2010 INTERIM REPORT

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(1)WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 2010 INTERIM REPORT.

(2) WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. ABC arbitrage Group 2010 INTERIM REPORT.

(3) WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107.

(4) contents Management report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated financial statements. . . . . . . . . 8 Notes to the consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . 13 Statutory auditors’ report on the 2010 interim Consolidated financial statements. . . . . . . . . . . . . . . . . . . . . . . . . 21 Statement of the person responsible for the first half 2010 financial report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. Printed on: Print speed 3. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. abc arbitrage.

(5) Management report. June 30, 2010. Management report Key consolidated figures are presented below: June 30, 2010 IFRS. In EUR million Advisory revenues Proprietary trading revenues (1). June 30, 2009 IFRS. Dec. 31, 2009 IFRS. 0.4. -. -. 35.1. 35.8. 62.6. Net revenues. 35.5. 35.8. 62.6. Payroll costs. (8.4). (7.8). (13.8). Occupancy costs. (0.7). (0.3). (0.8). Other expenses. (2.0). (1.6). (3.6). Income before tax. 24.3. 26.0. 44.4. Net income. 15.3. 17.0. 30.4. 1.. Operating performance. Net income came to €15.3 million, in line with first-half 2009.. This type of environment is much less favourable to ABC arbitrage’s activities, as we have explained in the past few years, yet business momentum remained buoyant in the first half and above the average of the past five years.. At €35.5 million, net revenues were stable compared with the first half of 2009 but up on an annual equivalent basis. Gross return on equity (defined as net revenues expressed as a percentage of average equity) stood at almost 31% compared with, for example, a 12.54% fall in the CAC 40 over the period.. These results demonstrate the Group’s ability to compensate for lower volumes and volatility in the financial markets by innovating and improving its processes. They also reflect the contribution of its funds and the growth in new money, albeit moderate at present.. The financial markets have been calm since November 2009 and, except for May, the first half of 2010 saw a significant drop in volumes and volatility. There was no recovery in M&A activity during the period whilst issuer activity fell to some of its lowest levels in recent years.. During the period, we continued our diversification drive, by extending our geographical reach and developing new strategies, while also improving our capability in high-volume, low-margin transactions.. 4. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. (1) Net gains on derivative financial instruments measured at fair value through profit or loss (€35.9m) less provision expense ((€0.8)m)..

(6) abc arbitrage. We maintained our conservative approach in a still uncertain credit and regulatory environment by choosing not to allocate the Group’s entire capital to its business activities.. In light of this performance, the Annual Shareholders’ Meeting held in May 2010 authorised employees to exercise their stock options a year early, starting in June 2010, as part of a controlled process. In June 2010, the 25 grantees exercised 8,873,732 stock options and 1,200,000 founder share warrants, representing the remaining options and warrants outstanding under the 2006 incentive plan. A total of 5,741,237 new ABC arbitrage shares were issued and the remaining options and warrants were exchanged for shares acquired under buyback programmes that had been established to minimise their dilutive impact.. We also maintained a selective recruitment policy, mainly hiring people to bolster our core business teams. The Group employed an average of 75 people in the first half compared with 69 in 2009. Our human resources policy ensures that there is a strong, direct link between targets, results and individual bonuses. At the end of January, we moved into our new offices, which provide more suitable trading room facilities and improved information circulation. As announced in 2009, this will lead to an increase in occupancy costs and other expenses. Horizon 2010. Third-party asset management. In 2006, ABC arbitrage set up a far-reaching sharebased incentive programme called Horizon 2010 for its executive officers and employees. The plan set ambitious five-year earnings targets and vesting criteria based on the Group’s financial performance over the period. These targets were met a year ahead of schedule, with aggregate net income of almost €107 million generated over the period 2006 to 2009.. The Irish alternative investment fund ABCA Opportunities Fund Plc, which exploits M&A arbitrage opportunities, delivered a net return of 3.43% in the first half and 4.99% in the eight months to August 31, below target but substantially ahead of the market in general. Although the fund has generated positive returns since inception, its performance has been limited by the scarcity of deals in the past year, which makes it more difficult to spread risk and offers fewer opportunities for gains.. 5. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. As a result of the incentive plan, management now owns more than 20% of ABC arbitrage’s capital, ensuring that their interests are aligned with those of the shareholders..

(7) Management report. June 30, 2010. The fund has attracted €16 million in new capital since January 1, 2010, an increase of almost 50%, and should benefit from the expected recovery in M&A activity.. The fund began with capital of €17 million, including €8 million provided by ABC arbitrage, and will help expand the asset management business, a driver of future results. It delivered a net return of 3.70% over two months and 7.26% over four months, in line with expectations.. In early May 2010, the Group launched a new Irish alternative investment fund, ABCA Reversion Fund, which exploits statistical arbitrage opportunities.. Dividend distribution. The Annual Shareholders’ Meeting of May 28, 2010 approved a final net dividend of €0.55 per share for 2009.. Based on first-half results and its confidence in the Group’s ability to continue growing, the Board of Directors has decided to pay an interim 2010 dividend of €0.20 per share before the end of 2010. Shareholders will be given the option of reinvesting all or part of their interim dividend in ABC arbitrage shares at a price of €6.75 per share. The exact payment date will be announced at a later stage. n. The total net dividend for 2009 therefore came to €0.75 per share. After taking into account the shares issued upon reinvestment of dividends, the share capital currently amounts to €797,767.78, represented by 49,860,486 shares. The free float stands at just over 45%.. 6. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 2.. The fund has received two new investments totalling €3.7 million since June 30, 2010. n.

(8) abc arbitrage. Outlook. There is little visibility as regards the economic environment facing issuers in the second half of 2010. A climate of uncertainty has developed in the financial and interbank markets and it is hard to predict when and how quickly we will see any recovery in investor and issuer activity.. We will continue to optimise our information systems capability to meet structural changes in the financial markets. We also intend to pursue our strategy of leveraging the skills and commitment of our teams, as well as our strict investment discipline, to drive our business forward. n. The financial markets were quiet in July and August with very low volumes and little volatility. The Group’s business momentum during this period was in line with the first half.. The Board of Directors September 9, 2010. 7. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 3..

(9) Consolidated financial statements June 30, 2010. Balance sheet - assets In EUR. Note. June 30, 2010 IFRS. Dec. 31, 2009 IFRS. Intangible assets. 2.2. 44,405. 68,396. Property and equipment. 2.2. 3,507,736. 668,254. –. 2,009,323. 2.3. 349,409. 348,944. 4,039,479. 1,823,550. Work in progress Current financial assets Deferred tax assets Total non-current assets Financial assets at fair value through profit or loss. 2.5. Other accounts receivable. 2.6. 7,941,028. 4,918,468. 596,668,312. 417,497,261. 9,384,476. 5,637,623. 22,815,818. 22,988,565. Total current assets. 628,868,606. 446,123,449. TOTAL ASSETS. 636,809,634. 451,041,916. June 30, 2010 IFRS. Dec. 31, 2009 IFRS. Cash and cash equivalents. In EUR. Note. Paid-up share capital Additional paid-in capital Retained earnings Interim dividend Net income Total equity attributable to equity holders. 2.4. Minority interests. 759,686. 667,826. 78,874,189. 64,834,573. 5,315,788. 16,683,580. 0. (7,933,267). 15,270,834. 30,368,797. 100,220,497. 104,621,509. (180). (180). 100,220,317. 104,621,329. Provisions for contingencies and charges. 655,845. 1,067,108. Non-current financial liabilities. 196,672. 196,672. 852,517. 1,263,780. Total equity. Non-current liabilities Financial liabilities at fair value through profit or loss. 2.5. 499,104,895. 335,765,153. Other liabilities. 2.6. 36,254,508. 9,131,635. Taxes payable. 245,290. 175,117. Short-term debt. 132,107. 84,901. Current liabilities. 535,736,801. 345,156,807. TOTAL EQUITY AND LIABILITIES. 636,809,634. 451,041,916. 8. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Balance sheet - liabilities.

(10) abc arbitrage. In EUR. Note. June 30, 2010 IFRS. June 30, 2009 IFRS 36,348,047. Net gain/loss on financial instruments at fair value through profit or loss. 3.1. 35,895,393. Other revenue. 3.2. 654,897. 549,045. Administrative expenses. 3.3. (2,574,064). (2,360,689). (274,296). (468,821). 3.4. (8,173,033). (7,332,674). Taxes and duties Payroll costs Depreciation and amortisation expense OPERATING INCOME Provision expense. 3.5. (415,390). (148,652). 25,113,507. 26,586,258. (811,059). (537,131). INCOME BEFORE TAX. 24,302,448. 26,049,127. Current taxes. (11,247,543). (9,475,930). Deferred taxes NET INCOME Attributable to equity holders. 2,215,928. 474,315. 15,270,834. 17,047,512. 15,270,834. 17,047,512. Attributable to minority interests. -. -. 47,480,347. 37,741,711. Earnings per ordinary share. 0.32. 0.45. Diluted earnings per ordinary share. 0.32. 0.45. Number of ordinary shares. Statement of comprehensive income In EUR. Note. Net income. June 30, 2010 IFRS. June 30, 2009 IFRS. 15,270,834. 17,047,512. Change in foreign exchange. -. -. Remeasurement of available-for-sale assets. -. -. Remeasurement of hedging instruments. -. -. Remeasurement of non-current assets. -. -. Actuarial gains and losses on defined benefit plans. -. -. Share of other comprehensive income on equity-accounted affiliates. -. -. Income tax. -. -. TOTAL OTHER COMPREHENSIVE INCOME. -. -. Net income and other comprehensive income. 15,270,834. 17,047,512. Attributable to equity holders. 15,270,834. 17,047,512. -. -. Attributable to minority interests. 9. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Statement of income.

(11) Consolidated financial statements June 30, 2010. Statement of changes in equity between december 31, 2008 and June 30, 2010 Paid-up share capital. In EUR thousand At December 31, 2008. 604. Issue of shares. -. Elimination of treasury shares. -. Share-based payments. -. Appropriation of net income 2008*. -. Net income for the period. 604. Paid-up share capital. In EUR thousand At December 31, 2009. 668. Issue of shares. 92. Elimination of treasury shares. -. Share-based payments. -. Appropriation of net income 2009*. -. Net income for the period. -. At June 30, 2010. 760. * Appropriation of 2008 and 2009 net income do not include the impact of dividend reinvestment in shares during July (see note 2.4.).. 10. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. At June 30, 2009.

(12) abc arbitrage. Equity instruments and related reserves. Elimination of treasury shares. Retained earnings and net income. Total equity attributable to equity holders. 42,513. (1,705). 42,440. 83,851. -. -. -. -. (2,171). (9). -. -. 22. 22. -. -. (20,758). (20,758). -. -. 17,048. 17,048. 42,513. (3,876). 38,741. 77,982. Equity instruments and related reserves. Elimination of treasury shares. Retained earnings and net income. Total equity attributable to equity holders. 64,835. (5,321). 44,440. 104,622. 14,040. -. -. 14,131. -. 5,204. -. 5,204. -. -. (12,893). (12,893). -. -. (26,114). (26,114). -. -. 15,271. 15,271. 78,875. (117). 20,704. 100,221. 11. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. (2,180).

(13) Consolidated financial statements June 30, 2010. In EUR thousand Net income. June 30, 2010 IFRS. June 30, 2009 IFRS. 15,271. 17,048. Net allocations to provisions. 400. 537. Net allocations to depreciation and amortisation. 415. 149. (2,216). (474). Change in deferred taxes Others Net cash provided by operations before changes in working capital Changes in working capital Net cash provided by operating activities Net cash used by investing activities Net cash provided by capital transactions Dividends paid Share-based payments Net cash used by financing activities. 43. 22. 13,913. 17,281. 6,804. 19,840. 20,717. 37,120. (1,222). (202). 14,131. -. (26,114). (20,758). (7,732). (2,180). (19,715). (22,938). Net change in cash and cash equivalents. (220). 13,980. Cash and cash equivalents, beginning of period. 22,904. 12,467. Cash and cash equivalents, end of period. 22,684. 26,447. 12. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Consolidated cash flow statements.

(14) abc arbitrage. Notes to the consolidated financial statements Accounting principles. The summarized interim consolidated financial statements for the ABC arbitrage Group for the six months ended June 30, 2010 were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. In particular, the interim financial statements were prepared and are presented in accordance with IAS 34 “Interim Financial Reporting”.. Preparation of the financial statements required ABC arbitrage Group to make estimates and assumptions, which could have an impact on the amounts at which assets, liabilities, income and expenses are stated. The estimates, and the assumptions underlying them, have been made on the basis of past experience and of other factors considered to be reasonable in the circumstances. They thus serve as the basis for the judgement made in determining the carrying amounts of assets and liabilities that could not be determined directly from other sources. The definitive amounts that will be stated in ABC arbitrage Group’s future financial statements may be different from the amounts currently estimated. These estimates and assumptions are reviewed on a continuous basis.. As permitted by IAS 34, this condensed set of financial statements includes only selected explanatory notes. These condensed consolidated financial statements for the six months ended June 30, 2010 must be read in conjunction with the Group’s 2009 consolidated financial statements. In preparing the interim consolidated financial statements, the Group applied the same accounting principles and methods as for its 2009 annual consolidated financial statements, which were drawn up in accordance with IFRS as adopted by the European Union and described in note 1 to the 2009 consolidated financial statements “Accounting principles and policies”.. As the Group’s activities are neither seasonal nor cyclical in nature, its first half results were not affected by any seasonal or cyclical factors. n. 13. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 1..

(15) Notes to the consolidated financial statements June 30, 2010. 2.. Notes to the balance sheet – 1st half 2010. 2.1. Consolidation principles All Group subsidiaries are fully consolidated. Countries. % of interest. ABC arbitrage. Company. France. Parent company. ABC arbitrage Asset Management. France. 100.00%. ABCA Global Fund. France. 100.00%. ABCA Opportunities Fund Plc. Ireland. 40.44%. ABCA Reversion Fund Plc. Ireland. 47.06%. In early May 2010, ABC arbitrage launched a second alternative investment fund, ABCA Reversion, as part of its drive to expand the third-party. 2.2. Property & equipment and intangible assets Gross value In EUR thousand Concessions and similar rights Equipment, fixtures and fittings Vehicles Office and computer equipment, furniture. Gross value Dec. 31, 2009 353 1,602 192 1,531. Total gross value. Acquisitions 32 1,204 2,170. 3,678. 3,406. Dec. 31, 2009 (285) (1,390) (48) (1,219). Increases (56) (70) (19) (270). (2,942). (415). Retirements Gross value disposals June 30, 2010 (121) 264 (1,505) 1,301 192 (603) 3,097 (2,229). 4,854. Amortisation and depreciation In EUR thousand Concessions and similar rights Equipment, fixtures and fittings Vehicles Office and computer equipment, furniture Total amortisation and depreciation. The movements in property & equipment and intangible assets were due to the Group’s relocation to 18 rue du Quatre Septembre.. Decreases June 30, 2010 121 (220) 1,348 (113) (66) 586 (903) 2,055. (1,302). Assets classified as work in progress at December 31, 2009 came on stream early in the first half of 2010.. 14. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. asset management business by offering a broader spectrum of alternative products..

(16) abc arbitrage. 2.3. Other non-current financial assets At June 30, 2010, this item included €350 thousand in deposits.. 2.4. Consolidated equity Share-based payment At its meeting of May 22, 2006, the Board of Directors decided to grant: • 8,845,000 stock options to 24 grantees; • 1,200,000 warrants to 3 grantees. For the two groups, the exercise price has been set at €4 and may be revised in light of future dividend payments, excluding statutory adjustments, with a minimum of €2.514 (average share price on date of Board’s decision).. The Annual Shareholders’ Meeting also approved a share buyback programme. Under the terms of the authorisation, the Company may purchase its own shares on the market or over-the-counter, including by means of block purchases or sales or the use of derivative financial instruments, at the times the Board of Directors deems appropriate. More particularly, the Company may purchase, at the market price on the transaction date, blocks of shares originally acquired by employees and executive officers under the share-based incentive plan. Prior to the Annual Shareholders’ Meeting, the Board’s compensation committee had recommended that the amount invested in these market-price purchases should be limited to the proceeds raised from the exercise of stock options, in order to avoid reducing the Group’s cash reserves.. At its meeting of January 22, 2008, the Board of Directors also decided to grant: • 169,700 shares to 17 grantees; • 670,000 stock options to 14 grantees. For the last group, the exercise price has been set at €6.5 and may be revised in light of future dividend payments, excluding statutory adjustments, with a minimum of €4.85 (average share price on date of Board’s decision). The expense related to stock option plans is recognised over the vesting period. This expense, the credit entry for which is posted to shareholders’ equity, is calculated on the basis of the overall plan value, determined at the grant date by the Board of Directors.. A total of 10,076,314 options have been exercised and 169,700 shares awarded under stock grants. At December 31, 2009, the Company held 939,626 shares in treasury to cover the exercise of stock options or founder share warrants, purchased at an average price of €5.44 per share. These treasury shares are recorded as a deduction from equity.. In first-half 2010, the payroll expense amounted to €43 thousand.. 15. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. At the Annual Shareholders’ Meeting in May 2010, the Board of Directors recommended bringing forward the exercise date of the Horizon 2010 stock options by one year, as the Horizon 2010 targets had been exceeded (almost €107 million in aggregate net income over four years) a year ahead of schedule. The shareholders authorised the exercise of the stock options from May 28, 2010..

(17) Notes to the consolidated financial statements June 30, 2010. During the first half of 2010, the Company bought back 3,565,151 shares for an amount of €25,371 thousand to cover the stock grants and some of the exercised stock options. Taking account of shares bought back in 2010 and in previous years, 4,335,077 of the shares allocated upon exercise of stock options were treasury shares and the remaining 5,741,237 were newly issued shares.. At June 30, 2010, equity was reduced by €26,114 thousand to take account of the dividend payment. At the end of the option period (July 20, 2010), taking account of reinvested dividends and treasury shares: • cash dividends were paid in the amount of €10,641 thousand, • 2,380,139 new ordinary shares, ranking pari passu with existing shares, were issued at a price of €6.50 per share.. The after-tax loss on all share buybacks was €12,936 thousand, which was recognised as a deduction from consolidated equity. The impact on equity in the first half of 2010 was adjusted by the impact already recognised at December 31, 2009. The share issues resulted in a €14,131 thousand increase in consolidated equity, being the total amount of the exercise price.. At this date, the Parent Company’s share capital was represented by 49,860,486 ordinary shares with a par value of €0.016 each, all fully paid.. Capital increase resulting from reinvestment of dividends. During first half 2010, ABC arbitrage sold 63,375 of its own shares. At the same time, 48,397 shares were purchased under the market-making agreement with Cheuvreux.. The Annual Shareholders’ Meeting of May 28, 2010 decided to pay a final dividend for 2009 in a net amount of €0.55 per share and to offer shareholders the option of receiving the final 2009 dividend either in cash or in new shares.. At June 30, 2010, ABC arbitrage held 17,462 of its own shares, acquired at a total cost of €116 thousand. In accordance with IFRS, treasury stock is deducted from equity.. 2.5. Financial assets/liabilities at fair value through profit or loss The Group holds financial instruments for trading purposes only.. Fair value of financial assets and liabilities is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The primary basis for determining the fair value of a financial instrument is the quoted price in an active market. If the instrument is not traded on an active market, fair value is determined using valuation techniques.. Details of securities to be received and delivered are provided in note 2.7. Risks. Cash reserves earn interest at variable rates indexed to benchmark market rates.. 16. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Treasury stock.

(18) abc arbitrage. Financial assets. Financial liabilities. Securities to be received. 651,033. 254,943. Securities to be received (recorded off-balance sheet). 151,421. 218,751. (49,873). (763,757). (163,542). (218,646). In EUR thousand. Securities to be delivered Securities to be delivered (recorded off-balance sheet) Cash and cash equivalents. Total at December 31, 2009. 1,276,148 (1,195,819). 7,629. 50,475. 58,104. -. (40,870). (40,870). 596,668. (499,105). 417,497. (335,765). Investors' equity the consolidated fund Total at June 30, 2010. Total. 2.6. Other receivables and payables All receivables and payables are due within less than one year. Other receivables. Trade receivables/payables Balance of dividend payable Accrued income/expenses. Other payables. 71. (614). -. (26,114). 254. (763). Accrued taxes and payroll costs. 9,059. (8,762). Total at June 30, 2010. 9,384. (36,255). Total at December 31, 2009. 5,638. (9,132). 2.7. Risks The Group’s risks are the same as those described in the notes to the consolidated financial statements for the year ended December 31, 2009. The following table summarizes the positions taken on the markets at June 30, 2010: Type of arbitrage (in EUR thousand). Total long positions. Total short positions. 272,734. (272,734). Arbitrages without market risks. 859,390. (855,295). Arbitrages with market risks. 144,025. (67,789). 1,276,148. (1,195,819). Borrowed securities not yet sold or symmetrical exposures. Total for arbitrage transactions. 17. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. In EUR thousand.

(19) Notes to the consolidated financial statements June 30, 2010. The Group has never had any exposure to the subprime mortgage market nor to any directly correlated derivatives.. • d rying up of deals in the financial markets (mergers & acquisitions, issuance of various products); • delays in completing deals, which could lead to carrying costs in excess of the expected profits.. The main risks in this type of market environment are: • a rise in the failure rate of arbitrages with market risks;. 2.8. Guarantees given. 3.. given as collateral to the institutions that provide the financing. n. Notes to the statement of income – 1st half 2010. 3.1. Net gains on financial instruments at fair value through profit or loss In view of the highly specific nature of its business, the ABC arbitrage Group is probably one of the only independent firms engaged solely in arbitrage trading.. This item corresponds to revenues from proprietary trading activities discussed in the Group’s management report, except for provisions. It includes all expenses and costs directly related to the trading business, such as: • dividends; • gains and losses on disposal of financial assets at fair value through profit or loss; • changes in fair value of instruments held or due; • securities carrying or lending costs; • exchange gains and losses.. The Group has opted for presentation by nature as this is closer to the indicators customarily published in its management report. At June 30, 2010, “Net gains or losses on financial instruments at fair value through profit or loss” came to €36,895 (€36,348 thousand at June 30, 2009).. 18. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Most financial instruments recorded under “Financial assets at fair value through profit or loss” have been.

(20) abc arbitrage. 3.2. Other revenue Other revenue comprises revenue from sub-letting premises (€243 thousand) and from advisory activities (€411 thousand) amounted to. €654 thousand versus €549 thousand during first half 2009.. 3.3. Administrative expenses Administrative expenses principally comprise data mining and processing costs, together with administrative and communications costs.. This item totalled €2,574 thousand versus €2,361 thousand for the first half 2009.. At June 30, 2010, the average number of employees was 75 (versus 69 at June 30, 2009).. Payroll-based taxes amounted to €209 thousand (versus €396 thousand in 2009).. Payroll costs include (i) €6,032 thousand in fixed and performance-related compensation together with statutory and discretionary profit-sharing (versus €5,925 in 2009), (ii) payroll taxes of €2,087 thousand (versus €1,385 thousand in 2009).. Share-based payments amounted to €43 thousand (versus €22 thousand at June 30, 2009). The Group does not provide any post-employment benefits (supplementary pensions or health insurance).. 3.5. Provision expense At June 30, 2010, provision expense amounted to €811 thousand, comprising additional impairment losses on receivables from foreign governments,. where the recovery process is likely to be long and time-consuming. n. 19. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 3.4. Payroll costs.

(21) Notes to the consolidated financial statements June 30, 2010. 4.. Segment information. Revenues by business segment Arbitrage trading is the Group’s only business activity and all revenues are derived from proprietary transactions. The Group conducts two types of arbitrage strategy with different risk profiles in various geographical markets: arbitrages without market risks as self liquidating arbitrage strategies (transactions that do not generate any directional risk or any event. risk; positions are fully hedged and are governed by legally binding documentation which guarantees convergence on a fixed date) and arbitrages with market risks as suspensive clause arbitrage strategies (unlike the first category, the legally binding documentation governing suspensive clause strategies does not guarantee convergence). n. Note: In the following tables, positions correspond to long positions valued at the convergence price, adjusted for the value of any payments to be made or received to close out the transaction.. Breakdown of arbitrage transactions by type of risk Average positions (value). Arbitrages without market risks. 65%. 86%. Arbitrages with market risks. 35%. 14%. 100%. 100%. Average number of arbitrage transactions. Average positions (value). 14%. 8%. Total. Breakdown of arbitrage transactions by geographic area 1st half 2010 Euro zone (excluding France) France USA Other markets Total. 4%. 2%. 54%. 53%. 28%. 37%. 100%. 100%. Breakdown of arbitrage transactions by geographic area and type of risk Arbitrages without market risks. Arbitrages with market risks. Total. Euro zone (excluding France). 6%. 2%. 8%. France. 2%. 0%. 2%. 46%. 7%. 53%. 1st half 2010. USA Other markets. 32%. 5%. 37%. Total. 86%. 14%. 100%. 20. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Average number of arbitrage transactions. 1st half 2010.

(22) abc arbitrage. Statutory auditors’ report on the first half 2010 interim consolidated financial statements To the shareholders, In accordance with the terms of our appointment by the General Meeting of Shareholders and as required by Article L.451-1-2 III of the French Monetary and Financial Code (Code Monétaire et Financier), we have performed a limited review of the accompanying condensed interim consolidated financial statements of ABC arbitrage for the period from January 1 to June 30, 2010, and of the information contained in the interim management report.. Conclusions concerning the financial statements material misstatement as would be obtained from a full audit.. We conducted our limited review in accordance with professional standards applicable in France. A limited review of interim financial statements consists primarily of making inquiries of the persons responsible for financial and accounting matters, and applying analytical procedures. It is less in scope than an audit conducted in accordance with auditing standards applicable in France and, consequently, does not enable us to obtain the same level of assurance that the financial statements are free from. 2.. Based on our limited review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements are not prepared in accordance with IAS 34, the International Financial Reporting Standard adopted in the European Union for Interim Financial Reporting. n. Specific verification. We have also reviewed the information given in the activity report accompanying the condensed interim consolidated financial statements that were the subject of our limited review.. We have no matters to report regarding its fair presentation and conformity with the condensed interim consolidated financial statements. n. Neuilly-sur-Seine, September 13, 2010 The Statutory Auditors ERNST & YOUNG ET AUTRES Olivier DRION. DELOITTE & ASSOCIES Jean-Marc MICKELER 21. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. 1.. The condensed interim consolidated financial statements were prepared under the responsibility of the Board of Directors in a continued poor economic climate. Our responsibility, based on our limited review, is to report our conclusions concerning these interim consolidated financial statements..

(23) statement of the person responsible June 30, 2010. Statement of the person responsible for the interim financial report ABC arbitrage – FIRST-HALF 2010 I hereby declare that, to the best of my knowledge, i) the condensed consolidated financial statements for the six months ended June 30, 2010 have been prepared in accordance with applicable accounting standards and give a true and fair view of the consolidated assets and liabilities, financial position and results of ABC arbitrage, and ii) the interim. management report presents a true and fair view of the information required under Article 222-6 of the General Regulation of the Autorité des Marchés Financiers.. 22. WorldReginfo - 80dac4f4-6225-44ae-b498-a35524c59107. Dominique CEOLIN Chairman of the Board of Directors.

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