TIDMARGO
RNS Number : 4039J
ARGO Group Limited
30 March 2010
Argo Group Limited
("Argo" or the "Company")
Annual Report and Accounts for the Year Ended 31 December 2009
Argo today announces its final results for the year ended 31 December 2009.
The Company will today send to its shareholders its report and accounts for the
year ended 31 December 2009, which are also available at the Company's website
www.argogrouplimited.com.
Key Highlights for the twelve months ended 31 December 2009
(the comparative trading period is from 13 June 2008 to 31 December 2008 unless
otherwise stated)
- Improved performance across the Argo credit funds
- Remained profitable despite significant reduction in performance fee
income
- Revenues of USD11.7 million (2008: USD16.6 million)
- Operating profit of USD0.9million (2008: USD9.3 million)
- Profit before tax of USD2.4 million (2008: USD8.2 million)
- Strong balance sheet: net assets of USD44.5 million (December 2008:
USD40.9 million)
Commenting on the results and outlook, Kyriakos Rialas, Chief Executive of Argo
said:
"In line with the entire hedge fund industry the Company and its funds have
experienced two difficult years of trading. However the Company has been able to
stabilise its position by making some difficult yet essential decisions. As a
result the Company's liquidity and balance sheet are strong and its regulatory
structure is well established. As the Company's main fund enters its tenth year
of existence it is well positioned to benefit from any upturn in market
conditions."
Chairman's Statement
The company was incorporated on 14 February 2008 and acquired the Argo
businesses on 13 June 2008. Whilst the comparative trading period is therefore
from 14 February 2008 to 31 December 2008, financial data in respect of the Argo
business has only been consolidated from 13 June 2008.
Key Highlights for the twelve months ended 31 December 2009
(the comparative trading period is from 13 June 2008 to 31 December 2008 unless
otherwise stated)
- Improved performance across the Argo credit funds
- Remained profitable despite significant reduction in performance fee
income
- Revenues of USD11.7 million (2008: USD16.6 million)
- Operating profit of USD0.9million (2008: USD9.3 million)
- Profit before tax of USD2.4 million (2008: USD8.2 million)
- Strong balance sheet: net assets of USD44.5 million (December 2008:
USD40.9 million)
Business review
Argo is pleased to report its results for the year ended 31 December 2009. The
Company was incorporated in February 2008 in the Isle of Man and began trading
as a new group holding company on 13 June 2008, creating a shorter comparative
period of 13 June to 31 December 2008. It listed on the AIM market in November
2008.
Argo's primary business is to deliver a diversified approach to investing in
emerging markets. Its investment objective is to provide investors with absolute
returns in the six funds that it manages by investing in, inter alia, fixed
income, special situations, local currencies and interest rate strategies,
private equity, real estate, quoted equities, high yield corporate debt and
distressed debt, although not every fund invests in each of these asset classes.
Argo has a performance track record dating back to 2000.
For the year ended 31 December 2009 the Group generated revenues of USD11.7
million (period to 31 December 2008: USD16.6 million) with management fees
accounting for USD10.9 million (period to 31 December 2008: USD9.0 million). The
decline in revenues reflected lower performance fee income of USD0.4 million
(period to 31 December 2008: USD7.5 million) during the period due to the
application of the high-water mark across the funds. The Argo Fund Limited
("TAF") and Argo Global Special Situations Fund SP ("AGSSF"), a segregated
portfolio of the Argo Capital Investors Fund SPC, will need to increase their
NAV as at 28 February 2010 by 51.0% and 25.8% respectively in order to reach
their high-water mark. Earnings per share were USD0.04 (period to 31 December
2008: USD0.09).
Assets under management ("AUM") decreased during the year ended 31 December 2009
by 33% to USD439.5 million from their level at 31 December 2008. The decrease of
USD217 million was largely the result of, firstly, redemptions from AGSSF and
TAF and, secondly, the write down of assets of the Argo Real Estate
Opportunities Fund Limited ("AREOF") which is described in more detail below.
As foreshadowed in the interim Chairman's Statement, the Group subscribed USD11
million of existing cash resources for new shares in TAF on 5 June 2009. This
allowed the Company to improve the return on assets by taking advantage of lower
market valuations and achieve better returns than the prevailing rates available
from bank deposits.
The directors recommend a final dividend of 1p per share (2008: Nil). The final
dividend will be paid on 23 June 2010 to shareholders who are on the Register of
Members on 28 May 2010. Going forward, it is intended that the Company
implements a progressive dividend policy, paying a final dividend each year. In
addition the directors intend to undertake a share purchase programme up to a
maximum total value of USD2 million over a period of 12 months commencing from 1
April 2010. The directors firmly believe that a return of excess cash to
shareholders through dividends and buy-backs will send a positive message to
investors in the Company.
Operational review
The number of new redemptions received by the Argo Funds declined significantly
during the course of the year. As noted previously, TAF's board of directors
decided to implement a 'gate' on redemptions effective 19 November 2008. Under
the terms of this gate, the Fund would meet redemption requests amounting to 10%
of TAF's total number of shares at each subsequent dealing date until all
redemptions were satisfied. The gate became superfluous in the first half of
2009 and we hope that, in due course, this development combined with the better
performance will encourage new investor interest to the Fund.
AGSSF Holdings Limited ("AHL") was established in February 2009 to hold
approximately 40% of AGSSF's existing net assets comprising less liquid
positions. Redemption requests to AGSSF have been met to date partly in cash -
albeit restricted by the imposition of a gate - and partly through in specie
distribution of AHL shares. This Fund still has a backlog of redemptions to meet
but AGSSF's board of directors is continuing to work with the fund manager on a
plan to normalise the operations of the Fund.
The reduction in AUM and concomitant fall in revenues has necessitated a
detailed review of the Company's cost base. Staff salaries were reduced by 15%
effective 1 April 2009 and this was followed by a redundancy programme in the
summer. The latter, together with some voluntary staff departures, has led to a
decline in the headcount from 39 at the end of 2008 to 26 currently but the
Company has ensured that the operational framework remains intact and that it
retains the capacity to manage additional fund inflows as and when they occur.
In order to retain and properly incentivise its qualified personnel, the Company
paid its employees variable compensation in the form of a cash bonus and intends
to continue such practice in the aggregate amount of 30%-50% of profit before
tax.
As part of the review of the Company's cost base the directors decided to
transfer the Group's marketing activities to Argo Capital Management Limited and
wind down the marketing businesses of Argo Investor Services Limited and Argo
Investor Services AG. The former company was struck off on 14 December 2009.
Fund performance
Performance across the range of Argo Funds was mostly encouraging for the year
ended 31 December 2009 with TAF, Argo Distressed Credit Fund Limited ("ADCF"),
AGSSF and the AHL portfolio delivering positive returns for the year, in
contrast to the draw-downs in 2008. The recovery in credit markets from March
2009 helped some of the funds' assets benefit from higher market valuations but
whilst the return of confidence to these markets was encouraging, we erred on
the side of caution and positioned the funds in line with this view by retaining
some short strategies. Whilst TAF, AGSSF and ADCF all achieved double digit
returns, the performance lagged those that adopted long-only strategies.
However, whilst fund subscriptions have been sparse in our asset classes as new
or returning investors prefer the daily/weekly liquidity terms offered by equity
long/short, global macro and managed futures, we believe investors will at some
point recognise the merits of uncorrelated strategies with managed downside
risk.
Argo Funds
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Fund | | 2009 | 2008 | Since | Annualised |Sharpe | Down | AUM |
| | | Year | Year |inception |performance | ratio |months | |
| |Launch | total | total | | | | | |
| | date | | | | | | | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| | | % | % | % | CAGR % | | | US$m |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| The Argo |Oct-00 | 12.18 |-39.86 | 115.8 | 9.58 | 0.76 | 12 |123.0 |
| Fund | | | | | | | of | |
| | | | | | | | 111 | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Argo Global |Aug-04 | 12.85 |-26.88 | 37.08 | 6.63 | 0.59 | 15 |122.1 |
| Special | | | | | | | of | |
| Situations | | | | | | | 65 | |
| Fund | | | | | | | | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| AGSSF |Feb-09 | 7.72 | N/A | 7.72 | 8.63 | 1.34 | 4 | 76.4 |
| Holdings | | | | | | | of | |
| | | | | | | | 11 | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Argo |Oct-08 | | 0.49 | 11.61 | 8.76 | 1.37 | 5 | 13.1 |
| Distressed | | 11.06 | | | | | of | |
| Credit Fund | | | | | | | 15 | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Argo Real |Aug-06 |-78.47 | -2.13 | -72.5 | -31.33 | N/A | N/A |37.8* |
| Estate | | | | | | | | |
| Opportunities | | | | | | | | |
| Fund | | | | | | | | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Argo |Aug-06 | -2.83 |-37.51 | 29.1 | 8..00 | N/A | N/A | 67.1 |
| Capital | | | | | | | | |
| Partners | | | | | | | | |
| Fund | | | | | | | | |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
| Total | | | | | | | |439.5 |
+---------------+--------+--------+--------+-----------+-------------+--------+--------+-------+
* NAV reported twice a year, March and September.
The Argo Real Estate Opportunities Fund Limited ("AREOF") was affected by
challenging trading conditions and more specifically, retailer bankruptcies,
increasing demand for rent concessions and a growing reluctance of tenants to
make payments of their contractual obligations on a timely basis. Nevertheless,
the Fund's two retail centre projects in Sibiu and Suceava in Romania continued
to trade with high tenant occupancy levels. AREOF's first venture in Ukraine,
the Riviera Shopping City in Odessa, was completed and opened in October 2009;
it is currently 89% let and was the largest retail opening in the country last
year.
The Company still received management fee income from the initial capital of
EUR100 million. AREOF reported an adjusted NAV of EUR26.4 million as at
end-September 2009 (compared with EUR122.6 million as at 30 September 2008) due
to losses on investment properties, an impairment provision against land secured
financial assets and the revaluation of development land; with the support of
the Argo Funds AREOF has raised a further EUR10.5 million through a placing and
open offer in October 2009 to support working capital needs and the cash flow
requirements of its shopping centres.
The Argo Capital Partners Fund declined by 2.8% in the year ended 31 December
2009, attributable to adverse currency movements during the period. This private
equity fund is closed to new subscriptions and is now invested in five projects
having exited from an African banking investment in the first quarter of 2009.
The realisation period for the Fund commences in August 2010 but can be extended
for two years.
Outlook
2009 can be viewed as a period of stabilisation for the Company. Following the
dramatic financial events of late-2008 and the unprecedented response from
governments, markets enjoyed a fillip and there has been a marked return of
confidence. However, the announcement of a debt standstill by Dubai World and,
more recently, the speculation concerning Greek sovereign debt illustrate the
pressures still facing the global economy.
Whilst the uncertainty surrounding the future of financial regulation continues
the Company is well positioned to comply with the tighter restrictions currently
being proposed by the draft EU directive. The directors believe that the Company
is as well placed as it can be given that both the investment manager and
adviser are already EU regulated and the primary business functions are
outsourced to large, well-established banks in the EU.
The performance of the Company's funds has improved significantly, new
redemptions have tailed off and the cost base has been realigned with the lower
AUM. Although the challenge of re-building the business franchise remains the
directors are confident that the long track record of our credit funds,
continued steady performance and renewed marketing efforts will yield results in
the coming year.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2009
+------------------------------------+-------+----------+----------+-----------------+
| | | Year | | 14 |
| | | ended | | February |
| | | | | to |
+------------------------------------+-------+----------+----------+-----------------+
| | | 31 | | 31 |
| | | December | | December |
+------------------------------------+-------+----------+----------+-----------------+
| | | 2009 | | 2008 |
+------------------------------------+-------+----------+----------+-----------------+
| | Note | US$'000 | | US$'000 |
+------------------------------------+-------+----------+----------+-----------------+
| | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Management fees | | 10,900 | | 8,967 |
+------------------------------------+-------+----------+----------+-----------------+
| Incentive fees | | 437 | | 7,473 |
+------------------------------------+-------+----------+----------+-----------------+
| Other income | | 352 | | 160 |
+------------------------------------+-------+----------+----------+-----------------+
| Revenue |2(e), | 11,689 | | 16,600 |
| | 3 | | | |
+------------------------------------+-------+----------+----------+-----------------+
| | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Legal and professional expenses | | (866) | | (1,465) |
+------------------------------------+-------+----------+----------+-----------------+
| Management and incentive fees | 2(f) | (263) | | (707) |
| payable | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Operational expenses | | (1,870) | | (1,479) |
+------------------------------------+-------+----------+----------+-----------------+
| Employee costs | 4 | (7,222) | | (4,077) |
+------------------------------------+-------+----------+----------+-----------------+
| Foreign exchange gain/(loss) | | 269 | | (691) |
+------------------------------------+-------+----------+----------+-----------------+
| Amortisation of intangible assets | 10 | (692) | | (380) |
+------------------------------------+-------+----------+----------+-----------------+
| Depreciation | 11 | (119) | | (78) |
+------------------------------------+-------+----------+----------+-----------------+
| Excess of acquirer's interest in | 9 | - | | 1,556 |
| net value of identifiable net | | | | |
| assets | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Operating profit | 6 | 926 | | 9,279 |
+------------------------------------+-------+----------+----------+-----------------+
| | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Interest income on cash and cash | | 134 | | 258 |
| equivalents | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Unrealised gain/(loss) on | | 1,361 | | (1,368) |
| investments | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Profit on ordinary activities | 3 | 2,421 | | 8,169 |
| before taxation | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| ` | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Taxation | 7 | 387 | | (1,409) |
+------------------------------------+-------+----------+----------+-----------------+
| Profit for the year/period after | 8 | 2,808 | | 6,760 |
| taxation attributable to members | | | | |
| of the Company | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Other comprehensive income | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Exchange differences on | | 785 | | 625 |
| translation of foreign operations | | | | |
+------------------------------------+-------+----------+----------+-----------------+
| Total comprehensive income for the | | 3,593 | | 7,385 |
| year/period | | | | |
+------------------------------------+-------+----------+----------+-----------------+
+------------------------------------+----+----------+----------+---------+
| Earnings per share (basic) | 8 | US$0.04 | | US$0.09 |
+------------------------------------+----+----------+----------+---------+
| Earnings per share (diluted) | 8 | US$0.04 | | US$0.09 |
+------------------------------------+----+----------+----------+---------+
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2009
+------------------------------+------+------------+----------+------------+
| | | | | Restated |
+------------------------------+------+------------+----------+------------+
| | | | | (Note 23) |
+------------------------------+------+------------+----------+------------+
| | | At 31 | | At 31 |
| | | December | | December |
+------------------------------+------+------------+----------+------------+
| | | 2009 | | 2008 |
+------------------------------+------+------------+----------+------------+
| |Note | US$'000 | | US$'000 |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Assets | | | | |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Non-current assets | | | | |
+------------------------------+------+------------+----------+------------+
| Intangible assets | 10 | 17,557 | | 18,110 |
+------------------------------+------+------------+----------+------------+
| Fixtures, fittings and | 11 | 136 | | 237 |
| equipment | | | | |
+------------------------------+------+------------+----------+------------+
| Loans and advances | 15 | 226 | | 235 |
| receivable | | | | |
+------------------------------+------+------------+----------+------------+
| | | 17,919 | | 18,582 |
+------------------------------+------+------------+----------+------------+
| Current assets | | | | |
+------------------------------+------+------------+----------+------------+
| Investments | 12 | 14,337 | | 1,976 |
+------------------------------+------+------------+----------+------------+
| Trade and other receivables | 13 | 1,972 | | 2,214 |
+------------------------------+------+------------+----------+------------+
| Cash and cash equivalents | 14 | 13,069 | | 20,058 |
+------------------------------+------+------------+----------+------------+
| Loans and advances | 15 | 36 | | 44 |
| receivable | | | | |
+------------------------------+------+------------+----------+------------+
| | | 29,414 | | 24,292 |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Total assets | 3 | 47,333 | | 42,874 |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Equity and liabilities | | | | |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Equity | | | | |
+------------------------------+------+------------+----------+------------+
| Issued share capital | 16 | 769 | | 769 |
+------------------------------+------+------------+----------+------------+
| Share premium | | 32,772 | | 32,772 |
+------------------------------+------+------------+----------+------------+
| Revenue reserve | | 12,648 | | 9,840 |
+------------------------------+------+------------+----------+------------+
| Foreign currency translation |2(d) | (1,670) | | (2,455) |
| reserve | | | | |
+------------------------------+------+------------+----------+------------+
| Total equity | | 44,519 | | 40,926 |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Current liabilities | | | | |
+------------------------------+------+------------+----------+------------+
| Trade and other payables | 17 | 2,692 | | 717 |
+------------------------------+------+------------+----------+------------+
| Taxation payable | 7 | 122 | | 1,231 |
+------------------------------+------+------------+----------+------------+
| Total current liabilities | 3 | 2,814 | | 1,948 |
+------------------------------+------+------------+----------+------------+
| | | | | |
+------------------------------+------+------------+----------+------------+
| Total equity and liabilities | | 47,333 | | 42,874 |
+------------------------------+------+------------+----------+------------+
| | | | | |
| | | | | |
+------------------------------+------+------------+----------+------------+
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED 31 DECEMBER 2009
+------------------------+---------+---------+---------+-------------+----------+
| | | | | Foreign | |
| | Issued | | | currency | |
| | share | Share | Revenue | translation | |
| | capital | premium | reserve | reserve | Total |
+------------------------+---------+---------+---------+-------------+----------+
| | 2008 | 2008 | 2008 | 2008 | 2008 |
+------------------------+---------+---------+---------+-------------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+------------------------+---------+---------+---------+-------------+----------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| As at 14 February 2008 | - | - | - | - | - |
| (date of | | | | | |
| incorporation) | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| Total comprehensive | | | | | |
| income | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| Total comprehensive | - | - | 9,840 | (2,455) | 7,385 |
| income for the | | | | | |
| period (Restated | | | | | |
| Note 23) | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| Contributions by and | | | | | |
| distributions | | | | | |
| to owners | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| Issue of 76,931,620 | 769 | 32,772 | - | - | 33,541 |
| shares | | | | | |
| (US$0.01 par) | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| | | | | | |
| | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
| As at 31 December 2008 | 769 | 32,772 | 9,840 | (2,455) | 40,926 |
+------------------------+---------+---------+---------+-------------+----------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+----------+
+------------------------+---------+---------+---------+-------------+---------+
| | | | | Foreign | |
| | Issued | | | currency | |
| | share | Share | Revenue | translation | |
| | capital | premium | reserve | reserve | Total |
+------------------------+---------+---------+---------+-------------+---------+
| | 2009 | 2009 | 2009 | 2009 | 2009 |
+------------------------+---------+---------+---------+-------------+---------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+------------------------+---------+---------+---------+-------------+---------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| As at 1 January 2009 | 769 | 32,772 | 9,840 | (2,455) | 40,926 |
| (Restated | | | | | |
| Note 23) | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| Total comprehensive | | | | | |
| income | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| Total comprehensive | - | - | 2,808 | 785 | 3,593 |
| income for the | | | | | |
| Year | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| | | | | | |
| | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
| As at 31 December 2009 | 769 | 32,772 | 12,648 | (1,670) | 44,519 |
+------------------------+---------+---------+---------+-------------+---------+
| | | | | | |
+------------------------+---------+---------+---------+-------------+---------+
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2009
+------------------------------+------+------------+----------+-------------------------+
| | | Year ended | | 14 |
| | | | | February |
| | | | | to |
+------------------------------+------+------------+----------+-------------------------+
| | | 31 | | 31 |
| | | December | | December |
+------------------------------+------+------------+----------+-------------------------+
| | | 2009 | | 2008 |
+------------------------------+------+------------+----------+-------------------------+
| |Note | US$'000 | | US$'000 |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Net cash inflow from | 19 | 3,003 | | 3,818 |
| operating activities | | | | |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Cash flows from investing | | | | |
| activities | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Interest received on cash | | 134 | | 258 |
| and cash equivalents | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Purchase of current asset | 12 | (11,000) | | - |
| investments | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Acquisition of the Argo | 9 | - | | 10,057 |
| businesses | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Proceeds from disposal of | | - | | 6,199 |
| current asset investments | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Purchase of fixtures, | 11 | (23) | | (25) |
| fittings and equipment | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Repayment of loans | | - | | (199) |
+------------------------------+------+------------+----------+-------------------------+
| Net cash (used in)/from | | (10,889) | | 16,290 |
| investing activities | | | | |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Net (decrease)/increase in | | (7,886) | | 20,108 |
| cash and cash | | | | |
| Equivalents | | | | |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Cash and cash equivalents at | | 20,058 | | - |
| 1 January 2009 and | | | | |
| 14 February 2008 (date | | | | |
| of incorporation) | | | | |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Foreign exchange gain/(loss) | | 897 | | (50) |
| on cash and cash | | | | |
| Equivalents | | | | |
+------------------------------+------+------------+----------+-------------------------+
| | | | | |
+------------------------------+------+------------+----------+-------------------------+
| Cash and cash equivalents as | | 13,069 | | 20,058 |
| at 31 December 2009 and 31 | | | | |
| December 2008 | | | | |
+------------------------------+------+------------+----------+-------------------------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2009
1. CORPORATE INFORMATION
The Company was incorporated on 14 February 2008 in the Isle of Man
under the Companies Act 2006 and started to trade on 13 June 2008. Its
registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB and
the principal place of business is at 10 Vasilissis Frederikis Street, 1066
Nicosia, Cyprus. The principal activity of the Company is that of a holding
company and the principal activity of the wider Group is that of an investment
management business. The functional and presentational currency of the Group
undertakings is US dollars. The Group has 26 (2008: 39) employees.
Wholly owned subsidiaries
Country of incorporation
+--------------------------------------------+---------------+
| Argo Capital Management (Cyprus) Limited | Cyprus |
+--------------------------------------------+---------------+
| Argo Capital Management Limited | United |
| | Kingdom |
+--------------------------------------------+---------------+
| Argo Capital Management Property Limited | Cayman |
| | Islands |
+--------------------------------------------+---------------+
| Argo Capital Management (Asia) Pte. Ltd. | Singapore |
+--------------------------------------------+---------------+
| North Asset Management Srl | Romania |
+--------------------------------------------+---------------+
| North Asset Management Sarl | Luxembourg |
+--------------------------------------------+---------------+
| Argo Investor Services Limited | Cayman |
| | Islands |
+--------------------------------------------+---------------+
| Argo Investor Services AG | Switzerland |
+--------------------------------------------+---------------+
2. ACCOUNTING POLICIES
(a) Accounting convention
These consolidated financial statements have been prepared on a
historical cost basis, except for the revaluation of certain financial
instruments, and in accordance with International Financial Reporting Standards.
These accounts have been prepared on the basis that the Company is
a going concern.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries. Subsidiaries are consolidated from the date
upon which control is transferred to the Company and cease to be consolidated
from the date upon which control is transferred from the Company.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Company. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
(c) Business combinations
The acquisition of subsidiaries is accounted for using the purchase
method. The cost of the acquisition is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities incurred or
assumed and equity instruments issued by the Group in exchange for control of
the acquiree, plus any costs directly attributable to the business combination.
The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3 are recognised
at their fair value at acquisition date.
Goodwill
Goodwill arising on the consolidation represents the excess of the
cost of the acquisition over the Company's interest in the fair value of the
identifiable assets and liabilities of a subsidiary at the date of acquisition.
Any excess of the Company's interest in the fair value of the identifiable
assets and liabilities over the cost of the acquisition (negative goodwill) is
immediately recognised in the Consolidated Statement of Comprehensive Income.
Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill which is
recognised as an asset is reviewed at least annually for impairment. Any
impairment is recognised immediately in the Consolidated Statement of
Comprehensive Income.
Intangible assets
The Group's principal intangible asset is a fund management contract recorded at
directors' valuation at the date of acquisition. The directors' valuation is
based on the underlying share price of the vendor and its assets under
management at the time of acquisition. This intangible asset has a finite life
and is amortised on a straight line basis over the period of the contract.
Impairment tests are undertaken annually to determine any diminution in the
recoverable amount below carrying value. The Group does not capitalise
internally generated goodwill or intangible assets.
Impairment of intangible assets
At each balance sheet date the Group reviews the carrying amounts of its
intangible assets to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment loss, if any.
Recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset is estimated to be
less than its carrying amount, the carrying amount of the asset is reduced to
its recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
(d) Foreign currency translation
The consolidated financial statements are expressed in US dollars. Transactions
denominated in currencies other than US dollars have been translated at the rate
of exchange prevailing at the date of the transaction. Assets and liabilities
in other currencies are translated to US dollars at the rates of exchange
prevailing at the balance sheet date. The resulting profits or losses are
reflected in the Consolidated Statement of Comprehensive Income.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group's foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the year. Exchange differences arising, if any,
are classified as equity and transferred to the Group's foreign currency
translation reserve. Such translation differences are recognised in the
Consolidated Statement of Comprehensive Income as income or as expenses in the
year in which the operation is disposed of.
(e) Revenue
Revenue is recognised to the extent that it is probable that economic benefit
will flow to the Group and the revenue can be reliably measured.
Management and incentive fees receivable
The Group recognises revenue for providing management services to
mutual funds. Revenue accrues on a monthly basis on completion of management
services and is based on the assets under management of each mutual fund.
Incentive fees generally arise monthly or annually, however for the
Argo funds incentive fees may arise monthly, annually or on realisation of an
investment. In addition, for the Argo Real Estate Opportunities Fund Ltd
(managed by Argo Capital Management Property Ltd) incentive fees may be
triggered at any time on realisation of a property asset.
The management and incentive fees receivable from the Argo Real
Estate Opportunities Fund Ltd are defined in the management contract between
that company and Argo Capital Management Property Ltd. The management contract
has a fixed term expiring on 26 July 2013.
(f) Management and incentive fees payable
The Group pays management and incentive fees based on a proportion
of fees receivable from mutual funds. Fees payable are accrued for on a monthly
basis consistent with revenue streams earned.
(g) Depreciation
Plant and equipment is initially recorded at cost and depreciated on a
straight-line basis over the expected useful lives of the assets as follows:
Leasehold
33 1/3% per annum
Fixtures and fittings
10% to 33 1/3% per annum
Office equipment
10% to 33 1/3% per annum
Computer equipment and software
20% to 33 1/3% per annum
(h) Investments held at fair value through profit or loss
All investments are classified as held at fair value
through profit or loss. Investments are initially recognised at fair value.
Transaction costs are expensed as incurred.
After initial recognition, investments are measured at fair value,
with unrealised gains and losses on investments and impairment of investments
recognised in the Consolidated Statement of Comprehensive Income. Investments
held at fair value in managed mutual funds are valued at fair value of the net
assets as provided by the administrators of those funds. Investments in the
management shares of The Argo Fund Ltd, Argo Capital Investors Fund SPC, Argo
Capital Partners Fund Ltd and Argo Distressed Credit Fund Limited are stated at
fair value, being the recoverable amount.
(i) Trade date accounting
All 'regular way' purchases and sales of financial assets are recognised on the
'trade date', i.e. the date that the entity commits to purchase or sell the
asset. Regular way purchases or sales are purchases or sales of financial assets
that require delivery of the asset within the time frame generally established
by regulation or convention in the market place.
(j) Financial instruments
Financial assets and liabilities are recognised on the Consolidated Statement of
Financial Position when the Company becomes party to the contractual provisions
of the instrument.
Non-derivative financial instruments include trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and other payables. The
initial and subsequent measurement of non-derivative financial instruments is
dealt with below.
Trade and other receivables
Trade and other receivables do not carry any interest and are stated at their
original invoice amount as reduced by appropriate allowances for estimated
irrecoverable amounts. An estimate for doubtful debts is made when collection is
no longer probable. Bad debts are written off when identified.
Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand
deposits and short-term, highly liquid investments which are readily convertible
to known amounts of cash, subject to insignificant risk of changes in value, and
have a maturity of less than three months from the date of acquisition.
For the purposes of the cash flow statement, cash and cash
equivalents consist of cash in hand and bank deposits.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
(k) Loans and borrowings
All loans and borrowings payable are initially
recognised at cost, calculated as the fair value of the consideration received
less issue costs where applicable. After initial recognition, all
interest-bearing loans and borrowings are subsequently measured at amortised
cost. Amortised cost is calculated by using the effective interest method,
taking into account any issue costs, and discounts and premiums on settlement.
All loans and borrowings receivable are initially
recognised at cost and subsequently measured at amortised cost.
(l) Current taxation
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amounts are those enacted or substantially enacted by the
balance sheet date.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the Consolidated Statement of
Comprehensive Income because it excludes items of income or expense that are
taxable or deductible in other periods or because it excludes items that are
never taxable or deductible.
(m)Deferred taxation
Deferred income tax is provided for using the liability
method on temporary timing differences at the balance sheet date between tax
basis of assets and liabilities and their carrying amounts for financial
reporting purposes. Deferred tax liabilities are recognised in full for all
temporary differences. Deferred tax assets are recognised for all deductible
temporary differences, carried forward unused tax credits and unused tax losses
to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences and carry-forward of unused tax
credits and unused losses can be utilised.
The carrying amount of deferred income tax assets is revalued at
each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised. Unrecognised deferred income tax
assets are reassessed at each balance sheet date and are recognised to the
extent that is probable that future taxable profits will allow the deferred tax
asset to be recovered. Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply in the year when the asset is
realised or the liability settled, based on tax rates that have been enacted or
substantively enacted at the balance sheet date.
(n) Accounting estimates, assumptions and judgements
The preparation of the consolidated financial statements necessitates the use of
estimates, assumptions and judgements. These estimates, assumptions and
judgements affect the reported amounts of assets, liabilities and contingent
liabilities at the balance sheet date as well as affecting the reported income
and expenses for the year. Although the estimates are based on management's
knowledge and best judgment of information and financial data, the actual
outcome may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that and prior periods, or in
the period of the revision and future periods if the revision affects both
current and future periods.
In the process of applying the Group's accounting policies, which are described
above, management has made the following judgements that have the most
significant effect on the amounts recognised in the consolidated financial
statements:
- Management and incentive fees
- Intangibles (see note 10)
It has also been assumed that, when available, the audited financial statements
of the funds under the Group's management will confirm the net asset values used
in the calculation of management and performance fees receivable.
(o) Operating leases
Costs in respect of operating leases are charged on a straight line basis over
the lease term. Benefits, such as rent free periods, received and receivable as
incentives to take on operating leases are spread on a straight line basis over
the lease term, or, if shorter than the full lease term, over the period to the
review date on which the rent is first expected to be adjusted to the prevailing
market rent.
(p) Changes in accounting policies
For the 2009 financial statements the Group has adopted IAS 1 "Presentation of
Financial Statements" (Revised 2007), IFRS 8 "Operating Segments" and IFRS 7
Improving Disclosures about Financial Instruments and Fair Value Hierarchy.
The adoption of IAS 1 (Revised 2007) makes certain changes to the format and
titles of the primary financial statements and to the presentation of some items
within these statements. It also gives rise to additional disclosures. The
measurement and recognition of the Group's assets, liabilities, income and
expenses are unchanged. However, some items that were recognised directly in
equity are now recognised in other comprehensive income. IAS 1 affects the
presentation of owner changes in equity and introduces a "Statement of
Comprehensive Income".
The Group adopted the amendments to IFRS 7 Improving Disclosures about Financial
Instruments effective from 1 January 2009. These amendments require the Group to
disclose certain information about financial instruments measured at fair value
in the Statement of Financial Position. In the first year of application
comparative information need not be presented for the disclosures required by
the amendment. Accordingly, the disclosure for the fair value hierarchy is only
presented for the year ended 31 December 2009.
The following represents the fair value hierarchy of financial instruments
measured at fair value in the Statement of Financial Position. The hierarchy
groups financial assets and liabilities into three levels based on the
significance of inputs used in measuring the fair value of the financial assets
and liabilities. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level within which the financial asset or liability is classified is
determined based on the lowest level of significant input to the fair value
measurement.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not
yet effective for the year, and have not been applied in preparing these
consolidated financial statements:
+-----------------------------------------------+-------------+
| New/Revised International Accounting | Effective |
| Standards / International Financial Reporting | date |
| Standards (IAS/IFRS) | (accounting |
| | periods |
| | commencing |
| | after) |
+-----------------------------------------------+-------------+
| | |
+-----------------------------------------------+-------------+
| IAS 7 Statement of Cash Flows (Revised | 1 January |
| 2009) | 2010 |
+-----------------------------------------------+-------------+
| IAS 17 Leases (Revised 2009) | 1 January |
| | 2010 |
+-----------------------------------------------+-------------+
| IAS 24 Related Party Disclosures - Revised | 1 January |
| definition of related parties | 2011 |
+-----------------------------------------------+-------------+
| IAS 27 Consolidated and Separate Financial | 1 July 2009 |
| Statements - Amendment relating | |
| to cost of an investment on | |
| first-time adoption (Revised 2008) | |
+-----------------------------------------------+-------------+
| IAS 32 Financial Instruments: Presentation - | 1 February |
| Amendments relating to | 2010 |
| classification of rights issues | |
+-----------------------------------------------+-------------+
| IAS 36 Impairment of Assets (Revised 2009) | 1 January |
| | 2010 |
+-----------------------------------------------+-------------+
| IAS 38 Intangible Assets | 1 July 2009 |
+-----------------------------------------------+-------------+
| IAS 39 Financial Instruments: Recognition | 30 June |
| and Measurement - Amendments | 2009 |
| for embedded derivatives when | |
| reclassifying financial instruments | |
+-----------------------------------------------+-------------+
| IAS 39 Financial Instruments: Recognition | 1 July 2009 |
| and Measurement - Amendments | |
| for eligible hedged items | |
+-----------------------------------------------+-------------+
| IAS 39 Financial Instruments: Recognition | 1 January |
| and Measurement (Revised 2009) | 2010 |
+-----------------------------------------------+-------------+
| IFRS 3 Business Combinations - Comprehensive | 1 July 2009 |
| revision on applying the | |
| acquisition method | |
+-----------------------------------------------+-------------+
| IFRS 9 Financial Instruments | 1 January |
| | 2013 |
+-----------------------------------------------+-------------+
| | |
+-----------------------------------------------+-------------+
| | |
+-----------------------------------------------+-------------+
| IFRIC Interpretation | |
+-----------------------------------------------+-------------+
| | |
+-----------------------------------------------+-------------+
| IFRIC 9 Reassessment of Embedded Derivatives | 30 June |
| | 2009 |
+-----------------------------------------------+-------------+
The directors do not expect the adoption of the other standards and
interpretations to have a material impact on the Group's financial statements in
the period of initial application.
Any standard adopted during the year has presentational impact only; it is
therefore not necessary to adjust comparative information.
(q) Dividends payable
Interim and final dividends are recognised when paid.
3. SEGMENTAL ANALYSIS
The Group operates as a single asset management business.
The operating results of the companies set out in note 1 above are regularly
reviewed by the directors of the Group for the purposes of making decisions
about resources to be allocated to each company and to assess performance. The
following summary analyses revenues, profit or loss, assets and liabilities:
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | | Argo | | | | | Year |
| | Argo | Capital | Argo | Argo | Argo | | ended |
| | Group | Management | Capital | Capital | Investor | | 31 |
| | Ltd | (Cyprus) | Management | Management | Services | Other | December |
| | | Limited | Limited | Property | Ltd | | |
| | | | | Limited | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Revenues from | - | 8,587 | - | 3,085 | - | 17 | 11,689 |
| external | | | | | | | |
| customers | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Intersegment | 11,705 | - | 3,409 | - | - | 574 | 15,688 |
| revenues | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Reportable | 10,863 | (8,272) | (2,068) | 304 | (2,349) | (105) | (1,627) |
| segment | | | | | | | |
| profit/(loss) | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Intersegment | 11,705 | (15,424) | 3,409 | - | (226) | 574 | 38 |
| profit/(loss) | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Reportable | 45,463 | 4,070 | 6,801 | 5,300 | 76 | 475 | 62,185 |
| segment | | | | | | | |
| assets | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
| Reportable | 56 | 911 | 1,602 | 405 | 26 | 117 | 3,117 |
| segment | | | | | | | |
| liabilities | | | | | | | |
+---------------+---------+------------+------------+------------+----------+---------+----------+
Revenues, profit or loss, assets and liabilities may be reconciled as follows:
+----------------------------------------------------------+----------+
| | Year |
| | ended |
+----------------------------------------------------------+----------+
| | 31 |
| | December |
+----------------------------------------------------------+----------+
| | 2009 |
+----------------------------------------------------------+----------+
| | US$'000 |
+----------------------------------------------------------+----------+
| Revenues | |
+----------------------------------------------------------+----------+
| Total revenues for reportable segments | 27,377 |
+----------------------------------------------------------+----------+
| Elimination of intersegment revenues | (15,688) |
+----------------------------------------------------------+----------+
| Group revenues | 11,689 |
+----------------------------------------------------------+----------+
| | |
+----------------------------------------------------------+----------+
| Profit or loss | |
+----------------------------------------------------------+----------+
| Total loss for reportable segments | (1,627) |
+----------------------------------------------------------+----------+
| Elimination of intersegment profits | (38) |
+----------------------------------------------------------+----------+
| Other unallocated amounts | 4,086 |
+----------------------------------------------------------+----------+
| Profit on ordinary activities before taxation | 2,421 |
+----------------------------------------------------------+----------+
| | |
+----------------------------------------------------------+----------+
| Assets | |
+----------------------------------------------------------+----------+
| Total assets for reportable segments | 62,185 |
+----------------------------------------------------------+----------+
| Elimination of intersegment receivables | (304) |
+----------------------------------------------------------+----------+
| Elimination of Company's cost of investments | (14,548) |
+----------------------------------------------------------+----------+
| Group assets | 47,333 |
+----------------------------------------------------------+----------+
| | |
+----------------------------------------------------------+----------+
| Liabilities | |
+----------------------------------------------------------+----------+
| Total liabilities for reportable segments | 3,117 |
+----------------------------------------------------------+----------+
| Elimination of intersegment payables | (303) |
+----------------------------------------------------------+----------+
| Group liabilities | 2,814 |
+----------------------------------------------------------+----------+
+---------------+---------+------------+------------+----------+---------+----------+
| | | Argo | | | | Year |
| | Argo | Capital | Argo | Argo | | ended |
| | Group | Management | Capital | Investor | | 31 |
| | Ltd | (Cyprus) | Management | Services | Other | December |
| | | Limited | Limited | Limited | | |
+---------------+---------+------------+------------+----------+---------+----------+
| | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 |
+---------------+---------+------------+------------+----------+---------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+---------------+---------+------------+------------+----------+---------+----------+
| Revenues | - | 11,657 | 3,265 | - | 1,678 | 16,600 |
| from | | | | | | |
| external | | | | | | |
| customers | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
| Intersegment | 2,088 | - | 3,797 | - | 708 | 6,593 |
| revenues | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
| Reportable | 1,002 | 2,026 | 5,208 | (1,837) | 225 | 6,624 |
| segment | | | | | | |
| profit/(loss) | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
| Intersegment | 2,088 | (6,827) | 3,797 | - | 708 | (234) |
| profit/(loss) | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
| Reportable | 34,598 | 12,359 | 7,439 | 2,431 | 5,175 | 62,002 |
| segment | | | | | | |
| assets | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
| Reportable | 54 | 549 | 1,434 | 32 | 297 | 2,366 |
| segment | | | | | | |
| liabilities | | | | | | |
+---------------+---------+------------+------------+----------+---------+----------+
Revenues, profit or loss, assets and liabilities may be reconciled as follows:
+--------------------------------------------------+-----------+
| | 14 |
| | February |
| | to |
| | 31 |
| | December |
+--------------------------------------------------+-----------+
| | 2008 |
+--------------------------------------------------+-----------+
| | US$'000 |
+--------------------------------------------------+-----------+
| Revenues | |
+--------------------------------------------------+-----------+
| Total revenues for reportable segments | 23,193 |
+--------------------------------------------------+-----------+
| Elimination of intersegment revenues | (6,593) |
+--------------------------------------------------+-----------+
| Group revenues | 16,600 |
+--------------------------------------------------+-----------+
| | |
+--------------------------------------------------+-----------+
| Profit or loss | |
+--------------------------------------------------+-----------+
| Total profit for reportable segments | 6,624 |
+--------------------------------------------------+-----------+
| Elimination of intersegment loss | 234 |
+--------------------------------------------------+-----------+
| Other unallocated amounts | 1,311 |
+--------------------------------------------------+-----------+
| Profit on ordinary activities before taxation | 8,169 |
+--------------------------------------------------+-----------+
| | |
+--------------------------------------------------+-----------+
| Assets | |
+--------------------------------------------------+-----------+
| Total assets for reportable segments | 62,002 |
+--------------------------------------------------+-----------+
| Elimination of intersegment receivables | (431) |
+--------------------------------------------------+-----------+
| Elimination of Company's cost of investments | (18,697) |
+--------------------------------------------------+-----------+
| Group assets | 42,874 |
+--------------------------------------------------+-----------+
| | |
+--------------------------------------------------+-----------+
| Liabilities | |
+--------------------------------------------------+-----------+
| Total liabilities for reportable segments | 2,366 |
+--------------------------------------------------+-----------+
| Elimination of intersegment payables | (418) |
+--------------------------------------------------+-----------+
| Group liabilities | 1,948 |
+--------------------------------------------------+-----------+
4. EMPLOYEE COSTS
+--------------------------------------+-----------+----------+-----------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+--------------------------------------+-----------+----------+-----------+
| | 31 | | 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Wages and salaries | 6,571 | | 3,789 |
+--------------------------------------+-----------+----------+-----------+
| Social security costs | 550 | | 234 |
+--------------------------------------+-----------+----------+-----------+
| Pension costs | 41 | | - |
+--------------------------------------+-----------+----------+-----------+
| Other | 60 | | 54 |
+--------------------------------------+-----------+----------+-----------+
| | 7,222 | | 4,077 |
+--------------------------------------+-----------+----------+-----------+
5. KEY MANAGEMENT PERSONNEL REMUNERATION
Included in employee costs are payments to:
+--------------------------------------+-----------+----------+-----------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+--------------------------------------+-----------+----------+-----------+
| | 31 | | 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Directors and key management | 3,157 | | 1,376 |
| personnel | | | |
+--------------------------------------+-----------+----------+-----------+
6. OPERATING PROFIT
Operating profit is stated after charging:
+--------------------------------------+-----------+----------+-----------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+--------------------------------------+-----------+----------+-----------+
| | 31 | | 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Auditors' remuneration | 117 | | 80 |
+--------------------------------------+-----------+----------+-----------+
| Directors' fees | 2,543 | | 1,013 |
+--------------------------------------+-----------+----------+-----------+
| Operating lease payments | 624 | | 336 |
+--------------------------------------+-----------+----------+-----------+
7. TAXATION
Taxation rates applicable to the parent company and the Cypriot, UK,
Singaporean, Luxembourg, Swiss and Romanian subsidiaries range from 0% to 28%.
Income Statement
+--------------------------------------+-----------+----------+-----------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+--------------------------------------+-----------+----------+-----------+
| | 31 | | 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Taxation (credit)/charge for the | (387) | | 1,409 |
| year/period on Group companies | | | |
+--------------------------------------+-----------+----------+-----------+
The (credit)/charge for the year/period can be reconciled to the profit per the
Consolidated Statement of Comprehensive Income as follows:
+--------------------------------------+-----------+----------+-----------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+--------------------------------------+-----------+----------+-----------+
| | 31 | | 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Profit before tax | 2,421 | | 8,169 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Applicable Isle of Man tax rate for | - | | - |
| Argo Group Limited of 0% | | | |
+--------------------------------------+-----------+----------+-----------+
| Timing difference | (7) | | 144 |
+--------------------------------------+-----------+----------+-----------+
| Non-deductible expenses | 11 | | 7 |
+--------------------------------------+-----------+----------+-----------+
| Non-taxable income | (12) | | (15) |
+--------------------------------------+-----------+----------+-----------+
| Other adjustments | (131) | | 25 |
+--------------------------------------+-----------+----------+-----------+
| Tax effect of different tax rates of | (248) | | 1,248 |
| subsidiaries operating in other | | | |
| jurisdictions | | | |
+--------------------------------------+-----------+----------+-----------+
| Tax charge | (387) | | 1,409 |
+--------------------------------------+-----------+----------+-----------+
Balance Sheet
+--------------------------------------+-----------+----------+-----------+
| | At 31 | | At 31 |
| | December | | December |
+--------------------------------------+-----------+----------+-----------+
| | 2009 | | 2008 |
+--------------------------------------+-----------+----------+-----------+
| | US$'000 | | US$'000 |
+--------------------------------------+-----------+----------+-----------+
| | | | |
+--------------------------------------+-----------+----------+-----------+
| Corporation tax payable | 122 | | 1,231 |
+--------------------------------------+-----------+----------+-----------+
8. EARNINGS PER SHARE
Earnings per share is calculated by dividing the net profit for the
period by the weighted average number of shares outstanding during the period.
+----------------------------------------+------------+----------+------------+
| | Year | | 14 |
| | ended | | February |
| | | | to |
+----------------------------------------+------------+----------+------------+
| | 31 | | 31 |
| | December | | December |
+----------------------------------------+------------+----------+------------+
| | 2009 | | 2008 |
+----------------------------------------+------------+----------+------------+
| | US$'000 | | US$'000 |
+----------------------------------------+------------+----------+------------+
| | | | |
+----------------------------------------+------------+----------+------------+
| Net profit for the year/period after | 2,808 | | 6,760 |
| taxation attributable to members | | | |
+----------------------------------------+------------+----------+------------+
| | | | |
+----------------------------------------+------------+----------+------------+
| | | | No. of |
| | | | shares |
+----------------------------------------+------------+----------+------------+
| | | | |
+----------------------------------------+------------+----------+------------+
| Weighted average of ordinary shares | 76,931,620 | | 76,931,620 |
| for basic earnings per share | | | |
+----------------------------------------+------------+----------+------------+
| Effect of dilution | - | | - |
+----------------------------------------+------------+----------+------------+
| Weighted average number of ordinary | 76,931,620 | | 76,931,620 |
| shares for diluted earnings per share | | | |
+----------------------------------------+------------+----------+------------+
+----------------------------------------+----------+----------+-------------+
| | | | 14 |
| | Year | | February to |
| | ended | | |
+----------------------------------------+----------+----------+-------------+
| | | | 31 |
| | 31 | | December |
| | December | | |
+----------------------------------------+----------+----------+-------------+
| | 2009 | | 2008 |
+----------------------------------------+----------+----------+-------------+
| | US$ | | US$ |
+----------------------------------------+----------+----------+-------------+
| | | | |
+----------------------------------------+----------+----------+-------------+
| Earnings per share (basic) | 0.04 | | 0.09 |
+----------------------------------------+----------+----------+-------------+
| Earnings per share (diluted) | 0.04 | | 0.09 |
+----------------------------------------+----------+----------+-------------+
9. BUSINESS COMBINATIONS
At an Extraordinary General Meeting held in the Cayman Islands on 13 June 2008
the shareholders of Absolute Capital Management Holdings Limited passed a
resolution to distribute the Argo division of its group to shareholders, to be
managed and owned independently under the newly formed Argo Group Limited.
The demerger was completed by making a distribution of shares of Argo Group
Limited to the shareholders of Absolute Capital Management Holdings Limited. The
total purchase consideration was
76,931,619 ordinary shares of US$0.01 each with an aggregate fair market value
(determined by a calculation of assets under management) of $33,541,727
apportioned as follows:
+------------------------------------+--------------+
| Argo Capital Management (Cyprus) | $13,501,195 |
| Ltd | |
+------------------------------------+--------------+
| Argo Capital Management Ltd | $12,063,619 |
+------------------------------------+--------------+
| Argo Investor Services Ltd | $4,048,125 |
+------------------------------------+--------------+
| Argo Capital Management Property | $3,928,787 |
| Ltd | |
+------------------------------------+--------------+
| Argo Capital Management (Asia) | $1 |
| Pte. Ltd | |
+------------------------------------+--------------+
The Argo businesses acquired as part of this transaction contributed the
following to the consolidated net profit on ordinary activities after tax: Argo
Capital Management (Cyprus) Ltd US$8,450,936 (profit), Argo Capital Management
Ltd US$415,745 (profit), Argo Investor Services Ltd US$1,836,600 (loss), Argo
Capital Management Property Ltd US$62,645 (profit) and Argo Capital Management
(Asia) Pte Ltd US$390,517 (loss).
The fair value of the identifiable net assets and liabilities of the Argo
businesses at the date of acquisition and the consideration are detailed below:
+------------------+------------+------------+----------+------------+------------+----------+
| | Argo | Argo | Argo | Argo | Argo | |
| | Capital | Capital | Investor | Capital | Capital | |
| | Management | Management | Services | Management | Management | Total |
| | (Cyprus) | Ltd | Ltd | Property | (Asia) Pte | |
| | Ltd | | | Ltd | Ltd | |
+------------------+------------+------------+----------+------------+------------+----------+
| | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
+------------------+------------+------------+----------+------------+------------+----------+
| Intangible | | | | | | |
| assets - fund | 7,188 | 7,757 | - | 3,889 | - | 18,834 |
| management | | | | | | |
| contracts | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Fixtures, | 25 | 313 | 4 | 11 | 10 | 363 |
| fittings & | | | | | | |
| equipment | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Investments | 5,500 | - | 4,000 | - | - | 9,500 |
+------------------+------------+------------+----------+------------+------------+----------+
| Trade & other | 5,204 | 1,490 | 37 | 1,284 | 191 | 8,206 |
| receivables | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Bank & cash | 3,167 | 5,678 | 218 | 717 | 277 | 10,057 |
+------------------+------------+------------+----------+------------+------------+----------+
| Trade & other | (7,583) | (3,174) | (58) | (878) | (169) | (11,862) |
| payables | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Net assets | 13,501 | 12,064 | 4,201 | 5,023 | 309 | 35,098 |
| acquired | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Excess of | - | - | (153) | (1,095) | (308) | (1,556) |
| acquirer's | | | | | | |
| interest in net | | | | | | |
| value of | | | | | | |
| identifiable net | | | | | | |
| assets | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Total | 13,501 | 12,064 | 4,048 | 3,928 | 1 | 33,542 |
+------------------+------------+------------+----------+------------+------------+----------+
| Satisfied by: | | | | | | |
+------------------+------------+------------+----------+------------+------------+----------+
| Shares issued | 13,501 | 12,064 | 4,048 | 3,928 | 1 | 33,542 |
+------------------+------------+------------+----------+------------+------------+----------+
| | | | | | | |
| Total | 13,501 | 12,064 | 4,048 | 3,928 | 1 | 33,542 |
+------------------+------------+------------+----------+------------+------------+----------+
+------------------------------+----------+----------+-------+----------+--+---------+----------+----------+---------+
| Net cash inflow arising on acquisition | | | | | | US$'000 |
+------------------------------------------------------------+----------+--+---------+----------+----------+---------+
| Cash and cash equivalents | | | | | | 10,057 |
| acquired | | | | | | |
+------------------------------+----------+----------+---------------------+---------+---------------------+---------+
| | | | | | | 10,057 |
+------------------------------+----------+----------+---------------------+---------+---------------------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+-------+----------+--+---------+----------+----------+---------+
Intangible assets represent the fair value of fund management contracts of the
Argo businesses, essentially the Argo Funds and the Argo Real Estate
Opportunities Fund Ltd (managed by Argo Capital Management Property Ltd) to
which it provides management and advisory services.
The Argo Group Limited ordinary shares were admitted to trading on AIM on 18
November 2008.
10. INTANGIBLE ASSETS
+--------------------------------------------------+------------+
| | Fund |
| | management |
| | contracts |
+--------------------------------------------------+------------+
| | US$'000 |
+--------------------------------------------------+------------+
| Cost | |
+--------------------------------------------------+------------+
| Acquisition of Argo businesses | 18,834 |
+--------------------------------------------------+------------+
| Foreign exchange movement | (344) |
+--------------------------------------------------+------------+
| At 31 December 2008 | 18,490 |
+--------------------------------------------------+------------+
| Foreign exchange movement | 139 |
+--------------------------------------------------+------------+
| At 31 December 2009 | 18,629 |
+--------------------------------------------------+------------+
| | |
+--------------------------------------------------+------------+
| Amortisation and impairment | |
+--------------------------------------------------+------------+
| Amortisation of Argo business intangible assets | 380 |
+--------------------------------------------------+------------+
| At 31 December 2008 | 380 |
+--------------------------------------------------+------------+
| Amortisation of Argo business intangible assets | 692 |
+--------------------------------------------------+------------+
| At 31 December 2009 | 1,072 |
+--------------------------------------------------+------------+
| | |
+--------------------------------------------------+------------+
| Net book value | |
+--------------------------------------------------+------------+
| At 31 December 2008 | 18,110 |
+--------------------------------------------------+------------+
| At 31 December 2009 | 17,557 |
+--------------------------------------------------+------------+
The Group tests intangible assets annually for impairment, or more frequently if
there are indications that the intangible assets may be impaired. The
recoverable amounts of the intangible assets that have been reviewed for
impairment are separately identifiable business units within the Group. The
value in use approach has been used as the businesses were not considered
saleable in their current form due to certain factors, the main being reliance
on certain key individuals.
At the balance sheet date the carrying value of goodwill was US$14.9m (2008:
US$14.9m) being allocated to Argo Capital Management (Cyprus) Limited and Argo
Capital Management Limited as US$7.2m (2008: US$7.2m) and US$7.7m (2008:
US$7.7m) respectively.
The key assumptions on which the directors have based their five year discounted
cash flow analysis are a pre-tax discount rate of 15% (2008: 15%), an inflation
rate of 5% (2008: 5%) and a growth in assets under management (which determine
management and performance fee income) of 15% to 20% (2008: 15% to 20%), with
4.5% to 6% (2008: 4.5% to 6%) of this estimated to be from annual profits. The
assumption of growth in assets under management has been based on the historic
performance of the funds. The calculations use cash flow projections based on
actual operating results. The result of this review has been compared to the
carrying value of goodwill and accordingly the directors have concluded that
there is no impairment to goodwill. As an added sensitivity, if the estimated
discount rate applied to the discounted cash flows had been 25% higher (2008:
25% higher) or the growth rate of assets under management had been 25% lower
(2008: 25% lower) there would still have been no impairment of goodwill as the
net present value of future cash flows would still have been higher than the
carrying value of goodwill.
At the balance sheet date the carrying value of the Argo Real Estate
Opportunities Fund Limited management contract is US$2.6m (2008: US$3.2m), net
of amortisation. The intangible asset has been amortised over 5 years and 44
days, being the remaining period of the contract from the date of acquisition.
11. FIXTURES, FITTINGS AND EQUIPMENT
+-------------------------------------------------+---------------+
| | Fixtures, |
| | fittings |
| | & |
| | equipment |
+-------------------------------------------------+---------------+
| | US$ '000 |
+-------------------------------------------------+---------------+
| Cost | |
+-------------------------------------------------+---------------+
| Acquisitions through business combinations | 363 |
+-------------------------------------------------+---------------+
| Additions | 25 |
+-------------------------------------------------+---------------+
| Disposals | (4) |
+-------------------------------------------------+---------------+
| Foreign exchange movement | (69) |
+-------------------------------------------------+---------------+
| At 31 December 2008 | 315 |
+-------------------------------------------------+---------------+
| Additions | 23 |
+-------------------------------------------------+---------------+
| Disposals | (25) |
+-------------------------------------------------+---------------+
| Foreign exchange movement | (14) |
+-------------------------------------------------+---------------+
| At 31 December 2009 | 299 |
+-------------------------------------------------+---------------+
| | |
+-------------------------------------------------+---------------+
| Accumulated Depreciation | |
+-------------------------------------------------+---------------+
| Depreciation charge for period | 78 |
+-------------------------------------------------+---------------+
| At 31 December 2008 | 78 |
+-------------------------------------------------+---------------+
| Depreciation charge for period | 119 |
+-------------------------------------------------+---------------+
| Disposals | (3) |
+-------------------------------------------------+---------------+
| Foreign exchange movement | (31) |
+-------------------------------------------------+---------------+
| At 31 December 2009 | 163 |
+-------------------------------------------------+---------------+
| | |
+-------------------------------------------------+---------------+
| Net book value | |
+-------------------------------------------------+---------------+
| At 31 December 2008 | 237 |
+-------------------------------------------------+---------------+
| At 31 December 2009 | 136 |
+-------------------------------------------------+---------------+
12. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
+---------+------------------------+------------+----------+------------+
| | | At 31 | | At 31 |
| | | December | | December |
+---------+------------------------+------------+----------+------------+
| | | 2009 | | 2009 |
+---------+------------------------+------------+----------+------------+
|Holding | Investment in | Total cost | | Fair value |
| | management shares | | | |
+---------+------------------------+------------+----------+------------+
| | | US$ '000 | | US$ '000 |
+---------+------------------------+------------+----------+------------+
| | | | | |
+---------+------------------------+------------+----------+------------+
| 10 | The Argo Fund Ltd | 0 | | 0 |
+---------+------------------------+------------+----------+------------+
| 10 | Argo Capital Investors | 0 | | 0 |
| | Fund SPC | | | |
+---------+------------------------+------------+----------+------------+
| 10 | Argo Capital Partners | 0 | | 0 |
| | Fund | | | |
+---------+------------------------+------------+----------+------------+
| 100 | Argo Distressed Credit | 0 | | 0 |
| | Fund Ltd | | | |
+---------+------------------------+------------+----------+------------+
| 100 | AGSSF Holdings Ltd | 0 | | 0 |
+---------+------------------------+------------+----------+------------+
| | | 0 | | 0 |
+---------+------------------------+------------+----------+------------+
+---------+-----------------------+------------+----------+------------+
|Holding | Investment in | Total cost | | Fair value |
| | ordinary shares | | | |
+---------+-----------------------+------------+----------+------------+
| | | US$ '000 | | US$ '000 |
+---------+-----------------------+------------+----------+------------+
| | | | | |
+---------+-----------------------+------------+----------+------------+
| 66,435 | The Argo Fund Ltd | 14,343 | | 14,337 |
+---------+-----------------------+------------+----------+------------+
| | | 14,343 | | 14,337 |
+---------+-----------------------+------------+----------+------------+
+---------+------------------------+------------+----------+------------+
| | | At 31 | | At 31 |
| | | December | | December |
+---------+------------------------+------------+----------+------------+
| | | 2008 | | 2008 |
+---------+------------------------+------------+----------+------------+
|Holding | Investment in | Total cost | | Fair value |
| | management shares | | | |
+---------+------------------------+------------+----------+------------+
| | | US$ '000 | | US$ '000 |
+---------+------------------------+------------+----------+------------+
| | | | | |
+---------+------------------------+------------+----------+------------+
| 10 | The Argo Fund Ltd | 0 | | 0 |
+---------+------------------------+------------+----------+------------+
| 10 | Argo Capital Investors | 0 | | 0 |
| | Fund SPC | | | |
+---------+------------------------+------------+----------+------------+
| 10 | Argo Capital Partners | 0 | | 0 |
| | Fund Ltd | | | |
+---------+------------------------+------------+----------+------------+
| 100 | Argo Distressed Credit | 0 | | 0 |
| | Fund Ltd | | | |
+---------+------------------------+------------+----------+------------+
| | | 0 | | 0 |
+---------+------------------------+------------+----------+------------+
+---------+----------------------+------------+-------------------------------+----------+
|Holding | Investment in | Total cost | | Fair |
| | ordinary shares | | | value |
+---------+----------------------+------------+-------------------------------+----------+
| | | US$ '000 | | US$ '000 |
+---------+----------------------+------------+-------------------------------+----------+
| | | | | |
+---------+----------------------+------------+-------------------------------+----------+
| 10,270 | The Argo Fund Ltd | 3,343 | | 1,976 |
+---------+----------------------+------------+-------------------------------+----------+
| | | 3,343 | | 1,976 |
+---------+----------------------+------------+-------------------------------+----------+
13. TRADE AND OTHER RECEIVABLES
+----------------------------+-----------+-------------------------------+----------+
| | At 31 | | At 31 |
| | December | | December |
+----------------------------+-----------++----------+
| | 2009 | | 2008 |
+----------------------------+-----------++----------+
| | US$ '000 | | US$ '000 |
+----------------------------+-----------++----------+
| | | | |
+----------------------------+-----------++----------+
| Trade receivables | 1,166 | | 1,780 |
+----------------------------+-----------++----------+
| Other receivables | 677 | | 195 |
+----------------------------+-----------++----------+
| Prepayments and accrued | 129 | | 239 |
| income | | | |
+----------------------------+-----------++----------+
| | 1,972 | | 2,214 |
+----------------------------+-----------++----------+
| | | | |
+----------------------------+-----------+-------------------------------+----------+
The directors consider that the carrying amount of trade and other
receivables approximates to their fair value. All trade receivable balances are
recoverable within one year from the balance sheet date.
14. CASH AND CASH EQUIVALENTS
Included in cash and cash equivalents is a balance of US$103,000 (2008:
US$116,000) which represents a bank guarantee in respect of credit cards issued
to Argo Capital Management Property Limited. Due to the nature of this balance
it is not freely available.
15. LOANS AND ADVANCES RECEIVABLE
+--------------------------------+-----------+----------+------------+
| | At 31 | | At 31 |
| | December | | December |
+--------------------------------+-----------+----------+------------+
| | 2009 | | 2008 |
+--------------------------------+-----------+----------+------------+
| | US$'000 | | US$'000 |
+--------------------------------+-----------+----------+------------+
| | | | |
+--------------------------------+-----------+----------+------------+
| Deposits on leased premises - | 36 | | 44 |
| current | | | |
+--------------------------------+-----------+----------+------------+
| Deposits on leased | 226 | | 235 |
| premises-non-current | | | |
+--------------------------------+-----------+----------+------------+
| | 262 | | 279 |
+--------------------------------+-----------+----------+------------+
The deposits on leased premises are retained by the lessor until
vacation of the premises at the end of the lease term as follows:
+--------------------------------+------------+----------+------------+
| | At 31 | | At 31 |
| | December | | December |
+--------------------------------+------------+----------+------------+
| | 2009 | | 2008 |
+--------------------------------+------------+----------+------------+
| | US$'000 | | US$'000 |
+--------------------------------+------------+----------+------------+
| Current: | | | |
+--------------------------------+------------+----------+------------+
| Lease expiring within one year | 36 | | 44 |
| | | | |
+--------------------------------+------------+----------+------------+
+---------------------------------+------------+----------+------------+
| | At 31 | | At 31 |
| | December | | December |
+---------------------------------+------------+----------+------------+
| | 2009 | | 2008 |
+---------------------------------+------------+----------+------------+
| | US$'000 | | US$ '000 |
+---------------------------------+------------+----------+------------+
| Non-current: | | | |
+---------------------------------+------------+----------+------------+
| Lease expiring in second year | - | | 30 |
| after balance sheet date | | | |
+---------------------------------+------------+----------+------------+
| Lease expiring in third year | 226 | | 205 |
| after balance sheet date | | | |
+---------------------------------+------------+----------+------------+
| | 226 | | 235 |
+---------------------------------+------------+----------+------------+
16. SHARE CAPITAL
The Company's authorised share capital is unlimited with a nominal value of US$
0.01.
+---------------------------------+------------+----------+------------+
| | | | |
+---------------------------------+------------+----------+------------+
| | 2009 | | 2009 |
+---------------------------------+------------+----------+------------+
| | No. | | US$'000 |
+---------------------------------+------------+----------+------------+
| Issued and fully paid | | | |
+---------------------------------+------------+----------+------------+
| Ordinary shares of US$ 0.01 | 76,931,620 | | 769 |
| each | | | |
+---------------------------------+------------+----------+------------+
| At 1 January 2009 and 31 | 76,931,620 | | 769 |
| December 2009 | | | |
+---------------------------------+------------+----------+------------+
17. TRADE AND OTHER PAYABLES
+--------------------------------+------------+----------+------------+
| | | | At 31 |
| | At 31 | | December |
| | December | | |
+--------------------------------+------------+----------+------------+
| | | | 2008 |
| | 2009 | | |
+--------------------------------+------------+----------+------------+
| | US$ '000 | | US$ '000 |
+--------------------------------+------------+----------+------------+
| | | | |
+--------------------------------+------------+----------+------------+
| Trade and other payables | 44 | | 49 |
+--------------------------------+------------+----------+------------+
| Other creditors and accruals | 2,648 | | 668 |
+--------------------------------+------------+----------+------------+
| | 2,692 | | 717 |
+--------------------------------+------------+----------+------------+
Trade and other payables are normally settled on 30-day terms.
18. OBLIGATIONS UNDER OPERATING LEASES
Operating lease payments represent rentals payable by the Group for certain of
its business premises. The leases have no escalation clauses or renewal or
purchase options and no restrictions imposed on them.
As at the balance sheet date, the Group had outstanding future minimum lease
payments under non-cancellable operating leases, which fall due as follows.
+---------------------------+------------------------+----------+------------+
| | | | At 31 |
| | At 31 | | December |
| | December | | |
+---------------------------+------------------------+----------+------------+
| | | | |
| | 2009 | | 2008 |
+---------------------------+------------------------+----------+------------+
| | US$ '000 | | US$ '000 |
+---------------------------+------------------------+----------+------------+
| Operating lease | | | |
| liabilities: | | | |
+---------------------------+------------------------+----------+------------+
| Within one year | 527 | | 573 |
+---------------------------+------------------------+----------+------------+
| In the second to fifth | 607 | | 969 |
| years inclusive | | | |
+---------------------------+------------------------+----------+------------+
| Present value of minimum | 1,134 | | 1,542 |
| lease payments | | | |
+---------------------------+------------------------+----------+------------+
19. RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
+------------------------------+-------------+----------+---------------------------+
| | Year ended | | 14 |
| | | | February |
| | | | to |
+------------------------------+-------------+----------+---------------------------+
| | 31 December | | 31 |
| | | | December |
+------------------------------+-------------+----------+---------------------------+
| | | | |
| | 2009 | | 2008 |
+------------------------------+-------------+----------+---------------------------+
| | US$ '000 | | US$ '000 |
+------------------------------+-------------+----------+---------------------------+
| | | | |
+------------------------------+-------------+----------+---------------------------+
| Profit on ordinary | 2,421 | | 8,169 |
| activities before taxation | | | |
+------------------------------+-------------+----------+---------------------------+
| | | | |
+------------------------------+-------------+----------+---------------------------+
| Interest income | (134) | | (258) |
+------------------------------+-------------+----------+---------------------------+
| Other income | - | | (42) |
+------------------------------+-------------+----------+---------------------------+
| Amortisation of intangible | 692 | | 380 |
| assets | | | |
+------------------------------+-------------+----------+---------------------------+
| Depreciation | 119 | | 78 |
+------------------------------+-------------+----------+---------------------------+
| Increase/(decrease) in | 1,975 | | (10,001) |
| payables | | | |
+------------------------------+-------------+----------+---------------------------+
| Decrease in receivables | 259 | | 5,538 |
+------------------------------+-------------+----------+---------------------------+
| (Increase)/decrease in fair | (1,361) | | 1,368 |
| value of current asset | | | |
| investments | | | |
+------------------------------+-------------+----------+---------------------------+
| Loss on disposal of | 23 | | - |
| fixtures, fittings & | | | |
| equipment | | | |
+------------------------------+-------------+----------+---------------------------+
| Negative goodwill | - | | (1,556) |
+------------------------------+-------------+----------+---------------------------+
| Net foreign exchange | (269) | | 691 |
| (gain)/loss | | | |
+------------------------------+-------------+----------+---------------------------+
| Income taxes paid | (722) | | (549) |
+------------------------------+-------------+----------+---------------------------+
| Net cash inflow from | 3,003 | | 3,818 |
| operating activities | | | |
+------------------------------+-------------+----------+---------------------------+
20. RELATED PARTY TRANSACTIONS
73% of revenue derives from funds in which two of the Company's
directors, Andreas Rialas and Kyriakos Rialas, have an influence through the
provision of investment advisory services.
Michael Kloter, the non-executive chairman, is also partner in a legal firm
which supplies services to the Group. This firm charged US$45,986
(2008:US$24,220) for services rendered to the Group in the period.
21. FINANCIAL INSTRUMENTS
(a) Use of financial instruments
The wider Group has maintained sufficient cash reserves
not to use alternative financial instruments to finance the Group's operations.
The Group has various financial assets and liabilities such as trade and other
receivables, loans and advances, cash, short-term deposits, and trade and other
payables which arise directly from its operations.
The Group's non-subsidiary investments in funds were
entered into with the purpose of providing seed capital for these funds.
(b) Market risk
Market risk is the risk that a decline in the value of
assets adversely impacts on the profitability of the Group, either as a result
of an asset not meeting its expected value or through the decline of assets
under management generating lower fees. The principal exposures of the Group are
in respect of its seed investments in its own funds. Lower management fee and
incentive fee revenues could result from a reduction in asset values.
(c) Capital risk management
The primary objective of the Group's capital management is to ensure
that the Company has sufficient cash and cash equivalents on hand to finance its
ongoing operations. This is achieved by ensuring that trade receivables are
collected on a timely basis and that excess liquidity is invested in an optimum
manner. This is achieved by placing fixed short-term deposits or using interest
bearing bank accounts.
At the year-end cash balances were held at Royal Bank
of Scotland, Laiki Bank, Bank of Cyprus, United Overseas Bank, Bancpost, Bank
Julius Baer & Co Ltd, UBS AG and ABN-AMRO Bank (Luxembourg).
(d) Credit/counterparty risk
The Group will be exposed to counterparty risk on parties with whom it trades
and will bear the risk of settlement default. Credit risk is concentrated in the
funds under management as detailed in note 12. Trade receivables are normally
settled on 30-day terms.
The Group's principal financial assets are bank and cash balances,
trade and other receivables and investments held at fair value through profit or
loss. These represent the Company's maximum exposure to credit risk in relation
to financial assets and are represented by the carrying amount of each financial
asset in the balance sheet.
(e) Liquidity risk
Liquidity risk is the risk that the Group may be unable to meet its payment
obligations. This would be the risk of insufficient cash resources and liquid
assets, including bank facilities, being available to meet liabilities as they
fall due.
The main liquidity risks of the Group are associated with the need to satisfy
payments to creditors. Trade receivables and trade payables are on 30-day terms.
(f) Foreign exchange risk
Foreign exchange risk is the risk that the Group will sustain losses
through adverse movements in currency exchange rates.
The Group is subject to short-term foreign exchange movements
between the calculation date of fees in currencies other than US dollars and the
date of settlement. The Group holds cash balances in US dollars, Sterling,
Singapore dollars, Swiss Francs and Euros.
If there was a 5% increase or decrease in the exchange
rate between the US dollar and the other operating currencies used by the Group
at 31 December 2009 the exposure would be a profit or loss to the Consolidated
Statement of Comprehensive Income of approximately US$266,000 (2008:US$800,000).
(g) Interest rate risk
The interest rate profile of the Group at 31 December 2009 is as follows:
+---------------------+---------+--------------+-------------+-------------+
| | | | | Instruments |
| | Total | Variable | Fixed | on which no |
| | as per | interest | interest | interest is |
| | balance | rate | rate | receivable |
| | sheet | instruments* | instruments | |
+---------------------+---------+--------------+-------------+-------------+
| | US$ | US$ | US$ | US$ |
| | '000 | '000 | '000 | '000 |
+---------------------+---------+--------------+-------------+-------------+
| Financial Assets | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Financial assets at | 14,337 | - | - | 14,337 |
| fair value | | | | |
| through profit or | | | | |
| loss | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Loans and | 2,234 | - | - | 2,234 |
| receivables | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Cash and cash | 13,069 | 2,300 | 7,343 | 3,426 |
| equivalents | | | | |
+---------------------+---------+--------------+-------------+-------------+
| | 29,640 | 2,300 | 7,343 | 19,997 |
+---------------------+---------+--------------+-------------+-------------+
| Financial | | | | |
| liabilities | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Financial | 2,692 | - | - | 2,692 |
| liabilities at fair | | | | |
| value | | | | |
| through profit or | | | | |
| loss | | | | |
+---------------------+---------+--------------+-------------+-------------+
* Changes in the interest rate may cause movements.
The average interest rate at the year end was 0.3%. Any movement in interest
rates would have an immaterial effect on the profit/loss for the period.
The interest rate profile of the Group at 31 December 2008 is as follows:
+---------------------+---------+--------------+-------------+-------------+
| | | | | Instruments |
| | Total | Variable | Fixed | on which no |
| | as per | interest | interest | interest is |
| | balance | rate | rate | receivable |
| | sheet | instruments* | instruments | |
+---------------------+---------+--------------+-------------+-------------+
| | US$ | US$ | US$ | US$ |
| | '000 | '000 | '000 | '000 |
+---------------------+---------+--------------+-------------+-------------+
| Financial Assets | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Financial assets at | 1,976 | - | - | 1,976 |
| fair value | | | | |
| through profit or | | | | |
| loss | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Loans and | 2,493 | - | - | 2,493 |
| receivables | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Cash and cash | 20,058 | 1,525 | 16,899 | 1,634 |
| equivalents | | | | |
+---------------------+---------+--------------+-------------+-------------+
| | 24,527 | 1,525 | 16,899 | 6,103 |
+---------------------+---------+--------------+-------------+-------------+
| Financial | | | | |
| liabilities | | | | |
+---------------------+---------+--------------+-------------+-------------+
| Financial | 717 | - | - | 717 |
| liabilities at fair | | | | |
| value | | | | |
| through profit or | | | | |
| loss | | | | |
+---------------------+---------+--------------+-------------+-------------+
* Changes in the interest rate may cause movements.
The average interest rate at the period end was 1.29%. Any movement in interest
rates would have an immaterial effect on the profit/loss for the period.
(h) Fair value
The carrying values of the financial assets and liabilities equate
to the fair value of the financial assets and liabilities and are as follows:
+----------+-----------------------------------+-------------+----------+-------------+
| | At 31 | | At 31 |
| | December | | December |
+----------------------------------------------+-------------+----------+-------------+
| | 2009 | | 2008 |
+----------------------------------------------+-------------+----------+-------------+
| | US$ '000 | | US$ '000 |
+----------------------------------------------+-------------+----------+-------------+
| Financial Assets | | | |
+----------------------------------------------+-------------+----------+-------------+
| Financial assets at fair value through | 14,337 | | 1,976 |
| profit or loss | | | |
+----------------------------------------------+-------------+----------+-------------+
| Loans and receivables | 2,234 | | 2,493 |
+----------------------------------------------+-------------+----------+-------------+
| Cash and cash equivalents | 13,069 | | 20,058 |
+----------------------------------------------+-------------+----------+-------------+
| | | 29,640 | | 24,527 |
+----------+-----------------------------------+-------------+----------+-------------+
| Financial Liabilities | | | |
+----------------------------------------------+-------------+----------+-------------+
| Financial liabilities at fair value through | 2,692 | | 717 |
| profit or loss | | | |
+----------------------------------------------+-------------+----------+-------------+
| | | | | |
+----------+-----------------------------------+-------------+----------+-------------+
Financial assets and liabilities, other than investments, are either repayable
on demand or have short repayment dates. The fair value of investments is stated
at the redemption prices quoted by fund managers and is based on the fair value
of the underlying net assets of the funds because, although the funds are
listed, there is no active market. Redemption gates are currently imposed by the
funds thereby limiting the Group's ability to realise the value of its
investments in a timely manner.
Fair value hierarchy
The table below analyses financial instruments measured at fair value at the end
of the reporting period by the level of the fair value hierarchy (see note 2).
At 31 December 2009
+------------------+----------+----------+--------+--------+
| | Level 1 | Level 2 | Level | Total |
| | | | 3 | |
+------------------+----------+----------+--------+--------+
| | US$ '000 | US$ '000 | US$ | US$ |
| | | | '000 | '000 |
+------------------+----------+----------+--------+--------+
| Financial assets | | | | |
| at fair value | - | 14,337 | - |14,337 |
| through profit | | | | |
| or loss | | 2,132 | - | 2,692 |
| | 560 | | | |
| Financial | | | | |
| liabilities at | | | | |
| fair value | | | | |
| through profit | | | | |
| or loss | | | | |
+------------------+----------+----------+--------+--------+
22. CLAIM RELATING TO LAWSUIT AGAINST FORMER GROUP COMPANY
Argo Group Limited ("Argo") has been named as an additional defendant in a
lawsuit filed against Absolute Capital Management Holdings Limited (now named
ACMH Limited ("ACMH")) and others. The suit has been filed in the United States
District Court for the District of Colorado, by an investor in several of ACMH's
investment funds. This litigation arose after the demerger of Argo from ACMH.
The plaintiff, The Cascade Fund LLLP ("Cascade"), has made a number of claims
against ACMH. In the event that Cascade's claim against ACMH proves successful,
Cascade is seeking to include Argo assets as part of the ACMH asset pool
available to it by way of compensation.
Argo considers that the courts of Colorado do not have jurisdiction over it and
has filed a motion to dismiss Cascade's claim, which motion is pending before
the court. The directors believe that the claim against Argo is wholly without
merit and Argo intends vigorously to defend its position.
23. PRIOR PERIOD ADJUSTMENT
Comparative figures have been restated due to a reclassification in the 31
December 2008 financial statements, resulting in a transfer from Foreign
Currency Translation Reserve to Revenue Reserve of US$3,080,270. This occurred
due to a reclassification between pre and post acquisition reserves on the
acquisition of the Argo businesses.
24. EVENTS AFTER THE BALANCE SHEET DATE
The directors consider that there has been no event since the year
end that has a significant effect on the Group's position.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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