British businessmen in the kingdom said last week they feared the issue could damage Britain's

British businessmen in the kingdom said last week they feared the issue could damage Britain's commercial interests.Mr Rifkind said the government did not like the presence of people such as Mr Masari but could take no action against them unless they broke the law. "We take a very hard line but we act against terrorism, not opinions," Mr Rifkind said.The Home Office is reviewing an appeal by Mr Masari against deportation to Yemen and he has also lodged an application for political asylum.The security services are believed to be keeping a close eye on Mr Masari and the CDLR. There is little doubt that if officials can find a reason to get Mr Masari out of the country they will do so.Two little-known groups, the Islamic Change Movement and the Tigers of the Gulf, claimed responsibility for Monday's bombing. Such titles are often no more than a nom de guerre, giving no clues to the identity of the perpetrators.But both Mr Masari and Western officials agreed on the likelihood that the bombing could be the work of so-called "Afghanis," devout young men trained by the CIA and Pakistan's military intelligence to use arms and explosives against Soviet troops in Afghanistan.Many have since returned to the Middle East to discover a new outlet for their skills, joining a pool of discontented youth who regard existing governments as corrupt and see Islam as the solution. Some have made their way to Bosnia to fight as mujahedin alongside forces of the Muslim-led government in Sarajevo..

Srinagar - Two of four Western hostages held in Kashmir by Al- Faran guerrillas since early July are ill and one of them is struggling for life, according to their captors. A handwritten statement said the Indian government would be responsible if any of the hostages died. The statement did not identify which hostages were unwell but India said last week that an American, Don Hutchings, and one of the two British hostages, Paul Wells and Keith Mangan, was ill Reuter. JOHN WILLCOCK Financial Correspondent Merrill Lynch has poached two top corporate finance directors from its investment banking rival Deutsche Morgan Grenfell, as part of the US bank's expansion in the UK following its recent acquisition of Smith New Court.The defection of Morgan's number one and two in corporate finance, Guy Dawson and Justin Dowley, had nothing to do with rumours of cultural clashes between the UK merchant bank and its German parent, a Morgan spokesman said yesterday."They've tendered their resignations. They have been with us for many years, and we wish them well," the Morgan spokesman said."We have set up a five-man management committee for corporate finance," he said.

"Life goes on."Deutsche Morgan Grenfell recently lost its entire 20-strong derivatives team to West Merchant Bank, the London subsidiary of its German rival West Deustche Landesbank.Deutsche decided to base all its global investment banking activities with the Morgan Grenfell subsidiary in London last autumn, since which it has itself pursued an aggressive hiring policy.Sources close to Merrill insisted that the defectors would be paid "not a single penny more" than they had received at Morgan.They had left because the American bank had a better strategic vision than Deutsche Morgan Grenfell, and there will be more hirings to make Merrill the leading investment bank in the UK and Europe, the source said.Guy Dawson said: "Merrill Lynch's international advisory and financing capabilities, combined with their powerful presence in the UK equity and sterling debt markets, gives the firm a competitive edge in serving the varied corporate finance needs of its clients.". Shares in Geest, the banana importer and fresh produce group, lost almost a quarter of their value yesterday after the company issued a profits warning. The shares fell 32p to 107p when the company said this year's profits would be "materially below" last year's pounds 12.8m. The company blamed the problems on an excess supply of bananas caused by changes in European Union import quotas.

These have caused prices in October to fall 30 per cent below last year's levels. The company announced a further pounds 7m of provisions on top of the pounds 5m announced in the first half Analysts are now forecasting a pounds 4m loss Investment Column, page 26. DAVID HELLIER and MAGNUS GRIMOND There are growing concerns in the City that Glaxo Wellcome, the pharmaceutical giant, faces a far greater tax liability than previously thought as a result of its disputed transfer pricing policy.In US filings the company has already admitted to a potential liability of pounds 463m in the years from 1987 onwards, but this takes no account of possible tax owed by the company, and interest on that tax, prior to 1986.Last week the High Court ruled that the Inland Revenue is free to pursue the company for back tax incurred prior to 1986, the normal time limit.According to US filings, Glaxo Wellcome has benefited by pounds 463m from its special tax status in Singapore for the past eight years alone, compared with what it might have paid under the applicable UK statutory corporation tax rates.Glaxo insists that it has fully provided for all possible tax liabilities but refuses to disclose the amount. It is understood that the company believes disclosure could reinforce the Revenue's case.Last week's ruling enables the Revenue to pursue tax that has been the subject of dispute with the company for at least 19 years. Added to the company's tax liability is the interest on any unpaid tax which, experts say, could run into many millions.In notes to its accounts, Glaxo Wellcome states that it has manufacturing operations in Singapore, which were wholly exempt from Singapore tax until 30 June 30 1992, and are now taxed at a reduced rate until 30 June 1997. The effect of the special tax status in Singapore is shown in the US filings for the period between 1987 and 1994.According to the judgment from last week's High Court case, Glaxo's former finance director and later chairman, Sir Paul Girolami, was in correspondence with the Revenue about the disputed tax situation as far back as 1976.The 1977 Glaxo accounts, which were audited by Coopers & Lybrand, state that "the tax liabilities of certain UK and overseas subsidiaries have not been fully agreed with the appropriate Revenue authorities for a number of years".Transfer pricing is the method by which subsidiaries of multinationals account for sales between different subsidiaries.