Last checked at 28 Aug 2009 07:00
Argo Group Limited
("Argo" or the "Company")
Interim Results for the six months ended 30 June 2009
Argo today announces its interim results for the six months ended 30 June 2009.
The Company will today make available its interim report for the six month period ended 30 June 2009 on the Company's website www.argogrouplimited.com.
The company was incorporated on 14 February 2008 and acquired the Argo businesses on 13 June 2008. Whilst the comparative trading period is therefore from 14 February 2008 to 30 June 2008, financial data in respect of the Argo business has only been consolidated from 13 June 2008.
Key Highlights for the six month period ended 30 June 2009
Commenting on the results, Kyriakos Rialas, Chief Executive of Argo said:
"We successfully navigated the Company through six difficult trading months by controlling costs and managing liquidity to benefit the bottom line margin performance. All our credit funds have seen positive returns with one even earning a small performance fee. Redemptions have stabilised and the Group is well capitalised for the current scale of operations. We remain committed to delivering on our strategy by delivering attractive steady returns while rebuilding assets under management."
Enquiries
Argo Group Limited
Andreas Rialas
Shamillia Sivathambu
020 7535 4000
Panmure Gordon
Dominic Morley
020 7459 3600
Chairman's statement
The company was incorporated on 14 February 2008 and acquired the Argo businesses on 13 June 2008. Whilst the comparative trading period is therefore from 14 February 2008 to 30 June 2008, financial data in respect of the Argo business has only been consolidated from 13 June 2008.
Key Highlights for the six month period ended 30 June 2009
Business review
Argo is pleased to report the interim results for the half year ended 30 June 2009. The Company was incorporated in February 2008 in the Isle of Man and began trading as a new group holding company on 13 June 2008, creating a shorter comparative period of 13 June to 30 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 five funds that it manages by investing in, inter alia, fixed income, special situations, local currencies and interest rate strategies, private equity, real estate, quoted equities, high yield corporate debt and distressed debt, although not every fund invests in each of these asset classes. Argo has a performance track record dating back to 2000.
For the six month period ended 30 June 2009 the Group generated revenues of USD5.8 million (period to 30 June 2008: USD1.5 million) with management fees accounting for USD5.5 million (period to 30 June 2008: USD0.9 million). Revenues reflected lower performance fee income of USD0.2 million (period to 30 June 2008: USD0.6 million) during the period due to the application of the high water-mark across the Funds. The Argo Fund Limited ("TAF") and Argo Global Special Situations Fund SP ("AGSSF"), a segregated portfolio of the Argo Capital Investors Fund SPC, will need to increase their NAV as at 31 July 2009 by 60% and 35% respectively in order to reach their high-water mark. Earnings per share were USD0.02 (period to 30 June 2008: USD0.03).
Assets under management ("AUM") decreased during the six month period ended 30 June 2009 by 28.1% to USD477.5 million from their level at 31 December 2008. The decrease of USD187 million was a result of lower market valuations and redemptions in TAF and AGSSF. The unrealised market value reductions to a number of assets across the Argo investment portfolios following the dislocation in credit markets in the second half of 2008 was a further contributing factor to the decline in AUM. To enhance value for shareholders, the Group subscribed USD11 million of existing cash resources for new shares in TAF on 5 June 2009. This allowed the Fund to improve the return on assets by taking advantage of lower market valuations and achieve better returns than the prevailing rates available from bank deposits.
The Directors, having given due and careful consideration, have decided not to pay an interim dividend.
Operational review
Redemption pressure eased over the first half of the year although asset-raising conditions remained challenging. As previously announced, TAF's board of directors decided to implement a 'gate' on redemptions effective 19 November 2008. Under the terms of the gate, the Fund would meet redemption requests amounting to 10% of TAF's total number of shares at each next dealing date until all redemptions were satisfied. The gate became unnecessary in June and we expect this development to encourage new investor interest to the Fund.
The newly created subsidiary, AGSSF Holdings Limited ("AHL"), which was approved by AGSSF's board of directors in February to hold approximately 40% of AGSSF's existing net assets, performed well in the six-month period ended 30 June 2009. It delivered a year-to-date return of 5.47%, in part driven by more favourable mark-to-market valuations. AHL represents assets that are currently more difficult to liquidate.
The Group was also successful in recovering value from TAF and AGSSF's less liquid assets during the period. In February and March 2009, the Funds successfully realised two of their less liquid investments with positive results, namely, an Argentine distressed position that came out of bankruptcy and the exercise of a capital protection clause of an investment in preference shares of a Nigerian bank. In April 2009, a further investment was realised through the Funds' position in one of Ukraine's largest banks.
As part of the Company's efforts to restructure and rebalance portfolios to meet changing market conditions, the Argo Multi Strategy Fund was renamed Argo Distressed Credit Fund Limited ("ADCF) in April 2009. This was instituted to better reflect the Fund's evolved investment remit of capitalising on new opportunities emerging from dislocated credit markets.
Additionally, in a move to trim operating costs, the Company reduced staff salaries by 15% effective 1 April 2009 and we continue to monitor the expense base closely.
Fund performance
Performance across the range of Argo Funds was mostly encouraging for the half year ended 30 June 2009 with TAF, ADCF, AGSSF and the AHL portfolio delivering positive year-to-date returns for the period. The resurgence of emerging markets in the first six months of the year gave some of the Funds' assets the opportunity to benefit from higher market valuations. But while the return of confidence to these markets was encouraging, we felt the rally had run a little ahead of fundamental developments towards the latter part of the six month period and therefore erred on the side of caution. We positioned the Funds in line with this view by not closing all short positions.
Argo Funds
| Fund | Launch date | 30 June 2009 year-to-date | 30 June 2008 year-to-date | 2008 Year total | Since inception | Annualised performance | Sharpe ratio | Down months | AUM |
| % | % | % | % | CAGR % | US$m | ||||
| The Argo Fund | Oct-00 | 5.30 | 2.70 | -39.86 | 102.56 | 9.35 | 0.48 | 12 of 105 | 122.3 |
| Argo Global Special Situations Fund | Aug-04 | 5.47 | 5.21 | -26.88 | 28.12 | 5.84 | 0.24 | 13 of 59 | 143.6 |
| AGSSF Holdings | Feb-09 | 5.80 | N/A | N/A | 5.80 | 14.70 | 1.55 | 2 of 5 | 66.2 |
| Argo Distressed Credit Fund | Oct-08 | 6.03 | N/A | 0.49 | 5.83 | 7.17 | 0.73 | 3 of 9 | 12.4 |
| Argo Real Estate Opportunities Fund | Aug-06 | -60.52 | 0.32 | -2.13 | -49.58 | -20.88 | N/A | 12 of 36 | 62.9* |
| Argo Capital Partners Fund | Aug-06 | -2.7 | 2.3 | -37.51 | 28 | 9 | N/A | N/A | 70.05 |
| Total | 477.5 |
* NAV only officially measured twice a year, March and September.
The Argo Real Estate Opportunities Fund Limited ("AREOF"), which is more susceptible to deterioration in the real economy, was affected by rising retailer bankruptcies, increasing demand for rent concessions and a growing reluctance of tenants to make payments of their contractual obligations. Nevertheless, the Fund's two retail centre projects in Sibiu and Suceava in Romania continued to trade with 98% and 95% tenant occupancy levels, respectively. The third project, the Riviera Shopping City in Odessa, Ukraine, is due to reach completion in the 3rd quarter of 2009.
Despite the Fund's fall in AUM during the six month period ended 30 June 2009 by 59% to USD62.9 million, the Company still received management fee income from the initial capital of EUR100 million. AREOF reported an adjusted NAV of EUR48.3 million (as at 31 March 2008: EUR125.6 million).
Meanwhile, the Argo Capital Partners Fund reported a negative return of -2.7 % for the six months ended 30 June 2009 (as at 30 June 2008: 2.3%). Nevertheless, the Fund is still performing well and its underlying assets remain robust. The Fund is closed to new subscriptions.
Outlook
There has been significant turnaround in market sentiment during the last six months as the impact of massive and unprecedented government intervention has begun to be felt. Liquidity has returned in some quarters, enabling great trading volumes in the main markets but the sustainability of the global economic recovery will remain the subject of speculation for some time.
Although there are fewer opportunities now to acquire assets at prices well below fundamental value, there remains plenty of potential to profit from trading and monetising less liquid assets. The Group's multi-strategy approach to investing in emerging markets means that it is well placed to take advantage of these opportunities.
The Group is well capitalised for the current scale of operations and the Board remains committed on delivering attractive returns while rebuilding assets under management.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2009
| Six months | 14 February | |||
| Ended | to | |||
| 30 June | 30 June | |||
| 2009 | 2008 | |||
| Note | US$'000 | US$'000 | ||
| Management fees | 5,485 | 944 | ||
| Incentive fees | 177 | 553 | ||
| Other income | 173 | - | ||
| Revenue | 5,835 | 1,497 | ||
| Legal and professional expenses | (294) | (8) | ||
| Management and incentive fees payable | (181) | (191) | ||
| Operational expenses | (1,004) | (578) | ||
| Employee costs |
| (2,660) | (125) | |
| Foreign exchange gain/(loss) | 157 | (142) | ||
| Amortisation of intangible assets | 6 | (333) | - | |
| Depreciation | 7 | (54) | (6) | |
| Excess of acquirer's interest in net value of identifiable net assets | - | 1,556 | ||
| Operating profit | 1,466 | 2,003 | ||
| Interest income on cash and cash equivalents | 99 | 17 | ||
| Unrealised gain on investments | 481 |
| 72 | |
| Profit on ordinary activities before taxation | 2,046 | 2,092 | ||
| Taxation | 4 | (184) | - | |
| Profit for the period after taxation attributable to members of the Company | 5 | 1,862 | 2,092 | |
| Other comprehensive income | ||||
| Exchange differences on translation of foreign operations | 895 | 155 | ||
| Total comprehensive income for the period | 2,757 | 2,247 |
| Earnings per share (basic) | 5 | US$0.02 | US$0.03 | |
| Earnings per share (diluted) | 5 | US$0.02 | US$0.03 |
The Directors consider that all results derive from continuing activities.
The company was incorporated on 14 February 2008 and acquired the Argo businesses on 13 June 2008
when it began to trade as a new group.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2009
| Restated (Note 13) | ||||
| At 30 June | At 31 December | |||
| 2009 | 2008 | |||
| Note | US$'000 | US$'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 6 | 17,855 | 18,110 | |
| Fixtures, fittings and equipment | 7 | 206 | 237 | |
| Loans and advances receivable | 264 | 235 | ||
| 18,325 | 18,582 | |||
| Current assets | ||||
| Investments | 8 | 13,457 | 1,976 | |
| Trade and other receivables | 2,366 | 2,214 | ||
| Cash and cash equivalents | 10,767 | 20,058 | ||
| Loans and advances receivable | 6 | 44 | ||
| 26,596 | 24,292 | |||
| Total assets | 44,921 | 42,874 | ||
| Equity and liabilities | ||||
| Equity | ||||
| Issued share capital | 9 | 769 | 769 | |
| Share premium | 32,772 | 32,772 | ||
| Revenue reserve | 11,702 | 9,840 | ||
| Foreign currency translation reserve | (1,560) | (2,455) | ||
| 43,683 | 40,926 | |||
| Current liabilities | ||||
| Trade and other payables | 944 | 717 | ||
| Taxation payable | 4 | 294 | 1,231 | |
| Total current liabilities | 1,238 | 1,948 | ||
| Total equity and liabilities | 44,921 | 42,874 | ||
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2009
| Issued share capital | Share premium | Revenue reserve | Foreign currency translation reserve | Total | |
| 2008 | 2008 | 2008 | 2008 | 2008 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| As at 14 February 2008 (date of incorporation) | - | - | - | - | - |
| Total comprehensive income | |||||
| Profit for the period after taxation | - | - | 2,092 | - | 2,092 |
| Exchange differences on translation of foreign operations | - | - | - | 155 | 155 |
| Contributions by and distributions to owners | |||||
| Issue of 76,931,620 shares (US$0.01 par) | 769 | 32,772 | - | - | 33,541 |
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| As at 30 June 2008 | 769 | 32,772 | 2,092 | 155 | 35,788 |
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| Issued share capital | Share premium | Revenue reserve | Foreign currency translation reserve | Total | |
| 2009 | 2009 | 2009 | 2009 | 2009 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| As at 1 January 2009 (Restated Note 13) | 769 | 32,772 | 9,840 | (2,455) | 40,926 |
| Total comprehensive income | |||||
| Profit for the period after taxation | - | - | 1,862 | - | 1,862 |
| Exchange differences on translation of foreign operations | - | - | - | 895 | 895 |
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| As at 30 June 2009 | 769 | 32,772 | 11,702 | (1,560) | 43,683 |
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CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2009
| Six months ended | 14 February to | |||
| 30 June | 30 June | |||
| 2009 | 2008 | |||
| Note | US$'000 | US$'000 | ||
| Net cash inflow from operating activities | 10 | 659 | 644 | |
| Cash flows from investing activities | ||||
| Interest received on cash and cash equivalents | 99 | 17 | ||
| Acquisition of the Argo businesses | - | 10,057 | ||
| Purchase of current asset investments | (11,000) | - | ||
| Purchase of fixtures, fittings and equipment | 7 | (23) | (12) | |
| Net cash (outflow)/inflow from investing activities | (10,924) | 10,062 | ||
| Net (decrease)/increase in cash and cash equivalents | (10,265) | 10,706 | ||
| Cash and cash equivalents at 1 January 2009 and 14 February 2008 (date of incorporation) | 20,058 | - | ||
| Foreign exchange gain on cash and cash equivalents | 974 | 268 | ||
| Cash and cash equivalents as at 30 June 2009 and 30 June 2008 | 10,767 | 10,974 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2009
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 2009 comprise the Company and its subsidiaries (together referred to as the "Group").
The consolidated financial statements of the Group as at and for the period ended 31 December 2008 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 39 employees.
Wholly owned subsidiaries Country of incorporation
| Argo Capital Management (Cyprus) Limited | Cyprus |
| Argo Capital Management Limited | United Kingdom |
| Argo Capital Management Property Limited | Cayman Islands |
| Argo Capital Management (Asia) Pte. Ltd. | Singapore |
| North Asset Management Srl | Romania |
| North Asset Management Sarl | Luxembourg |
| Argo Investor Services Limited | Cayman Islands |
| Argo Investor Services AG | Switzerland |
2. 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 period ended 31 December 2008.
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 period ended 31 December 2008
These condensed consolidated interim financial statements were approved by the Board of Directors on 27 August 2009.
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 | 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 profits | (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 |
3. SEGMENTAL ANALYSIS (continued)
| | Argo Group Ltd | Argo Capital Management (Cyprus) Limited | Argo Capital Management Limited | Argo Capital Management Property Limited | Other | 14 February to 30 June |
| | 2008 | 2008 | 2008 | 2008 | 2008 | 2008 |
| | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 | US$’000 |
| Revenues from external customers | - | 1,349 | - | 148 | - | 1,497 |
| Intersegment revenues | - | - | 481 | - | 29 | 510 |
| Reportable segment profit/(loss) | (22) | 505 | 2 | 73 | (39) | 519 |
| Intersegment profit/(loss) | - | (656) | 481 | - | 29 | (146) |
| Reportable segment assets | 33,542 | 10,386 | 7,909 | 6,075 | 4,487 | 62,399 |
| Reportable segment liabilities | 22 | 3,568 | 3,555 | 872 | 14 | 8,031 |
Revenues, profit or loss, assets and liabilities may be reconciled as follows:
| | 14 February to 30 June |
| | 2008 |
| | US$’000 |
| Revenues | |
| Total revenues for reportable segments | 2,007 |
| Elimination of intersegment revenues | (510) |
| Group revenues | 1,497 |
| | |
| Profit or loss | |
| Total profit for reportable segments | 519 |
| Elimination of intersegment loss | 146 |
| Other unallocated amounts | 1,427 |
| Profit on ordinary activities before taxation | 2,092 |
| | |
| Assets | |
| Total assets for reportable segments | 62,399 |
| Elimination of intersegment receivables | (900) |
| Elimination of Company’s cost of investments | (18,597) |
| Group assets | 42,902 |
| | |
| Liabilities | |
| Total liabilities for reportable segments | 8,031 |
| Elimination of intersegment payables | (917) |
| Group liabilities | 7,114 |
4. TAXATION
Taxation rates applicable to the parent company and the Cypriot, UK, Singaporean, Luxembourg, Swiss and Romanian subsidiaries range from 0% to 28%.
| Income Statement | Six months | 14 February | |
| ended | to | ||
| 30 June | 30 June | ||
| 2009 | 2008 | ||
| US$'000 | US$'000 | ||
| Taxation charge for the period on Group companies | 184 | - |
The charge for the period can be reconciled to the profit per the Condensed Consolidated Income Statement as follows:
| Six months | 14 February | ||
| ended | to | ||
| 30 June | 30 June | ||
| 2009 | 2008 | ||
| US$'000 | US$'000 | ||
| Profit before tax | 2,046 | 2,092 | |
| Applicable Isle of Man tax rate for Argo Group Limited of 0% | - | - | |
| Timing difference | - | (204) | |
| Other adjustments | (9) | - | |
| Tax effect of different tax rates of subsidiaries operating in other jurisdictions | 193 | 204 | |
| Tax charge | 184 | - |
| Balance Sheet | At | At | |
| 30 June | 31 December | ||
| 2009 | 2008 | ||
| US$'000 | US$'000 | ||
| Corporation tax payable | 294 | 1,231 |
5. EARNINGS PER SHARE
Earnings per share is calculated by dividing the net profit for the period by the weighted average number of shares outstanding during the period.
| Six months | 14 February | ||
| ended | to | ||
| 30 June | 30 June | ||
| 2009 | 2008 | ||
| US$'000 | US$'000 | ||
| Net profit for the period after taxation attributable to members | 1,862 | 2,092 | |
| No. of shares | No. of shares | ||
| Weighted average of ordinary shares for basic earnings per share | 76,931,620 | 76,931,620 | |
| Effect of dilution | - | - | |
| Weighted average number of ordinary shares for diluted earnings per share | 76,931,620 | 76,931,620 |
| Six months | 14 February | ||
| ended | to | ||
| 30 June | 30 June | ||
| 2009 | 2008 | ||
| US$ | US$ | ||
| Earnings per share (basic) | 0.02 | 0.03 | |
| Earnings per share (diluted) | 0.02 | 0.03 |
6. INTANGIBLE ASSETS
| Fund management contracts | |
| US$'000 | |
| Cost | |
| Acquisition of Argo businesses | 18,834 |
| Foreign exchange movement | (344) |
| At 31 December 2008 | 18,490 |
| Foreign exchange movement | 78 |
| At 30 June 2009 | 18,568 |
| Amortisation and impairment | |
| Amortisation of Argo business intangible assets | 380 |
| At 31 December 2008 | 380 |
| Amortisation of Argo business intangible assets | 333 |
| At 30 June 2009 | 713 |
| Net book value | |
| At 31 December 2008 | 18,110 |
| At 30 June 2009 | 17,855 |
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.
6. INTANGIBLE ASSETS (continued)
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$2.9m, net of amortisation. The intangible asset has been amortised over 5 years and 44 days, being the remaining period of the contract.
7. FIXTURES, FITTINGS AND EQUIPMENT
| Fixtures, fittings & equipment | |
| US$ '000 | |
| Cost | |
| Acquisitions through business combinations | 363 |
| Additions | 25 |
| Disposals | (4) |
| Foreign exchange movement | (69) |
| At 31 December 2008 | 315 |
| Additions | 23 |
| At 30 June 2009 | 338 |
| Accumulated Depreciation | |
| Depreciation charge for period | 78 |
| At 31 December 2008 | 78 |
| Depreciation charge for period | 54 |
| At 30 June 2009 | 132 |
| Net book value | |
| At 31 December 2008 | 237 |
| At 30 June 2009 | 206 |
8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
| At | At | |||
| 30 June | 30 June | |||
| 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 | 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 | 13,457 | |
| 14,343 | 13,457 |
| At | At | |||
| 31 December | 31 December | |||
| 2008 | 2008 | |||
| 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 | |
| 0 | 0 |
| Holding | Investment in ordinary shares | Total cost | Fair value | |
| US$ '000 | US$ '000 | |||
| 10,270 | The Argo Fund Ltd | 3,343 | 1,976 | |
| 3,343 | 1,976 |
9. SHARE CAPITAL
The Company's authorised share capital is unlimited with a nominal value of US$ 0.01.
| 2009 | 2009 | ||
| No. | US$'000 | ||
| Issued and fully paid | |||
| Ordinary shares of US$ 0.01 each | 76,931,620 | 769 | |
| At 1 January 2009 and 30 June 2009 | 76,931,620 | 769 |
10. RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
| Six months ended 30 June 2009 | 14 February to 30 June 2008 | ||
| US$ '000 | |||
| Profit on ordinary activities before taxation | 2,046 | 2,092 | |
| Interest income | (99) | (17) | |
| Amortisation of intangible assets | 333 | - | |
| Depreciation | 54 | 6 78 | |
| Unrealised gains on investments | (481) | (72) 1,368 | |
| Negative goodwill | - | (1,556) | |
| Net foreign exchange (gain)/loss | (157) | 142 691 | |
| Increase/(decrease) in payables | 227 | (5,090) | |
| (Increase)/decrease in receivables | (143) | 5,139 5,538 | |
| Income taxes paid | (1,121) | - | |
| Net cash inflow from operating activities | 659 | 644 |
11. RELATED PARTY TRANSACTIONS
74% 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$9,382 (six months ended 30 June 2008: nil) 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 known as ACMH Limited ("ACMH")) and others. The suit has been filed in the District of Colorado, USA, 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 litigation proves successful, Cascade is seeking to include Argo assets and shares as part of the ACMH asset pool available to it by way of compensation.
Argo considers that the courts of Colorado do not have valid jurisdiction and it intends to file a motion to dismiss in the near future. The directors believe that the claim against Argo is wholly without merit and Argo intends vigorously to defend its position.
13. PRIOR PERIOD ADJUSTMENT
Comparative figures have been restated due to a reclassification in the 31 December 2008 financial statements, resulting in a transfer from Foreign Currency Translation Reserve to Revenue Reserve of US$3,080,270. This occurred due to a reclassification between pre and post acquisition reserves on the acquisition of the Argo businesses.