TIDMARGO

RNS Number : 7408Q

ARGO Group Limited

02 March 2021

Argo Group Limited

("Argo" or the "Company")

Annual Report and Accounts for the Year ended 31 December 2020

Argo today announces its final results for the year ended 31 December 2020.

The Company will today make available its report and accounts for the year ended 31 December 2020 on the Company's website www.argogrouplimited.com . These will be sent by post to shareholders no later than 31 March 2021.

Key highlights for the twelve months ended 31 December 2020

   -       Revenues US$3.3 million (2019 restated: US$4.5 million) 
   -       Operating loss US$0.9 million (2019 restated: operating loss US$0.6 million) 
   -       Profit before tax US$1.7 million (2019 restated: profit before tax of US$0.6 million) 
   -       Net assets US$22.8 million (2019 restated: US$21.3 million) 

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

" As 2021 progresses our thoughts go to those that lost their lives and to the continuing uncertainty and disruption caused by the pandemic. Our staff and our online contingency systems coped very well in the last year keeping disruption to a minimum.

Argo group ended the year on a positive note with our restructured Argo feeder Fund returning over 5.5% in its main share class. Operationally we have concentrated all assets and investors in the previously mentioned Argo Master feeder Fund thus reducing expenses and improving efficiency.

We have also set up a US Feeder Fund to attract further investments from US onshore investors as our main target remains to increase assets under management."

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 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

CHAIRMAN'S STATEMENT

Key highlights for the twelve months ended 31 December 2020

   -       Revenues US$3.3 million (2019 restated: US$4.5 million) 
   -       Operating loss US$0.9 million (2019 restated: operating loss US$0.6 million) 
   -       Profit before tax US$1.7 million (2019 restated: profit before tax of US$0.6 million) 
   -       Net assets US$22.8 million (2019 restated: US$21.3 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 multi strategy investments in emerging markets.

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 2020.

For the year ended 31 December 2020 the Group generated revenues of US$3.3 million (2019 restated: US$4.6 million) with management fees accounting for US$2.6 million (2019: US$4.1 million). The management contract from Argo Real Estate Opportunities Fund Limited ("AREOF)" was terminated on 1 January 2020. The contract with AREOF was for $1.1 million (EUR1 million) fees per annum. The Group also generated incentive fees of US$0.5 million (2019 restated: US$0.2 million) during the year. The incentive fees earned during the current year comprised $0.4 million from The Argo Fund ("TAF") and $0.1 million from Argo Distressed Credit Fund ("ADCF"). The management contract of ADCF was also terminated on 1 November 2020.

Total operating costs, ignoring bad debt provisions, are US$3.7 million (2019: US$4.2 million). The Group has provided against management fees of US$0.5 million from the Designated Investment share class in TAF. 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 should match the exit from the investments in this share class.

Overall, the financial statements show an operating loss for the year of US$0.9 million (2019 restated: operating loss US$0.6 million) and a profit before tax of US$1.7 million (2019 restated: profit before tax of US$0.6 million) reflecting the realised and unrealised gain on current asset investments of US$1.5 million (2019: unrealised gain of US$1.1 million) and interest income of $1 million (2019: $0.2 million).

At the year end, the Group had net assets of US$22.8 million (2019 restated: US$21.3 million) and net current assets of US$8.8 million (2019 restated: US$20.7 million) including cash reserves of US$0.7 million (2019: US$0.9 million). The Directors are not declaring a final dividend.

Net assets include investment in TAF at fair value of US$6.8 million (2019: US$18.6 million).

At the year end the Argo Funds (excluding AREOF) owed the Group total management and performance fees of US$1.0 million ( 31 December 2019 restated: US$0.7 million). The Group received $0.5 million of these fees in January 2021. The remaining fees of $0.5 million relates to the Designated Investment share class which will be paid when the investments are sold and against which a full provision has been made in these financial statements.

During the year the Master Feeder organisational structure of the funds became fully operational. Furthermore, a US Feeder Fund registered in Delaware was set up to attract US onshore investors.

The Argo Funds ended the year with Assets under Management ("AUM") at US$119.1 million (2019: US$130.3). As mentioned earlier the management contract with ADCF was terminated on 1 November 2020 having first transferred those assets and investors who wished to continue with Argo to a new share class with The Argo Feeder Fund Ltd. 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 2020 was 20 ( 2019 : 22).

Fund performance

The Argo Funds

 
                         2020     2019 
              Launch     Year     Year        Since     Annualised   Sharpe      Down 
 Fund           Date    Total    Total    inception    performance    ratio    months     AUM 
                            %        %            %         CAGR %                       US$m 
            --------  -------  -------  -----------  -------------  -------  --------  ------ 
 The Argo                                                                       79 of 
  Fund        Oct-00     5.53     2.18       242.29           7.02     0.50       243   119.1 
            --------  -------  -------  -----------  -------------  -------  --------  ------ 
 Total                                                                                  119.1 
                      -------  -------  -----------  -------------  -------  --------  ------ 
 

In common with most asset classes, emerging market fixed income had a turbulent time in 2020. Initial reports of a new virus found in China were noted but not quickly acted upon in most other countries, with devastating economic and health consequences. As infection and mortality rates rose across the globe, markets tumbled in anticipation of the detrimental impact that the Covid-19 pandemic could have on production, trade and consumption. The S&P 500 index had been on an upwards trajectory for most of the Trump era and reached an all-time high of 3386 in February but lost one third of that value by late March. The yield on US 10-year Treasury bonds commenced the year at 1.88% but had dropped to 0.53% in early April whilst oil prices also slumped with Brent falling from $66 a barrel to less than $20. Not surprisingly, risk appetite for credit risk in general and emerging market bonds in particular, quickly diminished; the JP Morgan EMBI Global spread rose from a low of 277bp in mid-January to a high of 661bp two months later.

Since the Global Financial Crisis -and before in the case of Japan- many advanced economies have deployed policy rates and quantitative easing ("QE") to keep interest rates low and maintain economic momentum but the shock threatened by Covid-19 forced the rapid adoption of fiscal stimuli unprecedented in size outside of wartime. In March the US Congress passed a US$2.2 trillion package and other countries followed suit, if not in the same quantum. The European Union ("EU") launched a Euro 750 billion recovery plan which was also notable for being financed by joint debt issuance and the recipient countries received grants as well as loans. The policy response and relaxation of health measures led to a generalised upturn in economic activity from Q3 onwards and markets recovered somewhat by the end of the year. Despite the noise created by the US presidential election, the S&P 500 set new all-time highs, US 10-year Treasury bond yield edged back towards 1% and JP Morgan EMBI Global spreads declined about 50% from the peak level.

Many EM countries were unable to match the policy actions described above as they lack the resources to combat the impact of higher healthcare costs, lower commodity prices, fewer export opportunities and curtailment of tourism. However some countries in Asia, notably China and Vietnam, fared comparatively well amidst the difficulties whilst, in contrast, the Latin America region struggled. Recognising the elevated debt levels of certain countries even prior to the pandemic, the G20 launched the Debt Service Suspension Initiative ("DSSI") which means that bilateral official creditors will, during a limited period, suspend debt service payments from the poorest countries (73 low- and lower middle-income countries) that request the suspension. The private sector has been invited to join this initiative but so far only one country (Zambia) has requested such relief from bondholders.

TAF was not exempt from these swings of fortune. The Class A shares recorded a gain of over 5% in 2020 despite having a difficult first half of the year, as the prices of a number of sovereign bonds recovered; whilst the fund experienced drawdowns in the market sell-off, the magnitude was lower due to conservative positioning and focus on preserving capital. The Designated Investment shares - currently holding a position in distressed sovereign debt - rose by 84.6% due to the thaw in the relationship between the US and Sudan including the latter's removal from the State Sponsor of Terrorism list and heightened expectations of a stabilisation of the country's economy including a debt reconciliation and restructuring. A Delaware feeder was also created during the year to allow wider US investor participation in all share classes of TAF.

Argo Capital Management relinquished its role as investment manager of ADCF during the year.

The transition period for the withdrawal of the United Kingdom ("UK") from the EU ended on 31(st) December 2020. The regulatory regime covering financial services between the two jurisdictions has yet to be finalized but the UK continues to implement the EU-imposed Alternative Investment Fund Managers Directive for the time being and it is important to note that there was never a single market for non-EEA funds such as TAF, with marketing restrictions varying from country to country.

Dividends

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.

Outlook

As previously stated, a significant increase in AUM is still required to ensure sustainable profits on a recurring management fee basis. The Group is well placed with capacity to absorb such an increase in AUM with negligible impact on operational costs.

Raising AUM remains Argo's top priority over the coming year. The Group's marketing efforts continues to focus on TAF which has 20 years of track record. However, the Group continues to seek opportunities to increase AUM either through existing fund structures or by identifying external partners with whom to cooperate.

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.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

YEARED 31 DECEMBER 2020

 
                                                         Year ended    Year ended 
                                                        31 December   31 December 
                                                               2020          2019 
                                                                         Restated 
                                                Note        US$'000       US$'000 
 
 Management fees                                              2,569         4,070 
 Performance fees                                               457           188 
 Other income                                                   264           237 
=============================================  ======  ============  ============ 
                                                2(e), 
 Revenue                                          3           3,290         4,495 
=============================================  ======  ============  ============ 
 
 Legal and professional expenses                              (511)         (501) 
 Management and incentive fees payable                        (207)          (57) 
 Operational expenses                                         (661)         (858) 
 Employee costs                                   4         (2,161)       (2,581) 
 Foreign exchange gain/(loss)                                    64          (22) 
 Bad debts                                       11           (484)         (935) 
 Depreciation                                     9           (198)         (162) 
=============================================  ======  ============  ============ 
 Operating loss                                   6           (868)         (621) 
=============================================  ======  ============  ============ 
 
 Interest income                                              1,022           174 
 Realised and unrealised gains on 
  investments                                                 1,514         1,073 
=============================================  ======  ============  ============ 
 Profit on ordinary activities before 
  taxation                                        3           1,668           626 
=============================================  ======  ============  ============ 
 
 Taxation                                         7               -          (30) 
=============================================  ======  ============  ============ 
 Profit for the year after taxation 
  attributable to members of the Company          8           1,668           596 
 
 Other comprehensive income 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Exchange differences on translation 
  of foreign operations                                       (123)          (72) 
=============================================  ======  ============  ============ 
 Total comprehensive income for the 
  year                                                        1,545           524 
=============================================  ======  ============  ============ 
 
 
                                      Year ended    Year ended 
                                     31 December   31 December 
                                            2020          2019 
                                             US$           US$ 
 Earnings per share (basic)      8          0.04          0.01 
==============================      ============  ============ 
 Earnings per share (diluted)    8          0.04          0.01 
==============================      ============  ============ 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

 
                                          At 31 December 2020   At 31 December 
                                                                          2019 
                                                                      Restated 
                                   Note               US$'000          US$'000 
--------------------------------  -----  --------------------  --------------- 
 Assets 
 
 Non-current assets 
 Land, fixtures, fittings and 
  equipment                         9                     484              661 
 Financial assets at fair value 
  through profit or loss            10                      -               56 
 Loans and advances receivable      12                 13,645              120 
--------------------------------  -----  --------------------  --------------- 
 Total non-current assets                              14,129              837 
--------------------------------  -----  --------------------  --------------- 
 
   Current assets 
 Financial assets at fair value 
  through profit or loss            10                  6,818           19,357 
 Loan and advances receivable       12                     13                - 
 Trade and other receivables        11                  1,669              951 
 Cash and cash equivalents          13                    675              863 
--------------------------------  -----  --------------------  --------------- 
 Total current assets                                   9,175           21,171 
--------------------------------  -----  --------------------  --------------- 
 Total assets                       3                  23,304           22,008 
--------------------------------  -----  --------------------  --------------- 
 
   Equity and liabilities 
 Equity 
 Issued share capital               14                    390              390 
 Share premium                                         25,353           25,353 
 Revenue reserve                                          122          (1,546) 
 Foreign currency translation 
  reserve                          2(d)               (3,055)          (2,932) 
--------------------------------  -----  --------------------  --------------- 
 Total equity                                          22,810           21,265 
--------------------------------  -----  --------------------  --------------- 
 
   Current liabilities 
 Trade and other payables           15                    415              443 
 Taxation payable                   7                       -               20 
--------------------------------  -----  --------------------  --------------- 
 Total current liabilities          3                     415              463 
--------------------------------  -----  --------------------  --------------- 
 
   Non-current Liabilities 
 Trade and other payables           15                     79              280 
--------------------------------  -----  --------------------  --------------- 
 Total non-current liabilities                             79              280 
--------------------------------  -----  --------------------  --------------- 
 Total equity and liabilities                          23,304           22,008 
--------------------------------  -----  --------------------  --------------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

YEARED 31 DECEMBER 2020

 
                                                                         Foreign 
                                  Issued                                currency 
                                   share       Share     Revenue     translation 
                                 capital     premium     reserve         reserve      Total 
                                    2019        2019        2019            2019       2019 
                                 US$'000     US$'000     US$'000         US$'000    US$'000 
                                                        Restated                   Restated 
 Restated at 1 January 
  2019 (note 16)                     470      28,022     (2,142)         (2,860)     23,490 
 
 Total comprehensive income 
 Restated profit for the 
  year after taxation                  -           -         596               -        596 
 Other comprehensive income            -           -           -            (72)       (72) 
 Transactions with owners 
  recorded directly in 
  equity 
 Purchase of own shares 
  (note 14)                         (80)     (2,669)           -               -    (2,749) 
 
 Restated at 31 December 
  2019 (note16)                      390      25,353     (1,546)         (2,932)     21,265 
============================  ==========  ==========  ==========  ==============  ========= 
 
 
                                                                         Foreign 
                                  Issued                                currency 
                                   share       Share     Revenue     translation 
                                 capital     premium     reserve         reserve     Total 
                                    2020        2020        2020            2020      2020 
                                 US$'000     US$'000     US$'000         US$'000   US$'000 
 Restated at 1 January 
  2020                               390      25,353     (1,546)         (2,932)    21,265 
 
 Total comprehensive income 
 Profit for the year after 
  taxation                             -           -       1,668               -     1,668 
 Other comprehensive income            -           -           -           (123)     (123) 
 Transactions with owners 
  recorded directly in 
  equity 
 Purchase of own shares                -           -           -               -         - 
  (note 14) 
 
 As at 31 December 2020              390      25,353         122         (3,055)    22,810 
============================  ==========  ==========  ==========  ==============  ======== 
 

CONSOLIDATED STATEMENT OF CASH FLOWS YEARED 31 DECEMBER 2020

 
                                                 Year ended    Year ended 
                                                31 December   31 December 
                                                       2020          2019 
                                                                 Restated 
                                         Note       US$'000       US$'000 
 Net cash outflow from operating 
  activities                              17          (515)         (129) 
 
 Cash flows from investing activities 
 Interest received on cash and 
  cash equivalents                                        3            11 
 Share buy back                           14              -       (2,749) 
 Disposal of financial assets 
  at fair value through profit 
  or loss                                 10         11,797             - 
 Distribution from investments                            -          (12) 
 Loan investments                         12       (11,200)             - 
 Purchase of fixtures, fittings 
  and equipment                           9               -           (5) 
======================================  =====  ============  ============ 
 Net cash generated/(used) in 
  investing activities                                  600       (2,731) 
======================================  =====  ============  ============ 
 
 Cash flows from financing activities 
 Payment of lease liabilities             16          (191)         (199) 
======================================  =====  ============  ============ 
 Net cash used in financing 
  activities                                          (191)         (199) 
======================================  =====  ============  ============ 
 
 Net decrease in cash and cash 
  equivalents                                         (106)       (3,059) 
 
 Cash and cash equivalents at 
  1 January 2020 and 
  1 January 2019                                        863         4,005 
 
 Foreign exchange loss on cash 
  and cash 
  Equivalents                                          (82)          (83) 
 
 Cash and cash equivalents as 
  at 31 December 2020 and 31 
  December 2019                                         675           863 
======================================  =====  ============  ============ 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

   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 20 (2019: 22) employees.

 
 Wholly owned subsidiaries                              Country of incorporation 
 Argo Capital Management (Cyprus) Limited (terminated   Cyprus 
  30 November 2020) 
 Argo Capital Management Limited                        United Kingdom 
 Argo Capital Management Property Limited (dissolved    Cayman Islands 
  in June 20) 
 Argo Property Management Srl                           Romania 
 
 
   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 2021. 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 consolidated financial statements.

The Directors have therefore concluded that it is appropriate to prepare the consolidated 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.

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.

Incentive fees arise monthly, quarterly or on realisation of an investment. Incentive fees are recognised in the month they arise.

   (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)       IFRS 9 "Financial instruments" 

The standard requires debt financial assets to be classified into two measurement categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through profit or loss (either FVTPL or FVPL) and those to be measured at amortized cost. The determination is made at initial recognition. For debt financial assets the classification depends on the entity's business model for managing its financial instruments and the contractual cash flows characteristics of the instruments. For equity financial assets it depends on the entity's intentions and designation.

In particular, assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income. Lastly, assets that do not meet the criteria for amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss.

For investments in equity instruments that are not held for trading, the classification depends on whether the entity has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. If no such election has been made or the investments in equity instruments are held for trading they are required to be classified at fair value through profit or loss.

IFRS 9 also introduces a single impairment model applicable for debt instruments at amortised cost and fair value through other comprehensive income and removes the need for a triggering event to be necessary for recognition of impairment losses. The new impairment model under IFRS 9 requires the recognition of allowances for doubtful debts based on expected credit losses (ECL), rather than incurred credit losses as under IAS 39. The standard further introduces a simplified approach for calculating impairment on trade receivables as well as for calculating impairment on contract assets and lease receivables; which also fall within the scope of the impairment requirements of IFRS 9.

For financial liabilities, the standard retains most of the requirements of IAS 39. The main change is that, in case where the fair value option is taken for financial liabilities, the part of a fair value change due to the entity's own credit risk is recorded in other comprehensive income rather than in profit or loss, unless this creates an accounting mismatch.

The Group has adopted IFRS 9 with a date of transition of 1 January 2018, which resulted in changes in accounting policies for recognition, classification and measurement of financial assets and liabilities and impairment of financial assets.

   (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 - Classification

The Group classifies its financial assets in the following measurement categories:

-- those to be measured subsequently at fair value (either through OCI or through profit or loss), and

   --      those to be measured at amortised cost 

The classification and subsequent measurement of debt financial assets depends on: (i) the Group's business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. On initial recognition, the Group may irrevocably designate a debt financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

All other financial assets are classified as measured at FVTPL.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

Currently the Group holds only investments which have been classified as financial assets at fair value through 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.

Financial assets - Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.

Financial assets -- impairment -- credit loss allowance for ECL

The Group assesses on a forward--looking basis the ECL for debt instruments (including loans) measured at Amortized Cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Group measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank. Cash and cash equivalents are carried at Amortized Cost because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.

Financial Liabilities

Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.

   (j)        Loans and borrowings 

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred. Loans and borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset. Loans and borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.

   (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)       Leases 
 
At inception of a contract, the Group assesses whether a contract 
 is, or contains, a lease. A contract is, or contains, a lease 
 if the contract conveys the right to control the use of an identified 
 asset for a period of time in exchange for consideration. To 
 assess whether a contract conveys the right to control the use 
 of an identified asset, the Group assesses whether: 
 
        *    the contract involves the use of an identified asset 
             this may be specified explicitly or implicitly and 
             should be physically distinct or represent 
             substantially all of the capacity of a physically 
             distinct asset. If the supplier has a substantive 
             substitution right, then the asset is not identified; 
 
        *    the Group has the right to obtain substantially all 
             of the economic benefits from use of the asset 
             throughout the period of use; and 
 
        *    the Group has the right to direct the use of the 
             asset. The Group has this right when it has the 
             decision--making rights that are most relevant to 
             changing how and for what purpose the asset is used. 
             In rare cases where the decision about how and for 
             what purpose the asset is used is predetermined, the 
             Group has the right to direct the use of the asset if 
             either: 
 *    the Group has the right to operate the asset; or 
 
 
                  *    the Group designed the asset in a way that 
                       predetermines how and for what purpose it will be 
                       used. 
At inception or on reassessment of a contract that contains 
 a lease component, the Group allocates the consideration in 
 the contract to each lease component on the basis of their relative 
 stand--alone prices. However, for the leases of land and buildings 
 in which it is a lessee, the Group has elected not to separate 
 non--lease components and account for the lease and non--lease 
 components as a single lease component. 
 
 

The Group as lessee

The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right of use asset is subsequently depreciated using the straight line method from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

   -      fixed payments, including in substance fixed payments; 

- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

   -      amounts expected to be payable under a residual value guarantee; and 

- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group 's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

    (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:

   (i)    Not adopted by the EU 
 
 New / Revised International Financial Reporting        Effective date - 
  Standards (IAS/IFRS)                                   not yet endorsed 
                                                            by the EU 
-----------------------------------------------------  ------------------ 
 Effective date of IBOR reform Phase 2 amendments        1 January 2021 
 Effective date of IFRS 3 amendments updating            1 January 2022 
  a reference to the Conceptual Framework 
 Effective date of IAS 37 amendments regarding           1 January 2022 
  onerous contracts 
 Effective date of IAS 16 amendments regarding           1 January 2022 
  proceeds before intended use 
 Effective date of IAS 1 amendments on classification    1 January 2023 
 IFRS 17 "Insurance contracts"                           1 January 2023 
 Effective date of amendments on disclosure              1 January 2023 
  of accounting policies 
 Effective date of IAS 8 amendments on accounting        1 January 2023 
  estimates 
-----------------------------------------------------  ------------------ 
 

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.

   (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 Capital                  Argo Capital 
                                       Management   Argo Capital     Management 
                        Argo Group       (Cyprus)     Management       Property     Year ended 
                               Ltd        Limited        Limited        Limited    31 December 
                              2020           2020           2020       2020               2020 
                           US$'000        US$'000        US$'000        US$'000        US$'000 
 
 Total revenues 
  for reportable 
  segments                      30              -          3,025            235          3,290 
 Intersegment                    -              -              -              -              - 
  revenues 
 
 Total profit/(loss) 
  for reportable 
  segments                   2,850          (421)          (203)          (558)          1,668 
 Intersegment 
  profit/(loss)                352          (352)              -              -              - 
 
 Total assets 
  for reportable 
  segments                  21,472              8          1,541            283         23,304 
 Total liabilities 
  for reportable 
  segments                      41              4            394             55            494 
=====================  ===========  =============  =============  =============  ============= 
 
 
 Revenues, profit or loss, assets and liabilities      Year ended 
  may be reconciled as follows: 
                                                      31 December 
                                                             2020 
                                                          US$'000 
 Revenues 
 Total revenues for reportable segments                     3,290 
 Elimination of intersegment revenues                           - 
==================================================  ============= 
 Group revenues                                             3,290 
==================================================  ============= 
 
 Profit or loss 
 Total profit for reportable segments                       1,668 
 Other unallocated amounts                                    (-) 
==================================================  ============= 
 Profit on ordinary activities                              1,668 
==================================================  ============= 
 
 
 Assets 
 Total assets for reportable segments                      26,606 
 Elimination of intersegment receivables                  (3,302) 
 Group assets                                              23,304 
==================================================  ============= 
 
 Liabilities 
 Total liabilities for reportable segments                  3,796 
 Elimination of intersegment payables                     (3,302) 
==================================================  ============= 
 Group liabilities                                            494 
==================================================  ============= 
 
 
                                  Argo Capital 
                                    Management  Argo Capital       Argo Capital 
                      Argo Group      (Cyprus)    Management         Management    Year ended 
                             Ltd       Limited       Limited   Property Limited   31 December 
                            2019          2019          2019               2019          2019 
                                                    Restated                         Restated 
                         US$'000       US$'000       US$'000            US$'000       US$'000 
 
Total revenues 
 for reportable 
 segments                      -           887         3,138              1,357         5,382 
Intersegment 
 revenues                      -         (887)             -                  -         (887) 
 
Total profit/(loss) 
 for reportable 
 segments                    594           213          (68)              (143)           596 
Intersegment 
 profit/(loss)             1,693       (1,300)         (393)                  -             - 
 
Total assets 
 for reportable 
 segments                 19,547           383         1,618                460        22,008 
Total liabilities 
 for reportable 
 segments                     40           132           469                102           743 
====================  ==========  ============  ============  =================  ============ 
 
 
 Revenues, profit or loss, assets and liabilities      Year ended 
  may be reconciled as follows: 
                                                      31 December 
                                                             2019 
                                                         Restated 
                                                          US$'000 
 Revenues 
 Total revenues for reportable segments                     5,382 
 Elimination of intersegment revenues                       (887) 
==================================================  ============= 
 Group revenues                                             4,495 
==================================================  ============= 
 
 Profit or loss 
 Total profit for reportable segments                         596 
 Other unallocated amounts                                    (-) 
==================================================  ============= 
 Profit on ordinary activities                                596 
==================================================  ============= 
 
 Assets 
 Total assets for reportable segments                      22,547 
 Elimination of intersegment receivables                    (539) 
 Group assets                                              22,008 
==================================================  ============= 
 
 Liabilities 
 Total liabilities for reportable segments                  1,282 
 Elimination of intersegment payables                       (539) 
==================================================  ============= 
 Group liabilities                                            743 
==================================================  ============= 
 
   4.         EMPLOYEE COSTS 
 
                                                   Year ended      Year ended 
                                                  31 December     31 December 
                                                         2020            2019 
                                                      US$'000         US$'000 
 
 Wages and salaries -under employment 
  contract                                              1,614           1,986 
 Wages and salaries - under service contract              263             286 
 Social security costs                                    189             222 
 Other                                                     95              87 
=============================================  ==============  ============== 
                                                        2,161           2,581 
=============================================  ==============  ============== 
 
   5.         KEY MANAGEMENT PERSONNEL REMUNERATION 

Included in employee costs are payments to the following:

 
                                              Year ended      Year ended 
                                             31 December     31 December 
                                                    2020            2019 
                                                 US$'000         US$'000 
 
 Directors and key management personnel              989             988 
========================================  ==============  ============== 
 

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

 
 
                                                                              Year ended      Year ended 
                                                              Cash bonus     31 December     31 December 
                      Salaries        Fees       Benefits                           2020            2019 
                       US$'000     US$'000        US$'000        US$'000         US$'000         US$'000 
   Executive 
    Directors 
 Kyriakos 
  Rialas                   217           -              -              -             217             213 
 Andreas 
  Rialas                   203           -             13              -             216             215 
 
 Non-Executive 
  Directors 
 Michael 
  Kloter                     -          55              -              -              55              52 
 David Fisher                -          32              -              -              32              32 
 Ken Watterson               -          32              -              -              32              32 
---------------  -------------  ----------  -------------  -------------  --------------  -------------- 
 
   6.         OPERATING (LOSS)/PROFIT 

Operating profit is stated after charging:

 
                                             Year ended      Year ended 
                                            31 December     31 December 
                                                   2020            2019 
                                                US$'000         US$'000 
 
    Auditors' remuneration                           67              72 
    Depreciation -owned assets                       10               9 
    Depreciation - right of use assets              187             153 
    Directors' fees and key management 
     personnel                                      989             988 
 Rent expense                                        18              66 
=======================================  ==============  ============== 
 
   7.         TAXATION 

Taxation rates applicable to the parent company and the Cypriot, UK, and Romanian subsidiaries range from 0% to 12.5% (2019: 0% to 12.5%).

 
                                                Consolidated statement of 
                                                           profit or loss 
                                              Year ended       Year ended 
                                             31 December      31 December 
                                                    2020             2019 
                                                 US$'000          US$'000 
 
 Taxation charge for the year on Group 
  companies                                             -              30 
 Tax on profit on ordinary activities                   -              30 
=======================================  ================  ============== 
 

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 
                                                   2020            2019 
                                                               Restated 
                                                US$'000         US$'000 
 
 Profit before tax                                1,668             626 
=======================================  ==============  ============== 
 
   Applicable Isle of Man tax rate for 
    Argo Group Limited of 0%                          -               - 
   Timing differences                               (2)             (3) 
   Non-deductible expenses                            1               4 
   Other adjustments                                 55              47 
   Tax effect of different tax rates 
    of subsidiaries operating in 
    other jurisdictions                            (54)            (18) 
=======================================  ==============  ============== 
   Tax charge                                         -              30 
=======================================  ==============  ============== 
 

Consolidated statement of financial position

 
                                        At 31 December    At 31 December 
                                                  2020              2019 
                                               US$'000           US$'000 
 
 Corporation tax payable/receivable                   -               20 
====================================  =================  =============== 
 
   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 20).

 
                                           Year ended      Year ended 
                                          31 December     31 December 
                                                 2020            2019 
                                                             Restated 
                                              US$'000         US$'000 
 
 Profit for the year after taxation 
  attributable to members                       1,668             596 
=====================================  ==============  ============== 
 
                                               No. of          No. of 
                                               Shares          Shares 
 
 Weighted average number of ordinary 
  shares for basic earnings 
  per share                                38.959,986      40,978,209 
 Effect of dilution (note 20)               4,340,000       4,340,000 
=====================================  ==============  ============== 
 Weighted average number of ordinary 
  shares for diluted earnings per 
  share                                    43,299,986      45,318,209 
=====================================  ==============  ============== 
 
 
                                    Year ended      Year ended 
                                   31 December     31 December 
                                          2020            2019 
                                           US$             US$ 
 
 Earnings per share (basic)               0.04            0.01 
 Earnings per share (diluted)             0.04            0.01 
==============================  ==============  ============== 
 
   9.         LAND, FIXTURES, FITTINGS AND EQUIPMENT 
 
                                     Right      Fixtures, 
                                    of use       fittings 
                                     asset    & equipment      Land     Total 
                                   US$'000        US$'000   US$'000   US$'000 
 Cost 
 At 1 January 2019                       -            266       184       450 
 IFRS 16 recognition at 1 
  January 2019                         717              -         -       717 
 Additions                              91              6         -        96 
 Disposals                               -           (31)         -      (31) 
 Foreign exchange movement               -             20       (5)        15 
--------------------------------  --------  -------------  --------  -------- 
 As at 31 December 2019                808            260       179     1,247 
 Additions                               -              -         -         - 
 Disposals                               -              -         -         - 
 Foreign exchange movement              25              6        17        48 
--------------------------------  --------  -------------  --------  -------- 
 At 31 December 2020                   833            266       196     1,295 
--------------------------------  --------  -------------  --------  -------- 
 Accumulated Depreciation 
 At 1 January 2019                       -            238         -       238 
 IFRS 16 recognition at 1 
  January 2019                         191              -         -       191 
 Depreciation charge for period        153              9         -       162 
 Disposals                               -           (31)         -      (31) 
 Foreign exchange movement               -             26         -        26 
--------------------------------  --------  -------------  --------  -------- 
 At 31 December 2019                   344            242         -       586 
 Depreciation charge for period        188             10         -       198 
 Disposals                               -              -         -         - 
 Foreign exchange movement              23              4         -        27 
--------------------------------  --------  -------------  --------  -------- 
 At 31 December 2020                   555            256         -       811 
--------------------------------  --------  -------------  --------  -------- 
 Net Book Value 
 At 31 December 2019                   464             18       179       661 
--------------------------------  --------  -------------  --------  -------- 
 At 31 December 2020                   278             10       196       484 
--------------------------------  --------  -------------  --------  -------- 
 
   10.      FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 
 
                                        31 December       31 December 
                                               2020              2020 
 Holding   Investment in management      Total cost        Fair value 
            shares 
                                            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     Total cost       Fair value 
            shares 
                                         US$'000          US$'000 
 
 20,061    The Argo Fund Ltd*              5,511            6,818 
                                           5,511            6,818 
========  =======================  =============    ============= 
 
 
                                        31 December       31 December 
                                               2019              2019 
 Holding   Investment in management      Total cost        Fair value 
            shares 
                                            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             Total cost           Fair value 
            shares 
                                                 US$'000              US$'000 
 
 57,301    The Argo Fund Ltd*                     15,472               18,587 
    -      Argo Real Estate Opportunities              -                    - 
            Fund Ltd 
           Argo Special Situations 
   115      Fund LLP                                 115                   56 
           Argo Distressed Credit 
   221      Fund Limited*                            786     4            770 
                                                  16,373               19,413 
========  ===============================  =============  ====  ============= 
 

*Classified as current in the consolidated statement of financial position

   11.      TRADE AND OTHER RECEIVABLES 
 
                                     At 31 December     At 31 December 
                                               2020               2019 
                                                              Restated 
                                           US$ '000           US$ '000 
 
 Trade receivables - Gross                    1,291             10,489 
 Less: provision for impairment 
  of trade receivables                        (780)            (9,733) 
--------------------------------  -----------------  ----------------- 
 Trade receivables - Net                        512                756 
 Other receivables                            1,061                105 
 Prepayments and accrued income                  95                 90 
================================  =================  ================= 
                                              1,669                951 
================================  =================  ================= 
 
 

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$0.5million in full settlement of these trade receivables.

The management contract with AREOF was terminated on 1 January 2020 and the balances were transferred from trade receivables to loans and advances receivable at a net book value of $nil.

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

 
                                        At 31 December     At 31 December 
                                                  2020               2019 
                                              US$ '000           US$ '000 
 
 As at 1 January                                12,405             11,803 
 Bad debt recovered                                  -              (335) 
 Provision charged during the year                 484              1,270 
 Foreign exchange movement                       1,212              (333) 
 As at 31 December                              14,101             12,405 
===================================  =================  ================= 
 

At year end, the provision for impairment of loan receivables related to balances owed by AREOF for US$13.3 million (2019: US$2.7 million). During the year US$9.5 million of trade receivables from AREOF was transferred from trade receivables to loan receivables.

   12.      LOANS AND ADVANCES RECEIVABLE 
 
                                                   At 31 December             At 31 December 
                                                             2020                       2019 
                                                          US$'000                    US$'000 
 
                                                                                           - 
   Deposits on leased premises - current                       13                          6 
   Deposits on leased premises - non-current 
    (see below)                                               111                        120 
   Other loans and advances receivable                          -                          - 
    - current 
   Other loans and advances receivable                     13,534                          - 
    - non-current 
=============================================  ==================  ========================= 
                                                           13,658                        120 
=============================================  ==================  ========================= 
 
 

The deposits on leased premises relate to the Group's offices in London and Romania.

Other loans and advances receivable relates to a loan for $11.2 million (EUR10.2 million) made by Argo Group Limited to Argo Real Estate Limited Partnership, an entity that is 100% owned by Andreas Rialas. The loan carries an interest rate of 9%.

The Group also have a balance receivable for $13.3 million (EUR10.9 million) from AREOF. The carrying value of this balance is $nil.

   13.      CASH AND CASH EQUIVALENTS 

Included in cash and cash equivalents is a balance of US$nil (2019: US$27,000) 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 was 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 
                                  2020          2020             2019             2019 
                                   No.       US$'000              No.          US$'000 
 Issued and fully paid 
 Ordinary shares of 
  US$0.01 each              38,959,986           390       38,959,986              390 
=======================  =============  ============  ===============  =============== 
                            38,959,986           390       38,959,986              390 
=======================  =============  ============  ===============  =============== 
 

The Directors do not recommend the payment of a final dividend for the year ended 31 December 2020 (31 December 2019: US$nil).

   15.      TRADE AND OTHER PAYABLES 
 
                                  At 31 December   At 31 December 
                                            2020             2019 
                                        US$ '000         US$ '000 
 
 Trade creditors                             118               17 
 Other creditors and accruals                297              426 
===============================  ===============  =============== 
 Total current trade and other 
  payables                                   415              443 
===============================  ===============  =============== 
 

Trade creditors are normally settled on 30-day terms.

 
                                      At 31 December   At 31 December 
                                                2020             2019 
                                            US$ '000         US$ '000 
 
 Other creditors and accruals                     79              280 
===================================  ===============  =============== 
 Total non-current trade and other 
  payables                                        79              280 
===================================  ===============  =============== 
 
   16.    PRIOR YEAR ADJUSTMENTS 

The comparatives have been restated for correction of performance fees for the prior period arising from a problem with the fund administrator system. Comparatives were adjusted by decreasing performance fees and debtors by US$0.4 million. As a result, the opening revenue reserve at 1 January 2020 has been adjusted downward by US$0.4 million.

Moreover, it transpired that US$0.2 million additional performance fees relating to 2017 was still due to investment manager. This amount was received during 2020 and was recorded as an adjustment to the opening revenue reserve of the prior year at 1 January 2019. The prior year adjustments are summarized below:

 
                                     2020      2019 
                                  US$'000   US$'000 
-------------------------------  --------  -------- 
 Opening revenue reserve at 1 
  January                         (1,136)   (2,363) 
 Prior year adjustment              (410)       221 
-------------------------------  --------  -------- 
 Restated opening reserve at 1 
  January                         (1,546)   (2,142) 
-------------------------------  --------  -------- 
 

17. RECONCILIATION OF NET CASH OUTLOW FROM OPERATING ACTIVITIES TO LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION

 
                                        Year ended    Year ended 
                                       31 December   31 December 
                                              2020          2019 
                                                        Restated 
                                          US$ '000      US$ '000 
 
 Profit on ordinary activities 
  before taxation                            1,668           626 
 
 Interest income                           (1,022)         (174) 
 Depreciation                                  198           162 
 Provision for bad debts                       484             - 
 (Decrease)/increase in payables              (38)           125 
 (Increase)/decrease in receivables          (201)           188 
 Increase in fair value of current 
  asset investments                        (1,520)       (1,073) 
 Net foreign exchange (gain)/loss             (64)            22 
 Income taxes paid                            (20)           (5) 
------------------------------------  ------------  ------------ 
 Net cash outflow from operating 
  activities                                 (515)         (129) 
------------------------------------  ------------  ------------ 
 
   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 an investment in The Argo Fund Limited. This investment is reflected in the consolidated financial statements at a fair value of US$6.8 million.

The management contract with AREOF was terminated on 1 January 2020. As at the period end, AREOF owed US$13.3 million (EUR10.9 million) (31 December 2019: US$13.3 million (EUR10.9 million)). These balances are carried at US$ nil (31 December 2019: US$ nil) in the financial statements.

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

During the period, the Group also made a loan for $11.2 million (EUR10.2m) to Argo Real Estate Limited Partnership, an entity that is 100% owned by Andreas Rialas. The loan carries an interest rate of 9%.

   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$nil (2019: US$nil).

   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$0.6 million, Sterling - US$0.05 million and Euros - US$0.02 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 2020 the exposure would be a profit or loss to the Consolidated statement of comprehensive income of approximately US$0.004 million (2019: US$0.02 million).

   (g)   Interest rate risk 

The interest rate profile of the Group at 31 December 2020 is as follows:

 
                                  Total as             Variable      Fixed interest      Instruments 
                               per balance             interest    rate instruments         on which 
                                     sheet    rate instruments*                          no interest 
                                                                                       is receivable 
                                  US$ '000             US$ '000            US$ '000         US$ '000 
 Financial Assets 
 Financial assets at 
  fair value 
  through profit or 
  loss                               6,818                    -                   -            6,818 
 Loans and receivables              15,327                  111              13,535            1,681 
 Cash and cash equivalents             675                   18                 113              544 
===========================  =============  ===================  ==================  =============== 
                                    22,820                  129              13,648            9,043 
===========================  =============  ===================  ==================  =============== 
 
 Financial liabilities 
 Trade and other payables              494                    -                 290              204 
===========================  =============  ===================  ==================  =============== 
 

* Changes in the interest rate may cause movements.

The average interest rate at the year end was 0.4%. 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 2019 is as follows:

 
                                                                                            Instruments 
                                   Total as              Variable                              on which 
                                per balance              interest       Fixed interest      no interest 
                                      sheet     rate instruments*     rate instruments    is receivable 
                                   Restated                                                    Restated 
                                   US$ '000              US$ '000             US$ '000         US$ '000 
 Financial Assets 
 Financial assets at 
  fair value 
  through profit or 
  loss                               19,413                     -                    -           19,413 
 Loans and receivables                1,071                   108                    -              963 
 Cash and cash equivalents              863                    95                   15              753 
===========================  ==============  ====================  ===================  =============== 
                                     21,347                   203                   15           21,129 
===========================  ==============  ====================  ===================  =============== 
 
 Financial liabilities 
 Trade and other payables               743                     -                    -              743 
===========================  ==============  ====================  ===================  =============== 
 

* Changes in the interest rate may cause movements.

The average interest rate at the year end was 0.02%. 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 
                                              2020                  2019 
                                                                Restated 
                                          US$ '000              US$ '000 
 Financial Assets 
 Financial assets at fair value 
 through profit or loss                      6,818                19,413 
 Loans and receivables                      15,327                 1,071 
 Cash and cash equivalents                     675                   863 
=================================  ===============  ==================== 
                                            22,820                21,347 
 ================================  ===============  ==================== 
 
 Financial Liabilities 
 Trade and other payables                      494                   743 
=================================  ===============  ==================== 
 
 

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 2020 
                               Level 1    Level 2    Level 3      Total 
                              US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets at fair 
  value through profit or 
  loss                               -      6,818                 6,818 
==========================  ==========  =========  =========  ========= 
 
 
                                        At 31 December 2019 
                               Level 1    Level 2      Level      Total 
                                                           3 
                              US$ '000   US$ '000   US$ '000   US$ '000 
 Financial assets at fair 
  value through profit or 
  loss                               -     19,357         56     19,413 
==========================  ==========  =========  =========  ========= 
 

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            Listed open 
                                       closed ended       ended investment 
                                         investment                   fund 
                                               fund               Emerging 
                                                                   markets 
                                        Real Estate                             Total 
                                           US$ '000               US$ '000   US$ '000 
 
 Balance as at 1 January 2020                      -                    56         56 
 Total losses recognized in                       -                      -          - 
  profit or loss 
 Distribution received                            -                      -          - 
 Transfer to level 2                               -                  (56)       (56) 
 Balance as at 31 December 2020                    -                     -          - 
================================  ==================  ====================  ========= 
 

20. 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 GBPnil (2019: GBPnil).

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

 
                                       Weighted average   No. of share 
                                         exercise price        options 
 Outstanding at beginning of period               24.0p      4,115,000 
 Granted during the period                        24.0p              - 
 Forfeited during the period                      24.0p              - 
====================================  =================  ============= 
 Outstanding at end of period                     24.0p      4,115,000 
====================================  =================  ============= 
 Exercisable at end of period                     24.0p      4,115,000 
====================================  =================  ============= 
 

The options outstanding at 31 December 2020 have an exercise price of 24p and a weighted average contractual life of 1 years. Outstanding share options are contingent upon the option holder remaining an employee of the Group.

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END

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