency of a debt.*

Clause 159 sets out rules to determine the nominal amount of a debt which is outstanding at any particular time.*

Clause 160 defines the local currency of a trade.*

Clause 161 contains various interpretation provisions for the purposes of Chapter II.

MISCELLANEOUS

Clause 162 and Schedule 16 provide that the new rules for taxing foreign exchange gains and losses are to apply from the first day of a company's first accounting period to begin on or after an appointed day. Where a qualifying asset, currency contract or qualifying liability is held or owed on the commencement date the company is to be treated as if it became entitled or subject to the asset, contract or liability on that date. Regulations will provide transitional rules for such items.*

Clause 163 allows a 'just and reasonable' adjustment to be made where a company changes its accounting date, and hence its commencement day under clause 162(7), for the purpose of securing a tax advantage.*

Clause 164 contains miscellaneous provisions concerning orders and regulations.*

Clause 165 allows regulations to provide special rules for the treatment of exchange differences in respect of assets and liabilities held by insurance companies.*

Clause 166 and Schedule 17 provide that qualifying assets currently subject to capital gains tax will cease to be so.*

Clause 167 and Schedule 18 make various amendments to the taxes acts to accommodate the effects of the new provisions on foreign exchange gains and losses.*

LLOYD'S UNDERWRITERS ETC MAIN PROVISIONS

Clause 168 provides that the profits from the underwriting business of a Lloyd's member are to be chargeable to income tax as trading profits.

It also sets out the years for which underwriting losses can be set off against general income.

Clause 169 sets out the general rules for deciding for which year of assessment the various categories of profit or loss arising from an underwriting business are to be brought into account.

Clause 170 and Schedule 19 continue the arrangements for assessing and collecting tax on underwriting profits arising from a member's syndicates and from the funds in which his premiums received are invested ('premiums trust funds').

MEMBER'S TRUST FUNDS

Clause 171 treats assets in premiums trust funds as acquired and disposed of each year, with the exception of certain UK securities where an exemption applies for particular non-resident holders.

Clause 172 and Schedule 20 provide the tax arrangements for the new special reserve fund. Tax deductibility is available for up to 50 per cent of a member's profits transferred to reserve each year subject to an overall fund value limit of 50 per cent of the member's overall premium limit.

Income and gains on assets within the fund will be free of tax.

Withdrawals from the fund will be required, notably, to meet losses and where the member ceases underwriting, and will be treated as trading income. The new reserve will apply from 1992-93.

The clause and schedule also provide for the winding up of the existing special reserve fund, for which the last year will be 1991-92.

Clause 173 provides that the gains or losses on the disposal of assets in funds other than a premiums trust fund or the new reserve fund, continue to be subject to capital gains tax and are not brought within the computation of trading profits.

OTHER SPECIAL CASES

Clause 174 sets out that relief for payments ('reinsurance to close' premiums) which one syndicate makes to its successor to take over its outstanding liabilities is available to the extent that the payments are fair and reasonable having regard to the liabilities transferred.

Clause 175 provides rules giving relief for payments and charging receipts in respect of loss insurance and of the new Lloyd's High Level Stop Loss Fund. It also provides relief for payments made to transfer to someone else a member's rights and liabilities in respect of business he has underwritten.

Clause 176 enables the board to make regulations setting out the extent and manner of deductibility for accountancy fees payable by members in respect of their underwriting business.

MISCELLANEOUS

Clause 177 provides that the final year of assessment of a member's underwriting business is generally that in which his deposit at Lloyd's is repaid, subject, in cases of death, to the final year not being later than the year in which the underwriter dies.

Clause 178 sets out that profits from an underwriting business are to constitute earned income for tax purposes. This applies to profits assessable after 1992-93.

Clause 179 removes an extended time limit (which is no longer necessary) for Lloyd's underwriting agents in relation to a claim for a deduction against profits for a year in respect of emoluments paid after that year. It has effect for periods of account ending on or after 30 June 1993.

SUPPLEMENTAL

Clause 180 enables the board to make regulations on specified matters affecting the taxation of members, and provides for regulations made under legislation which is being repealed to continue to have effect where appropriate.

Clause 181 makes a number of consequential amendments to references in other provisions of tax legislation affecting Lloyd's members.

Clause 182 defines various terms used in the legislation.

OIL TAXATION

Clause 183 abolishes petroleum revenue tax for oil and gas fields given development consent on or after 16 March 1993 ('non-taxable' fields) and makes amendments so that expenditure can be apportioned as appropriate between those fields and fields within the charge to the tax.*

Clause 184 reduces the rate of petroleum revenue tax from 75 per cent to 50 per cent from 1 July 1993 and makes adjustments to the limit on interest payable on repayments of petroleum revenue tax arising where losses are carried back.

Those adjustments reduce the limit in line with the rate reduction and correct an anomaly in the existing rules which discounted advance petroleum revenue tax in calculating the limitation.*

Clause 185 disapplies the petroleum revenue tax rules relating to returns and information for fields ('non-taxable fields') outside the charge to petroleum revenue tax and introduces a PRT version of the corporation tax powers in Section 20 of the Taxes Management Act 1970, to request specific information from taxpayers and third parties. Schedule 21 is a PRT version of the taxpayer safeguards in Section 20B of that Act.*

Clause 186 abolishes relief against petroleum revenue tax paid by 'taxable' fields for expenditure incurred on or after 16 March 1993 on exploring for 'non-taxable' fields and then appraising them, subject to transitional arrangements.

These arrangements allow continued relief against the income of existing fields provided that expenditure is incurred within two years of 16 March 1993 under a contract for exploration and appraisal in force before that date, or the expenditure is necessary for the completion of the obligation under that contract.

Expenditure incurred after a break clause in a contract could have been triggered, or after exercise of an option, will not get the transitional relief.*

Clause 187 provides for the situation where an asset is used in connection with a field outside the charge to petroleum revenue tax (a 'non-taxable field') either before or after it is used in connection with a field within the charge to petroleum revenue tax (a 'taxable' field), so that relief against petroleum revenue tax may, as appropriate, be restricted.

This clause also ensures that receipts from asset disposals, or from third-party use of assets, are limited or charged to PRT at market value, as appropriate, to prevent artificial reduction of petroleum revenue tax liability by transactions between connected parties.*

Clause 188 introduces, for claims received after 16 March 1993, a definition covering the time when expenditure is incurred for petroleum revenue tax purposes. The definition is based on when the claimant has an unconditional obligation to pay, provided that the amount of expenditure incurred is not disproportionate to the extent to which the contract has been performed.

There is an extra, temporary, test to discourage the use of 'front-end loaded' procurement contracts to obtain 75 per cent PRT relief on future supplies of assets or services.

This clause also clarifies the effect of an existing anti-avoidance rule (the 'restriction to cost' rule) limiting relief for expenditure in transactions between connected persons to costs incurred under the latest arm's length transaction. That clarification includes a separate new definition of when such costs are incurred.

It applies to connected-person transactions on or after 16 March 1993.*

Clause 189 introduces provisions preventing expenditure incurred after the end of a six-month chargeable period getting relief against petroleum revenue tax in that, or any earlier, period (other than by carry-back of losses).

The provisions apply to claims received after 16 March 1993 or, in the case of exploration and appraisal expenditure, costs incurred after 31 March 1993.

Clause 190 makes a number of changes to the treatment for petroleum revenue tax purposes of receipts from asset disposals or third-party use of assets and to corresponding payments.

Fields providing services will not benefit from the tariff receipts allowance when tariffs are paid from a field outside the charge to petroleum revenue tax (a 'non-taxable' field).

Foreign fields, or foreign parts of fields, will be treated broadly in line with UK fields. And payments from participators in 'taxable' fields to connected persons in 'non-taxable' fields will not be allowed relief against petroleum revenue tax.*

Clause 191 facilitates double taxation relief from PRT chargeable on receipts arising from the use by UK oil fields of assets connected to foreign fields, but situated in the UK or on the UK continental shelf.*

Clause 192 defines terms used in previous clauses and provides that the Board of Inland Revenue will be able to make any amendments to decisions on expenditure claims and to tax assessments that are necessary following enactment of the provisions in Clauses 183 to 192 (inclusive).*

INHERITANCE TAX

Clause 193 sets the inheritance tax threshold for the year 1993-94 at Pounds 150,000.

Clause 194 provides for the base month for indexation of the inheritance tax rate bands to be changed from December to September with effect from 1994-95. This follows the decision to move to a November Budget.

Clause 195 extends fall in value relief to investments which are cancelled within 12 months of the date of death and to investments quotation of which is suspended at a date 12 months after death.

The change applies to deaths occurring on or after 16 March 1992.

Clause 196 extends from three to four years after death the period during which houses or other real or leasehold property may be sold and the sale price substituted for the value at death. The change applies to deaths occurring on or after 16 March 1990.

Clause 197 allows the special commissioners to refer to the Lands Tribunal questions as to the valuation of land.

STAMP DUTY

Clause 198 increases the threshold for the 1 per cent stamp duty on sales of land, buildings and certain other property from Pounds 30,000 to Pounds 60,000.

It also increases from Pounds 300 pa to Pounds 600 pa the rental limit for premiums under new leases to benefit from the threshold. The increases take effect for documents executed on or after 16 March 1993 (providing they are not stamped before 23 March 1993).*

Clause 199 puts right an anomaly in the application of stamp duty to houses purchased in England and Wales under the 'rents-to-mortgages' scheme being introduced by the Housing Bill. It ensures that the stamp duty threshold will apply to houses purchased under rents to mortgages in the same way as to properties purchased in the wider market.*

Clause 200 makes provision similar to clause 199 for stamp duty in respect of the parallel scheme, 'rent-to-loan', being introduced in Scotland.*

Clause 201 provides enabling powers for the Treasury to make regulations as to the method by which stamp duty is denoted. Current legislation requires the use of 'impressed' stamps. This provision does not affect the amount of duty payable on a transaction. Inland Revenue Press Release of 14 April 1993 'Stamp Duty: Method of Stamping'.

MISCELLANEOUS AND GENERAL

Statutory effect of resolutions etc

Clause 202 amends the rules for giving immediate (but temporary) statutory effect to changes to income tax, petroleum revenue tax, supplementary petroleum duty, VAT and duties of customs and excise on the passing of a resolution by the House of Commons. The clause also brings corporation tax within the scope of these rules. This follows the decision to move to a November Budget.

Clause 203 allows, if an appropriate resolution is passed by the House of Commons, assessments to be made to corporation tax for a financial year at rates which are lower than the rates for that year charged in an Act.

This applies for the financial year 1993 and subsequent years.

Clause 204 amends the rules for resolutions giving immediate (but temporary) effect to changes in stamp duty. This follows the decision to move to a November Budget.

MISCELLANEOUS

Clause 205 amends the rules for determining whether individuals who are in the UK for a temporary purpose only are resident for tax purposes.

It abolishes the rule that those who have accommodation here available for their use are resident for any year in which they visit this country. This change takes effect from 6 April 1993 and will apply for both income tax and capital gains tax purposes.*

Clause 206 ends the liability to gas levy (subject to the approval of the secretary of state for trade and industry and the Treasury) where a pre-1975 petroleum revenue tax exempt contract is terminated on the grounds that continued supply has become uneconomic. In those circumstances the rule allowing up to 5 per cent of cumulative production from the field to be sold outside the contract without liability to petroleum revenue tax also ends.

Clause 207 and Schedule 22 makes provision to amend the Government Trading Funds Act 1973. It permits opening capital to be financed by reserves, enables public dividend capital to be used to finance any expenditure by a trading fund and make consequential amendments to trading funds borrowing limits.

Clause 208 this clause allows for technical changes to the arrangements for issuing gilt-edged securities. The changes are purely internal to the public sector and have no implications for the gilt market as a whole.

*indicates a press release issued on Budget Day, 16 March 1993.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 13 10858
The Finance Bill: Profession finds few surprises and much to digest - Tax Practitioners Publication 930415FT Processed by FT 930415 By ANDREW JACK

TAX PRACTITIONERS were yesterday busily digesting the fine print of one of the lengthiest finance bills in recent years, while stressing it contained few surprises.

If the chancellor's Budget speech in March provided the hors d'ouevres, the finance bill represented a substantial main course filling in the details.

'It is a very impenetrable document, very technical and surprisingly thick,' said Mr Chris Adams, a tax partner with accountants Arthur Andersen. 'They certainly haven't skimped on the words. This will provide a lot of work for the profession.'

Mr Roger White, head of tax at accountants KPMG Peat Marwick, said: 'For practitioners, this is a bit like being given a new comic as a child. We can study, enjoy and grow to like it over the next few days.'

The bill runs to more than 300 pages, with 211 clauses and 19 detailed schedules. Part of its significance lies in the fact that it follows the Budget speech so closely.

Most important, it showed little sign of backing down from the chancellor's more controversial proposals, such as the removal of zero-rating on domestic fuel, and changes to petroleum revenue tax and advance corporation tax (ACT).

'This very closely follows the Budget speech,' said Mr Maurice Parry-Wingfield from Touche Ross. 'Everything is in there that we expected. There is nothing new.'

He pointed out that omissions - as already anticipated - included legislation on inheritance tax relief for traders at the London International Financial Futures Exchange.

Much of the wording reflected the intentions laid down in the Budget speech or the press releases that accompanied it. The clauses on ACT mirrored draft versions already circulated. Among the lengthier items covered are changes to excise duties and Value Added Tax; details of the duty on the new national lottery; the treatment of overseas life insurance companies; and provisions for underwriters on the Lloyd's insurance market.

There is also a substantial section on the taxation of exchange gains and losses. Mr Richard Law, a tax partner with accountants Ernst & Young, said his firm was disappointed that the bill contained this section. This meant there had been no time to include comments on the draft proposals issued earlier this year.

There are also many attempts throughout the bill to introduce anti-avoidance clauses designed to prevent taxpayers from taking advantage of loopholes.

Practitioners said considerable time must have been taken by the Inland Revenue to close a number of existing loopholes and prevent the creation of new ones.

Other changes included confirmation of changes in the classification of residency for tax purposes; tightening taxation for foreign-controlled corporations; and final details of the pay and file system for corporations to be introduced from this September.

Mr Andrew Evans, an employee benefits partner at Price Waterhouse, highlighted as important a new definition of 'accessories' to be applied to company cars, and amendments to discretionary trusts affecting funded unapproved retirement benefit schemes.

Mr Adams said there were clauses in the legislation which would lead to test cases in the courts, such as clarifying when interest is payable in relation to debts between associated companies. 'The wording is not as clear and straightforward as you might expect,' he said.

Mr White added: 'The bill is a whole collection of bits and pieces.'

'It's a terrible mish-mash, which jumps from one provision to another. If one thing stands out, it is advance corporation tax.'

But he stressed the bill would be very interesting for specialists and generate considerable work: 'You won't find tax practitioners jumping out of windows.' The firm will be analysing the bill and encouraging its professionals to sell on their advice to clients so they can be guided 'down the cheapest route.'

'We will have a pretty good workload,' he said. 'And there is another Budget at the end of the year.'

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 12 677
The Finance Bill: Government stands firm on oil reforms - North Sea Publication 930415FT Processed by FT 930415 By DAVID LASCELLES, Resources Editor

THE government stood firm on its controversial reforms of North Sea oil taxation yesterday. The Finance Bill left unchanged the proposals put forward by Mr Norman Lamont in his Budget last month, in spite of protests from parts of the oil and gas industry.

Under the bill the rate of petroleum revenue tax (PRT) will be reduced from 75 per cent to 50 per cent on existing oil and gas fields, and abolished altogether on those given government consent after the Budget.

But rules which allow oil companies to set exploration and development costs against profits from existing fields will also be changed. The cost of new fields started after the Budget cannot be offset against profits from older fields.

However, transitional arrangements are proposed to cushion the impact of the changes: contracts entered into before the Budget will continue to be eligible for relief for two years.

The bill also proposes provisions for streamlining North Sea oil taxation.

The tax reforms were said by Mr Lamont to be necessary to encourage oil companies to become more efficient in both drilling for oil and gas, and extracting it.

The existing rules were 'anachronistic', he said, and belonged to a time when oil prices were high and the typical oilfield was very large. Oil prices were now low, and it was important that companies have an incentive to extract the maximum from their fields.

The changes would transform what was in effect a tax subsidy for oil explorers to a revenue earner for the Treasury: the yield in 1994-95 would be Pounds 300m and in 1995-96 Pounds 400m.

Mr Lamont's proposals have already been welcomed by large North Sea operators such as BP which maintain that the old tax regime discriminated against large producers.

But they were strongly opposed by exploration companies who claimed that the changes would discourage new drilling and cost thousands of jobs in offshore services, and onshore support and fabrication industries.

Although some oil companies said yesterday that they were disappointed by the bill, they said further changes might still be possible as the oil lobby gears up to influence the debate in parliament.

The UK Offshore Operators Association, which earlier warned that the changes would 'put a substantial burden on the industry', declined to comment on the Finance Bill yesterday. The association said it would be discussing contents of the bill with its members.

GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas GOVT Taxes P1311 The Financial Times London Page 12 439
The Finance Bill: Names' affairs simplified by rules - Lloyd's Publication 930415FT Processed by FT 930415 By RICHARD LAPPER

YESTERDAY'S finance bill contains nothing to surprise tax practitioners who specialise in the affairs of troubled Lloyd's insurance market.

'Above all the new rules simplify taxation arrangements for Names and make them easier,' said Mr Mike Voller, specialist with BDO Binder Hamlyn, the accountancy firm. He said the bill simply supplied greater detail about changes first announced in last month's Budget.

He is positive about new arrangements for reserving, which 'make it much more attractive to be in Lloyd's, always assuming that Lloyd's can do something to clear the decks of its past problems.'

The new arrangements do nothing to help Names already hit by heavy losses, but allow them to establish tax-free reserves against heavy losses they may incur in the future.

Under the new arrangements - which come into in effect to cover the 1992 underwriting year - Names will be able to transfer up to 50 per cent of profits to the new reserve each year, provided the value of the funds in the reserve does not exceed 50 per cent of the Name's overall premium income limit. Amounts withdrawn will be made to fund losses or cash calls withdrawals that are not used to meet losses will attract tax.

GB United Kingdom, EC P6411 Insurance Agents, Brokers, and Service GOVT Taxes P6411 The Financial Times London Page 12 240
The Finance Bill: New tax break for lump-sum payments - Company Cars Publication 930415FT Processed by FT 930415 By KEVIN DONE, Motor Industry Correspondent

A NEW tax deduction is to be introduced for employees who make 'lump-sum' payments to the initial expenditure on their company cars, the government announced yesterday.

The government is also prepared to consider suggestions for other detailed changes to the proposed company car tax reforms announced in the Budget, the Inland Revenue said yesterday.

Any further changes must be aimed at achieving the objective of 'a fair and efficient tax charge on company cars'.

The present system of company car taxation is to be significantly overhauled with the introduction of a new scheme from April 1994.

The chancellor said in the Budget that the new system was intended to make the tax charged on company cars a more fair measure of the benefit people received. The new system should eliminate distortions in the new car market and encourage the use of more fuel-efficient cars.

The present broad scale of charges will be replaced by a new measure of the benefit of a car for private use, based on a charge equivalent to 35 per cent of the list price of the car.

There will be a discount of a third if the employee drives more than 2,500 business miles in a year, or two thirds if the employee drives 18,000 or more business miles.

The most significant further change announced yesterday in the Finance Bill makes provision for employees who contribute capital sums to the initial expenditure on their company cars - for example in order to have particular accessories added to their cars.

The bill defines the the list price of a car as 'the price for the car published by the manufacturer, distributor or importer of the car, when the car was first registered, including VAT and any other relevant tax and any delivery charge; plus the price for any optional accessories provided with the car when it was first made available to the employee'.

GB United Kingdom, EC P5511 New and Used Car Dealers P3711 Motor Vehicles and Car Bodies GOVT Taxes P5511 P3711 The Financial Times London Page 12 366
The Finance Bill: Indexation month to change - Personal Allowances Publication 930415FT Processed by FT 930415 By SCHEHERAZADE DANESHKHU

THE introduction of a November Budget means that the base month for the indexation of personal allowances will also have to change. Traditionally, these are increased annually in line with inflation, although this year Mr Norman Lamont, the chancellor of the exchequer, broke with that tradition by deciding to freeze personal allowances.

Until the last Budget, the amount of increase was based on the retail price index measured from the 12 months to Decem-ber. However, the new base month from this year will be Septem-ber.

This means that if the chancellor were to decide to increase personal allowances for April 1994 the amount would be based on the in-crease in the RPI from September 1992-93.

According to Mr Michael Bishopp of Price Waterhouse, the accountancy firm, the new base date should not have a significant effect on individuals, mainly because of the chancellor's decision to freeze personal taxation allowances this year.

'The chancellor had decided to lose this year's indexation so there is no longer a con-tinuous period on which the next increase would be based,' said Mr Bishopp.

The new base month of September will apply to all personal allowances, the amount of capital gains tax exemption, the inheritance tax threshold, the pensions earnings cap and the limit between the 20 per cent and 25 per cent rate tax band.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Taxes P9311 The Financial Times London Page 12 258
A sherry by any other name Publication 930415FT Processed by FT 930415

BRITISH SHERRY is to be called 'fortified British wine' from the end of 1995, the British Wine Producers' Committee said yesterday.

Disagreement over the name almost reached the European Court of Justice last year. Spain argued that UK excise duties were used illegally to discriminate in favour of British sherry, which contains less alcohol than the Spanish variety.

Spain dropped the court action when the government promised to stop calling the British product 'sherry' after 1995, and to reduce the duty difference to 25 per cent by the end of 1996.

Genuine Spanish sherry must come from the Jerez region and be matured for three years in wooden casks.

British sherry is made in vats from reconstituted grape juice imported from Cyprus and elsewhere.

Mr Tony Grayson, chairman of the committee, said the term fortified British wine 'will be understood and readily accepted by consumers, who are particularly loyal to the product type'.

GB United Kingdom, EC P2084 Wines, Brandy and Brandy Spirits NEWS General News P2084 The Financial Times London Page 12 184
The Finance Bill: Relief for moving expenses - Job Transfers Publication 930415FT Processed by FT 930415 By DIANE SUMMERS, Labour Staff

EMPLOYEES who buy another house because their job requires them to move will be able to claim tax relief on moving expenses, even if they do not plan to sell their former home, the Finance Bill made clear yesterday .

The new home must be the employee's main residence. If the former home is rented out, or is just visited at weekends, the new house will qualify as the principal residence, the Inland Revenue said.

The main change on tax relief and relocation expenses, announced in the Budget and set out in the bill, introduced a ceiling of Pounds 8,000 on relief from April 6. Before that relief was, in effect, uncapped.

The move has been condemned by the Confederation of British Industry which says relocation costs average Pounds 25,000 and can rise to more than Pounds 50,000. The Budget also scrapped concessions on payments to employees if they had to move to more expensive areas.

The government said yesterday it intended to introduce two amendments to the Finance Bill at the committee stage. One will provide some relief for employees whose bridging arrangements include a loan from their companies; the other will make it clear that tax relief for international travel will be in addition to relief for removals.

It also emerged yesterday that further regulations, beyond the Finance Bill, will be needed to implement all aspects of the new relocation rules. The regulations will be needed so employers do not have to deduct tax under PAYE if total payments and benefits exceed Pounds 8,000.

GB United Kingdom, EC P6514 Dwelling Operators, Ex Apartments GOVT Taxes P6514 The Financial Times London Page 12 294
Production rise spread evenly Publication 930415FT Processed by FT 930415 By EMMA TUCKER, Economics Staff

FEBRUARY'S RISE in manufacturing output was fairly evenly spread across all sectors, the Central Statistical Office said yesterday.

The sharp 1.2 per cent increase in February, compared with January, lifted output above the very narrow range it languished in for most of last year, and followed a revised 1.3 per cent month-on-month increase in January. Compared with a year ago, output was 1.5 per cent higher.

This was the third successive monthly increase in manufacturing output and led a number of analysts to conclude that, at least in the manufacturing sector, the recession was over.

'It looks as though the turning point was in the fourth quarter of last year, and that we are now in the early stages of an upturn,' said Mr Neil MacKinnon, chief economist at Citibank in London.

Output over the three months to February was particularly buoyant in the chemicals and engineering industries.

Higher production of pharmaceuticals boosted chemicals output by 2.7 per cent compared with the previous three-month period.

In the engineering industries, a 1.6 per cent three-month on three-month rise in output was driven almost entirely by the computer industry where sales have been particularly strong and exports healthy.

Engineering was given a further boost by increased output of computer components and electronic consumer goods.

There was an unusually steep rise in the output of investment goods. Investment goods production was 2.6 per cent higher in the latest three months, and 4.1 per cent higher than in the same three months a year ago.

The CSO said the healthy computer and electrical goods figures were behind the steep increase.

Output of the food in-dustries over the past three months was fairly flat, although a bumper sugar harvest boosted production sharply in February. Food industry output rose by 0.2 per cent in the latest three months compared with the three months to November, but rose 3.2 per cent, month-on-month, in February.

Production was weakest in minerals output, which rose only 0.1 per cent in the latest three months. In February, however, increased demand for building materials boosted output sharply.

Energy output was 2.1 per cent lower in the three months to February compared with the previous three months. Oil output fell 2.4 per cent as winter storms in the North Sea disrupted oil production.

Other energy production was 1.9 per cent lower over the same period after mild weather reduced the demand for gas and electricity.

Within consumer goods, a rise in the production of durable goods and pharmaceuticals more than offset a drop in car production over the three months to February.

During this period, overall output rose by 0.9 per cent, compared with the previous three months.

The CSO estimates that manufacturing output is now increasing at a trend growth rate of 3 per cent year-on-year once monthly fluctuations are taken out.

GB United Kingdom, EC P3999 Manufacturing Industries, NEC NEWS General News P3999 The Financial Times London Page 12 502
Confidence up in financial services Publication 930415FT Processed by FT 930415 By NORMA COHEN, Investments Correspondent

BUSINESS confidence in nearly all sectors of the financial services industry has strengthened markedly for the second successive quarter, a Confederation of British Industry survey shows.

The survey, conducted quarterly with accountancy firm Coopers and Lybrand, covers more than 300 companies including banks, finance houses, building societies, life and general insurance companies, fund managers, securities traders and venture capitalists.

The survey, which covers the period to the end of February, found that while business volumes fell slightly, they fell more slowly than in the previous quarter and are now expected to increase in the three months to June.

Volumes picked up for most fund managers, insurance brokers and security traders, while the sharpest declines were reported by life insurers and venture capitalists. Some 39 per cent of life insurance respondents said that sales volumes actually fell in the period, in spite of expectations that they would rise. Sluggish demand, intense domestic competition and the threat of legislation are all seen as impediments to future business.

While profitability is improving for the banking sector, 49 per cent of respondents reported an increase in non-performing loans which has restrained the improved earnings which should have accompanied the rise in fee and commission income.

Meanwhile, the survey found that in all sectors of the financial services industry, margins widened further and average fees, commissions and premiums grew strongly over the last quarter, although their value grew more slowly than in the previous quarter.

Industry respondents also reported lower costs for the sixth consecutive survey period. The sharpest cost reductions were reported by venture capitalists, general insurers, finance houses and building societies.

Profitability also increased moderately overall, with fund managers, insurance brokers and general insurance companies reporting the largest increases.

GB United Kingdom, EC P6162 Mortgage Bankers and Correspondents P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance P6289 Security and Commodity Services, NEC P6799 Investors, NEC NEWS General News P6162 P6311 P6331 P6289 P6799 The Financial Times London Page 12 342
British Coal considers court help in dispute Publication 930415FT Processed by FT 930415 By MICHAEL SMITH

BRITISH COAL seems certain to ask the High Court to resolve a dispute over 10 pits earmarked for early closure unless three of its four main unions have a change of heart in the next few days.

Following a High Court ruling that its original closure plans were illegal, the corporation has given the unions until today to respond to its latest proposal on consultations.

This involves the appointment of a single scrutineer to study all closures 'in a single procedure', rather than each one individually, as suggested by the National Union of Mineworkers.

The British Association of Colliery Management has said it is willing to accept the suggestion. Other unions are still considering how to respond.

In spite of today's deadline, British Coal is likely to allow the unions several days before returning to the High Court for a ruling.

It has for some months been indicating it will not apply the Modified Colliery Review Procedure, previously used as the conciliation procedure for closures in the industry, either to the 10 or another nine the corporation wants to close, mothball or cease large-scale production at. MCRP procedures can take nine months.

British Coal believes the court would be satisfied by its use of John T. Boyd, the US consultancy which has already evaluated the pits, and by the appointment of a single scrutineer. In a letter to unions before Easter it said the scrutineer could consider each pit individually. A review could be carried out by mid-May, it said.

The corporation has also told the unions it does not believe an 'independent element' is required in consultations involving the nine to be closed, mothballed or placed on development work only.

British Coal wants to cease coaling at the six to be mothballed at the end of April.

The government has formally rejected calls by the Commons employment committee that it failed to take into account the full financial cost of pit closures.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground COMP Company News P1222 The Financial Times London Page 11 359
British Coal pension dispute Publication 930415FT Processed by FT 930415

BRITISH COAL and managers of its pension scheme said yesterday they expected the High Court to consider within the next month a dispute over the use of part of a Pounds 1bn surplus. The government and British Coal want to recover the corporation's share of the surplus, thought to be worth Pounds 480m, by withholding payments due to the fund to cover the cost of early retirements. British Coal and the scheme said they wanted the issue sorted out as soon as possible.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground P6371 Pension, Health, and Welfare Funds COMP Company News P1222 P6371 The Financial Times London Page 11 120
Doubt over orimulsion projections Publication 930415FT Processed by FT 930415 By MICHAEL SMITH

BP BITOR, the sole importer of orimulsion to the UK, is expecting to keep sales at existing levels during the next few years. Its hopes cast doubts on government assertions that consumption of the bitumen-based fuel is likely to fall.

Mr Stuart Johnston, BP Bitor commercial director, says the company aims for sales to continue at about 1.3m tonnes to 1.5m tonnes a year for the next few years and hopes to increase the figure further by the end of the century.

The ambitions of BT Bitor, a joint venture between BP and Petroleos de Venezuela, will cause concern at British Coal which is already struggling to find a future for 12 pits reprieved by the government last month.

In its coal white paper, launched after the public outcry over previous pit closure plans, the government said it had been informed by the Venezuelan authorities that orimulsion exports were likely to stay at their minimum contractual level for the foreseeable future.

'This should entail a reduction in the consumption of orimulsion in the United Kingdom of at least 500,000 tonnes of coal equivalent a year from current levels,' the white paper said.

In subsequent interviews, Mr Michael Heseltine, trade and industry secretary, made frequent mention of the likely decline in demand for orimulsion.

Energy industry analysts agreed there could be some reduction because of the government's intention to subsidise coal, which would make orimulsion less attractive to the electricity generators.

However, they were surprised at the prediction of a drop of as much as 500,000 tonnes, given that the government had rejected suggestions that orimulsion should be subjected to stricter environmental controls that coal.

In the short term, competition from orimulsion will affect demand for British coal only at the margins, although existing import levels are the equivalent to the output of one pit, or about 1.5m tonnes of coal.

In three or four years time, however, the fuel will pose a greater threat as subsidies for coal run out and stricter pollution controls on all fuels come into practice. Electricity generators believe that recent rulings by the Pollution Inspectorate mean they may have to fit equipment to reduce sulphur levels on all coal-fired and oil-fired power stations in heavy use.

This would favour orimulsion, which is burned in oil-fired stations. If generators had to choose between fitting such equipment to coal-fired or oil-fired power stations they may opt for the latter because they have been used less in recent years and have a longer life expectancy.

BP Bitor GB United Kingdom, EC P5172 Petroleum Products, NEC MKTS Sales P5172 The Financial Times London Page 11 449
UK Economic Indicators Publication 930415FT Processed by FT 930415

------------------------------------------------------------------------ UK ECONOMIC INDICATORS ------------------------------------------------------------------------ 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 29.9 119.6 175.4 2,515 114.1 ------------------------------------------------------------------------ 1992 ------------------------------------------------------------------------ 1st qtr. 105.4 111.1 30.8 119.5 145.9 2,635 119.8 2nd qtr. 105.0 111.5 31.0 120.0 153.6 2,712 115.2 3rd qtr. 105.9 111.5 30.4 120.6 154.3 2,805 107.0 4th qtr. 106.7 111.2 31.2 121.0 181.0 2,918 102.7 February 106.2 111.6 31.4 120.1 145.2 2,645 120.0 March 105.2 111.6 30.8 118.8 147.5 2,653 120.2 April 105.7 111.7 31.1 119.7 154.8 2,695 117.8 May 104.6 111.2 31.0 120.0 152.9 2,716 115.2 June 104.6 111.7 31.0 120.2 153.1 2,724 112.5 July 105.8 111.8 31.4 119.8 155.0 2,760 112.6 August 105.7 111.4 31.2 120.9 154.0 2,811 108.4 September 106.1 111.2 30.4 121.2 153.9 2,843 100.1 October 107.3 111.4 31.2 121.5 160.1 2,868 98.2 November 106.5 111.0 31.4 121.5 172.8 2,913 100.8 December 106.4 111.1 31.2 120.1 210.0 2,973 109.1 ------------------------------------------------------------------------ 1993 ------------------------------------------------------------------------ January 106.3 112.5 31.4 122.7 152.9 2,993 104.7 February 108.0 113.9 123.0 152.0 2,971 122.3

------------------------------------------------------------------------ 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. 108.5 111.8 103.2 108.0 109.7 86.7 11.8 ------------------------------------------------------------------------ 1992 ------------------------------------------------------------------------ 1st qtr. 110.2 110.6 101.5 108.3 107.0 86.7 14.0 2nd qtr. 111.3 111.1 100.1 108.3 107.7 87.7 14.5 3rd qtr. 110.9 111.9 101.6 108.3 105.7 88.0 13.1 4th qtr. 110.8 112.5 103.0 108.3 99.0 88.7 10.7 January 108.9 109.9 101.2 107.0 106.0 86.0 14.0 February 110.8 110.9 102.6 109.0 108.0 87.0 13.1 March 110.9 111.0 100.8 109.0 107.0 87.0 14.8 April 111.0 111.5 101.4 109.0 108.0 87.0 14.0 May 111.2 110.4 99.7 108.0 110.0 88.0 14.1 June 111.8 111.3 99.2 108.0 105.0 88.0 15.5 July 111.3 111.9 101.3 109.0 107.0 87.0 14.2 August 110.4 112.2 101.4 108.0 109.0 88.0 12.5 September 111.0 111.7 102.0 108.0 101.0 89.0 12.6 October 110.6 113.2 103.8 109.0 103.0 89.0 11.8 November 109.7 112.2 103.2 108.0 102.0 89.0 11.0 December 112.0 112.2 102.0 108.0 92.0 88.0 9.4 ------------------------------------------------------------------------ 1993 ------------------------------------------------------------------------ January 110.7 116.0 101.0 110.0 108.0 90.0 13.8 February 111.7 117.8 103.0 90.0 12.9

------------------------------------------------------------------------ EXTERNAL TRADE - Indices of export and import volume (1985=100); visible balance (Pounds m); current balance (Pounds m); oil balance (Pounds m); terms of trade (1985=100); official reserves. ------------------------------------------------------------------------ Export Import Visible Current Oil Terms of Reserves US volume volume balance balance balance trade* Dollars 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 January 121.3 137.0 -1,150 -1,088 +145 99.0 44.59 February 130.1 147.3 -1,008 -946 +109 99.9 44.75 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 ------------------------------------------------------------------------ January 42.56 February 43.45 March 41.58

------------------------------------------------------------------------ FINANCIAL - Money supply (annual percentage change), M0, new M2 (retail deposits and cash), M4; 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 % % % Pounds m Pounds m Pounds 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 +4,802 266 +142 10.50 2nd qtr. 2.2 5.9 5.3 +9,754 77 +5 10.00 3rd qtr. 2.4 5.3 5.3 +5,877 -262 -11 9.00 4th qtr. 2.7 4.9 4.4 +4,783 214 +194 7.00 January 1.7 8.1 6.2 +2,744 293 +82 10.50 February 1.8 7.7 5.9 +1,123 145 +87 10.50 March 2.3 7.1 5.8 +935 -172 -27 10.50 April 2.4 6.2 5.6 +4,247 212 +16 10.50 May 2.7 5.9 5.1 +2,670 179 +45 10.00 June 1.5 5.6 5.3 +2,837 -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 4.8 +686 -264 -25 9.00 October 2.4 5.1 5.2 +3,597 281 +72 8.00 November 3.0 4.6 4.3 +84 -184 +17 7.00 December 2.8 5.1 3.7 +1,102 117 +105 7.00 ------------------------------------------------------------------------ 1993 ------------------------------------------------------------------------ January 3.9 4.5 3.2 +3,179 363 +151 6.00 February 4.5 5.0 3.3 +758 208 +49 6.00 March 4.9 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 January 134.0 103.2 135.8 135.6 128.4 1,596 90.8 February 135.7 103.2 136.3 136.3 129.1 1,586 90.9 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 ------------------------------------------------------------------------ January 140.0 109.8 140.7 137.9 128.8 1,703 80.6 February 110.6 141.4 138.8 130.2 1,759 76.8 March 110.7 142.4 1,758 78.2 ------------------------------------------------------------------------ *Not seasonally adjusted **Net changes in amounts outstanding, excluding bank loans. ------------------------------------------------------------------------

GB United Kingdom, EC P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 11 1103
British Coal considers court help in dispute Publication 930415FT Processed by FT 930415 By MICHAEL SMITH

BRITISH COAL seems certain to ask the High Court to resolve a dispute over 10 pits earmarked for early closure unless three of its four main unions have a change of heart in the next few days.

Following a High Court ruling that its original closure plans were illegal, the corporation has given the unions until today to respond to its latest proposal on consultation procedures.

This involves the appointment of a single scrutineer to study all closures 'in a single procedure', rather than each one individually, as suggested by the National Union of Mineworkers.

The British Association of Colliery Management has said it is willing to accept the suggestion. Other unions are still considering how to respond.

In spite of today's deadline, British Coal is likely to allow the unions several days before returning to the High Court for a ruling.

British Coal has for some months been indicating it will not apply the Modified Colliery Review Procedure, previously used as the conciliation procedure for closures in the industry, either to the 10 or another nine the corporation wants to close, mothball or cease large-scale production at.

MCRP procedures can take nine months.

British Coal believes the High Court would be satisfied by its use of John T. Boyd, the US consultancy which has already evaluated the pits, and by the appointment of a single scrutineer. In a letter to unions before Easter it said the scrutineer could consider each pit individually.

A review could be carried out by the middle of May, it said.

The corporation has also told the unions it does not believe an 'independent element' is required in consultations involving the nine to be closed, mothballed or placed on development work only.

Consultations on closure or mothballing procedures should be 'initiated at local level.'

British Coal wants to cease coaling at the six to be mothballed at the end of April.

Meanwhile, the High Court is expected to consider a separate dispute over staff pensions within a month after the corporation and the pension scheme managers agreed the terms of litigation arising from a fund surplus.

The dispute centres on the government's and British Coal's desire to cease making payments into a fund for early retirement as a result of the surplus.

British Coal Corp GB United Kingdom, EC P1222 Bituminous Coal-Underground COMP Company News P1222 The Financial Times London Page 11 413
Sea 'could provide 20% of energy': Experimental tidal power station to be developed Publication 930415FT Processed by FT 930415

TIDEMILLS to harness fast-flowing sea currents around the coast could supply almost one fifth of the UK's electricity needs, says a report commissioned by the Department of Trade and Industry.

The report, by a group led by Engineering and Power Development Consultants, a subsidiary of Balfour Beatty, the civil engineering group, says the main potential for 'tidal stream energy' lies in the Pentland Firth, between the Scottish mainland and Orkney - where tidal currents can run at up to 12mph - and around the Channel Islands.

The Pentland Firth alone could supply three times as much electricity as hydro-electric power stations, at present Britain's biggest source of renewable energy, with 1,000MW of installed capacity.

Other areas with significant potential include the Bristol Channel and parts of the North Channel between Scotland and Northern Ireland, together with smaller sites off Port-land Bill in Dorset and off Scotland's west coast.

The report recommends the use of proven technology, mainly derived from offshore engineering and windpower expertise.

It envisages arrays of 'tide mills' using underwater propellers with diameters of 20 metres. These would either be fixed towers tied to the seabed, dropped from sea surface floats or suspended in mid-water below wave level, using a small-scale adaptation of the technology used in 'tension-leg' oil platforms.

The authors are cautious about costs, stressing that these are tentative as no tide-mills yet exist. However, they believe that some of the best Pentland Firth sites could produce power at under 10p per kilowatt.

Mr Peter Fraenkel, one of the authors, says experience of other renewable energy research suggests that costs could be cut to half or less of estimates once tidemill generating sets were mass-produced.

This summer his 12-strong company, IT Power, will co-operate with Scottish Nuclear and NEL - formerly the National Engineering Laboratory of East Kilbride, near Glasgow - in installing the world's first sea-current power station on an experimental basis in the Corran Narrows in Loch Linnhe, near Fort William. The 10KW unit is regarded as 'a proof of concept' experiment costing just under Pounds 200,000.

Mr Fraenkel said power from sea currents was '100 per cent predictable, making it far more reliable than electricity wind energy farms or wave power sites, which produce nothing when the air or sea is calm'.

The study was carried out for the DTI by Engineering and Power Development Consultants, with civil engineering consultants Binnie and Partners and builders Sir Robert McAlpine as part of the Renewable Energy Research and Development Programme managed by the Energy Technology Support Unit.

GB United Kingdom, EC P4911 Electric Services P1629 Heavy Construction, NEC RES Natural resources P4911 P1629 The Financial Times London Page 11 462
Parliament and Politics: Overburdened but optimistic - John Authers listens to teachers in conference at Bournemouth Publication 930415FT Processed by FT 930415 By JOHN AUTHERS

TEACHERS spent most of their time in Bournemouth yesterday trying to demonstrate that they are overworked. With almost equal dedication, delegates to the NASUWT conference also tried to prove they are professional.

These are the two main planks in the union's opposition to the government's proposed national curriculum tests: the dispute is over workloads and the claim that implementing the tests places an unreasonable work burden on them. This is a legitimate ground for industrial action.

The union won its case in the High Court against Wandsworth Borough Council by taking this stand. If their action is held to be politically motivated, it could yet be ruled illegal by the Appeal Court, whose judgment is expected next week, or by the House of Lords.

A large quote from Wandsworth's director of education even hangs above the stage of the conference. In it he is quoted as calling the national curriculum 'over-bureaucratic and unworkable. The sooner it is buried the better.'

Support from parents, who are said to be asking for children to be withdrawn from the tests, has also been claimed.

NASUWT members are also taking heart from the actions of other teachers' unions following the Wandsworth ruling.

The decision by the traditionally moderate ATL union, which is not affiliated to the TUC, to ballot its members on a test boycott came after Mr John Patten, the education secretary, addressed the ATL conference.

Mr Richard Hinton, an NASUWT delegate and history teacher at a Staffordshire comprehensive, said: 'Anyone who can go to the ATL and make them take action after 25 years of inaction has a great talent.'

Support from the ATL, with a membership roughly the same size as NASUWT's, increases the chance that action could be effective.

But the decision by the NUT, the biggest teachers' union, to ballot members over performance-related pay, caused anger because it was felt this might be seen as political activism.

This could undermine support from parents, which will be vital for teachers if a compromise is not reached before June when the tests are due to take place.

Cheers greeted a delegate who said: 'What's taking place elsewhere at other conferences I think we should abhor. It's not tolerable to see this profession, which we cherish, portrayed this way.'

Complaints about workload made up the bulk of conference speeches. Every teacher had their own statistic.

Apart from the 8,085 pages of national curriculum documentation which Mr Nigel de Gruchy, general secretary, presented to conference, delegates were told that primary school teachers had to make 100 statements for every pupil in each class, which, according to one delegate, meant 80 hours of work a week.

A Socialist Workers party stall in the conference foyer was the strongest evidence of leftwing infiltration.

But the stand facing it, where a life insurance company was selling teachers' pensions, seemed to be doing a better trade.

GB United Kingdom, EC P8631 Labor Organizations P8211 Elementary and Secondary Schools NEWS General News P8631 P8211 The Financial Times London Page 10 526
Parliament and Politics: Thatcher rekindles her old fire over Bosnia Publication 930415FT Processed by FT 930415 By RALPH ATKINS

BARONESS Thatcher proved yesterday that she has not lost her political touch.

However strong the private annoyance of ministers and however rationally argued the public denunciation, the former prime minister's remarks on Bosnia stirred Westminster into passionate debate over the role Britain could play - and struck a chord with a surprising number of Labour and Tory MPs.

'The unofficial view is that she has flipped - gone completely mad,' said one MP ally of Mr Malcolm Rifkind, the defence secretary. 'It was good Dog and Duck stuff for a Friday afternoon in the pub.'

That was a careless assesment - although it was true that scarcely a Tory MP was prepared to support Lady Thatcher's call for the Bosnian Moslems to be armed and few had concrete alternatives to present government policy.

Government officials' attempts to pretend that Mr Rifkind's Commons statement was planned were half-hearted. The government was clearly on the defensive, anxious that her views should not become common currency or be seen in the US as policy. The private scorn of loyal MPs, fed up with Lady Thatcher's attacks on her successor as prime minister over Maastricht, was coupled with an admission that her views chimed with swelling anxiety beyond Westminster over Bosnia.

'Her comments have struck a chord with the public,' said a Tory MP who fiercely opposes increasing Britain's military involvement. 'I had an old man speaking at a meeting in my constituency who said 'I remember 1945 and never thought that we would see the return of concentration camps.''

For Thatcherites, Lady Thatcher's outburst echoed her time as prime minister when, at least in their minds, Britain was either totally involved in overseas military operations, or not at all.

Lady Thatcher's intervention may have been clumsy. Her decision to grant several interviews to television news programmes rather than make a considered speech, allowed ministers to pick holes in her argument. But in the Commons there was a growing 'something must be done' mentality that Mr Rifkind at times struggled to contain.

'There is a ghastly parallel between the feebleness of the United Nations as it now stands and the League of Nations some 60 years ago against expansionism,' said Mr Barry Porter, Conservative MP for South Wirral.

'There is a real danger of being dragged into a far wider and more difficult conflict unless some check is imposed on the Serbian-driven expansion,' said Mr David Howell, Tory chairman of the foreign affairs committee.

Reaction among some Labour MPs too was surprisingly strong; the condemnation of inactivity by leftwing backbenchers more vociferous than the front bench.

Ms Clare Short, Labour MP for Birmingham Ladywood, drew parallels between the plight of Bosnian Moslems and the failure to protect Jews in the second world war. Mr Tony Banks, Labour MP for Newham North West, said the former prime minister had articulated at least 'the deep anger and frustration of people in this country'.

To an extent, Lady Thatcher was voicing the frustration of Tories wanting firm leadership after a year dominated by rows. She has served warning that ministers must work hard to hold the party together over Bosnia.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs PEOP People P9721 The Financial Times London Page 10 557
Parliament and Politics: Patten moves to seize initiative over controversy Publication 930415FT Processed by FT 930415 By ALISON SMITH

MR JOHN PATTEN, the education secretary, yesterday sought to regain the initiative in the controversy over testing in schools by writing to all Conservative MPs to explain why a boycott by teachers would damage the prospect of further improvements to the government's education reforms, Alison Smith writes.

In a letter to his colleagues, Mr Patten acknowledged that there were a range of concerns among teachers, and he said that his announcement in February of a review of testing and also of the national curriculum was in response to those views.

That review would be hindered if there were no results available from this year's tests for it to consider, he argued. This view had also been emphasised by Sir Ron Dearing, who will chair the review.

Mr Patten said that the English tests for 14-year-olds, which are due to start this summer, had been the subject of particular anxiety.

He accused the NUT and the NASUWT teachers' unions of exploiting concern about those tests in their plans to boycott all the tests.

Opening his attack well in advance of the boycott itself, Mr Patten described any such action as 'counter-productive and unnecessarily damaging, including to the professional standing of teachers'.

GB United Kingdom, EC P9411 Administration of Educational Programs GOVT Government News P9411 The Financial Times London Page 10 237
Parliament and Politics: Prison management's first rule proves hard - Group 4's prisoner escort services Publication 930415FT Processed by FT 930415 By ALAN PIKE JAIL systems throughout the world share a common first rule

hang on to the prisoners.

Officials of Britain's prison service will be anxious to ensure that Group 4, the private security company, is able to fulfil the rule when they meet its managers today. The meeting has been called to review the inglorious start last week to Group 4's handling of Britain's first private contract for escorting prisoners between prisons and courts. Four men escaped or were wrongly released within as many days.

There is more at stake in today's meeting than the usual embarrassment over escapes. The government's ambition to extend private management to wide areas of the criminal justice system depends on the private sector being able to deliver a reliable service.

Group 4, one of the largest security organisations in the world, is at the forefront of this. In addition to gaining the contract to escort prisoners in the east Midlands, Yorkshire and Humberside it runs Wolds, the first privately managed prison in the UK. And it is among this week's bidders to manage Strangeways prison, Manchester. Security companies were natural candidates when the government sought private-sector involvement in the criminal justice system. But their established activities in cash delivery, guard services and security patrols still left them short of the specific expertise needed to run prison services. The new court escort service is operated by 400 prison custody officers and support staff - recruited from 6,500 applicants since it was announced in November Group 4 had won the contract.

Custody officers undergo a six-week training programme. Group 4 Court Services' Nottinghamshire training centre contains a mock courtroom and cells, and training is the responsibility of Mr John Bown, a former police service head of training recruited by the company. Mr David Corbally, quality manager responsible for maintaining performance standards on the escort service, is another former senior police officer.

Group 4 has recruited some high-ranking staff from the public sector. Mr Charles Erickson, a senior Home Office civil servant, and Mr Walter MacGowan, a former governor of Strangeways, joined the company last year. Group 4's director of the new prison escort contract is Mr Michael Hirst, until January chief constable of Leicestershire.

'Bidding for government prison contracts is in line with our business objective of remaining in security activities rather that diversifying,' Mr Stephen Brown, managing director of Group 4 Total Security said yesterday. 'We needed the most experienced staff available to run prison and escort services, and in Britain that expertise is in the public sector.'

Mr Brown says Group 4's line-up of senior staff with police and other specialist experience demonstrates that it has the necessary skills necessary to deliver the court escort service. The company blames deficient design of vehicles, built to Home Office specifications, for two of last week's escapes and says a third man was released on the order of the court.

'There was always a possibility of complications in taking over a complete, complex contract on a single day.' said Mr Brown. 'But it should be remembered that since Group 4 started managing Wolds prison a year ago we have been responsible for escorting prisoners between Wolds and the courts. We have handled 8,000 movements in a year without incident.'

Group 4 Security Services Group 4 Court Services GB United Kingdom, EC P7381 Detective and Armored Car Services TECH Safety & Standards TECH Services & Services use P7381 The Financial Times London Page 10 598
Parliament and Politics: Morris warning on social chapter Publication 930415FT Processed by FT 930415 By DAVID OWEN

THE DEPUTY speaker chairing the detailed discussion of the Maastricht bill last night warned the government it could face a vote of no confidence if it ignores MPs' demands over the treaty's social chapter.

Speaking on BBC 2's Westminster Live programme, Mr Michael Morris acknowledged the government could ignore a vote in favour of a proposed Labour new clause but said 'all sorts of things could flow - votes of confidence et cetera' if it did so.

Mr Morris selected the new clause - which would prevent powers being transferred under the bill until MPs had decided whether the social chapter should apply to the UK - in a ruling last month.

At the same time he announced there would be no vote on a separate and potentially crucial Labour amendment that would remove the protocol containing Britain's opt-out from Maastricht's social chapter.

But with the bill due to return to the Commons today, Mr Morris was last night under intense cross-party pressure to reconsider this decision. During a 30-minute meeting in Mr Morris's chambers, Mr Jack Cunningham, shadow foreign secretary, pleaded the case for allowing a vote either during the current committee stage or the subsequent report stage.

If the deputy speaker reversed his decision by allowing a vote while the bill is in committee, the division - which could deal a severe blow to the government - would probably come later tonight.

Mr Morris made clear he would listen to MPs' views regarding his ruling: 'It may be that I have missed some aspect, in which case I will take it very very seriously.'

There were rumours last night that Tory Euro-sceptics might attempt to call a vote of no confidence in Mr Morris if he confirmed no vote on the amendment would be allowed.

GB United Kingdom, EC P9721 International Affairs GOVT Government News P9721 The Financial Times London Page 10 330
Parliament and Politics: Teachers give strong backing to test boycott Publication 930415FT Processed by FT 930415 By JOHN AUTHERS

THE second-largest teaching union, the NASUWT, yesterday underlined its commitment to boycotting all tests for assessing pupils on the national curriculum.

Delegates to its annual conference in Bournemouth unanimously endorsed a motion upholding the total boycott which the union had already announced. The motion stated that 'the resentment of teachers against their existing heavy workload' would be 'greatly exacerbated by the miserable salary award made to teachers for 1992-93'.

The confirmation of the boycott on tests adds to the pressure on the government to abandon the tests for this year. The move follows votes last week by the other two leading teachers' unions, the NUT and the ATL, to ballot members on similar action.

Mr Nigel de Gruchy, NASUWT general secretary, yesterday stepped up the union's opposition to the government's education reforms when he produced a pile of documents for the national curriculum which he said ran to 8,085 pages.

He told the conference: 'I don't know what more evidence we have to present to the world that the system is fundamentally flawed and that Mr Patten must act not next year but now.'

The leadership, however, suffered a defeat on the issue of school league tables and examination results at the hands of its delegates who voted for a harder line.

The executive was defeated when delegates declined to back a commitment to present strong alternative league tables to the Department for Education - which would have taken additional factors into account - in favour of outright opposition to league tables.

There was applause when one delegate told the conference that co-operating with the tables would mean 'giving future league tables the legitimacy now denied to them by almost every leading commentator'.

GB United Kingdom, EC P8631 Labor Organizations P8211 Elementary and Secondary Schools NEWS General News P8631 P8211 The Financial Times London Page 10 324
Parliament and Politics: 'One-stop' business centres finalised Publication 930415FT Processed by FT 930415 By CHARLES BATCHELOR

THE GOVERNMENT has decided on the locations of 16 pilot 'one-stop' business advice centres which will form the core of a national network of 200 'one-stop shops'. A disproportionately large number are in north-west England and the Midlands.

Mr Michael Heseltine, trade and industry secretary, is expected to announce the names of six areas which have successfully tendered to operate a 'one-stop shop', and nine which will be granted official recognition if they modify their business plans and a special case - central London - which will receive additional funds for further development.

Bids for 'one-stop shop' status were made by 57 partnerships of local business support organisations headed by Training and Enterprise Councils - which administer government training schemes in England and Wales - and comprising chambers of commerce, enterprise agency and local authority economic development departments. From these, 20 were shortlisted, of which 16 have been selected.

The six areas awarded one-stop shops are south and east Cheshire, Manchester, Birmingham, Hertfordshire, Tyneside, and Warrington.

The nine areas which will qualify if they carry out further work on their proposals are Chester and the Wirral, south Derbyshire, Shropshire, Merseyside, Hereford and Worcestershire, Doncaster, Leicestershire, Surrey, and Dorset.

The bias towards the north-west and the Midlands reflects the preponderance of bids from those areas in response to the original tender announcement last December.

In some areas the 'one-stop shops' will be set up in areas with strong existing business support networks such as Manchester and Birmingham. In other areas such as Surrey and Hertfordshire they will be established in areas with fragmented support networks.

In central London, Mr Heseltine has accepted a provisional combined bid from four Tecs - Central London, City & Inner London, South Thames and London East. A bid from Aztec, covering Kingston and Wandsworth, was rejected but it was advised to combine with the four other Tecs.

These five London Tecs, the London and Westminster chambers of commerce and the London Enterprise Agency, are to carry out a Pounds 500,000 study, part-funded by the government, aimed at establishing a central London 'one-stop shop' linked to satellite advice centres in the outer boroughs. The central London bid was complicated by the large number of business support organisations including nine Tecs, more than 30 chambers of commerce and about 25 enterprise agencies.

GB United Kingdom, EC P8331 Job Training and Related Services GOVT Government News P8331 The Financial Times London Page 10 419
Parliament and Politics: Clarke to hear City on insider trading Publication 930415FT Processed by FT 930415 By IVOR OWEN, Parliamentary Correspondent

MR KENNETH Clarke, the home secretary, last night promised further consultations with the Stock Exchange and other City authorities to ensure that more stringent curbs on insider dealing do not inhibit legitimate trading processes.

He told the Commons that Treasury ministers handling the Criminal Justice Bill believed they could allay fears that normal practices based on expertise might be affected.

Mr Robert Maclennan for the Liberal Democrats led protests that City interests and the CBI had not been adequately consulted before the bill was given a second reading by the Lords last November.

Mr Clarke acknowledged the difficulties experienced in mounting successful prosecutions under the existing law and stressed the importance of ensuring that the new provisions were correctly drafted so that the law could be effectively enforced.

Insisting that legitimate business practices would not be jeopardised, he said: 'Nothing in the bill will prevent the sort of contact between companies and investors which properly take place today.'

Nor would it require changes to the legitimate practices of investment analysts, or involve any modification of underwriting arrangements.

Mr Clarke confirmed that it would continue to be an offence for an insider who possessed inside information or someone who had obtained information from an insider to take advantage of it by dealing in securities to make a profit or avoid a loss.

Mr Clarke said the new legislation would apply to all listed securities, and to all securities which were traded on exchanges throughout the EC, rather than just those which operated in the UK.

Mr Anthony Nelson, economic secretary to the Treasury, said nothing in the bill would prevent meetings between companies and institutional investors, or occasional meetings with analysts.

The bill was given an unopposed second reading.

GB United Kingdom, EC P6231 Security and Commodity Exchanges GOVT Government News P6231 The Financial Times London Page 10 327
Parliament and Politics: Newbury ballot tied to council elections Publication 930415FT Processed by FT 930415 By PHILIP STEPHENS, Political Editor

THE government set the stage yesterday for the most important test of its popularity since last year's general election by announcing that the Newbury by-election will be held on May 6.

The date for the by-election, where the Conservatives face a powerful challenge from the Liberal Democrats to their 12,357 majority, has been chosen to coincide with the county council elections. The reasoning in Conservative Central Office is that the impact of a defeat might be cushioned by a stronger performance in the local polls.

Both the Liberal Democrats and the Conservatives were being careful yesterday not to overstate their confidence of winning the seat. Senior officials on both sides said privately that they regarded the result as 'too close to call'.

Newbury has traditionally been regarded as part of the Conservatives' home counties heartlands, but the recession has severely eroded support for the government. The Liberal Democrats also have a strong presence on the Berkshire county council where their support ensures a Labour administration.

The poll, caused by the death of Mrs Judith Chaplin, is regarded by the Liberal Democrat party as a key test of its ability to re-establish its political profile after a lacklustre year.

The 9.3 per cent swing it needs to win the seat is well within the margin of its by-election victories during the last parliament. Labour, which polled fewer than 4,000 votes in the constituency last April, is not regarded as a serious contender.

For Mr John Major the stakes are still higher. Apart from the obvious psychological blow, a defeat would reduce the government's Commons majority from 21 to 19. With several Tory MPs now 'semi-detached' from the government as a result of the row over Maastricht, its 'reliable' majority on many issues is already in single figures.

Mr Paddy Ashdown, who yesterday launched his party's campaign for the local elections with a prediction that it would win a record number of seats, said Newbury had the opportunity to 'speak for Britain' in rejecting the government's policies.

Mr Ashdown rejected Conservative charges that his party had established informal pacts with Labour, insisting that no deals had been struck at local or at national level.

Mr Jack Straw, Labour's shadow environment secretary, said yesterday that he had asked for a report on the withdrawal of some Labour candidates in Berkshire in an apparent attempt to help the Liberal Democrats.

Prospective candidates named for the by-election so far: Julian Davidson (C), David Rendel (Lib Dem), Steve Billcliffe (Lab), Jim Wallis (Green), Dr Alan Sked (Anti-Federalist), Colin Palmer (21st Century party), Lord David Sutch (Monster Raving Loony 30 Years party).

General election result, April 1992: Mrs Chaplin (C) 37,135; David Rendel (Liberal Democrat) 24,778; Richard Hall (Lab) 3,962; Jim Wallis (Green) 539.

Unemployment has risen five times faster in Conservative-controlled counties than in their Labour counterparts, Labour claimed yesterday in its local election campaign.

Launching a survey on the 'success' of Labour councils in protecting companies and jobs, Ms Harriet Harman, the shadow chief Treasury secretary, said that Labour had promoted economic development and attracted inward investment.

Labour said the jobless total in the last four years had risen 193 per cent in Tory-controlled counties against an average of 37 per cent in counties under Labour control.

GB United Kingdom, EC P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 10 578
Parliament and Politics: Maastricht 'chaos' rapped Publication 930415FT Processed by FT 930415 By DAVID OWEN

MPS HIT out yesterday at the 'chaotic' state of affairs that has left them ignorant of which amendments to the bill to ratify the Maastricht treaty they will be asked to vote on when they conclude detailed consideration of clause one of the bill, probably tonight.

On the eve of the measure's return to the Commons, Mr Peter Shore, the veteran Labour Euro-sceptic, called on Mr Michael Morris, deputy speaker, to clarify the position as early as possible when today's debate gets under way.

Mr Shore was supported by Mr Nigel Spearing, another Euro-sceptic Labour MP.

Mr Shore said he would be adding his voice to cross-party calls for Mr Morris to reconsider a decision not to allow a vote on Labour's potentially crucial amendment 27 - which would remove the protocol containing Britain's opt-out from Maastricht's social chapter.

Mr Jack Cunningham, shadow foreign secretary, was last night due to see Mr Morris in person to plead the case for allowing a vote.

If the deputy speaker does reverse his decision, the vote - which could deal a severe blow to the government - would probably come later tonight.

If he sticks to his guns, there would be a vote on a separate Labour clause to prevent powers being transferred under the bill until MPs had decided whether the social chapter should apply to the UK.

There were rumours last night that disgruntled Tory Euro-sceptics might attempt to call a vote of no confidence in Mr Morris if he confirmed that no vote on amendment 27 would be allowed. Hard-core Tory rebels were expected to meet to discuss tactics today before the committee stage resumed.

GB United Kingdom, EC P9721 International Affairs P9111 Executive Offices GOVT Government News P9721 P9111 The Financial Times London Page 10 310
Parliament and Politics: InterCity turns trains to hotels Publication 930415FT Processed by FT 930415 By ROY TERRY

INTERCITY is taking steps to earn at least some revenue during tomorrow's planned 24-hour rail strike, Roy Terry writes.

Rather than see its fleet of 125 Pullmans standing idle at Paddington station, InterCity is offering sleeper accommodation for commuters tonight and tomorrow. The cost is Pounds 20 a night for a shared cabin and Pounds 30 a night for a single cabin.

In addition, a full first class Pullman dining service is available from 8pm. Weary travellers or, in this case, non-travellers, may retire to their sleeper berths at 9.30pm.

They will be awakened with a BR coffee.

InterCity said: 'We are trying to give something back to our customers in difficult circumstances by offering a service to meet a known demand.'

There have been some bookings, and BR expects many more. A similar service at Euston and King's Cross in previous years proved very popular. Bookings can be made by calling 071 922 6766.

British Rail GB United Kingdom, EC P4111 Local and Suburban Transit TECH Services & Services use P4111 The Financial Times London Page 10 195
Parliament and Politics: Trouble with the first rule of prison management - The shaky start to Group 4's prisoner escort services Publication 930415FT Processed by FT 930415 By ALAN PIKE PRISON systems throughout the world share a common first rule

hang on to the prisoners.

Officials of Britain's prison service will be anxious to ensure that Group 4, the private security company, is able to fulfil the rule when they meet its managers today. The meeting has been called to review the inglorious start last week to Group 4's handling of Britain's first private contract for escorting prisoners between prisons and courts. Four men escaped or were wrongly released within as many days.

There is more at stake in today's meeting than the usual political embarrassment over escapes. The government's ambition to extend private management to wide areas of the criminal justice system - offering valuable business opportunities for security companies - depends on the private sector being able to deliver a reliable service.

Group 4, one of the largest private security organisations in the world, is at the forefront of this. In addition to gaining the contract to escort prisoners in the east Midlands, Yorkshire and Humberside it already runs Wolds, the first privately-managed prison in the UK. And it is among this week's bidders to manage Strangeways prison, Manchester. Dutch-based Group 4 Securitas has 32,000 employees worldwide - 8,000 of them in the UK - and operates in 33 countries.

Security companies were natural candidates when the government sought private-sector involvement in the criminal justice system. But their established activities in cash delivery, guard services and security patrols still left them short of the specific expertise needed to run prison services.

The new court escort service is operated by 400 prison custody officers and support staff - recruited from 6,500 applicants since it was announced in November that Group 4 had won the five-year contract. Between 20 per cent and 30 per cent of the successful applicants had previous experience in the prison service, police or armed services.

Custody officers undergo a six-week training programme, ranging from routine duties to handling emergencies and restraint techniques. Group 4 Court Services' Nottinghamshire training centre contains a mock courtroom and cells, and training is the responsibility of Mr John Bown, a former police service head of training recruited by the company. Mr David Corbally, quality manager responsible for maintaining performance standards on the escort service, is another former senior police officer.

Group 4 has recruited some high-ranking staff from the public sector. Mr Charles Erickson, a senior Home Office civil servant, and Mr Walter MacGowan, a former governor of Strangeways, joined the company last year. Group 4's director of the new prison escort contract is Mr Michael Hirst, until January chief constable of Leicestershire, and his two senior controllers are former chief superintendents.

'Bidding for government prison contracts is in line with our business objective of remaining in security activities rather that diversifying,' Mr Stephen Brown, managing director of Group 4 Total Security said yesterday. 'We needed the most experienced staff available to run prison and escort services, and in Britain that expertise is in the public sector.'

'But we have not gone out to poach or headhunt public sector managers. We regularly receive approaches from people in the public sector who are interested in joining us.'

Mr Brown says Group 4's line-up of senior staff with police and other specialist experience demonstrates that it has the necessary skills necessary to deliver the court escort service. The company blames deficient design of vehicles, built to Home Office specifications, for two of last week's escapes and says a third man was released on the order of the court.

He added: 'There was always a possibility of complications in taking over a complete, complex contract on a single day.' said Mr Brown. 'But it should be remembered that since Group 4 started managing Wolds prison a year ago we have been responsible for escorting prisoners between Wolds and the courts. We have handled 8,000 movements in a year without incident.'

Group 4 Security Services Group 4 Court Services GB United Kingdom, EC P7381 Detective and Armored Car Services TECH Safety & Standards TECH Services & Services use P7381 The Financial Times London Page 10 711
Parliament and Politics: Labour claims success on jobs Publication 930415FT Processed by FT 930415 By DAVID OWEN

UNEMPLOYMENT has risen five times faster in Conservative-controlled counties than their Labour counterparts, Labour claimed yesterday as it opened a fresh line of attack in its local election campaign, David Owen writes.

Launching a survey on the 'success' of Labour councils in protecting companies and jobs, Ms Harriet Harman, shadow chief Treasury secretary, said Labour had promoted economic development despite 'disastrous' Tory economic mismanagement.

Labour said the jobless total in the last four years had risen by 193 per cent in Tory-controlled counties against an average of 37 per cent in Labour counties.

The party also used a mid-campaign press conference and a party political broadcast to reinforce its principal election message that Labour councils provided better services and cost local taxpayers less.

Labour claims that average council tax bills under Labour councils were Pounds 14 less than under Tory councils.

GB United Kingdom, EC P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 10 174
Record N Sea oil output forecast Publication 930415FT Processed by FT 930415

OIL PRODUCTION by the main countries involved in the North Sea will reach a record level of nearly 5.5m barrels per day in 1995 - a 41 per cent increase on 1991 - according to a report from Mackay Consultants, oil industry analysts.

Mackay says output from new oil fields coming onstream mainly in the UK and Norway sectors will more than compensate for declining production in some of the older fields.

Mr David Rennie and Mr Tony Mackay say the expected increase is a result of a high level of development work over the last five years. They do not expect a continuing rise after 1995 because the level of such activity is much lower.

In their report, Prospects for the North Sea Oil and Gas Industry 1993-95, they say a significant factor in the UK will be the oil industry's reaction to tax changes in last month's Budget, which they expect to lead to a further contraction in exploration drilling.

They admit their prediction that UK oil production will peak at 2.5m barrels a day in 1995, to be followed by a slow decline, is in marked contrast to other experts who forecast continuing growth for the rest of the decade.

GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas MKTS Production P1311 The Financial Times London Page 8 233
Call to cut prices of CDs Publication 930415FT Processed by FT 930415

THE CONSUMERS' Association last night call for restrictions on imports of cheaper compact discs from the US to be lifted and the savings passed on CD buyers.

The association is to give evidence today to the first hearing in the Commons national heritage committee's investigation of CD prices. Last night it produced a list of discs with UK prices higher than those in the US.

The MPs will also be hearing evidence from rock groups which are demanding lower prices for their own CDs. WH Smith, Britain's biggest record retailer, will present evidence on April 22.

Mr Derek Prentice, Consumers' Association assistant director said: 'CDs are a rip-off. CD buyers in the UK are a small-scale, high-profit, largely captive market. Exchange rates and other factors cannot explain the persistent gap between the cost of CDs in the UK and US.'

The association called on the Office of Fair Trading to investigate the 'possibly anti-competitive effects' of the Copyright, Designs and Patents Act 1988, which it said was used to block imports.

The British Phonographic Industry said that although it might cost just Pounds 1 to manufacture the disc, other expenses such as copyright fees, recording sessions and cover designs added to the cost.

GB United Kingdom, EC US United States of America P3652 Prerecorded Records and Tapes MKTS Foreign trade P3652 The Financial Times London Page 8 238
Industry beats off radical plans: Tackling market power of dominant companies Publication 930415FT Processed by FT 930415 By ROBERT RICE

THE government's decision to do little more than tinker with the present legislation for tackling abuse of market power by dominant companies represents a significant victory for the industry lobby.

Mr Neil Hamilton, corporate affairs minister, was quick to deny yesterday there had been a government climbdown. It had not 'caved in to industry', he said. But the decision will come as a severe disappointment to businesses used to competing with a dominant player in the market to consumer organisations and to competition lawyers who had all argued for radical reform.

But in general industry will welcome yesterday's announcement. The Confederation of British Industry, after extensive consultation with its members, strongly opposed radical change. It told the Department of Trade and Industry: 'If-it-ain't-bust-don't-fix-it.' Radical change was unnecessary and would be very costly for industry, it argued.

In the November green paper the government canvassed three options for reform:

To retain the existing case-by-case approach under the 1973 Fair Trading Act and the 1980 Competition Act for dealing with anti-competitive practices. Under this option the Office of Fair Trading would have been given stronger investigatory powers and businesses would be made liable for damages and possible civil penalties for continuing abuse.

To introduce a general prohibition on abuse of market power based on Article 86 of the Rome Treaty backed by tough investigatory powers for the OFT and fines on companies of up to 10 per cent of worldwide turnover.

To introduce a general prohibition backed up by fines of up to 10 per cent of worldwide turnover and give the OFT tough investigatory powers, but retain the existing Fair Trading Act provisions for investigating monopolies.

At the time of publication the government was thought to prefer option three, seen as the best chance of an effective deterrent while retaining the breadth and flexibility of the existing legislation.

Mr Hamilton said yesterday the government had approached the issue with an open mind. There had been no consensus among respondents to the green paper and the government had 'concluded that the regulatory costs which would have arisen from options two and three would have been disproportionate to the gains to consumers.'

The government now proposes to strengthen legislation in four ways: wider powers of investigation for the Office of Fair Trading allowing it to search and seize documents in certain circumstances; additional scope for companies to give undertakings to the OFT which can be enforced through the courts; power for the director-general of fair trading to make interim orders prohibiting any further anti-competitive behaviour; and extension of the law to cover some property rights, such as rights of access.

The government, however, has dropped the proposal to make companies liable for penalties and damages for continuing abuse. Mr Hamilton said a number of respondents had argued this would be unjust and might lead a company to abandon a practice that was later found not to be against the public interest.

GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors GOVT Government News P9651 The Financial Times London Page 8 527
Building societies look for security in their funding: The reasons why mortgage lenders are considering a fresh method of raising finance Publication 930415FT Processed by FT 930415 By TRACY CORRIGAN

FIVE years ago the concept of repackaging mortgages for sale as securities was anathema to most building societies.

Now, many societies are preparing the ground so that they will be ready to securitise their mortgages, if the need arises. The Leeds Permanent building society may go ahead as early as September, and other societies, such as Nationwide and Bristol & West, are making adjustments to their computer and administrative systems to ensure that they can cope with the logistics of securitisation.

So what lies behind this change of heart? Not, as in the case of some foreign banks, the need for capital. Securitisation allows financial institutions to remove assets from their balance sheets, reducing the amount of capital they have to hold for regulatory purposes. But the constraints facing building societies have actually diminished in recent years.

The real reason for the change is that societies have become increasingly worried about their ability to meet their funding needs through traditional channels when the housing market starts to improve.

During the housing boom of the late 1980s, centralised mortgage lenders, such as The Mortgage Corporation, were able to win market share using securitisation as their main method of funding.

At present building societies have two main sources of funds, and both appear constrained. The most important is retail deposit accounts, but falling interest rates have prompted a withdrawal of funds. The other mainstay is the wholesale market, where building societies can raise up to 40 per cent of their funding, under Building Societies Commission rules, through bonds and loans.

In practice, however, the average limit, dictated by the BSC on an individual basis, is closer to 20 per cent, and many building societies are already approaching their limits.

'Any society in the top 20 that is wholesale-funded up to 25 per cent or more must be looking at the prospect of securitisation out of necessity,' said Mr Simon White, assistant treasurer at the Halifax building society, which has only 15 per cent wholesale funding.

Any increase in deposit rates, in order to attract more retail funds, would squeeze building societies' margins - or push up mortgage rates. Securitisation is off-balance sheet financing, which does not count towards the 40 per cent funding rule, and allows building societies to lock in a profit margin.

At present there is a differential of about 2 percentage points between Libor (the London interbank offer rate, the main reference for wholesale funding) and the mortgage rate. If building societies were able to finance securitised mortgages at, say, 3/4 of a point above Libor, they would still have locked in a margin of more than a point.

Securitisation has other advantages: the maturity of mortgage-backed securities is matched with the life of the mortgage, so that, unlike other types of funding, it does not leave building societies with any exposure when refinancing is necessary.

Clearing banks are also looking at securitisation, but only Barclays Bank plans to securitise both mortgages and two to five-year consumer loans this year. It is 'highly likely' that the bank will securitise about Pounds 300m of mortgages this year, according to Mr Brian Worsley, deputy treasurer.

Apart from Barclays, which already securitised one batch of mortgages four years ago, building societies are expected to lead the way. But for all its theoretical attractions, some societies such as the Halifax and Alliance & Leicester do not believe that securitisation is commercially viable for them.

The start-up costs are extremely high - one Swedish bank is estimated to have spent Dollars 1m on its first issue of mortgage-backed securities.

When mortgage-backed financing was first introduced in the US, the result was cheaper housing finance in some areas as the available pool of mortgage funding was spread more evenly. Even the most optimistic observers see little prospect of any benefits to homebuyers here. At best it may provide 'a new source of funding at levels not significantly higher than . . in the wholesale market,' according to Mr Mark Stadler, director in charge of securitisation at Merrill Lynch.

All the same, if the long-awaited recovery in house prices finally materialises in the next year or so, at least the building societies will be ready, and able, to lend.

GB United Kingdom, EC The Financial Times London Page 8 740
European Bank of Reconstruction and Development loans to be investigated Publication 930415FT Processed by FT 930415

TWO cross-party Commons committees are likely to investigate the spending and loans of the European Bank of Reconstruction and Development and whether the UK government exercised sufficient care in preventing its Pounds 40m grant to the bank being misspent.

Mr Robert Sheldon, Labour chairman of the public accounts committee, described the bank's expenditure as 'quite astonishing'. He is planning to ask the comptroller and auditor-general, Sir John Bourn, whether the spending of the UK's Pounds 40m grant - given to the bank as an incentive to locate in London - was suitable for investigation.

He said examination of the Common Agricultural Policy provided a precedent for examining whether the government had taken appropriate steps to ensure that a contribution to a European institution had been spent wisely.

Meanwhile, Mr Giles Radice, a Labour member of the Treasury and Civil Service committee, said the committee had agreed yesterday that it would 'look at how effectively the bank is lending money in Eastern Europe'.

To date the bank has disbursed just Pounds 101m.

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies P9111 Executive Offices NEWS General News P6081 P9111 The Financial Times London Page 8 211
101 brewery jobs to be shed Publication 930415FT Processed by FT 930415

SCOTTISH and Newcastle Breweries yesterday announced 101 job losses over the next six months, affecting management, staff and hourly paid employees. It follows a restructuring of the company's central engineering and building services activities.

The job losses will be mainly in Edinburgh, where 66 jobs will go, and Newcastle upon Tyne, where 28 will be lost.

Nearly 80 jobs will go when the Chesswood Produce mushroom factory in Horham, Suffolk, closes in June.

Scottish and Newcastle Chesswood Produce GB United Kingdom, EC P2082 Malt Beverages P2099 Food Preparations, NEC PEOP Labour P2082 P2099 The Financial Times London Page 8 111
Call to cut prices of CDs Publication 930415FT Processed by FT 930415

THE CONSUMERS' Association last night call for restrictions on imports of cheaper compact discs from the US to be lifted and the savings passed on CD buyers.

The association is to give evidence today to the first hearing in the Commons national heritage committee's investigation of CD prices. WH Smith, Britain's biggest record retailer, will present evidence on April 22.

Mr Derek Prentice, Consumers' Association assistant director said: 'CDs are a rip-off. CD buyers in the UK are a small-scale, high-profit, largely captive market. Exchange rates and other factors cannot explain the persistent gap between the cost of CDs in the UK and US.'

GB United Kingdom, EC US United States of America P3652 Prerecorded Records and Tapes MKTS Foreign trade P3652 The Financial Times London Page 8 139
Further twist in war over air fares Publication 930415FT Processed by FT 930415

THOMAS COOK, one of Britain's biggest travel agents, gave a new twist to the war over business air fares yesterday by offering yet bigger savings to its corporate clients in exchange for a fee.

Mr Bill Kirkwood, sales and marketing director, suggested that savings of up to 40 per cent were possible on corporate travel. However this would eat into the agency's traditional income, derived from a 9 per cent commission on the price of an air ticket.

Following similar plans in the US, Thomas Cook is also offering to manage corporate travel spending. It wants to bypass companies' in-house travel managers and provide spending reports directly to budget holders.

American Express, one of Thomas Cook's rivals, said that it was already offering similar cost-management services to corporate clients.

Thomas Cook and Sons GB United Kingdom, EC P4724 Travel Agencies TECH Services & Services use P4724 The Financial Times London Page 8 165
Talks on sale of Leyland Daf plant Publication 930415FT Processed by FT 930415 By KEVIN DONE

THE management buy-out team seeking to acquire the Leyland Daf truck assembly plant at Leyland, Lancashire, has started formal negotiations with the administrative receivers, Kevin Done writes.

Mr John Gilchrist, who is leading the buy-out team, said yesterday 'a number of offers of funding support' had been received from leading financial institutions.

The MBO team has received a letter of intent from Daf Trucks in the Netherlands for the supply of its UK-built range of Leyland Daf light trucks to the Dutch company's European dealer network.

The management buy-out team is also negotiating with the receivers on behalf of Lancashire County Council, which is seeking to acquire the entire Leyland site for development into a business and high technology park.

The MBO team is seeking to secure the use of the truck assembly plant itself, but the remainder of the 230-acre site includes a range of other industrial buildings, including the Leyland components plant and Leyland Daf headquarters building.

Mr Gilchrist said the bid from the management buy-out team was in its 'final stages'. Negotiations were expected to continue for several days, but it was hoped a final agreement could be reached by the end of the month.

The future ownership of the former African subsidiaries of Leyland Daf, the subject of separate management buy-out negotiations, was 'not in any way critical' to the success of the Leyland MBO team's bid, Mr Gilchrist said.

Automotive Products, the automotive components maker, which has stopped supplying brakes and clutches to Leyland Daf pending the repayment of debts totalling Pounds 758,000, said last night it was 'on the verge' of completing an agreement with the Leyland truck MBO team to resume supplies of clutches, if the buy-out bid succeeded.

Leyland DAF Automotive Products GB United Kingdom, EC NL Netherlands, EC P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories COMP Buy-in & Buy-out P3713 P3714 The Financial Times London Page 8 336
Car design company goes into receivership Publication 930415FT Processed by FT 930415 By KEVIN DONE, Motor Industry Correspondent

IAD (UK), one of Europe's leading automotive design and engineering consultancies, has been forced into administrative receivership with debts of about Pounds 13.5m.

Mr Maurice Withall and Mr Peter Flesher of accountants Grant Thornton have been appointed joint administrative receivers. Mr Withall said last night that offers for IAD had been received from several companies and a sale could be completed before the end of next week.

'We are very hopeful and expect to be successful in selling the business as a going concern,' he said.

Mr Godfrey Harker, IAD group finance director, said the company's debts included bank debt of Pounds 7m, trade debt of Pounds 4m and Pounds 2.5m owed to the Inland Revenue. It expected to make a loss of Pounds 2m to Pounds 2.5m on a turnover of up to Pounds 52m in the year to the end of this month. Turnover had begun to fall sharply since mid-1992.

The company had been profitable until halfway through the present financial year, but turnover had declined significantly from about Pounds 60m achieved in both the previous two years. The strain on IAD's finances was increased by the financial collapse in February of Daf, the Dutch truck maker, which owed IAD around Pounds 500,000.

International Automotive Design, based at Worthing, West Sussex, has carried out contracts for many of the world's leading vehicle makers since it was formed in 1976 by Mr John Shute. The company is owned 77.5 per cent by Mr Shute and his family, and 22.5 per cent by Cinven, the UK's second largest venture capital investor.

The company, which won three Queen's awards for exports in the late 1980s, has established a presence in most of the leading car producing countries with subsidiaries in Germany, France, Spain and the US and liaison offices in Tokyo, Seoul and Moscow.

It has played a leading role in the design and prototype development of a wide range of vehicles including the Ford Scorpio estate car, Ford's Lincoln Town Car in the US, the Volvo 440 and the Mazda MX-5 sports car. It has played a leading role in the development of electric vehicles and recently won a substantial design and development contract from Telco, the large Indian commercial vehicle maker.

The IAD group has a workforce of close to 1,000 worldwide, including a large number of independent consultants working under contract. The company employs just under 300 in the UK mainly at its Worthing headquarters.

Only the UK parent company and five UK subsidiaries have been placed in receivership.

Mr Harker said last night: 'It is the back end of the recession catching us. We had been looking for additional capital for a little while and had been trying to interest the venture capital market, but falling turnover did not help.'

Under Mr Shute's forceful leadership IAD has been built into the UK's leading automotive design and engineering consultancy. Its concept vehicles have been exhibited at many of the world's leading international motor shows, and the company had started to rival many of the long-established Italian automotive design houses such as Pininfarina, Italdesign and Bertone.

IAD (UK) GB United Kingdom, EC P8711 Engineering Services P3711 Motor Vehicles and Car Bodies COMP Company News P8711 P3711 The Financial Times London Page 8 562
EBRD staff told to fly economy class Publication 930415FT Processed by FT 930415 By ROBERT PESTON and DANIEL GREEN

AMID the furore over the use of private jets by Mr Jacques Attali, president of the European Bank for Reconstruction and Development, the bank disclosed yesterday that all other staff have been instructed to fly economy class.

There are only two exceptions to the rule: Mr Attali and Mr Ron Freeman, the first vice president. Mr Pierre Pissaloux, the EBRD's budget director, said the ban on business class flights was made five weeks ago. Mr Attali and Mr Freeman were exempted because it is in their contracts, Mr Pissaloux said.

Mr Pissaloux also said that 'a few months ago' he introduced a new system for controlling the costs of hiring jets for Mr Attali. The new system means that each time Mr Attali needs an aircraft, three charter companies are asked to submit bids. Mr Pissaloux said this was not a direct response to pressure from the bank's board of governors, though one of those governors, Mr Norman Lamont, the UK chancellor, said yesterday the governors had become concerned about the costs of the private airplanes.

Mr Pissaloux added that each three months he informs the chairman of the bank's audit committee, which consists of representatives of the countries which own the bank, how much Mr Attali has spent on jets and other items in the previous quarter. 'We desire to be entirely transparent,' Mr Pissaloux said.

Mr Attali, who is facing mounting criticism over internal spending at the bank, said in a recent interview it would be impossible for him to do his job without the use of private jets.

'I am sorry, I cannot do without it', he said. Such aircraft were needed, he claimed, for trips which were incompatible with commercial airline schedules.

He gave an example of his schedule from 25 March to 29 March, when he flew from a meeting with the Prince of Wales, who was inaugurating the bank's head office, to Bucharest in Romania, for an environmental meeting. Then he went to Paris and from there to Hamburg. Finally he flew to Moscow where he had breakfast on the 29th with Mr Boris Federov, the Russian deputy prime minister.

Mr Pissaloux insisted that private jets could sometimes work out cheaper than flying in a commercial aircraft, when large numbers of bank executives needed to be travelling together.

The EBRD spent Pounds 600,000 on renting private aircraft last year and is budgeting to spend up to Pounds 400,000 this year for between 15 and 18 trips - roughly Pounds 22,000 for each use of a jet.

Aircraft brokers said yesterday that even a small Learjet, seating three or four people comfortably, would cost around Pounds 2,000 an hour to charter. The bank recently called for tender offers for a chartered Learjet from at least one London area air charterer.

It also wanted details on the British Aerospace 125 jet, which can carry six or seven people in luxury but costs about Pounds 3,000 an hour to charter.

One air broker yesterday described the BAe 125 as 'the Rolls-Royce of private aircraft' and the Learjet as 'the Mercedes'.

Private jet charter is a business that thrives on secrecy as much as economics. Corporate dealmakers like to own or charter private jets to conceal their movements from potential rivals who may monitor the public areas of airports.

Mr Brian Wigham of consultancy, International Bureau of Aviation, says that private charterers buy 'convenience and security'.

Luton is one of the biggest centres of private jet chartering in the UK, followed by Heathrow, Gatwick and Biggin Hill, Kent.

Editorial comment, Page 15

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies P7359 Equipment Rental and Leasing, NEC PEOP Labour NEWS General News P6081 P7359 The Financial Times London Page 8 642
N Sea oil rig workers evacuated Publication 930415FT Processed by FT 930415

MORE THAN 30 oil workers were evacuated from a North Sea platform last night after it was hit by a power failure.

Oil company Amoco said they were airlifting non-essential personnel from the Montrose Alpha platform, about 130 miles east of Aberdeen.

The Aberdeen coastguard said no-one was understood to have been injured and the platform, which is permanently secured to the sea-bed, was in no danger. The coastguard added: 'We don't know why there was a power failure. There's no danger of the platform drifting anywhere, but the loss of power means that communications are difficult.'

Oil production by the main countries involved in the North Sea will reach a record level of nearly 5.5m barrels per day in 1995 - a 41 per cent increase on 1991 - according to a report from Mackay Consultants, oil industry analysts.

Mackay says output from new oil fields coming on-stream mainly in the UK and Norway sectors will more than compensate for declining production in some of the older fields.

In their report, Prospects for the North Sea Oil and Gas Industry 1993-95, Mr David Rennie and Mr Tony Mackay say the expected increase is a result of a high level of development work over the last five years. They do not expect a continuing rise after 1995 because the level of such activity is much lower.

Amoco Corp GB United Kingdom, EC P1311 Crude Petroleum and Natural Gas P1382 Oil and Gas Exploration Services TECH Safety & Standards MKTS Production P1311 P1382 The Financial Times London Page 8 270
Businessmen give conduct pledge Publication 930415FT Processed by FT 930415 By GARY MEAD, Marketing Correspondent

THE Office of Fair Trading has received written undertakings from two businessmen involved in the collapsed Club Riviera timeshare company that they will abide by various consumer protection laws.

Sir Bryan Carsberg, director-general of the OFT, said yesterday that the future conduct under the Fair Trading Act of Mr Simon Clarke and Mr Lawrence Werner would be 'carefully' monitored.

Club Riviera was compulsorily wound up in the High Court on February 3 this year. In July last year the OFT revoked the company's consumer credit licences, the first time the OFT had taken such action against a timeshare company.

Sir Bryan said yesterday that if Mr Werner or Mr Clarke failed to abide by their undertakings the matter could be taken before the courts, with ultimately the threat of a fine or imprisonment.

The OFT has invoked part three of the Fair Trading Act, which empowers Sir Bryan to require written assurances from company executives to desist from apparent breaches of a wide range of civil and criminal laws.

Among the offences that Mr Werner and Mr Clarke have agreed to refrain from committing are: making false or misleading statements regarding services, accommodation and facilities, or which induce consumers into entering contracts; sending threatening letters; retaining consumers' money paid in error; failing to return deposits; and obtaining property by deception.

Club Riviera GB United Kingdom, EC P9651 Regulation of Miscellaneous Commercial Sectors P6531 Real Estate Agents and Managers COMP Company News P9651 P6531 The Financial Times London Page 8 264
Shark tank scrapped Publication 930415FT Processed by FT 930415 By RHODRI DAVIES

PLANS FOR a shark tank at London's Planet Hollywood restaurant have been scrapped after architects found the fish too unreliable, Rhodri Davies writes.

The theme restaurant (shown left in design and under construction) is due to open in the West End on May 17. It will have exhibits from films Terminator 2 and Rocky and the handcuffs from 9 1/2 Weeks, but architects Blair Eastwick abandoned plans for a live shark exhibit. Partner Michael Eastwick said: 'Baby sharks cost a small fortune and you have no guarantee of an extended lifetime with those fish.'

Diners will enter the James Bond room through a gun barrel.

Planet Hollywood GB United Kingdom, EC P5812 Eating Places TECH Safety & Standards P5812 The Financial Times London Page 8 137
Talks on sale of Leyland Daf plant Publication 930415FT Processed by FT 930415 By KEVIN DONE, Motor Industry Correspondent

THE management buy-out team seeking to acquire the Leyland Daf truck assembly plant at Leyland, Lancashire, has started formal negotiations with the administrative receivers.

Mr John Gilchrist, who is leading the buy-out team, said yesterday 'a number of offers of funding support' had been received from leading financial institutions.

Crucially the MBO team has also received a letter of intent from Daf Trucks in the Netherlands for the supply of its UK-built range of Leyland Daf light trucks to the Dutch company's European dealer network.

The management buy-out team is also negotiating with the receivers on behalf of Lancashire County Council, which is seeking to acquire the entire Leyland site for development by Lancashire Enterprises, its economic development agency, into a business and high technology park.

The MBO team is seeking to secure the use of the truck assembly plant itself, but the remainder of the 230 acre site includes a range of other industrial buildings, including the Leyland components plant and Leyland Daf headquarters building, Lancaster House.

Mr Gilchrist said the joint bid would give the truck business 'a future' and contribute to the regeneration of the Leyland site.

The bid from the management buy-out team was in its 'final stages'. Negotiations were expected to continue for several days, but it was hoped a final agreement could be reached by the end of the month.

The future ownership of the former African subsidiaries of Leyland Daf, the subject of separate management buy-out negotiations, was 'not in any way critical' to the success of the Leyland MBO team's bid, said Mr Gilchrist.

Automotive Products, the automotive components maker, which has stopped supplying brakes and clutches to Leyland Daf pending the repayment of debts totalling Pounds 758,000, said last night it was 'on the verge' of completing an agreement with the Leyland truck MBO team to resume supplies of clutches, if the buy-out bid succeeded.

Leyland DAF Automotive Products GB United Kingdom, EC NL Netherlands, EC P3713 Truck and Bus Bodies P3714 Motor Vehicle Parts and Accessories COMP Buy-in & Buy-out P3713 P3714 The Financial Times London Page 8 367
Pilot 'one-stop' business advice centres chosen Publication 930415FT Processed by FT 930415 By CHARLES BATCHELOR

THE GOVERNMENT has decided on the locations of 16 pilot 'one-stop' business advice centres which will form the core of a national network of 200 'one-stop shops'. A disproportionately large number are in north-west England and the Midlands.

Mr Michael Heseltine, trade and industry secretary, is expected to announce the names of six areas which have successfully tendered to operate a 'one-stop shop', nine which will be granted official recognition if they modify their business plans and a special case, central London, which will receive additional funds to carry out further development work.

Bids for 'one-stop shop' status were made by 57 partnerships of local business support organisations headed by Training and Enterprise Councils - which administer government training schemes in England and Wales - and comprising chambers of commerce, enterprise agency and local authority economic development departments. These were whittled down to a shortlist of 20 from which 16 have now been selected.

The six areas awarded one-stop shops are south and east Cheshire, Manchester, Birmingham, Hertfordshire, Tyneside and Warrington.

The nine areas which will qualify if they carry out further work on their proposals are Chester and the Wirral, south Derbyshire, Shropshire, Merseyside, Hereford and Worcestershire, Doncaster, Leicestershire, Surrey, and Dorset.

The bias towards the north-west and the Midlands reflects the preponderance of bids from those areas in response to the original tender announcement last December.

In some areas the 'one-stop shops' will be set up in areas with strong existing business support networks such as Manchester and Birmingham. In other areas such as Surrey and Hertfordshire they will be established in areas with fragmented support networks.

In central London, Mr Heseltine has accepted a provisional combined bid from four Tecs - Central London, City & Inner London, South Thames and London East. A separate bid from Aztec, covering Kingston and Wandsworth, has been rejected but it has been advised to combine with the four other Tecs.

These five London Tecs, the London and Westminster chambers of commerce and the London Enterprise Agency, are to carry out a Pounds 500,000 study, part-funded by the government, aimed at establishing a central London one-stop shop linked to satellite advice centres in the outer boroughs.

The central London bid was complicated by the large number of business support organisations including nine Tecs, more than 30 chambers of commerce and about 25 enterprise agencies, and further research needs to be done.

The aim is to create a national network of business advice centres to equal the government-backed chambers of commerce in much of continental Europe and to end the fragmentation of support services for business.

The Tecs are free to establish their own business centres outside the 'one-stop shop' network but official recognition guarantees government finance of about Pounds 230,000 in the first year and continuing government backing for the next two years. Ultimately the 'one-stop shops' are expected to become self-funding.

GB United Kingdom, EC P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 8 514
World Trade News: Boeing looks for more lift from Chinese orders Publication 930415FT Processed by FT 930415 By DANIEL GREEN and LYNNE CURRY LONDON, BEIJING

BOEING is trying to follow last week's Dollars 800m aircraft sale to China with further orders of a similar size.

The Clinton administration is nearing a decision on its Most Favoured Nation status trade policy towards China while the soaring US trade deficit with China remains an intractable problem. For China to lose MFN status would make imports more expensive, and China sees aircraft purchases as a way to buy political goodwill.

Boeing, too, has a strategic need to sell to China. While loss-making western airlines are cancelling orders, China has the world's fastest-growing aviation market. Air travel rose last year by about 30 per cent, and there has been a surge of smaller regional airlines. Over the next decade, experts forecast China will need 50 aircraft a year to meet passenger demand.

That demand has already led to a series of orders by Beijing for Boeings. The Dollars 800m contract was for 20 737-300 aircraft and one 757-200.

Boeing is hoping Beijing will now buy wide-bodied 767 aircraft, which can carry 260 passengers, as well as its yet-to-be launched, longer-range 777 aircraft, which seat 380 people. In principle, Air China of Beijing would acquire the 777s and China Southwest would purchase the 767s.

Whether Beijing goes through with another bloc purchase of Boeings, however, will depend on whether it believes such a step will reap it political dividends. 'If they are not buying the goodwill they had hoped, they will go to Airbus,' said one aviation analyst. Airbus - the European consortium of French, German, British and Spanish companies - is number two in the world market for commercial passenger aircraft.

The Chinese buying mission to the US, led by Gan Ziyu, vice-chairman of the State Planning Commission, has become a yearly event, as Beijing seeks to persuade the US to continue granting it MFN status, which allows Chinese exports to qualify for the lowest US tariffs.

This is not the first time Beijing has sought to use aircraft buying as political leverage. With its recent purchase of 12 Airbuses and options for more through Germany, it showed it could by-pass France, the headquarters of Airbus. China has tried to blacklist French makers over the sale of Mirage jets to Taiwan last year.

Both Airbus and Boeing want Chinese sales to plug the gap in aircraft deliveries over the next two to three years until profits at western airlines recover. The stage is set for a tough battle,but the winner could emerge through a political decision in Washington in June.

Boeing US United States of America CN China, Asia P3721 Aircraft MKTS Contracts P3721 The Financial Times London Page 7 466
World Trade News: Finnair starts to replace aircraft Publication 930415FT Processed by FT 930415 By HUGH CARNEGY STOCKHOLM

Finnair, the loss-making Finnish national airline, has taken a step towards replacing its 44-strong fleet of McDonnell Douglas and Airbus aircraft with Boeings by the end of the decade, Hugh Carnegy writes from Stockholm.

The airline, 70 per cent state-owned, said it had signed a letter of intent with Boeing and International Lease Finance Corporation to restructure the fleet based on the Boeing 767 long-haul and 737 short-haul families of aircraft. Discussions would be completed within three months after which Finnair would decide whether to proceed.

Mr Antti Potila, president of Finnair, said the agreement was preliminary and non-binding and did not close the door to Airbus and McDonnell Douglas.

Boeing International Lease Finance Corp FI Finland, West Europe P4512 Air Transportation, Scheduled P3721 Aircraft COMP Company News P4512 P3721 The Financial Times London Page 7 154
World Trade News: Brussels discounts French car fears Publication 930415FT Processed by FT 930415 By ANDREW HILL BRUSSELS

THE European Commission yesterday played down the significance of French concern about the recent EC-Japan deal on exports of Japanese vehicles to the Community during 1993.

Mr Gerard Longuet, French industry minister, and Mr Alain Lamassoure, minister for European affairs, have written to Mr Martin Bangemann, the EC industry commissioner, expressing worries about the deal, which should lead to a 9.4 per cent drop in the number of Japanese cars and vans exported to the EC this year.

The Commission has not yet received the letter, but officials said yesterday they believed the concerns were mainly 'technical'.

France is one of five EC countries which have had to lift national quotas on Japanese vehicles, as part of a 1991 agreement which should lead to a completely open EC market by the end of the decade.

In spite of the overall drop in exports to the EC, Japanese exports to France will actually increase this year from 69,016 to 77,300, as the liberalisation of the French market begins to take effect.

The new French government wants to know how the EC estimated demand in the Community for 1993.

Japanese and Community officials agreed earlier this month that European demand would fall by 6.5 per cent against 1992, but the French industry estimates that its national market could shrink by as much as 10 per cent.

French manufacturers are also concerned about the impact of imports of Japanese cars made in other Community countries.

These so-called 'transplants' were taken into account by EC and Japanese negotiators but not included in the agreed figures.

QR European Economic Community (EC) JP Japan, Asia FR France, EC P3711 Motor Vehicles and Car Bodies P9721 International Affairs MKTS Foreign trade P3711 P9721 The Financial Times London Page 7 309
World Trade News: US-Canada disputes cloud Nafta talks Publication 930415FT Processed by FT 930415 By NANCY DUNNE WASHINGTON

US, CANADIAN and Mexican officials have started a series of negotiations on side agreements to complete the North American Free Trade Agreement. At the same time, however, US legislators were raising doubts about the binational dispute settlement mechanism already operating between the US and Canada.

The US National Pork Producers' Council warned that a decision against their group by a binational appeals panel, the extraordinary challenge committee, has 'cast a shadow over the entire binational panel process' set up under the US-Canada free trade pact.

The three-member committee ruled that, while a lower binational panel, which ruled against the US, 'may have erred' in its interpretation of a US Commerce Department application of the countervailing duty law, 'on balance the committee was not persuaded that the panel failed to apply the properly articulated standard of review.'

'The committee itself said the panel may be wrong,' said Mr Karl Johnson, president of the pork producers. 'Why have the extraordinary challenge committee process at all if a binational panel's blatant flaws cannot be overturned?'

One issue was a decision by the original binational panel to refuse documents from the Commerce Department which were alleged to have shown how Canadian subsidies support the pork industry there.

The committee said the refusal was 'somewhat surprising', in that a previous panel had ruled against the US on the grounds that there was not substantial evidence shown to support a Commerce decision.

US parties have not done well in the binational process, according to Ms Joanna McIntosh, one of the attorneys for the pork council.

Of the 10 cases brought concerning US agency determinations, six have gone against the US and three ended with no improvement - the US side has won just once.

More than a third of the US Senate wrote to President Clinton in January, warning that a negative decision in the pork case 'could have grave implications for pending cases'.

Editorial Comment, Page 23

US United States of America CA Canada MX Mexico P9721 International Affairs P0213 Hogs NEWS General News P9721 P0213 The Financial Times London Page 7 364
World Trade News: E Europe urged to renew ex-Soviet ties - No firm dates offered for EC membership Publication 930415FT Processed by FT 930415 By LIONEL BARBER COPENHAGEN

EC member states yesterday urged central and east European countries to rebuild commercial ties with the former Soviet republics to strengthen trade liberalisation in Europe.

The call came at the end of a two-day international conference in Copenhagen, but several delegations cautioned that greater regional co-operation in the east should not be a substitute for improved market access to western Europe and eventual EC membership.

Mr Geza Jeszenszky, Hungarian foreign affairs minister who emerged as the champion of the former communist countries in eastern Europe, said: 'This is not a bad idea. But it only makes sense if integration goes ahead with western Europe.'

A free trade zone in east Europe would complement existing efforts to cut barriers between Poland, the Czech republic, Hungary and Slovakia - the so-called Visegrad Four. But it remains politically sensitive as east European countries fear being pushed back towards markets in Russia and the former Soviet Union.

The Copenhagen meeting was organised by the Danish government to discuss how best to foster economic development and political stability in central and eastern Europe. In addition to delegates from the 12 EC countries and the Visegrad Four were members of the European Free Trade Area, the Baltic states, Bulgaria, Romania and Slovenia. Russia was not represented.

The conference highlighted the contradiction between western European countries' political desire to help the former communist countries and the economic reality of recession, which has made them reluctant to offer generous concessions on market access.

Despite misgivings among free trade-minded countries such as the UK, Denmark, Switzerland and the Nordic states, the final communique avoided concrete offers on market access. It noted only that the EC and Efta, among others, had an important role in opening markets progressively 'on a mutually advantageous basis'.

However, Sir Leon Brittan, EC trade commissioner, suggested the conference could increase political support for faster moves to open the EC's markets to central and east European imports. The issue is to be considered at the EC summit in June.

At present the EC has struck association agreements with six east European countries, including the Visegrad Four, Romania and Bulgaria. These provide for progressive dismantling of trade barriers, but contain restrictions on sensitive items such as agriculture, textiles and steel - all of which remain key export earners in eastern Europe.

The conference, which was non-binding, did not offer a firm date for EC membership for Poland, the Czech republic, Hungary and Slovakia. Mr Niels Helveg Petersen, Danish foreign minister, spoke of a 'clear perspective' on membership but added: 'It makes no sense to set a time. It can't be done. It would not help.'

QR European Economic Community (EC) XV Commonwealth of Independent States P9721 International Affairs NEWS General News P9721 The Financial Times London Page 7 488
World Trade News: Miyazawa confident of import rise Publication 930415FT Processed by FT 930415 By MICHIYO NAKAMOTO and NANCY DUNNE TOKYO, WASHINGTON

MR Kiichi Miyazawa, Japanese prime minister, leaves Tokyo today for Washington, confident that the Dollars 117bn domestic economic package announced on Tuesday, and the benefits it will have in increasing domestic demand for imports, is sufficient to soothe US concerns about its Dollars 46bn merchandise trade deficit with Japan.

But he will not, by all official accounts, be bringing a new trade initiative to his first meeting with President Bill Clinton. The latter will have to be satisfied, for the time being, with a stimulant package designed to lift the Japanese economy out of its doldrums and thereby help boost world growth, and with a Japanese willingness to lend an attentive ear to any US ideas on how Japan might help reduce its massive trade surplus.

Mr Miyazawa will convey his belief to Mr Clinton that the package will put the Japanese economy firmly on the road to recovery and that such macro-economic measures are the proper way to address the nagging problem of the two countries' trade imbalance. The lift that the new measures will give to imports is estimated by Japan's ministry of international trade and industry at more than Dollars 8bn.

Also, the package includes government procurement of many products in which the US is competitive, such as medical equipment and computers.

Mr Miyazawa may find, however, that US enthusiasm for Japan's efforts is not quite what he had expected. US government officials now in Tokyo, for the meeting of G7 foreign and finance ministers, have shown a measured response to the economic package.

Mr Lloyd Bentsen, US treasury secretary, while acknowledging Japan's recent efforts to reduce the deficit, suggested that the US expects more. He stressed the need for continued stimulation and increasing demand, calling the economic package 'a step forward - but you need to look beyond the headlines.'

Mr Clinton is unlikely to be pleasantly surprised by a Japanese proposal on addressing sectoral issues. Japan has repeatedly stated that it will not discuss quantitative market-opening targets, which are favoured by US officials as a means to reduce the trade deficit with Japan.

However, leading trade officials in Tokyo indicate that, targets aside, they are prepared to be flexible towards any proposals the US has on trade issues, including the setting-up of a new forum for discussing bilateral issues.

Nancy Dunne adds from Washington: In an effort to boost sales of US auto parts in Japan, the US Commerce Department and Japan's Miti will sponsor a two-day conference on June 2-3 at Dearborn, Michigan. The aim is to lift sales to Dollars 19bn in 1994. In 1991, the US sold some Dollars 10.5bn of auto parts to Japan.

US parts producers have complained that they are being discriminated against by Japanese companies manufacturing in the US.

The conference will bring together senior Japanese auto executives and US parts suppliers to discuss Japanese procurement practices and future opportunities for the sale of US auto parts in Japan.

JP Japan, Asia US United States of America P9611 Administration of General Economic Programs P9721 International Affairs NEWS General News P9611 P9721 The Financial Times London Page 7 540
Los Angeles awaits verdict Publication 930415FT Processed by FT 930415

Korean shopkeepers were putting up razorwire in Los Angeles yesterday, as the city waited for a verdict in the federal trial of four white policemen accused of a 1991 beating of black motorist Rodney King. Hopes that a decision had been reached were raised briefly when the judge recalled lawyers to the court late yesterday. However, he announced that one of the jurors had become ill and had asked to see a doctor. The jury was expected to reassemble this morning for a sixth day of deliberations.

US United States of America P5999 Miscellaneous Retail Stores, NEC P9211 Courts NEWS General News P5999 P9211 The Financial Times London Page 6 119
VAT may finance US health plans Publication 930415FT Processed by FT 930415 By GEORGE GRAHAM WASHINGTON

VALUE added tax is back as an option for financing the Clinton administration's healthcare reform plan, senior US officials said yesterday.

Ms Alice Rivlin, deputy director of the Office of Management and Budget, told a Washington conference that VAT or some other form of national sales tax was 'clearly a possible candidate' for financing the overhaul of the healthcare system.

'Certainly, we are looking at a VAT,' added Ms Donna Shalala, health and human services secretary, interviewed by the newspaper USA Today.

VAT, common in most other developed countries, is backed by several US senators and seen by others as inevitable in the long run. Most advocates, however, have argued it should be introduced as part of a comprehensive reform of the US tax system, in place of a considerable portion of the revenue now raised from income taxes.

President Bill Clinton said two months ago that he did not want to complicate his economic plan with such a radical change as the introduction of VAT, ruling the idea out for at least the next four or five years.

White House officials have also said in recent weeks that VAT had been explicitly ruled out as a way of financing the healthcare reform.

But Mr George Stephanopoulos, White House spokesman, confirmed yesterday that the idea of VAT was again under consideration, although Mr Clinton had made no decision.

White House officials say at least 20 different tax options are still on the table for financing the healthcare reform, with 'sin taxes' on alcohol, tobacco and guns especially favoured because they curb unhealthy habits that burden the medical system.

Ms Rivlin said yesterday that a national VAT had 'a good deal to recommend it' because of the US need to boost investment rather than consumption. On the other hand, it would be regressive in its impact, and could also hurt states' revenues from local sales taxes.

A White House task force is still at work on the administration's healthcare reform plan, expected to be completed in mid-May.

The core goals of the reform plan are to ensure all US citizens have some form of health coverage and a guarantee that this not be jeopardised if they change jobs or become sick. All that is almost certain to cost the government a great deal more than the current system, where most people have health insurance provided by their employer.

At least in the short term it will prove expensive to extend coverage to the estimated 37m people who have no employer-provided health insurance but do not qualify for the government's Medicaid or Medicare schemes, which cover the poor and the elderly.

Over the longer term the administration hopes that the reforms will pay for themselves by bringing medical costs under control.

Administration officials say the outlines of their plan include a health security card that would guarantee every citizen access to a standard package of health benefits.

US United States of America P9431 Administration of Public Health Programs GOVT Taxes P9431 The Financial Times London Page 6 520
UK union pact with Teamsters Publication 930415FT Processed by FT 930415 By ROBERT TAYLOR

Britain's Transport and General Workers Union yesterday signed what it called an historic agreement with the International Brotherhood of Teamsters of the US, writes Robert Taylor.

The TGWU said the two unions would consult about developing a co-ordinated approach toward the United Parcel Service company.

The co-operation agreement would also cover an exchange of information and educational facilities but concentrate on developing common interests in global transport.

'As capital becomes more internationally mobile, so must organisations of labour co-ordinate their work across national boundaries', said Mr Bill Morris, TGWU general secretary.

GB United Kingdom, EC US United States of America P8631 Labor Organizations NEWS General News P8631 The Financial Times London Page 6 126
Haiti PM lays down conditions to quit Publication 930415FT Processed by FT 930415 By AP PORT-AU-PRINCE

HAITI'S military-backed prime minister has said he will resign to make way for democracy, but has also laid out conditions that would further delay President Jean-Bertrand Aristide's return, AP reports from Port-au-Prince.

Prime Minister Marc Bazin's statement came immediately after Mr Dante Caputo, UN special envoy, put forward proposals to end the country's 18-month-old political crisis.

Mr Caputo suggested a blanket amnesty to the leaders of the September 1991 coup if they made way for an Aristide-approved government. The plan is strongly supported by the Clinton administration.

Mr Bazin said he would resign as soon as Mr Aristide had designated a new cabinet leader, but the new prime minister should be subject to approval by the army, the two main parliamentary groups, and business, community and church leaders.

HT Haiti, Caribbean P9121 Legislative Bodies GOVT Government News P9121 The Financial Times London Page 6 159
Caribbean goes shopping for citizens: Canute James sights Far Eastern businessmen looking for a haven Publication 930415FT Processed by FT 930415 By CANUTE JAMES

A DISTANT ramification of the diplomatic skirmish between Britain and China over the future of Hong Kong is being felt on the eastern Caribbean island of Dominica, where citizenship is 'for sale'.

Dominica has been casting its net throughout south-east Asia for the past year, in an effort to entice, with the offer of passports, new 'economic citizens' in exchange for investments. Businessmen from the Far Eastern British colony have been visiting.

The prospective citizen pays the government USDollars 25,000, which goes into a trust fund, and makes an initial business investment of not less than Dollars 35,000 in a venture producing for export and employing Dominicans.

The country is not alone in making an eastern Caribbean pitch for wealthy citizens. The government of St Kitts-Nevis plans to sell several hundred passports to residents of Hong Kong, who appear concerned about the future of the colony when it comes under Chinese control in 1997.

St Kitts-Nevis officials say they will not grant more than 3,000 'economic citizenships' and that many of those who qualify would not live in the twin-island country, which has a population of 50,000 people. However, the phantom immigrants would have a haven in case of need.

In the same region, the government of Antigua is studying a similar programme to attract investors from the Far East. An official said the administration favours issuing economic visas, as in Canada.

To the west across the Caribbean, Jamaica has launched a programme to attract 'business migrants', to draw both their professional skills and their money. The programme was launched in Hong Kong but the Jamaican government says it is willing to consider applicants from any country.

Jamaica has stipulated no minimum investment, but preference will be given to prospective migrants willing to commit no less than Dollars 100,000 in ventures creating local jobs. Indirect investors will also be favoured, if able to put Dollars 100,000 in a venture capital fund, in non-transferable government bonds for at least 10 years, or in approved private joint ventures. A successful applicant will receive resident status and a passport, and will be able to apply for Jamaican citizenship.

There is, however, concern over the consequences of some of these programmes in the Caribbean's labour-surplus economies. There is little to prevent an investor shutting up shop on one island when his tax holiday - one of the many incentives - has expired and starting anew in a neighbouring country. Government spokesmen in Grenada say they have turned down requests for special citizenship for Hong Kong residents.

Besides the extra strain of an influx of new citizens on a social and physical infrastructure already overstretched, their presence could affect external financing of island economies.

Many eastern Caribbean governments have complained repeatedly and bitterly about the tendency of international financial institutions and aid agencies, applying per capita income criteria, to place their countries outside the category of those entitled to cheap loans. The presence of a few well-heeled economic citizens could push the island economies even further away from soft-money windows.

DM Dominica, Caribbean P9721 International Affairs NEWS General News P9721 The Financial Times London Page 6 544
Unpopular governor asks for more time Publication 930415FT Processed by FT 930415 By JUREK MARTIN WASHINGTON

GOVERNOR Jim Florio of New Jersey has given encouragement this week to all incumbent politicians who have plumbed the depths of unpopularity while in office. He announced that he will seek re-election in November to a second term.

The east coast Democrat is by no means sure of success. Most state polls show him behind, or level with, two prominent Republicans, Mrs Christine Todd Whitman and Mr Carey Edwards. Both have recently been saddled with another contemporary US problem, failure to pay taxes on their domestic staff.

But the fact that the governor is now given a fighting chance has made him very much the Easter week candidate, for few politicians have ever been declared so politically dead, so often, as has the 55-year-old Mr Florio.

If he recovers and wins in the autumn, then many others who had fallen on hard times through their attempts to impose fiscal disciplines on their states may take heart. Among them are Mr Pete Wilson, Republican governor of California, and even Mr Mario Cuomo, Democratic governor of New York and no longer a candidate for the next vacancy on the US Supreme Court.

Mr Florio, elected in 1989 by a landslide, had seemed the quintessential victim of the Republican era of revulsion to higher taxes. He immediately pushed through the state legislature, then in Democratic hands, a Dollars 2.8bn tax increase, plus other controversial measures covering education, insurance and gun control.

Political retribution was immediate. Within two years the legislature was in Republican hands and the state's most popular politician, Democratic Senator Bill Bradley, nearly lost his re-election bid to Mrs Whitman because of his association with Mr Florio.

However, in recent months a recovery seems to have been under way in the state economy and in the governor's fortunes. A victory was recorded this year when the legislature withstood great pressure from the National Rifle Association (NRA) and refused to override his veto of attempts to eviscerate his tough gun control law.

The fact that Mr Florio has recruited Mr James Carville, President Bill Clinton's strategic mastermind last year, to direct his re-election effort is considered important. The 'ragin' Cajun', who also engineered the stunning Pennsylvania Senate by-election victory in 1991 by Mr Harris Wofford, the Democratic longshot, is the hottest political adviser in the US at present.

In declaring his candidacy this week, Mr Florio sought to cast himself, not unlike Mr Clinton, as a man unafraid to take tough decisions in difficult times. Also borrowing from earlier in the president's political career, he said he had learned in his first term 'to talk less and listen more'. Mr Clinton lost his first bid for re-election as governor of Arkansas largely because he had tried to push through a series of measures considered too radical by his state.

US United States of America P9111 Executive Offices PEOP People P9111 The Financial Times London Page 6 499
Six dead as riots sweep South Africa Publication 930415FT Processed by FT 930415 By PATTI WALDMEIR and PHILIP GAWITH JOHANNESBURG

RIOTS swept South Africa yesterday and at least six people were shot dead after one of the largest political protests in the country's history, called to mourn slain activist Chris Hani.

President F W de Klerk announced further security measures in advance of Monday's funeral of the murdered Communist party leader.

But political leaders, including officials of the African National Congress, made clear that the death toll yesterday was lower than might have been expected, given that hundreds of thousands of people attended rallies and protest gatherings and millions stayed away from work. Employer organisations said 80-90 per cent of workers remained at home.

On national television, Mr De Klerk said that yesterday had been 'a dark day for South Africa,' adding 'what happened. . . cannot be tolerated in any civilised country.' He said 3,000 extra police would be added to anti-riot units in the wake of the violence, more unrest areas could be declared, and that authorities might clamp down on types of protest allowed.

Mr Cyril Ramaphosa, ANC secretary-general, took a less gloomy view of the day's events, saying the countrywide mourning had gone off 'relatively peacefully.' He believed the pace of constitutional negotiations would pick up, and that there would be joint black-white control of the security services within two months.

Mr Ramaphosa criticised what he said was an unprovoked attack by police on demonstrators in Soweto, where marshals struggled, but succeeded, in controlling a crowd tens of thousands strong. At least four people were killed and some 250 injured, five of them critically.

But in Cape Town, Durban, Pietermaritzburg and Port Elizabeth ANC officials appeared to lose control of the large crowds, which attacked police, smashed windows and looted shops after breaking away from rallies addressed by ANC leaders.

Police appeared to act with restraint in the areas, although there were unconfirmed reports that at least two people had been killed in Cape Town.

The Soweto shooting broke out when an angry crowd marched on a police station after attending a rally addressed by Mr Nelson Mandela, ANC leader. Mr Mandela implored a packed stadium to act peacefully.

He praised the white Afrikaner woman whose eyewitness evidence had led to the apprehension of Mr Hani's alleged murderer and said to South Africa's youth: 'Your duty is to take such examples and use them to build a new non-racial nation.'

Violence erupting erupted only after he had departed to address a rally in a nearby town.

However, Mr Carl Niehaus, an ANC spokesman, warned after the Soweto shooting: 'This kind of action by police is exactly what will lead this country to bloodshed and. . . the consequences in days to come must be laid squarely at the door of the police force.'

Financial markets reacted nervously to events. The financial rand - a barometer of foreign investor confidence - closed at R4.82 against the dollar, compared with R4.56 before Mr Hani's death. The stock market index fell by 31 points to 3,498, having shed 51 points on Tuesday.

Although yesterday's unrest will have depressed businessmen, few would have been surprised.

Mr Jeff Liebesman, chairman of the W&A group, an industrial conglomerate, said he was 'disappointed and upset' at yesterday's events, but not shocked. 'We were braced for it as a group.'

ZA South Africa, Africa P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 4 585
HK share prices boosted by China talks Publication 930415FT Processed by FT 930415 By SIMON DAVIES HONG KONG

HONG KONG yesterday celebrated the end of the Sino-British political deadlock in traditional fashion, with the Hang Seng Index surging 371.53 points to a record high of 6,789.74.

Local politicians displayed rather less optimism, however, that the four-day talks to be held by Britain and China would resolve the dispute over Hong Kong's political development, and Beijing issued further warnings indicating that the stock market reaction could be premature.

A UK foreign office spokesman said Hong Kong's three representatives would join the negotiations with China on April 22 as equal members of the team, implying that Britain had won a diplomatic concession from the Chinese.

However, Mr Zhang Junsheng, deputy director of the Hong Kong branch of Xinhua News Agency - the official mouthpiece for China - yesterday declared that the Hong Kong representatives would merely adopt the role of advisers or experts, in accordance with China's initial demands.

Regardless of the semantics, a stumbling block has clearly been overcome in allowing talks to be resumed. But as one Legislative Councillor said yesterday: 'It is possible that the gap between the two sides is still large. China wants the freedom to appoint its own lackeys, while the British want an honourable retreat.'

Mr Martin Lee, leader of the United Democrats, said he was not optimistic about a resolution. But he argued that Mr Patten, the Hong Kong governor, appeared to have won an important procedural point, and had proven that Britain could successfully stand up to China.

He said: 'Let us hope this is a sobering reminder to the China clique (so-called Foreign Office Sinophiles such as former Beijing Ambassador Sir Percy Craddock) that theirs is not the right way.'

Foreign investors took more encouragement from the diplomatic breakthrough. Stock market turnover hit an all-time high of HKDollars 7.7bn (Pounds 652m) compared with the previous record of HKDollars 6.3bn set in May 1992. Brokers expected follow-through buying from London and New York to push the index further today.

A resolution to the dispute would stimulate corporate earnings. It would spark an increase in property prices and provide the economic benefits of a go-ahead for several big infrastructure projects, which have become pawns in the political conflict.

The most politically marked company in the stock market, Jardine Matheson - which in December was singled out by China as a 'bad element in Hong Kong's business community' - was the best performing blue chip stock of the day, climbing HKDollars 7 to HKDollars 55.

Mr William Overholt, managing director of Bankers Trust (Hong Kong) said: 'I don't think that there is a view that things will go smoothly. But the Hong Kong community has now come to the conclusion that China will do nothing to harm Hong Kong. The basic fear of 1997 has evaporated.'

HK Hong Kong, Asia CN China, Asia GB United Kingdom, EC P6231 Security and Commodity Exchanges P9721 International Affairs NEWS General News P6231 P9721 The Financial Times London Page 4 510
Rabin and Mubarak meet in bid to put peace talks on schedule Publication 930415FT Processed by FT 930415 By ROGER MATTHEWS, Middle East Editor

ARAB delegations to the Middle East peace talks will wait until Saturday before deciding whether to attend the next round of negotiations scheduled for Washington on Tuesday.

President Hosni Mubarak of Egypt made the last effort at conciliation yesterday when he met Mr Yitzhak Rabin, Israel's prime minister, in Ismaliya on the Suez Canal. The talks were the final stage of a series of contacts involving the US, Israel, Egypt, the Palestinians, Jordan and Lebanon. Senior representatives from the four Arab delegations will meet in Damascus tomorrow and Saturday to make their decision.

Mr Mubarak said there were 'very great hopes' that peace negotiations would resume on schedule but neither he nor Mr Rabin offered any details on the substance of their talks.

While Syria, Jordan and Lebanon have all expressed their desire to proceed with negotiations, the Palestinians have demanded that Israel should pledge not to repeat the December deportation of more than 400 men from the occupied West Bank and Gaza.

Israel has indicated that it may be prepared to take back some Palestinians who had been deported over the past several years and also allow Palestinians from east Jerusalem to become members of its negotiating team.

Mr Rabin confirmed yesterday that Mr Faisal al-Husseini, who comes from east Jerusalem and is the leading Palestinian in the West Bank, could in future head the Palestinian delegation. It might indicate some easing of Israel's previous insistence that it would not discuss the status of east Jerusalem, which it annexed after the 1967 war.

At a news conference later the Israeli leader reassured Palestinians that their two peoples would ultimately settle their conflict based on a swap of land for peace.

IL Israel, Middle East EG Egypt, Africa XN Middle East P9721 International Affairs NEWS General News P9721 The Financial Times London Page 4 327
North Korean prime minister attacks 'enemies of Pyongyang' Publication 930415FT Processed by FT 930415 By REUTER TOKYO

North Korean Prime Minister Kang Song-san lashed out yesterday at enemies confronting Pyongyang in the nuclear inspection crisis in the midst of a gushing 81st birthday tribute to 'Great Leader' Kim Il-sung, Reuter reports from Tokyo.

In a keynote speech to a 'national celebration' in the capital, Mr Kang hailed Mr Kim's birth on April 15, 1913, as 'a big stroke of luck which heralded the dawn of national liberation and rebirth on the dark land of the country ..'

Pyongyang's defiance of demands by the UN atomic watchdog agency for access to suspected nuclear weapons sites has prompted the UN Security Council to consider punitive sanctions.

KP North Korea, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 4 140
Over 70,000 protest against religious strife in India Publication 930415FT Processed by FT 930415 By REUTER NEW DELHI

More than 70,000 people came out in a scorching summer sun yesterday to call for an end to the politics of religion which has led to widespread Hindu-Moslem riots in India, Reuter reports from New Delhi. The rally to affirm India's secular constitution was called by 13 left and left-of-centre political parties near the historic Red Fort in the old city of Delhi.

Speakers at the rally charged the right-wing Hindu nationalist Bharatiya Janata Party (BJP), which spearheaded the movement for building a temple on the site of the mosque, for injecting religion into politics.

The Indian government has removed cars and white goods, such as refrigerators and washing machines, from the list of industries requiring licences, the Press Trust of India said, Reuter adds from New Delhi.

It quoted an official spokesman as saying that, since the government has introduced full convertibility of the rupee, investments should be determined by the availability of foreign exchange, making licensing in these sectors unnecessary.

IN India, Asia P9229 Public Order and Safety, NEC P3639 Household Appliances, NEC P3711 Motor Vehicles and Car Bodies TECH Patents & Licences NEWS General News P9229 P3639 P3711 The Financial Times London Page 4 214
Senior Iraqi officials 'executed after kidnap attempt' Publication 930415FT Processed by FT 930415 By REUTER NICOSIA

Senior Iraqi officials have been arrested and executed and security forces are laying siege to part of Baghdad after gunmen tried to kidnap the interior minister, travellers from Iraq said yesterday, Reuter reports from Nicosia.

They said there had been explosions and casualties in the city. Unconfirmed reports spoke of the execution of former interior minister Samir Abdel Wahab al-Shaykeli in a purge ordered by President Saddam Hussein. However, travellers said they knew only that a number of senior military officers and ruling Ba'ath party officials had been arrested and executed.

IQ Iraq, Middle East P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 4 126
Iran devalues 6.7% against the dollar Publication 930415FT Processed by FT 930415 By REUTER TEHRAN

IRAN'S central bank devalued the rial 6.7 per cent against the dollar yesterday, and stepped up the sale of foreign exchange in a bid to take control of a volatile currency market, Reuter reports from Tehran.

In its second devaluation in three weeks, the bank set the rial at 1,648/50 to the dollar against Tuesday's 1,538/41.

Several dozen state bank branches in Tehran began selling up to Dollars 5,000 (Pounds 3,300) to any buyers after Tuesday's announcement that the rial would be fully convertible.

The central bank acted after the rial sank to a new low of 1,830 to the dollar on Sunday, raising fears of a free-fall after an official devaluation of up to 95.6 per cent on March 27.

The first devaluation jolted prices. Newspapers report a 30 per cent jump in prices of household goods since early March - about equal to the rise in wholesale prices in the 11 months to February 19 over the same period a year ago.

Meanwhile, Irna, the official news agency said a British trade mission to Tehran planned for next month was likely to be postponed because of London's public support for novelist Salman Rushdie, ordered killed by Iran for alleged blasphemy.

IR Iran, Middle East P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 4 236
Attack fears after pull-out by Khmer Rouge Publication 930415FT Processed by FT 930415 By VICTOR MALLET BANGKOK

THE WITHDRAWAL of Khmer Rouge officials from the Cambodian capital on Tuesday night has raised fears that the guerrilla group will step up attacks across Cambodia ahead of next month's UN-sponsored elections.

Mr Khieu Samphan, the nominal Khmer Rouge leader, said in a letter yesterday to Prince Norodom Sihanouk, who chairs Cambodia's interim Supreme National Council (SNC), that Khmer Rouge officials no longer felt secure in Phnom Penh, although the UN has blamed most of the recent violence in the country on Khmer Rouge guerrillas.

The withdrawal will make it difficult for the 22,000-strong UN Transitional Authority in Cambodia (Untac) to communicate with the Khmer Rouge leadership, except via Thailand. It was not immediately clear if Mr Khieu Samphan would be prepared to visit Phnom Penh to attend future meetings of the SNC, which brings together the four main factions and the UN.

The attitude of the Khmer Rouge, which was responsible for the deaths of 1m Cambodians when it ran the country between 1975 and 1978, is regarded as crucial for the peace process because its guerrillas and the rival army of the Phnom Penh administration are the only substantial Cambodian military forces.

The group has effectively pulled out of the peace process already, by seeking to disrupt the elections, refusing to disarm its fighters and rejecting UN attempts to gain access to Khmer Rouge territory.

Seven UN peacekeepers have been killed in the past three weeks, and the UN blames the Khmer Rouge for most of the deaths.

Yesterday Untac attempted to lure the Khmer Rouge back to its compound behind the royal palace in Phnom Penh by saying that UN forces could provide extra security for Mr Khieu Samphan and his followers.

In Tokyo, foreign ministers from the Group of Seven industrialised countries said the elections should go ahead. Mr Ali Alatas, the Indonesian foreign minister, urged Untac to persevere because the alternative would be 'uncontrolled fighting again in Cambodia'.

KH Kampuchea, Asia P9711 National Security NEWS General News P9711 The Financial Times London Page 4 355
US isolation grows over Vietnam Publication 930415FT Processed by FT 930415 By GEORGE GRAHAM WASHINGTON

THE 'road map' set out by former President George Bush for normalising relations between Vietnam and the US has already led the two countries into a few dead ends and several potholes.

The discovery in Moscow of a document apparently showing that Vietnam may have held twice as many US prisoners of war as it ever admitted seems sure to throw another obstacle in the way of their awkward march towards full links.

While US policy towards Vietnam is officially under review, it has been widely assumed in Washington - although without any explicit statement from President Bill Clinton himself - that the new administration would not depart dramatically from the Bush road map.

This set out a phased progression to lifting the US trade embargo and establishing full dramatic relations in exchange for Vietnam's co-operation on accounting for US servicemen listed as missing in action during the Vietnam war and on the UN sponsored peace process in neighbouring Cambodia.

The next phase foreseen in the road map would involve the US lifting its trade embargo against Vietnam, ending its opposition to reinstating the country in the International Monetary Fund and supporting loans by the IMF and the World Bank for basic human needs.

The US is growing more and more isolated in its insistence on maintaining an embargo against Vietnam.

Other western nations, which have until now held back out of deference to the US from helping Vietnam back into the IMF, now seem increasingly inclined to press ahead willy nilly.

A support group led by France stands ready to provide a bridging loan to pay off Vietnam's arrears to the IMF of around Dollars 140m (Pounds 92m). Mr Michel Camdessus, the IMF managing director, has made it clear he feels Hanoi's economic policies would already qualify it for normal IMF financing, allowing it to repay this bridging loan.

This, in turn, would pave the way for World Bank infrastructure lending which Vietnam sorely needs.

The support group had been expected to meet during the IMF's spring meetings later this month. Until the prisoners of war document surfaced in Moscow this week, Fund officials had expected the Clinton administration to signal its acceptance of Vietnam's reinstatement by lifting the embargo.

Such a move now appears, in the short term at least, to be politically impossible for Mr Clinton: whether or not the Moscow document is authentic - and the Vietnamese are not alone in crying 'forgery' - it has the ring of truth to a substantial body of US opinion, which is unlikely ever to be reconciled to the probability that no MIAs are still held in Vietnam.

Opinion in the Senate, however, is increasingly shifting towards the view that the best way of ensuring progress on MIA issues, as well as on other US concerns such as human rights violations in Vietnam, is to establish closer relations.

Senator Claiborne Pell, the Democratic chairman of the Senate Foreign Relations committee, and Senator Richard Lugar, his Republican opposite number, wrote together last month to urge Mr Clinton to lift the embargo.

'We believe that an aggressive and enlightened bilateral and multilateral dialogue with Vietnam will eventually result in democratic change in Vietnam and achieve a more complete resolution of the POW/MIA issue,' they wrote.

US United States of America VN Vietnam, Asia P9721 International Affairs NEWS General News P9721 The Financial Times London Page 4 579
Pakistan's president warns PM to resolve continuing political crisis Publication 930415FT Processed by FT 930415 By REUTER ISLAMABAD

PAKISTANI President Ghulam Ishaq Khan issued a stern warning to Prime Minister Nawaz Sharif yesterday to resolve what he called grave problems and to end a crisis that threatens his government, Reuter reports from Islamabad.

Mr Sharif met the president for the third time in 10 days to try to end a bitter feud that many ministers have said could prompt Mr Ishaq Khan to use his powers to dissolve the National Assembly (lower house).

Mr Sharif enraged the president in February when he set up a committee to modify the Eighth Amendment, martial law-era legislation that empowers the president to dissolve parliament and appoint the armed forces chiefs of staff.

Six cabinet ministers and two advisers have resigned in an apparent show of support for the president in the present tussle.

Mr Sharif undertook to act on 'an urgent basis' and to report to the president with precise measures, the statement said.

Fears that Mr Sharif's 2 1/2 -year coalition government, weakened by several desertions in the past year, could fall sent the stock exchange into a tailspin.

'The stock market has nose-dived and business activity is suffering because of the political instability,' Mr Sharif told reporters earlier in the day. The Karachi Stock Exchange index has plunged 25 points since Sunday.

'The uncertain political situation will affect the economy, which in turn will bring unemployment,' he said. 'Unemployment breeds anarchy.'

Mr Sharif said political instability could reverse Pakistan's ambitious reform programme to deregulate the economy.

Last week the prime minister nominated Mr Ishaq Khan for a second term to try to end the hardening antagonism.

Mr Ishaq Khan, whose five-year term expires late this year, used the Eighth Amendment to dismiss former prime minister Benazir Bhutto on charges of corruption and misrule in 1990 and feels betrayed by her successor's bid to curb his authority.

General Abdul Waheed, chief of army staff, postponed a visit to France due to begin today. His visit to the US from April 20 will go ahead.

Diplomats said Gen Waheed may have postponed his departure because of the mounting domestic political crisis.

Should the president decide to dissolve parliament, they said, he would be unlikely to act without consulting the chief of army staff - the most powerful pillar in the ruling troika with the president and prime minister.

The army has governed Pakistan for most of its 45 years since independence from Britain and partition in 1947.

PK Pakistan, Asia P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 4 439
NZ inflation rate stabilises at 1% Publication 930415FT Processed by FT 930415 By TERRY HALL WELLINGTON

NEW ZEALAND consumer prices in the year to March 31 rose by 1 per cent, a result only bettered by Australia in the Organisation for Economic Co-operation and Development, the government statistician said yesterday.

Australia's inflation rate was 0.3 per cent. The low New Zealand annual rate continues a trend, with the CPI registering 1.3 per cent in the year to December and 1 per cent in the 12 months to September.

In the three months to March the CPI was 0.1 per cent, a figure that surprised economists who had been predicting a rise because of an increase in home mortgage rates in January.

This followed the Reserve Bank's decision to intervene to support the New Zealand dollar in pursuit of its low inflation target when it appeared likely the currency would fall below its target of 52 on the index which measures the value of the dollar on a trade weighted basis with the country's main trading partners.

The statistics department also reported yesterday that food prices had fallen 1.3 per cent in March.

This followed increases of 1.1 per cent and 0.6 per cent in February and January, which were due to poor weather affecting the price of fruit, vegetables and meat.

NZ New Zealand P9611 Administration of General Economic Programs ECON Economic Indicators P9611 The Financial Times London Page 4 239
Japanese bank chief cautious over package Publication 930415FT Processed by FT 930415 By CHARLES LEADBEATER TOKYO.

THE Japanese economy will start to recover only gradually towards the end of the year, in spite of the Y13,200bn (Pounds 76bn) emergency spending programme announced by the government on Tuesday, Mr Yasushi Mieno, the Bank of Japan's governor, warned yesterday.

His remarks came as retailers confirmed the depth of the slump in consumer spending, with an 11.4 per cent fall in sales at Tokyo's 27 main department stores last month.

Mr Mieno's cautious assessment of the special package's impact on the economy, which is mired in the worst downturn for two decades, sharply contrasts with the government's view that it will pave the way for a sustained recovery.

Mr Yoshiro Hayashi, the finance minister, in a speech to executives from trust banks said the Y13,200bn package, mainly made up of public works spending, would promote sustained recovery in the second half of the 1993 financial year.

Mr Mieno said that recent increases in car sales, industrial shipments and the surge in the Tokyo stock marketmight indicate that the decline in business confidence was coming to a halt.

However, he cautioned that it was too early to say the economy was ready to recover given the depth of the slump in consumer spending and corporate investment.

The March fall in Tokyo department store sales was the sharpest monthly drop recorded since the Japan Department Stores Association started collecting statistics in 1965.

Sales of clothes, furniture and household appliances were particularly hard hit.

JP Japan, Asia P9611 Administration of General Economic Programs P5999 Miscellaneous Retail Stores, NEC ECON National income P9611 P5999 The Financial Times London Page 4 282
Russian and the G7: Coup defendants protest at trial Publication 930415FT Processed by FT 930415 By JOHN LLOYD

THE trial of 12 former Soviet and Communist party leaders charged with high treason for organising the unsuccessful coup in August 1991 began yesterday. It opened with a flurry of claims by the defendants that they were being tried in a non-existent country by the wrong people on a punishing schedule.

One of the defendants, Mr Alexander Tizyakov, 67, was taken ill half an hour before the end of the afternoon session. Mr Tizyakov, a less prominent member of the 'State Committee for the Extraordinary Situation', as the plotters called themselves, was head of the state industrialists' association.

Mr Anatoly Lukyanov, former speaker of the Soviet parliament and an intimate of former Soviet President Mikhail Gorbachev, argued that the prosecutors, drawn from the military department of the Russian Supreme Court, were biased. He noted that they would be under the command of General Pavel Grachev, the defence minister, who will be one of the witnesses.

Gen Grachev came out against the plotters during the coup.

Major General Anatoly Ukolov, the presiding judge, dismissed the claim, as he did an earlier plea that the case be dismissed as the court had no jurisdiction over alleged crimes committed in the Soviet Union. The defendants also argued unsuccessfully that the court's schedule be relaxed to reflect the age of the defendants - many in their sixties - and the fact that they had spent a year in prison.

The trial of the plotters promises to be long and at times rivetting - as several of them, including Mr Lukyanov and Mr Valentin Pavlov, the former Soviet prime minister, have made clear that they will point the finger at Mr Gorbachev as having been at least a passive accomplice in developing the coup. Mr Pavlov said in a recent interview that the former Soviet president had indicated that he would return from his vacation villa - where he was under house arrest - to lead the country if the plot succeeded.

RU Russia, East Europe P9211 Courts NEWS General News P9211 The Financial Times London Page 3 360
Russian and the G7: Libya shipment barred Publication 930415FT Processed by FT 930415 By CHRYSTIA FREELAND KIEV

A RUSSIAN company's attempt to ship a banned chemical to Libya was blocked by Ukrainian customs officers at the southern port of Illichevsk last week, writes Chrystia Freeland in Kiev.

The seizure comes amid growing western concern that Russian defence officials are seeking to profit from their nation's economic chaos by selling dangerous substances to countries subjected to international embargoes.

The action also suggests Ukraine is trying to tighten export controls in response to western allegations that it was breaching sanctions against Serbia by allowing oil to be shipped up the Danube from Ukrainian ports.

The Ukrainian Foreign Ministry said 80 tonnes of ammonium perchlorate, being shipped to Libya by the Moscow firm 'Pavoks', was seized by customs officials. This can be used as a rocket fuel, although it also has medical and farm applications.

Pavoks RU Russia, East Europe LY Libya, Africa UA Ukraine, East Europe P9721 International Affairs P4412 Deep Sea Foreign Transportation of Freight P2819 Industrial Inorganic Chemicals, NEC MKTS Foreign trade P9721 P4412 P2819 The Financial Times London Page 3 191
Russian and the G7: Lamont sets a 10-year target for free trade Publication 930415FT Processed by FT 930415 By CHARLES LEADBEATER TOKYO

THE G7 countries should commit themselves to establishing completely free trade with Russia within 10 years to hasten Russian integration into the world economy, Mr Norman Lamont, British Chancellor of the Exchequer, told the Group of Seven's finance and foreign ministers in Tokyo.

He said such a timetable would be a symbol of economic partnership, rather than merely aid.

Mr Lamont also announced a Pounds 380m addition to the UK's bilateral aid programme to promote economic reform in Russia and other countries of the former Soviet Union.

The additional assistance would bring British aid to the former Soviet Union to Pounds 1.1bn, including the UK's commitment to the EC's aid programme.

It is mainly in the form of Pounds 320m in export credits and insurance for British companies investing in Russia.

Technical assistance to Russia will be doubled to Pounds 120m. Most of this will go into an international fund to support the development of small and medium-sized enterprises, with the rest to expand the recently launched scheme to second Russian managers to British businesses to give them experience of working in a market economy.

Mr Lamont said: 'Russia could be one of the biggest export markets for British firms in the next decade. We want to help and encourage them to get in on the ground floor and to establish links with Russia at an early stage.'

However, the British proposal for a free trade agreement appeared to win little immediate backing, apart from support from Japan.

Before yesterday's announcement Britain had pledged about Pounds 130m in bilateral aid, including Pounds 38m for military safety and Pounds 60m to the Know-how fund for business development. It had also provided Pounds 323m in export credits and Pounds 321m for the EC aid programme.

US United States of America DE Germany, EC JP Japan, Asia GB United Kingdom, EC RU Russia, East Europe IT Italy, EC CA Canada RU Russia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 355
Russian and the G7: Nations rival each other in Moscow aid Publication 930415FT Processed by FT 930415 By ROBERT THOMSON TOKYO

BEFORE Mr Lloyd Bentsen, US Treasury secretary, began negotiating with his Group of Seven partners in Tokyo yesterday on the future of Russia, he noted that nowadays the group is not as concerned with 'the balance of power as with the balance sheet'.

Apart from agreement that, by international accounting standards, the Russian balance sheet is definitely in poor shape, several of the G7 members were ready to find fault with each other's reckoning of bilateral contributions to the Russian cause.

'It has become a numbers game,' a Canadian official lamented. Mr Bentsen himself observed that a Dollars 1.82bn (Pounds 1.2bn) Japanese package for Russia announced yesterday was heavy on trade insurance, while Japanese officials insisted the weighting of the aid stood comparison with that of fellow members.

'Some commitments (by G7 members) are new and some commitments are not. When you compare the Japanese commitment it is not as miserable as you might think,' one said. Out of the Dollars 1.82bn, Japan is providing direct grants of Dollars 320m for food, medical equipment and technical help and Dollars 1.1bn in trade insurance and a Dollars 400m loan facility.

The US is also expected to announce a package of around Dollars 1.8bn at the meeting, which ends tomorrow. This will include Dollars 500m towards a Dollars 4bn privatisation fund for Russian industry. US officials proposed the fund yesterday, but they are dependent on other G7 members mustering another Dollars 1.5bn and international agencies, in particular the World Bank and the European Bank for Reconstruction and Development, supplying about Dollars 2bn.

Japan had planned to announce only Dollars 1.2bn in assistance this week, but apparently increased the figure to ensure favourable comparison with the US.

German officials said they felt under no obligation to announce another headline-grabbing figure, as the country's contributions account for an estimated 67 per cent of the bilateral aid promised by G7 members over the past two years and about 75 per cent of that already disbursed.

Italian representatives explained that the country is prepared to consider future assistance, but would like Russia to remember that it has yet to repay two outstanding commercial bank loans. French officials said the focus should be on multilateral assistance, rather than bilateral figures.

The UK was generous in applauding the Japanese package as 'welcome, excellent and a major contribution', though, as Mr Bentsen would say, Britain's extra Dollars 600m package announced yesterday was also heavy on export credits, which account for Dollars 500m.

The European Commission wanted to emphasise that its Dollars 3bn in already announced assistance has been listed in its budget. A spokesperson said the Commission put the stress on strategic technical assistance. 'We notice that the Japanese package does contain technical assistance,' the EC said.

However, another US official said that comparing the respective packages of the members was as difficult as 'comparing apples to oranges'.

US United States of America DE Germany, EC JP Japan, Asia GB United Kingdom, EC RU Russia, East Europe IT Italy, EC CA Canada FR France, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 3 539
Russian and the G7: Yeltsin seeks backing for attack on his foes Publication 930415FT Processed by FT 930415 By JOHN LLOYD MOSCOW

PRESIDENT Boris Yeltsin of Russia yesterday promised 'more decisive action' against the 'negative activities' of the Russian parliament if he wins the support of the people in this month's referendum. He said he would resign immediately if he were not supported.

The president said he had prepared a 'range of urgent measures' to present to the country on April 26, the day after the referendum. Though he did not specify in his meeting with the press what these would be, it was clear from other remarks that ensuring a legal base for individuals to hold private property would be foremost among them.

Mr Yeltsin has called for a Yes vote on all four questions in the referendum.

These, decided by the Congress of People's Deputies during a bitterly fought session, are on trust in the president; approval of the economic reform; early elections for the presidency and for a new, one-chamber parliament. He said he would define 'losing' as receiving a No vote on trust in himself and on early parliamentary elections through which the Supreme Soviet and Congress - a hangover from Soviet days - would be transformed to a bicameral parliament on the democratic model.

Mr Yeltsin has done little campaigning and much of that has been lacklustre. He has no single opponent - but Vice-president Alexander Rutskoi and Mr Ruslan Khasbulatov, the parliamentary speaker, have propelled ever-harsher criticism of him and his government.

Asked if he sought the resignation of General Rutskoi - considered a possible presidential contender - Mr Yeltsin said Gen Rutskoi was 'completely opposed to the reforms being introduced by the president'. He asked: 'How can he work in such a situation?'.

Mr Yeltsin said he would define early elections as taking place in autumn this year rather than, as had been mooted, in spring 1994. He said a new constitution, guaranteeing all civil rights 'to world standards', was already prepared and would now be sent for discussion to the republics and regions of Russia.

The constitution, he said, could then be adopted either by a referendum or a constituent assembly, or by the Council of the Federation itself. Mr Yeltsin, who has increasingly used regional and republican leaders as allies in his struggle with parliament, suggested that the last of these might be the better way and said that the new constitution put the upper house of the two-chamber parliament, the Chamber of the Federation, as the highest legislative body.

Later, in talks with leaders of the Russian republics in Moscow, Mr Yeltsin said a new constitution would create a presidential republic and a 'full-blooded federation'. He told the republican heads that the present constitution, a patched version of the old Soviet era document, was an 'explosive mixture'.

Mr Yeltsin also said that he would meet other heads of the Commonwealth of Independent States in Minsk tomorrow 'to discuss only one question - the future of the CIS, when integration would begin and which (of the states) would continue in an integrated community'.

However, he said Russia would cease to sell energy to former Soviet republics at subsidised prices.

RU Russia, East Europe P9121 Legislative Bodies NEWS General News P9121 The Financial Times London Page 3 554
Bosnia to reject peace plan if Srebrenica falls Publication 930415FT Processed by FT 930415 By LAURA SILBER and ROBERT MAUTHNER BELGRADE, LONDON

THE Moslem-led Bosnian government yesterday warned it would withdraw support for the international peace plan if Srebrenica, the besieged town near the Serbian border, were captured by Bosnian Serb forces.

As reports came in that another eight people had been killed and 21 wounded in the latest Serb artillery attack on the town on Tuesday night, the Bosnian foreign ministry said: 'The fall of Srebrenica will signal the final demise of the Vance-Owen (peace) plan.'

Under the plan - already signed by Bosnian Croats and Moslems, but rejected by Serbs - the country would be divided into 10 semi-autonomous provinces. Srebrenica, surrounded by Serb militia, is in a region allocated to the Moslems but which Bosnian Serbs want to absorb into their territory because it is in a region adjoining the Serbian border.

The renewed attack on Srebrenica, after a fierce Serb bombardment of the centre of the city last Monday during which at least 56 people were killed, coincided with a fresh diplomatic offensive by the US and Russia in support of the Vance-Owen plan.

Both the US and Russian special envoys to the Bosnian peace talks, Mr Reginald Bartholomew and Mr Vitaly Churkin, had talks in Belgrade yesterday with Serb and Yugoslav leaders, including President Slobodan Milosevic of Serbia and President Dobrica Cosic of the rump Yugoslavia.

Mr Bartholomew emphasised time was running out for Bosnia's Serbs to sign the plan.

He warned that, while the US was pursuing 'the diplomatic track' for the moment, it was not prepared to wait much longer for Serbia to endorse the peace plan. If it failed to do so, Washington would press its allies very soon to help Bosnian Moslems arm themselves by a partial lifting of the UN arms embargo.

'The military action must stop, the atrocities in places like Srebrenica must stop,' Mr Bartholomew said, warning that otherwise Serbia would be subject to the stiffest sanctions ever imposed. Yugoslav officials said Mr Bartholomew, who also saw Mr Radovan Karadzic, leader of the Bosnian Serbs, wanted Serbs to come up with proposals on what modifications they wanted in order to agree to the peace plan.

Mr Karadzic said he was not ready to sign the plan but that peace was still possible. 'We are working hard on possible corrections that have been announced (by Mr Warren Christopher, US secretary of state) and we do hope that we will make some progress.'

However, he made clear he would never concede control of the corridor across northern Bosnia which links Serb-held territories in Bosnia and Croatia with Serbia.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 464
Sharp fall in Euro car sales Publication 930415FT Processed by FT 930415 By KEVIN DONE, Motor Industry Correspondent

NEW car sales in west Europe fell by 9.4 per cent last month as demand dropped steeply for the third month in succession.

In the first quarter, new car sales declined by 17.3 per cent to around 3.06m.

Sales in March declined to 1.18m from 1.3m in the equivalent month a year earlier, according to industry estimates. Demand in March was lower than a year ago in 15 of 17 markets across west Europe, with higher sales registered only in the UK and Greece.

The rate of decline moderated in March, following steep falls of 23 and 17 per cent in January and February, but leading carmakers are being forced to lower further their already pessimistic sales forecasts for the full year.

General Motors, the US maker, said yesterday it now expected new car sales in west Europe to fall by 11 per cent to only 11.95m this year from 13.45m in 1992 compared with a 1993 forecast of 12.3m.

In Germany, the single biggest market in west Europe, sales fell by 14.9 per cent in March to an estimated 363,000. Sales plunged by 21.7 per cent in the first quarter.

Most leading carmakers in Europe have been forced to implement short-time work and are cutting workforces in the face of shrinking profits or mounting losses.

The rate of decline has accelerated in Italy, where new car registrations fell by 20.8 per cent in March to 190,000.

New car sales in France in March were 9 per cent lower than a year ago, while demand in Spain dropped steeply by 22.7 per cent.

The only significant relief is being shown in the UK, where sales in March were 12.7 per cent higher than a year ago. Sales in the first quarter rose by 11.6 per cent. After plunging by a third during more than three years of recession, sales in the UK have been higher than a year ago in each of the last six months.

------------------------------------------------------------------------ WEST EUROPEAN NEW CAR REGISTRATIONS January-March 1993 ------------------------------------------------------------------------ Volume Volume Share (%) Share (%) (Units) Change(%) Jan-Mar 93 Jan-Mar 92 ------------------------------------------------------------------------ TOTAL MARKET 3,064,000 -17.3 100.0 100.0 MANUFACTURERS: Volkswagen* (incl. 515,000 -17.9 16.8 17.0 Audi, SEAT & Skoda) General Motors 382,000 -18.2 12.5 12.6 (Opel/Vauxhall, US**** & Saab) - Opel/Vauxhall 367,000 -18.1 12.0 12.1 - Saab** 10,000 -24.5 0.3 0.4 Fiat (incl. Lancia, 374,000 -19.1 12.2 12.5 Alfa Romeo, Ferrari Innocenti, Maserati) Ford (Europe, 368,000 -15.6 12.0 11.8 US**** & Jaguar) - Ford Europe 356,000 -15.7 11.9 11.7 - Jaguar 3,000 -2.2 0.1 0.1 Peugeot (incl. 367,000 -19.4 12.0 12.3 Citroen) Renault***** 325,000 -18.3 10.6 10.7 Nissan 103,000 -14.9 3.4 3.3 BMW 98,000 -17.0 3.2 3.2 Rover*** 86,000 +11.3 2.8 2.1 Mercedes-Benz 84,000 -29.2 2.7 3.2 Toyota 83,000 -1.5 2.7 2.3 Mazda 54,000 -22.9 1.8 1.9

Volvo***** 45,000 -22.9 1.5 1.6 Honda*** 37,000 -19.0 1.2 1.2 Mitsubishi 34,000 -16.1 1.1 1.1 Total Japanese 364,000 -13.1 11.9 11.3 MARKETS: Germany 839,000 -21.7 27.4 28.9 Italy 585,000 -16.3 19.1 18.9 United Kingdom 453,000 +11.6 14.8 11.0 France 403,700 -22.5 13.2 14.1 Spain 175,000 -35.2 5.7 7.3 ------------------------------------------------------------------------ **** Cars imported from US and sold in western Europe. * VW holds 31 per cent and management control of Skoda. ** GM holds 50 per cent and management control of Saab Automobile. *** Honda holds a 20 per cent stake in Rover vehicle operations. ***** Renault and Volvo are linked through minority cross-shareholdings. ------------------------------------------------------------------------ Source: industry estimates ------------------------------------------------------------------------

QR European Economic Community (EC) P3711 Motor Vehicles and Car Bodies P5511 New and Used Car Dealers MKTS Sales P3711 P5511 The Financial Times London Page 2 615
W German GDP may fall 1.5% Publication 930415FT Processed by FT 930415 By ARIANE GENILLARD BONN

WEST Germany's GDP could fall by 1.5 per cent in 1993 because of the continuing international recession, a relatively strong D-Mark and persistent high domestic costs, the Cologne-based Institute for German Economy (IW) said yesterday.

The report said the recession could only be overcome if prospects for investment and profits improved and the Bundesbank obtained more room for lower interest rates. But it warned unless domestic costs and price pressure are dampened, economic recovery would not begin in 1993.

The report came out as figures released by the federal statistics office showed West Germany's wholesale prices in March increasing by 0.2 per cent against the previous month. This followed a similar rise in February and a 0.7 per cent increase in January.

In mid-March, West Germany's consumer prices were 0.3 per cent higher thanin mid-February, bringingthe inflation rate to 4.2 per cent.

In east Germany, consumer prices increased in mid-March by 0.2 per cent to 8.8 per cent.

In its yearly spring report, the IW said investment in machinery and equipment will fall by 9 per cent in 1993. Only the constructionsector shows an upward trend,increasing by another 1 per cent this year.

The gloomy forecast was partially offset by brighter prospects in the east.

Real GDP in eastern Germany can be expected to rise by 6.5 per cent in 1993.

DE Germany, EC P9611 Administration of General Economic Programs ECON Gross domestic product P9611 The Financial Times London Page 2 256
French grain supplier applies for protection Publication 930415FT Processed by FT 930415 By ALICE RAWSTHORN PARIS

INTERAGRA, the French farming products business which was one of the most prominent western suppliers of grain and food to eastern Europe during the cold war, yesterday filed for bankruptcy protection.

The company, founded in 1955 by the late Jean-Baptiste Doumeng, known as le milliardaire rouge, the red billionaire, has applied to the Paris commercial court for protection. The court will announce its judgment on Tuesday.

In its heyday Interagra made annual sales of up to FFr20bn (Pounds 2.4bn) by selling the European Community's 'food mountain' - surplus supplies of subsidised grain, meat, dairy products and powdered milk - to communist countries.

Mr Doumeng built up the business by exploiting connections with eastern bloc leaders but Interagra has floundered since his death in 1987.

The final blows were the collapse of the Soviet Union and the United Nations embargo on trading with Iraq during the Gulf war. Annual sales have fallen to just FFr5bn a year and its debts have risen rapidly to FFr500m.

France's commercial banks yesterday responded to the recent fall in money market rates and to Tuesday's reduction in the Bank of France's repurchase rate by cutting base rates from 10 per cent to 9.75 per cent.

The reduction was triggered on Tuesday night by Credit du Nord. French base rates had been held at 10 per cent since December as the French authorities battled to defend the franc from speculative attack in the run-up to last month's parliamentary elections.

Interagra FR France, EC P2099 Food Preparations, NEC COMP Company News P2099 The Financial Times London Page 2 277
Andreotti inquiry told of link with Mafia killings Publication 930415FT Processed by FT 930415 By HAIG SIMONIAN MILAN

MR Giulio Andreotti, seven times prime minister of Italy, yesterday began what could be the toughest battle of his long political career as hearings began into lifting his parliamentary immunity.

The Senate hearings opened amid explosive new allegations of collusion by Mr Andreotti, now a Christian Democrat life senator, with the Mafia. Implicit in the allegations is that he was involved in two political assassinations.

New testimony from Mafia informants, revealed by the Senate yesterday, includes details of three alleged meetings between Mr Andreotti and senior Mafia figures in the 1970s. The informants also allege that two assassinations attributed to the Mafia were carried out on political instructions from Mr Andreotti.

The murder in 1979 of Mr Mino Pecorelli, a right-wing journalist with links to the secret services, and that of General Carlo Alberto Dalla Chiesa in 1982, the senior Mafia-fighter sent to Palermo, allegedly took place because both were privy to sensitive information regarding the earlier kidnap and assassination of former prime minister Aldo Moro.

The request to lift the immunity of Mr Andreotti was made last month by Palermo magistrates investigating organised crime. This week the magistrates supplied additional information to support their request after new interrogations of Mr Tommaso Buscetta and Mr Francesco Marino Mannoia, the two Mafia informants now under protection in the US.

The two collaborators, who had until recently refused to talk about links between politicians and crime, also claimed that Mr Salvatore Lima, the senior Christian Democrat politician in Sicily and member of the European parliament, liaised with the Mafia on behalf of the Christian Democrats. Mr Lima, murdered in March 1992, was a close friend of Mr Andreotti and his main aide in Sicily. It has long been rumoured that his assassination was to show the Mafia's displeasure with the growing unwillingness of senior politicians in Rome to comply with its wishes.

Mr Giovanni Pellegrino, chairman of the Senate committee, reacted cautiously to reports that the new testimony could require the re-opening of investigations into the assassinations. The new material could be 'an advance warning of other requests for immunity to be lifted on the part of other magistrates,' he said.

Unconfirmed press reports yesterday said details of the new testimony, collected by Mr Giancarlo Caselli, the chief public prosecutor in Palermo, had been sent to Rome magistrates responsible for investigating the Moro assassination and the murder of Mr Pecorelli.

Mr Andreotti has presented the 23-man Senate committee with a 66-page document defending his position. The document casts doubt on the points raised in the magistrates' allegations. It accuses the magistrates of persecution, attacks their stand on procedural grounds and casts doubt on the motives of the Mafia informants. The former prime minister has faced down 26 previous attempts to have his parliamentary immunity lifted on a variety of grounds.

Rome magistrates investigating allegations of corruption in aid to developing countries issued a cautionary warrant against Mr Ferdinando Mach di Palmstein, a financier associated with the Socialist party. It alleges he was involved in extortion in connection with aid to Senegal, Argentina and unspecified other countries.

Separately, Mr Vito Bonsignore, a Christian Democrat junior minister in the budget ministry, has said he will resign next week. Mr Bonsignore has been told by magistrates he is under investigation.

IT Italy, EC P9121 Legislative Bodies PEOP People P9121 The Financial Times London Page 2 577
Guns and butter on the road to Tuzla: Laura Silber travels the war-devastated route aid officials call Bosnia's Ho Chi Minh trail Publication 930415FT Processed by FT 930415 By LAURA SILBER

WITH a Sieg Heil salute, the Croat militia man waves the packed car through a check point on the road to Tuzla.

Peering through his sun-glasses, he asks the driver for a permit from the Croatian Defence Council (HVO) allowing him to leave Herceg-Bosna, as they call the self-styled Croat state.

Emir, a Moslem worker, shows his pass to the militia man, who has a gold 'U' pinned to his uniform - in honour of the Ustashe, pro-Nazi Croats during the Second World War.

The latest war has devastated the infrastructure of former Yugoslavia. A once simple two-hour journey between Tuzla and Belgrade has become a harrowing three-day expedition in which you have to travel a near circle around a shattered country patrolled by gunmen. This war is about territory and control of the roads.

To travel between 'free' Bosnia and Serbia involves a 12-hour drive via Split on Croatia's Adriatic coast, a flight via Zagreb, and another drive through Croatia on the Zagreb-Belgrade motorway, watched over for the past year by UN peacekeepers.

Passenger cars, battered lorries and white UN vehicles ply the Tuzla road to and from Split, nicknamed by relief workers the Ho Chi Minh trail.

The road is circuitous, hazardous and above all slow. This lifeline for Tuzla, a region of some 800,000 people, at some points is little more than a rutted dirt track.

It weaves through villages which have been all but destroyed by Serb bombardment. It runs past Mostar, where months of pounding by the Yugoslav army deliberately reduced to rubble most of the centuries-old mosques and churches.

An olive green US army bridge now spans the River Neretva, replacing one of the old stone Turkish bridges, Mostar's trademark, which was knocked out by Serb mortars.

Croat militia men control more check points on the road than their mainly Moslem Bosnian counterparts. They have set up a kitchen table in front of the ruins of Zitomislici, a 16th century Serbian Orthodox monastery, blown up last year. The guards barely look at the passing cars in an apparent sign of confidence that they are in control of this vital route.

'This is Croatia, from here to the Adriatic,' says one closely cropped soldier in a grey uniform. 'It always has been Croatia,' he adds, dismissing the Bosnian forces on the grounds as too lightly armed.

Rows of freshly dug graves fill parks in Breza, a mostly Moslem town in the heart of Bosnia.

In anticipation of further Serb bombardments, logs have been used to cover windows not already shattered in the relentless attacks. Villagers haul sacks of flour donated by international relief organisations.

Moslem children ask the passing convoys for sweets. Refugees crowded into houses wave glumly at the lorries. Some sell knitted socks. They are tired and undernourished. Many have scabies. The blown-up mosques testify to the destruction of their culture.

The route grows narrow in central Bosnia, running through remote mountain passes to avoid Serb artillery and front-lines. Traffic jams are frequent as 10-tonne aid lorries slip off the road or get stuck in the mud.

It can take 24 hours to reach Tuzla from the Bosnian capital, Sarajevo, a stretch of only 90 miles. Tempers flare as vehicles queue up along the winding trail. A Bosnian lorry driver pulls a gun on a Danish relief worker who asks him to back up.

Some locally hired aid trucks have seen better days. But they slog through the rivulets and pools of mud. One driver has been stuck overnight waiting for someone to tow his petrol tanker.

'I can't leave because someone may steal the oil,' he says. He appears pathetically grateful as he is offered an apple and a packet of cigarettes.

The lorries must drive at full speed outside Kladanj, where Serb fighters bombard the road to Tuzla. It is dubbed 'bomber alley'. Soldiers wearing the Bosnian fleur-de-lys advise people to drive quickly.

Helmet and flak jacket are needed for the last stretch to Tuzla within easy reach of Serb guns. The industrial city is almost a reservation, cut off from the outside world except for one road. Serb and Croat blockades have stopped almost all traffic but relief lorries.

On the return trip to Belgrade, at a check-point in UN Sector West some 50 miles east of Zagreb, Croat policemen offer coffee.

'Tell them to come over for some ham and Easter cakes,' orders one policeman. It is unclear to whom he is referring.

'The Jordanians whose checkpoint divides you from the Serbs?' he is asked.

'No, silly, they don't eat pork. Invite the Serbs over for cake.'

With some trepidation the Serb policemen are told that they were invited for an Easter celebration with their Croat neighbours.

'Hello neighbour,' he bellows over the walkie-talkie. 'Thanks for the invitation. We'll come over.'

'You bring the beer,' said a Serb militia man.

From there it is down the abandoned Zagreb-Belgrade motorway, once the major route joining Europe with the Middle East.

It has been a three-day journey back from Tuzla through the former Yugoslavia. At the roadside just outside Belgrade there is a sign: 'Tuzla 70km'.

HR Croatia, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 902
West Germany's GDP could fall by 1.5% Publication 930415FT Processed by FT 930415 By ARIANE GENILLARD and AP-DJ BONN

WEST Germany's GDP could fall by 1.5 per cent in 1993 because of the continuing international recession, a relatively strong D-Mark and persistent high domestic costs, the Cologne-based Institute for German Economy (IW) said yesterday.

The report said the current recession could only be overcome if prospects for investment and profits improved and the Bundesbank obtained more room for lowering interest rates.

But it warned that unless domestic costs and price pressure are dampened, economic recovery would not begin in 1993.

The report came out as figures released by the federal statistics office showed West Germany's wholesale prices in March increasing by 0.2 per cent against the previous month.

This follows a similar rise in February and a 0.7 per cent increase in January.

In mid-March, West Germany's consumer prices were 0.3 per cent higher than in mid-February, bringing the inflation rate to 4.2 per cent.

In east Germany, consumer prices rose in mid-March by 0.2 per cent to 8.8 per cent.

In its yearly spring report, the IW said investment in machinery and equipment will fall by 9 per cent in 1993. Only the construction sector shows an upward trend, increasing by another 1 per cent this year.

The gloomy forecast was partially offset by brighter prospects in the east where an 'autonomous investment prospect had started.'

Real GDP in eastern Germany can be expected to rise by 6.5 per cent in 1993, just slightly less than in 1992, the report said.

German state governments had a net financing deficit of DM30.3bn (Pounds 12.4bn) last year, DM12.3bn less than had been foreseen, the German Finance Ministry said yesterday, AP-DJ reports from Bonn.

Mr Jurgen Echternach, parliamentary state secretary, attributed the better-than-expected result to 'the positive economic development in Germany, which continued far into last year.'

DE Germany, EC P9611 Administration of General Economic Programs ECON Gross domestic product P9611 The Financial Times London Page 2 334
Bosnia threatens to renege on peace plan Publication 930415FT Processed by FT 930415 By LAURA SILBER and ROBERT MAUTHNER BELGRADE, LONDON

THE Moslem-led Bosnian government yesterday warned it would withdraw support for the international peace plan if Srebrenica, the besieged town near the Serbian border, was captured by Bosnian Serb forces.

As reports came in that another eight people had been killed and 21 wounded in the latest Serb artillery attack on the town on Tuesday night, the Bosnian Foreign Ministry said: 'The fall of Srebrenica will signal the final demise of the Vance-Owen plan.'

Under the plan, already signed by Bosnian Croats and Moslems, but rejected by Serbs, the country would be divided into 10 semi-autonomous provinces. Srebrenica, surrounded by Serb militia, is in a region which has been allocated to the Moslems, but which Bosnian Serbs want to absorb into their territory because it is in a region adjoining the Serbian border.

The renewed attack on Srebrenica, which followed a fierce Serb bombardment of the centre of the city last Monday during which at least 56 people, many of them children, were killed, coincided with a fresh diplomatic offensive by the US and Russia in support of the Vance-Owen plan.

Both the US and Russian special envoys to the Bosnian peace talks, Mr Reginald Bartholomew and Mr Vitaly Churkin, had talks in Belgrade yesterday with Serb and Yugoslav leaders, including President Slobodan Milosevic of Serbia and President Dobrica Cosic of the rump Yugoslavia.

Mr Bartholomew, appointed by President Bill Clinton in February to give a fresh impetus to the peace effort, emphasised time was running out for Bosnia's Serbs to sign the plan.

He warned that, while the US was pursuing 'the diplomatic track' for the moment, it was not prepared to wait much longer for Serbia to endorse the peace plan. If it failed to do so, Washington would very soon press its allies to help Bosnian Moslems arm themselves by a partial lifting of the UN arms embargo.

'The military action must stop, the atrocities in places like Srebrenica must stop,' Mr Bartholomew said, warning that Serbia would otherwise become a 'pariah state' subject to the stiffest sanctions ever imposed.

Yugoslav officials said Mr Bartholomew, who also saw Mr Radovan Karadzic, leader of the Bosnian Serbs, wanted Serbs to come up with concrete proposals on what modifications they wanted to agree to the peace plan.

Mr Karadzic said he was not ready to sign the plan but that peace was still possible. 'We are working hard on possible corrections that have been announced (by US secretary of state Warren Christopher) and we do hope that we will make some progress.'

However, he made clear he would never concede control of the corridor across northern Bosnia which links Serb-held territories in Bosnia and Croatia with Serbia.

BA Bosnia-Hercegovina, East Europe P9721 International Affairs NEWS General News P9721 The Financial Times London Page 2 485
Sharp fall in Euro car sales Publication 930415FT Processed by FT 930415 By KEVIN DONE, Motor Industry Correspondent

NEW car sales in west Europe fell by 9.4 per cent last month as demand dropped steeply for the third month in succession.

In the first quarter new car sales declined by 17.3 per cent to around 3.06m.

Sales in March declined to 1.18m from 1.3m in the same month a year earlier according to industry estimates. Demand in March was lower than a year ago in 15 of 17 markets across west Europe with higher sales registered only in the UK and in Greece.

The rate of decline moderated in March following steep falls of 23 and 17 per cent in January and February, but leading carmakers are being forced to lower further their already pessimistic sales forecasts for the full year.

General Motors, the US carmaker, said yesterday it now expected new car sales in west Europe to fall by 11 per cent to only 11.95m this year from 13.45m in 1992 compared with a 1993 forecast of 12.3m.

In Germany, the single biggest market in west Europe, new car sales fell by 14.9 per cent in March to an estimated 363,000. Sales plunged by 21.7 per cent in the first quarter.

Most leading carmakers in Europe have been forced to implement extensive short-time working and are cutting workforces in the face of shrinking profits or mounting losses.

The rate of decline has accelerated in Italy, where new car registrations fell by 20.8 per cent in March to 190,000.

New car sales in France in March were 9 per cent lower than a year ago, while demand in Spain dropped steeply by 22.7 per cent.

The only significant relief to the downturn across Europe is being shown in the UK, where new car sales in March were 12.7 per cent higher than a year ago. Sales in the first quarter rose by 11.6 per cent.

After plunging by a third during more than three years of recession new car sales in the UK have been higher than a year ago in each of the last six months.

Rover, the UK car producer and a subsidiary of British Aerospace,

increased its sales in west Europe by around 11 per cent to 86,000 in the first quarter supported by a 22 per cent increase in volume in the UK.

Volkswagen, Europe's biggest carmaker, which recently disclosed a net loss of DM1.25bn (Dollars 750m) for the first quarter, suffered a 17.9 per cent fall in new car sales in west Europe in the first three months to 515,000.

Mercedes-Benz, the German maker of executive and luxury cars, has been hardest hit with a 29 per cent sales decline in the first quarter.

QR European Economic Community (EC) P3711 Motor Vehicles and Car Bodies P5511 New and Used Car Dealers MKTS Sales P3711 P5511 The Financial Times London Page 2 485
East Germans warned strike could cost 100,000 jobs Publication 930415FT Processed by FT 930415 By JUDY DEMPSEY BERLIN

UP TO 100,000 workers could lose their jobs in eastern Germany if IG Metall, Germany's engineering union, calls an all-out strike in support of large pay increases in the region, Mr Klaus Murmann, president of the country's employers' association, warned yesterday.

At the same time, he asked IG Metall to return, without preconditions, to negotiations because a strike 'now would be at the wrong time, inappropriate, and destructive'.

However, IG Metall, which has already held warning strikes in eastern Germany's steel, metal and electrical sectors, wants the employers' associations to rescind a decision which ended a contract equalising eastern and western German wages by April 1994. Under the terms of that contract, eastern German steel employees were due this year a 21 per cent pay increase and the metal and electrical sectors 26 per cent.

The union, unsure about the extent of its support for an all-out strike in eastern Germany, has accused the employers of illegally breaking the contract. It claims the employers want to destroy the principle of collective wage bargaining which has shaped industrial relations in Germany for five decades.

Mr Murmann yesterday denied both charges, saying 'we uphold the principle of collective wage bargaining.' He also stressed that employers were entitled to invoke a revision clause in the March 1991 agreement, allowing them to end the contract because of changed economic circumstances in eastern and western Germany. He said heavy pay increases, apart from economic reasons, could not be sustained in view of the fact that other sectors of the eastern German economy have settled for pay increases of around 9 per cent, in line with the annual inflation rate in the five eastern German states.

DE Germany, EC P8631 Labor Organizations PEOP Labour P8631 The Financial Times London Page 2 312
Banks in France cut interest rates to 9.75% Publication 930415FT Processed by FT 930415 By ALICE RAWSTHORN PARIS

FRANCE'S commercial banks yesterday responded to the recent fall in money market rates and to Tuesday's reduction in the Bank of France's repurchase rate by cutting base rates from 10 per cent to 9.75 per cent.

Prime Minister Edouard Balladur told the National Assembly he would do 'everything possible to make sure this fall in interest rates continues'.

The reduction was triggered on Tuesday night by Credit du Nord and yesterday followed by other banks. French base rates had been held at 10 per cent since December as the French authorities battled to defend the franc from speculative attack in the run-up to last month's parliamentary elections.

The franc has strengthened since the conservatives' return to power and the announcement last week of Mr Balladur's economic reform package. Yesterday the D-Mark closed unchanged on the day at FFr3.380. However the French stock market slipped on profit taking, following its surge on Tuesday. The CAC 40 Index fell by 0.17 per cent to close at 2,015.43.

The base rate reduction is too small to alleviate the pressure on the French economy, still squeezed by sluggish consumer spending and investment. Mr Philippe Toussaint, chief executive of Credit du Nord, said the cut was 'an essential gesture'.

FR France, EC P9311 Finance, Taxation, and Monetary Policy P6081 Foreign Banking and Branches and Agencies ECON Balance of payments P9311 P6081 The Financial Times London Page 2 249
Rise in output reinforces signs of recovery Publication 930415FT Processed by FT 930415 By EMMA TUCKER, PHILIP STEPHENS and MICHAEL CASSELL

FRESH EVIDENCE that the UK is emerging from recession came yesterday with news that manufacturing output increased sharply in February.

Output rose by 1.2 per cent compared with January, the third successive monthly increase. The rise took manufacturing output to its highest levels for 18 months and prompted the government to come closer than ever before to an official declaration that the recession had ended.

The Central Statistical Office figures brought an unequivocal assessment from 10 Downing Street that the recession was over. A senior official said it was clear that 'we have a much more broadly based recovery'.

Last night, Mr John Major said: 'We have come through the worst of our difficulties and very few people now doubt that the economy in this country is getting better.

'Most of our competitors are still in difficulties or going into difficulties and that means for British industry and commerce a very remarkable series of opportunities that lie ahead of us.'

Optimism about the economy was reflected in British Steel's decision yesterday to announce a second round of price increases for the year. Price rises announced in January and implemented in recent weeks have been accepted by customers and fully implemented, unlike last year when they failed to stick.

The upbeat news was also underlined by a report from the Confederation of British Industry and Coopers & Lybrand. This found that business confidence in the financial services industries had 'strengthened markedly' for the second successive quarter. Business volumes had fallen slightly compared with the previous quarter, but the rate of decline was slowing.

On the foreign exchanges, the much better than expected industrial production figures prompted gains for sterling although they failed to inspire share prices.

The sharp month-on-month rise in manufacturing output was backed by a sustained rise over the three months to February, a measure which gives a better picture of underlying trends.

According to the seasonally adjusted figures from the CSO, manufacturing output rose by 1.2 per cent in the three months to February, compared with the previous quarter. Against the same period a year ago, output was 1.5 per cent higher.

Speaking in Tokyo at the G7 meeting of foreign and finance ministers, Mr Norman Lamont, the chancellor, said yesterday's figures were 'excellent news'.

Rise spread evenly, Page 12

Samuel Brittan, Page 22

GB United Kingdom, EC P3999 Manufacturing Industries, NEC ECON Industrial production P3999 The Financial Times London Page 1 424
UK to urge curbs on EBRD: Lamont says government made earlier pleas for greater economy Publication 930415FT Processed by FT 930415 By CHARLES LEADBEATER, ROBERT PESTON and ANDREW HILL TOKYO, LONDON, BRUSSELS

THE BRITISH government will next week press for tighter controls of spending by the European Bank for Reconstruction and Development following disclosure that it had spent more than Pounds 200m on overheads and equipping its building in the past two years.

Mr Norman Lamont, chancellor, said yesterday he had become so concerned at the level of spending by the EBRD that the government had frequently called for greater efficiency and economy in the way the bank was run.

The call for tighter budgetary controls will come at the EBRD's annual meeting next week and follows disclosures in the Financial Times that the bank has spent Pounds 55.5m equipping its London headquarters, Pounds 600,000 hiring private jets and Pounds 52,000 on a Christmas party.

The FT disclosed that from April 1991 to the end of last year, the EBRD had disbursed Pounds 101m in loans and investments against Pounds 201.5m spent on furnishing its offices, paying staff, travel and administrative overheads.

Mr Lamont, who represents Britain on the board of governors and is in Tokyo for the emergency meeting of G7 finance and foreign ministers on aid to Russia, said he would make sure the government's concerns about efficiency would be fully considered at the meeting of governors.

The EBRD governors are typically finance ministers from the 53 mostly western and east European countries, the European Community and the European Investment Bank, which make up the bank's shareholders.

Mr Lamont said several of the bank's 23 governors, meeting informally, had voiced concerns about the EBRD's spending in the two years since it was set up.

He indicated that the concerns were mainly about salary levels, as well as issues such as the use of private jets to ferry Mr Jacques Attali, the bank's president and founder, to meetings.

Mr Pierre Pissaloux, the bank's executive director in charge of the budget, said the bank had become aware that spending on the jets was 'sensitive'.

He introduced a new system for hiring jets 'a few months ago' by which the bank asks for tenders from three charter companies. All executives except Mr Attali and senior vice-president Mr Ron Freeman were also told a month ago to fly economy class.

It also emerged that the bank's 23 directors, who are civil servant representatives of the shareholders, are pressing for greater control over the bank's budget-making process.

'There is a lack of transparency and accountability,' a UK official said.

Mr Pissaloux said: 'We are very anxious to respond to requests for any additional information (from directors).'

Founder European Community shareholders of the EBRD are also expected to use the bank's annual meeting to quiz Mr Attali about its spending record.

But officials from the European Commission and European Investment Bank, which together hold 6 per cent of the EBRD's shares, said yesterday they were sympathetic to the difficulties of funding projects in the economic chaos of the former eastern bloc.

Mr Lamont said: 'Britain is at the forefront of those calling for economy and efficiency.' The UK would continue to make such calls, but he noted that the bank was playing a vital role in the reconstruction of eastern Europe.

Economy class flights Page 8

Editorial Comment Page 23

GB United Kingdom, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 1 586
World News In Brief: Briton dies in avalanche Publication 930415FT Processed by FT 930415

Olivia Marchington, 22, from Didmarton, Gloucestershire, was killed by an avalanche while skiing off piste with friends near the resort of Meribel in the French Alps, police said.

FR France, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 1 57
World News In Brief: Attack on Honeyghan Publication 930415FT Processed by FT 930415

Boxer Darren Dyer, 26, was charged with attacking Commonwealth light-middleweight champion Lloyd Honeyghan at a south London gym causing actual bodily harm, Scotland Yard said.

GB United Kingdom, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 57
World News In Brief: Thomas Cook Publication 930415FT Processed by FT 930415

Thomas Cook, travel agency and financial services company, has secured a 21 per cent stake in holiday group Owners Abroad. Page 26; Lex, Page 24

Thomas Cook and Sons Owners Abroad Group GB United Kingdom, EC P4724 Travel Agencies P4725 Tour Operators COMP Shareholding P4724 P4725 The Financial Times London Page 1 64
World News In Brief: Hang Seng surges Publication 930415FT Processed by FT 930415

The Hang Seng Index surged 371.53 to a record 6,789.74 on news of an end to the Sino-British political deadlock. Page 4; Lex, Page 24; World stocks, Page 39

JP Japan, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 1 59
World News In Brief: Dollars 4bn Russian fund proposed Publication 930415FT Processed by FT 930415

The US launched a plan for a Dollars 4bn (Pounds 2.6bn) multilateral fund to promote Russian privatisation in an attempt to assert its leadership of efforts to bolster reforms. Page 24; Russian and the G7, Page 3

US United States of America RU Russia, East Europe P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 1 76
World News In Brief: Fayeds sell Sears stake for Pounds 60m loss Publication 930415FT Processed by FT 930415

House of Fraser, the department stores group owned by the Fayed brothers, has sold its 10.6 per cent stake in the Sears retailing group for a book loss of about Pounds 60m. Suggestions from City analysts that the sale indicated the group, whose chairman is Mohamed Fayed, was in financial difficulties were 'entirely untrue', said Michael Cole, a House of Fraser director. Page 25; Lex, Page 24

House of Fraser Holdings Sears GB United Kingdom, EC P5399 Miscellaneous General Merchandise Stores COMP Disposals P5399 The Financial Times London Page 1 108
World News In Brief: Tory tensions rise over Bosnia after Thatcher attack Publication 930415FT Processed by FT 930415

A fierce attack by Baroness Thatcher heightened tensions among Tory MPs over the scale of Britain's involvement in Bosnia and forced the government into defending its policy. Defence secretary Malcolm Rifkind strongly rejected the former prime minister's call for the Bosnian Moslems to be allowed to arm themselves.

Reginald Bartholomew, the US special envoy to the Bosnian peace talks, meanwhile, warned that the US was not prepared to wait much longer for Serbia to endorse the peace plan. Page 24; Guns and butter on the road to Tuzla, Page 2; Thatcher rekindles old fire, Page 10

GB United Kingdom, EC BA Bosnia-Hercegovina, East Europe P8651 Political Organizations P9721 International Affairs NEWS General News P8651 P9721 The Financial Times London Page 1 138
Four die in Soweto as police fire on marchers: Patti Waldmeir witnesses the bloody end to a peaceful protest over the death of Chris Hani Publication 930415FT Processed by FT 930415 By PATTI WALDMEIR

IT WAS the largest and most peaceful demonstration I had ever seen in Soweto - until the shooting started.

Without warning and without apparent provocation, police guarding the main gate of the police station opened fire on demonstrators protesting at the assassination of prominent black activist Chris Hani.

Four people were killed and 250 injured by police firing birdshot, buckshot and rubber bullets. At least six people died across the country during a day which saw one of the largest political protests in South African history, marked by rioting in Cape Town, Port Elizabeth, Pietermaritzburg and Durban.

In Soweto, the black township where violence had erupted in 1976, a huge crowd of angry but disciplined blacks surrounded the heavily fortified station.

The mostly young, black and white policemen besieged inside appeared to lose their nerve; shooting spread down the line guarding the station's barbed wire perimeter fence. The crowd fled in terror. Thousands of people, scores of them covered with blood, surged forward.

I took refuge in a car as rocks and teargas canisters flew in the confusion. Colleagues and I helped to lift a young man, his shirt front soaked with blood, into the car. Another injured man fought his way inside; many more people tried to crowd in too. We could not help them.

We raced through the streets to deliver our injured to Baragwanath Hospital where 250 people lay on stretchers in the car park outside the crowded examination rooms. The young man moaned in pain, clutching a blood-soaked rag to his head.

Sixteen years ago Sowetan youths took to the streets in an uprising that, in many respects, marked the start of the South African rebellion. The fearsome prospect of impatient angry youngsters going on the rampage, out of control of the African national Congress marshals, seemed to carry the danger of South Africa slipping into ungovernability.

It raised the prospect of confrontation with police, unable to contain their own fear, or to allow the demonstrators to disperse peacefully, which they had already begun to do when the shooting started.

Earlier a young 'comrade' from the South African Communist party had celebrated the order and discipline shown by the huge crowd milling outside the station. 'This is marvellous, fantastic, unbelievable,' he said, clearly delighted that ANC leaders had managed, against the odds, to control the angry crowd. Then the shooting started.

The truce which reigns in South Africa at the moment is fragile. 'We wanted peace, but we can see that they want war,' said an angry young African National Congress marshal, Rose Malawu, who said two BBC journalists standing next to her were shot - though she is sure police were aiming at her. 'Now we are prepared to fight,' she said.

Weston Shabangu, a senior official of the Soweto Civic Association, said he could see the hatred in police eyes before the shooting started: 'The way that meeting was so disciplined - I could see that their (the police) hearts were bleeding.

'They think they are sending a signal that we must think twice before burying Chris (Hani) in Boksburg white cemetery,' Weston said, shaking his head.

Earlier, in the day, as we approached the police station in our car, picking a careful path through thousands of walking demonstrators, scores of marchers greeted us with smiles, cries of 'Dumela' (a greeting in the Sotho language); one man called me 'my sister'. Seeing my frightened face, an ANC marshal stopped to smile and say: 'This is Africa. It's our land. You don't worry.'

One group of very young men called out the radical slogan 'one settler, one bullet'; but others nearby shook their heads in disapproval, and smiled at our car full of white journalists. Everywhere there was anger - but not at us, even though we were the only white targets in sight. The demonstrators made clear they hated the government and the police - not whites for the simple fact of being whites.

That positive mood was dissipated by the police attack. Chris Hani, who has already become black South Africa's greatest martyr, is no longer there to contain the anger.

Six dead in riots, Page 4

ZA South Africa, Africa P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times London Page 1 747
Stock & Currency Markets Publication 930415FT Processed by FT 930415

------------------------------------------------------------ STOCK MARKET INDICES ------------------------------------------------------------ FT-SE 100: 2842.1 (-4.7) Yield 4.01 FT-SE Eurotrack 100 1160.63 (+3.09) FT-A All-Share 1393.49 (-0.2%) FT-A World Index 156.87 (-0.6%) Nikkei 20,533.38 (-206.91) New York: Dow Jones Ind Ave 3455.64 (+11.61) S&P Composite 448.66 (-0.56) ------------------------------------------------------------ US CLOSING RATES ------------------------------------------------------------ Federal Funds: 3 1/4% (2 13/16%) 3-mo Treas Bills: Yld 2.859% (2.89%) Long Bond 104 23/32 (104 3/8) Yield 6.752% (6.778%) ------------------------------------------------------------ LONDON MONEY ------------------------------------------------------------ 3-mo Interbank 6% (5 15/16%) Liffe long gilt future: Jun 106 7/16 (Jun 107 7/16) ------------------------------------------------------------ NORTH SEA OIL (Argus) ------------------------------------------------------------ Brent 15-day (May) Dollars 18.945 (18.99) ------------------------------------------------------------ Gold ------------------------------------------------------------ New York Comex Jun Dollars 340.8 (338.8) London Dollars 339.2 (336.55) ------------------------------------------------------------ STERLING ------------------------------------------------------------ New York: Dollars 1.5525 (1.5585) London: Dollars 1.5525 (1.559) DM 2.47 (2.4625) FFr 8.3475 (8.325) SFr 2.26 (2.2525) Y 177.0 (176.75)

Pounds Index 80.8 (80.7) ------------------------------------------------------------ DOLLAR ------------------------------------------------------------ New York: DM 1.59205 (1.5789) FFr 5.3885 (5.342) SFr 1.4583 (1.445) Y 113.78 (113.35) London: DM 1.5915 (1.579) FFr 5.3775 (5.34) SFr 1.456 (1.445) Y 113.95 (113.35) Dollars Index 64.4 (64.2) Tokyo open Y 113.67 ------------------------------------------------------------

GB United Kingdom, EC US United States of America 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 1 230
Rail strike looms as talks break up after eight minutes Publication 930415FT Processed by FT 930415 By ROBERT TAYLOR, Labour Correspondent

BRITAIN'S railway network is set to be closed down tomorrow by a second 24-hour strike after the breakdown of talks between British Rail and the main RMT rail union last night.

Talks lasted only eight minutes before breaking up in acrimony. Mr Jimmy Knapp, RMT's general secretary, accused BR of 'bully-boy tactics' and of being 'totally intransigent'.

He said Sir Bob Reid, BR chairman, had been 'abusive' to him. 'I have never been treated like that in 35 years in the industry . . . There is no chance of averting tomorrow's strike.'

Sir Bob said he did not believe the union was 'interested in negotiating a settlement'. He accused the RMT of playing politics in an industrial dispute. He was 'very disappointed' at the union's position which he said had hardened since Tuesday. 'I saw no point in prolonging the meeting,' he added.

Mr Paul Watkinson, BR employee relations director, accused Mr Knapp in a letter of following 'a political, not an industrial, agenda' which ignored the interests of railway workers and focused on the 'narrow sectional interest' of the RMT's executive.

'Your action is the biggest threat to jobs that the BR board now has to confront', said Mr Watkinson. He urged Mr Knapp to reconsider calling the strike.

Sir Bob confirmed that BR - in retaliation for tomorrow's strike - would scrap the check-off system under which union dues are deducted from railway worker's pay packets and sent to the unions.

The RMT will have to find another and more expensive way of collecting their membership subscriptions which bring Pounds 500,000 a month.

The angry exchanges between BR and RMT last night indicate a sharp escalation in the dispute. Today BR meets the train drivers' union Aslef to try to resolve their dispute, but it seems likely that Aslef will also go ahead with its stoppage tomorrow.

Hopes of a settlement of the dispute over union demands of a guarantee for no compulsory redundancies and use of contract labour faded during the day as attitudes hardened.

BR expects to lose a further Pounds 10m gross, and freight business contracts worth Pounds 1bn are at risk, as a result of tomorrow's stoppage.

Last night BR released its final bargaining position. It told the RMT that it 'did not foresee the need for compulsory redundancy amongst existing general staff during the next couple of years, providing that staff avail themselves of the opportunities for redeployment and retraining spelt out in the various rail agreements and there is full co-operation with any programmes of voluntary severance.'

BR added that there was less certainty over jobs in the rail workshops, though every effort would 'continue to be made to avoid any compulsory discharge of staff'.

It went on to assure the RMT that it had 'no plans for a major extension to the use of contractors in the area of track maintenance during the next couple of years'.

BR confirmed there would be no compulsory redundancies over contract work.

Finally, it promised to consult the RMT on preparing track and signalling maintenance staff to meet the 'emerging requirements' of the railway network as it underwent privatisation.

Both sides last night accepted that the differences between them over compulsory redundancies had come down to 'the order of words in a sentence'.

But the RMT continues to insist on a moratorium on contract work, something BR refuses to accept.

GB United Kingdom, EC P4011 Railroads, Line-Haul Operating PEOP Labour P4011 The Financial Times London Page 1 603
World Hews in Brief: Briton dies in avalanche Publication 930415FT Processed by FT 930415

Briton Olivia Marchington, 22, from Didmarton, Gloucestershire, was killed by an avalanche while skiing off piste with friends near the resort of Meribel in the French Alps, police said. Meanwhile, intensive searches failed to find any trace of four British ski-mountaineers missing in the Caucasus mountains since Friday.

FR France, EC P99 Nonclassifiable Establishments NEWS General News P99 The Financial Times London Page 1 77
World Hews in Brief: Adams applies for visa Publication 930415FT Processed by FT 930415

Sinn Fein President Gerry Adams said he had applied for a visa to visit the US. Washington has previously refused entry to the IRA leader.

GB United Kingdom, EC P9721 International Affairs NEWS General News P9721 The Financial Times London Page 1 55
US proposes Dollars 4bn fund for Russian economic reforms Publication 930415FT Processed by FT 930415 By ROBERT THOMSON and CHARLES LEADBEATER TOKYO

THE US tried to assert its leadership of international efforts to bolster Russian reforms yesterday in launching a plan for a Dollars 4bn (Pounds 2.6bn) multilateral fund to promote privatisation.

The Clinton administration made the proposal at the opening of a two-day emergency meeting in Tokyo of the Group of Seven leading industrialised countries, convened to help strengthen President Boris Yeltsin, the embattled Russian leader.

Mr Andrei Kozyrev, the Russian foreign minister, who will attend the talks today, delivered a warning that the world might 'slide back to cold war' without continued western financial assistance to promote reform.

The US proposal is aimed at easing the privatisation of large state enterprises, which are the most difficult to privatise.

Mr Lloyd Bentsen, the US Treasury secretary, said the scheme would free Russia's central bank of some of the burden of converting the huge oil, gas and other leading industries to private control; save thousands of jobs; and reduce inflation caused by the bank's issuing of easy credits to state industries. Mr Bentsen and Mr Warren Christopher, US secretary of state, said the US would provide Dollars 500m for the scheme if other G7 countries provided a total Dollars 1.5bn. The rest would come from international insititutions such as the World Bank and the International Monetary Fund.

However, German officials indicated that further large pledges of money were unlikely, as it had already contributed huge sums to Russian reform. A senior Japanese official said: 'We have already made our best efforts and we do not expect to be asked for further money.'

Mr Norman Lamont, Britain's chancellor of the exchequer, said that although the UK agreed with the emphasis on privatisation, 'all G7 members would want to consider further how best to pursue that aim'. Canadian officials said the proposal would require more study, while the Italians emphasised that the privatisation plan was still a US idea.

Details of the plan will be developed during this morning's closing session, which will be attended by the Russian representatives Mr Kozyrev and Mr Boris Fyodorov, the deputy primeminister. The G7 meeting is expected to approve aid worth about Dollars 30bn, most of which will be debt relief and credit extensions from the IMF that have already been agreed.

Several countries announced new country-to-country assistance yesterday. Japan confirmed that it was offering Dollars 1.8bn in bilateral assistance, mainly trade credits.

The UK said it would provide an additional Pounds 383m, while the US said its contribution to the privatisation fund would be drawn from a Dollars 1.8bn package, details of which are due to be announced today.

Germany, France and Canada said they would not add to existing bilateral aid. Some ministers complained that 'one-upmanship' was encouraging G7 members to announce ever larger offers, of decreasing effectiveness. One minister said: 'Our emphasis must be on quality, not quantity.'

The foreign and finance ministers agreed that further aid for Russia should be conditional upon economic, political and foreign policy reform being made irreversible.

The meeting agreed that aid should be linked to progress in controlling inflation; establishing greater discipline at the Russian central bank; and the restructuring of Russian industry, particularly through the development of small and medium-sized enterprises.

The other main focus for aid was decommissioning Russian nuclear weapons.

Mr Douglas Hurd, the British foreign minister, will today emphasise the importance of Russia's playing a constructive role in international affairs, particularly the support for international efforts to end the war in former Yugoslavia by putting greater pressure on Serbia.

RU Russia, East Europe US United States of America GB United Kingdom, EC JP Japan, Asia IT Italy, EC CA Canada FR France, EC DE Germany, EC P9311 Finance, Taxation, and Monetary Policy P9721 International Affairs NEWS General News P9311 P9721 The Financial Times London Page 1 652
World News in Brief: Mersey blockade called off Publication 930415FT Processed by FT 930817

A blockade of the River Mersey by fishermen angered at proposed legislation they claim threatens their livelihoods was called off after just over five and a half hours.

Picture, Page 10

GB United Kingdom, EC P091 Commercial Fishing NEWS General News P091 The Financial Times London Page 1 61
International Company News: US stores blame poor weather for flat sales Publication 930414FT Processed by FT 930608 By NIKKI TAIT NEW YORK

THE severe winter storm that swept across the eastern US last month was blamed for the generally disappointing March retail sales figures reported by the largest US store groups last week.

K mart, which takes in a leading chain of discount stores and specialty retail operations, reported a 1.3 per cent fall in same-store sales last month, for example.

Wal-Mart Stores, the nation's top-selling retailer, managed only a 3 per cent gain, far below the double-digit increases that investors have come to expect from the Arkansas-based company.

Sears, Roebuck, another big retail group based in Chicago, also posted a fall - in this case of 1.4 per cent.

Some of the traditional department stores fared slightly better, however.

May Department Stores managed a 5 per cent increase in same-store sales; Neiman Marcus posted a 3.8 per cent gain; and Federated Department Stores, which owns Bloomingdale's and Abraham & Straus, reported a 2.5 per cent advance.

But among the specialty retailers, there were some pronounced declines: The Gap, the San Francisco-based fashion chain whose 'star' reputation has become somewhat tarnished lately, reported a 6 per cent fall in same-store sales, for example.

Retailers admitted that the weather might not have been the only influence, with waning consumer confidence also a factor.

'Uncertainty about the outlook for the economy and the prospect of higher taxes is translating into lower levels of consumer confidence and a modest reduction in consumer activity,' said Mr Allen Questrom, chairman of Federated.

'If these trends continue, they can be expected to have some impact on retail performance for the remainder of the year,' he added.

Wal-Mart Stores May Department Stores Inc US United States of America P5311 Department Stores MKTS Sales P5311 The Financial Times London Page 29 312
Long and winding road to recovery: Michael Cassell follows an export manager to the front lines of the battle to boost UK sales abroad Publication 930414FT Processed by FT 930608 By MICHAEL CASSELL

Mr Ed van Der Heijden tunes his car radio to the BBC while he speeds towards Antwerp and a hotel bed. A highway exit sign beckons motorists to nearby Boom as Norman Lamont, the UK chancellor, unveils his Budget for sustained recovery.

There is to be extra help for Britain's exporters. Mr van der Heijden knows a lot about exporting. He also knows a great deal about deep fryers, coffee grinders, rice cookers, blenders and mixers. Ask him anything about German buns, Belgian bread or Danish meatballs. Test him on calibrated food pushers, juice centrifuges or cordless kettle jugs.

As an export manager for Kenwood, the Hampshire-based manufacturer of food preparation appliances, Mr van der Heijden, 49, is a mastermind on his products and his marketplace. That is a requirement of the job if you battle daily for business against big guns such as Philips, Moulinex, Braun and Bosch.

Kenwood, with a strong brand name behind it, annually turns out 1.75m appliances from its Havant factory and survives on exports. Two-thirds of its Pounds 100m annual sales are made outside the UK, one-third of them in continental Europe.

At Kenwood's heart is the Chef, a food mixer launched 45 years ago and which has since whisked and beaten its way into more than 7m kitchens. Something of a cook himself, Mr van der Heijden talks of the appliance in reverential tones.

He and his colleagues are at the sharp end of Mr Lamont's calls for an export-led recovery. His job relies on encouraging and cajoling distributors and agents to sell Kenwood. His salary is performance-related; fewer sales mean less take-home pay for him and lower earnings for Britain.

The completion of the single market, with its 344m customers, means little for companies already well entrenched on the Continent. Trading barriers may be down but markets are still characterised by wide differences in pricing, distribution and retailing patterns.

There is no such thing as common pricing. The Chef, for example, costs twice as much in Switzerland as in the UK. While big, national retailers ease the logistics of distribution in the UK, a proliferation of small independent businesses in Germany means more complicated supply chains.

There may have been big strides towards technical harmonisation across the EC but UK consumers still often find themselves expected to pay extra for a three-pin plug.

For Kenwood and other British companies selling in Continental Europe, the more immediate challenge lies not in adapting to structural change but in winning orders. Deepening recession means shops empty of goods and falling sales.

But Mr van der Heijden relishes the challenge. His particular patch includes Holland, Belgium, Luxembourg and some former communist countries. A long-time UK resident, German-born, with a Dutch father and English and Danish former wives, he can talk small appliances in four languages.

Kenwood's man has today notched up a few more of the 25,000 miles a year he drives to help win sales. The company's pioneering founder, Kenneth Wood, may have buzzed about Europe in his own executive aircraft, but Mr van der Heijden stays firmly on the ground.

When he started, he had to scour Europe for sales in his own, ageing Mercedes. 'If I did more than 200 miles, my mileage allowance was halved. Every bit of the route had to be approved in advance, to make sure it was the shortest.'

In 1989, however, Kenwood's executive directors, led by a former Treasury official, Tim Parker, organised a management buy-out from Thorn-EMI and last July the company floated on the London Stock Exchange. Now Mr van der Heijden has a 5-series BMW and is not afraid to use it.

His long day had begun in the Netherlands at the offices of Beska Nederland, a Kenwood distributor near Eindhoven owned by Henk Beckmann, whose ocean-going yacht testifies to his success in importing electrical appliances.

Nicola, his daughter, is product manager. She says British electrical products now enjoy the confidence of Continental consumers. 'Kenwood products are as good as any. Reliability is excellent; prices are stable and competitive'.

As Mr van der Heijden leaves the room to take a telephone call from a Polish customer, Mr Beckmann welcomes Kenwood's recent expansion into products such as shavers and hair dryers. But he adds: 'They left it very late. They were seen as a one-product company without the range needed to take on the competition.'

With a Pounds 50,000 order in the bag, Mr van der Heijden returns to explain that Beska can now import some Kenwood-designed products direct from the company's new, low-cost production base in China. Quality is guaranteed, he says, drawing a discreet veil over a recent setback with an early consignment of Chinese-made coffee-making machines.

Mr Beckmann looks over a draft contract to extend his Kenwood partnership for another four years. He has one big complaint, shared by other Kenwood suppliers: 'There is nothing like enough spent on advertising. The competition spends millions.'

Kenwood accepts the criticism but cannot escape its status as a second division manufacturer without the financial resources available to big league players such as Bosch and Braun. Distributors must, therefore, play a large part in promoting products.

After a quick Taiwanese meal, Mr van der Heijden checks out a huge electrical superstore at Cuijk. Kenwood products seem swamped; Mr van der Heijden admires an in-store video promotion by Philips and wants the same. More store visits follow.

Next morning, he is in Aartselaar, near Antwerp, for a meeting with Jacques van den Bogaert, the growling proprietor of Asogem, Kenwood's Belgian distributor.

Thirty years ago, Mr van den Bogaert struck a deal with Kenneth Wood over a bottle of Scotch. His business now sells more than Pounds 2m of Kenwood products a year, less than Kenwood sales in France, Austria, Denmark or Germany, but still an important market.

The conversation is conducted in English, French and Flemish. Mr van den Bogaert generally holds Kenwood in high regard but reckons it has been slow off the mark with new products: 'Belgium buys 600,000 coffee-makers a year. What have I got to offer from Kenwood? - nothing.' Patience, says Mr van der Heijden, the Kenwood models are on their way.

Mr van den Bogaert is also concerned about Kenwood's prices. 'Why aren't they reflecting the near-20 per cent devaluation in sterling?' he asks. Kenwood, Mr van der Heijden reminds his customer, has changed to invoicing in local currencies in order to stabilise selling prices. 'Devaluation was a bonus but we bear the risk on currency fluctuations. He didn't phone up offering to take lower margins when sterling strengthened,' says the export manager.

Mr van den Bogaert laughs but is not amused. He adds: 'They (the British) are financially very bright but still not commercial enough.' But Thierry Vander Elst, Asogem's commercial director, balances the criticism by heaping praise on the commercial section of the local British consulate: 'It is excellent. They leave the others standing.'

Lunch at the local tennis club ends in a skirmish about plans to expand the network of family-run Kenwood dealer centres around Belgium. Asogem had originally suggested up to 150 but now talks of 75. It is the first Mr van der Heijden has heard of the plans.

He next drives to Brussegem near Brussels, where Agnes Willems runs just such a Kenwood centre. She seems unhappy about selling quality products marked 'Made in China'.

It is early evening and the man from Kenwood is done for the day. He sets off for the Luxembourg border and another hotel. At the weekend he will be home to see his 15-year-old daughter and to plan the next trip.

He says he still loves his job, but insists that he works to live, not the other way round. But ask him for a personal ambition and he instinctively responds: 'Five per cent of the European market for mens' shavers - that would be great.'

Kenwood Corp GB United Kingdom, EC P3639 Household Appliances, NEC P3634 Electric Housewares and Fans MGMT Management & Marketing P3639 P3634 The Financial Times London Page 20 1376
VNU sells print operations to focus on publishing Publication 930414FT Processed by FT 930415 By RONALD VAN DE KROL AMSTERDAM

VNU, the largest publishing group in the Netherlands, is to sell its printing division to De Boer Boekhoven, a Dutch printing group, in a cash and paper deal that will leave it with a 30 per cent stake in the new printing company.

The transaction will create the largest printing group in the Netherlands, with annual turnover of Fl 1.2bn (Dollars 665m). It will enable VNU to concentrate on its core publishing activities, in line with a strategy pursued successfully by Elsevier and Wolters-Kluwer, the Netherlands' other two dominant publishing groups, since the early 1980s.

VNU is to receive Fl 100m in cash, shares worth Fl 19m and 1.88m five-year warrants in De Boer Boekhoven. It will provide the new printing group with a Fl 40m subordinated loan and a Fl 18m convertible bond. Last month, it took a Fl 80m charge on 1992, reflecting expectations that it would sell its printing division for less than book value.

Mr Joep Brentjens, VNU's chairman, said VNU intended to hold its stake at around 30 per cent, which means that it may sell shares that it gains through the conversion of loans or exercise of warrants.

De Boer Boekhoven is only one-third the size of the printing activities that it will be acquiring from VNU. The Fl 100m in cash is to be provided by a banking consortium led by ABN AMRO, which owns 42 per cent of De Boer Boekhoven.

When VNU announced in 1990 that it planned to sell all or part of its printing activities, expectations were high that the company would find a foreign buyer. However, talks with other potential buyers had been upset by the currency turmoil in Europe in the autumn, which changed the outlook for export orders.

The new printing company, which has yet to be given a name, will benefit from the receipt of long-term printing contracts from VNU, the largest publisher of consumer magazines in both the Netherlands and Belgium.

Other customers are publishers of radio and television guides, as well as international magazines such as Time, Newsweek and The Economist, which have part of their international circulations printed in the Netherlands.

Verenigde Nederlandse Uitgeversbedrijven De Boer Boekhoven NL Netherlands, EC P2759 Commercial Printing, NEC COMP Disposals P2759 The Financial Times International Page 1 401
Morocco plans petrol station sale Publication 930414FT Processed by FT 930415 By REUTER RABAT

THE Moroccan government is offering its 50 per cent stake in seven petrol station networks to domestic and foreign investors, Reuter reports from Rabat. It plans to sell off its stake in a total of 112 enterprises worth Dh35bn (Dollars 4bn) by 1995, including distributors of petroleum products.

The seven networks are Mobil Oil, Shell, Total, Dragon-Gaz, Societe Petroles du Maghreb (Petrom), Societe Marocaine de Stockage (SOMAS), and the Compagnie Marocaine des Hydrocarbures (CMH). They are capitalised at Dh360m.

Petrom shares worth Dh122.4m and CMH shares worth about Dh100m are among those on offer. Societe Nationale des Produits Petroliers (SNPP), the state agency, holds 51 and 50 per cent in the two companies. Bids close on May 12.

'In 1992, domestic sales (of petroleum products) were between Dh12bn and Dh14bn, an increase of 12.6 per cent compared with 1991,' the mines and energy ministry said.

The SNPP owns 50 per cent of the seven companies to be privatised and controls 75 per cent of the Moroccan petroleum distribution market. It was set up in the 1970s when the authorities launched a 'Moroccanisation' programme to avoid multinational control of the distribution network.

'The government is preparing a large-scale return of multinationals to the strategic oil sector,' the opposition daily Al Bayane said. However, officials deny foreigners will control the oil industry. Mr Moulay Zine Zahidi, privatisation minister, said yesterday: 'The state is responsible for crude oil imports and the SNPP and other companies distribute refined products only.'

Officials said the state-owned oil refineries at Mohammedia, near Casablanca, and at Sidi Kacem, north-east of Rabat, were strategic enterprises and not for sale.

When the oil distribution companies have been sold, the SNPP will return to its status before 'Moroccanisation' and will also be privatised.

SNPP, whose oil stock at the end of last year was worth an estimated Dh2bn, will probably take over gas distribution when the trans-Maghreb pipeline taking Algerian natural gas across Morocco to Europe is completed in 1995, analysts said.

Societe Nationale des Produits Petroliers MA Morocco, Africa P9611 Administration of General Economic Programs P5541 Gasoline Service Stations COMP Disposals P9611 P5541 The Financial Times International Page 1 373
Rhone-Poulenc chairman forecasts that group's net earnings will rise Publication 930414FT Processed by FT 930415 By REUTER

Mr Jean-Rene Fourtou, chairman of state-controlled Rhone-Poulenc, repeated a forecast that the group's net earnings would rise in 1993, Reuter reports.

Mr Fourtou, whose company is seen as likely to head the list of privatisations expected from the new French government, said he hopes to generate Dollars 6bn to Dollars 8bn in sales from new products by the year 2000.

Rhone-Poulenc FR France, EC P2834 Pharmaceutical Preparations COMP Company News P2834 The Financial Times International Page 1 94
Masked Bosnian Croat militiamen seize food aid trucks Publication 930414FT Processed by FT 930415 By REUTER SARAJEVO

Masked Bosnian Croat militiamen with Nazi swastikas on their helmets seized four government food aid trucks at a checkpoint in central Bosnia. The trucks were returned after UN intervention, UN officials said yesterday.

BA Bosnia-Hercegovina, East Europe P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 1 69
Bank of France faces battle to keep its powers Publication 930414FT Processed by FT 930415 By DAVID BUCHAN PARIS

THE Bank of France plays a bigger role in its national economy than any other European central bank. Its 17,000 employees implement monetary policy, regulate commercial banks, compile corporate data, run the payments clearing system, even provide management advice to industry and conduct some private banking.

But French politicians will soon decide whether some of the bank's roles should be hived off to a separate authority. Mr Edmond Alphandery, finance minister, has said he will produce a draft statute on the bank's future by the end of this week, which he expects parliament to pass before the summer break.

The Maastricht treaty dictates that national central banks must be made independent in the transition to economic and monetary union (Emu), with their board members having 'irrevocable' tenure for at least five years and being forbidden to 'solicit or accept' instructions from outside bodies. The treaty is, however, silent on what other roles independent central banks should have, beyond conducting monetary policy.

It is in this grey area that bureaucratic battle has begun between the Bank of France, which naturally wants to move into its new era of independence or autonomy with all its powers intact, and other institutions, notably the influential Tresor department of the finance ministry, which sees merit, not to say self-interest, in slimming down the 'Old Lady' on the Rue de la Vrilliere.

The odds are the central bank will keep its present powers. This was indeed the provision in the draft statute produced earlier this year by the UDF party in the ruling conservative coalition, from which Mr Alphandery hails.

However, the finance minister has chosen, as the director of his private office, a Tresor official, Mr Christian Noyer, who has openly suggested that the central bank suffers from a potential conflict of interest between its job of controlling liquidity and its role of lender-of-last-resort.

Mr Jacques de Larosiere, Bank of France governor, said he saw no reason to remove banks from his supervision. Mr de Larosiere said the split in Germany between a Bundesbank in charge of monetary policy and a Berlin office responsible for supervising banks was more apparent than real, since the latter institution was dependent on the former.

The French Association of Banks does not have a formal view on who should best regulate its members. Most banks seem to favour the devil they know intimately (the Bank of France), rather than one they know less well (the Tresor), or not at all (in the case of some new body).

One solution, suggested by an adviser to Prime Minister Edouard Balladur, would be to leave day-to-day bank supervision with the Bank of France, with its network of 212 branches and data base on banks and their clients.

The same network enables the central bank, its officials claim, to intervene at the first sniff of trouble. They cite the fact that the Bank of France - and the Banking Commission which Mr de Larosiere chairs - stepped in to inspect the Bank of Credit and Commerce International (BCCI) France in October 1990, and to forbid BCCI taking deposits from French residents in January 1991, months before that banking scandal blew up publicly.

By contrast, the Bank of France should perhaps play less of a role in the Banking Regulation Committee, of which Mr de Larosiere is vice-chairman, because of the potential for divided interests. The committee sets rules which the Banking Commission enforces, among which are the level of non-interest bearing reserves which commercial banks must place with the Bank of France. 'But the level of these reserves affects the central bank's profits,' notes the Balladur adviser.

FR France, EC P601 Central Reserve Depositories P9311 Finance, Taxation, and Monetary Policy GOVT Government News P601 P9311 The Financial Times International Page 1 646
World News in Brief: Crude price rises Publication 930414FT Processed by FT 930415

Crude oil rose in value by around 20 cents a barrel after Opec ministers pledged to try to adhere more strictly to previously agreed production quotas. Commodities, Page 28

QM Organisation for Economic Cooperation and Development P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining COSTS Commodity prices P1311 P2911 The Financial Times International Page 1 68
World News in Brief: Mass pile-up Publication 930414FT Processed by FT 930415

More than 70 cars and trucks and one bus crashed in fog which cut visibility to 45 metres on the Munich-Stuttgart autobahn. Police said 36 people were injured, nine seriously, in the accident near Guenzburg.

DE Germany, EC P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 1 65
World News in Brief: Romanian MiGs crash Publication 930414FT Processed by FT 930415

Two Romanian air force pilots were killed when their MiG-21 fighters collided during a training flight near Caracal, 150 km west of Bucharest.

RO Romania, East Europe P9229 Public Order and Safety, NEC NEWS General News P9229 The Financial Times International Page 1 55
Fininvest poised to raise cash by activities merger Publication 930414FT Processed by FT 930415 By HAIG SIMONIAN MILAN

FININVEST, the privately-owned media and financial services group of Italy's Mr Silvio Berlusconi, is poised to raise cash by merging and floating its main publishing activities.

The scheme, which has yet to be given a formal go-ahead by Mr Berlusconi, involves merging Silvio Berlusconi Editore, Fininvest's magazine publishing and industrial printing business, with Mondadori, Italy's biggest publisher, which Fininvest controls.

Shares in the amalgamated unit, which would have annual sales of about L2,000bn (Dollars 10m), would be offered to domestic and international investors, with Fininvest retaining 51 per cent. The proceeds would be used to bring down the group's debts, officially about L3,000bn, although some bankers put the total higher.

'We are looking seriously at these hypotheses, but no final decision has been made,' said Fininvest.

The group has steered clear of some of the over-ambitious takeovers which have driven other international media concerns into difficulties, and has not visibly suffered from the recession. However, Mr Adriano Galliani, head of its television interests, and one of Mr Berlusconi's main lieutenants, said it was 'in a consolidation phase'. Indirect confirmation that preparations for the deal are well under way came with news last weekend that SBE had bought 20 per cent of Mondadori's ordinary shares from the Fininvest parent company.

No price for the intra-group transaction was disclosed. However, the transfer has been seen as a first step to the merger between the two publishing operations later this year.

Goldman Sachs and Banca Commerciale Italiana have been appointed to advise on the deal. However, bankers note that Mr Berlusconi, on whom the ultimate decision rests, has not yet fully committed himself.

Two years ago, the widely-expected flotation of Fininvest's Silvio Berlusconi Communications film subsidiary was shelved because of opposition from Mr Berlusconi, who remains hostile in principle to the participation of outside shareholders in his activities. However, bankers believe a cash-raising exercise is much more likely now in view of the greater financial pressures on his group.

The merger of SBE with Mondadori is likely to come through a reverse takeover, which would precede placing a large proportion of the shares in the combined unit.

SBE is best known for publishing Italy's biggest-selling magazine, TV Sorrisi e Canzoni and a new magazine, Noi. The company made net profits of L29.7bn on sales of L320bn in 1992.

Mondadori is Italy's biggest book publisher, and also has sizeable magazine interests, including Panorama, the country's biggest-selling news magazine. Sales amounted to L1,600bn last year.

Fininvest gained control of Mondadori's book and magazine interests after a long-running battle for control between Mr Berlusconi and Mr Carlo De Benedetti at the end of which Mondadori was split, with Mr Berlusconi retaining its publishing and magazines.

Although still listed, Fininvest controls almost 90 per cent of its ordinary shares and 80 per cent of its savings stock. Mondadori's share price has risen sharply this year on rumours of a deal.

Bankers believe up to 40 per cent of the shares being sold could be placed with foreign investors, explaining the role of Goldman Sachs in the transaction. However, in contrast to the planned flotation of Fininvest's film interests, which had been slated for the New York Stock Exchange, the SBE listing would only involve Milan.

VNU to sell printing division, Page 20

Finanziaria d'Investimento IT Italy, EC P2721 Periodicals P2759 Commercial Printing, NEC FIN Share issues COMP Mergers & acquisitions P2721 P2759 The Financial Times International Page 1 589
London Stock Exchange: New highs and lows for 1993 Publication 930414FT Processed by FT 930414 By CHRISTOPHER PRICE, JOEL KIBAZO and STEVE THOMPSON

NEW HIGHS (129).

BRITISH FUNDS (3) Treas. 8pc 2013 (Pounds 50 Pd), Consols 2 1/2 pc, Consols 4pc, OTHER FIXED INTEREST (5) African Dev. Bank 11 1/8 pc Ln. 2010, Asian Dev. Bank 10 1/4 pc Ln. 2009, Hydro Quebec 15pc 2011, Ireland 9pc Cap. Ln. 1996, Do. 8 1/2 pc Ln. 2010, CANADIANS (1) Gulf Canada, BANKS (3) Allied Irish, Tokai, Toyo Tst. & Banking, BREWERS (1) Devenish 4 1/2 pc Pf., BLDG MATLS (3) CRH, Epwin, Tarmac, BUSINESS SERVS (1) Wills, CHEMS (1) Croda Intl., CONGLOMERATES (2) Bodycote Intl., Jourdan (T), CONTG & CONSTRCN (5) Berkeley, Higgs & Hill, Persimmon, Westbury, Wilson Bowden, ELECTRICALS (3) Delta, Menvier-Swain, Motorola, ELECTRICITY (8) East Midlands, Eastern, Manweb, PowerGen, South Wales, South Western, Southern, Yorkshire, ELECTRONICS (4) Kewill Systems, Macro 4, P & P, Pegasus, ENG AERO (1) UMECO, ENG GEN (2) Meggitt, VSEL Consortium, FOOD MANUF (2) Golden Vale, Greencore, FOOD RETAILING (1) Greggs, HEALTH & HSEHOLD (1) Greenacre, HOTELS & LEIS (2) Granada Pf., Manchester Utd., INSCE BROKERS (1) Hogg, INSCE COMPOSITE (1) General Accident, INSCE LIFE (1) Irish Life, INV TRUSTS (33) Abtrust New Dawn, Do. Series B Warrants, Baillie Gifford Japan, Baillie Gifford Shin Nippon, Brit. Assets IL 2005, Drayton Far East, Drayton Korea Warrants, EFM Japan, Do. Warrants, Fidelity Japan OTC & Reg. Fd., Fleming Far Eastern, Fleming Japanese, Do. Warrants, For. & Col Pacific, Do. Warrants, French Prop., GT Japan, Genesis Malaysia Maju Fd., Govett Oriental, JF Fledgeling Japan, JF Fledgeling Warrants, JF Japan OTC Fd., Do. Warrants, JF Pacific Warrant Co., Martin Currie, Martin Currie Pacific Warrants, Mid Wynd, Morgan Grenfell Equity Income, Overseas Warrants, Scottish Asian Warrants, Scottish Value, Second Market, Turkey Warrants, MEDIA (6) City of London PR, Daily Mail A, HTV, Intl. Business Comms., Mirror Group Newspapers, Reed Intl., MERCHANT BANKS (2) Warburg (SG), Do. 6pc Pf., MOTORS (1) Jessups, OIL & GAS (2) Bridge Oil, Oliver Res., OTHER FINCL (10) Baltic, Do. 7pc Pf., Cater Allen, Edinburgh Fund Man., Gerrard & Natl., Govett, London Forfaiting, Mitsubishi, Smith New Court, Tyndall Australia, OTHER INDLS (1) Cookson, PACKG, PAPER & PRINTG (3) Bemrose, Intereurope Tech., St Ives, PROP (3) Bilton, Brit. Land 8 5/8 pc Pf., Stanhope Props., STORES (4) Church, Kingfisher 8 1/2 pc Ln. 2000, Tie Rack, Wyevale Garden Centres, TEXTS (2) Honeysuckle, Toray, TRANSPORT (2) Manchester Ship Canal, TIP Europe, WATER (2) Cheam A, Mid Kent, MINES (6) Anglo-Dominion, Boulder Gold, Monarch Res., Do. 1993 Cv., Niugini Mining, Southvaal.

NEW LOWS (49).

BRITISH FUNDS (3) Tr. 12 1/2 pc 1993, Tr. 13 3/4 pc 1993, Exch. 13 1/2 pc 1994, AMERICANS (6) Amdahl, Amer. Cyanamid, Dun & Bradstreet, Morris (P), Sun Co., Waste Man., BREWERS (2) Macallan-Glenlivet, Macdonald Martin A, CHEMS (1) Leigh Ints., CONGLOMERATES (2) Brierley Invs., Hanson, CONTG & CONSTRCN (1)) NSM, ENG AERO (1) AIM, ENG GEN (2) BM, Victaulic, FOOD RETAILING (3) Appleby Westward, Morrison (Wm) 5 1/4 pc Pf., Tesco Cap. 9pc Bd. 2005, HEALTH & HSEHOLD (8) AAH, Baxter Intl., Community Hospitals, Fisons, Haemocell, Huntingdon Intl., Lilly (Eli), UniChem, HOTELS & LEIS (1) Manderin Oriental Intl., INSCE BROKERS (2) Alexander & Alexander, Sedgwick, INV TRUSTS (2) Gartmore Scotland Zero Div. Pf., JF Indonsia Warrants, MEDIA (2) Radio Clyde, Southern Radio, MISC (2) UDO, Waste Man. Intl., MOTORS (1) Lucas, OTHER INDLS (2) Morgan Crucible, Do. 7 1/2 pc Pf., PROP (1) Herring Baker Harris, STORES (1) Oriflame Intl., TELE NETWORKS (4) Nth. Telecom, Securicor, Do. A, Security Services, SOUTH AFRICANS (1) Tiger Oats, MINES (1) Pasminco.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 623
London Stock Exchange: Forte gloom Publication 930414FT Processed by FT 930414 By CHRISTOPHER PRICE, JOEL KIBAZO and STEVE THOMPSON

Continued speculation of a dividend cut at Forte, which is due to announce full-year results tomorrow, weakened the shares. They closed 2 adrift at 181p. There were also renewed rumblings over a possible rights issue to reduce the hotel group's high debt, although most leisure specialists believe it is likely to happen until later in the year.

However, further evidence of how gloomy the market has become over the short-term prospects for the stock was seen in the traded options market where one leading securities house bought put options suggesting that Forte's shares will be below yesterday's closing price in two months time.

Among banks, participation in the BT3 sale continued to boost SG Warburg and the shares improved 9 to 658p. Merchant bank Hambros gained 7 to 331p, with dealers focusing on the improved prospects for Hambro Countrywide which may benefit from the recovering housing market.

The composite insurers were carried by the strong market trend with a sell recommendation on Sun Alliance the only noteable feature. Mr David Nisbet at NatWest Securities believes the 'shares are overpriced an should be either switched within the sector or sold.' He suggested that Royal Insurance Holdings and Commercial Union may offer a better investment opportunity and dealers reported switching activity during the course of the day. Sun Alliance closed at 349p xd. Royal hardened a penny to 307p, while CU advanced 17 to 628p. Also wanted was General Accident up 19 at 613p.

A detailed research note from Hoare Govett on Granada Group helped the shares gain 2 to 395p. Analyst Mr Hamish Dickson argued that Granada was one of the few companies that offered investors the opportunity to 'deliver two to three years of significant earnings growth regardless of whether or not the UK economy improves.' He believes the shares have an upside of 450p.

International drinks stocks were lifted by a combination of confidence over UK, European and Japanese recovery. Allied Lyons gained 10 to 562p, Grand Metropolitan 5 to 428p and Guinness 15 to 482p.

Water stocks were among the worst performers in the market as broker advice and press comment drew attention to the sector's relative high rating. This combined with the shift of mood away from defensive and into recovery stocks sent the shares down. Kleinwort Benson was among those advising clients to 'reduce holdings' in the sector. Anglian declined 8 to 538p, Thames 6 to 550p and Wessex 3 to 638p.

Oil shares substantially underperformed the rest of the UK market despite big gains in oil shares on Wall Street overnight. The strength of sterling was put forward as one of the prime restraining factors.

BP settled marginally easier ar 304 1/2 p after relatively good turnover of 6.9m with the market still reacting to last week's hints that the company's latest well in Colombia has proved dry.

Vodafone Group resisted the mood in a positive telecoms sector, the shares standing steady at 388p. Smith New Court revised its profits forecasts, shaving Pounds 5m from this year's to Pounds 320m and moving to Pounds 350m the year after. The securities house blames increased start-up costs overseas for the cut.

Bargain hunters were seen in BAT helping the shares gain 13 to 900p. Also in demand were Williams Holdings and Tomkins. The former gained 8 to 335p, while the latter finished 9 better at 253p.

The recent overhang of stock in Siebe appeared to have been cleared leaving the shares to move strongly ahead. An initial retreat gave way to good buying and a squeeze was later seen. The shares closed 15 better at 465p, with volume having reached 1.6m.

Continued speculation that British Aerospace will soon announce a Pounds 500m order for Hawk aircraft from Indonesia helped the shares finish 5 up at 278p. TI Group added 5 to 310p, boosted by a buy recommendation from BZW.

Favourable weekend press comment on VSEL saw the shares jump 15 to 650p.

Dividend hunters sought out Booker, shares in the food manufacturing and distribution group bounding forward 11 to 382p. Unilever rebounded from last week's downgradings, the shares closing 11 ahead at 1126p.

Food retailers, shunned by investors in recent weeks on price war fears, also caught the recovery mood. Asda added 1 1/2 to 67 1/2 p, with Robert Flemings suggesting that the company's new format stores will produce good trading news.

Elsewhere, J Sainsbury lifted 14 to 472p, while Tesco rose 5 to 230p.

DIY stocks initially bounded forward but faded as talk was heard that reports of strong sales had been overdone. Do It All owner WH Smith slipped 3 to 420p, while B&Q owner Kingfisher was held to a rise of 5 to 590p. Ladbroke, owner of Texas, added 3 to 175p.

In the transport sector, UK airports operator BAA revealed a 6.2 per cent year on year improvement in March passenger traffic. The shares closed 10 better at 793p.

Forte Sun Alliance Group Royal Insurance Holdings Commercial Union Granada Group Anglian Water Thames Water Wessex Water Vodafone Group TI Group Asda Group GB United Kingdom, EC P7011 Hotels and Motels P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance P6719 Holding Companies, NEC P7812 Motion Picture and Video Production P4941 Water Supply P4812 Radiotelephone Communications P3714 Motor Vehicle Parts and Accessories P5411 Grocery Stores P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P7011 P6311 P6331 P6719 P7812 P4941 P4812 P3714 P5411 P6231 The Financial Times London Page 42 929
London Stock Exchange: HK lift for C&W Publication 930414FT Processed by FT 930414 By CHRISTOPHER PRICE, JOEL KIBAZO and STEVE THOMPSON

The news that talks were to resume between the UK and Chinese authorities over the future of Hong Kong sent related shares sharply forward on the London market yesterday. Among the best performers was Cable and Wireless, helped also by a weighty tome from Hoare Govett and a positive note from NatWest Securities. The shares jumped 17 to 747p in turnover of 2.9m.

Hoare's predicts earnings growth of 16 per cent per annum between now and 1996-7, while productivity and efficiency improvements are forecast to add Pounds 50m to annual profits. The securities house also draws attention to the growth potential for Hong Kong Telecom in the Pacific Rim. In reiterating its positive stance, NatWest also drew attention to C&W's low relative weighting due to weakness in the first quarter as Hong Kong worries overhung the stock.

Elsewhere, HSBC climbed 13 to 623p, Standard Chartered 11 to 709p and Inchcape 5 to 601p.

Cable and Wireless GB United Kingdom, EC P3661 Telephone and Telegraph Apparatus P6231 Security and Commodity Exchanges CMMT Comment & Analysis P3661 P6231 The Financial Times London Page 42 203
London Stock Exchange: Glaxo hit by US sellers Publication 930414FT Processed by FT 930414 By CHRISTOPHER PRICE, JOEL KIBAZO and STEVE THOMPSON

NEGATIVE remarks from a leading US fund manager over the outlook for Glaxo, published on Monday in a Wall Street financial newspaper, sent shares in the UK pharmaceutical group into reverse and renewed worries over the future of its leading drug, Zantac.

In the article, the fund manager suggested that Glaxo's reliance on its anti-ulcer product - which supplies nearly half of group profits - was worrying given the threat of competition, recent regulatory concerns and the lack of other lines coming through for development. A 40 per cent fall in Glaxo's ADR price was predicted in the article.

The reaction of UK drugs analysts was more sanguine. Mr Andrew Porter at Nikko said that the article was further evidence of the anxiety among the US investment community over President Clinton's plans for drug prices, yet to be announced. 'Today's fall has been overdone,' he said, 'and represents an excellent opportunity to get into the stock.' The shares fell 19 to 553p in turnover of 8.4m, the most heavily traded stock of the day.

It was announced yesterday that the number of shares held by US investors has fallen by almost 1 per cent since last November, down from 23.8 per cent to a current level of 22.95 per cent, or 695m shares.

Glaxo Holdings GB United Kingdom, EC P2834 Pharmaceutical Preparations P6231 Security and Commodity Exchanges CMMT Comment & Analysis P2834 P6231 The Financial Times London Page 42 261
London Stock Exchange: Equity futures and options trading Publication 930414FT Processed by FT 930414 By JOEL KIBAZO

HOPES of further reductions in interest rates and a feeling that the UK economic recovery was at last on the way together led to an active day derivatives trading, writes Joel Kibazo.

In futures, the strong opening in dealings in the June contract on the FT-SE 100 at 2,846 - some 11 points above its close last Thursday - was clear evidence of the positive mood in the market.

The contract advanced steadily throughout the morning, pulling the underlying equity market higher along the way, though turnover remained thin. By 12.30pm the June contract was trading at the day's high of 2,870.

A period of sideways trading then followed but the June contract continued to trade at the higher levels boosted by the firm opening on Wall Street but a slight bout of profit-taking was seen towards the close.

The June contract finished at 2,865, up 34 on its previous close and around 9 points above its fair value premium to cash of about 11. Turnover was poor with a mere 6,328 lots dealt by the close.

In traded options, volume reached 29,715 lots, with 8,512 contracts of that total dealt in the FT-SE 100 option, and 5,071 lots in the Euro FT-SE 100 option.

Among stock options, Glaxo was the most active with a day's total of 2,437 trades. It was followed by J Sainsbury at 1,596.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 263
London Stock Exchange: Equities rally as pound strengthens Publication 930414FT Processed by FT 930414 By STEVE THOMPSON

IMPRESSIVE performances from most of the world's bigger stock markets plus a strong showing by sterling and and an improving outlook for international interest rates brought a halt to six consecutive downside trading sessions on London's equity market. Vague suggestions that a predator could be constructing a sizeable takeover bid helped sentiment in some of the so-called bid targets.

Adding to a generally optimistic mood in London was an exceptionally strong performance by companies heavily involved in Hong Kong after it was announced that the UK and Chinese governments are to resume talks on April 12 about the colony's elections scheduled for 1994/5.

The only disappointing aspect of an otherwise positive day on the London market was the low level of actual business transacted as the market moved back into action after the long Easter holiday break.

The FT-SE 100 index closed the session at 2,846.8, clawing back 25 points of the 56.6 it had fallen over the previous six trading days. Another highlight of the session was the outperformance by the 100-share index of the FT-SE Mid 250 index which closed only 17 points up at 3,101.3.

The performances by the Wall Street and Tokyo markets during London's closure over the holiday period ensured that London would open on a positive note. Wall Street's 31-point rise on Monday and a much needed rally in the US bond market after better than expected inflation news at the end of last week, were viewed by London dealers as real boosters to market confidence. So,too, was the Pounds 79bn package unveiled by the Japanese government designed to kick-start the Japanese economy.

The Footsie 100 index opened more than two points higher and progressed smoothly to reach the day's high, up 26.2 at 2,848.0, ahead of the opening of Wall Street. Sterling's latest rise plus a reduction in one of the French interest rate instruments prompted renewed talk that a cut in German interest rates, and possibly another reduction in UK rates, may not be too far away.

The latest UK economic data - producer price figures for March - announced in mid-morning was much in line with estimates and had little impact on the market. This morning will see the official figures on industrial output for February while inflation figures for March are scheduled for Friday. A near 20-point jump on Wall Street shortly after the opening failed to produce fireworks in London and the Footsie 100 index, after reaching the day's high, moved narrowly for the rest of the session.

There were, however, a number of poor performing areas of the market with the recently bruised and battered drug sector worst hit. A bearish report on Glaxo in one of the leading US newspapers saw the shares retreat further with matters hardly helped by news that US investors have been continuing to lighten their holdings.

Water stocks, among the market's best performers over the past year, were upset by press comment.

Dealers were relieved at the extent of the market's rally yesterday, but pointed out that the Footsie was due for a substantial rise against a backdrop of very positive news.

Turnover, always expected to be low, was 419.5m shares. The value of customer business on Thursday was Pounds 1.06bn.

GB United Kingdom, EC P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 42 574
World Stock Markets: Italy rebounds on hopes of a recovery Publication 930414FT Processed by FT 930414 By JOHN PITT

IN a week shortened by the Easter holiday break, Italy emerged with strong gains as investors reacted to comments by the governor of the Bank of Italy that the economy was showing signs of recovery.

Japan was another significant feature with the Nikkei average breaking through the 20,000 barrier during trading on Thursday before closing slightly below, but still at a new year's high.

The gains in Italy were also encouraged by the government's restatement, towards the end of the week, of its determination to press ahead with its privatisation programme, together with final cabinet approval of the law on private pensions.

But it was the growing belief that economic recovery was under way which really provided buying stimulus, at least among domestic investors. Some analysts noted that foreign institutions remained absent last week as they awaited this weekend's referendum on constitutional changes.

Cautioning against too much optimism, Goldman Sachs in its regular monthly strategy note comments that 'on earnings the Italian equity market (short-term) still looks overvalued by about 27 per cent and faces a difficult reporting season'.

On a longer perspective, Goldman says that 'the upside largely depends on how long it takes to build a perceived stable political equilibrium through new elections. Great emphasis should also be put on the 1994 budget law and (the government's) ability to sustain the fiscal discipline recently introduced'.

While Spain was not a feature last week, the decision by Mr Felipe Gonzalez, the prime minister, on Monday to call a snap election for June 6 could provide a short-term boost for equities. Mr Victor Galliano of Baring Securities comments that pressure on the peseta may lead to lower interest rates, even before polling day.

XA World P6231 Security and Commodity Exchanges CMMT Comment & Analysis MKTS Market data P6231 The Financial Times London Page 39 322
World Stock Markets (America): Higher bond prices help lift US equities Publication 930414FT Processed by FT 930414 By PATRICK HARVERSON NEW YORK

Wall Street

FOR the second day running US stock markets moved higher in tandem with government bond prices, writes Patrick Harverson in New York.

At the close, the Dow Jones Industrial Average was up 15.94 at 3,444.05. The more broadly based Standard&Poor's 500 ended 0.86 higher at 449.23, while the Amex composite finished up 2.43 at 420.51, and the Nasdaq composite up 0.71 at 673.83. Trading volume on the NYSE was 286m shares.

Once again, rising bond prices and falling yields helped stock market sentiment, even though part of the upward momentum in bonds came from bad news on retail sales, which fell 1.0 per cent in March.

Ultimately, however, bond prices were rising steadily because recent news on consumer and producer prices allayed fears that inflationary pressures have been building up in the economy.

Stocks were also boosted by big gains in overseas markets, notably in Tokyo, where the main index jumped 4.3 per cent after the Japanese government unveiled an ambitious fiscal stimulus package aimed at helping the ailing economy.

The market held its form even after bond prices fell back mid-afternoon, with prices supported by some program buying. Brokerage and investment banking stocks were in particularly good form, lifted by news of another quarter of record earnings at the securities industry's biggest company, Merrill Lynch, which reported profits of Dollars 342m for the period, up 57 per cent on a year earlier.

The earnings helped Merrill shares rise Dollars 4 7/8 to Dollars 76 3/8 in busy trading. Also firmer were PaineWebber up Dollars 1 5/8 at Dollars 27 1/4 , Morgan Stanley Dollars 2 5/8 higher at Dollars 64 7/8 , Dean Witter Discover Dollars 1 1/8 stronger at Dollars 38 1/8 , and JP Morgan up Dollars 2 at Dollars 72 3/8 . while Primerica rose Dollars 2 1/2 to Dollars 49.

Motorola remained buoyed by Monday's news, released after the close of trading, of strong first quarter earnings. The stock rose more than Dollars 2 initially, before dropping back to end up Dollars 1/4 at Dollars 71 1/8 in volume of 3.2m shares.

Other big computer issues were flat or weaker, with IBM down Dollars 1 3/8 at Dollars 49 3/8 , Digital Equipment Dollars 1/2 lower at Dollars 39 7/8 and Hewlett-Packard up Dollars 1 at Dollars 74 5/8 .

Other notable stocks to be aided by first quarter earnings were Westinghouse Electric, up Dollars 1/8 at Dollars 15 1/4 , and CBS, Dollars 7 1/8 higher at Dollars 237 1/8 .

Citicorp rose Dollars 1/8 to Dollars 30 3/8 as reports continued to circulate that Prince Alwaleed Bin Talal, the bank's largest individual shareholder, had sold almost 9m shares on Monday.

Canada

TORONTO stock prices closed higher in heavy trading. According to preliminary figures, the TSE 300 index rose 9.83 points, or 0.27 per cent, to close at 3,624.84.

Newbridge Networks jumped 4 to CDollars 76. SoundView Financial Group of New York rated Newbridge a "buy" for the short term and a "hold" for the long term in its rating of the stock.

US United States of America CA Canada P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 554
World Stock Markets (Asia Pacific): Nikkei peaks as Hang Seng accelerates in London Publication 930414FT Processed by FT 930414 By WAYNE APONTE TOKYO

EQUITIES climbed by 4.3 per cent to a new 1993 peak as the announcement of Japan's Y13,200bn supplementary budget to resuscitate the economy triggered active buying from dealers, arbitragers and public fund managers, writes Wayne Aponte in Tokyo.

The Nikkei average closed 858.15 higher at 20,740.29, after reaching an intraday high of 20,753.74 during the final minutes of trading and opening at its session low of 19,902.42. The last time the average closed above this level was March last year.

Volume shot up again to 750m shares compared with Monday's 336.6m. Advances overwhelmed declines by 1,055 to 65, with 66 unchanged, the Topix index of all first section issues rose 53.35 to 1,608.76 and, in London, the ISE/Nikkei 50 index fell 3.75 to 1,268.43.

Traders had initially expected share prices to fall since the stimulus package, although the largest ever, was in line with expectations. However, hopes of a sustained bullish trend offset concerns over weak economic fundamentals.

Mr Ryoji Tanaka, head of Japanese equity trading at Kidder Peabody International, said that most investors believed that additional buying will enter the market as the Nikkei average has settled above the 20,000 level.

Large-capitalisation stocks were bought aggressively, with Nippon Steel, the most active issue of the day, settling Y16 higher to Y409 while Mitsubishi Heavy Industries rose Y27 to Y682.

Nippon Telegraph and Telephone, which has led the recent market rally, closed up Y40,000 at a session high of Y1.07m. Reports that the fiscal package announced yesterday included government investments in telecommunications infrastructure encouraged broadly based buying in the sector. Nippon Comsys, the telecommunications engineer, soared Y130 to Y1,400. Electric wire and cable issues were also strong with Fujikura up Y40 to Y1,040 and Furukawa Electric rising Y23 to Y724.

Exporters were higher in spite of the higher yen. Hitachi rose Y39 to Y908, Sony gained Y200 to Y5,000 and Toyota Motor advanced Y50 to Y1,740.

In Osaka, the OSE average rose 660.89 to settle at 22,113.38 in volume of 33m shares.

Roundup

WIDELY divergent routes were taken by equity markets around the Pacific Rim.

HONG KONG went into a slow burn. Shares surged 2.1 per cent in anticipation of the announcement, which came after the market closed, of a resumption of Sino-British talks on the colony's future. The Hang Seng index rose 132.54 to 6,418.21 as turnover improved slightly to HKDollars 2.54bn.

The mood subsequently carried over into London trading of Hong Kong shares. HG Asia in London said that prices peaked at the equivalent of a further 300 point rise in the Hang Seng before settling to close 275 ahead at 6,693. One analyst said: 'This was a big surge for trading in London but we are used to this kind of volatility.'

Gains in Hong Kong were recorded across the board, with banks and utilities leading the way. HSBC Holdings, which topped the actives list, climbed HKDollars 1 to HKDollars 69.50 and Hong Kong Telecom rose 20 cents to HKDollars 10.

Jardine Matheson bounced HKDollars 2 higher to HKDollars 48 on hopes of a thaw in Sino-British relations. There was also talk of disposal of its Hongkong Land subsidiary, on which the group declined comment.

AUSTRALIA closed at a 17-month high, taking its lead from the strength of the Japanese and US markets. The All Ordinaries index rose 23.0 to 1688.7, its highest since November 11, 1991.

BOMBAY ended with slight gains in a declining market on intervention by the state-owned Unit Trust of India. The BSE index rose 13 to 2,235, having fallen in early trading to a 14-month low of 2,175.

KARACHI closed lower on political uncertainty after the resignations of two more cabinet ministers and the 100-share index ended 15.53 down at 1,094.11.

SEOUL failed to maintain the momentum that took shares to an 18-month high on Monday and the composite index edged 0.44 lower to 720.52 in turnover of Won807.9bn after Monday's Won933.2bn.

SINGAPORE was prey to profit-taking after last week's rally and the Straits Times Industrial index shed 14.33 to 1,693.51.

TAIWAN was lower for the fifth straight day in thin turnover. The weighted index spent most of the session moderately easier before a late wave of selling pushed it down 84.61 or 1.8 per cent to 4,597.66.

JP Japan, Asia HK Hong Kong, Asia AU Australia IN India, Asia PK Pakistan, Asia KR South Korea, Asia SG Singapore, Asia MY Malaysia, Asia P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 768
World Stock Markets (Europe): French interest rate cut signals further reductions Publication 930414FT Processed by FT 930414 By Our Markets Staff

BOURSES offered a limited response to the overnight strength in the US and Japanese equity markets, writes Our Markets Staff.

Mr Anthony Thomas, European strategist at Kleinwort Benson, said that Europe, these days, is looking inward much more than before, influenced by the German recession on one hand and by the fall in continental interest rates, on the other.

PARIS reacted to the cut in the 5-10 day repo rate with a 1.6 per cent gain in the CAC-40 index which closed 31.22 higher at 2,018.08. While the 2 percentage point cut had been anticipated last week, the market now expects a decrease in intervention rates, perhaps before the weekend. The central bank's decision reflected the resilience of the franc, which many commentators had expected to come under pressure in the currency markets as speculators tested the new government's commitment to the franc fort policy.

March inflation figures, much in line with expectations, also supported trading in average turnover of FFr2.3bn.

Interest-rate sensitives were among the best performers with SocGen gaining FFr13 to FFr644, Paribas FFr8.80 to FFr424.80 and Credit Local FFr24 or 6 per cent to FFr429.

FRANKFURT registered its biggest gains in a month as the DAX index closed 15.32 higher at 1,671.05, but opinions on the market continued to conflict.

Turnover was reported to have been thin. Financials were strong as bond markets rose following the decline in US bond yields, Deutsche Bank rising DM8.80 to DM707.40, although dealers said that the DM35 gain to DM2,220 in Allianz reflected a buy signal in the stock's chart pattern.

Car stocks moved up, down and sideways, reflecting disagreement between German financial advisers like Merck Finck, in Dusseldorf, which puts the sector in the reduce/underweight category, and Bank Julius Bar in Frankfurt, which has gone for an overweight position now that comprehensive cost-cutting measures are in hand in the industry.

Daimler rose DM4.20 to DM569.20 after an intraday peak of DM576.00; BMW lost 50 pfennigs to DM484 after an intraday high of DM487.50; and Volkswagen ended with a gain of DM1 at DM312.

MADRID rose on Wall Street's strength and the view that the early general election might remove some of the uncertainties facing the market - although some analysts demurred, saying that a close-fought campaign could create more problems than it solved.

The general index rose 2.51 to 239.00. There were gains of up to, and over 10 per cent in constructions where Cubiertas ended Pta700 higher at Pta7,300 and FCC rose Pta510 to Pta9,620 on a Pta658bn hydrological plan to redirect water resources to the drought ridden south.

ZURICH began firmly on hopes of lower interest rates, but the advance was not sustained as worries about the effect of a firmer Swiss franc weighed on the prospects for exporters. The SMI index finished 6.5 lower at 2,181.8.

Among export oriented companies, Nestle bearers slipped SFr5 to SFr1,165 while Roche certificates eased SFr20 to SFr4,170.

Banks and insurers were the beneficiaries of lower rate hopes. CS Holding bearers firmed SFr10 to SFr2,410, recouping early losses which followed Thursday's news that Moody's had downgraded the long-term debt of Credit Suisse.

AMSTERDAM followed the general trend with a gain in the CBS Tendency index of 0.7 to 108.6. VNU put on 80 cents to Fl 112.10 ahead of confirming after the close that it had reached agreement to sell its printing division.

MILAN moved ahead from the start before gains were pared by technical trading ahead of today's expiry of options contracts. The Comit index ended 0.92 higher at 513.01.

Privatisation stocks were mixed in further response to last Thursday's sell-off timetable. Among candidates due to be sold by May, Credito Italiano fell L60 to L2,650 while Sme gained L60 to L5,990.

STOCKHOLM edged ahead in thin trading and the Affarsvarlden Index rose 2.3 to 996.9.

Volvo B shares added SKr10 to SKr382 following news at the weekend that its North American truck operations had returned to profit.

Hennes and Mauritz, the clothing retailer, added SKr10 or 5 per cent to SKr208 after Mr Stefan Persson, the majority shareholder, agreed to accept SKr800m of company shares in payment for the SKr1bn convertible debenture loan that he holds.

DUBLIN took its gains further, the ISEQ overall index closing 28.92, or 1.92 higher at 1,551.36, on anticipation of yet another rate cut this Friday, and on indications of improved cash flow at domestic institutions - meaning that they had no need to sell into continued foreign buying of the market.

TEL AVIV rose in strong trading with a gain in the index of 4.72 or 2.3 per cent to 215.44.

---------------------------------------------------------------------- FT-SE ACTUARIES SHARE INDICES ---------------------------------------------------------------------- April 13 THE EUROPEAN SERIES ---------------------------------------------------------------------- Hourly changes Open 10.30 11.00 12.00 ---------------------------------------------------------------------- FT-SE Eurotrack 100 1159.03 1159.84 1159.75 1158.72 FT-SE Eurotrack 200 1221.83 1222.39 1223.64 1221.61 ---------------------------------------------------------------------- Hourly changes 13.00 14.00 15.00 Close ---------------------------------------------------------------------- FT-SE Eurotrack 100 1158.38 1158.43 1157.83 1157.54 FT-SE Eurotrack 200 1223.55 1223.27 1222.03 1220.72 ---------------------------------------------------------------------- Apr 8 Apr 7 Apr 6 Apr 5 Apr 2 ---------------------------------------------------------------------- FT-SE Eurotrack 100 1151.40 1144.36 1147.43 1136.15 1140.36 FT-SE Eurotrack 200 1211.28 1206.25 1210.05 1202.24 1215.52 ---------------------------------------------------------------------- Base value 1000 (26/10/90) High/day: 100 - 1160.41; 200 - 1224.90 Low/day: 100 - 1157.10; 200 - 1219.86. ----------------------------------------------------------------------

FR France, EC DE Germany, EC ES Spain, EC CH Switzerland, West Europe NL Netherlands, EC IT Italy, EC SE Sweden, West Europe IE Ireland, EC IL Israel, Middle East P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 935
World Stock Markets: South Africa Publication 930414FT Processed by FT 930414

JOHANNESBURG fell following Saturday's assassination of the Communist Party chief and ANC national executive member, Mr Chris Hani. The overall index fell 60 to 3,529, heavily influenced by golds which shed 47, or 3.7 per cent to 1,217.

The industrial index closed 17 lower at 4,352. Dealers said that a major sell-off had been avoided, but that tomorrow's general stayaway, called by the African National Congress, was expected to dictate short term direction.

ZA South Africa, Africa P6231 Security and Commodity Exchanges MKTS Market data P6231 The Financial Times London Page 39 102
Money Markets: Futures tightly traded Publication 930414FT Processed by FT 930414 By PETER JOHN

SEVERAL small pieces of positive economic news failed to break through the post-holiday lethargy yesterday and both the money and financial futures markets generated scant enthusiasm, writes Peter John.

An announcement that the French upper-limit emergency lending rate was to be cut by two percentage points to 10 per cent prompted some buying of Pibor futures.

However, dealers soon appreciated that the rate was so far out of line with the overnight lending rate that the cut made little difference. In spite of an optimistic statement from Mr Edmond Alphandery, the new economics minister, predicting further interest rate falls, the contract for June delivery settled unchanged at 91.81 on low turnover.

The news from France gave heart to some of the perennial optimists banking on the Bundesbank to produce a rate cut with more substance than what has been described as the 'salami-slicing' of recent months. The Euromark contract for June was bought up three basis points to a high of 92.91 but the sceptics prevailed and it settled slightly down on the day.

Finally, in the UK, a stronger pound combined with economic data to signal that underlying inflationary pressures might remain distant for some time. However neither pointer was strong enough to take short sterling anywhere but the doldrums and the June contract settled three basis points lower at 92.84 on desultory turnover of less than 10,000 contracts.

Dealing in the money markets was also gentle with an end to the large shortages forecast last week. The Bank of England forecast an early shortage of Pounds 250m, later revised to around Pounds 350m, of which Pounds 215m was taken up.

German call money firmed to 8.25/30 per cent, up sharply from Thursday's 8.10/20 per cent as tax payments drained liquidity from the banking system.

Traders said they expected the Bundesbank to relieve the upward pressure by allocating DM78bn to DM84bn marks in this week's repo tender, thus adding DM4bn to DM10bn in funds to the market. They see the minimum allocated rate easing to 8.10 per cent from 8.13 per cent. Reserves on deposit with the Bundesbank rose to DM60.1bn from DM56.3bn on Monday, bringing the average to DM56.8bn for the first six days of April.

FR France, EC GB United Kingdom, EC DE Germany, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 33 407
Foreign Exchanges: Dollar slides on poor sales data Publication 930414FT Processed by FT 930414 By PETER JOHN

DISAPPOINTING retail sales figures from the US imposed further pressure on an already ailing US dollar, which was weaker across the board yesterday, and suffered a sharp fall against the D-Mark, writes Peter John.

Economists had expected the March sales figures to be poor but had, nevertheless, anticipated a slight rise. When the news broke that they had actually fallen by one per cent against the previous month the dollar tumbled through the DM1.5850 level.

This followed last week's poorly received CPI figures and led to a wave of heavy, computer generated stop-loss selling.

However, there was some comment that the reaction was overdone. Mr Nick Parsons an economist with the Canadian Imperial Bank of Commerce said: 'Everyone is worried about the US recovery but the US has a recovery rate that Europe would kill for.'

Dealers said volumes were low and they expected the dollar to bounce back before being hit again and falling, according to some, as low as DM1.52. The dollar closed at DM1.5790 down from DFM1.6070 previously.

The Yen was strong again, although held back by intervention from the Bank of Japan. The Japanese currency was boosted by news of a Y13.2 trillion economic stimulation package announced by the Liberal Democratic Party. The extent of package, which still has to be ratified by the government, was generally predicted and the Yen closed in London only marginally higher against the dollar at Y113.35.

Meanwhile, sterling performed well in early sessions hitting DM2.4725 at best as sentiment was buoyed by a growing feeling that the economy is on the turn while Germany is heading for what could be its worst recession since the Second World War.

Mr Neil MacKinnon, the chief economist at Citibank, believes the only black spot on the horizon is the worsening trade gap and, with good fundamentals in place, the pound is set to break through DM2.50 in the short-term and hit DM2.65 within the next 12 months. Sterling closed at DM2.4625, up from DM2.4500 previously.

The franc was unaffected by news of a two-per cent cut in the upper limit emergency lending rate. The cut underlines growing economic confidence in France but merely brings the emergency rate in line with overnight lending. The currency strengthened to FFr3.3800 against the D-Mark from FFr3.3855.

Elsewhere in Europe, the peseta and escudo were both under pressure. The Spanish currency was affected by the decision of Mr Felipe Gonzalez, the prime minister, to call a general election five months early. It eased to Pta72.11 against the D-Mark, down from Pta71.61.

The Bank of Portugal intervening to support the escudo which nevertheless fell to Es93.16 against the D-Mark from Es92.97.

US United States of America DE Germany, EC JP Japan, Asia GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 33 489
Commodities and Agriculture: Turkish agriculture approaches watershed - A look at a project to harness the Tigris and Euphrates for irrigation Publication 930414FT Processed by FT 930414 By JOHN MURRAY BROWN

THE WORLD'S second largest single source irrigation scheme will be inaugurated by Turkey's prime minister, Suleyman Demirel, on May 22, when the large 24km Urfa tunnels are opened to take water from the Ataturk dam to the Harran plain on the border with Syria.

The twin tunnels, providing water for 1.7m hectares (4.2m acres) of farmland along Turkey's border with Syria and Iraq, form part of the largest engineering undertaking in any country bordering the Mediterranean.

The South-East Anatolian development, or Gap, has already aroused criticism from Turkey's downstream neighbours. It will be the task of the UK water engineer, Sir William Halcrow and Partners, which has been awarded a USDollars 12m consultancy contract, to design an irrigation system which meets the various political, economic and environmental concerns.

Halcrow's findings could decide the future shape of farming in Turkey, providing a blueprint for irrigation in other parts of the country.

Water management is at the heart of Turkey's attempts to harness the Tigris and Euphrates rivers for agriculture. Turkey already earns almost Dollars 3bn from farm product exports, about 20 per cent of total export earnings. Gap is expected to increase Turkey's irrigated farmland by a third, doubling wheat production and increasing cotton output more than fivefold.

After going it alone for so long, Turkey is soliciting foreign advice on a number of critical aspects of the project, an indication of desire to avoid the criticism associated with other large scale public investment irrigation schemes.

The French group Compagnie Nationale Bas Rhone Lanquedoc is surveying the main canal system. Alexander Gibb, the UK consultant, has a subcontract to look at road infrastructure. Tubitak, the Turkish science research institute, is studying agricultural credit policy. The German company AFC is looking at market strategy.

At Cukurova university, scientists are making studies of everything from the reproductive habits of bees - vital for future pollination purposes in such a vast monoculture crop scheme - to the region's soils.

Halcrow's project will focus on issues of land ownership, land quality, topography, climate, water availability and the social, religious and economic attitudes of farmers in the region. It will advise on the teaching of extension skills for farmers unused to modern farm methods, on cost recovery and conservation technologies for downstream users.

Water is perhaps the Middle East's most vital resource and control of both the Euphrates and the Tigris would make Turkey a vital player in settlement of the region's water disputes in any future Arab-Israeli negotiation. Foreign hydrologists have long argued for more prudent management.

There are many obstacles. Today Turkish farmers are charged for their water according not to volume used but to the quality of the land being irrigated - the poorer the soils the cheaper the water. According to Mr Hurman Ocakli, deputy president of the Gap authority, 'the farmers use as much water as they want. It is not even calculated.'

Repayment of loans in Turkey's south east region is 30-40 per cent, compared with a national figure of 75-80 per cent for agricultural credits.

Many agronomists believe there will have to be widescale land reform, not so much for equity as efficiency.

There is little prospect of increasing scale economies in a region where according to one calculation, more than a quarter of the cultivated land is owned by less than 1 per cent of the region's farmers. Equally striking is that 61 per cent of farmers own less than five hectares of land.

The environmental challenge is even more urgent. No more than 30 per cent of the planned 1.7m hectares is likely to use the more expensive drip or pressurised hose irrigation, the rest being open furrow system.

Western officials say there is a new urgency as farmers prepare to irrigate the first 40,000 hectares on the Harran plain, close to the Syrian border.

The land use issue is political at a time of rising violence in Kurdish speaking areas. According to one senior official, the explicit aim of the Gap project is to 'reduce the rural population,' through land consolidation and the provision of alternative industry in urban areas.

Many officials believe the jobs created by the Gap will help accelerate this process. In the long run, Ankara sees the demographic cards stacked in its favour, and believes that this, more than any olive branch of reform, is the best way to undermine the power base of the Kurdish guerrillas.

Sir William Halcrow and Partners TR Turkey, Middle East P1629 Heavy Construction, NEC P4971 Irrigation Systems RES Natural resources P1629 P4971 The Financial Times London Page 32 793
Commodities and Agriculture (Farmer's Viewpoint): Domesday in a big brown envelope - Cereal and beef producers wanting set-aside payments have their paperwork cut out Publication 930414FT Processed by FT 930414 By DAVID RICHARDSON

LARGE BROWN envelopes marked MAFF and weighing a total of some 20 tonnes thudded through British farmers' letter boxes last week. Many of the cereal and beef farmers to whom these packages were addressed will have spent much of their Easter holiday poring over the contents. For they contained the dramatically dubbed 'Domesday' forms, otherwise known as 'The Integrated Administration and Control System', IACS for short.

They are the direct result of the reform last May of the Common Agricultural Policy. If farmers do not complete them correctly those who grow cereals and produce beef will not be eligible for arable area payments in compensation for setting aside 15 per cent of their cereal land or for headage payments on controlled numbers of cattle.

Each form has 19 columns of questions which farmers must answer, giving every detail about every field under their control - its Ordnance Survey sheet number, its national grid reference, its size (in hectares, not acres) to two decimal places, the crop it is growing, the variety of the seed, its estimated yield, etc etc etc. Each part field must be recorded on a separate line which, in practice, because of split cropping perhaps, or the fact that the whole field may not appear on just one map, means that some fields run to five or six lines. Copies of the maps themselves must be included with the forms when they are returned. Rather more than 20 tonnes of paper will shortly be heading back to Maff, I suspect.

Before a farmer attempts to fill in the IACS forms he is advised to read and fully understand the 79-page book of instructions which accompanied them. For if there is a delay in returning the forms, or a mistake is made, the penalties are harsh. For instance, if the forms, correct in every detail, are returned to Maff later than the May 15 deadline the farmer concerned will have his aid reduced by 1 per cent for each day by which the return is delayed. If this extends beyond 20 days he will lose the whole of his entitlement. There are similar penalties for accidental inaccuracy and threats of criminal prosecution for those who make fraudulent claims. It is unlikely there will be much public sympathy for an industry about to receive close to Pounds 1bn of public money merely because its participants are required to fill in some forms.

But to understand farmers' hostility to the massive bureaucracy it should be remembered that most farmers did not want set-aside in the first place and never thought that it would work; that they would far rather be growing crops or producing meat from their land than allowing weeds to regenerate on 15 per cent of it; and that while these forms have taken hundreds of experts 10 months to write, the farmers who have to complete them have barely five weeks to gather together all the necessary facts and evidence and return them.

To the layman, that may sound more than adequate time. But 67 people are leaving the land each week, leaving a growing number of farmers to do all the work on their holdings themselves. And this at a time of year that involves being on a tractor from dawn to dusk or perhaps on duty in the lambing shed for 20 or more hours a day.

It would not be so bad if the related services were on the ball and helpful. As it is I know from personal experience that the local Ordnance Survey map office does not open until 10.30 am (weekdays only), by which time there is invariably a queue of irate farmers banging on the door.

For next Friday is effectively the last day for placing orders for maps with any hope of getting them in time for May 15.

In desperation many farmers are seeking assistance with the forms from land agents, their agricultural merchants or consultants who have advertised such a service.

On the other side, so to speak, Maff has employed 500 extra staff to check the forms, inspect and measure fields and try to identify fraud and. Maff also intends using aerial photographs and satellite images to double check farmers' returns. And Pounds 25m has been allocated for policing the scheme.

Inevitably UK farmers have expressed suspicions that within the European Comnunity they may be the victims of enthusiastic British bureaucracy, while the farmers of other member states may be getting away with much less. This, apparently, cannot be fully substantiated.

It is reported that some countries, notably Portugal and Spain, have used the form as an excuse to ask extra questions on which they required answers on matters unconnected with CAP reform. Ireland has not yet sent out its forms and Greece produced such a complicated draft that farmers' organisations have so far refused to agree to its distribution.

Germany issued its forms a month earlier than the UK - although farmers spanning state borders have to complete two versions - while our nearest neighbours across the North Sea appear to have come closest to reason. Denmark's form runs to eight pages, Belgium's to six and Holland's to only four.

But British farmers have some justification for feeling they are being asked to carry a bigger bureaucratic burden than the rest. In the Community as a whole, 34 per cent of the arable land area escapes set-aside regulations and therefore these forms, because of small farm exemptions. Moreover in Greece 88 per cent of the arable land is not involved; in Luxembourg the figure is 77 per cent and in Italy 71 per cent. Other Mediterranean member states and those with poor farming structure qualify for rather lower exemptions while even Holland has 36 per cent of its area outside the scheme; Germany 27 per cent and France 18 per cent.

In the UK, however, small farm exemptions represent only 4 per cent of the arable area. That is the reason why almost any farmer you may have seen over Easter will have been even more grumpy than usual.

GB United Kingdom, EC P0119 Cash Grains, NEC P0211 Beef Cattle Feedlots P9641 Regulation of Agricultural Marketing GOVT Government News P0119 P0211 P9641 The Financial Times London Page 32 1075
Commodities and Agriculture: PNG plans 50% stake in Lihir gold project Publication 930414FT Processed by FT 930414 By KEVIN BROWN SYDNEY

THE GOVERNMENT of Papua New Guinea (PNG) yesterday said it would take a half share in the USDollars 760m Lihir Island gold project unless RTZ Corporation and Niugini Mining, the joint venture partners, find a third partner within a month.

The announcement comes only days after the government said it would increase its proposed stake in Lihir from 20 per cent to 30 per cent to achieve parity with the Australian-run Porgera gold project.

Mr Paias Wingti, prime minister, said after a cabinet meeting in Port Moresby that the government had decided to take a 50 per cent shareholding to make sure the project was not delayed.

He said the joint venture partners had indicated the project faced 'financing difficulties."

The announcement appeared to surprise the joint venture partners. Niugini Mining, which owns 20 per cent of the project, said it had received no official notification of the proposal.

The Lihir Joint Venture (LJV), which represents both companies, said it was considering its response and hoped 'to continue discussions with the PNG government in the near future."

The government was expected to pay USDollars 37.5m, equivalent to 30 per cent of the project's sunk costs, for a 30 per cent stake which would reduce Niugini's shareholding from 20 per cent to 14 per cent, and RTZ's from 80 per cent to 56 per cent.

Lac Minerals of Canada, one of the companies RTZ talked to about taking a shareholding, withdrew from the project last year, and the development has been delayed by RTZ's failure to find a fresh taker for a 15 per cent stake.

RTZ Corp Niugini Mining Lihir Joint Venture PG Papua and New Guinea, Oceania P1041 Gold Ores COMP Shareholding COMP Strategic links & Joint venture P1041 The Financial Times London Page 32 317
Commodities and Agriculture: Fox halts trade in raw sugar as volumes plunge Publication 930414FT Processed by FT 930414 By DAVID BLACKWELL

TRADING IN London's raw sugar contract was suspended yesterday by the London Futures and Options Exchange (Fox). But the search is on for a replacement contract, which it is thought could be launched this summer.

Mr Robin Woodhead. Fox chief executive, said a report by Landell Mills Commodities Studies had suggested that no single factor had been behind the sharp decline in the exchange's raw sugar volumes. But moves from sterling to dollars, from floor to screen and back again, and the addition of Cuba as a country of deliverable origin had all done harm. Business switched to the relatively young and very liquid New York market.

Last month London raw sugar volume fell to 1,399 lots compared with 4,384 lots in March last year. In January 1991, when trading was switched to screens in a bid to boost volumes, the contract traded 120,176 lots.

Sugar trading, which began in London in the late 1880s, will go on in the screen-based white contract - probably the world's most successful screen-traded commodity. But Mr Woodhead reported a groundswell of support from trade and brokerage houses for the exchange to create a new raws contract.

Response from the trade in London and New York yesterday was mixed. 'It is essentially the main sugar trade in London who dropped the contract in the first place. Why do they now say they want it continued?' asked one seasoned observer. Changing any contract was always a sure way to lose volume, he said, pointing out that London's virtually untouched cocoa contract was Fox's most successful market.

However, another London trader said reports of the death of raw sugar trading in London were greatly exaggerated. He suggested that a new contract - possibly screen based - would attract arbitrage business with New York.

Several US traders pointed out that their companies had stopped using London when it decided to accept Cuban sugar for delivery, as dealing in Cuban sugar was against US law. They would welcome a revived London market, especially in the light of recent renewed interest in sugar.

GB United Kingdom, EC US United States of America P0131 Cotton P6231 Security and Commodity Exchanges MKTS Market data CMMT Comment & Analysis P0131 P6231 The Financial Times London Page 32 395
Commodities and Agriculture: Minor metals prices Publication 930414FT Processed by FT 930414

Prices from Metal Bulletin (last week's in brackets).

ANTIMONY: European free market 99.6 per cent, Dollars per tonne, in warehouse, 1,640-1,700 (same).

BISMUTH: European free market, min. 99.99 per cent, Dollars per lb, tonne lots in warehouse, 2.30-2.50 (same).

CADMIUM: European free market, min. 99.5 per cent, Dollars per lb, in warehouse, 0.35-0.45 (same).

COBALT: European fr mkt, 99.5 per cent, Dollars per lb, in warehouse, 15.00-15.50 (same).

MERCURY: European free market, min. 99.99 per cent, Dollars per 76 lb flask, in warehouse, 120-140 (same).

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 (same).

TUNGSTEN ORE: European free market, standard min. 65 per cent, Dollars per tonne unit (10 kg) WO, cif, 31-43 (same).

VANADIUM: European free market, min. 98 per cent, Dollars a lb VO, cif, 1.55-1.65 (same).

URANIUM: Nuexco exchange value, Dollars per lb, UO, 7.45 (same).

--------------------------------- LME WAREHOUSE STOCKS --------------------------------- (As at Thursday's close) tonnes --------------------------------- Aluminium +8,800 to 1,763,225 Copper +1,450 to 367,250 Lead +1,550 to 247,575 Nickel +348 to 88,398 Zinc +1,550 to 604,200 Tin +5 to 19,650 ---------------------------------

US United States of America GB United Kingdom, EC P6231 Security and Commodity Exchanges P3339 Primary Nonferrous Metals, NEC COSTS Commodity prices P6231 P3339 The Financial Times London Page 32 237
Commodities and Agriculture: Danes end fish protest Publication 930414FT Processed by FT 930414 By XUELING LIN COPENHAGEN

A TWO-WEEK long action by Danish fishermen ended yesterday when the two largest fishing associations agreed to a government rescue package for the industry, which has been hit by cheap imported fish and cuts in EC catch quotas.

Exports of fish and fisheries products in 1992 were about Dkr13bn.

Fishermen mounted blockades of ports, fish processing factories and trucks transporting foreign fish through Denmark, the action culminating in a freeze on all fishing by Danish fishing vessels.

The demands met in the agreement include an increase in fish quotas, in particular cod and sole, cheaper long term loans, improved taxation rules, pension payments for retiring fishermen and better compensation for scrapped vesssels, which are part of measures to cut the size of the fishing fleet.

DK Denmark, EC P0912 Finfish P9641 Regulation of Agricultural Marketing NEWS General News P0912 P9641 The Financial Times London Page 32 162
World Commodities Prices: Market Report Publication 930414FT Processed by FT 930414 By REUTER

ZINC closed near seven-week highs on the LME, largely reflecting technical factors. The early breach of chart resistance around Dollars 1,030 a tonne for three-month metal triggered fund short covering and further buying. Talk also circulated of production cuts, centred on Pacific Rim countries, although no news had emerged by the close. Three-month COPPER was firmer, as the market staged a recovery from last week's five-year lows and moved above Dollars 2,050 a tonne. But business was not particularly active, while volatility levels in traded options eased, reflecting calmer conditions. Trading on the London bullion market was thin after the holiday weekend, with few new fundamental factors to sustain prices. Chartists said both GOLD and SILVER were consolidating above recent lows but forecast renewed weakness near term. Early firmness in Europe was attributed to the overnight rise in the Nikkei index and the unrest in South Africa after the weekend slaying of Communist Party leader Chris Hani. But these factors were played down later as New York opened mixed.

Compiled from Reuters

US United States of America P3339 Primary Nonferrous Metals, NEC P3331 Primary Copper P6231 Security and Commodity Exchanges COSTS Commodity prices P3339 P3331 P6231 The Financial Times London Page 32 214
World Commodities Prices: Jute and Cotton Publication 930414FT Processed by FT 930414

JUTE

C and F Dundee; BTC USDollars 345, BWC USDollars 370, BTD USDollars 315, BWD USDollars 335. C and F Antwerp; BTC USDollars 330, BWC USDollars 330, BTD USDollars 305, BWD USDollars 305.

COTTON

LIVERPOOL - Spot and shipment sales amounted to 88 tonnes for the week ended 9 April, against 294 tonnes in the previous week. subdued offtake did not bring many operations. support was forthcoming in certain specialist styles notably in the Russian range.

US United States of America P0139 Field Crops Ex Cash Grains, NEC P6231 Security and Commodity Exchanges COSTS Commodity prices P0139 P6231 The Financial Times London Page 32 115
Government Bonds: Hopes of lower interest rates lift European paper Publication 930414FT Processed by FT 930414 By PATRICK HARVERSON and SARA WEBB NEW YORK, LONDON

HOPES of lower interest rates lifted the main European government bond markets yesterday, with the recent strong performance of the US Treasury bond market providing an additional boost.

The Bank of France lowered one of its key interest rates yesterday morning, and dealers said many participants in the bond markets expect to see a further easing by the Bundesbank at this week's repo.

French government bonds closed higher on hopes that money market rates would continue to decline in the near future, following the decision by the Bank of France to cut its ceiling rate - the five to 10-day rate - from 12 per cent to 10 per cent. The central bank held its intervention rate at 9.10 per cent.

The cut in the ceiling rate had been widely expected, but the French bond market took further encouragement from Mr Edmond Alphandery, the economy minister, who said he expected French interest rates to continue to fall over the next few days.

The June futures contract ended up 0.32 at 118.22 after a high of 118.36, while the yield on the 10-year benchmark bond ended at 7.09 per cent against 7.14 per cent.

AFTER posting early gains on news of unexpectedly weak retail sales, US Treasury prices lost ground following a disappointing seven-year note auction.

In late trading, the benchmark 30-year government bond was up 3/16 at 104 3/8 , well below its highs for the day, and yielding 6.778 per cent. At the short end of the market, the two-year note was slightly firmer, up 1/16 at 100 5/32 , to yield 3.774 per cent.

Prices gained ground in early trading after the Commerce department announced that retail sales fell 1.0 per cent in March, and declined 1.2 per cent if car sales were excluded. The market had been expecting March sales to be flat, and the data was initially viewed as evidence that economic activity may be slowing down. Analysts pointed out, however, that the severe storms in March may have been behind the drop in sales.

The market dropped back from its morning highs, however, after the auction of Dollars 9.75bn of seven-year notes met with poor demand. The ratio of bids tendered to bids accepted was unusually low at 1.93-to-1.

GERMAN government bond prices gained about a quarter of a point on hopes that the Bundesbank would lower its repo rate from last week's 8.13 per cent to perhaps between 8.05 to 8.10 per cent at this week's repo.

Dealers pointed out that the move by the Bank of France - coupled with the pressure on the Spanish currency - could encourage the Bundesbank to lower German interest rates.

The Liffe bund futures contract opened at 96.40 and hit a high of 96.57 before trading at 96.48 by late afternoon.

SPANISH government bond prices, which had fallen back very sharply on Monday in the domestic market on political uncertainty, regained some of their losses yesterday but still ended the session down from their pre-Easter levels.

Monday's sharp fall was triggered by the prime minister's decision to call an early general election - on June 6 - leading to worries that the peseta may come under pressure and then be devalued.

'The early election heightens the uncertainty and the devaluation risk has been increased,' said Mr Steve Major, bond analyst at Credit Lyonnais.

Yesterday, the peseta came under pressure in the foreign exchange markets, and dealers said they suspected the Bank of Spain had intervened in order to support the Spanish currency.

Traders noted that there had been heavy selling on Monday by domestic investors, many of whom appeared to expect a wave of foreign selling.

However, dealers pointed out that selling by foreigners was not 'particularly heavy' yesterday.

A STRONGER lira and the firm tone in the European government bond markets gave Italian government bond prices a boost yesterday.

On Liffe, the June BTP contact rose 80 basis points to 95.38. The lira rose to around 964 against the D-Mark from 978 on Friday.

UK government bond prices gained between 1/8 and 1/2 a point, taking their cue from the recent firmness of the US bond market, sterling strength, and hopes of lower interest rates across Europe.

JAPANESE government bonds fell back yesterday, responding to the strong stock market rally. The Nikkei stock index ended 858.15 points higher at 20,740.29 as share prices were boosted by news of the government's Y13,200bn fiscal stimulus package.

The bond market opened on a firm note helped by the strength of the yen, which moved to Y112.70 to the dollar before falling back. Bond prices remained relatively stable during the day but fell back towards the end of trading.

FR France, EC US United States of America DE Germany, EC ES Spain, EC IT Italy, EC GB United Kingdom, EC JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy MKTS Market data P9311 The Financial Times London Page 31 843
International Bonds: Sterling sector braced as Japanese units set to raise Pounds 600m Publication 930414FT Processed by FT 930414 By TRACY CORRIGAN

THE STERLING market braced itself yesterday for a further spate of activity, amid expectations that two Japanese power companies are preparing to raise about Pounds 600m in sterling Eurobonds today.

Swap spreads in the sterling market have widened further in recent days, creating fresh arbitrage opportunities for borrowers.

Tokyo Electric Power Company (Tepco), the largest of the Japanese power companies, has mandated Credit Suisse First Boston to arrange a Pounds 300m five-year issue, which CSFB plans to launch today. The proceeds are expected to be swapped into yen via floating-rate sterling.

With five-year swap spreads at about 50 basis points above Libor, the borrower is expected to achieve a funding level of around 15 basis points below the London interbank offered rate (Libor), assuming a launch spread of about 35 basis points over the five-year gilt yield.

Kansai Electric Power is also believed to be preparing a Pounds 300 five-year deal via SG Warburg, but the timing of this deal is more uncertain. Officials at SG Warburg declined to comment.

After record volume in the first quarter, the sterling sector is suffering from some overhang of paper, despite strong demand. In particular, there has been a surplus of five-year paper.

However, further issues are expected to be concentrated at this area of the yield curve, because swap opportunities are most attractive over a five-year term.

Seven-year swap spreads are around 35 basis points and 10-year swap spreads are currently about 25 basis points, compared with five-year swap spreads of 50 basis points.

Yesterday, Deutsche Bank Finance added a further Pounds 100m tranche to its outstanding Pounds 200m issue launched in February. The bonds were priced to yield 37 basis points over the five-year gilt yield, a pick up over the current spread of 32 basis points for the outstanding paper.

In the French franc market, Alcatel added a further FF1bn to its FF2bn five-year deal launched earlier this month via Societe Generale. Firm demand was encouraged by expectations of further cuts in French interest rates.

In the Canadian dollar market, Toyota Credit Canada and the City of Winnipeg both tapped the market, with deals aimed at continental retail investors.

The City of Winnipeg launched a CDollars 125m 10-year issue of 8 1/2 per cent bonds via Wood Gundy. The deal was priced to yield 93 basis points over the comparable Canadian government bond.

Toyota's CDollars 150m issue of five-year bonds, via Hambros Bank, was priced to yield 48 basis points over the curve.

GB United Kingdom, EC FR France, EC CA Canada P6211 Security Brokers and Dealers MKTS Market data P6211 The Financial Times London Page 31 458
International Capital Markets: Moody's rating for Chinese issue Publication 930414FT Processed by FT 930414 By RICHARD WATERS

THE first Chinese bond issue planned for the Euromarket by an entity not owned by the state, a Dollars 150m floating-rate note offer from Guangdong International Trust and Investment Corporation, was yesterday given a Baa1 credit rating by Moody's, the US agency, writes Richard Waters.

The corporation is owned by the provincial government of Guangdong, China's fastest-growing region, and has been given the same rating as that accorded the People's Republic.

The province's economy grew by 14 per cent in real terms in 1992, and its exports by 32 per cent, Moody's said. Foreign debt, it added, 'represents a relatively small burden against quickly rising external revenues'.

Guangdong International Trust and Investment Corp CN China, Asia P9311 Finance, Taxation, and Monetary Policy P6722 Management Investment, Open-End CMMT Comment & Analysis P9311 P6722 The Financial Times London Page 31 155
International Capital Markets: Bankers warn over Brazil 'Brady bonds' Publication 930414FT Processed by FT 930414 By RICHARD WATERS

BRAZIL'S bank creditors will have to change their choice of so-called 'Brady bonds' to be issued by the country if they are to reach final agreement on a debt reduction deal, bankers claimed yesterday.

It emerged earlier this week that bank creditors have asked for 60 per cent of their loans to be converted into fixed-rate 'par bonds', with only 18 per cent in the form of floating-rate 'discount bonds'.

Brazil has indicated that it wants each class of bond to comprise around 40 per cent of the final deal, with other types of debt making up the rest.

The banks' preference for par bonds puts Brazil in the same position as Argentina last year, which also had to persuade banks to accept fewer fixed-rate bonds than they had requested. After tense negotiations, the Argentine Brady-style debt reduction deal was finally completed on April 7.

The preference for par bonds has been prompted by the continuing rise in the US Treasuries market. The 30-year bonds, which are repaid over an extended period, carry a fixed coupon of 4 per cent in the first year, rising to 6 per cent after the sixth year, with the principal fully collateralised by US zero-coupon bonds.

Discount bonds, by comparison, pay a floating rate, and carry a 35 per cent reduction from face value. The discount, and the better collateral on the par bonds, explains the banks' choice so far, according to one banker in London.

Analysts of the secondary market for lesser developed country debt said that banks would have to accept a higher proportion of discount bond for the deal to go ahead. Mr Arthur Ryan, president of Chase Manhattan, said: 'We and the banking committee have submitted what we would like to do, but an agreement has to be based on what is possible to do.'

BR Brazil, South America P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 31 343
International Capital Markets: Bank of England sets date for Ecu500m notes tender Publication 930414FT Processed by FT 930414 By TRACY CORRIGAN

THE Bank of England has set its Ecu500m tender of three-year notes for April 20, providing some vital liquidity to a market which has been starved of paper in recent months, writes Tracy Corrigan.

It is the second T-note tender by the Bank of England, following its Ecu1.2bn tender in February, since the collapse of the Ecu market forced the T-note programme to be put on hold last autumn.

But prospects for further supply in the Ecu market remain rather grim. Only the UK and France among European sovereign borrowers are showing substantial commitment to the market through regular programmes.

But France has already raised 45 per cent of this year's Ecu financing (which accounts for 15 per cent of its total funding), and the only other European sovereign borrower to tap the market so far this year was Finland, with an opportunistic Ecu500m deal in February. Otherwise, the market has had to rely on agency funding.

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy GOVT Government News P9311 The Financial Times London Page 31 197
International Company News: Westpac sells large part of US loan portfolio Publication 930414FT Processed by FT 930414 By KEVIN BROWN

WESTPAC Banking Corporation, the Australian bank, yesterday announced the sale of a large part of its US loan portfolio to Toronto-Dominion Bank of Canada in a further step towards its planned withdrawal from large-scale international operations.

Westpac said Toronto-Dominion would assume up to USDollars 5.5bn in credit commitments, representing approximately USDollars 3bn of risk-adjusted loans to more than 100 US corporations.

The sale, which is at book value, follows Westpac's decision to reduce its corporate lending risk assets by ADollars 10bn (USDollars 7bn) over the next three years as part of a restructuring plan under which it will refocus on Australian business.

Mr Robert Joss, managing director, said the sale of the loans was 'tangible evidence' that Westpac was achieving the goals set out in its recovery programme.

Mr Joss said the deal would enable Westpac's Americas division to focus on corporate customers doing business in Australia and New Zealand, where Westpac is the second-biggest trading bank. Westpac has already scaled back its North American operations.

Westpac Banking Corp Toronto-Dominion Bank AU Australia CA Canada P6081 Foreign Banking and Branches and Agencies COMP Company News P6081 The Financial Times London Page 30 212
International Company News: Riady family returns to its ancestral lands - Growth is taking the Lippo group back to China Publication 930414FT Processed by FT 930414 By SIMON HOLBERTON and WILLIAM KEELING

ONE of the most striking phenomena of Asian business in the past decade has been the appearance on Hong Kong's corporate scene of expatriate Chinese businessmen from the rest of south-east Asia.

Hong Kong has become the staging point for these 'overseas Chinese' who want to spread their asset bases wider than their adopted countries. This includes investment in China, land of their ancestors.

There is no better example of this than the Lippo group of Indonesia. Controlled by the Riady family through a series of private trusts, it spans banking in Indonesia; banking, travel and property development in Hong Kong; large-scale infrastructure and hotel development in China; and banking, property and diversified investment in the US.

In Indonesia, it controls seven listed companies, while in Hong Kong it controls six listed companies through its flagship Lippo Limited. The group has no holding company - a plan to consolidate group assets has been postponed indefinitely - but contains many private subsidiaries linked to its listed companies.

Lippo executives in Jakarta say the group is capitalised at USDollars 2.5bn - split equally between Indonesia and the rest. Group banking assets total USDollars 3.2bn, divided between Indonesia with 70 per cent and other countries with 30 per cent. Non-banking assets total USDollars 1.5bn.

But the lack of a formal corporate structure concerns some brokers, who want to know more about the flows within the group. 'I can't guarantee that, by buying into a traded Lippo company, I will share in the group's success,' says one Jakarta-based analyst. 'The family may be keeping the most lucrative investments in private hands.'

As with many Chinese companies, Lippo is dominated by one family. In Indonesia, they are known by their surname Riady; in Hong Kong and Fujian, their home province in China, they are known as the Li family. Mr Mochtar Riady, the family's scion, is in overall control and concentrates on the family's considerable Indonesian investments. His sons - James, 36, and Stephen, 32 - run operations in the US and Hong Kong respectively.

Networking, a key characteristic of Chinese business practice, has rewarded the family. Mr Mochtar Riady, his wife and two sons, where invited by Mr Bill Clinton, US president, to attend his inauguration in January. The connection with the Clintons goes back to the early 1980s when the Riadys bought into Worthen Bank of Little Rock, Arkansas. They sold it in 1985.

Their Asian contacts are less high-profile but still powerful. In Hong Kong, the Riadys are allied to Mr Li Ka-Shing, one of the colony's richest men, and China Resources, a leading Beijing company there. Mr Li owns 10 per cent of Lippo Limited and China Resources 5 per cent.

The Singapore-Malaysian Hong Leong group is an important partner, as is C. Itoh, the big Japanese trading house. Both own stakes in Lippo International, a private investment company, which also owns 8.2 per cent of Lippo Limited. Lippo International's best deal to date was the purchase in 1990 of Lippo Sun Plaza in Kowloon for HKDollars 900m (USDollars 116m) and its sale, a year later, for HKDollars 2bn.

The family's connections in Indonesia are also impressive. Mr Mochtar Riady is a former executive of Bank Central Asia (BCA), Indonesia's largest private bank and a subsidiary of the Salim Group led by Mr Liem Sioe Liong, reputedly the country's richest man. Bankers say Mr Riady was largely responsible for the growth of BCA in the 1970s and the early 1980s; Mr Liong was involved in the initial financing of some Lippo group activities.

In Indonesia and Hong Kong, Lippo has grown rapidly. When Lippo Bank in Indonesia was listed in 1988, it had 28 branches. Today it has about 200. Total assets rose to Rp3,818bn (Dollars 1,84bn) last year, from Rp2.684nn in 1990. But the rate of growth has made some analysts wary. They estimate branch managers' average experience at only four years and say the bank may be poorly positioned to cope with sector-wide problems of non-performing loans.

The group is also a large property developer in Indonesia. It is lead-financing two large property developments in Jakarta - Lippo City and Lippo Village - with a planned investment of USDollars 1.5bn over the next five years.

In Hong Kong, the first big acquisition for the family was the purchase in November 1984 of Hong Kong Chinese Bank (HKCB) from Overseas Trust Bank for HKDollars 337m. Worthen Bank was the vehicle for the transaction, with the Riadys, Mr Jack Stephens, a wealthy US financier, and Mr Liong putting up the cash.

From that beginning, the family's assets in Hong Kong have grown to exceed USDollars 1bn. HKCB was refloated on the colony's stock exchange last year, raising more than HKDollars 700m for the Riadys; the family controls the bank through a 60 per cent stake held by Lippo Limited. Lippo also controls EIE and Asia Securities, both property investment companies, Morning Star, a travel agency, Hong Kong Building and Loan Agency, a company providing home finance, and Lippo Asia, a merchant bank.

Despite the property and travel assets, the quality of which is variable, the group's focus is banking-related services, with a strong orientation towards China. Mr Stephen Riady, the family member who heads Lippo in Hong Kong, goes as far as to describe the group as a provider of merchant banking services.

This is especially the case with Lippo's development plans in Fujian province, on China's south coast. Mr Mochtar Riady's grandfather immigrated to Indonesia from Putian, a Fujian town.

Lippo in Hong Kong is planning developments in Fujian, including a 2,400MW power station, hotels, commercial property, and port and airport construction. In most, it will act as arranger of finance and technical expertise, while taking between a 10 per cent to 20 per cent interest in the assets.

'The power station is a project we like very much,' says Mr Stephen Riady. 'Infrastructure is a good business to be in. There are not many people involved, so competition is limited, and the buyer is the government, not the public. Fujian Electric guarantees us a minimum take-up and guarantees us a minimum yield. We will take 20 to 30 per cent of the power station.'

The port, at Meizhou Bay - one of five coastal ports the Chinese government has selected for development - will be upgraded to take a coal loader for the power station. If direct links with Taiwan come, as many expect, Lippo plans to upgrade it for containerisation.

The group also has monopoly rights to develop Meizhou island, which houses a deity of significance to fishermen and Fujianese. Visitors from Taiwan to the island's shrine totalled about 500,000 last year.

Lippo plans three hotels, a golf course, and residential and commercial developments on the island. Says Mr Riady: 'We do the master plan and find investors, that's our strength.'

Lippo Group ID Indonesia, Asia P6081 Foreign Banking and Branches and Agencies P4725 Tour Operators P6552 Subdividers and Developers, Ex Cemeteries P7011 Hotels and Motels P6799 Investors, NEC CMMT Comment & Analysis P6081 P4725 P6552 P7011 P6799 The Financial Times London Page 30 1218
International Company News: Toyota plans office efficiency programme Publication 930414FT Processed by FT 930414 By MICHIYO NAKAMOTO and EMIKO TERAZONO TOKYO

TOYOTA Motor, Japan's largest vehicle manufacturer, is seeking to raise the efficiency of its office staff by 30 per cent. The company is to set up a committee to consider how to restructure operations to do so.

Toyota expects to achieve efficiency improvements of 10 per cent by reducing working hours and by a further 20 per cent by devoting office workers' time to new businesses.

The move comes as the Japan Automobile Manufacturers' Association (JAMA) is considering applying to the ministry of labour to be designated an industry eligible for employment subsidies. The funds would be used to transfer employees to subsidiaries and re-train employees for new jobs.

One condition for eligibility is that production should fall in three consecutive months by 5 per cent year-on-year. In December, motor industry production was down by 9.7 per cent, in January by 13.5 per cent and in February by 10.2 per cent. However, new car sales in Japan rose in March for the first time in 14 months. But sales cannot be directly linked to production, JAMA said.

Fujisawa Pharmaceutical, a leading Japanese drug company, has lowered its forecast net profits for the year to the end of March due to heavy losses at its US subsidiary, writes Emiko Terazono in Tokyo.

The company said non-consolidated after-tax profits for the 12 months would plunge 78.3 per cent to Y1.3bn (Dollars 11m), instead of the initial forecast of Y6.5bn announced in November.

Fujisawa expects an extraordinary loss of Y6.5bn, due to appraisal losses on its stake in Fujisawa USA, which suffered net losses of Dollars 72m in the year to December 1992.

But, owing to brisk domestic sales, the company upgraded non-consolidated sales and pre-tax earnings projections.

Toyota Motor Corp Fujisawa Pharmaceutical JP Japan, Asia P3711 Motor Vehicles and Car Bodies P2834 Pharmaceutical Preparations PEOP Labour MKTS Production COMP Company News P3711 P2834 The Financial Times London Page 30 338
International Company News: Unions in move to block Black's Fairfax ambition Publication 930414FT Processed by FT 930414 By KEVIN BROWN SYDNEY

AUSTRALIA'S media unions yesterday sought an urgent meeting with Mr John Dawkins, the federal treasurer (finance minister) in a bid to block Mr Conrad Black's attempt to increase his stake in the John Fairfax newspaper group.

The request is likely to reinvigorate opposition to Mr Black, the Canadian proprietor of the Telegraph newspaper group of the UK, who is seeking to increase his stake in Fairfax from 15 per cent to 25 per cent.

In an unusual move, the Media, Entertainment and Arts Alliance and the Printing and Kindred Industries Union sent a joint statement to Mr Dawkins urging him to withhold approval for Mr Black's request.

'We are writing to express our extreme concern that the federal government is likely to approve the application by interests associated with Conrad Black to increase their holding,' the unions said.

'As representatives of people working in the newspaper industry, we do not believe that the national interest would be served by allowing the Black interests to increase their holding.'

Government officials have signalled recently that Mr Dawkins was likely to approve Mr Black's application, which is required under foreign investment regulations on media investments.

Opposition from backbench government MPs has softened in recent weeks, partly because a number of prominent critics of Mr Black were promoted to ministerial positions in a government reshuffle.

Fairfax, which publishes the Sydney Morning Herald, the (Melbourne) Age and the Australian Financial Review, was sold to a consortium led by the Telegraph in 1991.

Mr Kerry Packer, the billionaire Australian publisher, revealed last week that he held a stake of more than 10 per cent in Fairfax, prompting speculation that he would launch a takeover bid shortly.

Under Australia's cross-media ownership laws, Mr Packer would have to reduce his 48 per cent stake in the Channel Nine television network to less than 15 per cent before acquiring more than 14.99 per cent of Fairfax.

John Fairfax Holdings Telegraph AU Australia GB United Kingdom, EC P2711 Newspapers COMP Shareholding P2711 The Financial Times London Page 30 359
International Company News: Dust settles after turmoil at Placer Dome - The mining group's new chief will focus on gold and copper Publication 930414FT Processed by FT 930414 By KENNETH GOODING

SCARS are only just beginning to heal at Placer Dome, Canada's biggest gold mining group, after a boardroom battle that kept the Canadian financial community enthralled for months.

It resulted in the departure of several long-serving directors - including Mr Tony Petrina, formerly the president and chief executive, and Mr Peter Crossgrove, a vice-chairman who for some time seemed likely to succeed him.

There is also an injection of new blood. After a worldwide search, Mr John Willson has been recruited from a smaller gold company, Pegasus, to be chief executive.

The turmoil at Placer started in February last year when the group announced write-downs totalling CDollars 328m (USDollars 260.7m) after tax - including the entire CDollars 266m investment in the Mount Milligan copper-gold venture in British Columbia, acquired in 1990. This seems to have been a catalyst which brought simmering personal conflicts to the boil.

Analysts had warned of trouble ahead when Placer was formed in 1987 by a three-way merger between Placer Development, Dome Mines and Campbell Red Lake Mines.

The merger was welcomed as bringing together some of the best gold mining properties in North America and the South Pacific. Nevertheless, some wondered why Placer, a fast-growing, Vancouver-based group with mines in Australia and Papua New Guinea, would want to join with two rather conservatively-managed Toronto companies.

Placer, it seemed, believed it was a takeover target. Among those mentioned as potential aggressors was Mr Bob Needham, who once headed Placer's Australian operations and is today advising the government of Papua New Guinea on minerals policies. Mr Needham and New Zealand entrepreneur Mr Bruce Judge were thought to be stalking Placer.

The friendly Canadian merger went ahead, but London brokers in particular raised doubts about the wisdom of running three such different companies simultaneously from Toronto and Vancouver.

Nevertheless, the new Placer group seemed to be coping even though, as Mr Crossgrove said recently, 'it remained an unsettled mix of two diverse corporate cultures'.

Then came the Mount Milligan writedowns, coupled with the news that CDollars 50m of the CDollars 106m carrying value of Placer's investment in the Eskay Creek gold project in British Columbia, another interest acquired in 1990, would be written down.

Placer said a mine at Mount Milligan would produce a positive return but not enough to justify the CDollars 500m to CDollars 600m required to develop it.

At the Placer annual meeting, Mr Petrina told shareholders: 'Let me be blunt. We should have taken more time to develop more information on which to make the decision (about Mount Milligan). We relied too heavily on analysis that did not go far enough. It must not happen again.'

The Placer board obviously felt the same way. Last May, Mr Crossgrove, 55, a board member and president of Itco Properties, was appointed to a new position of vice-chairman and sent from Toronto to Vancouver, where Mr Petrina had his base, to head the company's mergers and acquisition activities. Placer said he would 'complement the strengths of the president, Tony Petrina'.

Instead, according to insiders, it led to a row about executive responsibility because Mr Crossgrove was to report directly to the board, not to Mr Petrina. This led to the resignation of Mr Petrina, seen by the investment community as a skilled mine operator, who had been 32 years with Placer and its predecessor. He announced on June 14 that he would step down in September, but would stay on the board.

Mr Crossgrove stepped in as acting chief executive and quickly gained a reputation as the man most likely to repair the group's reputation. He seemed to be a front-runner to succeed Mr Petrina, or perhaps take over when the chairman, Mr Fraser Fell, 64, retired.

Mr Crossgrove was soon claiming there had been a change of culture at the company, a change that emphasised teamwork and shareholder value. He said he had redefined Placer's growth strategy and ended the private fiefdoms within the group that caused managers to work at cross-purposes. Growing in confidence, he criticised Mr Petrina's management style during a newspaper interview in a way that upset many other members of the Placer board.

'This left him at odds with so many people it was obvious it would be best for him to leave,' one insider recalls.

So Placer turned to Mr Willson, a British-born, 52-year-old mining engineer, who in three years as president of Pegasus was credited with turning the low-cost gold producer into a stock market high-flyer.

He took over at Placer in January as chief executive of a group with interests in 17 gold mines in five countries, USDollars 500m of cash in the bank, virtually no debt, and a market value of more than USDollars 2bn.

Placer last year produced a record 2.3m troy ounces of gold and generated net profit of USDollars 111m on revenues of Dollars 1.1bn. It reported that production costs had been cut by 17 per cent to Dollars 186 an ounce, making it one of the lowest-cost producers among the big gold groups. In spite of the increase in gold output, Placer's reserves rose from 16.8m to 18.4m ounces.

The group also has a new non-executive chairman based in Toronto: Mr Robert Franklin, 46, president of Signalta Capital Corporation and a director of Placer and, previously, Campbell Red Lake.

Analysts suggest the Placer board has been envious of the high market rating given by investors to its rival Canadian gold group, American Barrick Resources, and will want Mr Willson to ensure the share price is maximised.

This calls into question Placer's recent strategic move into base metals mining. How far should diversification go?

The most important step so far has been its purchase of half the Zaldivar copper deposit in Chile for Dollars 100m (Outokumpu, the state-owned Finnish group, owns the rest). Placer will spend about Dollars 400m over four years to develop the project, which is expected to have a life of 50 years. It is scheduled to produce about 200m lbs of copper annually at a cost of less than 50 cents a lb.

Mr Willson says Placer is engaged in a 'pragmatic, intelligent, internal debate' to determine the group's approach to copper investment. 'With gold prices drifting down we must be in a position to show good earnings from elsewhere. Copper and gold is fine. But spread the company's interests too widely and you are in danger of losing the high value the market puts on gold companies. If you want to be the best you must focus, concentrate, and devote most of your energies to your focus.'

And what of the Mount Milligan project that proved such a catalyst for change at Placer? Mr Willson says: 'The solution to Mount Milligan is higher copper and gold prices. It is getting low priority but we are still working on it.'

Placer Dome Inc CA Canada P1041 Gold Ores CMMT Comment & Analysis MGMT Management & Marketing P1041 The Financial Times London Page 29 1193
International Company News: HK group in Dollars 54m Chicago property deal Publication 930414FT Processed by FT 930414 By SIMON DAVIES HONG KONG

HARBOUR Centre Development, the hotel investment arm of Hong Kong's Wharf (Holdings) group, has bought the City Place hotel and office tower in Chicago from the First National Bank of Chicago for USDollars 54m (Dollars HK419m).

The deal is Harbour Centre's third US hotel investment since December 1991. It has also acquired the Inn on the Park in Houston and the Marriott Hotel in Dallas for a total of Dollars HK668m.

Mr Edward Cheng, Harbour Centre managing director, said: 'It is our strategy to acquire key hotels in strategic cities in a depressed market with a view to longer-term asset appreciation.'

The company is estimated to have more than HKDollars 250m in net cash, following a rights issue last year, and will fund the acquisition from internal resources. Mr Cheng said the group was interested in further hotel purchases.

City Place is managed by Hyatt, but the purchase is conditional on the termination of this contract. The management will then be taken over by Wharf's own Omni hotel management chain.

The Wharf group has taken a gamble on the of the US hotel market since the 1988 purchase of the Omni chain from Aer Lingus for USDollars 135m. The market has been depressed and Omni's US network of 40 hotels lost money last year.

Harbour Centre Development HK Hong Kong, Asia US United States of America P6719 Holding Companies, NEC P7011 Hotels and Motels COMP Company News P6719 P7011 The Financial Times London Page 29 267
International Company News: Profits at Nalco surge to Rs1.2bn Publication 930414FT Processed by FT 930414 By REUTER BHUBANESWAR

NATIONAL Aluminium Company (Nalco), India's largest aluminium producer, yesterday reported net profits more than doubled to Rs1.2bn (Dollars 38m) in the 12 months to the end of March, from Rs580m the year before, Reuter reports from Bhubaneswar.

Turnover rose to Rs11.68bn from Rs9.74bn.

National Aluminium IN India, Asia P3334 Primary Aluminum FIN Annual report P3334 The Financial Times London Page 29 79
International Company News: General Electric climbs 10% in quarter Publication 930414FT Processed by FT 930414 By NIKKI TAIT NEW YORK

GENERAL Electric of the US yesterday reported a 10 per cent increase in first-quarter profits to Dollars 1.16bn after tax, helped by strong earnings advances in most divisions other than aircraft engines and technical products and services.

The improvement translated into earnings per share of Dollars 1.36, up by 11 per cent on Dollars 1.23 reported for the first-quarter of 1992. If the discontinued aerospace operations are excluded from the comparisons, after-tax profits from continuing businesses would have risen by 13 per cent, to Dollars 1.08bn.

First-quarter revenues from the continuing interests increased by 3 per cent, to Dollars 12.9bn, year-on-year.

Mr Jack Welch, GE's chairman, said that the earnings growth was 'broad-based as double-digit increases were reported by GE Capital Services, transportation systems, motors, NBC, power systems, appliances and plastics'. The lower profits in the aircraft engines division, which produces Pratt & Whitney engines, 'reflected an increase in product development costs and restructuring costs necessary to meet market conditions', he said.

General Electric US United States of America P3612 Transformers, Ex Electronic P3511 Turbines and Turbine Generator Sets FIN Interim results P3612 P3511 The Financial Times London Page 28 210
International Company News: Union Carbide sells fluids subsidiary Publication 930414FT Processed by FT 930414 By NIKKI TAIT

UNION Carbide, the large US chemicals group, announced yesterday that it was selling its OrganoSilicon subsidiary, which makes fluids and chemicals used in a wide range of industries, to a limited partnership run by Donaldson, Lufkin & Jenerette (DLJ).

The sale is valued at about Dollars 300m.

The consideration comprises Dollars 220m in cash, plus Dollars 80m of preferred stock - which is convertible into a 30 per cent voting interest in the silicones company.

Union Carbide, which will realise an unspecified after-tax gain on the deal, said that the transaction effectively concluded the asset sale programme which it announced in December 1991.

OSi had sales last year of around Dollars 350m, and has facilities in Belgium, Brazil, Italy, Korea and Switzerland, as well as in the US.

The company employs around 1,100 people.

DLJ, a New York investment banking operation, is part of the large Equitable insurance group, and the DLJ Merchant Banking Partners - which is making the acquisition - represents a Dollars 1bn acquisition fund.

Union Carbide OrganoSilicon Donaldson Lufkin and Jenerette US United States of America P2899 Chemical Preparations, NEC COMP Disposals COMP Mergers & acquisitions P2899 The Financial Times London Page 28 214
International Company News: FASB rule impacts on bondholders Publication 930414FT Processed by FT 930414 By PATRICK HARVERSON NEW YORK

THE Financial Accounting Standards Board, the US accountancy standards group, voted yesterday to approve a rule that will force US financial institutions to carry more of their debt and equity securities at market value.

The ruling, which will come into effect next year, will have a particularly big effect on banks and insurance companies, which have large holdings of bonds. The changes will make it harder for them to categorise their debt securities as long-term investments held for the duration of their maturity, and thus valuable at cost.

Instead, banks and insurers will have to categorise more of these bonds as 'available for sale', which means they will be marked-to-market, or valued according to their current price in the market.

The FASB decision immediately came under fire from banking and insurance groups, which have long argued that current value accounting would introduce unwelcome volatility into their earnings.

They have also argued that having to mark-to-market more of their financial assets may force them to change their investment philosophies by switching more of their assets out of long-term securities and into short-term securities.

The American Bankers Association, which expressed disappointment yesterday at the FASB vote, called current value accounting 'a bad idea whose time should not have come'. The ABA said the new rule would 'change the way banks conduct their business and the fundamental role they play in the economy'.

The FASB was also attacked for changing its rules on the accounting of assets, but not on the accounting of liabilities. In a statement, the Metropolitan Life insurance group said: 'Marking only assets to market without marking the corresponding liabilities to market is not sound accounting and reporting practice. We believe it makes little sense and is not healthy for long-term lenders and borrowers in the capital markets.'

A spokeswoman for the FASB said the board voted by 5-2 to approve the rule after one of its seven members, who had previously held out against supporting current value accounting, changed his mind.

The rule will be formally issued in June.

Sundstrand Rockwell International US United States of America P6081 Foreign Banking and Branches and Agencies P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance P6719 Holding Companies, NEC P3812 Search and Navigation Equipment NEWS General News COMP Disposals P6081 P6311 P6331 P6719 P3812 The Financial Times London Page 28 408
International Company News: Microsoft links with Compaq Publication 930414FT Processed by FT 930414 By LOUISE KEHOE SAN FRANCISCO

COMPAQ Computer and Microsoft announced an agreement to work together to make personal computers easier to use and to advance the development of new products and markets.

The two companies have long collaborated on PC hardware and software. However, the new agreement is not exclusive, so both companies will also continue to work with others in the PC industry.

Compaq Computer Corp Microsoft Corp US United States of America P3571 Electronic Computers COMP Strategic links & Joint venture P3571 The Financial Times London Page 28 103
International Company News: Top ratings help CBS turnround Publication 930414FT Processed by FT 930414 By KAREN ZAGOR NEW YORK

CBS, which owns one of the three US television networks, yesterday posted a strong improvement in underlying first-quarter earnings, helped by a better business climate and the television network's ability to command higher advertising rates as it gains market share.

Net income was Dollars 54.2m, or Dollars 3.50, compared with a net loss of Dollars 64m, or Dollars 4.18, a year ago.

Earnings benefited from a pre-tax gain of Dollars 19.2m on the sale of some marketable securities. Sales fell 19 per cent to Dollars 878.9m from Dollars 1.08bn.

A year ago, CBS took a non-cash post-tax charge of Dollars 81.5m, or Dollars 5.32, for the adoption of new accounting standards.

On Wall Street, shares in CBS closed up Dollars 7 1/8 at a 52-week high of Dollars 237 1/8 . The New York Times Company, which owns 31 regional newspapers and a 50 per cent stake in the International Herald Tribune, yesterday posted net income of Dollars 10.9m, or 14 cents a share, on revenues of Dollars 454.5m for the 1993 first quarter. A year earlier, the company suffered a net loss of Dollars 20m, or 26 cents, on revenues of Dollars 435.9m.

The results were distorted by a charge of Dollars 33.4m, or 43 cents, for accounting changes.

CBS Inc US United States of America P4833 Television Broadcasting Stations FIN Interim results P4833 The Financial Times London Page 28 250
International Company News: Coca-Cola turns in 18% advance Publication 930414FT Processed by FT 930414 By NIKKI TAIT

COCA-COLA, the Atlanta-based soft drinks group, yesterday unveiled a 21 per cent improvement in earnings per share during the first quarter of 1993, and an 18 per cent advance in profits, before accounting-related charges, to Dollars 454m after tax.

Earnings per share advanced to 35 cents, compared with 29 cents.

Sales in the three-month period were also up by around 10 per cent, at Dollars 3.05bn.

Mr Roberto Goizueta, chairman, suggested the first-quarter results 'support our very bullish outlook for continued strong performance in the remainder of the year'.

Coca-Cola shares - which, like others in the consumer products sector, have been hit by fears of brand erosion in response to the recent Philip Morris/Marlboro announcement of price cuts - slipped by Dollars 1/4 to Dollars 39 1/8 at the close.

The company said worldwide gallon shipments of soft drinks, concentrates and syrups increased by 6 per cent in the first quarter. International concentrate shipments were up by 7 per cent, while US shipments rose by 3 per cent.

Meanwhile, unit case volume rose by 4 per cent, with international volume up by 5 per cent and US volume up by 3 per cent.

At the operating level, the volume increases, coupled with margin improvement, led to an 18 per cent advance in profits, to Dollars 677m.

The earnings-per-share advances also reflected a share repurchasing programme: Coca-Cola bought in 2.5m shares in the first quarter, and has bought in another 1m in the first eight days of the second quarter.

The company aims to acquire up to 100m shares between now and 2000.

Coca-Cola Inc US United States of America P2086 Bottled and Canned Soft Drinks FIN Interim results P2086 The Financial Times London Page 28 303
International Company News: Boise Cascade reduces losses Publication 930414FT Processed by FT 930414 By NIKKI TAIT and KAREN ZAGOR

BOISE Cascade, the Idaho-based paper, office and building products company, yesterday reported a reduced Dollars 12.1m loss in the first three months of 1993.

By comparison, in the first quarter of 1992, Boise suffered a loss of Dollars 43.3m before the cumulative effect of accounting-related changes.

Sales were slightly higher at Dollars 984m, compared with Dollars 953.9m in the same period of last year.

The company said that the profits figure reflected continued weakness in the paper business, which was partially offset by a strong performance in the office and building products divisions.

In the paper division, Boise said losses were below those of the first quarter of 1992 but higher than the deficit recorded in the final quarter last year.

Prices of the company's mix of pulp and paper grades continued to decline on average in the latest three-month period, and reached the lowest level seen in the current industry cycle.

In the office products area, sales volume was flat year-on-year, but profitability improved due to reduced costs.

Profits from the building products division also climbed sharply, due to an improvement in demand and a shrinking supply of harvestable timber in the Pacific north-west, which drove lumber and hardwood prices higher.

On Wall Street, Boise shares were Dollars 3/8 higher at Dollars 25 1/2 at the close.

International Paper, the large US forest products group, yesterday reported first-quarter net earnings of Dollars 64m, or 52 cents a share, on sales of Dollars 3.4bn, writes Karen Zagor.

A year earlier, the company's earnings were muddied by a number of charges which reduced net income to Dollars 52m, or 44 cents.

Stripping out the impact of an accounting change and the costs to retire high interest debt, International Paper earned Dollars 104m, or 87 cents in the first three months of 1992 on sales of Dollars 3.4bn.

Boise Cascade Corp US United States of America P2621 Paper Mills P5112 Stationery and Office Supplies P5031 Lumber, Plywood and Millwork FIN Interim results P2621 P5112 P5031 The Financial Times London Page 28 358
International Company News: Nabisco modifies share scheme Publication 930414FT Processed by FT 930414 By NIKKI TAIT

RJR Nabisco, the large food and cigarettes manufacturer, said yesterday that it would go ahead with its 'targeted stock' scheme - which would create two classes of shares, one pegged to the fortunes of its tobacco division and one to the performance of its food operations - in spite of the cigarette price war begun by Philip Morris, a rival manufacturer, earlier this month.

RJR Nabisco's scheme would be modified in two important respects. First, the group would simply proceed with the sale of 93m RN-Nabisco shares to new investors. These shares would be pegged to the food operations' performance and represented a 25 per cent interest in the food group's equity.

RJR Nabisco would not issue RN-Nabisco shares to existing investors in the company at this stage. Instead, the existing RJR Nabisco shares would be renamed as RN-Reynolds shares once the RN-Nabisco flotation had gone ahead, and Reynolds group would retain the remaining 75 per cent interest in the food group's equity.

This contrasts with the original targeted stock scheme, which envisaged that another 142m RN-Nabisco shares would be issued to existing RJR Nabisco shareholders about six months after the flotation of RN-Nabisco shares.

Secondly, the company would delay declaring any dividends on the renamed RN-Reynolds shares until 'there is a clear assessment of the domestic tobacco operating environment and the company can initiate a dividend policy that is consistent with its capital structure and credit rating targets'.

This group of shares will carry a 'pass-through' dividend of about three cents a share from the third quarter of 1993 onwards, reflecting this stock's retained interest in the dividend-paying food interests.

RJR Nabisco Holdings Inc US United States of America P2111 Cigarettes P2099 Food Preparations, NEC COMP Demerger FIN Share issues P2111 P2099 The Financial Times London Page 28 315
International Company News: Alcoa of Australia ahead by 26% Publication 930414FT Processed by FT 930414 By KEVIN BROWN and ROBERT GIBBENS SYDNEY, MONTREAL

ALCOA of Australia, the aluminium and gold producer, yesterday announced a 26 per cent increase in net profit to ADollars 80.9m (USDollars 57.4m) for the first quarter to the end of March, on turnover up 3.4 per cent to ADollars 505m.

The group, which is jointly owned by Aluminum Company of America and Western Mining Corporation (WMC), the Australian resources group, said it had benefited from a weaker Australian dollar and new refinery capacity at Wagerup.

It said the next instalment of capacity at Wagerup, which will increase capacity by 200,000 tonnes a year to 1.7m tonnes per annum, would be speeded up to come on stream in 1994.

The group declared a fully-franked dividend of ADollars 80m on March 31, representing a return of 19.3 cents a share. It paid fully-franked dividends of ADollars 260m during 1992.

People's Jewellers, the Canadian retail chain in bankruptcy protection, cut its loss by more than half to CDollars 57.6m (USDollars 45.8m), or CDollars 4.72 a share, in the nine months to December 26, writes Robert Gibbens in Montreal. The chain operates 228 stores. Revenues dipped 9 per cent to CDollars 145m.

Alcoa of Australia People's Jewellers AU Australia CA Canada P3334 Primary Aluminum P3339 Primary Nonferrous Metals, NEC P5944 Jewelry Stores FIN Interim results P3334 P3339 P5944 The Financial Times London Page 28 244
International Company News: Top ratings help CBS turnround Publication 930414FT Processed by FT 930414 By KAREN ZAGOR NEW YORK

CBS, which owns one of the three US television networks, yesterday posted a strong improvement in underlying first-quarter earnings, helped by a better business climate and the television network's ability to command higher advertising rates as it gains market share.

Net income in the first three months of 1993 was Dollars 54.2m, or Dollars 3.50, compared with a net loss of Dollars 64m, or Dollars 4.18, a year ago.

During the latest quarter, earnings benefited from a pre-tax gain of Dollars 19.2m on the sale of some marketable securities.

A year ago, CBS took a non-cash post-tax charge of Dollars 81.5m, or Dollars 5.32, for the adoption of new accounting standards.

The absence of the Olympic Games and the Super Bowl from CBS's winter programming resulted in a 19 per cent decline in sales in the quarter to Dollars 878.9m from Dollars 1.08bn. However, the sales gains from the 1992 special event sports broadcasts were largely offset by high rights fees and related production and promotion costs.

CBS television, which languished for many years as the third-rated US network, is starting to benefit from its relatively new-found place at the head of the ratings table.

Mr Laurence Tisch, chairman and chief executive, said: 'CBS has just begun to capitalise both on its status as the nation's top-rated television network and on its efforts to carefully contain costs'.

During the 1993 quarter, the television network benefited from improved unit pricing and operating income in prime time and daytime entertainment and news.

'The network's earnings also benefited from a shift in its programming mix, airing more entertainment and news programmes and fewer special-event sports programmes,' said Mr Tisch.

Advertising in New York and Los Angeles was weak in the 1993 quarter because of sluggish regional economies.

On Wall Street, shares in CBS climbed Dollars 6 7/8 to a 52-week high of Dollars 236 7/8 before the close.

CBS recently agreed to remain headquartered in Manhattan after it was offered about Dollars 37.5m in city and state tax incentives and Dollars 12.2m in energy savings. In exchange, CBS has agreed to invest more than Dollars 300m in building improvements, equipment and new technologies for broadcasting and production.

CBS Inc US United States of America P4833 Television Broadcasting Stations FIN Interim results P4833 The Financial Times London Page 28 404
International Company News: NY Times group back in black with Dollars 10.9m for first quarter Publication 930414FT Processed by FT 930414 By KAREN ZAGOR

THE New York Times Company, which owns 31 regional newspapers and a 50 per cent stake in the International Herald Tribune, yesterday posted net income of Dollars 10.9m, or 14 cents a share, on revenues of Dollars 454.5m for the 1993 first quarter.

The company said a blizzard in March reduced pre-tax earnings by Dollars 3.7m, or 2 cents.

A year earlier, the company suffered a net loss of Dollars 20m, or 26 cents, on revenues of Dollars 435.9m. The results were distorted by a charge of Dollars 33.4m, or 43 cents, for accounting changes.

The 1992 figures also included a pre-tax gain of Dollars 3.1m from the sale of assets and an operating loss of of Dollars 1.7m from a Georgia paper which closed in September.

The New York Times newspaper saw advertising lineage decline 4.8 per cent in the first three months of 1993, reflecting continuing weakness in the region's economy. Advertising lineage for the 31 regional newspapers increased 6.2 per cent in the period, reflecting a rise in advertising inserts. Operating income for the whole newspaper division fell to Dollars 28.6m from Dollars 32.7m.

Excluding the impact of the March snowstorm and a 1992 gain from the sale of real estate, the group's operating profits rose to Dollars 32.3m from Dollars 31.2m.

The magazines division recorded operating profits of Dollars 3.2m, compared with Dollars 1.7m a year ago. Broadcasting and information services posted operating earnings of Dollars 3.6m, against Dollars 2.8m last year.

New York Times US United States of America P2711 Newspapers P2721 Periodicals FIN Interim results P2711 P2721 The Financial Times London Page 28 293
International Company News: Allegheny says sales set to reach two-year high Publication 930414FT Processed by FT 930414 By REUTER

ALLEGHENY Ludlum, the US metals group, said 1993 first-quarter sales were expected to reach their highest level in two-and-a-half years and earnings to be up around 50 per cent over last year, Reuter reports. Mr Robert Bozzone, president, said the strong performance flowed primarily from increased sales, improved productivity and continued tight control of costs.

In the 1992 first quarter, Allegheny Ludlum recorded Dollars 264.4m in sales and earnings of Dollars 11.3m, or 34 cents a share.

Allegheny Ludlum Corp US United States of America P3312 Blast Furnaces and Steel Mills COMP Company News P3312 The Financial Times London Page 28 120
International Company News: Tenneco lifts earnings to Dollars 74m despite lower sales Publication 930414FT Processed by FT 930414 By LAURIE MORSE CHICAGO

TENNECO, the Texas-based diversified industrial company, saw earnings jump in the first quarter, although revenues from all but its natural gas operations were lower than a year ago.

The group reported income from continuing operations at Dollars 74m, or 46 cents per share, compared with Dollars 35m, or 22 cents, in the first quarter of 1992.

Revenues were Dollars 3.25bn, against last year's Dollars 3.21bn.

The company's Case farm and construction equipment division trimmed its quarterly operating loss to Dollars 17m, from last year's Dollars 77m. In spite of the operating improvement, Case's revenues fell 9 per cent to Dollars 814m.

Tenneco said that North American sales of farm and construction equipment improved in the first quarter, but were offset by continuing declines in Europe.

The company's natural gas pipeline operations saw revenues in the quarter rise to Dollars 818m from Dollars 514m a year ago, while income from gas operations rose Dollars 3m to Dollars 121m, from Dollars 118m last year.

Tenneco said the income gain was the result of higher pipeline volumes and the inclusion of results from EnTrade, a gas marketing company acquired in the fourth quarter of 1992.

During the first quarter, Case cut its worldwide production by 19 per cent from the same period last year as part of its effort to control inventories and balance production with demand.

The Newport News Shipbuilding division recorded income of Dollars 55m, up marginally from Dollars 53m last year, in spite of a decline in sales to Dollars 452m, from Dollars 584m last time.

Tenneco's Albright and Wilson chemicals business had flat results in the quarter, with operating income at Dollars 15m. Revenues in the division fell 7 per cent because of recessionary pressures from Europe.

Operating income at the company's Packaging Corporation of America fell to Dollars 37m from Dollars 49m, partly because the European recession weakened worldwide linerboard prices.

Tenneco Inc US United States of America P3523 Farm Machinery and Equipment P4922 Natural Gas Transmission P6719 Holding Companies, NEC FIN Interim results P3523 P4922 P6719 The Financial Times London Page 28 367
International Company News: French retail group plans Cofinoga sale Publication 930414FT Processed by FT 930414 By ALICE RAWSTHORN and KERIN HOPE ATHENS

GALERIES Lafayette, the French retailing group, plans to sell a 49 per cent stake in Cofinoga, its credit and charge card business, to the Cetelem group.

The news of the proposed disposal comes shortly after Galeries Lafayette warned of a poor performance in 1992 due to the cost of servicing the debt on its FFr2.9bn (Dollars 537m) bid for the Nouvelles Galeries retail chain and the need to make steep provisions on its flagship store in New York.

Galeries Lafayette has confirmed that it stayed in the black in 1992 but will only release specific profit figures when its full results are published later this month.

Credit Lyonnais, the French state-controlled banking group, is to increase its holding in Banque Franco-Hellenique de Commerce International et Maritime (BFH), an Athens-based bank, to 75 per cent by acquiring a 25 per cent stake, writes Kerin Hope in Athens.

The French bank has agreed to buy the 25 per cent of BFH from the state-owned National Investment Bank for Industrial Development (Eteva) for an undisclosed sum. Eteva will retain the remaining 25 per cent. Under the terms of the agreement, BFH, with a net worth of about Dr7bn (Dollars 32m), will be expected to seek a listing on the Athens stock exchange within three years.

Galeries Lafayette Cofinoga Cetelem Rhone-Poulenc FR France, EC P5311 Department Stores P6141 Personal Credit Institutions P6719 Holding Companies, NEC P2899 Chemical Preparations, NEC COMP Disposals COMP Mergers & acquisitions COMP Company News P5311 P6141 P6719 P2899 The Financial Times London Page 27 276
International Company News: Salomon debt downgraded by S&P Publication 930414FT Processed by FT 930414 By KAREN ZAGOR NEW YORK

SALOMON, the US securities house, yesterday had about Dollars 8bn of outstanding debt downgraded by Standard & Poors, the US rating agency. The downgrade, which could push up the cost of Salomon's borrowings, reflected the firm's reliance on proprietary trading activity 'which has increased its vulnerability to quarterly earnings volatility,' S&P said.

Salomon's longer-term senior debt rating was cut to Single A minus from single A. Its subordinated debt rating fell to triple B plus from single A minus. Preferred stock received a rating of triple B from triple B plus, and the commercial paper rating was cut to A-2 from A-1.

Mr Donald Howard, chief financial officer said: 'In my view, some rating agencies focus too heavily on the short-term volatility of Salomon's earnings and give inadequate weight to our results measured over longer time-frames and to the exceptional quality and liquidity of our assets.'

Mr Howard said that the volatility of short-term earnings was a result of the firm's practice of valuing its inventory of securities on a mark-to-market basis.

S&P noted that Salomon's expected first-quarter loss was consistent with a pattern of sharp quarterly fluctuations during the last year.

S&P said the company's fixed income distribution business, and its trading and other operations, had a strong earnings capacity and the company's balance sheet was extremely liquid. Furthermore, the predicted first-quarter loss was not expected to have a material impact on the firm's Dollars 4.3bn equity base.

Salomon Inc US United States of America P6211 Security Brokers and Dealers CMMT Comment & Analysis P6211 The Financial Times London Page 27 281
International Company News: Waste Management sees flat term Publication 930414FT Processed by FT 930414 By LAURIE MORSE CHICAGO

WASTE Management, the world's largest rubbish hauler, said that it expected to report flat earnings in the first quarter.

The Oakbrook-Illinois-based company's stock tumbled to a 52-week low this week as investors became disillusioned with the company's growth potential. Waste Management issued the earnings estimates on Tuesday, in response to adverse Wall Street projections on the previous day. It will release official results next week.

In spite of adding more than 400 sales people in North America last year, Waste Management forecast first-quarter earnings of 40 cents per share to 41 cents per share.

This was little changed from last year's 39 cent first-quarter results.

It's publicly-traded subsidiary, Chemical Waste Management, is also anticipating flat results for the quarter, at Dollars 29m or 15 cents per share.

Waste Management Inc US United States of America P4953 Refuse Systems CMMT Comment & Analysis P4953 The Financial Times London Page 27 167
International Company News: Westinghouse posts Dollars 64m profit Publication 930414FT Processed by FT 930414 By NIKKI TAIT NEW YORK

WESTINGHOUSE Electric, the US conglomerate which has encountered serious problems within its financial services division and seen a variety of management changes recently, yesterday posted profits of Dollars 64m after tax in the first quarter.

The figure compares with a net loss of Dollars 246m in the same period of 1992, but this deficit largely reflected accounting-related charges.

Westinghouse said that first-quarter profits and sales from continuing operations were flat year-on-year, at Dollars 64m, compared with Dollars 65m, and Dollars 1.86bn against Dollars 1.85bn, respectively.

Westinghouse's attempts to sort out its financial services division's problems took a step forward last week when the company announced that it would sell most of the commercial property loans held by this unit to a newly-formed partnership, in which Lehman Brothers would be the general partner and Westinghouse would have a 49 per cent interest.

The partnership, in turn, will attempt to offload the properties as quickly as possible.

Yesterday, Westinghouse noted that its financial services unit had also sold other assets, for about Dollars 700m in cash, during the first quarter - proceeds which were in excess of the assets' reserved value.

Coupled with last week's announcement on the commercial property loans, Mr Gary Clark, Westinghouse's acting chief executive, said that this left the company's restructuring plan ahead of schedule. 'We expect to remain ahead of plan throughout the year', he added.

However, Mr Clark added that any improvement in operating results would probably be concentrated in the second half of 1993.

During the first three months, substantially improved sales and profits figures from the power systems business and an advance on the broadcasting side, were offset by declines in the electronics systems division, which primarily makes military equipment, and in the industrial division.

However, Westinghouse shares, which rose modestly on news of the real estate transaction, gained another Dollars 1/8 at Dollars 15 1/4 yesterday morning.

Westinghouse Electric Corp US United States of America P6719 Holding Companies, NEC P3699 Electrical Equipment and Supplies, NEC P6159 Miscellaneous Business Credit Institutions FIN Interim results P6719 P3699 P6159 The Financial Times London Page 27 368
International Company News: Merrill shares lifted by record first quarter Publication 930414FT Processed by FT 930414 By PATRICK HARVERSON NEW YORK

SHARES in Merrill Lynch, the largest securities house in the US, rose sharply yesterday after the company reported record first-quarter profits of Dollars 342m, up 57 per cent from a year earlier.

The results included a one-off pre-tax lease charge of Dollars 103m for offering vacated office space to other companies at Merrill's World Financial Center headquarters in Manhattan.

Merrill's strong performance delighted investors, who bid up the company's stock Dollars 4 7/8 to Dollars 76 3/8 in early trading on the New York stock exchange.

There were revenue records in Merrill's four main business lines - commissions, principal transactions, investment banking and asset management and custodial fees.

This was an indication that the Wall Street earnings juggernaut, powered for the past two years by low domestic interest rates and good demand from investors and corporations for securities broking and underwriting services, is not slowing down.

Revenues at Merrill reached a quarterly record of Dollars 3.96bn. The biggest chunk came from principal transactions, the business of trading securities for clients and for the company, which earned Dollars 755m.

Commission revenues rose 4 per cent to Dollars 714m, surpassing the previous record set in the first quarter of 1987. Investment banking revenues were also strong, up 23 per cent at Dollars 455m, as Merrill once again topped the debt and equity underwriting tables in US and global capital markets.

Fees from asset management and custodial services rose 7 per cent to Dollars 236m, buoyed by a 12 per cent increase in client assets under management to Dollars 145bn. Higher levels of interest earning assets, and favourable interest rates spreads lifted net interest and dividend profit 29 per cent to Dollars 256m.

Non-interest expenses rose 10 per cent to Dollars 1,923m, excluding the one-off lease charge.

Merrill Lynch and Co US United States of America P6211 Security Brokers and Dealers FIN Interim results P6211 The Financial Times London Page 27 339
International Company News: Suez confirms first loss in 135 years Publication 930414FT Processed by FT 930414 By ALICE RAWSTHORN

SUEZ, one of France's most prominent industrial and financial holding companies, yesterday confirmed that last year it made the first loss in its 135-year history with a FFr1.87bn (Dollars 346m) deficit, against net profits of FFr3.84bn in 1991. The group, with interests including the Indosuez bank and Victoire insurance group, has been the subject of takeover speculation since it disclosed its loss earlier this year.

Suez made an operating loss of FFr610m last year, against an operating profit of FFr5.07bn in 1991. It also suffered a sharp fall in exceptional profits to FFr1.64bn from FFr2.16bn for the same period.

The group earlier warned that its property losses and provisions for 1992 would amount to FFr4.2bn. In spite of the fall into the red it has held its dividend at FFr8.20.

Compagnie Suez FR France, EC P6719 Holding Companies, NEC P6081 Foreign Banking and Branches and Agencies P6311 Life Insurance FIN Annual report P6719 P6081 P6311 The Financial Times London Page 27 180
International Company News in Brief: Barco Publication 930414FT Processed by FT 930414 By REUTER BRUSSELS

Barco, the Belgian electronics company, reporting 1992 net profit up sharply at BFr553m (Dollars 16.8m), said the outlook for this year remains satis-factory, Reuter reports from Brussels.

Barco BE Belgium, EC P3679 Electronic Components, NEC FIN Annual report P3679 The Financial Times London Page 27 60
International Company News in Brief: Macintosh Publication 930414FT Processed by FT 930414 By REUTER MAASTRICHT

Macintosh, the retail group, says it is negotiating to sell all its Spanish and Portuguese activities, Reuter reports from Maastricht. The activities to be sold had 1992 sales of about Fl 260m (Dollars 145m).

Macintosh NL Netherlands, EC ES Spain, EC PT Portugal, EC P5999 Miscellaneous Retail Stores, NEC COMP Disposals P5999 The Financial Times London Page 27 73
International Company News in Brief: Securum Publication 930414FT Processed by FT 930414 By AGENCIES

Securum, the first so-called bad bank set up by the Swedish state to take over non-performing assets of lossmaking commercial banks, reported a loss after financial items of SKr1.67bn (Dollars 220m) for 1992, agencies report.

Securum CH Switzerland, West Europe P6081 Foreign Banking and Branches and Agencies FIN Annual report P6081 The Financial Times London Page 27 71
International Company News in Brief: Royale Vendome Publication 930414FT Processed by FT 930414 By REUTER BRUSSELS

ROYALE VENDOME, a unit of Groupe Bruxelles Lambert, and French insurer UAP have bought a further 2.38 per cent stake in Belgian insurer Groupe Royale Belge, a GBL spokesman said, Reuter reports from Brussels.

Royale Vendome Union des Assurances de Paris Groupe Royale Belge FR France, EC P6311 Life Insurance P6331 Fire, Marine, and Casualty Insurance COMP Shareholding P6311 P6331 The Financial Times London Page 27 82
International Company News: VNU sells printing operations Publication 930414FT Processed by FT 930414 By RONALD VAN DE KROL AMSTERDAM

VNU, the largest publishing group in the Netherlands, is to sell its printing division to De Boer Boekhoven, a Dutch printing group, in a cash and paper deal that will leave it with a 30 per cent stake in the new printing company.

The transaction will create the largest printing group in the Netherlands, with annual turnover of Fl 1.2bn (Dollars 665m). It will enable VNU to concentrate on its core publishing activities, in line with a strategy pursued successfully by Elsevier and Wolters-Kluwer, the Netherlands' other two dominant publishing groups, since the early 1980s.

VNU is to receive Fl 100m in cash, shares worth Fl 19m and 1.88m five-year warrants in De Boer Boekhoven. It will provide the new printing group with a Fl 40m subordinated loan and a Fl 18m convertible bond. Last month, it took a Fl 80m charge on 1992, reflecting expectations that it would sell its printing division for less than book value.

Mr Joep Brentjens, VNU's chairman, said VNU intended to hold its stake at around 30 per cent, which meant that it may sell shares that it gains through the conversion of loans or exercise of warrants.

De Boer Boekhoven is only one-third the size of the printing activities that it will be acquiring from VNU. The Fl 100m in cash is to be provided by a banking consortium led by ABN AMRO, which owns 42 per cent of De Boer Boekhoven.

Verenigde Nederlandse Uitgeversbedrijven Boer Boekhoven NL Netherlands, EC P2731 Book Publishing P2759 Commercial Printing, NEC COMP Disposals COMP Mergers & acquisitions P2731 P2759 The Financial Times London Page 27 287
International Company News: Credit Lyonnais to lift BFH stake Publication 930414FT Processed by FT 930414 By KERIN HOPE ATHENS

CREDIT Lyonnais, the French state-controlled banking group, is to increase its holding in Banque Franco-Hellenique de Commerce International et Maritime (BFH), an Athens-based bank, to 75 per cent by acquiring a 25 per cent stake.

The French bank has agreed to buy the 25 per cent of BFH from the state-owned National Investment Bank for Industrial Development (Eteva) for an undisclosed sum. Eteva will retain the remaining 25 per cent.

Under the terms of the agreement, BFH, with a net worth of about Dr7bn (Dollars 32m), will be expected to seek a listing on the Athens stock exchange within the next three years.

Credit Lyonnais has managed BFH since it was set up 12 years ago when Greece joined the European Community. In addition to trade financing, BFH has built up a shipping portfolio and is expanding into private banking.

Eteva, an investment bank controlled by National Bank of Greece, the country's largest state-owned bank, has been trying to dispose of its holding in BHF for some time.

Eteva plans to move into commercial banking, building a network of branches around Greece, as its development role has been curtailed by the government's privatisation policy.

Credit Lyonnais Banque Franco-Hellenique de Maritime National Investment Bank for Industrial Development FR France, EC P6081 Foreign Banking and Branches and Agencies COMP Shareholding P6081 The Financial Times London Page 27 244
International Company News: CGIP slips to FFr542m and plans FFr1bn disposal Publication 930414FT Processed by FT 930414 By ALICE RAWSTHORN PARIS

CGIP, the French holding company which recently raised its stake in the CarnaudMetalBox packaging group, yesterday announced a fall in net profits to FFr542m (Dollars 100.3m) last year from FFr672m in 1991 and disclosed plans to sell peripheral interests to finance the CarnaudMetalBox deal.

Mr Ernest-Antoine Seilliere, chairman, said the group hoped to raise just over FFr1bn, the money it had spent on its new CarnaudMetalBox shares. He said the proposed disposals would include CGIP's remaining 2 per cent stake in the Valeo industrial group together with property in the Netherlands.

CGIP, which owns 25.3 per cent of CarnaudMetalBox, announced earlier this month that it was buying an additional 7 per cent holding, the maximum allowed by the French stock market authorities.

It bought the shares from MB-Caradon, the UK building products group which was selling its entire 25.3 per cent stake.

The other shares have been bought by a consortium of investors allied to CGIP.

CGIP funded the CarnaudMetalBox transaction with its FFr650m cash balance and FFr450m provided by Orange-Nassau, its Dutch subsidiary. Mr Seilliere said it was not essential that the group should recover the whole cost of the deal, but that it did hope to rebuild finances.

CarnaudMetalBox was one of the best performers within the CGIP group last year.

Mr Seilliere said it made a healthy increase in its contribution to the group. Cedest, the cement company, was stable and Bio Participations, its medical business, suffered a slight fall in profits.

However, CGIP was hit by a sharp reduction of FFr140m in the contribution from Sogeti, the French computer services company, which fell into the red last year, thereby triggering the overall fall in group net profits.

Mr Seilliere said the outlook for 1993 was very uncertain. CGIP budgeted for a modest increase in profits this year but, he said, the first few months had been very difficult. He said the group's chances of returning to profits growth would be determined by the prospects for the second half of the year.

Compagnie Generale d'Industrie et de Participations FR France, EC P6719 Holding Companies, NEC P3411 Metal Cans FIN Annual report COMP Shareholding P6719 P3411 The Financial Times London Page 27 385
International Company News: Suchard invests in Turkish group Publication 930414FT Processed by FT 930414 By JOHN MURRAY BROWN ANKARA

JACOBS SUCHARD, the Swiss confectionery group owned by Philip Morris, has purchased a 50 per cent share in one of Turkey's largest edible oils companies. The acquisition will allow the Swiss group to market its products in Turkey and the six Turkic-speaking republics of former Soviet central Asia.

The Swiss company paid an undisclosed sum for the stake in Marsa Margarine Sanayi, a subsidiary of Sabanci Holding, Turkey's second-largest industrial group. This is Jacobs Suchard's first move into Turkey, and underlines growing foreign interest in the Turkish foods sector.

Marsa made sales of Dollars 171m in 1992, and is market leader in edible oils, margarine and bottled spring water.

Jacobs Suchard by buying into an existing business, instead of green field investment, will obtain immediate market access, a distribution network, a list of local brands, and a base to introduce its own well-known brands such as Toblerone, Sucard and Milka. The company said it planned to invest in manufacturing in Turkey in 1994.

In parallel moves, Unilever bought out the local Komili vegetable oils group last year, in the first example of a foreign buyer paying goodwill for a Turkish brand. Corn Products, the US owner of the Knorr brand name, bought out its local partner.

Jacobs Suchard Marsa Margarine Sanayi CH Switzerland, West Europe TR Turkey, Middle East P2066 Chocolate and Cocoa Products P2079 Edible Fats and Oils, NEC COMP Shareholding P2066 P2079 The Financial Times London Page 27 259
UK Company News: A branch less fruitful than expected - Bids are invited for Meyna, PPI's Turkish offshoot Publication 930414FT Processed by FT 930414 By JOHN MURRAY BROWN

CREDITORS of Polly Peck International should say goodbye to any lingering hope of significant cash remittances from Meyna, the company's Turkish fruit and packaging subsidiary.

Figures contained in a confidential 'information memorandum' sent to prospective buyers, reveal a company currently turning over barely a fifth of the sales reported in PPI's consolidated accounts before the group went into administration in October 1990 owing banks and other creditors Pounds 1.13bn.

Whatever may have been the impression in the City of Meyna's contribution to PPI's reported profits of Pounds 107m from its near and Middle East operations - out of a group total of Pounds 161m - Meyna would now appear to be a medium-sized business, with negligible exports, and about a 5 per cent share of a highly competitive local market.

The decision to invite bids ends one of the more frustrating chapters in a 27-month administration to recover the Turkish assets of the UK-based fruit and electronics group. According to Coopers & Lybrand, one of the two UK accountancy firms in charge of the administration, Meyna is being sold on the basis of the company's own unaudited management and tax accounts - figures which have not been 'independently verified,' the memorandum says.

'We're confident the numbers on which the sale is being made give a fair picture of the group,' said Mr Stuart Smith, the Coopers partner in charge of disposal of the Turkish companies, who said the administrators hoped to be in a position to conclude the sale in a few weeks.

As early as May 1991, the administrators warned that Meyna's trading performance as reported in Polly Peck's accounts 'may be significantly overstated.'

However, it is unlikely that many of PPI's 23,000 creditors envisaged quite the magnitude of the discrepancy.

Meyna incurred net losses - after general and administrative expenses - in 1990, 1991, and the nine months to September 1992. In contrast, the administrators had established from records at Polly Peck's London headquarters that Meyna had reported revenues of TL578bn (Pounds 140m) and trading profits of TL195bn for the first six months of 1990. The local management accounts reveal a much more modest performance. For the whole of 1990 Meyna's sales totalled TL251bn for a gross profit of just TL13bn.

Equally modest, the group's assets were valued at TL129bn (Pounds 31m). This is hard to match with Turkish Treasury figures which show Meyna as the second largest UK capital investment - Vestel, PPI's Istanbul electronics subsidiary, being the largest.

Turkish fruit traders, however, were always clear about the size of Meyna. 'If Meyna stopped producing tomorrow it would have absolutely no effect on the market here,' said the owner of one of largest fruit companies.

'I think they'll get a very rude shock when they try to sell the group,' said another competitor.

Bids are invited for Meyna, the group's fresh fruit arm, Meysin, a fruit concentrate business, and Unipac, a small corrugated box factory at Adana, the only subsidiary currently reporting profits.

Mr Fahri Gorgulu, the company's chief executive and former head of the Turkish police, confirmed that Meysan, a sunflower oil refiner, Kaynak, a wholesaler, and Niksar, PPI's bottled water plant, had been sold to Mr Sudi Ozkan, a local casino owner.

Because of the share structure and inter-company balances, only part of the proceeds have been remitted to PPI - the balance was reinvested in the Meyna group. However, the deal is not expected to generate a large sum. Meysan has little in the way of assets, while Kaynak has ceased operations in Ankara, Adana and Izmir.

'What we have left are the Meysan sites at Adana and Mersin and the three other packing houses. It's a conventional marketing and auctioning operation,' said Mr Smith.

The administrators are talking to 'a number of interested parties'. Their preference is to sell the whole operation, but they will consider the sale of individual units.

However, their efforts to sell could be hampered by current market conditions. The fruit sector is currently awash with excess capacity, following last year's sale of two state-owned fruit juice companies - Meysu and Guneysu. Traders say there may be interest from a business downstream, but here the government's planned share offering in Sek, its dairy corporation, could dampen enthusiasm.

Meyna may have some of the most modern facilities in Turkey, but there is unlikely to be much additional value put on Meyna's brand names - Fresh, its fruit juice, being its best known. Moreover, the properties, while close to the citrus groves, are far from the apple, peach, apricot and cherry regions, an important consideration when fruit businesses are trying to diversify product lines to maximise factory utility rates.

Given that the company is suffering losses, one London analyst suggested it was doubtful any buyer would pay more than net asset value and 'in fact more likely a discount to net asset value.' Meyna's net asset value was put at TL194bn in 1991.

Certainly, there has been an impact on the balance sheet. Already, banks are restricting credit lines, while suppliers demand cash payment. As a result, the group is now working on a contract basis, no longer buying fruit on its own account.

Meyna has been forced to sell one of its five packing houses and another was closed. The Unipac cardboard box facility at Adana is working at about 50 per cent capacity. Since the administration, the fresh produce operation has withdrawn from trading in pulses, raisins and nuts.

The administrators say they are marketing the companies on the basis of their present trading performance. Anything else would be 'entering the area of the unknown'.

However, a buyer may find it difficult to make an assessment of the group's potential, without figures for the period prior to the administration, which Meyna's management has declined to provide.

Polly Peck International Meyna GB United Kingdom, EC TR Turkey, Middle East P6719 Holding Companies, NEC P2653 Corrugated and Solid Fiber Boxes P5148 Fresh Fruits and Vegetables CMMT Comment & Analysis COMP Mergers & acquisitions P6719 P2653 P5148 The Financial Times London Page 26 1039
UK Company News: EFM Dragon bid terms finalised Publication 930414FT Processed by FT 930414

EFM Dragon Trust has finalised the terms of its all-share offer for Drayton Asia, its rival Far Eastern investment trust.

Holders of 100 Drayton shares will receive 694 new Dragon shares. The offer is now unconditional in all respects and remains open for acceptance until further notice.

EFM Dragon Trust Drayton Asia GB United Kingdom, EC P6726 Investment Offices, NEC COMP Mergers & acquisitions P6726 The Financial Times London Page 25 85
UK Company News: Bruntcliffe moves into aggregates Publication 930414FT Processed by FT 930414

Bruntcliffe Investments is to raise some Pounds 3.6m via a placing of 16m shares at 25p to fund its proposed move into aggregates extraction and coal reprocessing.

The company also intends to change its name to Bruntcliffe Aggregates and apply to the Stock Exchange for a listing.

Bruntcliffe, which has recently sold its investment portfolio, is to acquire Lorasen Holdings - a company with aggregate reserves and surface coal deposits near Pittsburgh, Pennsylvania - and Ideal Aggregates - a Warwickshire-based mineral extraction company.

The company also proposes to convert each of its preference shares into five new ordinary shares and five deferred shares. The deferred shares will have no value and will be cancelled following approval of the High Court.

Bruntcliffe Investments Lorasen Holdings Ideal Aggregates GB United Kingdom, EC US United States of America P6799 Investors, NEC P1442 Construction Sand and Gravel P1221 Bituminous Coal and Lignite-Surface COMP Company News COMP Mergers & acquisitions FIN Share issues P6799 P1442 P1221 The Financial Times London Page 25 180
UK Company News: ICI completes Canadian disposal Publication 930414FT Processed by FT 930414

Imperial Chemical Industries has completed the disposal of its Canadian-based nitrogen products business to Terra Industries, of Sioux City, Iowa, for CDollars 68m (Pounds 35.6m) cash.

The sale included ICI's anhydrous ammonia plant and related upgrading facilities in Sarnia, Ontario, and its interest in 32 'agromart' farm service centres in Ontario, New Brunswick and Nova Scotia.

Combined sales from ICI's Canadian nitrogen products and 'agromart' operations totalled about CDollars 250m in 1992.

Imperial Chemical Industries Terra Industries GB United Kingdom, EC CA Canada P2819 Industrial Inorganic Chemicals, NEC P2869 Industrial Organic Chemicals, NEC P2813 Industrial Gases COMP Disposals COMP Mergers & acquisitions P2819 P2869 P2813 The Financial Times London Page 25 124
UK Company News: Buy-out at Maiden Advertising Publication 930414FT Processed by FT 930414

Maiden Outdoor Advertising, the independent private poster contractor, has been acquired by its management in a buy-out financed by Morgan Grenfell Development Capital.

Morgan Grenfell and NatWest Acquisition Finance have respectively underwritten the institutional equity and debt commitment of the financing package which amounts to about Pounds 21m.

The funds will finance the acquisition and provide for future growth.

Maiden Outdoor Advertising GB United Kingdom, EC P7312 Outdoor Advertising Services COMP Buy-in & Buy-out P7312 The Financial Times London Page 25 94
UK Company News: Sykes-Pickavant lower at Pounds 629,000 Publication 930414FT Processed by FT 930414

Sykes-Pickavant, the USM-quoted manufacturer of hand tools and diagnostic equipment, reported another downturn in 1992 with pre-tax profits of Pounds 629,000, compared with Pounds 731,000 previously and Pounds 1.19m for 1990.

Turnover improved from Pounds 18.2m to Pounds 18.7m, reflecting an increase in export sales and a full year's trading from Auto Service Products.

After a lower tax charge, earnings per share were 6.23p (5.25p) but the final dividend is halved to 1.75p for a total of 4p (5.75p).

There was an extraordinary charge of Pounds 511,000, mainly related to writing off the investment in Motortest of Germany.

Sykes-Pickavant GB United Kingdom, EC P3423 Hand and Edge Tools, NEC P3841 Surgical and Medical Instruments FIN Annual report P3423 P3841 The Financial Times London Page 25 139
UK Company News: Erith losses top Pounds 0.56m Publication 930414FT Processed by FT 930414

LOSSES continued through 1992 at Erith, the builders' merchant, to total Pounds 557,000 for the full 1992 year. The group achieved a modest profit of Pounds 24,000 in the previous 12 months.

There is no final dividend, leaving the 0.35p interim as the payment against a total of 2p. Losses per share were 0.82p (earnings 0.09p).

Sales slipped to Pounds 66.3m (Pounds 67.5m) and generated an operating profit of Pounds 129,000 (Pounds 732,000).

The year was punctuated by a series of false dawns - the last two months of the year saw particularly adverse trading conditions, directors said.

Erith GB United Kingdom, EC P5032 Brick, Stone and Related Materials FIN Annual report P5032 The Financial Times London Page 25 133
UK Company News: Rich rewards from white-collar focus - A look at Capita and its strategy for success in the public sector Publication 930414FT Processed by FT 930414 By ANDREW BOLGER

A TOTAL of 170 finance staff from the London borough of Bromley will soon become employees of Capita Group, which has expanded rapidly by offering management services to the public sector.

Capita's market value has grown seven-fold, to Pounds 72m, since flotation in 1989. Pre-tax profits have surged from Pounds 700,000 in that year to Pounds 4.41m in 1992, on sales of Pounds 33.1m.

Unlike other private contractors which have moved in on the public sector, Capita focuses on high-value, high-margin activities such as revenue collection and computers, rather than refuse collection or school meals.

Mr Paul Pindar, Capita's managing director, said: 'Providing blue-collar services is not our bag.' He believes that methods used by other operators to win public sector contracts - such as cutting the wages and conditions of staff - are not sustainable in the long term.

The Bromley employees, who voted 98 per cent in favour of Capita's offer from a choice of three, will transfer on their existing terms and conditions. Under the Pounds 24m contract Capita will, for the next five years, manage most of the borough's exchequer services - including payroll, pensions, business rates, council tax and benefits.

Capita estimates that it will save the council Pounds 1m over the life of the contract, which is three times the size of any previous 'outsourcing' of white-collar services in local government. It also said new opportunities would be created for the Bromley staff, who have seen their workload diminished by recent changes, such as the move from community charge to council tax.

Although more than 80 per cent of the group's revenues come from work in the public sector, Capita's distinctive contribution has been to apply sophisticated private-sector business techniques to the traditional activities of local authorities and government agencies - particularly the collection of revenue.

Mr Pindar said: 'We want to be in areas that fit - quality areas, with significant margins. That's why we went after revenue - if we can put together something which brings in more cash, then everyone wins.'

On behalf of the Driver and Vehicle Licensing Agency, Capita employs up to 80 people using computerised telephone systems to deal with sales and inquiries for personalised number plates. Since starting in October 1990, it has sold more than 200,000 number plates and raised more than Pounds 100m for the Treasury.

Telephoning people at their homes during the evening can be an effective way of raising money. The latest technology from the US allows one operator to make 25-30 calls per hour and be provided with the details of the particular account on a screen when each connection is made. When Capita recently was contracted to call 100,000 people whose TV licence payments were overdue, nearly half of the 60,000 successfully contacted went out and bought a licence soon afterwards.

It was success rates like that which encouraged local authorities of all different political persuasions to use Capita to help collect poll tax.

In spite of offering services which have been championed by the Conservatives, Capita claims it would not have been upset by a Labour victory at the last general election. Mr Pindar said: 'We were unconcerned about the prospect of either a Tory or Labour government - but a hung parliament might have brought decision-making to a halt.'

To date, Capita has employed local authority staff when taking over contracts, but Mr Pindar said: 'Once we have major operating centres, we will offer deals to local authorities which do not involve the transfer of staff.'

Following a European directive, employees whose jobs are transferred from one employer to another are protected under the Transfer of Undertakings (Protection of Employment) regulations. Capita takes a cautious view of its obligations under the rules, and has fulfilled all of their conditions for the staff it has acquired.

If Capita took on the work but not the employees for a contract, it says the Tupe obligations would have to be honoured - probably by the local or central government department contracting out the work.

The Bromley staff will join Capita's existing workforce of 850, which is divided between two divisions - outsourcing and advisory, which provides consultancy and training services.

Capita's shares enjoy a premium rating - partly because of its rapid history of growth and partly due to the group's expanding opportunities, as 'outsourcing' spreads from local authorities to the NHS and into the heart of central government.

Although analysts remain bullish about the stock, some point out that it is difficult to evaluate Capita's contracts, which are both large and long-term. BZW says: 'Capita's businesses are complex and the nature of some of them is such as not to lend themselves to external analysis. Were something to go awry, there may be little warning.

Mr Pindar responds by pointing to the expertise of the seven-strong board, which includes five accountants. The business started in the early eighties when Mr Rod Aldridge, the current chairman, established a computer services company for the Chartered Institute of Public Finance and Accountancy. In 1989, a management buy-out was supported by 3i, the venture capital group.

Mr Pindar said: 'We are never going to go in and bid just on price. We recently walked away from a contract worth Pounds 10m, on which we had put in nine months' work. In five out of six of the large information technology contracts we won, we were not the cheapest bidder.'

Mr Richard Childs, a director, believes contracts are awarded on the basis of quality, added value, price and treatment of staff - in that order.

He said: 'We manage the treasurer's lifeblood. If we screw up, the treasurer is going to lose his job.'

Capita Group GB United Kingdom, EC P7389 Business Services, NEC CMMT Comment & Analysis P7389 The Financial Times London Page 25 1000
UK Company News: FR Group shows 9% improvement to Pounds 23.3m - Healthy niches in aviation and defence markets Publication 930414FT Processed by FT 930414 By RICHARD GOURLAY

FR GROUP yesterday reported pre-tax profits up 9 per cent at Pounds 23.3m for the year to December 31 as the company appeared to demonstrate there are some healthy niches within the depressed aviation and defence markets.

Cutbacks in the aviation programmes of most aircraft makers, however, meant the company was continuing to rationalise that side of the business in the face of 'a significant downturn in demand' from the high levels of the late 1980s.

Sales were also up 9 per cent at Pounds 182.8m while earnings per share rose 7 per cent to 21.48p.

A proposed final dividend of 4.74p brings the total for the year to 7.2p, up 8 per cent.

Mr Gordon Page, chief executive, said that while the aerospace and defence industries were experiencing significant falls in demand there remained continuing demand for FR's products and services.

On its military side, governments were going to spend an increasingly large slice of the smaller defence cake on products and services like FR's surveillance, high tech training capability and its air-to-air refueling systems.

On the aviation side, Mr Page said FR was reacting to the flow of cutbacks in civilian aircraft programmes by the likes of McDonnell Douglas, Airbus and Boeing by closing some sites and developing an ability to supply integrated systems rather than components on their own.

The group was cutting 170 jobs this year and last and was closing one factory and integrating the operations of two others. Substantially all the associated cost had been provided within the 1992 accounts.

FR ended the year with net cash of Pounds 9.4m, up from Pounds 7.8m, in spite of an increased interest charge on un-hedged foreign exchange denominated debt.

The company has also begun to develop non-military applications for the technology involved in air-to-air refueling.

Mr Page said the company should this year announce a venture in which it would be able to apply its fluid handling and couplings technology and expertise in the petrochemical or water treatment industries.

COMMENT

Western countries are for some time going to spend considerable amounts on defence, notwithstanding the peace dividend they are all trying to cash. The trick for investors is to differentiate between those companies metaphorically making submarines and those supplying what the armed forces will continue to need. Judging by the 40 per cent increase in FR's share price since last October, the company has gone some way towards demonstrating it might be a defence contractor with one of the rosier futures. But FR cannot avoid the pain being felt in aviation, even if it has now put what should be a lucrative components business on a sounder footing. Profits forecast at Pounds 25m for this year, would give earnings of 23.2p, and a prospective p/e that might appear relatively cheap at 12 times. On balance this price level is, however, probably about right.

FR Group GB United Kingdom, EC P3724 Aircraft Engines and Engine Parts CMMT Comment & Analysis FIN Annual report P3724 The Financial Times London Page 25 531
UK Company News: Flotation puts Pounds 70m price tag on RPC Publication 930414FT Processed by FT 930414 By MAGGIE URRY

RPC GROUP, the rigid plastic packaging company, yesterday confirmed its plans for a flotation in May. The float is expected to value the group at more than Pounds 70m, compared with its Pounds 33.4m management buy-out two years ago.

The issue is expected to raise more than enough new money to repay Pounds 21.5m of preference shares, including Pounds 13.5m issued to former owners Svenska Cellulosa of Sweden at the time of the buy-out. Some existing shareholders may also sell part of their investments.

The flotation involves a placing with institutions and an offer to the public through financial intermediaries.

The prospectus will include results for the year to March 31 which are expected to show an advance on the Pounds 5m operating profit recorded in 1991-92. The group has little debt, having repaid Pounds 12m of buy-out debt from cashflow and invested another Pounds 12m in the last two years.

RPC is chaired by Mr Lindsay Mackinlay, formerly a director of Rowntree Mackintosh, the confectionery group, who joined in January 1992. He is also a non-executive director of Argos and Bradford & Bingley Building Society.

RPC's executive directors have all been with the group through a number of ownership changes. The company was originally part of Reed International, the publishing company, but was sold with Reed's other packaging interests to Reedpack, a buy-out vehicle, in 1988.

RPC Group GB United Kingdom, EC P3082 Unsupported Plastics Profile Shapes FIN Share issues P3082 The Financial Times London Page 24 268
UK Company News: Board changes at Bullers' Britannia Collection Publication 930414FT Processed by FT 930414 By CATHERINE MILTON

BULLERS, the manufacturer and marketer of giftware, fine art and decorative accessory products, yesterday announced the resignation of one of its directors, Mr Terence Mason.

Mr Mason was managing director of the Britannia Collection, the group's principal trading subsidiary.

His departure follows the resignation of Mr Peter McBride, the group's managing director, announced in February.

Lord Even of Winton, Levend Beriker and Mr John Goodger have been appointed directors of the Britannia Collection and will fulfil Mr Mason's former executive responsibilities, the company said.

Earlier this month Bullers announced losses trimmed to Pounds 450,000 pre-tax for the half year to December 31 compared with Pounds 497,000 after stripping out losses of Pounds 838,000 for discontinued operations.

The company's share price dropped in late 1990 after it revealed pre-tax losses of Pounds 2.33m for the first half of the year against a Pounds 195,000 profit.

At the same time the company disclosed an exceptional provision of Pounds 360,000 against money owed by the Iraqi government including debt for large Islamic swords pictured in television reports.

The following year the decorative accessories division suffered when a majority of the staff at Glenlomond Fire Surrounds left and set up a rival firm.

The company restructured its finances last year.

Bullers Britannia Collection GB United Kingdom, EC P3999 Manufacturing Industries, NEC P5099 Durable Goods, NEC PEOP People P3999 P5099 The Financial Times London Page 24 249
UK Company News: Union Intl back into black with Pounds 32.5m Publication 930414FT Processed by FT 930414 By ROLAND RUDD

THE elimination of Union International's loss-making businesses through disposal and reorganisation helped turn a pre-tax loss of Pounds 102.3m into pre-tax profits of Pounds 32.5m after exceptionals for the year ended December 31.

During the last year the group sold many of its non-core activities, including the Australian pastoral land and cattle herd and its meatworks business, for about Pounds 80m.

However, as reported in February, preference shareholders will have to wait for any dividend until after the refinancing schedule is met at the end of December 1994.

A tight control of operational costs and a substantial reduction in central group overheads was mainly responsible for an increase in operating profits from Pounds 3.1m to Pounds 44.9m on reduced sales of Pounds 1bn (Pounds 1.3bn).

The UK division made profits before exceptionals and interest of Pounds 8.3m compared to a loss of Pounds 25.9m. The Dewhurst butcher suppliers were reduced from 1,200 to 200, and for the first time in a number of years the meat chain made a profit.

Property in the UK traded at a reduced loss and made sales of Pounds 30m, which included the disposal of the Dewhurst retail units.

Union's Australia and New Zealand businesses increased profits from Pounds 7.7m to Pounds 29.6m. The division sold its pastoral and meatworks operations and made a number of property disposals.

Profits from the Far East rose from Pounds 636,000 to Pounds 4m on the back of Union's own branded products of meat and canned product. Turnover in this area has shown an increase of 24 per cent and profits a 71 per cent rise over the past two years.

Mr Terry Robinson, chief executive, said: 'Considerable emphasis is now being placed on the importance of and value of the group's brands.'

Europe, excluding the UK, turned a Pounds 947,000 loss into a profit of Pounds 1.3m.

The only weak spot was South America and the West Indies which saw profits almost half from Pounds 32.5m to Pounds 16.5m.

A net cash inflow of Pounds 96.1m compared with a cash outflow of Pounds 5.9m.

Union International GB United Kingdom, EC P2011 Meat Packing Plants P5421 Meat and Fish Markets P6552 Subdividers and Developers, Ex Cemeteries FIN Annual report P2011 P5421 P6552 The Financial Times London Page 24 399
UK Company News: Hostile Pounds 1.2m bid made for Plateau Mining Publication 930414FT Processed by FT 930414 By KENNETH GOODING, Mining Correspondent

A HOSTILE bid was made last night for Plateau Mining, the former natural resources company which is now a shell with no employees, no liabilities or overheads but more than Pounds 1m in cash.

The all-share bid, worth Pounds 1.2m, is by Kingstream Resources, a small Australian exploration company which wants Plateau's cash to pay for a feasibility study for an integrated iron ore mine and a steel mini-mill project in Western Australia.

The offer, of 1 Kingstream ordinary for every 8 Plateau ordinary, values each Plateau share at 2.62p compared with the recent suspension price of 3p.

Plateau was floated at 90p a share in January 1990.

Guinness Mahon, acting for Plateau, described the Kingstream offer as 'unbelievable' because, not only was it hostile, but it also offered less than the cash in the company.

Kingstream is being advised by Ionian Corporate Finance.

Plateau Mining Kingstream Resources GB United Kingdom, EC AU Australia P1099 Metal Ores, NEC COMP Mergers & acquisitions P1099 The Financial Times London Page 24 191
UK Company News: Packer stake in Fairfax 'welcome' Publication 930414FT Processed by FT 930414

Mr Conrad Black said yesterday that Mr Kerry Packer was 'a welcome shareholder' in John Fairfax, the Australian newspaper group in which Mr Black has a 15 per cent stake, held through The Telegraph. Last week Mr Packer doubled his stake in Fairfax to 10 per cent, raising speculation of a takeover battle between the two.

Mr Black said that he was 'optimistic' that he would get government approval next week to increase his interest in Fairfax to 25 per cent.

He said Mr Packer's move was in line with what he had told Mr Black he would do beforehand, and 'there is nothing sinister in it at all. We see him as an ally'.

John Fairfax Holdings AU Australia P2711 Newspapers COMP Shareholding P2711 The Financial Times London Page 24 145
UK Company News: Telegraph's Southam deal approved - 'Exacting procedure' to obtain minorities' consent for Pounds 72.3m acquisition of stake Publication 930414FT Processed by FT 930414 By MAGGIE URRY

MINORITY shareholders in The Telegraph, which is 68 per cent owned by Mr Conrad Black's Hollinger, yesterday approved a deal under which The Telegraph will buy half Hollinger's stake in Southam, the Canadian newspaper group, for Pounds 72.3m.

The special meeting held to consider the deal lasted only five minutes.

The Hollinger shares were not allowed to be voted at the meeting yesterday afternoon. Of the shares eligible to vote, proxies were received from 53.52 per cent in favour of the deal and 1.44 per cent against. That meant that 95.9 per cent of votes cast approved the deal.

At the meeting the resolution was carried unanimously, and shareholders who attended did not ask any questions.

Speaking after the meeting, Mr Black said that the vote was 'a very good turn-out' for an EGM. He said 'if any shareholder had any significant concern they would not have abstained. An abstention is an indication of tacit approv-al.'

The deal - under which The Telegraph will buy shares in Southam at CDollars 18.10 each - had aroused comment when it was revealed that shortly after The Telegraph's independent directors had approved and posted a circular to shareholders recommending it, Power Corporation, the Canadian company which is run by Mr Paul Desmarais, had agreed to buy a stake in Southam at CDollars 14 a share.

Power and Hollinger, which each hold 18.8 per cent of Southam's shares, also came to a shareholder agreement.

The Telegraph then had to issue a supplementary circular, describing the new circumstances, in which the independent directors again recommended the deal.

Mr Black said yesterday that Power had put a proposal to Southam prior to the first circular going out but Southam had declined. 'I had no reason to believe that Power wished to proceed,' he said.

'I wish now that the first circular had not gone out. I had no idea that discussions with Power would revive and be fruitful.'

He said the first circular had been approved at a meeting on the morning of March 13 in London, and he had heard from Power that evening in Florida after which 'things moved quickly'.

He also said that if there had been 'any way of getting a lower price' for the shares bought by Hollinger he would have.

He described the process of gaining approval from The Telegraph's minority shareholders for the deal as 'an exacting procedure'.

He said that now Southam's management could proceed with plans to cut overmanning at the group, which has 7,500 employees, and that provisions had been made in previous accounts to cover 1,300 redundancies.

Telegraph Hollinger Inc Southam Inc Power Corp of Canada CA Canada GB United Kingdom, EC P2711 Newspapers COMP Shareholding P2711 The Financial Times London Page 24 487
UK Company News: Bank of Scotland disposal Publication 930414FT Processed by FT 930414 By KERIN HOPE ATHENS

BANK OF Scotland is to sell its 30 per cent stake in Dorian Bank, the Athens-based private concern controlled by Mr John Mavrakakis, a Greek shipowner, following Dorian's decision to expand into commercial lending.

Mr Antony Mantzavinos, president of Dorian, said yesterday that 'a friendly separation' had been agreed.

Mr Mavrakakis, who holds the other 70 per cent of Dorian, is to buy the British bank's stake through Dorian Hellenic, a holding company.

He said negotiations were under way with several Greek investors interested in taking minority holdings and contributing to a capital increase for the bank.

Bank of Scotland took an equity stake in Dorian when it was set up three years ago to provide merchant banking and ship financing services in Greece.

The bank's capital base of Dr2.2bn (Pounds 6.6m) was raised to Dr5bn last year.

'The market has developed differently and we're changing our strategy, expanding into commercial banking, which is not the focus of Bank of Scotland's foreign activities,' Mr Mantzavinos said.

After reporting losses of Dr647m in 1991, its first full year of operation, Dorian forecast net profits of Dr300m for last year.

Bank of Scotland acknowledged that the change in market conditions in Greece had forced Dorian to re-focus its strategy away from fee-earning services to include more corporate lending and other medium term credit products, which would require increased capital to support future growth. As a result the attraction of continuing as a shareholder in Dorian 'has diminished', it said.

Mr Jim Malcolm, assistant general manager of Bank of Scotland's international division, said the reasons for withdrawing from the Dorian operations were specific to that market.

'This is not a change of strategy as far as Europe is concerned,' he said, 'we are still very interested.'

Bank of Scotland Dorian Bank Dorian Hellenic GB United Kingdom, EC GR Greece, EC P6021 National Commercial Banks P6081 Foreign Banking and Branches and Agencies P6719 Holding Companies, NEC COMP Disposals COMP Mergers & acquisitions P6021 P6081 P6719 The Financial Times London Page 24 354
UK Company News: Private client brokers merge in Pounds 7m deal Publication 930414FT Processed by FT 930414 By NORMA COHEN, Investments Correspondent

BREWIN Dolphin Holdings, the London-based private client stockbroker, has acquired Bell Lawrie White from the TSB Group in a deal believed to be worth Pounds 7m.

The acquisition creates one of Britain's largest private client stockbrokers, and follows a growing trend among those organisations to revert to the historic partnership structures which were held until they were purchased at hefty premiums by international banks in the run up to Big Bang in 1986.

'Firms such as ours with emphasis on private client business don't have much in common with large integrated firms,' said Mr John Hall, managing director of Brewin Dolphin.

'Many of us became unstuck because we fell between two stools in the new structures and didn't know what it was we were supposed to do.'

Brewin Dolphin was the object of a management buy-out from SE Banken last year, which had bought the partnership for itself in 1986.

The consideration includes the cost of repayment of BLW's debts.

The enlarged firm will approximately double Brewin Dolphin's client base to about 32,000 and its assets under management will increase to some Pounds 4bn.

BLW's management will become partners owning 25 per cent of the equity; two other investors, the venture capital firms of Baronsmead and 3i, will have 15 per cent and the remainder will be held by Brewin Dolphin's management.

Of the funds under management, about Pounds 600m will be managed on a discretionary basis. Brewin Dolphin will retain the research capacity of BLW and will concentrate on smaller companies and Scottish companies.

Brewin Dolphin Holdings Bell Lawrie White TSB Group GB United Kingdom, EC P6021 National Commercial Banks P6211 Security Brokers and Dealers COMP Mergers & acquisitions P6021 P6211 The Financial Times London Page 24 310
Rule approved to make institutions value bonds at market rate Publication 930414FT Processed by FT 930414

The FASB has approved a rule that would force banks and insurers to value more of their bonds at market value. Banks and insurers fear a change would make their results more volatile.

Page 28

XA World P9311 Finance, Taxation, and Monetary Policy NEWS General News P9311 The Financial Times London Page 23 68
Queens Moat calls in finance consultant Publication 930414FT Processed by FT 930414 By ROBERT PESTON, Banking Editor

MR ANDREW COPPEL, the former finance director of jewellery group Ratners, has been appointed as a consultant to Queens Moat Houses to mastermind the financial reconstruction of the troubled hotels group.

Mr Coppel said it was 'not appropriate' to join Queens Moat's board until its financial position became clearer.

Mr Coppel, who left Ratners in April 1990 before the group ran into financial difficulties, said one of his first priorities was to improve Queens Moat's management information systems.

Further details emerged of Queens Moat's financial condition. A preliminary estimate by Grant Thornton, the accountants, shows that profits before interest and depreciation charges were Pounds 106m in 1992.

'That shows the group is viable,' a banker said. The group's 64 bank creditors, which are owed Pounds 1bn, are hopeful that the eventual financial restructuring will not involve conversion of debt into equity, though it might require some deferment of interest and rescheduling of principal payments.

However Grant Thornton believes Queens Moat made a pre-tax loss in the year of between Pounds 50m and Pounds 80m. The accountants have not fully quantified the effect on profits of the way that Queens Moat accounted for revenues derived from management incentive contracts. Under these contracts managers promised to earn specified revenues for the group during the forthcoming financial year but Queens Moat booked these revenues as profits for the previous financial year.

Last year, as the hotel industry went into recession, the managers delivered less profit than Queens Moat had booked.

Barclays, which is chairing a steering committee of the banks, has asked bank creditors to agree to a two-month standstill, involving the suspension of all interest and principal payments for that period. The standstill request also involves a freeze on banks' rights to take possession of Queens Moat deposits.

Some banks would like to use these deposits to reduce their loans to Queens Moat. However, Barclays believes that the group's survival depends on its ability to draw on these cash reserves to continue trading.

Lex, Page 22

Queens Moat Houses GB United Kingdom, EC P7011 Hotels and Motels PEOP Appointments COMP Company News P7011 The Financial Times London Page 23 374
The price of the boss's options: US executives face growing pressure on their pay-packets Publication 930414FT Processed by FT 930414 By KAREN ZAGOR

April is proving to be an ambiguous month for top-earning executives in the US. First, the Financial Accounting Standards Board (FASB) proposed hard-hitting measures which would make companies report the value of share options granted to employees and subtract them from profits. Then - only days later - the Clinton administration, which has been threatening strict new rules to limit the tax deductibility of seven-figure executive pay, softened its stance.

Discontent over the remuneration levels enjoyed by top US executives has been rumbling for years. It has, however, been exacerbated by recession. When companies are losing money and employees are losing jobs, the sight of executives netting millions has become distasteful to investors, workers and politicians alike. For example, in 1991, Chrysler's Mr Lee Iaccoca earned nearly Dollars 3m (Pounds 1.9m) when the car company lost Dollars 795m.

Share options - rights to buy a certain number of shares at a pre-determined 'exercise' price - have been a favourite way for US companies to increase employee incentive without discernibly hurting profits.

Employees involved in such schemes have a reason to work for a higher share price; while the company is not obliged to pay out cash, merely to distribute shares. This will eventually dilute earnings per share, but usually by a modest amount.

The popularity of such arrangements was demonstrated in a recent survey of 500 start-up companies by VentureOne, a San Francisco-based research company. About 97 per cent of the companies questioned had some form of share option scheme.

For top executives these arrangements have become hugely lucrative. Last year, Primerica's Mr Sanford Weill was granted new options on 3.65m shares, at an average exercise price of Dollars 27 a share. The subsequent sharp rise in Primerica's stock means that he is already showing a paper profit of more than Dollars 70m although all the options cannot be exercised at this stage.

Nor can share options always be justified as a long-term management incentive. In the pharmaceuticals sector, Merck's Mr Roy Vagelos was granted options on shares worth Dollars 25.6m at last year's exercise price. Mr Vagelos will retire at the end of 1994.

Because stock options do not involve a cash outlay, they are not listed among a company's expenses. However, when em-ployees cash in their options at a profit, companies are allowed to deduct this surplus from their income for tax purposes.

What FASB is proposing is a three-year interim period, during which companies must come to grips with techniques for estimating 'fair value' of employee options and prepare for the new accounting requirement.

From 1997 however, options will be recognised as expenses on the day they are granted and charged against profits - although the expense would be stretched over the vesting period for the options.

Quite how the 'fair value' of the options would be calculated is debatable. 'It's not all that complicated for companies to do,' said the board. 'All we've stated is that companies should use an option-pricing model, like the Black-Scholes model. These models are used now by option traders and others, and take into account interest rates, stock price today and volatility to produce a value for the options.'

Corporate America, which had hoped the board would limit its interference to more stringent disclosure standards without a charge against profits, has so far been muted in its criticism. But the board can expect a chorus of corporate disapproval during a six-month comment period which will follow publication in June of its formal exposure draft.

Ironically, the board's attempt to introduce flexibility for companies may trigger the loudest denunciation. It seems unlikely that the FASB will hold companies to any specific pricing model, and there have already been complaints about the confusion this will create.

There is also no consensus on the degree to which the plans would deplete reported profits. Estimates range from as little as 2 per cent to as much as 10 per cent. It is certain that that some companies will change the way they reward employees. Critics of the plan argue that it will hit smaller and newer companies hardest, and that middle management will suffer more than top management if companies cut back on stock options.

The VentureOne survey gives weight to some of these charges. While only 10 per cent of respondents said they would eliminate options altogether, 88 per cent they would reduce the number of employees receiving options. Furthermore, nearly half said options would be offered to key executives only. Some bigger companies, such as Merck and Pepsi, say they hope to retain their stock option programmes.

Just as US corporations were starting to grapple with the board's proposals, however, they were offered some consolation by the US Treasury.

Earlier this year the Clinton administration had suggested that companies should only be able to deduct salaries in excess of Dollars 1m when calculating taxable profits, if the pay was linked to the company's performance.

More detailed proposals put forward by the Treasury suggest that performance-linked pay would include not only commissions or other earnings based directly on an executive's percentage of sales, but also any compensation package based on performance standards approved by the company's shareholders.

The ban on deductibility would affect only the chief executive and the four other highest paid executives in a company. Compensation plans already in place before the measure was outlined on February 17 would be exempt.

Some senior Wall Street executives welcomed the more relaxed stance on deductibility of large pay awards. One expressed his relief: 'Wall Street firms do spend a lot of money on people, so broad notions of a cap on the deductibility of compensation above Dollars 1m would have used tax policy in a way that discouraged businesses which invest in human capital instead of plant and equipment. However, the present approach is much more in line with traditional tax policy . . . and the new proposals deal with the issue in a relatively rational way.'

Additional reporting by Nikki Tait, Patrick Harverson and George Graham.

US United States of America P8741 Management Services NEWS General News MGMT Management & Marketing P8741 The Financial Times London Page 23 1048
Companies in this issue Publication 930414FT Processed by FT 930414

---------------------------- UK ---------------------------- Bank of Scotland 24 Bell Lawrie White 24 Brewin Dolphin 24 Bruntcliffe Invs 25 Bullers 24 Capita 25 Drayton Asia 25 EFM Dragon 25 Erith 25 FR 25 Fleming Overseas Inv 18 ICI 25 In Shops 18 Maiden Advertising 25 Plateau Mining 24 Polly Peck Intl 26 Queens Moat Houses 23 RPC 24 Royal Bank Scotland 23 Sykes-Pickavant 25 TSB 24 The Telegraph 24 Union Intl 23, 24 Vestey Group 23 Wellcome 14 ---------------------------- Overseas ---------------------------- Boise Cascade 28 Boston Five Bancorp 23 CBS 28 CGIP 27 Citizens Financial 23 Coca-Cola 28 Copaq Computer 28 Credit Lyonnais 27 Dorian Bank 24 Fininvest 23 Fujisawa Pharm 30 Galeries Lafayette 27 General Electric 28 Harbour Centre Dev 29 Hollinger 24 International Paper 28 Jacobs Suchard 27 John Fairfax 30 Kingstream Resources 24 Lippo 30 Merrill Lynch 27 Microsoft 28 Mondadori 23 Nalco 29 New York Times 28 Placer Dome 29 RJR Nabisco 28 Rockwell 28 Salomon 27 SBE 23 Southam 24 Suez 27 Tenneco 28 Toyota Motor 30 VNU 27 Waste Management 27 Westinghouse 27 Westpac Banking Corp 30 ----------------------------

XA World P99 Nonclassifiable Establishments COMP Company News P99 The Financial Times London Page 23 205
Berlusconi plans publishing float Publication 930414FT Processed by FT 930414 By HAIG SIMONIAN MILAN

FININVEST, the privately-owned media and financial services group of Italy's Mr Silvio Berlusconi, is poised to raise cash by merging and floating its main publishing activities.

The scheme, which has to be given a formal go-ahead by Mr Berlusconi, involves merging Silvio Berlusconi Editore, Fininvest's magazine publishing and industrial printing business, with Mondadori, Italy's biggest publisher, which Fininvest controls.

Shares in the amalgamated unit, which would have annual sales of about L2,000bn (Pounds 839m), would be offered to domestic and international investors, with Fininvest retaining 51 per cent.

The proceeds would be used to bring down the group's debts, officially about L3,000bn, although some bankers put the total higher.

'We are looking seriously at these hypotheses, but no final decision has been made,' said a Fininvest spokesman.

Last week SBE bought 20 per cent of Mondadori's ordinary shares from the Fininvest parent company. No price for the intra-group transaction was disclosed. However, the transfer has been seen as a first step to the merger between the two publishing operations later this year.

Goldman Sachs and Banca Commerciale Italiana have been appointed to advise on the deal. However, bankers note that Mr Berlusconi, on whom the ultimate decision rests, has not yet fully committed himself to go ahead. Two years ago, the widely-expected flotation of Fininvest's Silvio Berlusconi Communications film subsidiary was shelved because of opposition from Mr Berlusconi. However, bankers believe a cash-raising exercise is much more likely now in view of the greater financial pressures on his group.

The merger of SBE with Mondadori is likely to come through a reverse takeover, which would precede placing a large proportion of the shares in the combined unit.

SBE is best known for publishing Italy's biggest-selling magazine, 'TV Sorrisi e Canzoni'. The company made net profits of L29.7bn on sales of L320bn in 1992. Mondadori is Italy's biggest book publisher, and also has sizeable magazine interests. Sales amounted to L1,600bn last year.

Bankers believe up to 40 per cent of the shares could be placed with foreign investors.

Fininvest Silvio Berlusconi Editore Arnoldo Mondadori Editore IT Italy, EC P6719 Holding Companies, NEC P2721 Periodicals P2759 Commercial Printing, NEC COMP Mergers & acquisitions FIN Share issues P6719 P2721 P2759 The Financial Times London Page 23 387
Royal Bank to buy Boston Five Bancorp Publication 930414FT Processed by FT 930414 By PAUL TAYLOR

THE Royal Bank of Scotland's fast growing US banking subsidiary, Citizens Financial, is paying Dollars 95m (Pounds 62.9m) in cash to acquire Boston Five Bancorp as part of its New England expansion.

The acquisition, which will be funded by Citizens without recourse to Royal Bank shareholders, represents a significant step towards the bank's goal of generating at least 10 per cent of its earnings from the US.

It also underlines the growing importance of the US banking operations run by Mr Larry Fish, Citizens' chief executive. Last year Citizens, which already has retail banking operations in Rhode Island and Massachusetts as well as a Georgia-based mortgage company, contributed Pounds 19.7m to the bank's profits.

Mr George Mathewson, Royal Bank's group chief executive, said yesterday: 'This acquisition is a further important step in our long term strategy in the US. We intend that Citizens should double in size in the next three years while becoming the leading community bank in southern New England.' The deal will make Citizens the sixth largest bank holding company in New England with Dollars 6.4bn of assets. At the end of January, Boston Five had total assets of Dollars 1.7bn.

Some 25 offices will be added to Citizens Bank of Massachusetts' 11 branches. Deposits will increase to Dollars 2.1bn.

The deal will double the size of Citizens' mortgage banking subsidiary's portfolio to Dollars 8bn and rank the Gulf States Mortgage company among the 60 largest in the country.

'Doubling the size of our mortgage servicing operation fits our goal of expanding our fee-generating business and our expansion into the Boston market fits with our strategic mission for growth,' said Mr Fish.

In spite of the recession and a banking crisis in New England, Citizens has thrived in recent years and has helped restore some faith in British banks' US operations.

After enduring losses in the late 1980s, and debating how quickly they could sell, the mood among some British banks towards their US subsidiaries has changed considerably. As they struggle with bad debt at home, US operations have become an attractive source of income for some banks including the Royal Bank and National Westminster.

Bank of Scotland sale, Page 24

Bank of Scotland Citizens Financial Boston Five Bancorp GB United Kingdom, EC US United States of America P6021 National Commercial Banks P6081 Foreign Banking and Branches and Agencies COMP Mergers & acquisitions P6021 P6081 The Financial Times London Page 23 420
Vestey arm plans disposals to concentrate on core businesses Publication 930414FT Processed by FT 930414 By ROLAND RUDD

UNION INTERNATIONAL, the trading arm of the Vestey Group, is planning new disposals as part of its strategy to develop into a smaller food processing and distribution group.

The company yesterday reported profit before tax and exceptional items of Pounds 30.8m in the year ended December 31, compared with a loss of Pounds 20.5m in the previous year.

An exceptional credit of Pounds 1.6m contrasts with the previous year's exceptional loss of Pounds 81.8m, which mainly arose from losses on disposals.

Net debt fell 38 per cent, from Pounds 327m to Pounds 202m, through sales and reorganisation.

Mr Terry Robinson, chief executive, said the group was already planning its future after the completion of the refinancing at the end of next year. 'We want to rebuild our fortunes by disposing of our non-core activities and expand our core businesses.'

Union International, one of the UK's largest private companies, is to focus on its food processing and distribution business.

Mr Robinson said he expected net debt to be 'well below Pounds 100m' by the end of the year.

The group is to seek new equity for its meat operations in New Zealand.

Union is looking for an overseas investor to buy 30 per cent of Weddel New Zealand, with the remaining 20 per cent sold through a public flotation.

It also plans to sell its international food processing and distribution businesses based in Brazil. The group is close to finalising the sale of its Brazilian farming interests - expected to fetch around Dollars 45m (Pounds 30m).

Sales of minor operations in other parts of Latin America, UK, Australia and the Far East are also being considered.

Union's UK property portfolio, which includes office developments in the City, has also been earmarked for sale. It has already been written down by more than Pounds 60m over the past two years.

Under Mr Robinson's control, Union has reasserted its authority over its subsidiaries, by capping capital expenditure and setting profit targets.

Union has formalised its refinancing agreements with its 70 banks in 25 countries through to December 1994.

Shareholders funds increased more than 40 per cent from Pounds 26.6m to Pounds 37.9m.

Details, Page 24

Union International GB United Kingdom, EC P2011 Meat Packing Plants P5421 Meat and Fish Markets P6552 Subdividers and Developers, Ex Cemeteries FIN Annual report COMP Disposals P2011 P5421 P6552 The Financial Times London Page 23 415
Printers win 3.7% pay rise Publication 930414FT Processed by FT 930414 By ROBERT TAYLOR, Labour Correspondent

UP TO 10,000 print workers have won wage rises of more than 3.7 per cent after a wage offensive by the Graphical, Paper and Media Union.

The union is targeting specific printing companies across Britain and demanding that they meet the union's claim of a Pounds 6.50-a-week rise, an extra day's holiday from January 1 1994 and pro rata conditions for part-timers and temporary workers.

This follows the collapse of national industry talks. The current agreement runs out on April 24 and deals are all being made at company level for the first time in more than 50 years. The rises of over 3.7 per cent are more than twice the government's 1.5 per cent public sector pay limit.

If the companies refuse to accept what the union wants their employees are being balloted for industrial action short of striking. Six companies are being disrupted.

Mr Brian Willoughby, a GPMU national officer, said yesterday: 'Our campaign is going from strength to strength. Companies are settling with us on our terms across the country.'

Agreements have been concluded with the St Ives Group, Severn Valley Press, the Bemrose group, Lawson Mardon, Ferry Pickering and the Howitts group. The union estimates 15 per cent of its members have so far secured deals on union terms.

Even John Waddington company has negotiated a deal satisfactory to the union although its chairman is Mr Victor Watson, president of the employers' body, the British Printing Industry Federation. The GPMU is now targeting companies in the north-east.

The union's campaign follows the collapse of pay talks with the employers who made a final offer (now withdrawn) worth 1.7 per cent or Pounds 2.92 a week on basic minimum rates.

The employers' federation said there was a 'great variation' in local deals. The average rise of the 41 negotiated settlements so far notified to the federation is Pounds 5.10 a week on the craft grade but it added there had also been 24 employer-imposed pay awards of which 13 are pay freezes.

GB United Kingdom, EC P2759 Commercial Printing, NEC PEOP Labour P2759 The Financial Times London Page 22 367
US recovery doubt as sales plunge Publication 930414FT Processed by FT 930414 By GEORGE GRAHAM WASHINGTON

A PLUNGE in US retail sales last month has revived pessimism about the strength of the country's economic recovery and sharpened President Bill Clinton's arguments in favour of the Dollars 16bn (Pounds 10.5bn) spending stimulus he has so far been unable to push through Congress.

The Commerce Department said retail sales dropped 1 per cent in March and revised earlier estimates of February sales to a fall of 0.3 per cent, instead of the 0.3 per cent rise originally announced.

The figures added to pressure on the dollar on the foreign exchange markets. In London, the US currency lost ground across the board, dropping to DM1.5790 from DM1.607 before the Easter break on Thursday. In late New York trading, it was little changed at DM1.57935.

Some of last month's fall in sales could be attributed to the effects of heavy snowstorms along much of the east coast, which depressed sales of building materials, clothing and petrol.

But Mr Ron Brown, the commerce secretary, said the two consecutive months of decline provided 'compelling evidence that recovery is at risk unless decisive action is taken when Congress returns next week'.

All sectors except drugstores showed a decline, with furniture stores down 2.3 per cent and department stores down 2.5 per cent. March sales still stood 4.4 per cent higher than a year ago at an estimated Dollars 166.9bn, but economists said recent surveys of consumer confidence, such as the Conference Board indicator, have shown a much grimmer outlook for consumer spending after a brief surge in the wake of Mr Clinton's election last November.

The stimulus bill, which the Clinton administration claims will create 500,000 jobs, has been blocked in the Senate by a united Republican opposition, which has denied the administration the three fifths majority it needs to end debate and force a vote.

Mr Clinton has embarked on a campaign of harsh public criticism of the Republicans - on Monday, pointing to 25,000 children taking part in an Easter egg race on the White House lawn, he suggested that the young were suffering because of the delay.

He further irritated Senator Robert Dole, Republican leader, by accusing senators of romping in their private swimming pool on Capitol Hill while denying funds for pools in inner cities. The administration is also trying to win support from Republican mayors, several of whom have backed the spending plan.

Currencies, Page 33

World stocks, Page 39

US United States of America P5999 Miscellaneous Retail Stores, NEC MKTS Sales P5999 The Financial Times London Page 22 436
Thatcher attacks Hurd on Bosnia: 'Accomplice to massacre' accusation threatens Conservative party unity Publication 930414FT Processed by FT 930414 By RALPH ATKINS

BARONESS Thatcher last night launched a scathing attack on government policy towards Bosnia, accusing the UK and other western countries of acting like 'an accomplice to a massacre'.

The former prime minister also condemned Mr Douglas Hurd, foreign secretary, of using 'terrible and disgraceful' phrases to justify not arming Bosnian Moslems. She was 'ashamed' at the European Community's reluctance to intervene.

Her outbursts, in a series of television interviews, provoked anger among ministers and fractured the fragile unity within the Conservative party over action against the Bosnian Serbs.

Last night, Mr David Howell, Tory chairman of the Commons foreign affairs select committee, said Baroness Thatcher's comments 'reflect almost worldwide concern about what is happening but they go a whole lot further and propose very much stronger measures than most people think are necessary. But I think something has to be done. The present situation is clearly untenable'.

Mr Patrick Cormack, Tory MP for South Staffordshire, said: 'While I don't always agree with Baroness Thatcher I think that on this she is plumb right.'

Mr Malcolm Rifkind, defence secretary, accused her of 'emotional nonsense' and said arms for Bosnian Moslems 'would be used to prolong the war'. If the west armed one side, Russia might decide to help the Serbs, he said.

Most Tory MPs have so far been reluctant to see British troops further involved in the conflict - and Mr John Major has won a consensus within the party for a policy based on providing humanitarian aid and urging a negotiated peace settlement.

Conservative MPs are used to intemperate attacks on Mr Major by his predecessor, particularly over Maastricht. But Baroness Thatcher's emotional calls last night could rally Conservative MPs who have been horrified at recent atrocities - including Monday's killing of at least 56 people in a Serb artillery attack on the east Bosnian town of Srebrenica.

Tensions could erupt when the Commons returns today. Labour is pressing for a statement on Bosnia.

Speaking on BBC television, Baroness Thatcher said: 'We can't go on with this policy - namely feeding people but leaving them to be massacred.' United Nations resolutions should be overturned, she said, so the Bosnian Moslems could arm themselves: 'Everyone has a right to self-defence - that is far older than the UN's charter.'

Mr Hurd, who was last night travelling to Japan, has previously said such a policy would lead to 'level killing fields'. But Baroness Thatcher responded: 'I thought it was a terrible and disgraceful phrase. There is a killing field now where the innocent haven't the requisite arms properly to defend themselves.'

A policy of arming Bosnian Moslems should be backed by air cover and possibly ground attacks, she said. An alternative was to issue an ultimatum backed by the threat of greater military intervention to the Serbs to accept the peace plan drawn up by UN negotiators Lord Owen and Mr Cyrus Vance.

Food aid plea, Page 2

GB United Kingdom, EC BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs GOVT Government News P9711 P9721 The Financial Times London Page 22 533
NatWest in talks on link-up with two continental banks Publication 930414FT Processed by FT 930414 By ROBERT PESTON, Banking Editor

NATIONAL Westminster, the UK's second largest bank, is in talks with Societe Generale of France and Commerzbank of Germany about co-operating on providing improved services to small businesses and personal customers.

The bank said yesterday it was exploring two possible joint initiatives:

Linking the payment systems of the three banks, so that all customers can make cheaper transfers of funds between France, Germany and the UK.

Allowing the three banks' medium-size corporate customers to have access to the full range of services provided by the banks.

'Talks are at a very preliminary stage,' NatWest said. No decision had been taken on whether the banks' computer systems for funds transfers should be connected or if any linkage should be 'less formal'.

However, plans to combine the banks' services for medium-size companies are better developed. NatWest said the intention was that any medium-size corporate customer of the UK bank should be able to use the services of Commerzbank in Germany or Societe Generale in France, if that customer is planning to do business in those countries.

Many businesses complain about the difficulty and expense of obtaining banking services on the continent.

To date, bank initiatives to take advantage of the single European Community market in financial services - which was created at the beginning of this year - have been modest.

The NatWest proposal conforms with a general banking trend. Banks have been reluctant to acquire branches in large numbers of European countries. Their preference has been to co-operate on specific projects with other European banks.

Last year, Royal Bank of Scotland launched an electronic system, IBOS, linking its branches with those of Credit Commercial de France, Spain's Banco Santander and Banco de Comercio e Industria in Portugal. IBOS guarantees a 'same-day' transfer of funds between accounts at the member banks.

Royal Bank purchase, Page 23

Bank disposal, Page 24

National Westminster Bank Societe Generale Commerzbank GB United Kingdom, EC FR France, EC DE Germany, EC P6021 National Commercial Banks P6081 Foreign Banking and Branches and Agencies P6099 Functions Related to Deposit Banking COMP Strategic links & Joint venture P6021 P6081 P6099 The Financial Times London Page 22 376
The Lex Column: Queens Moat Publication 930414FT Processed by FT 930414

What does Queens Moat Houses have in common with British Steel, the best performing stock in the FT-SE 100 during the first quarter of this year? Both have been bought by US investors attracted by a share price at steep discount to stated net asset value. Such a yardstick is popular in the US, where earnings trends are volatile. At its suspension price of 47 1/2 p Queens Moat looks cheap compared with last stated assets per share of 114p. Yesterday's British Steel closing price of 85p was less than half the company's net assets of 194p per share.

The Queens Moat discount has been overtaken by events, however, while there must be room for debate about the real worth of British Steel's assets at a time of structural overcapacity in the European industry. Perhaps price to net assets is a better yardstick in the US because balance sheet accounting there is more disciplined. More likely it is flawed because it takes no account of the quality of management or its ability to generate profits from the assets under control. Either way, the measure looks an inadequate substitute for the price-earnings ratio which has been devalued by the new UK accounting standards.

Queens Moat Houses British Steel GB United Kingdom, EC P3312 Blast Furnaces and Steel Mills P7011 Hotels and Motels CMMT Comment & Analysis P3312 P7011 The Financial Times London Page 22 244
The Lex Column: ICI Publication 930414FT Processed by FT 930414

The 20 per cent target return on capital set by Mr Ronnie Hampel, heir to ICI's chemicals side, is less stringent than it sounds. A five year pay-back on new investment is close to being an industry standard. On a mixed bag of new and fully depreciated plant, return on capital is difficult to measure. Since ICI is shy about the distribution of capital across the group, the market will hardly be in a position to judge whether the target has been met. Mr Hampel could pin his colours firmly to the mast by setting a target rate of return on sales.

If the target is applied honestly, though, ICI will be in for radical reshaping. The chemicals side returned 3.7 per cent on net assets last year, based on operating profits of Pounds 146m before exceptionals and shareholders' funds of Pounds 4bn. That is some way from Mr Hampel's minimum rate of return of 10 per cent in the trough, even allowing for restructuring benefits to come. One answer may be for ICI to steer away from capital-intensive industries. But that decision is by no means clear cut. Tioxide has delivered an average return on net assets of 27 per cent over 20 years - a performance flattered by years of low investment, which depressed the asset base and reduced depreciation.

Shorn of cash-generative pharmaceuticals, cash flow may be a bigger constraint. Paying an uncovered, uncut dividend will cost ICI Pounds 200m this year. The latest round of restructuring carries a cash cost of Pounds 250m over three years, on top of residual costs from earlier slimming. Industries such as petrochemicals which feature big capital projects may seem too risky whatever the rate of return.

Imperial Chemical Industries GB United Kingdom, EC P2819 Industrial Inorganic Chemicals, NEC P2834 Pharmaceutical Preparations P2869 Industrial Organic Chemicals, NEC CMMT Comment & Analysis P2819 P2834 P2869 The Financial Times London Page 22 329
The Lex Column: UK economy Publication 930414FT Processed by FT 930414

The devaluation effect on UK manufacturers' costs abated in March. Not only did input prices rise only 0.1 per cent on February's level; the main influences were a sharp rise in home-grown food manufacturing materials offset by a drop in the price of electricity to large industrial users. With the prices of imported materials falling and sterling on a recovery track, it looks as though a line can be drawn under the debate on the price effect of devaluation. That still leaves the questions of how far the 10 per cent rise in input prices since September will be passed on, and of how quickly recovery will reignite inflation.

One risk is that domestic manufacturers will use recovery to catch up on the prices charged by foreign competitors. Another is that recovery will bring an end to discounting, pushing up retail prices as stores - rather than manufacturers - seek to claw back margins. The chances are, though, that such pressures will remain muted for the time being.

Recovery initially brings productivity gains as idle capacity is brought back on stream. At this stage the impact of higher demand is thus normally to dampen rather than kindle inflation. That should continue to offset the higher input prices for some time, especially since the UK is also enjoying a sharp fall in unit labour costs. The more dangerous moment will come when pay settlements start to rise again. Despite the apparent increase in union militancy, there is little sign of that yet. Wage levels should be watched, just the same.

GB United Kingdom, EC P9611 Administration of General Economic Programs CMMT Comment & Analysis P9611 The Financial Times London Page 22 290
The Lex Column: Japan's jump start Publication 930414FT Processed by FT 930414

The Japanese government's latest cure for its sick economy certainly spurred the stock market. But then a Pounds 76bn package of measures could hardly pass unnoticed, however heavily it had been trailed in advance. What remains unclear is whether the government is administering the right medicine. Conditions must remain tough enough to make industry sweat through some painful restructuring, while not being so tight that companies collapse into the black holes in their balance sheets. The measures to extend government agency loans to small businesses and house buyers suffering in the banks' credit squeeze work usefully toward that end. But the Y8,500bn-worth of fiscal expansion may be feeding cream buns to a corporate sector which still badly needs to diet.

Nor is it entirely clear that consumers will now leap enthusiastically back into the shops, or that companies have the right capacity to respond to government pump-priming. Japanese GNP will expand by an additional 1.5-2 percentage points this year. That, however, is entirely courtesy of the government, and there will be an anxious wait for the reaction of the private sector. If companies use this excuse quietly to jettison plans for painful cuts, then the medium-term rebound in profits may be feeble, weakening the economic recovery.

Not that the equity market is overly concerned with such niceties. A combination of foreign buying, the prospect of huge government stock purchases, low interest rates and the return of small investors should keep the pot boiling. Ironically it may be the flow of foreign funds into Japan which forces up the yen and keeps the pressure on Japanese companies to restructure. That would validate the market's rally to heights which still inspire vertigo in those who judge by fundamental value.

JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 22 318
Leading Article: Recoupling the through train Publication 930414FT Processed by FT 930414

IT WAS tempting yesterday, after Britain and China had put an end to months of wrangling by announcing the imminent resumption of talks on the political future of Hong Kong, to ask which side blinked. Was it the British or the Chinese government that made the crucial concession on the precise role to be played by Hong Kong officials in the talks? Or is it Mr Chris Patten, Hong Kong's governor, who has gone the extra distance by agreeing not to initiate the debate on his modest proposals for political reform in the colony's Legislative Council (LegCo) while the talks continue?

Entertaining as they may be, however, these questions are irrelevant. Yesterday's announcement is a compromise in which the parties have side-stepped obstacles of their own creation. It was always certain that, were talks to resume, they would take place between the two sovereign powers in dispute, Britain and China, with Hong Kong officials playing something of a secondary role; it was never plausible that they could happen, as China seemed until yesterday to be demanding, with these officials barred from seats at the negotiating table.

The resumption of dialogue is undoubtedly a welcome development for Hong Kong - provided it gets off to a brisk and businesslike start. Without it Mr Patten knew he was in a fragile position, facing the prospect of a difficult LegCo debate on his proposals buffetted by threats from Beijing, and the risk of a stand-off thereafter that might have seriously debilitated his governorship through the last four years of British colonial rule.

By agreeing to talk, Britain and China have at least taken the essential first step towards reconstituting the 'through train' that was supposed to pull Hong Kong through this delicate period of transition.

Clear timetable

Yet there are also risks for Mr Patten in the new course. The most obvious is that China, rather than engaging in a serious debate about Hong Kong's future political structure, will see the talks as an opportunity to mount a protracted filibuster with the aim of completely derailing Mr Patten's plans. The timetable is not open-ended. One of the governor's proposals affects elections to local district boards in the colony, due to take place next year; another would mean that officials elected on that occasion would have an important role to play in choosing members of LegCo in 1995.

This means that if a balanced package of electoral reforms is to have a chance of coming into effect, it will have to be passed by the Legislative Council by the autumn. If the talks starting on April 22 move slowly, or not at all, the British and Hong Kong governments may thus again find themselves facing a familiar dilemma later this year - whether to pull out of talks and press ahead with reforms in the teeth of Chinese threats to set up a shadow Hong Kong government before 1997 and to declare any changes null and void thereafter.

LegCo's role

Talks, then, cannot be an end in themselves, or indefinite in duration. Their value for Britain and Hong Kong will lie in seeking to ascertain what China itself wants for the colony before and after 1997, for while Beijing has been voluble in its denunciation of Mr Patten and all his works since October, it has been noticeably reluctant to come forward with proposals of its own.

If the negotiation means some amendment to the governor's reform proposals, so be it - provided that the outcome can be debated by, and is acceptable to, the Legislative Council. Strengthening LegCo as an autonomous legislature is, after all, Mr Patten's clearest and most sensible objective - and is more important than the precise way in which he proposes to tinker with electoral arrangements. Enhancing LegCo in this manner is also the best test of China's sincerity in having agreed that Hong Kong should be ruled after 1997 under the principle of 'one country, two systems'.

It remains entirely possible, of course, that China's objection is not to Mr Patten's precise proposals, or even to the unilateral manner in which he put them forward, but to the whole idea of having such an independent-minded legislature in Hong Kong. If that is the case, no amount of talking will suffice to bridge the gap.

GB United Kingdom, EC CN China, Asia HK Hong Kong, Asia P9721 International Affairs CMMT Comment & Analysis P9721 The Financial Times London Page 21 752
Leading Article: Mr Keynes and the Japanese Publication 930414FT Processed by FT 930414

'PRACTICAL MEN, who believe themselves to be quite exempt from any intellectual influences,' wrote John Maynard Keynes in the General Theory, 'are usually the slave of some defunct economist.' Which academic scribbler have Tokyo's bureaucrats been studying as they prepared Japan's second fiscal package in less than nine months?

Certainly not the economists who advised President Clinton that a package of tax increases and spending cuts would improve US economic performance. The voices in the air, encouraging Japanese politicians to spend their way out of recession, appear to come from Keynes himself, with a little neo-Keynesian encouragement from Washington.

Not that Keynes, experienced in the ways of international finance, would disagree with America's need for Clinton-style fiscal austerity. The high long-term interest rates that US-style fiscal profligacy deliver have damaging effects on economic activity.

Japan's advantage is that it used the fat years of the 1980s to build-up a healthy fiscal surplus. By prudently avoiding placing itself in a position in which old-style Keynesianism is counter-productive, it has been able to run down this surplus as economic growth has slowed.

Market reactions

Japanese fiscal activism, far from frightening investors, has allowed long-term bond rates to fall by a percentage point since the first fiscal package was announced and remain 1 1/2 points lower than in America. The combination of the latest Y13,200bn (Pounds 76bn) fiscal package and a recent government-managed revival of animal spirits, has lifted the Tokyo stock market through the 20,000 barrier, closing 44 per cent above last August's low, while the the yen has risen to a record high against the dollar.

The announcement yesterday was also an impressive propaganda coup. By announcing the package on the eve of a summit of the world's leading finance ministers in Tokyo, the government secured the public praise of US Treasury Secretary Lloyd Bentsen, despite yesterday's news that Japan's trade surplus rose to Dollars 111bn (Pounds 73bn) in the 1992 fiscal year.

But will it work? In the short-term, Japan's fiscal activism cannot fail to boost economic growth. The package, adjusted for the various dodges and leakages which enrage zealous US officials, will inject around Y8,500bn (Pounds 49bn) worth of new spending into the economy this fiscal year, equivalent to 1.8 per cent of Japanese gross national product. The Economic Planning Agency confidently expects the spending, mainly on infrastructure, to push GNP growth above 3 per cent this fiscal year.

Private investment

Yet fiscal expansion on such a scale cannot replace private spending and investment for long without leading to structural fiscal problems. Worryingly, the prospects of a marked revival in private-sector activity look poor, despite modest signs of an upturn in housing starts, car sales and broad money supply.

Retail sales to nervous consumers are still falling and companies say they plan to cut investment spending again this year. The appreciation in the value of the yen, which fiscal expansion and the revival in the stock market are already helping to deliver, will further postpone a revival in Japanese industrial activity. In the short term, it will also make the trade surplus larger as yen import prices fall.

Even if investment demand picks up, it will take years rather than months before Japan's debt-burdened banks are able to support a recovery in private investment. The revival in the stock market, and widening of interest margins, have eased the prudential pressures on the banks. But the yield curve remains flat, suggesting a further cut in short-term interest rates is overdue, while bad debts are being written off at a sluggish pace.

In short, the revival in consumer demand for US imports and a fall in the trade surplus look many months away. The spirit of Keynes lives on in Tokyo. But, for all Japan's far-sighted prudence and political guile, modern-day pump-priming looks unlikely to produce quickly what the Japanese need and the US wants.

JP Japan, Asia P9311 Finance, Taxation, and Monetary Policy CMMT Comment & Analysis P9311 The Financial Times London Page 21 676
An Italian empire strikes back: ENI, the state energy group, is restructuring and breaking political ties Publication 930414FT Processed by FT 930414 By ROBERT GRAHAM and HAIG SIMONIAN

There can be few jobs more daunting than the one facing Mr Franco Bernabe, chief executive of ENI, Italy's state energy concern and the world's eighth largest oil group.

The 44-year-old economist must pick up the pieces of an industrial empire stricken by involvement in corruption investigations and prepare its businesses for privatisation.

His efforts are being watched closely from abroad. Potential investors will scrutinise his attempts to reshape the diverse group. Foreign governments will keep an equally close eye on emerging evidence of fraud in ENI's overseas operations.

It is at home, however, that the group's affairs have caused most disruption. ENI has emerged as one of the principal paymasters in an elaborate system of graft that has sustained Italy's main political parties for two decades. Its affairs have caused the resignation of two ministers in less than two months and contributed to the enforced departure of Mr Bettino Craxi from the leadership of the Socialist party.

Mr Gabriele Cagliari, ENI's chairman, resigned on March 9 after being arrested on charges of alleged corruption and falsifying accounts. The heads of four leading ENI subsidiaries - Agip (oil and gas exploration), Snam (gas supplies), Saipem (drilling) and Nuovo Pignone (turbines) - have also been arrested on similar charges. All are now helping magistrates unravel a darker side of what has been the most dynamic group in Italy's unwieldy public sector.

In the midst of this storm, Mr Bernabe has remained calm. 'Although very much alone, he knows what he wants and has had strong support from the government,' observes one colleague. 'Now that Cagliari's gone and the political parties are too discredited to interfere, he is much freer.'

His position has been reinforced by the appointment on March 31 of a new five-man board, composed of technocrats and oil industry experts. But he has enemies from within the political establishment who oppose his plans to shake up ENI, concentrate on core businesses and carry out extensive privatisation. 'Bernabe sees privatisation essentially as a means of reducing the capacity of the state to interfere in corporate management,' observes a senior ENI executive. ENI is the second largest state group with annual sales of over L50,000bn (Pounds 20.8bn) and 130,000 employees worldwide.

Many politicians are reluctant to lose this source of patronage. Last June, 'old guard' politicians from the Christian Democratic and Socialist parties tried to get Mr Bernabe sacked. The move backfired, and when ENI was converted into a joint stock company in August, Mr Cagliari, the representative of these politicians, was forced into a nominal chairman's role.

This marked the first stage in removing ENI from the direct political arena. Ever since the group was founded by Enrico Mattei in 1953 following significant gas discoveries in the Po Valley, it has played a high-profile political role. The drive to establish independent sources of oil supplies gave Mattei powerful influence, particularly in foreign policy.

'I treat the political parties like taxis - I get on and off them when I feel like,' is an often quoted Mattei dictum. A power unto himself, he took ENI in a number of diverse directions including newspaper ownership (ENI still owns the daily Il Giorno). But he also made ENI's logo of the fire-breathing dog with six legs the symbol of Italy's postwar development and prosperity.

After Mattei's death 1962, the politicians gradually reduced the group's independence. First it was the turn of the Christian Democrats, then the Socialists who in the late 1970s staked out ENI as their area of patronage.

Once Mr Craxi, the Socialist leader, became prime minister in 1983, he established a chain of officials to aid ENI operations. From Italian embassies abroad to pliant state-controlled banks, ENI received favoured treatment. In return, the party received political funds. The confessions of ENI executives and consultants in the past two months point to the group being one of the most important sources of illicit finance to Italy's political parties during the 1980s.

Among the many accusations now being levelled by Milan magistrates against Mr Craxi is that during the late 1980s he allegedly received or was party to organising illicit funds of about L12bn from ENI, L8bn from Snam, L4bn from Agip, L3.5bn from Saipem and L4bn from Nuovo Pignone.

Milan magistrates are pursuing five main areas of investigation:

the reorganisation of the petrochemicals and chemicals industry through Enimont, the joint venture set up in 1989 with Ferruzzi Montedison and bought by ENI in 1990;

domestic contracts won by ENI subsidiaries, notably in the energy sector;

kickbacks on foreign contracts won by Saipem and Snam. These include pipelines in Nigeria and Iraq, and gas supplies from Algeria and the Soviet Union;

the fate of Dollars 7m paid in 1982 to the Socialists by disgraced banker Roberto Calvi in return for ENI lending money to Banco Ambrosiano, the private bank which collapsed in 1982 and had to be rescued by Italian financial institutions.

funds generated by ENI offshore subsidiaries through false consultancy contracts, and through trading in oil contracts and currencies.

This is a big dossier with far-reaching implications. Take the Enimont affair. Magistrates are working on the assumption that ENI was pressed by its political masters in the Socialist and Christian Democrat-dominated coalition to buy out Ferruzzi Montedison's 40 per cent stake in Enimont for an inflated price of L2,805bn. But they have so far failed to prove there was any political pay-off from the transactions and Ferruzzi denies any wrongdoing. Nevertheless, the cost of this purchase and the subsequent losses of the fertilisers sector have been one of the main factors restraining ENI's profits.

The state's investigations are also revealing the extent of the group's overseas operations in directing funds to the political establishment. According to the investigators, revenues were diverted through subsidiaries in offshore tax havens or Switzerland, frequently using former ENI executives and their cronies. Foreign subsidiaries also passed on the profits of speculative trading in oil and currencies.

ENI executives have admitted that 'commissions' were frequently paid for overseas contracts. This was also confirmed in a recent interview by Mr Franco Reviglio, who was forced to resign as Italy's finance minister last month because of his alleged role in permitting ENI funds to be diverted to political parties while chairman of the group between 1983 and 1989.

In an interview in La Repubblica, one of Italy's leading newspapers, he said: 'Unfortunately this (granting of commissions) was something unavoidable if you wanted to deal with certain countries. . . . Our main concern was to ensure that these bribes did not find their way back to Italy to finance people, movements and institutions.'

In Italy the paying of 'commissions' to secure a contract abroad is not an offence provided the company's books are not falsified. This grey area of legality has enabled the parties to obtain illicit funds by taking a cut on inflated foreign 'commissions'. All of the 11 ENI executives involved in the corruption scandals are charged with falsifying accounts.

So far the magistrates appear to have decided to avoid embarrassing foreign governments - and prejudicing Italian contracts overseas - by not releasing the names of foreign nationals. But already the Algerian government has asked the Italian government for information about large gas sales contracts with ENI in the 1980s for which it fears bribes may have been paid.

In the wake of Mr Cagliari's resignation, Mr Bernabe set up a special working committee to examine management methods in ENI's overseas operations. By the beginning of June it will present proposals for tightening controls on the overseas activities of subsidiaries, especially those with purely financial functions. Already 30 overseas companies have been closed.

In addition to cleansing its organisation, the group faces a difficult challenge in restoring its credibility and defining its future shape. 'ENI has become too big to keep track of with 209 subsidiaries overseas,' says one executive.

Agip Petroli, the oil distribution arm, and the EniChem chemicals business have 60 companies based outside Italy, while another 30 are registered abroad by Agip. Bringing this far-flung empire to account is essential, says the company. The shake-up is already underway. Amsterdam-based ENI International Holding, which controls ENI International Bank, a financial institution registered in Nassau and operating out of Montecarlo, and which handles financial transactions exclusively for the group, has been one of the first targets. Last week, its 16-member board was removed and replaced by a 5-man team.

Mr Bernabe's efforts to reorganise the group will have a marked impact on ENI's financial performance. The results for 1992, as yet unpublished, will reflect the heavy cost of measures already taken to simplify the group's structure, purge loss-makers and sell off parts of the business. ENI officials concede that additional heavy provisions will be necessary.

About L500bn will be set aside in both the 1992 and 1993 accounts to cover redundancies at subsidiaries such as the group's heavily loss-making Sardinian lead and zinc mines. Job losses have already been felt in the higher echelons of the ENI organisation, with about 250 boardroom posts having been cut as a result of the closures so far. Heavy provisions will also be required to cover one-off write-downs in the value of fixed investments at some subsidiaries being closed or sold.

Together these provisions will depress earnings for the group, which made L1,081bn after tax in 1991. As a result, ENI is unlikely to meet the government's prediction in its 'green book' on planned privatisations that pre-tax earnings for 1992 will be in line with those of the previous year. The need to set money aside to cover special provisions may even require some of the proceeds from privatisation to go to ENI, rather than directly to the Treasury, as envisaged by the government's privatisation plans.

Mr Bernabe has already managed to sell some of the group's non-core assets and hopes to raise further cash by floating other operations on the stock market. Last month, he announced the disposal of two parts of the Savio textile machinery division, raising about L150bn. The remaining units of the division may be sold by the end of this year. Plans to sell the profitable Agip Coal business, which has operations from Australia to South America, are well advanced. In all, 25 significant disposals are now under way.

Sales of group assets are open to foreign investors. So, too, will be the next stage of restructuring and refinancing the group - the flotation of its principal subsidiaries.

The process is expected to start with Agip, one of the most profitable parts of ENI. Details are not yet available, but analysts expect up to 20 per cent of the shares will be listed, raising about L2,000bn. If the Agip deal goes successfully, Snam may be next. 'Taking the subsidiaries public is not just a way of raising money, but will also show bankers and potential investors we are serious about being judged by the market,' says a member of the privatisation team.

The transactions will be the prelude to floating ENI itself. Listing the parent company will be much more complicated than taking the subsidiaries public. Merchant bankers have been working on the Agip and Snam flotations for over two years; it will take them at least as long to do valuations and prepare ENI's accounts for a share issue.

During this period ENI will continue its struggle towards a new identity. The cleansing process has begun and there is a sense of liberation within the group, a result of its increasing freedom from political control. But there is much dirty linen still to emerge, and the road to privatisation will not be easy.

----------------------------------------------------------------------- ENI: PREPARING FOR PRIVATISATION ----------------------------------------------------------------------- The five main subsidiaries Sales (000 Lbn) Net Profit (000 Lbn) 1990 1991 1990 1991 ----------------------------------------------------------------------- Agip Upstream Oil & Gas 13.736 10.957 1.581 1.442 Agip Petroli Downstream Oil 15.327 16.089 -44 117 Snam 11.017 12.999 1.234 1.901 Enichem 15.060 13.727 40 -1.405 Nuovo Pignone 1.198 1.550 27 36 ----------------------------------------------------------------------- The five main subsidiaries Investment (000 Lbn) Workforce 1990 1991 1990 1991 ----------------------------------------------------------------------- Agip Upstream Oil & Gas 1.900 3.672 9.357 9.628 Agip Petroli Downstream Oil 756 973 24.844 24.956 Snam 1.286 1.919 16.207 16.783 Enichem 2.093 1.971 44.544 42.784 Nuovo Pignone 46 50 5.744 5.693 ----------------------------------------------------------------------- Source: Company report -----------------------------------------------------------------------

Ente Nazionale Idrocarburi IT Italy, EC P1311 Crude Petroleum and Natural Gas P2911 Petroleum Refining P3511 Turbines and Turbine Generator Sets P2899 Chemical Preparations, NEC CMMT Comment & Analysis P1311 P2911 P3511 P2899 The Financial Times London Page 21 2113
Observer: Short-changed Publication 930414FT Processed by FT 930414

Regular readers of this column will be aware that good jokes are in short supply. So Observer has no hesitation in recycling the following quip from yesterday's Daily Mail.

Pub customer: 'I'd like half a pint of your best bitter in a pint glass, topped up with a dash of Dom Perignon, three shots of Jack Daniels, two shots of vodka and a couple of cherries.'

Without raising a well-trained eyebrow the barman mixed the drink and watched the concoction go down in one. 'I shouldn't have had that with what I've got,' gasped the customer.

'And what have you got sir?' asked the alarmed barman. 'Thirty seven pence,' replied the bounder.

GB United Kingdom, EC P5813 Drinking Places NEWS General News P5813 The Financial Times London Page 21 136
Observer: Made to measure Publication 930414FT Processed by FT 930414

Would it not sound better if the Inland Revenue official dealing with capital allowances at Somerset House - N I C Perks - were to be transferred to the Department of Social Security to handle queries about National Insurance contributions?

GB United Kingdom, EC P9311 Finance, Taxation, and Monetary Policy PEOP People P9311 The Financial Times London Page 21 68
Observer: Oceans apart Publication 930414FT Processed by FT 930414

Watch out for fireworks as one of the world's odder bilateral partnerships comes up for inspection next month. Australia's tough-talking prime minister Paul Keating, fresh from his victory at the polls, is paying his first official visit on Jim Bolger, his New Zealand counterpart.

Don't be deceived into thinking that everything is hunky dory just because trade between the two ex-British colonies is booming. There are plenty of tensions behind the scenes.

Australians, for example, have never forgiven New Zealanders for refusing to join their fledgling federation in 1900, and many still don't understand why Kiwis don't want to have their affairs run from Canberra, a thousand miles away across the Tasman Sea. Ministers who would not dream of insulting Papua New Guinea or Fiji, find it hard to be polite about their Kiwi cousins.

The problem was at its worst in the run-up to last month's Australian election. Not only did Keating's Labor government paint conservative-run NZ as an economic basket case, ignoring growing signs of sustainable recovery, but senior Labor figures also lent weight to dubious claims that Kiwi sheep shearers were cheating on their Australian income tax returns. Whatever next?

Bolger, a taciturn North Island beef farmer, is not likely to upbraid Keating in public for his government's insensitivity. But he may feel free to point to another big difference - unlike the staunchly republican Keating, the vast majority of New Zealanders remain firmly attached to the monarchy. He might also have some diplomatic tips. European diplomats say the Kiwis' subtle approach has won them much better trade concessions than those obtained by the rougher Aussies.

AU Australia NZ New Zealand P9111 Executive Offices GOVT Government News P9111 The Financial Times London Page 21 295
Observer: Forgotten? Publication 930414FT Processed by FT 930414

Jack Welch, the GE boss, doesn't like being reminded that the acquisition of the NBC TV network was hardly his company's most astute move. So his sudden appearance inside his TV fiefdom on Monday had a dramatic impact.

His avowed purpose was to introduce the new president of NBC News, Andrew Lack, poached from rival CBS. The appointment follows the embarrassing row over an NBC programme which involved a well known make of pick-up truck rigged to catch fire after it crashed.

The mighty Welch was in a forgiving mood as he addressed the staff of a network which has been stuck in third place and long rumoured to be up for sale. Everybody has lapses in judgment, said Welch, but that was now all in the past.

'The good news is that GE likes NBC. NBC is not for sale. GE wants to be part of NBC,' said the great man, before joking: 'I guess some of you might feel that's bad news, but I hope not.'

General Electric National Broadcasting Co Inc US United States of America P4833 Television Broadcasting Stations P3724 Aircraft Engines and Engine Parts P3812 Search and Navigation Equipment COMP Company News P4833 P3724 P3812 The Financial Times London Page 21 214
Observer: Adding it up Publication 930414FT Processed by FT 930414

No doubt it has something to do with the time of year, but there seem to be an unusually large number of accountants advertising their services in the latest issue of Ariel, the BBC's staff magazine. Surely it can't be a spin-off of the unfortunate publicity given to the director-general's John Birt Productions?

British Broadcasting Corp GB United Kingdom, EC P2721 Periodicals P4833 Television Broadcasting Stations COMP Company News P2721 P4833 The Financial Times London Page 21 87
Observer: Paws for thought Publication 930414FT Processed by FT 930414

Remember Roland Rat, the cartoon character who came to the rescue of TV-am? So popular was the cuddly rodent that he managed to boost the British breakfast channel's flagging ratings single-handed. Well, it sounds as if Spain's Partido Popular has a similar sounding secret weapon waiting to attack the ills of the Spanish economy. Should the PP win the elections, one of the favourites tipped for the finance minister's job is the party's spokesman on economic affairs - the well-connected Rodrigo Rato.

ES Spain, EC P8651 Political Organizations NEWS General News P8651 The Financial Times London Page 21 107
Observer: Mandarin syndrome Publication 930414FT Processed by FT 930414

Whether it was the Chinese or the British who blinked first in the tortuous business of arranging talks about talks on the future of Hong Kong, the mandarins at the Foreign Office made quite sure that Chris Patten could not claim too much of the credit.

The announcement coincided with a London news conference given by the governor of Hong Kong. But a telephone call to the FO's well-staffed news department asking for the time and location of the event hit a brick wall.

Even though the event was taking place at the FO a well-spoken young lady in the news department told callers that everyone was busy in an internal briefing. She could give no details of any encounter between Patten and the press. The media should call back later.

By the time the department's own meeting was over, so too was Patten's press conference. Perhaps, after all, the friends of Beijing still hold sway among the mandarins of King Charles Street.

GB United Kingdom, EC HK Hong Kong, Asia CN China, Asia P9721 International Affairs PEOP People P9721 The Financial Times London Page 21 194
Letter: Rather rapid rotation Publication 930414FT Processed by FT 930414 From J A D'ARCY

Sir, John Patten, the education secretary, may be the nation's headmaster (Man in the News, April 11) but he is the fifth in six years. Joseph (early 1987), Baker, MacGregor and Clarke have all had their day. One wonders what readers would make of a school, or for that matter a company, that has had so many chief executives in so short a time.

J A D'Arcy,

King's Walk,

Malmesbury,

Wiltshire SN16 9DB

GB United Kingdom, EC P9411 Administration of Educational Programs NEWS General News P9411 The Financial Times London Page 20 105
Foes with shared values: Misleading myths divide Islamic and western states Publication 930414FT Processed by FT 930414 By EDWARD MORTIMER

'Have mercy upon all Jews, Turks, Infidels, and Hereticks, and take from them all ignorance, hardness of heart, and contempt of thy Word; and so fetch them home, blessed Lord, to thy flock, that they may be saved among the remnant of the true Israelites, and be made one fold under one shepherd, Jesus Christ our Lord . . .'

One no longer hears that collect read in Anglican churches on Good Friday, as one used to when I was a schoolboy. At some point, well before the phrase 'politically correct' became current, it was quietly dropped. The words might be construed as offensive to the categories of people mentioned: Jews, Moslems, atheists and Christians of other denominations. And since the Church of England does not wish to cause offence, it altered its liturgy.

Of course, if you really believe - as the author of the collect presumably did - that people who do not share your religious beliefs are missing their only chance of eternal bliss, you should pray for their conversion whether it offends them or not. But few Anglicans nowadays do believe that. Even the Pope, I suspect, no longer insists absolutely on the doctrine of extra ecclesia nulla salus (no salvation outside the church). He seems to regard other religions, especially monotheistic ones, less as competitors than as potential allies of Christianity in the great battle between God and mammon.

Britain's Chief Rabbi, Dr Jonathan Sacks, shares that view. In his 1990 Reith Lectures he urged religious minorities to support the established church, it being the only national institution capable of giving a religious dimension to Britain's public culture. The argument is quoted with approval by a Moslem scholar, Tariq Modood, in one of the thoughtful essays published last year under the title Not Easy Being British (Runnymede Trust and Trentham Books, Pounds 7.95). Modood is anxious to head off an attempt by secularists to use the supposed sensitivity of non-Christian minorities to advance the cause of disestablishment - something which, he says, has not been demanded by any minority faith organisation.

Moslems found much more understanding for their campaign against Salman Rushdie's Satanic Verses among the Christian clergy than they did in the secular intelligentsia. That may seem surprising. In earlier ages Christian writers depicted Islam as a vicious and fanatical heresy, and it was anticlerical liberals who first painted a different picture, of a civilised Islam, which they contrasted with the reactionary obscurantism of the Catholic establishment at home.

Now the boot is on the other foot. Islam is again seen as a threat to established western values, but those values have become more liberal than Christian, and some Christians see Islam as a possible ally in an effort to stem the tide of liberal triumphalism.

Is there in fact an irreconcilable conflict between Islam and western values? Many on both sides would say yes. Many Moslems see the west as completely godless and amoral, dominated by crime and pornography at home, brutal and arrogant in its behaviour towards the rest of the world, and nursing a special animus against them, the Moslems. From Bombay to Bosnia, passing by Iraq and Palestine, Moslems see themselves as victims, with 'the west' always directly or indirectly the aggressor. In his powerful TV series, Living Islam, starting tonight on BBC2, and in the accompanying book (BBC Books, Pounds 15.99), the Pakistani anthropologist Akbar Ahmed even called the war in Bosnia the 'last crusade'.

Similarly, many in the west see Islam as irredeemably violent and repressive. Neither side has any difficulty in finding evidence to support its view, and of course each is reinforced by the other.

But both 'Islam' and the 'west' can be regarded either as ideals or as civilisations. If we think of them as ideals, we may have difficulty in defining them precisely because so many different people identify with them in each case and there is such a variety of interpretations on offer. Clearly they are not identical: the west puts more emphasis on the value of each individual human being, while Islam insists on the centrality of God. But there is a considerable overlap in the core values that both proclaim: peace, justice, compassion, tolerance; even equality and the use of reason to acquire knowledge.

If we think of them as civilisations we are confronted with even greater diversity on both sides. They are composed of millions of human beings, nearly all of whom fall short in practice of the ideals they claim to believe in; and here too there is an increasing overlap. Not only do some 10m Moslems live in the west; equally significant is the presence of so many aspects of western civilisation within Moslem countries.

More than anything it is the impossibility of making a complete break with the west that drives some Moslems to desperation. They may succeed in defining an 'Islam' that is completely antithetical to the west, but their chances of imposing it durably on any part of the Moslem world are virtually zero. Revolutionary Iran and conservative Saudi Arabia alike are driven all the time to make compromises, though in very different ways.

The Moslems' extremist myth of a monolithic and malign west is as futile and misleading as the view, current in some western circles, that a monolithic, malign Islam has replaced communism as our most dangerous enemy. This indeed is the main point of Prof Ahmed's series; as an articulate Moslem living in the west, he hopes to persuade both sides to see good as well as bad in each other.

XA World P8661 Religious Organizations CMMT Comment & Analysis P8661 The Financial Times London Page 20 964
Letter: Unemployed in suspense Publication 930414FT Processed by FT 930414 From Mr JOHN EDMONDS

Sir, Samuel Brittan (Economic Viewpoint, April 8) is sympathetic to Professor Patrick Minford's view that the equilibrium rate of unemployment in the UK is 1m.

Does either Mr Brittan or Prof Minford have any idea when we might reach that equilibrium? The other 2m would like to know.

John Edmonds,

general secretary,

GMB Union,

32-34 Worple Road,

London SW19 4DD

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs ECON Employment & unemployment NEWS General News P9441 The Financial Times London Page 20 98
Letter: Technically superior economic model - but of little benefit Publication 930414FT Processed by FT 930414 From Prof WYNNE GODLEY

Sir, According to Jeremy Bray (Letters, April 7), 'Despite ill-informed press criticism, economic modelling practices in the UK are in most respects technically well ahead of those in the US' - the result, apparently, of the 'econometric methods developed by Prof David Hendry'.

Ahead of the US or not, Prof Hendry's technical advances have not resulted in any detectable improvement in the ability of the large-scale models developed under this influence to make accurate forecasts. Nor has there been any increase, flowing from best practice econometrics, in the understanding of how modern industrial economies function as systems. So what, usefully, can it mean to say we are 'technically well ahead' of the US?

In my view, adverse press comment on the performance of the relevant models (not only the Treasury's model, but those of the London Business School and the National Institute of Economic and Social Research) has not been 'ill-informed' at all. It has been fully justified by the deplorable, and extremely damaging, way in which public discussion, not to mention governments, have been misled by these monsters.

Wynne Godley,

King's College,

Cambridge

GB United Kingdom, EC P9611 Administration of General Economic Programs NEWS General News P9611 The Financial Times London Page 20 223
Letter: UK must learn a lesson from European partners Publication 930414FT Processed by FT 930414 From Dr DENIS MACSHANE

Sir, Your editorial, 'Labour and industry' (April 7), stressed the importance of institutional relationships (labour-management relations, pay, etc) inside companies instead of technological quick-fixes.

The politics of free collective bargaining practised through the 1980s bumped up labour costs in Britain far above its competitors'. The increases in productivity brought about by mass redundancies (2.3m manufacturing jobs disappeared between 1980 and 1990) could not compensate.

You refer to the 'miracle companies of the east' but one of the most striking aspects of their pay relations is the much smaller ratio between salaries paid to workers and to top executives. In Britain, this gap has widened significantly, is widening and must diminish before the more harmonious workplace you rightly identify as the key to success can come into being. Perhaps, instead of a statutory minimum wage, Labour should propose a statutory maximum one.

I also question the endless reference to Asia. Surely there are plenty of European examples of countries which manage their affairs better than Britain. Small ones such as the Netherlands, Belgium and Switzerland have better records in industrial output, trade and so on. And despite horrendous difficulties occasioned by unification or political stasis, the economic records of Germany and France are far better over the past decade than the UK's.

Institutional relationships in both countries play their part. The new French government has just called in the unions to discuss economic questions while the workers on the board of Daimler-Benz and Volkswagen are working constructively with managers to re-shape the companies.

It was sad, therefore, to read the predictable 1980s response of the Confederation of British Industry to Labour's worker directors proposal. At least they merit reasoned discussion. The CBI should try to learn from what works in other countries.

Denis MacShane,

54 bis, route des Acacias,

Case postale 1516,

CH-1227 Geneva, Switzerland

GB United Kingdom, EC P9441 Administration of Social and Manpower Programs NEWS General News P9441 The Financial Times London Page 20 343
Letter: Vance-Owen plan must be adjusted to achieve greater equity Publication 930414FT Processed by FT 930414 From Mr GEORGE TINTOR

Sir, For the second time in a year, the US and the European Community are attempting to impose their will on Bosnia's 1.5m Serbs. A year ago, the 'independence' of Bosnia was recognised by the west despite the objections of the Bosnian Serbs. The Serbs, who constitute a third of Bosnia's population and inhabit 60 per cent of its territory, opposed independence prior to an agreement on constitutional principles.

Predictably, the Bosnian Serbs took up arms to resist being forcibly incorporated in an inherently hostile state. The consequences of their rebellion have been dreadful.

Today, the West is attempting to force the Bosnian Serbs to accept the Vance-Owen plan. Although the Vance-Owen plan goes a long way toward recognising the rights of all three Bosnian groups, including the Bosnian Serbs, it stops short of an equitable and lasting solution. The Vance-Owen plan divides Bosnia into 10 semi-autonomous regions dominated by either Bosnia's Croats, Moslems or Serbs.

The Bosnian Croats accept the Vance-Owen plan without reservation because it gives them far more territory than they could have possibly expected. The Bosnian Moslems reluctantly accept the plan because, at present, it represents the best prospect for foreign military intervention. The cost to the Moslems, however, is the abandonment of their goal of a unitary state.

The Bosnian Serbs object to the Vance-Owen plan on two points. First, the map leaves large numbers of Serbs in areas dominated by Moslems and Croats; and second, it denies the Serbs a land corridor between the large Serb-inhabited region in north-western Bosnia and Serbia itself. Given the present animosity between the Bosnian Serbs and the Bosnian Croats and Moslems, an isolated Serb region in Bosnia would become the Nagorno-Karabakh of Europe. It is inconceivable that the Serbs will voluntarily accept this arrangement.

Adjustments must be made to the Vance-Owen plan to ensure that it is fair to all three Bosnian groups. Otherwise, the country will be condemned to decades of misery.

George Tintor,

52-62 Bishopsgate,

London EC2N 4AR

BA Bosnia-Hercegovina, East Europe P9711 National Security P9721 International Affairs NEWS General News P9711 P9721 The Financial Times London Page 20 372
Letter: Another Islamic bank in Europe Publication 930414FT Processed by FT 930414 From Mr JAMES HIGGO

Sir, John Gapper's article 'UK acts against Islamic bank' (April 1) begins: 'London-based Albaraka International Bank, the only Islamic bank in Europe. . .' In fact there is in Copenhagen an entirely separate bank run on Islamic principles - the A/S Islamic Bank International of Denmark - which I was visiting just last month.

James Higgo,

71 Oxford Gardens,

London W10 5UJ

DK Denmark, EC P6081 Foreign Banking and Branches and Agencies NEWS General News P6081 The Financial Times London Page 20 97
Arts: French without tears - Opera in Switzerland Publication 930414FT Processed by FT 930414 By ANDREW CLARK

The days when French singers were deemed necessary for French opera are long past. We want to hear the repertory, but there are no longer enough good native singers to go round. One solution is to sing in the vernacular, but this destroys the unique tonal blend of word and vocal line in French music. Another is to find non-French singers who have mastered the subtleties of the language - as in the latest Geneva staging of Poulenc's Dialogues des Carmelites. Or you engage a stock international cast who muddle their way through as best as possible, as Zurich has just done for Massenet's Herodiade.

Switzerland's linguistic mix means that audiences never have trouble understanding French when it is intelligently sung. But finding the right singers is no easier than elsewhere. This puts a premium on the artistic judgment and casting skills of theatres, qualities for which Geneva's Grand Theatre has become justly renowned. Recent seasons have included Louise, Ariane et Barbe-bleue, Mireille and Benvenuto Cellini, all with Anglophone principal singers. Now comes Poulenc's Christian tragedy - with Felicity Palmer, Marie McLaughlin and Alison Hagley as the three nuns whose words count the most.

They did themselves proud, and in the case of Miss Palmer's Old Prioress outstandingly so - not just in her fearless French declamation, but in her very human portrait of a woman whose redoubtable exterior crumbles before the agony of death. As Constance, Miss Hagley was spontaneous and child-like, a perfect foil for Blanche as portrayed by Miss McLaughlin: a troubled spirit searching for inner peace, sung and acted with quiet intensity. In the same way, Martine Dupuy's obsessive Mere Marie was the alter ego of Valerie Millot's fragrant, pragmatic Madame Lidoine.

This is an opera of opposites, all of them underlined in Francois Rochaix's staging. Robert Dahlstrom's representational decor allowed each scene to dovetail into the next. Here was the turmoil of Paris next to the solace of Compiegne, revolutionary hysteria face-to-face with religious order, mundane chatter amid a world of prayer. This most Catholic of operas made strong theatrical sense - never more so than when the nuns mounted the scaffold one-by-one in the final scene. And it would be hard to imagine Poulenc's serene, unspectacular music sounding more heartfelt than in the hands of Michel Plasson and the Suisse Romande Orchestra.

On these terms, the charge of longwindedness is hard to sustain. The criticism might be better targeted at Herodiade, judging by the Zurich Opera House's belated 150th anniversary tribute to Massenet. This grand operatic treatment of the Salome story has survived on the fringe of the repertory as a vehicle for star singers. What it really needs is a trenchant modern staging.

Zurich built this revival around Jose Carreras and Grace Bumbry, but Carreras cancelled, causing renewed worries about his health. Miss Bumbry, pro that she is, struggled valiantly to give the show some credibility. The odds were against her. Carreras' replacement as John the Baptist was Boiko Zvetanov, a young Bulgarian with a sweet voice, who sang with little dramatic purpose in a mush of vowel sounds. The virginal Salome was Cecilia Gasdia, who was similarly uninvolving, despite her touching delivery of the first act aria 'Il est doux'. As Herod, the American lyric baritone Rodney Gilfry enunciated well, but seemed temperamentally at odds with such a mature part. More convincing were Laszlo Polgar's Phanuel and the orchestra under Manfred Honeck, who made the most of Massenet's fund of lush melodies.

No expense had been spared on Gian-Franco de Bosio's staging, a fancy dress parade framed by arched columns and regularly interrupted by a quaint pictorial drop-curtain (designed by Pasquale Grossi). It was money down the drain. The chorus looked as if they were rehearsing for Verona. The ballets ranged from elementary acrobatics to a crotch-dance by a pretty boy in a loin cloth. To describe this as kitsch would be too generous.

CH Switzerland, West Europe P7922 Theatrical Producers and Services NEWS General News P7922 The Financial Times London Page 19 687