Argo Group Regulatory News (ARGO)

RNS Number : 3867R

ARGO Group Limited

20 August 2010

 

Argo Group Limited

("Argo" or the "Company")

 

Interim Results for the six months ended 30 June 2010

 

Argo today announces its interim results for the six months ended 30 June 2010.

The Company will today make available its interim report for the six month period ended 30 June 2010 on the Company's website www.argogrouplimited.com.

 

Key Highlights for the six month period ended 30 June 2010 

 

- Steady, profitable performance across the Argo funds

- Positive portfolio results in an upward trend

- Revenues of US$5.6 million (six months to June 2009: US$5.8 million)

- Operating profit of US$1.1 million (six months to June 2009: US$1.5 million)

- Profit before tax of US$1.2 million (six months to June 2009: US$2.0 million)

- Operating profit and profit before tax are stated after bonus accrual of US$840,000 (six months to June 2009: nil)

- Maintained balance sheet strength: net assets of US$43.0 million after dividend payment and share buyback totalling US$1.5m (December 2009: US$44.5 million)

 

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

 

"As Argo's flagship fund enters its 10th year of existence the Company continues to produce a steady and profitable performance. During the period Argo paid a dividend and carried out a successful buyback of shares whilst still maintaining its strong balance sheet and liquidity. We are confident that Argo is well-positioned to take advantage of the record levels of recent inflows into emerging markets and that the Company will continue to produce positive results."

 

Enquiries

 

Argo Group Limited

Andreas Rialas

020 7535 4000

 

Panmure Gordon

Dominic Morley

020 7459 3600

 

CHAIRMAN'S STATEMENT

 

Business review

 

Argo is pleased to report another profitable set of interim results for the half year ended 30 June 2010. The Company was incorporated in February 2008 in the Isle of Man and began trading as a new group holding company on 13 June 2008. It listed on the AIM market in November 2008.

 

Argo's primary business is to deliver a diversified approach to investing in emerging markets. Its investment objective is to provide investors with absolute returns in the six funds that it manages by investing in, inter alia, fixed income, special situations, local currencies and interest rate strategies, private equity, real estate, quoted equities, high yield corporate debt and distressed debt, although not every fund invests in each of these asset classes. Argo has a performance track record dating back to 2000 and this year celebrates its tenth anniversary.

 

For the six month period ended 30 June 2010 the Group generated revenues of US$5.6 million (six months to 30 June 2009: US$5.8 million) with management fees accounting for US$5.1 million (six months to 30 June 2009: US$5.5 million). The small reduction in management fees arising from lower assets under management ("AUM") was partially offset by higher incentive fees and other income. The Argo Fund Limited ("TAF") and Argo Global Special Situations Fund SP ("AGSSF"), a segregated portfolio of the Argo Capital Investors Fund SPC, have yet to reach their high-water mark.

 

AUM decreased during the six month period ended 30 June 2010 by 8.3% to US$403.1 million from their level at 31 December 2009. Despite flat to positive fund performance year to date the decrease of US$36.4 million was mainly due to the continued payment of "gated" redemptions from the AGSSF.

 

Operational review

 

Record levels of funds flow into emerging markets debt and equity but the beneficiaries so far have been long-only mutual funds. We believe that the high volatility witnessed will hit the returns of the long-only directional mutual funds and furthermore that emerging market inflows will in time benefit the more actively managed traditional hedge fund strategies. Whilst our marketing team identified a number of potential leads during the period, the market volatility induced by the crisis in confidence towards certain peripheral European states and, more generally, the Eurozone had the effect of once again undermining investor sentiment. The funds are encouraged by the recent raising of new money, admittedly small amounts.

 

The Group employed 25 people at the end of June 2010, one lower than the end of 2009 but 14 fewer than end-2008.

 

Fund performance

 

Performance across the range of Argo funds was mixed for the half year ended 30 June 2010, but the two main funds TAF and Argo Distressed Credit Fund ("ADCF"), which are not gated, showed positive returns at a time when the average fund performance was flat to negative. Argo Capital Partners Fund ("ACPF"), the closed private equity fund, and AGSSF suffer mainly from a weakening euro against the dollar experiencing unrealised FX losses. The generally optimistic tone experienced in the first quarter of the year gave way to concern over the fiscal imbalances and credit metrics of peripheral European economies, most notably Greece. Amidst mounting speculation concerning sovereign defaults, restructurings and the status of the Euro as a reserve currency, markets became very volatile and difficult to trade. Our funds navigated the volatility by maintaining some short positions and we are encouraged by the return of confidence witnessed in the few weeks prior to the date of this statement that is contributing to a better performance by the funds.

 

Argo Funds

 

Fund	Launch date	30 June 2010 6 months	30 June 2009 6 months	2009 Year total	Since inception	Annualised performance	Sharpe ratio	Down months	AUM
		%	%	%	%	CAGR %			US$m
The Argo Fund	Oct-00	0.37	5.35	12.18	116.60	9.11	0.74	15 of 117	111.6
Argo Global Special Situations Fund	Aug-04	-1.29	5.49	12.85	35.31	5.86	0.52	16 of 71	98.7
AGSSF Holdings	Feb-09	-5.49	5.75	7.72	1.81	1.45	0.20	9 of 17	76.7
Argo Distressed Credit Fund	Oct-08	4.67	5.23	11.06	16.82	9.09	1.36	7 of 21	21.5
Argo Real Estate Opportunities Fund	Aug-06	9.47	-60.52	-78.47	-69.90	-26.35	N/A	24 of 48*	35.3*
Argo Capital Partners Fund	Aug-06	-11.65	-4.82	-4.17	14.86	3.68	N/A	N/A	59.3
Total									403.1

 

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

 

AGSSF Holdings Limited ("AHL"), the creation of which was approved by the AGSSF board of directors in February 2009, comprises assets that are currently more difficult to liquidate. In the six-month period ended 30 June 2010 it delivered a year-to-date return of -5.49%, in part driven by exchange rate fluctuations, and despite difficult market conditions we are encouraged by the progress in creating liquidity events for investors in the fund.

 

AGSSF itself recorded a smaller decline of 1.29% in the six months to June 2010 but TAF had a positive year-to-date return of 0.37%. On a more constructive note, ADCF continued to build a solid track record of returns: after the 11.06% recorded in 2009, ADCF achieved a return of 4.67% in the six months to June 2010.

 

The Argo Real Estate Opportunities Fund Limited ("AREOF"), which has been severely affected by the downturn in Eastern Europe, reported a further write down of investment property values in the six months to 31 March 2010. The fund's adjusted Net Asset Value was EUR28.9 million as at end-March 2010, compared with EUR48.3 million a year earlier and EUR26.4 million six months earlier.

 

Meanwhile, ACPF reported a negative return of 11.65% for the six months ended 30 June 2010 (as at 30 June 2009: -4.82%). The realisation period for the Fund was scheduled to commence this month but, as per the Fund prospectus, this has been extended for one year.

 

Outlook

 

The board is satisfied with the current company composition in terms of headcount and assets under management. Costs are appropriate and are reviewed periodically so as to optimise the efficient deployment of company resources.

 

More emphasis is placed on direct communication with existing and new investors with the purchase of two databases to assist in growing the funds with additional subscriptions.

 

Management has recently observed greater mobility and a new air of optimism in the market conditions that will affect positively the workout of some of the less liquid and private equity transactions in the funds. A significant number of man hours is being spent on such transactions and there is continuous communication with investors about the funds' performance. On the more actively traded bonds we have benefitted greatly from improved performance in some of our key countries such as Argentina, Ukraine and Venezuela.

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

		Six months		Six months
		Ended		Ended
		30 June		30 June
		2010		2009
	Note	US$'000		US$'000
Management fees		5,093		5,485
Incentive fees		257		177
Other income		266		173
Revenue		5,616		5,835
Legal and professional expenses		(281)		(294)
Management and incentive fees payable		(94)		(181)
Operational expenses		(907)		(1,004)
Employee costs		(2,910)		(2,660)
Foreign exchange gain		77		157
Amortisation of intangible assets	6	(323)		(333)
Depreciation	7	(52)		(54)
Operating profit		1,126		1,466
Interest income on cash and cash equivalents		30		99
Unrealised gain on investments		53		481
Profit on ordinary activities before taxation		1,209		2,046
Taxation	4	(146)		(184)
Profit for the period after taxation attributable to members of the Company	5	1,063		1,862
Other comprehensive income
Exchange differences on translation of foreign operations		(1,018)		895
Total comprehensive income for the period		45		2,757

 

 

		Six months		Six months
		Ended		Ended
		30 June		30 June
		2010		2009
		US$		US$
Earnings per share (basic)	5	0.01		0.02
Earnings per share (diluted)	5	0.01		0.02

 

The Directors consider that all results derive from continuing activities.

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2010

 

		30 June		31 December
		2010		2009
	Note	US$'000		US$'000
Assets
Non-current assets
Intangible assets	6	16,889		17,557
Fixtures, fittings and equipment	7	79		136
Loans and advances receivable		244		226
Total non-current assets		17,212		17,919
Current assets
Investments	8	14,389		14,337
Trade and other receivables		1,448		1,972
Cash and cash equivalents		11,383		13,069
Loans and advances receivable		5		36
Total current assets		27,225		29,414
Total assets		44,437		47,333
Equity and liabilities
Equity
Issued share capital	9	747		769
Share premium		32,385		32,772
Revenue reserve		12,585		12,648
Foreign currency translation reserve		(2,688)		(1,670)
Total equity		43,029		44,519
Current liabilities
Trade and other payables		1,152		2,692
Taxation payable	4	256		122
Total current liabilities		1,408		2,814
Total equity and liabilities		44,437		47,333

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2009	2009	2009	2009	2009
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2009	769	32,772	9,840	(2,455)	40,926
Total comprehensive income
Profit for the period after taxation	-	-	1,862	895	2,757
As at 30 June 2009	769	32,772	11,702	(1,560)	43,683
	Issued share capital	Share premium	Revenue reserve	Foreign currency translation reserve	Total
	2010	2010	2010	2010	2010
	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2010	769	32,772	12,648	(1,670)	44,519
Total comprehensive income
Profit for the period after taxation	-	-	1,063	(1,018)	45
Transactions with owners recorded directly in equity
Dividends to equity holders (Note 9)	-	-	(1,126)	-	(1,126)
Purchase of own shares (Note 9)	(22)	(387)	-	-	(409)
As at 30 June 2010	747	32,385	12,585	(2,688)	43,029

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

		Six months ended		Six months ended
		30 June		30 June
		2010		2009
	Note	US$'000		US$'000
Net cash inflow from operating activities	10	409		659
Cash flows from investing activities
Interest received on cash and cash equivalents		30		99
Purchase of current asset investments		-		(11,000)
Purchase of fixtures, fittings and equipment	7	(2)		(23)
Net cash inflow/(outflow) from investing activities		28		(10,924)
Cash flows from financing activities
Repurchase of own shares		(409)		-
Dividends paid		(1,126)		-
Net cash used in financing activities		(1,535)		-
Net decrease in cash and cash equivalents		(1,098)		(10,265)
Cash and cash equivalents at 1 January 2010 and 1 January 2009		13,069		20,058
Foreign exchange (loss)/gain on cash and cash equivalents		(588)		974
Cash and cash equivalents as at 30 June 2010 and 30 June 2009		11,383		10,767

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2010

 

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 2010 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 2009 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 25 employees.

 

Wholly owned subsidiaries Country of incorporation

 

Argo Capital Management (Cyprus) Limited	Cyprus
Argo Capital Management Limited	United Kingdom
Argo Capital Management Property Limited	Cayman Islands
Argo Capital Management (Asia) Pte. Ltd.	Singapore
North Asset Management Srl	Romania
North Asset Management Sarl	Luxembourg
Argo Investor Services 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 2009.

 

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 2009.

 

These condensed consolidated interim financial statements were approved by the Board of Directors on 19 August 2010.

 

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) Limited	Argo Capital Management Limited	Argo Capital Management Property Limited	Other	Six months ended  30 June
	2010	2010	2010	2010	2010	2010
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Revenues from external customers	-	4,053	-	1,562	1	5,616
Intersegment revenues	904	-	1,640	-	228	2,772
Reportable segment profit/(loss)	597	591	(481)	452	50	1,209
Intersegment profit/(loss)	904	(2,759)	1,641	-	227	13
Profit/(loss) excluding inter- segment transactions	(307)	3,350	(2,122)	452	(177)	1,196
Reportable segment assets	44,498	4,307	5,206	4,800	492	59,303
Reportable segment liabilities	30	706	757	199	34	1,726

 

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months
	Ended
	30 June 2010
	US$'000
Revenues
Total revenues for reportable segments	8,388
Elimination of intersegment revenues	(2,772)
Group revenues	5,616
Profit or loss
Total profit for reportable segments	1,209
Elimination of intersegment profits	(13)
Other unallocated amounts	13
Profit on ordinary activities before taxation	1,209
Assets
Total assets for reportable segments	59,303
Elimination of intersegment receivables	(318)
Elimination of Company's cost of investments	(14,548)
Group assets	44,437
Liabilities
Total liabilities for reportable segments	1,726
Elimination of intersegment payables	(318)
Group liabilities	1,408

 

	Argo Group Ltd	Argo Capital Management (Cyprus) Limited	Argo Capital Management Limited	Other	Six months ended 30 June
	2009	2009	2009	2009	2009
	US$'000	US$'000	US$'000	US$'000	US$'000
Revenues from external customers	-	4,358	-	1,477	5,835
Intersegment revenues	11,479	-	1,728	221	13,428
Reportable segment profit/(loss)	11,971	(9,426)	(502)	(1)	2,042
Intersegment profit/(loss)	11,479	(13,424)	1,728	221	4
Profit/(loss) excluding inter- segment transactions	492	3,998	(2,230)	(222)	2,038
Reportable segment assets	46,550	2,721	6,702	7,872	63,845
Reportable segment liabilities	35	623	394	519	1,571

 

Revenues, profit or loss, assets and liabilities may be reconciled as follows:	Six months ended 30 June
	2009
	US$'000
Revenues
Total revenues for reportable segments	19,263
Elimination of intersegment revenues	(13,428)
Group revenues	5,835
Profit or loss
Total profit for reportable segments	2,042
Elimination of intersegment loss	(4)
Other unallocated amounts	8
Profit on ordinary activities before taxation	2,046
Assets
Total assets for reportable segments	63,845
Elimination of intersegment receivables	(327)
Elimination of Company's cost of investments	(18,597)
Group assets	44,921
Liabilities
Total liabilities for reportable segments	1,571
Elimination of intersegment payables	(333)
Group liabilities	1,238

 

4. TAXATION

 

Taxation rates applicable to the parent company and the Cypriot, UK, Singaporean, Luxembourg, Swiss, Cayman and Romanian subsidiaries range from 0% to 28%.

Income Statement	Six months		Six months
	ended		ended
	30 June		30 June
	2010		2009
	US$'000		US$'000
Taxation charge for the period on Group companies	146		184

 

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
	2010		2009
	US$'000		US$'000
Profit before tax	1,209		2,046
Applicable Isle of Man tax rate for Argo Group Limited of 0%	-		-
Other adjustments	(5)		(9)
Tax effect of different tax rates of subsidiaries operating in other jurisdictions	151		193
Tax charge	146		184

 

Balance Sheet
	30 June		31 December
	2010		2009
	US$'000		US$'000
Corporation tax payable	256		122

 

5. 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
	2010		2009
	US$'000		US$'000
Net profit for the period after taxation attributable to members	1,063		1,862
	No. of shares		No. of shares
Weighted average of ordinary shares for basic earnings per share	76,303,599		76,931,620
Effect of dilution	-		-
Weighted average number of ordinary shares for diluted earnings per share	76,303,599		76,931,620

 

	Six months		Six months
	Ended		ended
	30 June		30 June
	2010		2009
	US$		US$'000
Earnings per share (basic)	0.01		0.02
Earnings per share (diluted)	0.01		0.02

 

6. INTANGIBLE ASSETS

	Fund management contracts
	US$'000
Cost
At 1 January 2009	18,490
Foreign exchange movement	139
At 31 December 2009	18,629
Foreign exchange movement	(345)
At 30 June 2010	18,284
Amortisation and impairment
At 1 January 2009	380
Amortisation of Argo business intangible assets	692
At 31 December 2009	1,072
Amortisation of Argo business intangible assets	323
At 30 June 2010	1,395
Net book value
At 31 December 2009	17,557
At 30 June 2010	16,889

 

The Group tests intangible assets annually for impairment, or more frequently if there are indications that the intangible assets may be impaired. The recoverable amounts of the intangible assets that have been reviewed for impairment are separately identifiable business units within the Group. The value in use approach has been used as the businesses were not considered saleable in their current form due to certain factors, the main being reliance on certain key individuals.

 

At the balance sheet date the carrying value of goodwill was US$14.9m being allocated to Argo Capital Management (Cyprus) Limited and Argo Capital Management Limited as US$7.2m and US$7.7m respectively.

 

The key assumptions on which the directors have based their five year discounted cash flow analysis are a pre-tax discount rate of 15%, an inflation rate of 5% and a growth in assets under management (which determine management and performance fee income) of 15% to 20%, with 4.5% to 6% of this estimated to be from annual profits. The assumption of growth in assets under management has been based on the historic performance of the funds. The calculations use cash flow projections based on actual operating results. The result of this review has been compared to the carrying value of goodwill and accordingly the directors have concluded that there is no impairment to goodwill. As an added sensitivity, if the estimated discount rate applied to the discounted cash flows had been 25% higher or the growth rate of assets under management had been 25% lower there would still have been no impairment of goodwill as the net present value of future cash flows would still have been higher than the carrying value of goodwill.

 

At the balance sheet date the carrying value of the Argo Real Estate Opportunities Fund Limited management contract is US$1.9m, net of amortisation. The intangible asset has been amortised over 5 years and 44 days, being the remaining period of the contract.

 

7. FIXTURES, FITTINGS AND EQUIPMENT

	Fixtures, fittings & equipment
	US$'000
Cost
At 1 January 2009	315
Additions	23
Disposals	(25)
Foreign exchange movement	(14)
At 31 December 2009	299
Additions	2
At 30 June 2010	301
Accumulated Depreciation
At 1 January 2009	78
Depreciation charge for period	119
Disposals	(3)
Foreign exchange movement	(31)
At 31 December 2009	163
Depreciation charge for period	52
Foreign exchange movement	7
At 30 June 2010	222
Net book value
At 31 December 2009	136
At 30 June 2010	79

 

8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

		30 June		30 June
		2010		2010
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	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		14,389
		14,343		14,389

 

		31 December		31 December
		2009		2009
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		14,337
		14,343		14,337

 

9. 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
	2010	2010	2009	2009
	No.	US$'000	No.	US$'000
Issued and fully paid
Ordinary shares of US$0.01 each	74,663,494	747	76,931,620	769
	74,663,494	747	76,931,620	769

 

The directors recommended a final dividend of 1p per share (2008: Nil) in the financial statements for the year ended 31 December 2009. The final dividend of US$1,125,888 was paid on 23 June 2010 to ordinary shareholders who were on the Register of Members on 28 May 2010. Going forward, it is intended that the Company implements a progressive dividend policy paying a final dividend each year.

 

In addition the directors authorised the repurchase of 750,000 shares on 6 April 2010 and 1,518,126 shares on 3 June 2010 at respective purchase prices of US$0.20 and US$0.18 per share.

 

10. RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

 

	Six months ended 30 June 2010		Six months ended 30 June 2009
	US$'000		US$'000
Profit on ordinary activities before taxation	1,209		2,046
Interest income	(30)		(99)
Amortisation of intangible assets	323		333
Depreciation	52		54
Unrealised gains on investments	(53)		(481)
Net foreign exchange gain	(77)		(157)
(Decrease)/increase in payables	(1,540)		227
Decrease/(increase) in receivables	537		(143)
Income taxes paid	(12)		(1,121)
Net cash inflow from operating activities	409		659

 

11. RELATED PARTY TRANSACTIONS

 

72% of revenue derives from funds in which two of the Company's directors, Andreas Rialas and Kyriakos Rialas, have an influence through the provision of investment advisory services.

 

Michael Kloter, the non-executive chairman, is also partner in a legal firm which supplies services to the Group. This firm charged US$5,192 (six months ended 30 June 2009: US$9,382) for services rendered to the Group in the period.

 

12. POSSIBLE CLAIM RELATING TO LAWSUIT AGAINST FORMER GROUP COMPANY

 

Argo Group Limited ("Argo") has been named as an additional defendant in a lawsuit filed against Absolute Capital Management Holdings Limited (now named ACMH Limited ("ACMH")) and others. The suit has been filed in the United States District Court for the District of Colorado, by an investor in several of ACMH's investment funds. This litigation arose after the demerger of Argo from ACMH. The plaintiff, The Cascade Fund LLLP ("Cascade"), has made a number of claims against ACMH. In the event that Cascade's claim against ACMH proves successful, Cascade is seeking to include Argo assets as part of the ACMH asset pool available to it by way of compensation.

 

Argo considers that the courts of Colorado do not have jurisdiction over it and that the claim against Argo is wholly without merit. In April 2010 the Colorado court dismissed Cascade's action against ACMH for failure to state a claim, following which Cascade filed a second amended complaint. Argo subsequently filed a motion to dismiss Cascade's second amended complaint, which motion is pending before the court. Argo intends to continue to vigorously defend its position.

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