Half Yearly Report

RNS Number : 9734K

ARGO Group Limited

29 August 2012

 

Argo Group Limited

("Argo" or the "Company")

Interim Results for the six months ended 30 June 2012

Argo today announces its interim results for the six months ended 30 June 2012.

The Company will today make available its interim report for the six month period ended 30 June 2012 on the Company's website www.argogrouplimited.com.

Key Highlights for the six month period ended 30 June 2012

-     Revenues US$3.9 million (six months to 30 June 2011: US$6.2 million)

-     Operating profit US$0.7 million (six months to 30 June 2011: US$1.0 million)

-     Loss before tax US$15.3 million after a one-off goodwill impairment charge of US$14.9 million (six months to 30 June 2011: profit US$1.2 million)

-     Net assets US$26.5 million (31 December 2011: US$43.4 million) after dividend payment of US$1.4 million

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

"Global markets have once again proved challenging and Argo has continued to meet this challenge head-on through fund restructuring, new fund initiatives and cost-cutting. During the period Argo paid an increased dividend and successfully completed various asset management initiatives at its retail parks in Romania and Ukraine. Emerging markets remain attractive and despite the challenges posed by the global markets for asset gathering we are confident that through its strong balance sheet Argo is well-positioned to weather the current economic downturn and to benefit from the eventual global recovery."

Enquiries

Argo Group Limited

Andreas Rialas

020 7535 4000

Panmure Gordon

Dominic Morley

020 7459 3600

CHAIRMAN'S STATEMENT

The Group and its objective

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 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 interim results of Argo Group Limited for the half year ended 30 June 2012.

In the period under review markets once again proved challenging with the European sovereign debt crisis continuing to dominate events. The ongoing turmoil in the Eurozone continues to act as a major drag on the performance of the Argo funds which ended the period with Assets under Management ("AUM") at US$302.4 million, 7.0% lower than at the beginning of the period. The Argo funds have yet to regain their high-water mark.

For the six month period ended 30 June 2012 the Group generated revenues of US$3.9 million (six months to 30 June 2011: US$6.2 million) with management fees accounting for US$3.5 million (six months to 30 June 2011: US$4.9 million) reflecting the falling AUM throughout the period. There was no non-recurring income generated in the period.

In line with last year, the Group has continued to keep its cost base under review with total costs falling to US$3.2 million (six months to 30 June 2011: US$5.2 million). Further cost savings and efficiencies have been identified including the closure of the Buenos Aires office, with investments in Latin America continuing to be covered by the Group's investment teams operating out of its London office. The Group's cost base will remain under constant review whilst ensuring efficient deployment of Group resources and safeguarding of the requisite infrastructure.

Since the acquisition of the Argo businesses in 2008 the AUM attributable to the Group's separately identifiable business units have decreased significantly due to the volatility and uncertainty displayed by the global financial markets. As a result, operations have been scaled back and an impairment review of goodwill was undertaken at 30 June 2012. Following the review, the goodwill of US$14.9 million created on the purchase of the Argo businesses has been written off during the period.

Overall, the financial statements show an operating profit for the period of US$0.7 million (six months to 30 June 2011: US$1.0 million) and a loss before tax of US$15.3 million (six months to 30 June 2011: profit US$1.2 million) reflecting the goodwill impairment of US$14.9 million and the unrealised loss on current asset investments of US$1.0 million (six months to 30 June 2011: unrealised gain US$0.2 million).

At 30 June 2012, the Group had net assets of US$26.5 million (31 December 2011: US$43.4 million) and net current assets of US$25.8 million (31 December 2011: US$27.4 million) after paying a dividend of 2.0 cents (1.3 pence) per share on 20 June 2012 (2011: 1.9 cents, 1.2 pence) and a goodwill impairment charge of US$14.9 million. 

Net current assets include investments in The Argo Fund ("TAF") and Argo Real Estate Opportunities Fund Limited ("AREOF") at fair values of US$16.8 million (31 December 2011: US$15.5 million) and US$0.7 million (31 December 2011: US$1.0 million) respectively. During the period the Group invested a further US$2 million in TAF.

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 30 June 2012 total US$2,786,003 (€2,215,333). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows.

The number of employees of the Group at 30 June 2012 increased to 41 (six months to 30 June 2011: 30) predominantly due to the acquisition of the holding companies of the two shopping parks in Romania and the subsequent transfer of their staff to the Argo Group.

Fund performance

Whilst the performance of the Argo funds was disappointing it was near-inevitable given the prolonged period of volatility and uncertainty. The main fund, TAF, was behind by 4.70%, as was the Argo Distressed Credit Fund ("ADCF"), by 3.19%, albeit both funds finished on a positive note in June; by comparison, the main hedge fund indices showed a negative return of 0.36% for the same period.

Managing the Argo funds continues to be a challenge against the back-drop of the ongoing European debt crisis and turbulent markets, particularly as Argo specialises in illiquid funds. Investor confidence has been dented and, understandably, clients are reluctant to invest in illiquid assets at a time of such economic and political uncertainty. 

Argo Funds

Fund	Launch       date	30 June           2012 6 months	30 June             2011 6 months	2011        year       total	Since inception	Annualised  performance	Sharpe        ratio	Down     months	AUM
		%	%	%	%	CAGR %			US$m
The Argo Fund	Oct-00	-4.70	1.02	0.10	123.49	7.84	0.69	27 of 141	82.1
Argo Distressed Credit Fund	Oct-08	-3.19	-0.23	1.18	20.60	5.33	0.65	16 of 45	24.4
Argo Special Situations Fund LP	Feb-12	-4.30	N/A	N/A	-4.30	-10.10	-5.72	5 of 5	107.8
Argo Real Estate Opportunities Fund	Aug-06	-7.18	36.90	178.23	-30.65	-10.31	N/A	30 of 72*	88.1*
Total									302.4

* NAV only officially measured twice a year, March and September.

On 1 February 2012, Argo completed a significant fund restructuring exercise to reconfirm its mandate with the investor base of AGSSF Holdings Limited ("AHL") and Argo Capital Partners Fund ("ACPF") and to attract new liquidity. The portfolio assets of AHL and ACPF were transferred into a new fund, Argo Special Situations Fund LP ("SSF"), in exchange for ordinary partnership interests in SSF with the objective of acquiring follow-on investments and maximising the value of the assets. The Fund has been successful in attracting new subscriptions with all investors being invited to subscribe for two-year preference shares targeting a 13.5% annualised return. As part of this restructuring exercise the high-water mark for earning performance fees was reset to zero. SSF is a closed-ended fund with a realisation period of three years subject to extension. SSF finished in negative territory at the period end showing a negative return of 4.3%, largely the result of currency movements.

AREOF continues to operate in a particularly challenging and difficult environment albeit one which appears to be stabilising. The uncertainties surrounding the Eurozone crisis have impacted economic performance and property asset valuations, with pressures from competing centres in several of the regions in which AREOF operates changing the balance of negotiation in favour of the tenant. Whilst tenants continue to seek rent concessions and turnover only rents, the properties are consistently 98-100% let.

Despite the challenging trading environment AREOF successfully completed asset management initiatives at Sibiu Shopping City, Romania and Riviera Shopping City, Odessa both of which continue to maintain their trading dominance in the respective regions. The recently acquired shopping parks, ERA Shopping Park, Oradea and ERA Shopping Park, Iasi, in Romania, are both anchored by prominent international retailers with the former completing development of its 16,000 sqm shopping mall in early spring 2012 and the latter hoping to agree the restructuring of a €77m debt facility with a view to commencing the final phase development of its 28,000 sqm shopping mall this year.

AREOF has successfully renegotiated and agreed terms with its existing bankers on several of its loans which will provide development cash flow to complete the final phase of the asset management initiative at Sibiu Shopping City, Romania due to be competed in 2012.

The Fund's adjusted Net Asset Value was US$88.1 million (€70.0 million) as at 31 March 2012, compared with US$53.4 million (€37.1 million) a year earlier, the increase being attributable to the acquisition of the two Romanian shopping parks, ERA Shopping Park, Oradea and ERA Shopping Park in September 2011. Following the purchase of these assets AREOF has become the largest listed owner and operator of retail parks in the country thus making it more marketable to international investors over the long term. Further information may be found in the published accounts of AREOF on its website at www.argoproperty.com.

During the period the decision was taken to terminate Argo Global Special Situations Fund. The size of the Fund had diminished greatly as a result of redemptions and reached the quantum where administrative costs were too high relative to the Fund's size to continue trading. Fund operations were terminated on 1 June 2012 with investors being given the option to continue their exposure to a distressed credit strategy by switching their investment to ADCF.

Dividends

During the period the Group paid a dividend of 2.0 cents (1.3 pence) per share (2011: 1.9 cents, 1.2 pence). Going forward, the Company intends, subject to its financial performance, to pay a final dividend each year.

Outlook

Conditions in global financial markets are once again characterised by uncertainty amid investor anxiety about the future of the Eurozone. Unless there is a rapid return of investor confidence it is difficult to envisage anything other than another turbulent year ahead. This uncertainty has made attracting new investors to Argo's funds difficult.

Despite this backdrop the Group, with its strong balance sheet, is well positioned to continue to weather the economic and political challenges ahead. The business will continue to look for opportunities and invest in infrastructure where necessary whilst operating as cost-effectively as possible.

As a new initiative Argo is expanding its liquid product offering through a new fund, Argo Local Markets Fund, which will be launched over the coming months with the aim of achieving capital growth through investments in local bonds, interest rates and currency markets within the emerging markets sector.

The Board is confident that with its talented team the Group can continue to meet the ongoing economic challenges and is well placed to benefit from an eventual global recovery and in particular recovery of the emerging markets sector.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2012

		Six months		Six months
		ended		ended
		30 June		30 June
		2012		2011
	Note	US$'000		US$'000
Management fees		3,543		4,868
Other income		316		1,355
Revenue		3,859		6,223
Legal and professional expenses		(178)		(159)
Management and incentive fees payable		(7)		-
Operational expenses		(845)		(831)
Employee costs		(1,832)		(3,883)
Foreign exchange loss		(2)		(6)
Amortisation of intangible assets	7	(317)		(341)
Depreciation	8	(14)		(21)
Operating profit		664		982
Impairment of intangible assets	7	(14,945)		-
Interest income on cash and cash equivalents		8		29
Unrealised (loss)/gain on investments		(1,014)		159
(Loss)/profit on ordinary activities before taxation		(15,287)		1,170
Taxation	5	(76)		(131)
(Loss)/profit for the period after taxation attributable to members of the Company	6	(15,363)		1,039
Other comprehensive income
Exchange differences on translation of foreign operations		(127)		282
Total comprehensive (loss)/income for the period		(15,490)		1,321

		Six months		Six months
		Ended		Ended
		30 June		30 June
		2012		2011
		US$		US$
Earnings per share (basic)	6	-0.23		0.01
Earnings per share (diluted)	6	-0.23		0.01

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2012

		30 June		At 31 December
		2012		2011
	Note	US$'000		US$'000
Assets
Non-current assets
Intangible assets	7	660		15,942
Fixtures, fittings and equipment	8	62		70
Loans and advances receivable		37		38
Total non-current assets		759		16,050
Current assets
Investments	9	17,525		16,539
Trade and other receivables	10	3,579		3,314
Cash and cash equivalents		5,009		8,358
Loans and advances receivable		258		240
Total current assets		26,371		28,451
Total assets		27,130		44,501
Equity and liabilities
Equity
Issued share capital	11	674		674
Share premium		30,878		30,878
Revenue reserve		(2,633)		14,123
Foreign currency translation reserve		(2,377)		(2,250)
Total equity		26,542		43,425
Current liabilities
Trade and other payables		361		913
Taxation payable	5	227		163
Total current liabilities		588		1,076
Total equity and liabilities		27,130		44,501

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2012

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2011	2011	2011	2011	2011
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2011	737	32,199	13,645	(2,139)	44,442
Total comprehensive income
Profit for the period after taxation	-	-	1,039	282	1,321
Transactions with owners recorded directly in equity
Dividends to equity holders (Note 11)	-	-	(1,418)	-	(1,418)
Purchase of own shares (Note 11)	(39)	(793)	-	-	(832)
As at 30 June 2011	698	31,406	13,266	(1,857)	43,513

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2012	2012	2012	2012	2012
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2012	674	30,878	14,123	(2,250)	43,425
Total comprehensive income
Loss for the period after taxation	-	-	(15,363)	(127)	(15,490)
Transactions with owners recorded directly in equity
Dividends to equity holders (Note 11)	-	-	(1,393)	-	(1,393)
As at 30 June 2012	674	30,878	(2,633)	(2,377)	26,542

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2012

		Six months ended		Six months ended
		30 June		30 June
		2012		2011
	Note	US$'000		US$'000
Net cash inflow from operating activities	12	151		433
Cash flows (used in)/from investing activities
Interest received on cash and cash equivalents		8		29
Purchase of current asset investments	9	(2,000)		-
Purchase of fixtures, fittings and equipment	8	(8)		(10)
Net cash (used in)/from investing activities		(2,000)		19
Cash flows used in financing activities
Repurchase of own shares	11	-		(832)
Dividends paid	11	(1,393)		(1,418)
Net cash used in financing activities		(1,393)		(2,250)
Net decrease in cash and cash equivalents		(3,242)		(1,798)
Cash and cash equivalents at 1 January 2012 and     1 January 2011		8,358		11,907
Foreign exchange (loss)/gain on cash and cash equivalents		(107)		141
Cash and cash equivalents as at 30 June 2012 and 30 June 2011		5,009		10,250

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2012

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. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

         The consolidated financial statements of the Group as at and for the year ended 31 December 2011 are available upon request from the Company's registered office or at www.argogrouplimited.com.

         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 41 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
Argo Property Management Srl (formerly North Asset Management Srl)	Romania
North Asset Management Sarl	Luxembourg
Argo Investor Services AG	Switzerland

2.       BASIS OF PREPARATION

         These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2011.

         The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2011.

         These condensed consolidated interim financial statements were approved by the Board of Directors on 28 August 2012.   

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 Group Ltd	Argo Capital Management (Cyprus) Ltd	Argo Capital Management Ltd	Argo Capital Management Property Ltd	Other	Six months ended  30 June
	2012	2012	2012	2012	2012	2012
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenues from external customers	-	2,245	-	1,614	-	3,859
Intersegment revenues	2,200	-	1,093	-	184	3,477
Reportable segment profit/(loss)	968	(1,443)	(510)	581	18	(386)
Intersegment profit/(loss)	2,200	(3,297)	909	-	184	(4)
Profit/(loss) excluding inter- segment transactions	(1,232)	1,854	(1,419)	581	(166)	(382)
Reportable segment assets	48,999	830	2,352	4,442	430	57,053
Reportable segment liabilities	67	396	255	153	26	897

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months
	ended
	30 June 2012
	US$'000
Revenues
Total revenues for reportable segments	7,336
Elimination of intersegment revenues	(3,477)
Group revenues	3,859
Profit or loss
Total loss for reportable segments	(386)
Elimination of intersegment losses	4
Other unallocated amounts	(14,905)
Loss on ordinary activities before taxation	(15,287)
Assets
Total assets for reportable segments	57,053
Elimination of intersegment receivables	(325)
Elimination of Company's cost of investments	(29,598)
Group assets	27,130
Liabilities
Total liabilities for reportable segments	897
Elimination of intersegment payables	(309)
Group liabilities	588

	Argo Group Ltd	Argo Capital Management (Cyprus) Ltd	Argo Capital Management Ltd	Argo Capital Management Property Ltd	Other	Six months ended  30 June
	2011	2011	2011	2011	2011	2011
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenues from external customers	-	3,465	1,131	1,627	-	6,223
Intersegment revenues	4,000	-	1,575	-	266	5,841
Reportable segment profit/(loss)	3,977	(2,684)	(454)	144	62	1,045
Intersegment profit/(loss)	4,000	(5,578)	1,308	-	266	(4)
Profit/(loss) excluding inter- segment transactions	(23)	2,894	(1,762)	144	(204)	1,049
Reportable segment assets	49,141	2,524	4,378	3,679	732	60,454
Reportable segment liabilities	47	742	923	499	87	2,298

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months
	ended
	30 June 2011
	US$'000
Revenues
Total revenues for reportable segments	12,064
Elimination of intersegment revenues	(5,841)
Group revenues	6,223
Profit or loss
Total profit for reportable segments	1,045
Elimination of intersegment losses	4
Other unallocated amounts	121
Profit on ordinary activities before taxation	1,170
Assets
Total assets for reportable segments	60,454
Elimination of intersegment receivables	(441)
Elimination of Company's cost of investments	(14,653)
Group assets	45,360
Liabilities
Total liabilities for reportable segments	2,298
Elimination of intersegment payables	(451)
Group liabilities	1,847

4.   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. All options are exercisable in four equal tranches over a period of four years at an exercise price of 24p per share.

         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 are:

Exercise price (pence)	24.0
Weighted average share price at grant date (pence)	12.0
Weighted average option life (years)	10.0
Expected volatility (% p.a.)	2.11
Dividend yield (% p.a.)	10.0
Risk-free interest rate (% p.a.)	5.0

         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.

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	5,465,000
Granted during the period	-	-
Forfeited during the period	24.0p	(50,000)
Outstanding at end of period	24.0p	5,415,000
Exercisable at end of period	24.0p	1,353,750

The options outstanding at 30 June 2012 have an exercise price of 24p and a weighted average contractual life of 10 years. They expire after 10 years. Outstanding share options are contingent upon the option holder remaining an employee of the Group.

The weighted average fair value of the options outstanding at the period end was nil.

5.      TAXATION

         Taxation rates applicable to the parent company and the Cypriot, UK, Singaporean, Luxembourg, Swiss, Cayman and Romanian subsidiaries range from 0% to 25% (2011: 0% to 27%).

Income Statement	Six months		Six months
	ended		ended
	30 June		30 June
	2012		2011
	US$'000		US$'000
Taxation charge for the period on Group companies	76		131

The charge for the period can be reconciled to the profit per the Condensed Consolidated Statement of Comprehensive Income as follows:

	Six months		Six months
	ended		ended
	30 June		30 June
	2012		2011
	US$'000		US$'000
(Loss)/profit before tax	(15,287)		1,170
Applicable Isle of Man tax rate for Argo Group Limited of 0%	-		-
Timing differences	(5)
Non-deductible expenses	8
Non-taxable income	(1)
Other adjustments	(2)		-
Tax effect of different tax rates of subsidiaries operating in other jurisdictions	76		131
Tax charge	76		131

Balance Sheet
	30 June		31 December
	2012		2011
	US$'000		US$'000
Corporation tax payable	227		163

6.      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.

	Six months		Six months
	ended		ended
	30 June		30 June
	2012		2011
	US$'000		US$'000
Net (loss)/profit for the period after taxation attributable to members	(15,363)		1,039
	No. of shares		No. of shares
Weighted average number of ordinary shares for basic earnings per share	67,428,494		72,253,494
Effect of dilution (Note 4)	5,415,000		5,900,000
Weighted average number of ordinary shares for diluted earnings per share	72,843,494		78,153,494

	Six months		Six months
	ended		ended
	30 June		30 June
	2012		2011
	US$		US$
Earnings per share (basic)	-0.23		0.01
Earnings per share (diluted)	-0.23		0.01

7.      INTANGIBLE ASSETS

	Fund management contracts
	US$'000
Cost
At 1 January 2011	18,554
Foreign exchange movement	86
At 31 December 2011	18,640
Foreign exchange movement	42
At 30 June 2012	18,682
Amortisation and impairment
At 1 January 2011	1,939
Amortisation of Argo business intangible assets	683
Foreign exchange movement	76
At 31 December 2011	2,698
Impairment charge	14,945
Amortisation of Argo business intangible assets	317
Foreign exchange movement	62
At 30 June 2012	18,022
Net book value
At 31 December 2011	15,942
At 30 June 2012	660

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.

Since the acquisition of the Argo businesses in 2008 the assets under management attributable to the Group's separately identifiable business units have decreased significantly due to the volatility and uncertainty displayed by the global financial markets. As a result, operations have been scaled back and an impairment review of goodwill was undertaken at 30 June 2012. Following the review, the goodwill of US$14.9 million created on the purchase of the Argo businesses has been written off during the period. At the balance sheet date the carrying value of goodwill is US$nil (31 December 2011: US$14.9 million).

At the balance sheet date the carrying value of the Argo Real Estate Opportunities Fund Limited management contract is US$0.7 million (31 December 2011: US$1.0 million), net of amortisation. The intangible asset is being amortised over 5 years and 44 days, being the remaining period of the contract from the date of acquisition. The Group has successfully renegotiated the extension of this management contract by five years from the current termination date of 31 July 2013 to 31 July 2018.

8.      FIXTURES, FITTINGS AND EQUIPMENT

	Fixtures, fittings & equipment
	US$'000
Cost
At 1 January 2011	295
Additions	64
Foreign exchange movement	(2)
At 31 December 2011	357
Additions	8
Disposal	(13)
Foreign exchange movement	-
At 30 June 2012	352
Accumulated Depreciation
At 1 January 2011	254
Depreciation charge for period	35
Foreign exchange movement	(2)
At 31 December 2011	287
Depreciation charge for period	14
Disposal	(12)
Foreign exchange movement	1
At 30 June 2012	290
Net book value
At 31 December 2011	70
At 30 June 2012	62

9.      INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

		30 June		30 June
		2012		2012
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	0		0
10	Argo Capital Investors Fund SPC	0		0
10	Argo Capital Partners Fund Ltd	0		0
100	Argo Distressed Credit Fund Ltd	0		0
100	AGSSF Holdings Ltd	0		0
1	Argo Special Situations Fund LP	0		0
		0		0

Holding	Investment in ordinary shares	Total cost		Fair value
		US$'000		US$'000
75,165	The Argo Fund Ltd	16,343		16,799
10,899,021	Argo Real Estate Opportunities Fund Ltd	988		726
		17,331		17,525

		31 December		31 December
		2011		2011
Holding	Investment in management shares	Total cost		Fair value
		US$'000		US$'000
10	The Argo Fund Ltd	0		0
10	Argo Capital Investors Fund SPC	0		0
10	Argo Capital Partners Fund Ltd	0		0
100	Argo Distressed Credit Fund Ltd	0		0
100	AGSSF Holdings Ltd	0		0
		0		0

Holding	Investment in ordinary shares	Total cost		Fair value
		US$'000		US$'000
66,435	The Argo Fund Ltd	14,343		15,579
10,899,021	Argo Real Estate Opportunities Fund Ltd	988		960
		15,331		16,539

10.     TRADE AND OTHER RECEIVABLES                                               

During the year ended 31 December 2011 the Group provided Argo Real Estate Opportunities Fund Limited ("AREOF") (to whom it provides investment management services) 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. These amounts accrued or receivable at 30 June 2012 total US$2,786,003 (€2,215,333) (31 December 2011: US$2,480,165, €1,915,333). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows.

In the audited financial statements of AREOF at 30 September 2011 and the interim report of AREOF at 31 March 2012, a material uncertainty surrounding the refinancing of bank debts was referred to in relation to the basis of preparation of the financial statements. In the view of the directors of AREOF, discussions with the banks are continuing satisfactorily and they have therefore concluded that it is appropriate to prepare those financial statements on a going concern basis.

11.     SHARE CAPITAL

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

	30 June	30 June	31 December	31 December
	2012	2012	2011	2011
	No.	US$'000	No.	US$'000
Issued and fully paid
Ordinary shares of US$0.01 each	67,428,494	674	67,428,494	674
	67,428,494	674	67,428,494	674

The directors recommended a final dividend of 2.0 cents (1.3 pence) per share for the year ended 31 December 2011 (31 December 2010: 1.9 cents, 1.2 pence). The final dividend for the year ended 31 December 2011 of US$1,392,885 (GBP876,570) (31 December 2010: US$1,418,257, GBP 873,042) was paid on 20 June 2012 to ordinary shareholders who were on the Register of Members on 25 May 2012. Going forward, the Company intends, subject to its financial performance, to pay a final dividend each year.

During the six month period ended 30 June 2011 the directors authorised the repurchase of 3,910,000 shares at an average purchase price of 13.2p. No shares were repurchased during the current period.

12.     RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO                  

   (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

	Six months ended 30 June 2011		Six months ended 30 June 2011
	US$'000		US$'000
(Loss)/profit on ordinary activities before taxation	(15,287)		1,170
Interest income	(8)		(29)
Impairment charge	14,945		-
Amortisation of intangible assets	317		341
Depreciation	14		21
Unrealised (loss)/gain on investments	1,014		(159)
Net foreign exchange loss	2		6
(Decrease)/increase in payables	(552)		469
Increase in receivables	(282)		(1,379)
Income taxes paid	(12)		(7)
Net cash inflow from operating activities	151		433

13.     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 advisory services.

At the balance sheet date the Company holds investments in The Argo Fund Limited and Argo Real Estate Opportunities Fund Limited ("AREOF"). These investments are reflected in the accounts at a fair value of US$16,798,536 (31 December 2011: US$15,578,970 million) and US$726,450 (31 December 2011: US$959,694 million)respectively.

During the period the Group provided AREOF (to whom it provides investment management services) 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. These amounts accrued or receivable at 30 June 2012 total US$2,786,003 (€2,215,333) (31 December 2011: US$2,480,165, €1,915,333). AREOF continues to meet part of this obligation to the Argo Group as and when liquidity allows.

In the audited financial statements of AREOF at 30 September 2011 and the interim report of AREOF at 31 March 2012, a material uncertainty surrounding the refinancing of bank debts was referred to in relation to the basis of preparation of the financial statements. In the view of the directors of AREOF, discussions with the banks are continuing satisfactorily and they have therefore concluded that it is appropriate to prepare those financial statements on a going concern basis.

Michael Kloter, the non-executive chairman, is also partner in a legal firm which supplies services to the Group. This firm charged US$1,530 (six months ended 30 June 2011: US$11,426) for services rendered to the Group in the period.

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

 

END

 

 

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