Final Results

RNS Number : 9411G

ARGO Group Limited

07 March 2018

 

Argo Group Limited

("Argo" or the "Company")

Annual Report and Accounts for the Year ended 31 December 2017

Argo today announces its final results for the year ended 31 December 2017.

The Company will today post to shareholders and make available its report and accounts for the year ended 31 December 2017 on the Company's website www.argogrouplimited.com.

Key highlights for the twelve months ended 31 December 2017

-     Revenues US$10.3 million (2016: US$6.4 million)

-     Operating profit US$2.0 million (2016: operating loss US$0.6 million)

-     Profit before tax US$4.7 million (2016: US$0.6 million)

-     Net assets US$24.7 million (2016: US$20.1 million)

Commenting on the results and outlook, Kyriakos Rialas, Chief Executive of Argo said:

''I am very pleased with the Funds' exceptional performance in 2017 derived mostly from two restructured distressed transactions and I am also most encouraged by the active strategies of the Argo Fund Ltd with double digit return in 2017 and the successful navigation of the market turmoil in February 2018.  This is what distinguishes Hedge Funds from long only directional funds.  The challenge for our Group remains to increase assets under management in 2018.''

Enquiries

Argo Group Limited

Andreas Rialas

020 7016 7660

Panmure Gordon

Dominic Morley

020 7886 2500

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

CHAIRMAN'S STATEMENT

Key highlights for the twelve months ended 31 December 2017

-     Revenues US$10.3 million (2016: US$6.4 million)

-     Operating profit US$2.0 million (2016: operating loss US$0.6 million)

-     Profit before tax US$4.7 million (2016: US$0.6 million)

-     Net assets US$24.7 million (2016: US$20.1 million)

The Group and its objective

Argo's investment objective is to provide investors with absolute returns in the 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 was listed on the AIM market in November 2008 and has a performance track record dating back to 2000.

Business and operational review

This report sets out the results of Argo Group Limited for the year ended 31 December 2017.

For the year ended 31 December 2017 the Group generated revenues of US$10.3 million (2016: US$6.4 million) with management fees accounting for US$4.2 million (2016: US$4.3 million). The Group also generated incentive fees of US$5.9 million (2016: US$ 1.7 million) during the year. The incentive fees earned during the year were from The Argo Fund ("TAF") and Argo Distressed Credit Fund ("ADCF").

Total operating costs, ignoring bad debt provisions, are US$7.2 million (2016: US$6.4 million). The increase in operating costs is mainly due to higher variable employee costs. During the year management fee arrears of US$0.6 million (€0.5 million) were recovered from Argo Real Estate Opportunities Fund Limited ("AREOF") against which a provision had been raised in prior years. The Group has provided against management fees of US$1.4 million (€1.2 million) (2016: US$2.2 million, €2.0 million) due from AREOF.  In the Directors' view these amounts are fully recoverable however they have concluded that it would be appropriate to carry a provision against these receivables as the timing of the receipts may be outside the control of the Company and AREOF.

Overall, the financial statements show an operating profit for the year of US$2.0 million (2016: operating loss US$0.6 million) and a profit before tax of US$4.5 million (2016: US$0.6 million) reflecting the realised and unrealised profit on current asset investments of US$2.5 million (2016: US$1.1 million).

At the year end, the Group had net assets of US$24.7 million (2016: US$20.1 million) and net current assets of US$24.2 million (2016: US$19.6 million) including cash reserves of US$5.0 million (2016: US$6.1 million). The Directors are not declaring a final dividend.

Net assets include investments in TAF, AREOF, Argo Special Situations Fund LP ("ASSF") and ADCF (together referred to as "the Argo funds") at fair values of US$10.6 million (2016: US$9.7 million), US$0.1 million (2016: US$0.1 million), US$0.03 million (2016: US$0.01 million), and US$4.2 million (2016: US$2.5 million) respectively.

At the year end the Argo funds (excluding AREOF) owed the Group total management and performance fees of US$6.2 million (31 December 2016: US$2.4 million). The Group received full settlement of these fees in January 2018.

The Argo funds ended the year with Assets under Management ("AUM") at US$146.8 million (2016: US$110.6), 33% higher than at the beginning of the year. Management believe that the markets in which the Funds operate have now established a recovery following the 2008 economic collapse. The current level of AUM remains below that required to ensure sustainable profits on a recurring management fee basis in the absence of performance fees. This has necessitated an ongoing review of the Group's cost basis. Nevertheless, the Group has ensured that the operational framework remains intact and that it retains the capacity to manage additional fund inflows as and when they arise.

The number of permanent employees of the Group at 31 December 2017 was 23 (2016: 27).

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 31 December 2017 total US$nil (2015: US$nil) after a bad debt provision of US$8.2 million (€6.8 million) (2016: US$6.4 million (€6.1 million)). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. AREOF settled total fees of US$0.6 million (€0.5 million) during the year. In November 2013, AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. Argo Group Limited retains this additional security. The AREOF management contract expires on the later of its termination or the sale of all assets in the Portfolio. The life of the fund was extended to 30 June 2034 during the year.

Fund performance

The Argo Funds

Fund	Launch              date	2017   Year   total	2016   Year   total	Since inception	Annualised performance	Sharpe     ratio	Down     months	AUM
		%	%	%	CAGR %			US$m
The Argo Fund	Oct-00	10.70	52.30	236.46	8.11	0.51	60 of 207	67.5
Argo Distressed Credit Fund	Oct-08	65.60	32.69	229.30	15.93	0.65	52 of 111	52.5
Argo Special Situations Fund LP	Feb-12	115.45	-12.03	-72.14	-5.58	-0.12	55 of 71	26.8
Total								146.8

* NAV only officially measured once a year in September. The numbers for 2017 were not audited yet at the date of signing of the financial statements.

AREOF's adjusted NAV at 30 September 2017* was US$0.7 million (€0.6 million), compared with minus US$36.4 million (minus €31.9 million) a year earlier.  The Adjusted NAV per share at 30 September 2017 was US$0.001 (€0.001) (2016: minus US$0.06 (minus €0.05)). The improvement in NAV follows the AREOF Group restructuring that completed in March 2017.

The main shareholders in AREOF are:

Entity	No of Shares	%
Argo Distressed Credit Fund	175,694,400
Argo Special Situations Fund LP	300,396,609
Argo Group Limited	30,056,500
Total	506,147,509	83%

Argo Capital Management Limited, the subsidiary managing the funds listed above, had its application to become a full scope Alternative Investment Fund Manager (AIFM) approved by the Financial Conduct Authority in May 2017. TAF, the Group's flagship fund, recorded another solid performance, with NAV rising by 10.7% in 2017. This fund focuses on liquid corporate and sovereign bonds and emerging market fx and the returns generated were dispersed across the different strategies, with Latin America being the focus as Brazil and Argentina experienced gradual economic recovery. The relatively low volatility exhibited by the fund underlines its objective of delivering attractive risk-adjusted returns. Whilst market conditions were generally calm last year, leading to healthy volumes of emerging market debt issuance and ongoing spread compression, 2018 has opened with US dollar weakness and murmurings of trade conflicts which, combined with rising US rates, could lead to greater volatility in the coming months. Nevertheless, the US tax policy changes and a wider cyclical rebound have reinforced the broadest global growth upsurge for several years with both developed and emerging market economies participating. The sudden market correction on 5 February2018 did not materially affect the fund in a negative way indicating the resilience of the short/long strategies as opposed to directional trades.

The NAV of ADCF rose by 65.6% in 2017 due to the mark-up of a position related to the leasing of a catalyst to an Indonesian refinery. It is hoped that this asset will be realised through either a sale or settlement of litigation initiated in Singapore. The fund also benefited from the sale of another of the shopping malls in the AREOF portfolio. ADCF won the Eurohedge Award for Best Emerging Manager and Smaller Fund in 2017 which was awarded in January this year.  ASSF also staged a recovery due to the revaluation of the catalyst receivables mentioned previously and monies generated from the repayment of a real estate-related loan which had previously been in default.

The Group renewed its lease on premises in Bond Street for another five years, providing continuity for the London operations, and has recently supplemented its investor relations department in the effort to gain traction in raising AUM. The implementation of the Markets in Financial Instruments Directive II (MiFID II) on 3 January 2018 seemingly passed without major disruption. Whilst AIFMs are-for the time being at least- exempted from most of the more onerous requirements of MiFID II, the Group took the decision to absorb the costs of research services which sellside banks and brokers are now obliged to charge for: inevitably this means additional overhead for the investment manager. The Group is further enhancing its Tradar Fund System with an additional risk management module.

Dividends and share purchase programme

The Directors are not declaring a final dividend but intend to restart dividend payments as soon as the Group's performance provides a consistent track record of profitability.

During the year the Directors authorised the repurchase of 1,065,616 shares at a total cost of US$0.2 million (£0.2 million). The Share Buyback Programme II expired in September 2017. 

The Directors will consider future buy-back programmes as and when appropriate, subject to the execution of targeted capital actions and regulatory approval.

Outlook

The Board remains optimistic about the Group's prospects particularly in light of its transactions pipeline. A significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis and the Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.

Boosting AUM remains Argo's top priority over the coming year. The Group's marketing efforts continues to focus on the re-launch of TAF which has a 17 year track record as well as identifying acquisitions that are earnings enhancing. TAF's prospectus was amended on 1 March 2016 to eliminate trading in level 3 illiquid assets and concentrate trading and investments in emerging market bonds and other liquid assets.

Over the longer term, the Board believes there is significant opportunity for growth in assets and profits and remains committed to ensuring the Group's investment management capabilities and resources are appropriate to meet its key objective of achieving a consistent positive investment performance in the emerging markets sector. The volatility of markets in early February 2018 proved that ETFs are not a perfect substitute for active investment management strategies, giving optimism that investors will return to hedge funds. 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2017

		Year ended		Year ended
		31 December		31 December
		2017		2016
	Note	US$'000		US$'000
Management fees		4,165		4,251
Performance fees		5,887		1,685
Other income		208		445
Revenue	2(e), 3	10,260		6,381
Legal and professional expenses		(289)		(490)
Management and incentive fees payable		(68)		(68)
Operational expenses		(1,022)		(1,008)
Employee costs	4	(5,728)		(4,769)
Foreign exchange gain		(31)		(16)
Bad debts	11	(1,110)		(553)
Depreciation	9	(26)		(41)
Operating profit/(loss)	6	1,986		(564)
Interest income on cash and cash equivalents		200		137
Realised and unrealised gains on investments		2,549		1,076
Profit on ordinary activities before taxation	3	4,735		649
Taxation	7	(194)		(78)
Profit for the year after taxation attributable to members of the Company	8	4,541		571
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		250		(79)
Total comprehensive income for the year		4,791		492

		Year ended		Year ended
		31 December		31 December
		2017		2016
		US$		US$
Earnings per share (basic)	8	0.10		0.01
Earnings per share (diluted)	8	0.09		0.01

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

		At 31 December		At 31 December
		2017		2016
	Note	US$'000		US$'000
Assets
Non-current assets
Land, fixtures, fittings and equipment	9	227		50
Financial assets at fair value through profit or loss	10	151		134
Loans and advances receivable	12	125		264
Total non-current assets		503		448
Current assets
Financial assets at fair value through profit or loss	10	14,800		12,267
Trade and other receivables	11	6,442		2,870
Loans and advances receivable	12	-		66
Cash and cash equivalents	13	5,031		6,126
Total current assets		26,273		21,329
Total assets	3	26,776		21,777
Equity and liabilities
Equity
Issued share capital	14	470		481
Share premium		28,022		28,211
Revenue reserve		(1,127)		(5,668)
Foreign currency translation reserve	2(d)	(2,705)		(2,955)
Total equity		24,660		20,069
Current liabilities
Trade and other payables	15	2,097		1,683
Taxation payable	7	19		25
Total current liabilities	3	2,116		1,708
Total equity and liabilities		26,776		21,777

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

YEAR ENDED 31 DECEMBER 2017

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2016	2016	2016	2016	2016
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2016	674	30,878	(6,239)	(2,876)	22,437
Total comprehensive income
Profit for the year after taxation	-	-	571	-	571
Other comprehensive income	-	-	-	(79)	(79)
Transactions with owners recorded directly in equity
Purchase of own shares (note 14)	(193)	(2,667)	-	-	(2,860)
As at 31 December 2016	481	28,211	(5,668)	(2,955)	20,069

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2017	2017	2017	2017	2017
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2017	481	28,211	(5,668)	(2,955)	20,069
Total comprehensive income
Profit for the year after taxation	-	-	4,541	-	4,541
Other comprehensive income	-	-	-	250	250
Transactions with owners recorded directly in equity
Purchase of own shares (note 14)	(11)	(189)	-	-	(200)
As at 31 December 2017	470	28,022	(1,127)	(2,705)	24,660

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2017

		Year ended		Year ended
		31 December		31 December
		2017		2016
	Note	US$'000		US$'000
Net cash (outflow)/inflow from operating activities	17	(933)		508
Cash flows from investing activities
Interest received on cash and cash equivalents		22		7
Share buy back		(200)		(2,860)
Purchase of financial assets at fair value through profit or loss		-		(2,000)
Proceeds from sale of financial assets at fair value through profit or loss		-		7,467
Purchase of fixtures, fittings and equipment	9	(197)		(31)
Net cash used in investing activities		(375)		2,583
Net (decrease)/increase in cash and cash equivalents		(1,308)		3,091
Cash and cash equivalents at 1 January 2017 and     1 January 2016		6,126		3,126
Foreign exchange gain/(loss) on cash and cash        equivalents		213		(91)
Cash and cash equivalents as at 31 December 2017 and 31 December 2016		5,031		6,126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2017

1.       CORPORATE INFORMATION

         The Company is domiciled in the Isle of Man under the Companies Act 2006. Its registered office is at 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB and the principal places of business are at 10 Vasilissis Frederikis Street, 1066 Nicosia, Cyprus and 24-25 New Bond Street, London, W1S 2RR. 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 currencies of the Group undertakings are US dollars, Sterling, Euros and Romanian Lei. The presentational currency is US dollars. The Group has 23 (2016: 27) 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 Property Management Srl	Romania
North Asset Management Sarl (dissolved in November 2017)	Luxembourg

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, as adopted by the EU. 

          Going concern   

The financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due for the foreseeable future.

The Directors have carried out a rigorous assessment of all the factors affecting the business in deciding to adopt the going concern basis for the preparation of the accounts. They have reviewed and examined the Group's financial and other processes including the annual budgeting process and expect the Group to have sufficient cash resources available in the foreseeable future. This has included the preparation of forecast financial information focussed on cash flow requirements through to at least March 2019. These forecasts reflect current cost patterns of the Group and take into consideration current liquidity constraints of funds under management and therefore their ability to settle management fees and other receivables (refer to notes 11 and 13).

On the basis of review of this forecast financial information, the liquid assets currently held and forecast inflows during the period, the Directors are confident that the Group has adequate financial resources available to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis for preparing the financial statements.

The Directors  have therefore concluded that it is appropriate to prepare the financial statements on a going concern basis.

(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. North Asset Management Sarl, an inactive subsidiary, was liquidated in November 2017.

         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 acquisition 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 the 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 profit or loss. 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 profit or loss.

         Impairment of intangible assets  

                  At each reporting 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 reporting date. The resulting profits or losses are reflected in the Consolidated statement of profit or loss.

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 reporting 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. 

(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 funds. Revenue is accrued on a monthly basis on completion of management services. In the Argo funds revenue is based on the assets under management of each mutual fund and in the Argo Real Estate Opportunities Fund Limited ("AREOF") (managed by Argo Capital Management Property Limited) revenue is based on the gross proceeds of share placements. 

         Incentive fees arise monthly, quarterly or on realisation of an investment. Incentive fees are recognised in the month they arise. In addition, AREOF incentive fees may be triggered at any time on realisation of a property asset. The management and incentive fees receivable from AREOF are defined in the management contract between that company and Argo Capital Management Property Limited.

The Group has provided AREOF with a notice of deferral in relation to the amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies.

(f)      Depreciation

Plant and equipment is initially recorded at cost and depreciated on a straight-line basis over the expected useful lives of the assets, after taking into account the assets' residual values, as follows:

Leasehold                                                                         20% per annum

Fixtures and fittings                                                            33 1/3% per annum

Office equipment                                                               33 1/3% per annum

Computer equipment and software                                       33 1/3% per annum

(g)     Financial assets held at fair value through profit or loss

                  IFRS 13 has been adopted from 1 January 2013. It establishes a single source of guidance for measuring fair value and requires disclosures about fair value measurements. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. IFRS 13 also includes disclosure requirements. The application of IFRS 13 has not had any material impact on the amounts recognised in the financial statements.  

                  All investments are classified as financial assets 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 profit or loss. 

                  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. Where funds contain level 3 assets the Directors will consider the carrying value based on information regarding future expected cash flows using appropriate valuation techniques such as discounted cash flow analysis. Investments in the management shares of The Argo Fund Limited, Argo Distressed Credit Fund Limited and Argo Special Situations Fund LP are stated at fair value, being the recoverable amount. The Argo Fund can no longer trade in Level 3 assets under the terms of its new prospectus dated 1 March 2016.

(h)     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.

(i)      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 are held at amortised cost and do not carry any interest. They 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. The carrying value of trade receivables equates to their fair value.

         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 amortised cost.

(j)      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. An estimate for provision for recovery is made when collection is no longer probable.

(k)     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 substantively enacted by the reporting 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 profit or loss 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. 

(l)      Deferred taxation

                  Deferred income tax is provided for using the liability method on temporary timing differences at the reporting date between the 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 reporting 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 reporting 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 reporting date.

 (m)   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 reporting 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 best judgements of information and financial data that have the most significant effect on the amounts recognised in the consolidated financial statements:

-     Investments fair value

-     Management fees

-     Trade receivables

-     Going concern

-     Loans and advances

It has 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.

(n)     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.

 (o)     Financial instruments and fair value hierarchy

The following represents the fair value hierarchy of financial instruments measured at fair value in the consolidated 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.

 (p)    Future changes in accounting policies

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date

after the date of these financial statements:

New/Revised International Financial Reporting Standards (IAS/IFRS)	EU Effective date (accounting periods commencing on or after)
Annual Improvements to IFRSs 2014-2016 Cycle - various standards	1 January 2018
IFRS 15 Revenue from contracts with customers	1 January 2018
IFRS 9 Financial Instruments (issued on 24 July 2014)	1 January 2018
Amendments to IFRS 4 Insurance contracts	1 January 2018
Amendments to IFRS 2 Share-based payments	1 January 2018
Annual Improvements to IFRSs 2015-2017 Cycle - various standards	1 January 2019
IFRS 16 Leases	1 January 2019

The Directors do not expect the adoption of these standards and interpretations to have a material impact on the Group's financial statements in the period of initial application, except for IFRS 9 Financial Instruments, which becomes mandatory for the Group's 2018 consolidated financial statements and could change the classification and measurement of financial assets. The Group does not plan to adopt this standard early and the extent of the impact has not been determined.

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 declared.

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 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 Group Ltd	Argo Capital Management (Cyprus) Limited	Argo Capital Management Limited	Argo Capital Management Property Limited	Year ended 31 December
	2017	2017	2017	2017	2017
	US$'000	US$'000	US$'000	US$'000	US$'000
Total revenues for reportable segments	-	2,166	8,660	1,599	12,425
Intersegment revenues	-	(2,165)	-	-	(2,165)
Total profit/(loss) for reportable segments	2,269	1,276	1,482	(486)	4,541
Intersegment profit/(loss)	-	2,165	(2165)	-	-
Total assets for reportable segments	15,846	1,107	6,941	2,882	26,776
Total liabilities for reportable segments	41	36	1,693	346	2,116

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Year ended
	31 December
	2017
	US$'000
Revenues
Total revenues for reportable segments	12,425
Elimination of intersegment revenues	(2,165)
Group revenues	10,260
Profit or loss
Total profit for reportable segments	4,541
Other unallocated amounts	(-)
Profit on ordinary activities before taxation	4,541
Assets
Total assets for reportable segments	29,923
Elimination of intersegment receivables	(3,147)
Group assets	26,776
Liabilities
Total liabilities for reportable segments	5,263
Elimination of intersegment payables	(3,147)
Group liabilities	2,116

	Argo Group Ltd	Argo Capital Management (Cyprus) Limited	Argo Capital Management Limited	Argo Capital Management Property Limited	Year ended 31 December
	2016	2016	2016	2016	2016
	US$'000	US$'000	US$'000	US$'000	US$'000
Total revenues for reportable segments	600	994	3,525	2,645	7,764
Intersegment revenues	(600)	(783)	-	-	(1383)
Total profit/(loss) for reportable segments	1,251	(280)	(837)	515	649
Intersegment profit/(loss)	600	183	(783)	-	-
Total assets for reportable segments	15,708	1,035	4,292	3,435	24,470
Total liabilities for reportable segments	38	27	2,622	1,714	4,401

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Year ended
	31 December
	2016
	US$'000
Revenues
Total revenues for reportable segments	7,764
Elimination of intersegment revenues	(1,383)
Group revenues	6,381
Profit or loss
Total loss for reportable segments	649
Other unallocated amounts	(-)
Loss on ordinary activities before taxation	649
Assets
Total assets for reportable segments	24,470
Elimination of intersegment receivables	(2,693)
Group assets	21,777
Liabilities
Total liabilities for reportable segments	4,401
Elimination of intersegment payables	(2,693)
Group liabilities	1,708

4.      EMPLOYEE COSTS

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Wages and salaries -under employment contract	4,505		3,334
Wages and salaries - under service contract	564		923
Social security costs	570		407
Other	89		105
	5,728		4,769

5.      KEY MANAGEMENT PERSONNEL REMUNERATION

   Included in employee costs are payments to the following:

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Directors and key management personnel	3,247		2,155

          The remuneration of the Directors of the Company for the year was as follows:

					Year ended	Year ended
	Salaries	Fees	Benefits	Cash bonus	31 December 2017	31 December 2016
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Executive Directors
Kyriakos Rialas	209	-	-	250	459	404
Andreas Rialas	198	-	9	1,500	1,707	814
Non-Executive Directors
Michael Kloter	-	52	-	-	52	54
David Fisher	-	32	-	-	32	35
Ken Watterson	-	32	-	-	32	35

6.      OPERATING PROFIT/(LOSS)

Operating profit/(loss) is stated after charging:

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Auditors' remuneration	74		67
Depreciation	26		41
Directors' fees	3,170		2,155
Operating lease	203		172

7.      TAXATION

         Taxation rates applicable to the parent company and the Cypriot, UK, Luxembourg and Romanian subsidiaries range from 0% to 12.5% (2016: 0% to 12.5%).

         Consolidated statement of profit or loss

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Taxation charge for the year on Group companies	194		78
Tax on profit on ordinary activities	194		78

The tax charge for the year can be reconciled to the profit on ordinary activities before taxation shown in the consolidated statement of profit or loss as follows:

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Profit before tax	4,735		649
Applicable Isle of Man tax rate for Argo Group Limited of 0%	-		-
Timing differences	(1)		(1)
Non-deductible expenses	2		9
Other adjustments	(231)		70
Tax effect of different tax rates of subsidiaries operating in other jurisdictions	424		-
Tax charge	194		78

         Consolidated statement of financial position

	At 31 December		At 31 December
	2017		2016
	US$'000		US$'000
Corporation tax payable	19		25

8.      EARNINGS PER SHARE

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares (see note 21).

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$'000		US$'000
Profit for the year after taxation attributable to members	4,541		571
	No. of Shares		No. of Shares
Weighted average number of ordinary shares for basic earnings     per share	47,307,615		55,443,494
Effect of dilution (note 21)	4,340,000		4,840,000
Weighted average number of ordinary shares for diluted earnings per share	51,647,615		60,283,494

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$		US$
Earnings per share (basic)	0.10		0.01
Earnings per share (diluted)	0.09		0.01

9.   LAND, FIXTURES, FITTINGS AND EQUIPMENT

	Fixtures, fittings & equipment	Land	Total
	US$'000	US$'000	US$'000
Cost
At 1 January 2016	245	-	245
Additions	31	-	31
Disposals	(2)	-	(2)
Foreign exchange movement	(24)	-	(24)
At 31 December 2016	250	-	250
Additions	4	193	197
Disposals	-	-	-
Foreign exchange movement	15	-	15
At 31 December 2017	269	193	462
Accumulated Depreciation
At 1 January 2016	181	-	181
Depreciation charge for period	41	-	41
Disposals	(2)	-	(2)
Foreign exchange movement	(20)	-	(20)
At 31 December 2016	200	-	200
Depreciation charge for period	26	-	26
Disposals	-	-	-
Foreign exchange movement	9	-	9
At 31 December 2017	235	-	235
Net book value
At 31 December 2016	50	-	50
At 31 December 2017	34	193	227

10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

		31 December		31 December
		2017		2017
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	-		-
100	Argo Distressed Credit Fund Ltd	-		-
1	Argo Special Situations Fund LP	-		-
		-		-

Holding	Investment in ordinary shares		Total cost				Fair value
			US$'000				US$'000
31,636	The Argo Fund Ltd*		7,159				10,644
10,899,021		Argo Real Estate Opportunities Fund Ltd		988				119
115	Argo Special Situations Fund LP		115				32
1,262	Argo Distressed Credit Fund Limited*		2,000				4,156
			10,262				14,951

		31 December		31 December
		2016		2016
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	-		-
100	Argo Distressed Credit Fund Ltd	-		-
1	Argo Special Situations Fund LP	-		-
		-		-

Holding	Investment in ordinary shares	Total cost		Fair value
		US$'000		US$'000
32,104	The Argo Fund Ltd*	7,159		9,758
10,899,021	Argo Real Estate Opportunities Fund Ltd	988		119
115	Argo Special Situations Fund LLP	115		15
1,262	Argo Distressed Credit Fund Limited*	2,000	4	2,509
		10,262		12,401

*Classified as current in the consolidated statement of financial position

11.     TRADE AND OTHER RECEIVABLES                                               

	At 31 December		At 31 December
	2017		2016
	US$ '000		US$ '000
Trade receivables - Gross	14,489		11,078
Less: provision for impairment of trade receivables	(8,264)		(8,626)
Trade receivables - Net	6,225		2,452
Other receivables	110		354
Prepayments and accrued income	107		64
	6,442		2,870

The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivable balances are recoverable within one year from the reporting date except as disclosed below. Since the year end the Group received US$6.2million as part settlement of these trade receivables.

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 31 December 2017 total US$nil (2016: US$nil) after a bad debt provision of US$8.2 million (€6.8 million) (2017: US$6.4 million (€6.1 million)). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. AREOF settled total fees of €0.6 million (€0.5 million) during the year.

In November 2013 AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. In the Directors' view these amounts are fully recoverable although they have concluded that it would not be appropriate to continue to recognise income from these investment management services going forward, as the timing of such receipts may be outside the control of the Company and AREOF.

Argo Special Situations Fund LP settled all of its fee arrears in October 2017. These amounted to US$0.6 million at 31 December 2016.

The movement in the Group's provision for impairment of trade receivables is as follows:

	At 31 December		At 31 December
	2017		2016
	US$ '000		US$ '000
As at 1 January	8,626		8,345
Bad debt recovered	(577)		(2,776)
Provision charged during the year	1,687		3,329
Foreign exchange movement	1,256		(272)
As at 31 December	10,992		8,626

12.       LOANS AND ADVANCES RECEIVABLE

	At 31 December		At 31 December
	2017		2016
	US$'000		US$'000
Deposits on leased premises - current	-			66 6
Deposits on leased premises - non-current (see below)	125			13 9
Other loans and advances receivable - current	-		-
Other loans and advances receivable - non-current	-		251
	125		330

 The non-current other loans and advances receivable comprise:

	At 31 December		At 31 December
	2017		2016
	US$'000		US$'000
Loan to AREOF	-		23
Loans to other AREOF Group entities	-		226
Other loans	-		2
	-		251

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 December		At 31 December
	2017		2016
	US$'000		US$'000
Current:
Lease expiring within one year	-		66

	At 31 December		At 31 December
	2017		2016
	US$'000		US$'000
Non-current:
Lease expiring in second year after the reporting date	15		-
Lease expiring in third year after the reporting date	-		13
Lease expiring in fifth year after the reporting date	110		-
	125		13

13.     CASH AND CASH EQUIVALENTS

Included in cash and cash equivalents is a balance of US$24,000 (€20,000) (2016: US$25,000) 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.

14.     SHARE CAPITAL

      The Company's authorised share capital is unlimited ordinary shares with a nominal value of US$0.01.

	31 December	31 December	31 December	31 December
	2017	2017	2016	2016
	No.	US$'000	No.	US$'000
Issued and fully paid
Ordinary shares of US$0.01 each	47,032,878	470	48,098,494	481
	47,032,878	470	48,098,494	481

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2017 (31 December 2016: US$nil).

During the year, the Directors authorised the repurchase of 1,065,616 shares at a total cost of US$0.2 million.

15.     TRADE AND OTHER PAYABLES

	At 31 December		At 31 December
	2017		2016
	US$ '000		US$ '000
Trade and other payables	4		122
Other creditors and accruals	2,093		1,561
	2,097		1,683

      Trade and other payables are normally settled on 30-day terms.

16.  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 reporting date, the Group had outstanding future minimum lease payments under non-cancellable operating leases, which fall due as follows:

	At 31 December		At 31 December
	2017		2016
	US$ '000		US$ '000
Operating lease liabilities:
Within one year	252		149
In the second to fifth years inclusive	655		116
Present value of minimum lease payments	907		265

17.   RECONCILIATION OF NET CASH OUTLOW FROM OPERATING ACTIVITIES TO                  

  LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION

	Year ended		Year ended
	31 December		31 December
	2017		2016
	US$ '000		US$ '000
Profit on ordinary activities before taxation	4,735		649
Interest income	(200)		(136)
Depreciation	26		41
Increase in payables	414		1,444
Increase in receivables	(3,188)		(322)
Increase in fair value of current asset investments	(2,550)		(1,076)
Net foreign exchange loss	31		16
Income taxes paid	(201)		(108)
Net cash (outflow)/inflow from operating activities	(933)		508

18.       RELATED PARTY TRANSACTIONS

All Group revenues derive from funds or entities in which two of the Company's directors, Andreas Rialas and Kyriakos Rialas, have an influence through directorships and the provision of investment  services.

At the reporting date the Company holds investments in The Argo Fund Limited, Argo Real Estate Opportunities Fund Limited ("AREOF"), Argo Special Situations Fund LP and Argo Distressed Credit Fund Limited. These investments are reflected in the consolidated financial statements at a fair value of US$10.6 million, US$0.1 million, US$0.03 million and US$4.2 million respectively.

The Group has provided AREOF with a notice of deferral in relation to amounts due from the provision of investment management services, under which it will not demand payment of such amounts until the Group judges that AREOF is in a position to pay the outstanding liability. These amounts accrued or receivable at 31 December 2017 total US$nil (2016: US$nil) after a bad debt provision of US$8.2 million. (€6.8 million) (2016: US$6.4 million (€6.1 million)). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows. AREOF settled total fees of €0.6 million (€0.5 million) during the year. In November 2013, AREOF offered Argo Group Limited additional security for the continued support in the form of debentures and guarantees by underlying intermediate companies. Argo Group Limited retains this additional security.

At the year end, Argo Group was owed loans repayable on demand of US$2.0 million (€1.7 million) (2016: US$1.7 million, €1.6 million) by AREOF accruing interest at 10%. The company was also owed a further amount of US$0.7 million (€0.6 million) (2016: US$0.6 million, €0.6 million) for expenses it paid on behalf of AREOF Group entities. A full provision has been made in the consolidated financial statements against this balance at the current and prior year end.

          David Fisher, a non-executive director of the Company, is also a non-executive director of AREOF.

19.     FINANCIAL INSTRUMENTS RISK MANAGEMENT

(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, supporting liquidity and demonstrating the commitment of the Group towards its fund investors.

(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 (refer to note 10). 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 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, Bank of Cyprus and Bancpost.

(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 and in which the Group holds significant investments as detailed in notes 10, 11 and 13. As explained within these notes the Group is experiencing collection delays with regard to management fees receivable and monies advanced. Some of the investments in funds under management (note 10) are illiquid and may be subject to events materially impacting recoverable value.

         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 statement of financial position.

         At the reporting date, the financial net assets past due but not impaired amounted to US$nil (2016: US$746,851).

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 payables are normally on 30-day terms (note 15).

As disclosed in note 2(a), Accounting Convention: Going Concern, the Group has performed an assessment of available liquidity to meet liabilities as they fall due during the forecast period. The Group has concluded that it has sufficient resources available to manage its liquidity risk during the forecast period.

 (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, Romanian Lei and Euros with carrying amounts as follows: US dollar - US$2.2 million, Sterling - US$0.3 million and Euros - US$2.5 million.                       

                   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 2017 the exposure would be a profit or loss to the Consolidated statement of comprehensive income of approximately US$0.1 million (2016: US$0.2 million).

(g)  Interest rate risk

The interest rate profile of the Group at 31 December 2017 is as follows:

	Total as per balance sheet	Variable interest rate instruments*	Fixed  interest rate instruments	Instruments on which no interest is receivable
	US$ '000	US$ '000	US$ '000	US$ '000
Financial Assets
Financial assets at fair value    through profit or loss	14,951	-	-	14,951
Loans and receivables	6,567	125	-	6,442
Cash and cash equivalents	5,031	265	2,098	2,668
	26,549	390	2,098	24,061
Financial liabilities
Trade and other payables	2,097	-	-	2,097

* Changes in the interest rate may cause movements.

The average interest rate at the year end was 1.09%. Any movement in interest rates would have an immaterial effect on the profit/(loss) for the year.

The interest rate profile of the Group at 31 December 2016 is as follows:

	Total as per balance sheet	Variable interest rate instruments*	Fixed  interest rate instruments	Instruments on which no interest is receivable
	US$ '000	US$ '000	US$ '000	US$ '000
Financial Assets
Financial assets at fair value    through profit or loss	12,401	-	-	10,401
Loans and receivables	3,200	-	-	3,200
Cash and cash equivalents	6,126	899	1,927	3,300
	21,727	899	1,927	18,901
Financial liabilities
Trade and other payables	1,683	-	-	1,683

* Changes in the interest rate may cause movements.

The average interest rate at the year end was 0.01%. Any movement in interest rates would have an immaterial effect on the profit/(loss) for the year.

 (h) Fair value  

      The carrying values of the financial assets and liabilities approximate the fair value of the financial assets and liabilities and can be summarised as follows:

		At 31 December		At 31 December
		2017		2016
		US$ '000		US$ '000
Financial Assets
Financial assets at fair value through profit or loss		14,951		12,401
Loans and receivables		6,563		3,200
Cash and cash equivalents		5,031		6,126
		26,545		21,727
Financial Liabilities
Trade and other payables		2,097		1,683

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 administrators and are based on the fair value of the underlying net assets of the funds because, although the funds are quoted, there is no active market for any of the investments held.

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 (note 2o).

                                                               At 31 December 2017

	Level 1	Level 2	Level 3	Total
	US$ '000	US$ '000	US$ '000	US$ '000
Financial assets at fair value through profit or loss	-	14,800	151	14,951

                                                               At 31 December 2016

	Level 1	Level 2	Level 3	Total
	US$ '000	US$ '000	US$ '000	US$ '000
Financial assets at fair value through profit or loss	-	12,267	134	12,401

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of the fair value hierarchy:

	Unlisted closed ended investment fund		Listed open ended investment fund Emerging markets
	Real Estate			Total
	US$ '000		US$ '000	US$ '000
Balance as at 1 January 2017	119		15	134
Total losses recognized in profit or loss	-		17	17
Purchases	-                 -		-	-
Sales	-       -		-	-
Transfer to level 2	-		-	-
Balance as at 31 December 2017	119		32	151

20.        EVENTS AFTER THE REPORTING DATE

         The Directors consider that there has been no event since the year end that has a significant effect on the Group's position.

21.  SHARE-BASED INCENTIVE PLANS

On 14 March 2011 the Group granted options over 5,900,000 shares to directors and employees under The Argo Group Limited Employee Stock Option Plan. The options are exercisable in at an exercise price of 24p per share within 10 years of the grant date.

         The fair value of the options granted was measured at the grant date using a Black-Scholes model that takes into account the effect of certain financial assumptions, including the option exercise price, current share price and volatility, dividend yield and the risk-free interest rate. The fair value of the options granted is spread over the vesting period of the scheme and the value is adjusted to reflect the actual number of shares that are expected to vest.

The principal assumptions for valuing the options were:

Exercise price (pence)	24.0
Weighted average share price at grant date (pence)	17.0
Weighted average option life at grant date (years)	10.0
Expected volatility (% p.a.)	15.0
Dividend yield (% p.a.)	10.0
Risk-free interest rate (% p.a.)	0.907

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The total charge to employee costs in respect of this incentive plan is £nil  (2016: £nil).

The number and weighted average exercise price of the share options during the period is as follows:

	Weighted average exercise price	No. of share options
Outstanding at beginning of period	24.0p	4,840,000
Granted during the period	24.0p	450,000
Forfeited during the period	24.0p	(950,000)
Outstanding at end of period	24.0p	4,340,000
Exercisable at end of period	24.0p	4,340,000

The options outstanding at 31 December 2017 have an exercise price of 24p and a weighted average contractual life of 4 years.  Outstanding share options are contingent upon the option holder remaining an employee of the Group.

 

END

 

 

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